NTIA should require “full-disclosure labeling” on coupon-eligible DTV converter boxes because the agency’s final rule made BTSC stereo capability a permitted but not a required feature on those set-tops, technology company THAT Corp. told NTIA Director John Kneuer in a letter Wednesday. THAT, which succeeded dbx Inc., administers BTSC patents and licenses and has waged an uphill campaign to convince CE makers to build BTSC functionality into the boxes’ RF outputs (CED June 12 p3). “If the NTIA is not going to require BTSC stereo, it is in the interest of consumers, retailers and taxpayers that boxes be clearly and prominently labeled,” THAT CEO Leslie Tyler told Kneuer. The labels should “leave no doubt in the consumer’s mind before purchase as to which boxes contain stereo technology and which do not,” Tyler said. Without such labels, the DTV transition could result in a “degraded TV viewing experience” for those who will have to rely on the converter boxes to receive over-the-air signals, the company said. An NTIA spokesman responded that the final rule requires that the converter box have both RF and composite outputs and that they provide stereo audio. The required stereo outputs use open source technology (RCA connectors) for which no royalty fee is required, the spokesman said. The rule permits manufacturers to provide BTSC stereo via the RF output, he said. The inclusion of BTSC stereo uses patented technology, for which a royalty payment is required, he said.
Paul Gluckman
Paul Gluckman, Executive Senior Editor, is a 30-year Warren Communications News veteran having joined the company in May 1989 to launch its Audio Week publication. In his long career, Paul has chronicled the rise and fall of physical entertainment media like the CD, DVD and Blu-ray and the advent of ATSC 3.0 broadcast technology from its rudimentary standardization roots to its anticipated 2020 commercial launch.
Monday’s announcement that Sirius and XM as a merged entity would offer a la carte options to subscribers who buy new radios (CED July 24 p1) “is tantamount to an admission that without such special promises or conditions, the proposed merger would lead to higher prices and fewer choices to the detriment of satellite radio subscribers,” NAB said in reply comments Tuesday at the FCC. XM-Sirius, in reply comments of their own, said NAB’s “scorched-earth opposition” to the merger “is itself powerful evidence of the competition that so obviously exists” in the audio entertainment marketplace from which “terrestrial broadcasters have the most to lose.”
Netflix.com went down Monday evening and stayed down Tuesday when technicians tried to rejigger the site to post the company’s new lower subscription pricing (CED July 24 p6), a customer service representative told us at 5 p.m. EDT. The site was expected to remain unavailable for at least another three hours, she said. In cutting its two most popular subscriptions $1 monthly, Netflix seemed the first to blink in its online DVD rentals war with Blockbuster. For months, Netflix has accused Blockbuster of giving away the store in online DVD rentals, sacrificing profit to subscription growth by refusing to raise its monthly fees. Netflix seemed ready to wait out Blockbuster, thinking it eventually would need to raise prices to cover its higher marketing costs. Blockbuster brazenly replied that Netflix was in for a long wait, an outlook that Netflix seems to have embraced. “We thought Blockbuster might sustain these steep losses for only a quarter or two, as they did in 2005, so we maintained our profit goals and trimmed our subscriber expectations for the year,” Netflix CEO Reed Hastings told analysts in a quarterly earnings call late Monday. “At this point, however, we believe it is prudent for us to assume that Blockbuster stays in the online-growth-over-profits mode as long as they can,” he said. This forced Netflix to change its “competitive posture by shifting some profits to defend our share” by cutting monthly fees, Hastings said. Netflix has tested discounts “to see if there is enough elasticity to pay for the price cuts,” he said. Last month, Netflix decided it would discount its two-out unlimited program by $1, a move Hasting said “would substantially pay itself back through increased retention and increased organic growth, allowing us to spend less in marketing. We are very pleased with the result of that two-out price cut and we are now extending that reduction to our one-out and three-out customers.” Netflix will spend less getting subscribers “because of the increased attractiveness of our lower-priced programs,” Hastings said. “In other words, marketing reductions largely fund these price cuts.” Netflix profits grew second quarter, but subscriptions fell for the first time, due to Blockbuster’s competitive threat. Netflix want to “avoid the trap of overreacting,” Hastings said. “At some point, our competitor will likely desire at least a modest profit on their online service, and we expect Netflix to enjoy greater growth and profitability at that time. The market is large enough that there is room for two large, growing and profitable online businesses.”
Blu-ray and HD DVD will stage head-to-head news conferences at IFA Berlin for the second straight year. Blu- ray’s is 5 p.m. Aug. 30 at the Philips stand in Hall 22a. As occurred last year, Toshiba and the HD DVD Promotional Group will hold separate IFA news conferences, but their dates and times have not been set, a Toshiba Japan spokeswoman told us. Several Blu-ray companies, including Panasonic, Philips, Sharp and Sony, also plan their own IFA news conferences. Blu-ray’s IFA announcements likely will focus on interactive functionality, including introduction of hardware with Ethernet ports. But the full BDA Live suite of interactivity is not expected to be available until 2008. Many eyes at IFA will be on Philips, which has not yet launched a stand-alone Blu-ray player in Europe. Toshiba and HD DVD likely will tout the low-price strategy they credit with lending the format great momentum in the U.S. Last month, Toshiba permanently cut the price of its entry-level HD-A2 deck to $299, based on what it called strong sales in the two months of a promotion featured that price. The HD- A2, introduced in the 2006 holiday season at $499, dropped first to $399 and now $299. Home Media Expo participants can buy it at a blowout $99 “accommodation” price for a week, starting July 22 (CED July 18 p8). HD DVD “experiences won’t reach the masses unless they're affordable,” Ken Graffeo, executive vice president at Universal Studios Home Entertainment, told a recent Toshiba news conference, explaining HD DVD’s low-price strategy. “With the rapid migration to HD-capable TVs, high-def content will have to follow suit,” said Graffeo, chairman of the HD DVD Promotional Group. Consumers “need other sources” of HD content, since cable and satellite do not suffice, he said. An April/May “spike” in HD DVD player sales, spurred when Toshiba reduced entry-level pricing to $299, showed that “cost will play a crucial role in how they choose these sources,” he said. “In fact, the number one obstacle cited by consumers around the purchase of a high-definition media player was price. It’s not a concern over a format war -- it’s price.”
A “marketplace solution” is the only satisfactory way out of the policy “conundrum” that the FCC faces in trying to ensure that all cable subscribers can view must-carry TV stations on cable systems after the February 2009 analog cutoff, CEA told the Commission in comments on its April rulemaking. The FCC in its rulemaking should “think ‘outside the box,'” not accept “conventional closed-system, proprietary solutions” others may propose “that cause consumers to pay for the same programming and devices again and again,” CEA said.
Philips CE operations seemed to contribute little to an overall 34 percent jump in second-quarter EBITA, though the outlook for the CE sector is brighter the second half, the company said Monday. CE sales fell 11 percent in the quarter, but EBITA in the CE sector rose slightly, both in value and as a percentage of sales, the company said.
Bruce Besanko will get a base salary of $500,000 to join Circuit City July 30 as its chief financial officer, under a June 25 offer letter filed at the SEC. Besanko, CFO at Yankee Candle since 2005, was vice president of finance at Best Buy 2002 to 2005. Perks that Circuit has agreed to give Besanko: (1) A target bonus of 80 percent of base salary and a $400,000 guaranteed bonus payable at the end of fiscal 2008; (2) An $858 monthly car allowance; (3) Stock option grants for up to 300,000 shares.
Epson America and Atlantic Technology executives used many superlatives at a New York media briefing this week to tout their two new Ensemble 1080 front projector home theater systems (CED July 5 p1) as a boon to AV specialists and custom installers. “What we have here is truly revolutionary,” said Rajeev Mishra, Epson’s point man on the project. But the market will decide whether Mishra is correct and Epson delivers on its promise to open home theater to a new class of buyers.
Melding home-theater-in-a-box simplicity with more sophisticated HDTV front-projectors is the goal of two “Ensemble 1080” bundles introduced as “complete cinema systems” at a New York media briefing late Tuesday. The bundles, a collaboration between Atlantic Technology and Epson (CED July 5 p1), will ship to Epson dealers Nov. 1. A 720p version will list for $5,000 and a step-up 1080p system for $7,000. Each is a based on an Epson 3LCD front projector coupled to a preamplifier-processor from Atlantic. The processor incorporates a DVD player that upconverts red-laser discs to 1080p. It also has two HDMI inputs for hookup to a Blu-ray or HD DVD player and digital cable box, the partners said. Atlantic’s surround speakers, each 35 watts, mount on a motorized 100-inch screen and on the cradle that holds the projector to the ceiling or other surface. A 60-watt center- channel speaker is complemented by a subwoofer that acts as command-center for the system. Other system attributes include built-in equalization to correct for less than ideal screen placement. Home-theater-in-a-box has succeeded because the consumer “understands what he’s buying,” Atlantic Technology President Peter Tribeman said. “There are no hard decisions.” But “everything becomes more complicated” when the consumer decides to upgrade a media room, Tribeman said. The intricacies of assembling mix-and-match systems make many consumers “run for cover,” he said. For the first time, Ensemble 1080 will promote “one-stop shopping” for high-end front projector systems, he said. The simplest installations will take two “handy” civilians four hours or less, Tribeman said. More sophisticated applications can be installed professionally, he said. Both systems will have a music-only default bypassing the command to lower the screen when powered on, he said. They're also designed to placate spouses fearful of a room’s decor being loused up by more conventional front projectors, Tribeman said.
Tim McGeehan, executive vice president for retail sales, said Tuesday at the CIBC Consumer Growth Conference in Boston. “The whole market portfolio is growing,” McGeehan said. “So as opposed to just thinking about just growing one store at a time, or as a standalone, we're actually at it as a market,” he said. “What we learned here is we actually have a longer runway than we thought.” In Dallas, Best Buy went beyond adding its 45,000-square-foot “base-level” stores, also mixing in 20,000- and 30,000-square-foot stores, he said. Best Buy sees Dallas-style market-by-market store expansion as “a very big opportunity for us.” Nationwide, Best Buy scores high in customer satisfaction and low employee turnover thanks to its expansion, McGeehan said. Best Buy’s U.S. market share has grown to 20 percent vs. 13 percent for Wal-Mart, its closest rival, McGeehan said. It matters that employee turnover keeps shrinking, he said. “You know when you're out there shopping that if you interact with people more consistently and you've interacted with them before, you're probably going to have a better experience,” he said. Best Buy especially values its falling managerial turnover, now 20 percent vs. 25 to 30 percent a year ago. “If we can keep managers in stores longer and interact with customers in those stores for a longer duration, that store is going to be more successful,” McGeehan said. “Great store managers usually turn out to be a great store.” Best Buy’s “service opportunity” is market worth about $50 billion, said Sean Skelley, senior vice president for services. “We've scaled that down to where we think we can win: the consumer space and small businesses.” The last three to five years, Best Buy has been “laying the root system of our service network knowing this was going to be a massive oak tree instead of a little twig,” Skelley said. “To do this, you really do need to put significant roots” in the ground, he said.