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HomeArticlesTelevision ContentDigital Television Technology New Business Or Product Update?
Tuesday, 20 May 1997 00:00

Digital Television Technology New Business Or Product Update?

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An assessment of the potential of new markets and business opportunities arising from Digital Technology by Colin J. Knowles of the Australian Broadcasting Authority

 

We live in a world where new opportunities are continually opening, new businesses form to exploit these opportunities and old businesses must adapt or become extinct. Occasionally, radically new knowledge is created which results in a quantum shift in fundamental thinking and technology, which rapidly moves our endeavors to a new plane of activity. Digital signal processing is one of those changes. It has been the catalyst to the convergence of most forms of information dissemination: content creation, production and publishing, newspapers, broadcasting and telecommunications. Digital technology has brought us to the point where there will be few constraints on our capacity to deliver information and entertainment to consumers and the number and types of services available will be determined by commercial returns on investment rather than by channel capacity. Services will be delivered using digital transmission via a variety of means; Satellite, Free-to-Air terrestrial Broadcast in the VHP and UHF Bands, MMDS, and Cable and over time these transmission methods will become more and more specialised and adapted to the types of service delivery for which they are the most efficient. For example, a major sporting event with national interest might be transmitted via satellite, whereas a return of yesterday’s news or a personally selected documentary would be delivered via cable.

This removal of capacity constraints will facilitate the development of new types of services. Services, which may be very different to traditional radio and TV entertainment and information services. It has the potential to substantially reduce the entry and exit cost. for service providers and will encourage the development of niche services that are unviable under existing transmission arrangements.

Within perhaps 25 years viewers might have easy, and almost instant access, to programmes from around the world either in real time or delayed to a times of their choosing, and perhaps edited to their requirements. The Internet gives us a small glimpse of what may be possible, but it too is likely to undergo a massive metamorphosis, as its success demands more and more capacity in the links, which join its parts. This capacity is likely to come from new commercial driven approaches and optical broadcast networks, which will remove the present system bottlenecks, increase bandwidth to the point where real-time video transmission will be possible and channel capacity constraints will be less frequently a constraint on the possible. The success of such widespread and diversified sources of content will demand the development of service companies which provide “guidebooks” to the information world; service for which consumers will be prepared to pay. They bring order to the present Internet cyberspace.

Digital technology has brought us to the point where there will be few constraints on our capacity to deliver information and entertainment to consumers and the number and types of services available will be determined by commercial returns on investment rather than by channel capacity

Regulation will become increasingly difficult and probably irrelevant and will move from the traditional broadcasting type content and carriage regulation to simple systems designed to protect “children” and intellectual property and to foster open competition in the provision of carriage. The trend will be towards borderless, consumer driven content control rather than Government mandate. Towards international protection of intellectual property flowing across national borders, leading to better and more direct returns to content creators in relation to usage of the product. These more creation returns should encourage more people to engage in content creation and should assist to stimulate new content creation necessary to meet what could become an instable consumer demand for new information education and entertainment products. Products which are certain to bear only passing resemblance to the types content we associate with radio, television, or newspapers and magazines today. Governments will need to ensure that regulation is both stable and predictable so as to create an industrial environment, which will encourage investment, risk taking and innovation. All these ingredients will be necessary to achieve this vision.

Success of digital technology as a pathway to consumers will ultimately depend upon how consumers respond to the services on offer. Whether the services excite their interest. Whether the services are of sufficient interest to convince them to reinvest in the necessary equipment and whether consumers will invest at a rate sufficient to encourage manufacturers to produce and be innovative in product design. Innovation will be necessary if the full potential of digital technology is to be realised.

The rate at which the ultimate and inevitable conversion of all services to digital will occur, will depend on whether entrepreneurs are able to back from traditional thinking and to introduce new paradigms about the opportunities presents by the technology. Seen only as a replacement for exiting analogue technology digital will not excite consumers nor will it do much to create new markets and new services.

 

Consumer Demand

Future consumers will eventually be relieved of the tedium of watching programmes at the time determined by the service provider. They will be able to make individual choice of time place and arrange the content to their specific needs. Those needs will differ, depending on the purpose, and viewing situation (social and physical). The services will range from “on-demand” programming or interactive inquiry perhaps around a multimedia personal computer based terminal, through mobile applications, and more traditional viewing situations (perhaps with large screen) covering the involved and passive viewer situations. Even passive viewing type receivers will contain considerably more digital processing capacity than we know today and apart from operating features and screen size and the use to which the device is applied, there may be little else to distinguish television or radio receivers from computers. Even receivers primarily used for receiving sound or data will have the capacity to present pictures, further blurring the distinctions between radio, TV and computing. Demand for on-demand information services will grow. Information services are more likely to provide personally tailored full motion video and high quality audio as well as text for use in business or by private individuals.

Regulation will become increasingly difficult and probably irrelevant and will move from the traditional broadcasting type content and carriage regulation to simple systems designed to protect “children” and intellectual property and to foster open competition in the provision of carriage

  

VOD/NVOD

Video on Demand (VOD) or Video Dial Tone have been promoted as the killer applications for new broadband links to the home. Near Video On Demand (NVOD) might be seen by some as a crude implementation of VOD. While there are similarities, they are different. There is little efficiency in providing a separate delivery to each of the viewers anxious to watch a popular first release. There’s sense in making a 30-year-old return, of interest to only a select number of viewers, available as individual service.

NVOD operators suggest that 80% of their revenue is generated by about 20% of the titles and hence see NVOD as enhancing the business that makes most revenue while still providing space for the marginal services that encourage consumer loyalty. Not denying VOD might eventually replace NVOD, they suggest that VOD is not the answer yet.

One major drawback for VOD technology today is that it currently costs about ten times more in investment and operating cost than the NVOD alternative. The technology depends on very powerful video server technology, which is not yet available at reasonable cost to handle very large networks. The time frame in which VOD will become available is therefore uncertain at this stage.

The primary drivers for VOD seem to be:

(i) Access to a video library from home.

(ii) Access to historical programming material such as a past news broadcast. 

(iii) Ability for the consumer to interact with the movie (e.g. start, stop, rewind, in the same way as is possible on a VCR. 

(iv) None of these features yet offers any cost advantages over existing video access.

The cost price to the consumer would need to be set at about the equivalent video hire (e. $5-6 on first run material, less on older material) not allowing for a convenience factor since it would not be necessary to visit the video store. It has proven impossible to obtain the necessary return on investment at present prices for the technology.

Future consumers will eventually be relived of the tedium of watching programmes at the time determined by the service provider. They will be able to make individual choice of time place and arrange the content to their specific needs.

 

 

Compact Video Disk

A further unknown in the NVOD/VOD question is the emergence of cheap videodisk technology. Compact disk technology has been developing to the point where it will be possible to record a full length movie onto a compact disk of the size now used for Audio. There were two competing proposals being promoted by the manufacturers, one by Sony Phillips, and the other by Toshiba and Time Warner. In mid Sept 95, an agreement was reached on a single standard, which combines some of the best features of both systems. This opens the way for the development of a new range of multi-media products and a new medium for carriage of movie material for sale or rental. CVD is seen by many as a replacement for VCR tapes in the movie sale and rental business. It is billion per annum. Cynics suggest because the medium does not allow for recording at this stage that it will not replace the convenience of tape. The same was once said of the now ubiquitous compact disk.

  

Carriage

Broadcasting is currently dominated by service providers who are also their own carriage providers. This is the direct consequence of the single channel analogue technology they employ. Only one primary service may be carried per transmission system. Thus there are no economies of scale except in infrastructure like towers & buildings. Digital transmission technologies involve the carriage of many services over the same basic transmission infrastructure. The current concept, familiar to broadcasters, of a unique transmitter for each broadcasting service using the radio frequency spectrum disappear, there will then be little to distinguish traditional terrestrial free-to-air broadcast from cable, satellite or MMDS delivery from a carriage perspective. Each will be able to deliver many services through the same basic systems. This suggests that some form of open common carriage scheme may be needed to benefit consumers, services providers (particularly new entrants), and content providers.

Traditional terrestrial broadcast will inevitably continue its dominance as a service provider for at least the first decade of the 21st century but will need to diversify its interests and clearly decide on its strategist business directions. Some players may see their core expertise as programmers of mass appeal. To do that in the future they may become providers of tailored electronic programme guides enabling consumers to easily access the vast array of alternative programming available. Others will concentrate their attention on content creation and may decide to become carriage providers.

Advertising will continue to be a powerful force in television because it will continue to assist in reducing the cost of services to the masses, and is likely to remain the targeted and provide, through the features of interactivity, the capability for viewers to seek and receive almost instantaneously additional video and other information on the products and features

Terrestrial broadcasting will retain its dominant role longer because it has several features that cannot easily be matched by satellite, and only partly matched by cable : » It can provide localised programming of direct relevance to the viewing audience;

a. It can be received on portable receivers (digital receivers will provide more effectively for this than present analog systems)

b. It is free to the consumer.

c. The marginal cost of connecting additional viewer is almost zero.

 

Content

Lower delivery costs will open up opportunities for providers of narrow content formats to make their material widely available. Content is increasing likely to move towards a “user pays” rather than “advertiser pays” basis for much of the new content. Advertisers will no longer be able to guarantee the same level of access to consumers in the increasingly consumer driven choice world and will need to change the way they use the product. Advertising will continue to be a powerful force in television because it will continue to assist in reducing the cost of services to the masses, and is likely to remain the targeted and provide, through the features of interactivity, the capability for viewers to seek and receive almost instantaneously additional video and other information on the products and features.

Mainstream content providers will need to form alliances with content custodians (film libraries etc.) and products to ensure supply of product and we are likely to see such providers offering a number of services. Eventually, these service providers will move towards true video on demand once the bandwidth and processing capacity become available to meet the delivery response expectation of viewers. Consumers can ultimately expect to have a wide choice available. A choice extending from traditional mainstream events and movies, through to magazine like services of great interest to a few. Narrow cast service development will be driven by the fact that service providers, through the use of shared infrastructure on the digital highway, will have lower entry and exit costs, and for those who cannot with a mainstream provider, or through channels specifically targeted at short-run itinerant usage.

New business will emerge in programme packaging. The role of pre-packaged broadcasting will change as multi service delivery increases. It will be replaced by service providers who provide a variety of “electronic programme navigation services” to suit different viewer tastes. In-addition to “fixed” navigation choice for the passive viewer, there may be choices that adapt to viewer usage patterns. An important dimension in these navigation services will be the ability (like today’s newspapers) to insert headline advice on new programmes and options that might appeal to the viewer but based on past habits, and “cold calling”. The interactive component of this implies some feedback from viewer to service provider, which will then provide new powerful drivers of targeted advertising (privacy concerns might become an issue if this is not handled properly). Viewers are likely to pay for some of these programme navigation services.

 

Strategic Environment

Taking account of all of the above issues we can build a picture of the future strategic business environment for digital broadcasting. During the next 15-20 years, we are likely to find:

i. Digital delivery will become the norm for all forms of electronic communication.

ii. Delivery capacity will keep ahead of demand for all forms of carriage.

iii. Consumers will be able to better match their information and entertainment \” their needs (e.g. interactively),

iv. New business opportunities will develop in information and entertainment with the emphasis being on filling more diverse and more specialised niche markets.

v. Broadcast type wide appeal programming will continue to have a central place in meeting general entertainment and information needs of the community for both sound and vision programmers.

vi. Wide appeal programming will provide options for the consumer to “zoom in” on material of specific interest to obtain either more of the same or additional information about the item of interest (e.g. a general documentary might allow a consumer to seek further information about a particular locality) or perhaps to select different camera angles and shots from a suite of programme elements using a combination of interactive and on-demand services.

vii. A growing demand for “mobile and portable” video services and continuing and increasing demand for mobile and portable audio services (e.g. digital delivery, compressed video, light weight very small and efficient receivers - i.e. in the same way a transistor radio moved from a fixed or vehicle option to true portability). These will use over the air transmission using the radio frequency spectrum.

viii. Over the air services may permit some interactivity using either mobile telephone technology or a dedicated, shared, return path, but true interactive service delivery including video on demand ‘video dial tone, is likely to remain the domain of cable and possible short wireless delivery from the local distribution point to the home or business premises (in substitution for cable connections) which might also allow limited portable operation within the vicinity of the home or business premises.

ix. All forms of service delivery will give way to a common carrier type of delivery system with competitive common carriers providing carriage services. Open standards will predominate with emphasis on globe standards with a fall back to regional standards where global standardisation is not achieved.

x. Standardisation will be essentially limited to inter-connectivity, interoperability, and core services aspects. This will allow for services innovations and new service options within the standardisation framework. As these services develop, further industry agreed standards will emerge for the added value elements. Access to the added value services may require updation of equipment.

xi. Government intervention in standards matters will be limited to that of a facilitator and general monitoring of inter-operability/inter connectivity arrangements to assure all persons have reasonable access to services so as to fully participate in society.

xii. Most radio frequencies will be regulated by arrangement between the carriers who have acquired the spectrum. There will be a continuing role of regulation in setting minimum standards relating to interference and electromagnetic compatibility (setting the road rules for users of the spectrum), and relevant international coordination.

xiii. Internationalisation of copyright protection laws to facilitate just returns to creators and to regulate trans-border signals.

xiv. Domestic delivery of services will dominate, although there will be ready access to trans-border services which may fill empty niches within the broadcasting landscape.

xv. Satellite delivery will be the predominant means of trans-border delivery, with increasing access to international services through broadband terrestrial cable.

xvi. Satellite delivery of domestic services will continue to be a primary means of access to services in remote or isolated localities and there will be a growing variety of services available as transponder costs fall with increased digitisation of delivery etc. 

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