Back in 1994, NDS was keenly involved in shaping the introduction of digital technology into the existing pay-TV and public broadcasting models. It was a time when there were a lot of questions about how this emerging technology would change the pay-TV business.

Today, the digital TV industry is experiencing another of these transitions. New technologies are forcing broadcasters to re-think their strategies for content distribution and to ask where their potential audience now wants to consume and interact with their content. These changes are accelerated by evolving social factors.

Different devices for different people

Members of the so-called “Generation M” -- people currently in their teens -- are going to have a changing relationship with free-to-air broadcasters and may take a long time to become customers of established pay-TV operators. Why?

Basically, "Generation M" has neither the strong need nor the ability to subscribe to traditional platforms that tie them to a physical location. They do not own or control the property they reside in, nor do they expect to do so, even 10 years from now.

Instead, this generation is growing up with the ability and expectation to access services wherever they are, relying on whatever is available. Traditional TV and radio will feature on the list of devices they use, but increasingly they will opt for the convenience of mobility and the appeal of a device that is personal to them. While the cell phone may be the perfect solution for some, it is likely that other devices tailored to business or media will also succeed. Manufacturers of games consoles, portable media players and flash memory storage devices all have their eyes on this market.

Generation M already shares content among themselves freely (usually illegally), because they do not strongly associate content with physical media. To members of this brave new generation, content is but part of a constantly updated ecosystem that includes music, TV, video content, email and social interaction.

The combination of these trends could result in a Doomsday scenario for traditional pay-TV broadcasting and the continuing fragmentation of a free-to-air TV audience. Both of these traditional models depend on fixed location viewing, so most content owners are already attempting to find new ways of delivering content to their future audiences. One of these is the delivery of live broadcast TV and Video-on-Demand services over the public Internet. This is an area that NDS considers to be important.

Making Internet distribution pay

The relative cost of content distribution over the Internet is currently running at about $.20 per Gigabyte (delivered globally within an hour). Although this price will probably halve in the next 12 months, advertising has become the dominant method of covering the incremental distribution cost. Only when the audience grows to tens of thousands of people does subscription become viable.

While TV advertising revenues on free-to-air channels are either flat or in decline due to fragmentation in the audience, Internet TV ad revenues are growing, largely because the audience can be targeted more directly. But video advertising in this domain is still in its infancy – click-through and banner advertising still dominate.

So how does NDS plan to enable this kind of content delivery? Our prime target is to provide an infrastructure to address broadband enabled set-top boxes and then extend this to the PC and any other Internet connected device. Via NDS xSPACE™ we will support the efficient delivery of targeted advertising, whether it comes from an operator’s existing advertising inventory or from third party suppliers. Advertising formats will not be limited to traditional video ads, but will exploit new ways of linking the advertising experience to viewing.

xSPACE™ brings the best video content seamlessly from the Internet to the TV, and it also enables platform operators to combine and mix the services they offer across a variety of devices. Sometimes the devices will be used simultaneously (e.g. the PC and TV with a dual-screen experience), but even if used separately we aim to deliver a user experience which improves convenience and access wherever they are.

New world, new content security challenges

With more and more legitimate content available to people on the move, it is easy to think that content owners don’t care about where their content is being viewed. While for broadcast use, the geographic rights are already sophisticated and complex, Internet distribution rights have been relatively unsophisticated. In many cases, this was because the content was seen as being of low value and not a significant threat to mainstream broadcast TV.

Clearly, this situation will have to change if the ability to deliver a broadcast experience over the Internet becomes commonplace. However, there’s a problem. Philosophically and technically, this type of rights management challenge is just not built into the infrastructure of the public Internet and, in fact, not in many private content distribution networks either. Peer to peer technology has engaged designers of IP routing in a cat and mouse game of deep packet inspection, but this has been less about controlling content and more about limiting and shaping bandwidth.

The content protection and access problem for video is therefore going to get more challenging, not less. And yet, some would say that it should go away entirely, by allowing the free passage of content and therefore potentially increasing the overall market.

His Master’s Voice: a trusted guide?

When Steve Jobs (CEO of Apple) made his widely quoted statements about the fact that DRM was blocking the growth of online media, he did so at a time when audio CDs had no content protection. While many people would say this statement was also made in the confident knowledge that only Apple would be able to benefit from the vertical integration of iTunes with iPods, it is also deeply connected to the way audio content rights have been granted for years.

Unlike music, video is typically at its highest value when first viewed; it doesn’t become more valuable with repetition. Therefore, owners of video content are forced to maximize the first run value, and in some cases this can be 80 percent or more of the total revenue from a particular property.

NDS sees the deep integration of content rights management with distribution networks as a key enabler for the business of TV on the Internet. In the future, it will be necessary for content owners to know where their content has travelled, and to ensure the rights they have negotiated with one platform are not eroded by the actions of another.

Putting it all together

It seems that new video services with worldwide reach are being launched every week. Many will probably not succeed, but some will, and they will start to change the expectations of the TV audience. NDS is building on its experience in service protection and set-top box middleware to enable this future. Working within the domain of the Internet presents a set of technical challenges. But these are challenges which, thanks to our expertise, NDS is well equipped to take on, to the benefit of the operators and their customers.

If you want to know what keeps the Hollywood majors awake at night, it’s Internet piracy and illegal DVD-burning – particularly in Europe. Look no further than the European website of the Motion Picture Association of America.

“The key piracy issues in Europe are Internet piracy, particularly illegal downloading from P2P [peer-to-peer] systems, imports of pirate DVDs from Asia, the manufacture of pirate DVDs in Russia and their export to other European markets, and increased burning of DVD-Rs and CD-Rs in countries across the region.”

Internet piracy in Europe

In fact, the MPAA warns that “Internet piracy is growing at a faster rate in Europe than anywhere else worldwide.” They attribute this dire state of affairs to “rapid broadband take-up, weak laws in certain instances, and lenient public and official perceptions.” Note that pay-TV theft doesn’t even warrant a mention.

One might reasonably expect the studios to require a secure technical approach to content protection in the PC/Internet environment that mirrors the one required by pay-TV systems. Paradoxically, this does not appear to be the case.

Take as an example the emerging “legitimate” broadband movie downloading services operated by Europe’s two most prominent pay-TV operators, BSkyB and Canal+. The Hollywood studios happily allow variants of cardless systems such as the Microsoft Windows DRM to protect their premium movie content.

When is software security appropriate?

There is reason to be less concerned if it is only the content that is being protected and not the means of distribution. Hence a system to protect content stored on a device with no connections to the outside world might be able to afford to be relatively weak, whereas a satellite signal must be strongly protected.

It is abundantly clear that piracy of content on the Internet is a significant problem. In addition, the experience of software-based systems indicates that it would not be wise to enable copying between devices that are connected to the Internet without using that same connectivity to enhance the security of the system if it is not possible to use a hardware-based security solution.

Security for download services

It is strange that in the absence of any such security measures, Hollywood studios seem quite relaxed about the PC and Internet environment. Thus Canalplay, the download service offered by Canal+, uses a version of the Microsoft DRM to support the porting of downloaded movies to a portable media player (PMP). The same service supports a download-to-own model which allows the purchased movie to be recorded onto a DVD – a technological process which, according to the studios, embodies at least one of the most potent sources of film piracy -- DVD burning. Connect the PC to a peer-to- peer network and distribution is also enabled.

Following this logic of acceptability, if it’s permissible to copy content between a PC and a portable media player, then copying and distributing content from a set-top box would pose no problems for the studios.

In fact, no such digital copying facilities are offered by either BSkyB or Canal+ through their digital TV set-top boxes, despite the enabling technologies having been demonstrated by conditional access providers for several years. Indeed, in the world of pay-TV users may be barred from storing or recording content even on a VCR, let alone connecting a set-top box to a PC.

Whether or not this is at the studios’ insistence is anybody’s guess. But the evidence indicates that the major players in Hollywood exhibit unwarranted paranoia about premium content “leakage” from set-top boxes – when these devices appear to be far more controlled and protected than PCs which are connected to the Internet.

Take the issue of the “analog hole.” This is where a digital television set-top box includes an analog output which could be used to feed an allegedly high-quality video stream to a PC for subsequent illegal copying and distribution.

According to Jim Williams, the MPAA’s Vice President of Television and Video Systems Standards, in an interview with New Media Markets, “European pay-TV operators that choose to include unsecured, high-definition analog outputs on their HD set-top boxes will likely disadvantage themselves when negotiating to provide high-value content to their customers.”

The logic is difficult to understand considering that many European PC download services are allowing the downloading of HD movies onto PCs, but the MPAA doesn’t seem to be pressing for the banning of analog outputs on PCs.

Surely the studios are being inconsistent. By definition, a stolen analog pay-TV copy is less of a piracy threat than an illegal digital copy downloaded to a PC and burnt to a DVD or distributed using one of the many peer-to-peer systems. Nevertheless, Hollywood insists on a stronger approach to security on the former than the latter.

Time to look at security again?

This differential approach is puzzling. One can argue that pay-TV penetration is higher than broadband PC penetration, so it should be subjected to stricter controls.

According to the MPAA’s figures, pay-TV theft isn’t what costs the studios the most money; the Internet and DVD piracy do. Research it commissioned last year found that the major US motion picture studios lost $6.1 billion to piracy worldwide in 2005. Sixty-two percent of that loss resulted from piracy of hard goods such as DVDs, and 38 percent from Internet piracy.

Broadcast pay-TV systems also face increased risks as the Internet comes to the living room and with it a much increased threat from attacks such as “control word” distribution. It is probably time to re-examine the security models everyone has become so familiar with and to take advantage of the very connection that brings both new content – and new threats -- to the home.

It’s about time to take notice of the elephant in the room.

Barry Flynn is Principal Consultant for Farncombe Technology, a UK consulting firm offering expertise in pay-TV conditional access technology.

Hush, be still, can you hear it? From the corner of the room there is a hum coming from the set-top box. Initially I thought it might have been the hard drive, but advice from the CTO of one Europe’s leading box manufacturers was that it was not the disk, but the fan placed in the box to keep it cool.

The box in question is a Sky HD unit, one of three types of boxes subscribers can select according to their needs. Actually, when every variation is taken into account, there are in fact several dozen models to choose from.

The successful Sky formula of a basic receiver, digital video recorder (DVR) and HD-capable receiver is replicated by pay-TV operators the world over, though at present the inclusion of a DVR as a feature of the HD box is less common. Operators in continental Europe, where the retail model is beginning to displace the rental model on high-end boxes, have chosen to omit the DVR element in order to get the boxes to market more quickly.

The premise of the Triple Play offer has traditionally been three disparate services: usually TV, telephony and broadband. But until recently, other than being communications services, there has been little to link the three. But the operator is looking to “own” the home and the growing connectivity between this trio of services is beginning to make this possible. Mobile is starting to emerge as a fourth service, not just for established pay TV operators, but for telcos that already offer both mobile and IPTV.

What happens to “old” STBs?

When the shiny new HD box is purchased, chances are that it is replacing an older box which has just been removed from under the TV set in the living room. Moving this box to a second or even a third set elsewhere in the house may give the service provider the opportunity to derive some additional revenues. Such decisions become all the more important for the consumer as Europe goes through digital switchover. There is already evidence that in some markets digital terrestrial television is being deployed on these second and third sets.

It may seem hard to believe that some of the newer boxes have a near identical look and feel to those that were introduced with the arrival of digital television a dozen years ago. Of course there is a need to explain to the customer exactly how their box works without adding in numerous sub-clauses relating to each STB model.

The success of Universal Electronics’ Sky remote that it integrates both set-top box and television set, indicating how important it is to have that element of familiarity. In fact, many of the major platform operators – including Sky Italia and FOXTEL - offer a remote that works with any STB.

Twelve years ago, set-top box graphics took a leap forward from the black strips and captions that looked as if they had been laid out on a manual typewriter. They matched the graphics of the news and sports channels which were also emerging at that time.

Fast forward to the present and those same channels are not capable of putting up even the most basic captions without the sound effects department becoming involved.

Look and feel needs to catch up

The look and feel of the EPGs and menus on many set-top boxes is the same as it was 12 years ago. It seems that operators keep graphics and EPGs frozen in time to accommodate the performance of older boxes. The difficulty they face is that they would be unable to introduce new features just for new STBs without disenfranchising large sections of the installed base.

It is possible that the technology is beginning to settle down just enough to allow platform operators to draw a line in the silicon and say this is where they want to be.

BSkyB is in the process of purchasing Amstrad and gaining further insight into the world of the set-top box. And in the US, Echostar ran a satellite receiver business long before it became a broadcaster.

Multiple tuners, and more significantly perhaps, dual video and audio outputs, might soon be a standard item in the platform operators’ armory. Add to this the growing regulatory approval of Ultra Wideband (UWB) technology and the multiroom concept becomes even more attractive – particularly as the amount of wiring needed to connect everything would be significantly reduced.

Ofcom, the UK communications regulator, just approved the usage of Ultra Wideband this summer. UWB opens up the possibility of up to 2Gbit/s of data being transferred between personal computers, DVD players, set-top boxes and digital cameras.

Although the distance capabilities are relatively similar to those used by the established Bluetooth™ technology, the data capacity is far greater. UWB equipment operates across the bands between 3.1 and 10.6GHz.

UWB is already exempt from licensing in the US and Japan, and the UK regulator has been involved in negotiations with other European countries which are expected to lift their own licensing requirements in the next few months.

So the elements are coming together, and there are many more technologies around that the home can be inter-linked so that the networked home --managed by a single connected platform -- is now a reality.

Julian Clover is Editorial Director and European Digital Analyst for Broadband TV News.