Digital Hollywood: The Idea of Convergence Stands Strong

The sparse attendance at this week's Digital Hollywood conference in San Jose seemed to indicate that "Hollywood" just isn't where the industry is focusing these days. But while most streaming executives will tell you that the current focus on the enterprise market does represent a viable financial opportunity for the time being, the promise of winning "Hollywood" back over to the side of IP was still the topic of choice. One of the most widely talked about conference topics was that Internet streamers could learn a thing or two from the broadcast and cable industries.

On a panel which discussed the use of satellite for cost-effective distribution, Geoff Allen, CEO of Anystream ( www.anystream.com), suggested that the streaming industry should, "Go back to what works," or the broadcast model.

It was generally agreed upon that the past failures of Internet-only content companies do not represent a lack of possibility for the future. Allen pointed out that before the event of Internet-only content companies, no content company ever tied itself to only one distribution mechanism. Hollywood studios have found ways to profit from nearly every level of the distribution cycle, from theaters down to television. Allen believes that 99 percent of all quality content always has and always will come from the major studios, but the challenge of digital convergence these days is to actually provide a cost incentive.

The panel also agreed that digital distribution was reaching the point where large companies are beginning to sit up and take note. The AOL/ Time Warner merger was cited as a very promising development in that realm. Likewise, NDS Americas, a company 80 percent owned by Rupert Murdoch's News Corp, has decided to diversify into some of the interactive markets, said Jim Britain, vice president of sales for NDS.

Clint Chao, vice president of marketing and development at SkyStream Networks (www.skystream.com), also offered a historical perspective on the strength of linking together disparate networks. Chao pointed out that when Cisco filed its IPO there was a document that showed all of the unconnected university and corporate networks of the world waiting for the event of the router to enable communication. He believes that SkyStream's products, which enable IP transmissions over the broadcast MPEG transport stream, could have the same effect today. AOL/ Time Warner contributed to SkyStream's last round of funding.

Emulating Broadcast To Save Money

Anystream's Allen is big on learning from proven broadcast models, from creating wholesaler (cable stations) and reseller (local cable companies) relationships to the practice of encoding and localizing content on the edge.

Anystream, of course, offers a product to that end, which is its Agility Edge encoding platform. According to Allen, the system will allow content creators to send their content via an MPEG transport stream to various downlink centers, such as cable headends or POPs, where the content is then encoded using the Agility Edge software in the format or formats appropriate for the network that it will be distributed on. At a cable headend, for example, the content would be encoded at bit rates appropriate for cable modems. Local advertising or restrictions could also be administered on the local level, as it is done today in cable.

Allen points out that what flies in a cable station's programming in Utah is likely not identical to what flies in New York City, but the two cable systems are pulling down the identical satellite feed.

Allen admits that deploying the Agility Edge software across the various networks is the first task, but states that customer announcements will be made soon.

While Streaming Struggles, DirecTV thrives

The panel cited DirecTV (www.directv.com) as an example of a cost-effective way to use the one-to-many capability of satellite. According to NDS's Britain, DirecTV is incurring costs equal to about $20/month per subscriber, while the average subscriber is paying about $60/month - making the service profitable. The satellite service is then able to seek out additional content, and is currently the target of a Murdoch acquisition.

The panel agreed that whatever IP-based services convergence brings about, security will have to be paramount. DirecTV has been able to succeed also in part because it could control access to its content very effectively. Though, as one panelist joked, if DirecTV compressed its content down anymore to squeeze in more channels it'll be unwatchable.

IBlast (www.iblast.com), a company which seeks to use additional DTV spectrum for IP-based content delivery, was cited by the panel as a possible example of a company that could emulate the DirecTV model, as it will also face the challenge of deploying a receiving device. iBlast is a client of both NDS and SkyStream.

"We're excited about datacasting as an early revenue opportunity for broadcasters," stated Britain.

But with DirecTV succeeding, some may wonder what will pull the industry towards IP-convergence. Allen suggests that IP networks will eventually take over and become standard for one simple economic reason: Packet-switching networks are less expensive then circuit-switching.