I didn’t know. The United States Postal Service sports its very own Netflix drop box.

Almost dedicated – Netflix does share the box with postcards – I discovered the drop-off at San Francisco’s Union Square, downstairs, inside Macy’s Post Office.

Without further checks elsewhere, I’d like to assume a string of other USPS locations have followed suit.

Hey, had Netflix competitor Blockbuster been hipper to trends, it might have long been the popular brick-and-mortar video chain and not a young and disruptive DVD mail-order service to get that accomplished.

Of course, Blockbuster is on the auctioning block while Netflix is anything but.

Based on Netflix’s consumer cloud, here’s an early 21st century innovator that convinced someone inside what just might be the country’s largest 20th century bureaucracy to carve out room inside its legacy facilities. Not bad!

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For two reasons, Brian’s recent TV Everywhere post caught my renewed attention.

For one, earlier today, Comcast announced expansion of its online TV video efforts to an impressive 23 networks. From full-length movie channels – think Cinemax, HBO, IFC, an Starz –  to cable TV favorites such as A&E, E!, Food Network, and WE,  Comcast’s 5,000 trial homes are now among the very first to enjoy online video akin to legacy TV.

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Time are tough – maybe you’ve heard, it’s been in all the papers.  Oh wait, there aren’t any more papers – but we’re going to guess that one way or the other, you’ve had more than your share of macro-economic doom and gloom over the past few months anyway.  So we’re starting a new series of posts – think of them as occasional signs of (internet video-related) corporate hope amidst all the (over-leveraged under-regulated financial services) corporate rubble…

• The BBC, having seen a 152% increase in UK usage of their successful iPlayer streaming application over the past 12 months, has just increased their online budget for the next three years by almost 25%.
• The stock of mail-order DVD rental leader (and online pioneer) Netflix is up over 30% over the past 6 months.
• CBS has announced 2.8 million first-day unique users of its Silverlight-powered NCAA Men’s Tournament (March Madness) streams – at 56% increase over last year’s first day numbers.
• Pure Digital Technologies, the privately-funded startup responsible for the easy-to-use “Flip” personal internet video camcorder, is purchased by Cisco for $590 mil.

Hang in there – more good news to come…

We’ve written before on how ill-suited the personal computer is for viewing long-form internet video – and on the strange inability one often finds in the personal computing industry (and in a lot of new media analysis) to distinguish between how a 2 minute YouTube video and last week’s full episode of Lost are actually consumed.  The point is not lost on the CE industry, though: there will be a deluge of internet-enabled video hardware coming to market within the next 6-9 months (both televisions and set-top boxes), and while the few devices already out there (i.e. Apple TV, Vudu, and Roku) have all been based on closed “walled-garden” models, this new generation of hardware will instead be open, offering the promise of access to multiple internet video sources directly from the couch.

Which begs the question: what should the user interface for a system that aggregates multiple (and often competing) video services look like?  Clearly, a wide-open web browser model isn’t the appropriate solution for what is, after all, a consumer electronics device.

From an application design perspective, it’s an interesting question. Although I’ve already written about the approach Yahoo/Intel are taking with their Connected TV initiative, last week I had the opportunity to speak with Bob Poniatowski of TiVo regarding their upcoming internet video solution (currently in beta testing).  Two things I took away from our chat: (1) TiVo continues to place a substantial premium on UI design and ease of use, and (2) they’ve determined that focusing on a searching (rather than browsing) model neatly solves the problem of how to integrate multiple internet video services into a single cohesive user experience.  In fact, the name of the initiative (to be rolled out later this year as an additional feature on existing Series 3 and HD boxes) is “TiVo Search” – as CEO Tom Rogers puts it, “what Google did for the Internet, TiVo is now doing for the TV”.

It’s all about the search: users will be able to look for short-form content from sources such as YouTube, The N.Y. Times, and The Onion (among others).  As for premium content, if you have an account  with Amazon VOD, CinemaNow, or Netflix, you’ll enter a TiVo PIN on the respective website and be good to go.  However, one caveat: searching on Netflix is not yet supported – like the  Roku device, only whatever “Watch Instantly” titles already added to the Netflix queue via their website are available.

As an example, search “No Country for Old Men”, and you’ll be able to compare, purchase, and view the title from either Amazon or CinemaNow if you have accounts there (TiVo transparently handles any transactions).  You’ll also get reviews and related articles (from the N.Y. Times, for example), and from Youtube, you’ll get trailers, clips and fan raves/rants (Poniatowski likens the YouTube content to that of a “global DVD Extras menu”).  Search Tommy Lee Jones and you’ll get bio information, any other available films and/or television programs he’s appeared in, and again, any related short-form and user-generated content.

In addition, TiVo Search will include a (very TiVo-like) internet video “Discovery Bar” of suggestions based on your previous searches, and will also allow you view images from any computers on your home network… all in all, it’s easy to imagine this being pretty cool.

Things to watch:

• How will TiVo’s subscription revenue model compare to Yahoo/Intel’s Connected TV advertising-supported model?
• How will TiVo’s traditional in-house software development/deployment model compare against the Yahoo/Intel Connected TV “widget” model (and/or Apple TV’s App Store model)?
• When will Netflix “Watch Instantly” content become searchable too?
• Will TiVo expand into the lower end of the IPTV market by releasing a more affordable streaming-only (no HD, no DVR) device to compete with devices such as the Roku?  Having already done the heavy lifting of implementing the search system together, this would seem an likely move.

All in all, this looks to be a powerful and (as one would expect from TiVo) a well-designed long-form internet video solution.  Although TiVo’s market share has been under pressure from lower cost carrier-bundled DVRs in recent years, TiVo Search could be just the differentiating value-add the company’s looking for.

The Holy Grail: internet video directly from the TV.

While the primary challenges would seem to be hardware-based,  there are equally significant (and equally daunting) software challenges to be met as well, because no computer = no OS = no web browser.   Traditional operating systems aren’t appropriate for a lean-back passive viewing system on any number of levels, and studies repeatedly show that nobody really wants a full-featured browser on their television (and a keyboard on their coffee table) anyway, so in one sense it’s no great loss.  However, forgoing all that standardized functionality leaves one with a lot of design and development work to do: what about an operating system?  What should the user interface(s) look like?  Can we get by with the current button-laden remote as an input device, or should a Wii-like pointing remote be developed?  And how does the type of input device dictate what type of functionality can get built into the system itself?  All in all, a pretty heavy lift – because what we’re talking about here is the creation of an entirely new interface to the internet (potentially every bit as important as the web browser).

Into the void step Yahoo and Intel.  Just announced at last week’s CES is the Connected TV Widgets Channel, a ‘software foundation’ for internet-enabled television hardware built around a new generation of specialized Intel processors.  While the framework will be open to 3rd party software developers (according to Yahoo’s Patrick Barry, “We get a nice advantage, knowing the ins and outs, but we will not limit the platform to being addressable by us”), it’s worth noting that Yahoo and Intel are going with a lightweight “widget” model rather than a heavier-weight application model.   Running a widget on a modified JavaScript engine rather than an installed application down on the operating system itself tends to protect the OS from poorly-behaved software and also allows for more generalized control of what the software can and can’t do.  Much like the Apple App Store model, the widget model represents an attempt to strike a balance between encouraging open and innovative software development, while at the same time providing appropriate “guard rails” for what are, after all, consumer electronics devices rather than computers (look for this trend to continue as cloud computing and the overall “CE-ization” of home computing continues).

Initially at least, the Widget Channel appears to be primarily about adding ancillary features on top of the traditional cable/satellite television you already have – in other words, imagine being able to call up feeds from fan message boards or team websites in a dock at the bottom of your TV screen while simultaneously watching the big game on cable…   Or having a dashboard of specialized weather, news, or twitter feeds available while watching “Madmen” via satellite dish…

• On a purely technical level, though, there’s nothing to prevent a Connected TV widget from streaming video, either (bandwidth permitting).  At that point, things get interesting – as the innocent little ‘widget’ starts to eat into existing television distribution models.

• In fact, the terms “Widget” and “Channel” are both misleading, because the Intel/Yahoo initiative is not about merely adding additional incidental functionality -  it’s about (cue the thunderclap and the dry ice) letting internet video into your television.  In other words, that local weather report or eBay quote on the bottom of your screen is really something of a Trojan Horse (a point already probably not lost on the cable industry).

Connected TV is, um, well-connected: on the hardware side, CE manufacturers such as Samsung, Sony, and LG are already on board, and for web content, deals have been inked with traditional heavyweights such as eBay and the New York Times (among others).  For the video over IP scenario to play out, though, what Connected TV needs are video content partnerships – and there too, Yahoo and Intel seem to have things well in hand: agreements have already been signed with CBS, Netflix, Amazon, Blockbuster, and Showtime

It’s been a while since we’ve seen much good news coming out of Yahoo, but they seem to be getting a lot of things right here.

Yahoo intends to monetize the Widgets Channel through advertising, but in an effort to reach a critical mass of users as quickly as possible, will reportedly go easy on the advertising initially.  So who knows, maybe in a few years from now, Yahoo stockholders could actually be thanking Mr. Yang for turning Mr. Ballmer down at $31 per share….

The groundswell of interest in finally getting internet video over to the television in such a way that avoids the clunky computer-centric workarounds we’ve seen to date is picking up steam – just in time for next month’s CES show.

While this is much as we expected, a more surprising (and related) development is the resilient strength in game console sales:

• As of October, the video game industry is up 18% year-over-year, and remains on track for a record year.
• Microsoft reports November was its biggest xBox month ever in Europe, with sales up 124% over last November.
• According to a recent Pew Internet & American Life Project survey, more than half of American adults play video games, and 20% play every day.  More importantly (because after all, this is the future we’re talking about here), a full 81% of respondents between the ages of 18 and 29 are home video gamers.  And the gender gap is less than one would think: while 55% of adult males play, surprisingly, 50%of adult females report playing as well.

Needless to say, given the current economic climate, numbers like these are quite impressive – and suggest the game console could be a much more viable solution to that pesky internet video ‘last yard’ problem than previously thought.  With that, a brief overview of the three competing platforms:

Sony Due to an ongoing price war, Sony now loses money on each PS3 it sells, according to Macquarie Securities analyst David Gibson.  However, the company is firmly committed to the PS3 as an integral part of their long-term internet video strategy, and just rolled out a newly revamped Playstation Network direct video download service for the PS3.  What’s unique about the PS3?  Sony is able to leverage its unique position as both a CE manufacturer and a major film studio, and recently made Sony Pictures’ summer Will Smith vehicle ‘Hancock’ available via download prior to the DVD release.

Microsoft The complex and expensive prospect of upgrading the home PC to Vista Premium or Ultimate just to get internet video to the television has unsurprisingly proven less than compelling to most consumers.  In contrast, over the recent Thanksgiving weekend Microsoft reports a 25 percent increase over last year’s already robust sales of 310,000 xBox units – in short, it’s clear where the growth is.  Like Sony, Microsoft has a direct video download service for their game console (and like the Playstation Network, the xBox Live Marketplace offers a large number of titles in HD).  What’s unique about the xBox 360?  The Microsoft download library is larger than the recently launched Sony service’s, and in addition, the xBox can now also stream content from your Netflix ‘Watch Instantly’ queue (in other words, but an xBox, get Roku functionality for free).  While (like Roku) titles must be added to the queue from the Netflix website, the ability to both stream and download (and the better selection for both) gives the xBox an edge over the PS3 in terms of internet video functionality.

Nintendo Here we have a bit of a wild card.  Thanks to their groundbreaking motion-sensing remote control (and a unique selection of games made possible by it), the Nintendo Wii is the market leading game console in the US, selling 34.6 million units for 2008 Q3 (compared to 16.8 million for the PS3 and 22.5 for the xBox).  The company has been remarkably circumspect regarding its plans for internet video, though – so look for some kind of announcement shortly, perhaps at CES in January.  What’s unique about the Wii?  With no hard drive, any internet video solution would be streaming-based – which is just as well, since the Wii has only 480p (DVD) resolution anyway (although it’s worth noting that real-world demand for HD video has proven surprisingly low).   But perhaps the most interesting aspect of the Wii is the motion sensing remote – as user interfaces get more advanced to support direct internet video access from the TV, we expect this point-and-click technology to replace the cluttered button-filled remotes of today.

Who knows, Apple TV and Vudu have certainly gotten a lot of things right, but neither has yet made a meaningful impact on the market – perhaps the Trojan Horse of online mutli-player video gaming will be just the added value proposition needed to make for a compelling ‘Last Yard’ solution.

I’ve long been of the opinion that longer-form (professionally produced) internet video will happen on a truly widespread scale only when the problem of getting that content over to the television is solved – and that current discussion of internet video (and how to how to best monetize it) is often based on two questionable premises:

1. The personal computer will continue to be the primary internet video delivery device.
2. Internet video is necessarily about short- and mid-form content.

Such discussions often completely fail to adequately recognize how profoundly game-changing direct access to the internet from the next generation of TVs and set-top boxes will be.  In other words, while short form internet video (user-generated or otherwise) will always be a workplace diversion, the main event has not happened yet – we’re still in merely a transitional, evolutionary phase of the process – a process which will end at the couch, not the desk.

Where are we now?   Several major CE manufacturers are already offering a first generation of standalone internet-enabled devices (each partnered with one or more internet video services):

Hardware:                                Service:

• Sony Bravia, PS3               Sony Playstation Network, Amazon on Demand
• Roku                                   Netflix, more to come…
• LG                                      Netflix, more to come…
• AppleTV                             iTunes
• TiVo                                   Amazon, Netflix
• HP MediaSmart                  CinemaNow, including others
• Microsoft xBox360            xBox Live Marketplace, Netflix

The problem with the above scenario is that no computer means no web browser, which in turn means no Flash – so each OEM wishing to offer multiple services directly via their network interface-enabled hardware (TV, DVD, PCR or set-top box) has had to implement the interface to each service partner individually – a tremendously inefficient reinventing of the wheel.

Therefore, I’ve long felt that what’s needed is a standardized technical protocol for CE hardware to interface with these multiple video services.  Last week, Reed Hastings of Neflix expressed a similar view, noting that in the absence of standardization, “Everyone’s going to have to do customer interfaces for each device”, and further, that it’s “slowing down the market tremendously.”

While the web standards we now take for granted were developed in the shelter of academic and government agency environments, there’s a huge amount of money (and an equal amount of competing agendas) at stake in the internet video space – so the development of a new standard from the ground up at this point seems highly unlikely.  Instead, an embedded web browser running Flash (and/or Microsoft’s Silverlight) sounds like the better idea (Sony has already moved in this direction, embedding the highly-regarded Opera browser into its Bravia line of network-enabled TVs).

Admittedly, though, web on the TV leaves a bad taste in the mouth – previous attempts suffered from three major issues:

• Bandwidth
• Screen resolution
• User interface

Of these three, two are already solved: most broadband connections are now capable of streaming at least SD video, and increased resolution of HD TV makes web text quite readable. The third issue alone remains: the user interface.  Recognizing this, Hastings predicts a new generation of Nintendo Wii-like pointer/motion remotes to replace the primitive up/down/left/right arrows (and four dozen other never-used buttons) on today’s remotes (interestingly, Apple has recently filed for a patent on some technology for just such a device).

Look for this to be the big story at the CES show this January…

Interesting approach?

A couple of weeks ago, Blockbuster, the country’s largest video rental service announced testing of 50 or so DVD vending kiosks in preparation for a massive 10,000 store roll-out in the next 18 months.

The company certainly lacks neither scale nor resources to put this good plan to work.

But somehow – in the age of ubiquitous, super-”liquid” consumer video – Blockbuster’s push into the stationary DVD vending business seems somewhat “backwards” I thought.

Maybe afraid to miss the boat again – especially Netflix’s DVD mail-order success comes to mind – Blockbuster may have decided it could simply not cede any more business to others.

Among those, there’s Redbox of course, operating at least 8,000 kiosks each filled with 500+ DVDs. Currently one-night rentals run at $1 per DVD. For all titles, reservations can be made online and any of Redbox’s kiosk accepts returns.

Fair enough. Both Netflix and Redbox are certainly siphoning off consumers’ video dollars away from Blockbuster stores. Obviously that must hurt.

But will simply replicating someone else’s stationary vending model be enough for the video store king to (re)claim lost market share?

By now, most consumers certainly have ample alternatives to quench their thirst for full-length commercial video without the need to drive to a local store.

Cable VOD is already available in at least 50 million US homes. Add to that a growing IPTV subscriber base (2 million and counting), plus Apple TV, Hulu.com, and soon-to-launch Amazon Video on Demand. Then there’s Sony’s internet-connected Bravia TV sets of course, pre-loaded with Hollywood hit movies and other popular fair.

The list goes on and on.

But wait. Maybe NCR can add much-needed differentiation to Blockbuster’s DVD vending idea. The former AT&T-owned company partnered with Blockbuster on its planned in-store kiosk deal but has more to offer than that.

Turns out, NCR is behind the predecessor to the 802.x WiFi standard, and knows all about RFID.

To that end, what if a Blockbuster / NCR combination lets you use your cell phones or other portables equipped to scan DVD packaging while browsing through Blockbuster stores? Or, for that matter, any other store carrying DVDs. (Similar to what Amazon.com has done for in-store books).

While you’re already heading for the door, behind that RFID system, a backend transmission network pushes your favorite Blockbuster hit straight to your residential network, and you’re ready for movie night by the time you enter your home.

No DVD kiosk required, no return date to adhere to; oh, and much lower delivery cost boosting margins on incremental sales.

Interesting approach?

“We want to hire the geek.” “We’re looking for people who are in touch with their inner nerd.”

By now, this is taken as gospel: HR 101 for the tech industry.  But while I’m not going to dispute the advantages of having a passion for your job, I would make the case that there’s often more involved in creating truly effective technology than software development and electrical engineering – too often, clarity and simplicity in product design (especially at the UI level) are given short shrift, even in the CE space (where one would expect to see a premium placed on such concerns).  That this somehow remains the case despite the spectacular successes of conspicuously elegant and user-friendly products such as the  iPod and google baffles me – of course I can understand how a self-reinforcing corporate ‘geek culture’ can take root at a technology company, but it’s equally clear that a lot of companies building consumer-facing products would be better served by letting a few more ‘soft science’ types into the room when defining their use cases and user interfaces.

In other words, consumer software and CE hardware firms should continue to place a premium on hiring smart people – clear-thinking, logical people – but perhaps a few less technical fetishists, at least in areas that aren’t purely technical (in other words, Toyota doesn’t have the team responsible for engineering the automatic transmission design the dashboard).

Another chronic problem is feature-bloat – solutions looking for problems that are often the result of too many developers going unchecked, all looking make their territorial mark on the product in advance of their next review (a good example of this syndrome is the ever-expanding MS Word application…)

The bottom line: engineering and design are separate (and often mutually exclusive) talents – and should be treated as such. Consumer hardware and software companies should feel as much of a responsibility to design well as to code well.

Some companies in the video over IP sector are getting it right – hulu.com and the Netflix Roku set-top box come to mind (although due an extremely limited selection of available titles, the Roku box will ultimately amount to not much more than a proof-of-concept exercise – with a core competency in DVD rental, Netflix is understandably reluctant to do much more than stick their toe in the digital delivery business for right now – but I digress…)

To put it in quasi-empirical terms – “Brian’s Theorem of Design”, if you will:

• simplicity times (power + quality) = elegance
• elegance squared = user buy-in