(Another) One bites the dust: Boxee sold to Samsung

Yesterday, over-the-top Internet set-top box maker Boxee confirmed that it had been acquired by Samsung. The rumored acquisition price was around $30 million--about the same amount as the company raised in venture financing, meaning that at best, investors got their money back. According to VentureBeat, Boxee will continue to support owners of Boxee Box and Boxee TV devices "for the immediate future," but Boxee's Cloud DVR service will be discontinued on July 10th and recorded television shows will be deleted.

Samsung has been one of the biggest potential customers for set-top box technology companies such as Google and Roku. Now, it's very likely that Samsung will integrate Boxee's technology into future HDTVs, Blu-Ray players and other devices. For Roku in particular, the number of companies that are both likely to integrate its technology into their devices and are big enough to represent a major business opportunity are dwindling. Sony and Vizio are already Google licensees, and Samsung is now on board with Boxee. Panasonic, Sharp and LG are still in play, but beyond them, the remaining players are second- and third-tier brands.

I'm still not convinced that there's a broad market for standalone Internet set-top boxes. Boxee couldn't find one, Google's licensees are struggling, Apple TV is supposedly beyond the "hobby" stage (but not far beyond) and Roku is putting more emphasis on its "streaming stick" and software licensing deals than its set-top boxes. As much as I like the idea of over-the-top video, unless Apple or Intel can come up with something both revolutionary and highly desirable, Internet video will remain a "second screen" application for PCs, tablets and smartphones.

D-Link "plays the field" with a Yahoo Connected TV set-top box

Last week, D-Link announced a deal with Yahoo to implement that company's Connected TV in a set-top box. The D-Link/Yahoo set-top box will sell for less than $200 (U.S.) and will ship in Q2 2011. This is in addition to the D-Link Boxee Box that was released in time for last year's holiday season.

One of the major features of the latest version of Yahoo's Connected TV is its ability to integrate and interact with content coming from broadcast and cable networks. For example, at CES, Yahoo demonstrated the ability to overlay polls on live content from CBS and Showtime. For that to work, the video from a user's cable, satellite or IPTV box will have to go through the D-Link/Yahoo box. It's the same approach that Google TV uses.

Rafe Needleman of Cnet suggests that the Yahoo box shouldn't be priced much more than $49, because it doesn't offer much in the way of new content. As for D-Link, it's clearly hedging its bets on who will be the set-top box winner, but it's also adding to consumer confusion: When a customer goes into, say, Best Buy, will they be able to figure out whether to go with the D-Link Boxee or Yahoo boxes? My suspicion is that this isn't the last Internet TV system that D-Link will support.

Internet TV will turn your next HDTV into a set-top box

Ryan Lawler of NewTeeVee has written an excellent post about how the just-concluded Consumer Electronics Show demonstrated that HDTV manufacturers have become the new consumer gatekeepers, and cable (as well as satellite and IPTV) operators are just another content option. This is thanks to the Internet TV functions built into almost all of the major-brand HDTVs introduced at the conference. Some manufacturers, such as Samsung, Vizio and Sony, have licensed Internet TV technology from Yahoo, Google and/or Boxee. Others, such as Panasonic, have developed their own Internet TV systems.

Lawler's argument is somewhat premature, in that only a small minority of installed HDTVs have Internet TV capabilities, and sales growth in the U.S. market has slowed to only 1% per year. Nevertheless, it points out a "blind spot" in many industry observers' thinking (including my own). The focus to date has been on set-top boxes from Apple, Boxee, Google, Roku, etc. The argument has been made that most consumers won't add another set-top box to the one they already have from their cable, satellite or IPTV provider.

Last year, the U.S. Federal Communications Commission proposed a new set-top box design called AllVid that would combine the functionality of service provider and over-the-top set-top boxes in a single device. However, Internet TVs don't require a separate set-top box for over-the-top Internet video, and as Lawler points out, consumers' incumbent multichannel video services show up as one of many content choices, including Netflix, Amazon on Demand, Twitter, Pandora and other services. These Internet TVs accomplish most of the goals of AllVid without requiring any changes to existing set-top boxes.

On the other hand, just as there's currently a lot of consumer confusion about how to choose among Apple TV, Boxee, Google TV, Roku, Vudu and other over-the-top set-top boxes, there will be confusion about the Internet TV services built into the new HDTVs. That's in addition to the existing confusion over HDTV resolutions, refresh rates, backlight technologies and 3D technologies/formats, all of which may be enough to stall consumer adoption. I don't think that there's a chance that we'll see any real standards, either de facto or imposed by the consumer electronics industry, to lessen the confusion. It will take several years for technologies and formats to shake out.

Sooner or later, however, most HDTVs will be Internet-enabled, and at that point, the third-party set-top box argument will be moot. The real challenge for the current set-top box vendors will be to get their systems integrated into HDTVs. Yahoo is in the lead today, but with strong competition from Google and Boxee, it's not likely to keep it over the long run.

Comcast's Xcalibur: Another race back to the past?

Light Reading has published an article about Comcast's new Xcalibur service, which is in an early test in Augusta, GA. The details of the service are still sketchy, but it appears to be a hybrid web-to-TV set-top box codenamed "Parker", possibly the one under development in Comcast's Seattle labs that I wrote about last year. According to Light Reading's sources, Xcalibur is a "managed over-the-top" video service that's designed to compete with offerings such as Apple TV, Boxee, Roku and Google TV while keeping subscribers inside the Comcast tent.

Xcalibur is said to offer a limited, hand-picked selection of websites and video services. It's yet another "walled garden" approach, and it's very likely that you won't find any content on Xcalibur that's competitive with any of Comcast's existing services.

It's true that the other over-the-top video services are also walled gardens to some extent, but with the exception of Apple TV, that's not because they're deliberately closed off. It requires some development work, but anyone can make their video content available on Boxee, Roku or Google TV. In the case of Boxee and Google TV, they want to offer even more web video content but are actively being blocked.

If you want to envision what Comcast could be doing, consider France's Free. Earlier today, Engadget wrote an article about a new over-the-top IPTV set-top box that's been launched by France's Free (Iliad) Internet service, the Freebox 6. Here's what the box has:

• 250GB hard drive
• Blu-Ray drive
• 802.11n WiFi adapter
• HDMI output
• 3D support
• Built-in DECT adapter for wireless telephones
• Web browser
• Motion-sensing remote
• Joystick
• Two powerline Ethernet adapters

Depending on whether you're a new or current Free customer and how long you've owned your previous Freebox, the cost will be between 60 and 120 Euros (approximately $80 to $160), and monthly triple-play service will be 29.99 Euros/month ($40.14). It offers all of Free's 154 basic video channels at that price, and 213 additional channels on higher tiers.

Comcast, and virtually every other U.S. multichannel video service provider, is driving to the future while staring in the rear-view mirror. A walled garden approach won't fly, but you wouldn't expect anything more from a company whose most exciting recent development is an app that turns an iPad into a remote control.

Episode 3 of The Feldman File Videoblog

Episode 3 of The Feldman File videoblog has been posted below--if you can't view it here, you can watch it on YouTube. This week's episode covers:

• Sony U.K.'s announcement of the PMW-F3 "budget" professional camcorder with Super 35mm sensor
• Boxee's introduction of the Boxee Box, the forthcoming version of Boxee's software and new content partnerships
• Kno's announcement of prices and an availability date for its single- and dual-screen eBook readers for the higher education market

Logitech's Google TV set-top-box price and availability date announced

According to Engadget, Logitech has announced that its Google TV set-top box, the Revue, will be priced at $299 in the U.S. and will ship on September 29th. Dish Network subscribers can purchase a single Revue at a discounted price of $179. My suspicion is that Logitech is going to have a very tough time of it this holiday season.

The Revue was clearly designed to be competitive with the last-generation Apple TV, but the new version, which will be shipping at about the same time, will be priced at $99. Roku's current-generation set-top boxes run from $59.99 to $99.99, although they have new-generation models in the pipeline that may be more expensive. Boxee's Boxee Box by D-Link has a $229.99 list price, but Amazon has it available for pre-order at $199.99.

Looking at the Logitech Revue's price, I don't see how it competes in the current environment. By basing its architecture on Intel, Google automatically made its partners vulnerable to price competition from companies using ARM processors, and that's exactly what's happening. If the price point for a viable add-on set-top box drops to $199 or less (and especially if it drops to $99), I don't see how Google TV set-top boxes will be able to compete without subsidies.

The set-top box Tower of Babel

A company called Dyyno is offering to create your own channel for the Roku set-top box, or you can run your video content on their existing channel. If you want your own channel, they'll charge a one-time fee of $7,500, plus a monthly usage fee starting at $149 for 1,000 viewer hours. If you're willing to run your content through their channel, you'll pay only the monthly usage fee.

Roku has its own developer program, which costs nothing to join, and its own SDK. If you've worked with JavaScript, you can probably figure out how to create your own channel without paying $7,500 and being locked into a single online video service. However, once you've developed your Roku channel, it won't work on Boxee, Popbox, TiVo, Google TV, or any of the myriad Internet-connected Blu-Ray players and HDTV receivers. Each one of those platforms has its own SDKs, and each one requires a separate development effort.

That's why I developed the Capstan Content Syndication (CCS) format. CCS is a free, open source, XML-based format that does for live, scheduled and on-demand video content what RSS does for fixed content. It also provides the hooks necessary for authentication, monetization, search and recommendations. If the set-top box companies support CCS, content providers will be able to use the same feed and format for a variety of different devices and platforms. It will dramatically decrease the cost of making video content available, and will get many more channels onto many more devices.

I'll be presenting a session on CCS at the Open Video Conference, to be held at the Fashion Institute of Technology in New York City on October 1st and 2nd of this year. There's more information on CCS at the Klemfarb website, and you can download the spec and participate in the definition process at the project's Google Code site.

TV Everywhere = restraint of trade?

I just finished reading BusinessWeek's article from a couple of weeks ago on TV Everywhere. It gives the history of TV Everywhere as essentially a deal between the two largest US cable operators, Comcast and Time Warner Cable, to control distribution of video content over the Internet by limiting its availability to existing cable subscribers only. It also documents the difficulties that alternate distributors such as Netflix, Boxee and Sezmi have had in striking deals for cable and movie studio content, and points out that Sezmi has actually had to pay more than the cable operators for some content, even though it still has miniscule market share. It wraps it up with a few quotes from content providers saying that they'd be crazy to do deals with alternate distributors for fear of angering their largest customers, the cable operators.

Anyone who knows anything about U.S. antitrust law would see a host of red flags in the first paragraph of this post. The two largest cable operators colluded to prevent competition from Internet content distributors. Brian Roberts, the head of Comcast, had to be dissuaded from trying to force the individual content providers to shut down their own distribution sites. Alternate distribution services are at a competitive disadvantage because they can't get most of the content available to cable operators and have to pay more than cable operators for the content that they do get. The content providers confirm that they're holding back their content from alternative distribution channels to avoid retaliation by the major cable operators. So we've got collusion, restraint of trade and price fixing.

Time Warner and Comcast don't get out of the collusion charge because they don't directly compete with each other, since they were working together to limit mutual competitors. The cable networks and movie studios are in it up to their ears, and Comcast is trying to buy control of NBC Universal, which will give them even more control over cable programming and, for the first time, motion pictures and over-the-air services as well.

If I were with the U.S. Department of Justice, Federal Trade Commission or one of the companies named in the article like Netflix, Boxee and Sezmi, I'd be salivating over the opportunities for criminal and civil antitrust action. TV Everywhere, initially envisioned as a technique for the cable companies to take over control of video distribution on the Internet, may end up being the "step too far" that ends the cable companies' monopoly over video content distribution to homes.

NBC Universal: We make it up as we go along

In Congressional hearings today, NBC Universal and Comcast answered questions about how their merger would affect the supply of programming to competitive outlets, among other topics. During questions, NBC Universal Chairman Jeff Zucker was asked about Hulu's decision to block the ability of Boxee to display its programs. It's important to remember that at the time of the dustup between the two companies, Hulu was owned by NBC Universal, News Corporation and Providence Equity Partners (Disney subsequently invested in Hulu.) Therefore, any decisions that were made weren't Zucker's alone. However, responding to direct questioning, he said that the decision to block Boxee was made by Hulu's management because Boxee was "... illegally taking the content that was on Hulu without any business deal."

The problem with this statement is that it's wrong on both counts. First, Hulu's management has admitted that it was pressured by its joint venture owners, including NBC Universal, to block Boxee. Second, at the time that Boxee was displaying Hulu's content, it was using the same facilities that Hulu made freely available to anyone. Boxee wasn't stripping out any advertising in Hulu's streams or interfering with the streams in any way. Hulu specifically targeted Boxee in denying it service. Then, when Boxee attempted an end-around by using Hulu's freely-available RSS feeds, Hulu blocked them as well.

I wrote earlier about Zucker's cowardice in how he blamed Jeff Gaspin for the disastrous late night "musical chairs" plan at NBC. Now, Zucker is hiding behind Hulu's management (that acted at Zucker's direction) and is accusing Boxee of illegal behavior that never occurred. Boxee has responded to Zucker's charges and has linked to a video of the Congressional Q & A. I've given up on trying to comprehend how this man has managed to keep his job. All I can say is that Jack Welch is spinning in his grave, and he isn't even dead yet.

Hulu Part 2: At war with everybody

Paul Yanez, a talented developer who had previously written a clone of Joost as a Flash application, recently released a program called MyMediaPlayer to provide a desktop interface for Hulu. This app uses Hulu's published, public specifications for accessing and displaying videos. It uses the Hulu player, doesn't strip out any advertising, doesn't introduce any advertising of its own and is free. Nevertheless, Hulu has repeatedly come up with ways to block MyMediaPlayer, and it appears that after five rounds of reworking the application in order to get it working again, Mr. Yanez has given up.

In the same vein, Boxee was able to reestablish support for Hulu by connecting to that company's RSS feeds, the same feeds used by Internet Explorer, Firefox and Safari. Nevertheless, in just a few hours, Hulu blocked Boxee's access to its RSS feeds. As I write this, Boxee claims that it has worked around Hulu's changes and can again access the RSS feeds. Perhaps the best thing that Boxee could do is to change its browser user agent to look like Internet Explorer, so that Hulu would have to effectively shut down the RSS feed to block Boxee.

I don't know why Hulu is doing this, but it's only making itself look idiotic. All of its blocks will eventually be worked around, and its content isn't so precious that it's only available in one place. As I've written before, its actions are encouraging, rather than discouraging, piracy. Every time I see one of its commercials, I see a company that doesn't get it trying to act cool. Perhaps the people who called the company "ClownCo" weren't wrong, just premature.

Hulu--get successful, shoot self in foot

It's a common story--start-up that initially isn't taken seriously by either its competitors or the industry in general, delivers a great product and turns the industry's perception around. In order to get distribution, the start-up cuts deals with some competitors, and makes it easy for others to redistribute its products. Once the start-up gets successful, however, those partners start to look more like competitors, and it starts pulling back on deals.

That's exactly what's happening with Hulu, the web video start-up that was derisively labeled "ClownCo" by executives at Google, only to become, in some ways at least, a more profitable and popular destination than Google's YouTube. Last week, however, Hulu started pulling the plug on distribution. The first was to take Hulu's content off of TV.com, a site that CBS purchased when it acquired CNET last year. The second was to take Hulu off of Boxee, an increasingly popular web video browser for Linux, OS X, AppleTV and Windows that turns PCs into set-top boxes. Hulu's distribution deal with TV.com was contractual, while there was no formal business arrangement between Hulu and Boxee.

In the TV.com case, Hulu merely stated that it had the contractual right to remove its videos, and was doing so. In Boxee's case, Hulu seemed to be more apologetic, stating that it withdrew its content at the request of its content partners. It's important to note that Hulu's largest owners, with equal control, are NBC Universal and News Corporation (Fox), and to my understanding, it would only take one partner to get Hulu to yank its content. I'm not going to speculate on which partner I think pulled the plug (NBC Universal), because they're both extremely well-run companies with top-notch management teams (and pigs can fly.)

What is happening is that Hulu's actions are getting people to reconsider The Pirate Bay and other sources for the content that's distributed by Hulu. These are unlicensed sources, and not a penny of revenue goes back to Hulu, its parent companies or other affiliated content providers. At precisely the time that Hulu is engaging in a promotional program involving commercials on NBC, Fox and both companies' cable outlets, it's taking actions that curtail Hulu's distribution and encourage piracy.

In Boxee's case. it's entirely possible that it was cable operators that forced Hulu's partners to take the action they did. To these operators, I say that taking Hulu off of Boxee and any other service will not in any way slow down the trend for consumers to drop their cable services. The only thing that will do that is an industry-wide switch to a reasonable a la carte pricing scheme, which will happen fairly close to the heat death of the universe.

In short, Hulu's actions are only going to hurt Hulu. They won't accomplish what either the content providers or the cable operators want--in fact, they'll accomplish the reverse. Joint ventures almost always suck massively--they're impossible to manage, because the participating partners almost always have divergent strategic goals and objectives. I chalk Hulu's behavior up to that.

TiVo tanks, Apple breaks third-party apps

Earlier this week, TV By the Numbers reported that TiVo lost 163,000 subscribers in October, and the company has lost subscribers almost every month this year. In its most recent quarter, TiVo only sold an average of less than 500 DVRs a day. The company would have lost money in the quarter had it not received a one-time payment of $105 million from Echostar for patent violations. It's pretty clear that TiVo's situation is getting dire, and the company is not going to survive in the standalone PVR business for much longer.

At about the same time, Blockbuster got into the set-top box business, as I've written about earlier. Also, Apple released a new version of software for its AppleTV STB, which broke third-party software running on those devices, including Boxee, media center software for Linux and OSX that supports Hulu, CBS, Comedy Central, CNN and many other Internet media sites. Boxee was back up and running on the AppleTV a day later.

Is there really a market for third-party set-top boxes? By and large, the answer is "no," although the Roku Netflix player seems to be selling well. What I'd really like to see is a set-top box that's open and that supports multiple services. That rules out Apple and Vudu. You shouldn't have to pay a monthly subscriber fee to use the box, so that rules out TiVo, Microsoft's Xbox 360 and, at least for now, Roku. Blockbuster's new box is still a question mark--there's no monthly fee, and the box, built by 2Wire, runs Linux, but it's unclear if Blockbuster will allow Boxee and similar applications to run on it.

In my opinion, it would be a brilliant move if Blockbuster let Boxee, as well as others, run their software on its box without a long approval process or the fear that the third-party applications would be deliberately broken by Blockbuster. In one step, Blockbuster's offering would move from a me-too product to a market leader.

Experience has proven that consumers simply don't want multiple set-top boxes. Given the choice between a cable operator-provided PVR and a TiVo, they've chosen the cable operators' offerings in droves. This market is dead unless the players start seriously rethinking their strategies to adapt to consumer needs.