Verizon Adds Internet Video, Facebook and Twitter to the FiOS TV Screen

| Jul 17, 2009 | Digital Home - U.S. | Competitive Intelligence Report

| Analyst: Larry Hettick

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

July 15, 2009 -- Verizon has added interactivity to FiOS TV with the launch of Facebook Connect and Twitter Widgets, along with plans for an open development platform for third-party development of interactive FiOS TV applications. Its new Internet Video also enables Veoh, blip.tv, Dailymotion, and personal PC-based videos for viewing on the FiOS-connected TV screen.

Analytical Summary

• Current Perspective: Positive on Verizon’s addition of “Internet Video” to the FiOS TV screen, because it marks the first time a triple play service provider has aggregated video content from traditionally Web sources and delivered it to an existing set-top box. We are also taking a slightly positive stance on Verizon’s addition of widgets that add Facebook and Twitter to the TV screen, since these will add more value to the FiOS TV experience for no additional charge; bringing these social network services to the television positions Verizon with the ability to meet users’ growing interest in staying connected with friends online and the Web community at large.

• Vendor Importance: High to Verizon, because it elevates FiOS TV to be about more than better video through broadcast TV programming. It also presents the cable companies with a competitive differentiator they cannot easily match, while Verizon can use its existing Home Media DVRs that are already an integral part of the FiOS TV service for new Internet-based applications.

• Market Impact: Moderate on the digital home services market, because consumers are not yet accustomed to seeing “Internet Video” on their TV set, the video content providers Verizon has signed at launch may not be well known, and the social networking features are constrained by the user interface for typing text. As Verizon adds more widely recognized content partners and as consumers discover how easy it is to watch online-based video on the TV set, the market impact will shift upward.

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Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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Recommended Competitor Actions

• MSOs, DISH, and DIRECTV should tout their set-top box-based options that already offer a wide range of digital video and entertainment options today. Cable and satellite TV already have a strong grip on a large portion of consumers' entertainment dollars. Cable companies’ video-on-demand and DVR features already offer quick access to thousands of HD movies and TV shows.

• Comcast needs to work on a way to provide “Internet content” to the TV screen to compete against offers such as Verizon’s Social Networking Widgets and its new “Internet Video” and “My Videos” delivered to the FiOS TV set-top box. Comcast’s “TV Everywhere” is a great concept, but delivering Internet-supplied video on the TV set is also an equally important competitive imperative.

• Third-party Internet-to-TV devices should promote the fact that they can also bring more than pay-per-view video to the TV. For example, YouTube-supported Internet-to-TV boxes include TiVo HD DVR, VUDU Box, and VuNOW Pod. Moreover, YouTube XL can turn a Web page into a TV media guide for YouTube content; therefore, if a device such as a Nintendo Wii can display Web pages, then it can also offer YouTube content via the XL application.

• Amazon should highlight the advantages of its Amazon Video On Demand Internet service, which can offer customers access to premium video content including a wealth of TV shows and movies to be streamed instantly or downloaded for portability. Amazon movies can also be streamed to TV sets via the $99 Roku player, Xbox 360, Media Center Extender, or TiVo HD DVR. Another advantage Amazon offers is its large library of online video content, with a digital library of 40,000 movies and TV shows.

• To grab mainstream consumer attention, VUDU needs a sizable marketing campaign on the merits of its HDX format as the best quality online video format if it wants to gain sizable market share. VUDU offers many popular movies and upcoming HD movie releases in the new format with almost the same picture quality as a Blu-ray disc. In addition, it is important for VUDU to see a spark in sales from its new cross-promotion with Mitsubishi, granting a new HDTV buyer a free VUDU box and $50 in movie credits. If the Mitsubishi promo proves successful, it should reach out to other consumer electronics companies.

• In fall 2009, Microsoft’s Xbox Video Marketplace will merge with Zune’s video content site to provide instant streaming of movies and TV shows presented in near Blu-ray disc picture quality at 1080p HD resolution and with 5.1 surround sound. When the Xbox 360’s HD movie-streaming service arrives shortly, it needs to come with a comprehensive library of newly released and popular titles. Also in the fall of 2009, Last.fm (part of the CBS Interactive Music Group) will supply Xbox LIVE Gold members with access to free music streaming and Xbox will have access to Facebook and Twitter.

Recommended End User / Customer Actions

• Consumers should note that since FiOS TV’s Internet Video is delivered to the TV set; so, unlike third-party devices, the video quality does not rely on a broadband connection. When surveyed in the Verizon technology trial, most users found the video quality to be acceptable and 88% said they would now be more likely to add the Home Media DVR because of the new features.

• Consumers should understand that, with Verizon’s competitors, Internet-delivered programs viewed online (including the Comcast “On Demand Online” trial) count against the subscribers’ monthly data usage cap; therefore, frequent online video users will eventually hit the data usage cap limits imposed by many cable companies on their broadband service. For example, a user who downloads 13 HD movies in a month could exceed Comcast’s now-generous 250-GB threshold, although in fairness the same limits apply to 13 Netflix HD movies or similar amounts of HD content from others such as Amazon Video On Demand.

• Even though FiOS TV subscribers may not have heard of blip.tv, Dailymotion, or Veoh Networks, they should know that these content aggregators have millions of programs to watch. For example, Veoh has over 3.5 million videos and video clips; over 8,000 TV shows (full episodes and clips) including content from Hulu; over 6,000 full length movies; content from CBS, MTV, and YouTube; and more .

• While Internet-to-TV devices stream content to the TV, connectivity may be more difficult since these devices need a broadband connection that is frequently on the opposite side of the home. Hooking up an Ethernet cable from the Internet source is the most reliable option, and installing a WiFi access point is in most cases an adequate alternative. Also available are products that incorporate other home networking technologies such as Powerline and MoCA (see The Last Yards: Home Networking Options for Internet Connectivity to a Television, May 01, 2009). FiOS TV’s new Internet features do not require this additional home networking.

• Even with the rise of new Internet-to-TV devices, the PC is still the best device to access online video content, with its freedom to access several pieces of content from multiple Web sites through various media players, although the PC is seldom the best option for viewing video. PCs are also equipped with massive storage capacity and they have many easy-to-use software applications to port video content to other devices, including a TV set. The downside to using a PC as the device to deliver content for a TV environment is the constant upkeep and configuration required to just watch television.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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