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2006: The year of broadband, PSP and PS3

Were we on the money?

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We predicted that video file downloads and web portal video would see lots of launches during 2006, but no definite winner would emerge until well into 2007. We may have to extend this.

With the exception of Apple's iTunes which is doing well, and with Sony about to enter the market and with many internet video efforts coming from broadcasters, the market shape is unlikely to be clear at any point in 2007 and volumes will not rise substantially until 2008.

Saying that HD DVD would not survive through 2006 was perhaps something of a flyer, but despite Blu-ray delays, this looks like coming true before it is economically viable to make a player that can offer both HD DVD and Blu-ray, which would mean a merger of the formats.

However, we also said that UMD sales for the PSP would become significant in this market, having no idea that $30 would be the average price they would go to market at, which plainly was never going to work. The UMD is now mostly a game delivery device and most films were pulled on the format during 2006. Why didn't they just cut the prices?

To say that Sony PSP sales would sell over half the numbers of the iPod was bold, but it has turned out to be bang on with around 20 million devices now sold since last March when they were launched.

During 2007 the PSP will come into its own, we said, and there are big signs that it is doing just that, although it will need the Sony launch of an online film service for the PSP and the promised interaction with the PS3 to make the success spectacular.

We said that US Broadcast TV advertising would plummet by as much as five per cent, while cable advertising would surge. Well, we can count that as half right. We fancy that DVR installation rates means that although advertising rates per thousand rose mildly, the total number of advertising viewing hours fell by something like 11 per cent creating a net revenue reduction in the US TV ad market for the second year running.

However, the US advertising industry hasn't owned up to that, and it won't admit it going forwards either. By selling internet advertising at the same time, and in combined packages with TV ads, the broadcasters appear to have saved themselves from financial embarrassment, while cable, which continues to garner more and more of the total viewing hours in the US, had its ad revenues flat in terms of dollars per thousand viewers, and it lost a considerable number of viewing hours, so it fell further than broadcast.

However, we predicted the biggest growth area would be web based video advertising, which has risen by over 100 per cent compared to 40 per cent for overall internet advertising. It will rise by this much again in 2007.

We also predicted that Nielsen Media would have mobile TV viewing figures out by the end of 2006, but since these things tend to happen first in the US and Modeo never managed to get a cellular partner for its DVB-H service, there will be no mobile TV service launched in the US until MediaFLO launches in the first quarter of 2007. Modeo will launch just in New York in January, so we can repeat this forecast for next year.

We also said that at least one broadband supplier would attempt to block or slow VoIP or video traffic to the home, triggering a legal war. But the fuss about net neutrality in the US throughout 2006 meant that most telcos promised not to do this, in order to avoid a law being passed making it illegal.

Outside the US and the European Union, blocking video traffic by incumbents is now commonplace. Early in 2007 we will launch a Mobile TV report in conjunction with MRG in the US, and plan one of our next research papers to cover internet delivered video, so we'll save our concrete projections for these areas for 2007.

Copyright © 2006, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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