The way we watch television is constantly changing. At the Consumer Electronics Show (CES, Las Vegas January 7-10) NDS is showing exactly how seamless this change can be. NDS is exhibiting in the Murano Suites 3201-3202 of the Venetian Hotel. Call to arrange an appointment to see NDS’ latest developments for convergence.

NDS aims to demonstrate to operators the possibilities for the kinds of services they will be able to offer their customers, now and in the future. Operators can contemplate new and innovative offerings and business models by virtue of multi-platform delivery to the digital home and beyond. Broadcasters and content owners want to reach their audiences via an array of media to maximize their return on investment in content. And they want to build loyalty so that the relationship with the customer will grow in depth – and continue over time.

A simulated home environment – complete with living room, home office and garden – has been created for CES to demonstrate how NDS delivers true secure mobility. This home environment serves as the background for the individual pods demonstrating specific NDS convergence solutions.

For NDS, convergence is reality

At CES, NDS illustrates true convergence by enabling operators to see the potential it really offers. NDS is demonstrating how operators can generate more revenue from “three screen” users of today and tomorrow: Pay-TV operators can use a centrally managed content delivery system across multiple networks, enabling them to develop cross-platform business models.

Taking content from an HD DVR in the living room to a PC in the home office and then outside to a mobile device and PMPs – and back again – NDS VideoGuard^®, MediaHighway^® middleware and other market-leading solutions enable broadcasters, telcos and IPTV providers to extend business rules and security to multiple devices in a seamless experience for the end-user.

Quite simply, NDS is the pay-TV operator's partner of choice for advanced digital TV and for delivering on the promise of true convergence.

What will visitors to the NDS virtual home see at CES? The living room is equipped with an HDTV and STB connected to a residential gateway/home network which directs content to other devices. In the home office, a PC is also connected to the residential gateway and is able to receive content from the STB. Content and bookings made remotely can be viewed on mobile phones and a wireless enabled PMP which can receive content through NDS-protected wireless networks.

Solutions geared for convergence

Solutions being presented at CES reflect how NDS technology is aligned into three primary business units to help our customers succeed in making the most of the opportunities and challenges presented by convergence:

• Products that Secure content using conditional access and DRM
• Solutions that Enable operators to attract subscribers and generate revenue using broadcast, on-demand, and Internet content
• Applications that help subscribers Interact with their favorite programs, channels or games, extending the number of devices subscribers can use while enhancing the viewing experience and reducing churn.

Secure

VideoGuard – CA/DRM

NDS VideoGuard has established a solid, worldwide reputation in pay-TV delivery. Today NDS has more than 78.6 million active smart cards deployed on more than 60 TV platforms in more than 25 countries and 15 languages.

At CES NDS will demonstrate features that make VideoGuard the industry’s most advanced suite of conditional access (CA) and digital rights management (DRM) solutions.

IPTV – NDS Metro™

NDS Metro is a fully integrated turnkey middleware and DRM solution for telcos and broadband operators who provide IPTV services. It offers the unique combination of NDS IP middleware and VideoGuard content security. The Metro demonstration at CES shows how operators can offer the revenue generating services that make up a complete IPTV system.

Enable

Hybrid Set-Top Box

NDS hybrid solutions enable operators to optimize the delivery of both premium and Web content, as well as advanced Internet and interactive services. These solutions help deliver the best of both worlds: live linear programming TV over cable or satellite augmented by additional services, content and information delivered over an IP broadband connection.

Mobility

NDS Mobile TV solutions help operators maximize revenues while aggregating their user base via the VideoGuard Unified Headend™. Content protection, metadata management, electronic service guide (ESG) and interactive technologies provide the essential foundation for service growth and user satisfaction.

Interact

NDS Electronic Program Guides

EPGs can be one of the most important differentiators between your offering and that of your competition. In order to ensure the success of your EPG NDS is demonstrating an array of solutions that enable your viewers to find and launch your services easily. NDS EPGs are the most deployed in the world. They feature a fast response time and support sophisticated navigation tools as well as frequent data changes for promoting new services. At CES you can see next generation EPGs from NDS available for the STB, PC and mobile devices.

VideoGuard Unified Headend

The VideoGuard Unified Headend being demonstrated at CES provides a business management platform interface that is pre-integrated with all NDS VideoGuard solutions so that operators can manage all their services with one system. This includes Snowflake, a new user interface developed by NDS. It is compatible with any screen – STB, PC or mobile. At CES you can see it operating on an STB and in a mobile environment.

Interactive Advertising

Interactive TV has not only transformed programming it has also revolutionized advertising. Gone are the days of linear video content aimed at selling the same product to all viewers. In the world of interactive advertising viewers who are interested in a particular product or service can press a button on their remote control to find out more or to communicate directly with the advertiser. For more information on NDS solutions for targeted advertising, see “Targeted Advertising is Around the Corner" in this issue of World Vision.

Enhanced Television and Games

Interactive TV (iTV) games are a proven way to attract and retain viewing audiences. Promoting loyalty and reducing churn, games deliver added value to audiences and advertisers alike, while generating revenue through pay-per-play, high-score competitions and subscriptions.

When you see the range options that NDS is demonstrating at CES (Venetian Hotel, Murano Suites 3201-3202) you will understand why we say that while everyone else is talking about convergence, NDS is doing it.

A paradox: In today’s fragmented media and micro marketing environment, TV advertising may lose ground to other media especially to the Internet. Nevertheless it is still a multi-billion dollar industry and as such, it is significant. The question is: for how long?

This type of industry discussion – and the new technologies it is based on – helps explain why TV advertising is on the verge of change.

“There is no question that TV advertising has to change,” said NDS CEO Dr. Abe Peled in an interview in the (London) Financial Times on October 30, 2007. According to Dr. Peled, pay-TV companies are three to five years away from introducing technology that will allow advertisers to target viewers according to their viewing habits.

Targeted advertising is based on delivering ads containing information which individuals are interested in. The introduction of targeted advertising will keep advertisers from spending money on audiences unlikely to be receptive to their sales pitch.

“We believe the enabling technologies will soon find their way to set-top boxes,” says Gideon Gilboa NDS Product Marketing Manager for Advertising Solutions. He explains that with the introduction of digital technologies such as DVR, HD, and hybrid set-top boxes that combine both broadcast and broadband, TV operators are laying the groundwork for introducing targeted advertising capabilities. “In the next few years we expect to have mass deployment of technology enabling delivery of a specific ad to a specific viewer at a very specific time,” he says.

Understanding TV viewers

“In this new world of almost unlimited viewing choices, advertisers and media buyers must better understand how consumers watch TV advertising,” Gilboa says. “Targeted advertising is the next step but granular measurement should be there first.”

“The second-by-second reports on viewer interaction with STBs that STB-based measurement provides includes linear TV viewing, time-shifted viewing, as well as usage of DVRs and Video on Demand, EPG navigation, and interactive applications,” he says.

Today these systems provide advertisers with a better understanding of how viewers respond to and interact with new technology like DVRs and to advertising on these platforms.

Tomorrow’s measurement technology will become the heart of targeted advertising systems.

“The deployment of STB measurement technology will allow the monetization of advanced models like targeted DVR advertising and will also be used to fine tune these future models when they are launched,” Gilboa says. “If you can’t measure it you can’t sell it.”

How does this work?

Advertisements relevant to specific viewers can be stored on their DVR’s hard disk. When an ad break begins an alternate ad can be pulled from the disk to replace a “live broadcast” ad that is not relevant to the particular viewer. The replacement ad more closely matches the viewer’s demographics and interests.

Gilboa explains another possibility. “Once we have the ability to store targeted ads in a DVR then we can also think about presenting them not only for the right viewer but also in the right context. In this scenario the first ad in the break will be determined by the content that was previously viewed.” For example, a few minutes into a news broadcast viewers who had been watching a travel channel will see an ad for vacations.

Fewer, more relevant ads

So where are we headed? How will these technology advancements impact our viewing experience?

“When viewers watch a prime time TV show today the majority of the ads that come with it are not relevant to them. This obviously has a negative impact on their viewing experience. What we anticipate is that with the introduction of targeted TV advertising, viewers will see fewer, more relevant ads on TV,” Gilboa says.

The result will be that consumers will have a more positive experience, advertisers will deliver their messages more efficiently and cost-effectively, and TV operators will be able to generate more revenue from targeted ad spots.

“The bottom line is that targeted advertising will create a win-win situation,” Gilboa says.

Meir Lehrer, NDS VP US Technical Sales and Partnership Program, recently met with a group of analysts and journalists in the US. Two of their main questions were “Who is your competition?” and “What do you provide?”

According to Lehrer, the short answers are: “The competition these days is Microsoft. As for what we provide, it’s turnkey IPTV solutions.”

Let’s look at these one at a time.

Microsoft positions itself as a supplier of end-to-end IPTV solutions, Lehrer explains. “The problem is they have deployed fewer than 200,000 set-top boxes.” By comparison, NDS has deployed CA/DRM for 78.6 million STBs, middleware for some 69.9 million STBs, and DVR clients for 8.8 million units worldwide. “The point is,” he says, “NDS provides a turnkey solution in a market where few other vendors have the experience to do so.”

What is a turnkey vendor?

Lehrer explains that turnkey vendors take charge of end-to-end integration for the platform operator. “For example, we spent most of 2007 as the prime integrator for STBs for several operators in the US. NDS was in charge of managing the integration of chipsets (also called SoCs or ‘systems on a chip’ in the US) and STB vendors.”

"We were responsible for debugging new SoCs,” he says. “In other words we tested, reproduced and dealt with bugs that may have been found in a lab or at the customer site. Sometimes testing can be tricky because the bug may be in the product or in the lab environment’s configuration.”

What provided the impetus for NDS to become a turnkey vendor was the introduction of Metro™, its end-to-end IPTV solution.

Metro is based on two NDS building blocks: MediaHighway^® middleware and VideoGuard^® conditional access/digital rights management.

“We undertook the extensive testing because of our role as primary integrator,” Lehrer says. “We also made certain that the headend infrastructure – middleware, CA/DRM, EPG and interactive applications – all integrated correctly with third party vendors.”

“Been there; heard that”

“The challenge with working in the IPTV market is that operators have heard all the hype,” Lehrer says, “and they’re extremely skeptical.” He cites the case of one operator who simply refused to look at another IPTV presentation. “He told me he wants to see how the system works – not what you can say about it.”

The skepticism about IPTV presentations is well founded. IPTV is definitely an all-too-ubiquitous industry buzzword. Search Google for “IPTV Internet Protocol” and in the blink of an eye you get almost 1.4 million hits. “But the number of systems that are actually deployed doesn’t reflect this high profile,” he says.

To make certain that Metro works, NDS opened an “end-to-end Metro lab” at its site in Costa Mesa, California. “This lab enables us to reproduce and deal with any problems and certify upgrades under the footprint of SES AMERICOM, our key IPTV customer in the US.”

During 2007 NDS also set up integration labs in France, the UK, India and Israel. “The purpose of these labs is to facilitate product development and testing – in addition to investigating and dealing with any potential bugs – for different Metro components. This enables us to ensure that the solution works smoothly regardless of where the different parts of the system were developed,” Lehrer says.

During the year NDS also extended a VPN to its integration partners including STB vendors, IP multiplexer vendors, billing system vendors and VOD solution providers.

Deploying the IPTV solution for SES AMERICOM in the US presented a number of unique challenges. “In this case NDS is supporting both variable bit rate (VBR) and constant bit rate (CBR). This is first IPTV deployment that features a full complement of MPEG-2, H.264 (MPEG-4), standard definition and high definition (HD) broadcast and On Demand content.”

SES AMERICOM is an aggregator which means that “the NDS network architecture had to be able to accommodate hundreds of telcos all connected to a central headend where the majority of the processing occurs.”

The solution's ultimate test

In addition to the integration labs, NDS took another crucial step. “We checked to verify that the completed product actually works in consumers’ homes,” Lehrer says. “This added another layer of complexity – resolving IP networking and installation-related issues. But that’s what turnkey vendors have to do. To ensure the success of the SES AMERICOM system launch, we even have full-time on-site staff at the customer site.”

The fact is, Lehrer explains, “NDS is committed to delivering an end-to-end IPTV solution.”

“The reason it’s beneficial to use an end-to-end system from a turnkey vendor like NDS is that the alternative is to go to a different vendor for each of the system’s components. What happens to operators who choose this route is that at the end of the process they have a variety of pieces that have to be glued together.”

“There are cases where vendors may choose what they determine to be the best of breed in each space,” Lehrer explains. “The problem is that these components often use different technologies. Having been in the IPTV market since 2000 NDS is able to put it all together and make the system work.”

“IPTV deployment presents a number of challenges,” Lehrer says, “partially because the platform is still evolving. What we’ve seen during the past year is that because of our track record with STB deployments, systems integration, middleware and CA/DRM, no one is in a better position to fulfill this essential role.”

For more information:

Metro

World Vision recently caught up with some NDS customers to ask what made 2007 an important year for them and their businesses. While we were at it we also asked what they hope to accomplish in the New Year.

Julian McIntyre, President and Treasurer, Gateway Communications In early 2007 Gateway Communications announced that NDS would be supplying security for its subscription-based satellite TV platform in sub-Saharan Africa. The system is based on NDS VideoGuard®.

What was your highlight in 2007?

2007 was a great year for Gateway. As a company we doubled in size, we raised almost $200 million to invest in Africa and we consolidated our position in our telecommunications business while launching GTV, our new satellite television business.

Overall, the highlight of the year for me must have been watching the first Premier League game on GTV in a bar in Nairobi. This was really ground-breaking stuff!

What was the most important event in the industry in 2007?

So much has happened in the African telecommunications and media markets in 2007 that it’s difficult to pinpoint any particular event. What has been perhaps most interesting is the level of foreign investment going into these sectors both from Europe and North America but now from strategic regions such as Middle East and China. It is clear to me that Africa is going to see unprecedented investment and growth in the coming years. This makes it a very exciting market to work in.

What is your biggest hope or goal for 2008?

My primary objective in 2008 is to take GTV from a startup operation to a mass-market media platform. I am very pleased with our early results, adding almost 40,000 subscribers in only a couple of months. However I believe that the opportunity is unprecedented with the potential for millions of pay-television subscribers in Africa over the next few years. I want to go a long way towards achieving that in 2008.

What is your New Year's Resolution?

Raise lots more money; buy lots more smart cards!

Dragan Solak, CEO, Serbia Broadband In mid-2006 Serbia Broadband became the first customer for VideoGuard Express™, the solution designed for new and emerging operators ready to launch digital services. They were on air by the end of 2006.

What was your highlight in 2007?

2007 was a very exciting year for SBB because we changed ownership. We believe this is the beginning of a new investment cycle and exciting years as far as investment and development are concerned.

What was the most important event in the industry in 2007?

This was a very successful year for the cable industry. Overall the whole industry continued to grow in 2007. Content quality improved and more services became available and affordable. Most of what we anticipated is happening which makes us think we’re on the right track.

What is your biggest hope or goal for 2008?

Our primary goal is for Serbia to continue on the road to membership in the European Union. We also hope to see the full liberalization of the Serbian and regional telecommunications market. In this new environment, we hope to reach our full potential.

What is your New Year's Resolution?

We have gone through a period of transition and intensive growth. During 2008 we hope to put more focus on the personal satisfaction and the overall experience of our customers.

Vikram Kaushik, CEO, Tata Sky, Mumbai, India When Vikram Kaushik was interviewed in World Vision No. 34 a year ago he said one of his goals was to reach 1 million pay-TV subscribers in the first year after launch. He succeeded.

What was your highlight in 2007?

Tata Sky beat both global and local benchmarks for customer satisfaction in a national Nielsen survey in India and became the Gold Standard for customer service.

What was the most important event in the industry in 2007?

Tata Sky made a world record in the DTH business by crossing the one million connections mark in less than a year.

What is your biggest hope or goal for 2008?

To drastically reduce our cost-to-serve consumers so that we can convert people from analog cable aggressively.

What is your New Year's Resolution?

To innovate continuously in content (interactive applications), product (introduce DVRs), and price (for the basic service).

Mustafa Gozalan, Executive Board Member, Dogan Media Group, Istanbul, Turkey When Mustafa Gozalan discussed D-Smart in World Vision No. 38, his company’s new digital satellite platform had been on air for just a few months. D-Smart is an innovative pay-as-you-go platform with no monthly fee. It lets viewers use both credit cards and scratch cards.

What was your highlight in 2007?

Launch of the D-Smart project.

What was the most important event in the industry in 2007?

The introduction of the D-Smart way of doing pay-TV business.

What is your biggest hope or goal for 2008?

D-Smart breaking the world’s record of the fastest subscriber penetration.

What is your New Year's Resolution?

To stop working 15-16 hours a day!

Video content is popping up on the Internet like mushrooms after a hard rain. But when it comes to business models, companies that are trying to cash in on this video phenomenon are still largely feeling their way around in the dark.

While it can be amusing to watch a supporter of Britney Spears on YouTube vociferously defending the pop star’s most recent public performance, video on the Internet is looking for a more sophisticated, long-term relationship with viewers, whether it’s on PCs or on TV screens.

The problem for consumers is choosing among the crowded field of companies who wish to provide these video services, and their different approaches to the solution. Running down the roster of pure-play video providers, we have Joost, Vudu, Hulu, and Apple TV trying either to provide the video content, a device for the content, or both.

MovieBeam was scratched off the above list since it shuttered its doors in December, but it’s a good example of what not to do in this space. Disney sold MovieBeam to Movie Gallery for just under $10 million in March, but less than a year later MovieBeam went to the wall despite $100 million in funding.

First off, MovieBeam sent movies over the air to a set-top box with an antenna. As a result the service was limited to a market of 30 metropolitan areas in the United States. Next up was the cost of the set-top box, which was $250 along with a $30 activation fee. Lastly, movies cost from $1.99 to $3.99 with an additional charge of $1 for HD content. So in short, it’s hard to see exactly why a consumer would be compelled to use this service over a Video-on-Demand service from a cable or telco operator.

More boxes, more clutter

Set-top boxes that enable Internet videos to be played on TVs are another area that needs improving. Do customers really want one more device in their homes sitting next to DVRs, cable or telco set-top boxes and other devices? Not only is there more clutter, but some of the boxes have proven to be difficult for consumers to self-install.

And these boxes come with hefty price tags.

Apple rolled out its Apple TV box early last year at a cost of $299 with CEO Steve Jobs plugging the device’s ability to play movies from the Internet on large-screen TVs. To date, the Apple TV box combined with movies and TV shows for sale on iTunes, has been underwhelming. According to a study by Forrester Research released at the end of November, Apple TV sold 400,000 of its boxes since it hit the market in March. This is way below Forrester’s original forecast made in May predicting that one million units would be sold by the end of 2007.

Forrester recently said Apple would be lucky if they managed to sell another 400,000 of the devices during December’s shopping spree. But at least it is less pricey than Vudu’s movie box which also ports Internet movies and other content to TVs and sells for $399.

Despite the confusion over what the added value of these boxes is, ABI Research predicts shipments of 1.2 million Internet video set-top boxes this year.

There are cheaper alternatives, namely DVRs that can cost as low as $100. Amazon’s Unbox allows customers to download movies and TV shows, albeit mostly older ones, for viewing on a DVR.

Another obstacle for Internet-to-TV video providers such as Vudu and Apple TV is that their boxes don’t allow the content to be shared on a PC or moved to other DVRs within a house. Cable and telco operators are working on rolling out multi-room DVR solutions this year.

At last year’s TelcoTV conference in Atlanta in late October, Peter Hill, VP of Converged Services at AT&T Labs Research, said his company has multi-room DVRs on this year’s “to do” list while Comcast said it should have the same service available in select markets later this year.

As for PCs, CableLabs has been working on its OpenCable Unidirectional Receiver (OCUR) initiative that allows consumers to view digital and HD cable programming on their Microsoft Vista-enabled PCs, as well as other devices that are connected on their home networks.

Competing with VOD services

Cable’s obvious advantage here is its existing relationships with Hollywood studios and content providers. Comcast has its own Web portal, channels that include E!, Style Network and Versus, and a Video-on-Demand service that has racked up six billion on demand views in less than four years.

Internet video providers can carve out their own niches for long tail content or try to compete with the Comcasts and Verizons of the world, but the latter strategy will be difficult.

Verizon expects to have 1,000 HD VOD titles in place for customers to view by the end of this year. This includes a mix of newer movies from 2007 along with free content.

Even smaller telcos can get into the mix thanks to a new VOD solution soon to be launched by SES AMERICOM [using NDS technology]. SES AMERICOM hasn’t said exactly what content will be available on its VOD offering, other than revealing that it will include local and national content. But the service will get some telephone companies and broadband service providers into the VOD mix quicker than they would have done on their own.

And winners will be . . .

It’s not going to get any easier for Internet video providers. The cable industry is poised to trial set-top boxes that can connect to the Internet this year, but AT&T and Verizon will probably beat the cable business to the punch.

If I were to pick the companies destined for success in providing video over the Internet, I'd start with Vudu and Hulu. Hulu is a joint-venture between News Corp’s Fox and General Electric’s NBC Universal. This means that all of its viewers can watch the US version of The Office at their own convenience.

According to a review, Vudu has great picture quality, deals in place with more than 20 independent studios and distributors, and allows customers to pay by the movie instead of by the month. Vudu worked around the $399 cost of its set-top box during the holiday season by offering it for free to customers who purchased certain models of Sony HD TVs.

Vudu has also climbed up the movie distribution value chain. Once a movie passes through movie theaters, the usual distribution trajectory is as follows: hotels and airlines, DVD release, pay-per-view TV, premium movie channels, such as HBO, and then to the rest of the world. In December, The Bourne Ultimatum was released through Vudu’s online service the same day the DVD came out. Vudu is also offering HD content

In the end, content will be king. Will providing older TV shows and movies for free through an advertising model be enough to sustain a company?
Probably not.

The providers with the best partnerships for content will survive as long as they can provide value that is currently not being offered by telcos and cable operators.

The equipment needs to be priced reasonably and be easy to install by customers. Sites that can combine user-generated videos with professional video content will also have a leg up.

Let the viewing begin.

Michael Robuck, based in Colorado, has been reporting on the telecommunications industry since 1999.