The Integration of the Home PC and the Home Theater

Do We have the Internet Bandwidth to Support Downloaded Movies?

According to Google, the popularity of video downloads, especially High-Def downloads, could overwhelm internet bandwidth capacity. Services such as YouTube (owned by Google) are problematic, and new developments could create even more problems.

Joshua Danovitz, general manager and vice-president international for TiVo, said the issue of download limits differs in each country. In the United States and Asia, where bandwidth capacity is still available, users have few constraints (though not truly unlimited), while other countries, including Canada, ISPs are restricting users to some degree. The problem will only get worse with the increased popularity of video downloads. Currently, more than half of internet bandwidth utilization in the United States is peer to peer, and most of that is video download.

Time Warner said that it was going to start testing a new rate plan in Beaumont (Texas) that would limit the amount of bandwidth each customer can use each month before additional charges applied. New plans would offer between 5 gigabytes and 40 gigabytes of download a month. The top plan would cost roughly the same as the company’s highest-speed service ($50 and $60 a month).

Time Warner wants to test bandwidth limits to crack down on a minority of customers who are heavy downloaders. Only five percent of Time Warner's customers use over half of its total bandwidth.

Bell Canada has imposed bandwidth limits on its customers. Bell Canada charges as much as $7.50 for each gigabyte when customers exceed the 30-gigabyte limit on a plan that costs about $30 a month. Since the average high-definition movie is 4 gigabytes to 5 gigabytes, that would mean a charge of at least $30 a download for customers on a plan like that who were over their limit.

On more expensive plans, the over-limit charges at Bell Canada are as low as $1 a gigabyte. That would represent a $4 to $5 charge for an HD movie for people over their monthly limits. Standard-definition movies are typically 1 gigabyte to 2 gigabytes.

A lot of the movies are not downloaded from authorized vendors.

Property Control (reference: Downloaded Music)

One fifth of U.S. citizens have pirated a major film and two thirds of this group have downloaded a film at least monthly. 80% of overall movie downloaders use unauthorized services to get their movies for free, as opposed to using a legal solution. The RIAA and MPAA have already resorted to legal action against thousands of U.S. citizens.

If we assume a parrellel path with the audio recording industry, then the business implications are huge. MP3 players have now been around for about 10 years. Audio CD sales are down about 15% last year, 20% in 2006. The best estimate is that only about 42% of music acquisitions being paid. NPD (a retail tracking group) estimates that one million consumers "dropped out of the CD buyer market" in 2007, a trend led by teenagers, 48% of whom did not purchase a single CD in 2007.
The technologies of television and the internet are converging. No surprise there. We have been hearing about this trend for years. The rapid adoption of HDTV is driving the growth. Most customers of a fine video system want to take advantage of the associated benefits, including high definition audio, and merging their computer systems with the theater.

The primary forces impacting this trend include internet capacity constraints caused by video download demand, property rights of the movie producers (and the technical solutions), and an analysis of the who is likely to reap the financial windfall from it all.