McLaughlin Consulting Group - Human Factors | Microdisplays

MCG Reports

Display Opportunities in the DTV Era
by Charles McLaughlin | chuck@mcgweb.com | Telephone: 650 323 7155
and Ron Cooke | research@wizwire.com| 530 269 3804

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REPORT HIGHLIGHTS

Market Trends

Convergence? It's more like a clash of antagonists Everybody wants to dominate the outcome. The players are acting in their own selfish best interest. And in this coming together- nobody knows the rules. But convergence? More like cultural shock. And disequilibrium. Only the technology is converging. But that is more than enough to force the changes discussed in this report.
Video is the communications media of the 21st century. Video content. Aimed at a highly fragmented market. This is not TV. It's not designed for a TV screen. It assumes the use of a PC monitor.
The Internet is redefining the concept of what constitutes entertainment. Interactive Internet traffic is a growth market. It is dominated by the culture of the PC industry. Lots of creative energy. Freedom to experiment. That puts conventional TV content creation and distribution at a disadvantage. By 2003, perhaps 30 to 50 percent of the potential video audience will receive the majority of its content from Internet based resources.
This is not about HDTV. It is not even about DTV. It's about the digital renovation of America's analogue information systems infrastructure. And this conversion from an analogue to a digital system is nothing new. It has been going on since the invention of the digital computer.
Convergence will not happen. There are deeply imbedded cultural differences that separate the available players. Instead, there will be conflict. Nervous accommodation. Deals. And survivors.
The computer industry should position itself to develop, manufacture, install and - where appropriate- manage the digital systems of the entertainment industry. Thus far, however, the computer industry lacks the comprehension, leadership and organization to accomplish this goal.
The biggest single obstacle to DTV- and digital telecommunication- is the federal government.
The systems used to create, process, transmit and deliver entertainment- are obsolete. So too are the cultures that manage them.

Digital Pipelines

Although the FCC's DTV broadcasting ruling can be regarded as a "trigger event" that forced the digital era on the entertainment industry, the long term force behind DTV is the Internet.
Within this context, broadcast HDTV is a side show. And forget the acronyms- HDTV, WS-SDTV and SDTV. What the TV consumer will receive is higher quality video in a 16:9 format, an improved audio experience and a better way to select programming. That's about it
Hype aside, the cable TV industry may be in a position to pump some SDTV or HDTV down their pipes, but they are a long, long way from offering universal Internet or telephone service. Cable operators have to learn how to install, maintain and manage what is essentially a multimedia Local Area Network. That's a pretty hefty jump in technical sophistication.
Despite the lousy economics of HDTV, the satellite companies have cooked up a deal with receiver companies like Thomson to deliver HDTV to the consumer's home because they see HDTV and SDTV as a competitive weapon against the cable industry.
MCG believes that by 2002 the terrestrial broadcasters will have learned to derive revenue from the transmission of multi-tiered services, including data and video content. Continuing weakness in the terrestrial broadcast industry will favor the competitive position of DBS as a vehicle for DTV.
The Internet service communication companies are working on Internext, the next generation Internet. The technologies for DTV and DiTV will converge. The problem is with the ingrained cultures of the opposing players. We believe that the inevitable financial problems of conversion will eventually force this marriage.

Impact on Displays

Regardless a consumer's choice of entertainment displays, he ends up with a system that is optimized for conventional entertainment use, not for the new era of interactive video and community. As a result both small SDTVs and big screen HDTVs will be unsuitable for interactivity. The former lack adequate definition and the latter have insufficient resolution for up close viewing.
Thus the PC will continue to be the platform of choice for Internet content. The PC. Not a TV. The video PC with its high definition, ergonomically correct, wide screen video display.
Eventually, the growing popularity of HDTV and WS-SDTV content will force the computer industry to adopt the 16:9 format for all of its display products. Live interactive video and 3D graphics content favor the use of high resolution, ergonomically correct, computer displays.
By 2006, it will be impossible to distinguish between the display requirements of computer based HDTV, WS-SDTV, SDTV and PC peripherals. Video, especially Internet interactive video, will have driven the market toward 16:9 displays for all DTV and PC applications.
MCG believes that 16:9 WS-SDTV will become the dominant format for video content. That means the real revenue opportunities will lie in the provision of progressive scan WS-SDTV products and services.
Modest 30 to 50% price premiums can be achieved initially for DTV displays, but the development of a mass market for video PC monitors and DTV is extremely price sensitive. Until the industry and the market sorts and prioritizes the standards, higher cost interfaces and image processing will result.
In the near term the interface issue is close to a show stopper. Not only is the output of the digital cable STB unknown, but even the PC industry cannot decide on a final version of its digital interconnect.
WEB surfing tends to be a private and personal experience for an individual user. This works to encourage the use of small high definition screens viewed at short distances- such as PC monitors and mobile tablet readers- rather than big screen TVs for interactive Internet sessions.

Forecast

MCG has developed two alternative scenarios for DTV. The first- Case 1- assumes that content, cable, DBS, terrestrial broadcast, and retail companies can meet the FCC schedule. Set replacements and sets purchased by first time consumers raises total sales from 29.6 million in 1999 to 42.6 million units in 2006. The percentage of NTSC unit sales falls off rapidly after 2000 as consumers increasingly demand TV sets that are compatible with HDTV.
The conversion from NTSC to HDTV programming and content delivery is unlikely to follow the FCC's schedule. SDTV and WS-SDTV are more practical and will predominate at the expense of HDTV.
MCG has developed an alternative forecast for DTV that incorporates a more realistic schedule, recognition of the role that WS-SDTV will play in the market for DTV content and services and an assessment of the video PC as a center for home entertainment. The estimated penetration of HDTV is reduced from 40 to 27 percent of the content available in 2006. PCs exist. They take viewer market share. TV sales, after a brief surge of DTV interest in the mid years of the forecast period, settle back to 1998 levels. In short, the PC- particularly the Internet connected PC- is where the action is. The impact is to stagnate overall TV sales and to concentrate sales in primary TV products.

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