Who gets there first is the 1990s’ pivotal media battle

The race is on. Consumer electronics companies, cable TV companies and direct-broadcast satellite companies are all gearing to deliver digitally encoded movies to the home–while the telephone operating companies join partnerships to avoid being left at the starting gate.

Has everything. As they say in Hollywood, this story “has everything.”

• It will set the standard for the next generation of physical media: high-density compact discs.
• It will establish transmission of high-bandwidth digital data into the home.
• It will most likely have first call on consumer spending for electronic gear (a sobering thought for people trying to establish a consumer market for interactive multimedia products).
• It will bring the consumer electronics companies, the cable industry and satellite entrepreneurs into direct confrontation–with movie studios in a pivotal position in the middle. (Do not forget, however, that two of the major studios are now owned by consumer electronics companies.)
• It is certain to raise sticky copyright, intellectual property and copy-protection issues.

WHO NEEDS IT?

The consumer. The new compressed digital video technology could raise picture quality on current NTSC and PAL receivers to something closer to the quality of broadcast studio monitors–a striking improvement over both VHS tape quality and what most people now receive over the air or down the cable wire.

Consumer electronics firms. For consumer electronics companies, a new generation of compact discs and CD players should provide a much-needed boost. The consumer electronics industry is driven by finding new technologies to create new waves of demand.

Direct broadcast satellite entrepreneurs. For direct broadcast satellite entrepreneurs, on-demand delivery of movies to the home is the pivotal service that will attract consumers to a new television service–and the number of channels required to provide this service is practical only with digital technology.

Cable operators, too. But cable operators are also entranced with providing much the same kind of service. For them, “pay-per-view” delivery of movies and special events appears to be the best chance they have of increasing their revenues now that growth in new connections has leveled off and local governments are increasingly reluctant to grant cable rate increases.

“Pay-per-view” works best when cable operators can offer lots of channels (so that they can provide a wide choice of movies and starting times). Again, digital is the way to go.

Don’t forget movie studios. Finally, movie studios are well aware that total receipts from video rental of movies now outpace box office receipts. A pay-per-view system could allow the studios to collect a fee from each home viewer, just as it does from each theater attendee.

MOVIES ARE THE KEY

For everyone concerned, movies are the key. Movies are what built the video tape industry. Movies are the bacKBone of most cable programming. Movies are almost certain to be what drives the next video revolution.

MPEG. The factor that has brought all this into focus over the past year has been the rapid evolution of the Moving Pictures Experts Group standard for digital video compression. The MPEG standard is now virtually certain to be the digital encoding scheme used for recording movies on CD. It is likely to be used for most cable and direct-broadcast satellite systems as well.

Video on audio CDs. Most of the effort thus far has been focused on compressing digitized NTSC or PAL video sufficiently to fit onto the current generation of compact discs. This means that there is approximately 1.2 Mbits/second to convey full 30-frame-per-second NTSC or 25-fps PAL video–which requires something more than 100:1 data compression!

Like all high-compression procedures, MPEG is a “lossy” compression scheme–the more you compress a video stream, the more quality you lose. At low levels of compression, the loss is undetectable. At very high levels, you lose color definition, sharpness and smooth frame-to-frame motion.

The quality of 100:1 MPEG compressed video has improved enormously the past year. Even so, almost no one believes that it will ever be mistaken for original studio-monitor broadcast quality. The consensus is that you should expect an image equivalent to VHS quality.

Needed: improved quality. This is certainly adequate for interactive multimedia applications such as CD-I. But it does not provide any incentive for consumers to abandon VHS tape as the preferred medium for movies. This would take a significant improvement in quality–which can be achieved easily by moving to a new generation of high-density CDs that have, say, two or four times the data storage of current CDs and appropriately higher data transfer rates.

High-density CDs could be completely backward compatible with existing audio CDs. They could be a real boon for read-only computer storage and for interactive multimedia.

Cable delivery. The same compression techniques and the same data rates would work equally well for delivery of movies over cable. Moving to digital transmission would also allow cable operators to deliver higher-quality video to subscribers. Far more important from the cable operators’ point of view, it would allow them to send several times as many channels over existing coax wires–and many times as many signals over fiber-optic cabling.

This ability, coupled with the ease of scrambling and de-scrambling digital signals, makes possible multiple copies of the same movies with staggered start times. Viewers who want to see a movie will no longer have to go to the video store to rent it. They will be able to select it from a menu presented on their screens, and wait a few minutes for the next start time. They will be charged via their monthly cable bill.

Direct broadcast satellite. This is exactly the same scenario envisaged by companies such as Sky Pix that propose to bring on-demand movies to the home via direct broadcast satellite. Although Sky Pix is proposing to use a simpler compression scheme than MPEG, anyone starting to plan for such a service now would surely choose the MPEG route instead.

THE RACE IS ON

The threat of competition from direct broadcast satellite services is a powerful spur for cable operators to move as rapidly as possible–and vice versa.

Both would like to make significant inroads into the video rental business. Both will try to convince the movie studios that this could be an important new source of revenue for them as well. Meanwhile, the consumer electronics giants are racing to come up with a new and better medium for video sale and rental.

We will be exploring different aspects of this confrontation over the coming months and years: video compression technology, developments in cable and direct broadcast satellite, the role of the telephone companies, high-density CD technology, and so forth. In fact, the August issue will detail a proposal by Sun Microsystems’ VP of technology, Andy Bechtolsheim, which drew an enthusiastic response at this year’s Digital World conference.

WHAT ABOUT HDTV?

Analog high-density television (HDTV) was supposed to be the technology that would sweep the consumer electronics industry forward into the next century. Many people in Japan and Europe still believe that it is. However, it is now apparent that HDTV is a number of years off in the U.S.–and when it comes it will be digital, not analog.

The Japanese have tried for years to “jump start” analog HD. As mentioned in the June issue of Digital Media, the Europeans are now trying to do the same. Thomson and Philips agreed last year to invest a total of $3.2 billion in the project. Last month, the European Commission allowed the French government to give Thomson another $430 million to help cover its share. This will bring the total, direct HDTV subsidy to Thomson to a half-billion dollars.

Digital is faster and easier. But HD of any sort is going to be expensive for many years to come. And, because it requires so much bandwidth, analog HD is going to be difficult to transmit over the air, over cable, or via satellite. Digital implementation of standard, “low-definition” television is likely to come much more quickly and much more easily.

Even better would be digital “medium-definition” TV, part of Andy Bechtolsheim’s proposal that you’ll read about next month. In his speech to the Digital World Conference, Bechtolsheim proposed a wide screen format for digital movies, which could be easily implemented and which could coexist with current NTSC and PAL TV. We will have more of the details in our next issue.

Jonathan Seybold