Quality! Who Cares? Give Me Choice.

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TDG Opinions

Quality! Who Cares? Give Me Choice.

Colin Dixon, Practice Manager, IP Media

July 26, 2007

Barely a day goes by without a wide variety of companies announcing new or enhanced online video offerings. For example:

* CBS announced it will be syndicating its shows across hundreds of web properties;

* The National Hockey League announced it will be streaming hockey games on the Internet using Neulion's iPTV platform; and

* Charter Communications announced it is adding loads of video to beef up its Internet portal.

And that's just last week's "major" announcements.

Perhaps more interesting is that the majority of these announcements deal with bringing mainstream television shows to the Internet, not simply more "video snacks" of the YouTube variety. Content providers have clearly decided that the Internet is a "good enough" delivery vehicle to reach the 132 million Americans who were watching Internet video in May.1

As I stated in my recent report, Broadband Video: Redefining the Television Experience, the arrival of such high-value video on the television screen was inevitable. And the signs that this is happening are now all around us. Only recently Netflix announced it would provide a simple set-top box to all users of its "Watch Now" service2 so they could stream Internet video to their TV without using a PC. As well, TiVo announced it would deliver Amazon's Unbox video library to its subscribers, bringing a true Internet-based movies-on-demand service to the living room. These co mpanies are not alone. With similar services already in operation by companies such as Microsoft, British Telecom (BT), and AT&T, Netflix and TiVo are simply responding to rising competitive pressures and the growing demands of their customers.

Despite this momentum, there remains a sizeable group of naysayers, many of which continue to be concerned about the quality of Internet video. Given the impending analog switch off, burgeoning sales of HDTVs, and a growing catalog of HD shows, one could be forgiven for asking whether the Internet can deliver the quality necessary for mainstream acceptance. However, rather than plunge into a debate on the quality of Internet service capabilities or current codec technologies, perhaps it is better to question the question of quality itself. Simply stated, is quality relevant at all?

How can I possibly pose such an outrageous question? You may be thinking "What's he been drinking?"

Actually, nothing, and the truth behind the question seems to me pretty solid, and here's one good reason why I feel this way. I recently signed up for AT&T's Homezone TV+HD service and now have access to more than 30 HD channels (through Dish Network). Just last night, my teenage son and I sat down to watch TV. While watching some soccer (which looked great in HD), he got up and wandered over to the computer. After a few minutes, I went over to see what he was up to and, to my surprise, he was watching an episode of How I Met Your Mother he had found at alluc.org. The video quality appeared poor (certainly when compared to HD soccer) and it had Japanese subtitles. But that didn't seem to matter to him. In his mind, he simply wanted to watch another show regardless of the quality of the video. For him, choice trumped quality.

Chris Anderson, Wired Magazine Managing Editor and author of The Long Tail, expressed precisely this thought last December at Cisco's C-Scape when he said that people will take choice over quality every time. In his words: "Choice always trumps quality." For my son, clearly this was the case. But is there evidence that this is more generally true?

Orb Networks recently did an informal survey to gauge their user's feelings on the issue of choice versus quality. Hervé Utheza, VP & GM TV Properties at Orb3, presented some of these findings at iTVCon just last week. Although his sample size was very small (only 231 respondents), the results certainly seem to support Chris Anderson's statement.

When asked to make a choice between TV image quality (HD or non-HD) or choice (thousands of channels versus a dozen), 76% went for choice. More telling, however, is that when asked to choose between the restricted channels and tiers of cable and satellite TV services or being able to choose what they want to which even if the quality is not HD, 89% went for choice. Only in the content categories of sports and movies did people begin to weigh quality as highly as choice.

So in 2011, what will the 100-million broadband TV households4 be watching on their LCD HDTVs? Alongside their HD sports and movies, you can be sure that a whole lot of Internet video will be viewed from the comfort of couch. Although by then I expect much Internet video to be SD-quality or better, I also expect much of it will not be. And for the people that are interested in watching that content, quality will not matter.

Those naysayers who keep screaming about "video quality" are beginning to sound like those guys who kept saying their vinyl records sounded far better than CDs. While they are sitting on the sidelines suffering bellyaching about "greater quality," the rest of us will be laughing it up, enjoying the incredible variety of sitcoms on the web. In the end, it won't be the grainy video quality we remember; it will be the one-liners that stick.

1 Comscore Video Metrix, 3 Out of 4 U.S. Internet Users Streamed Video in May, July 17, 2007

2 Reed Hastings, CEO Netflix, as reported by Jennifer Netherby, Video Business, May 23, 2007

3 As well, Mr. Utheza remains an adjunct analyst with The Diffusion Group.

4 Broadband Video: Redefining the Television Experience (The Diffusion Group, January 2007)

About The Diffusion Group (TDG):

TDG is a research and professional services firm helping clients deliver better products and services in the new media and digital home markets. Using a unique blend of consumer insights, executive-level consultants, and hands-on technical experts, TDG generates reasoned and pragmatic insights that help clients make more intelligent market decisions. TDG produces more than just research - we create Intelligence in Action®.

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