COMPLIMENTARY ADVISORY REPORT

Digital Home Services in 2009:
An Evolution, not a Revolution

| February 5, 2009 | Digital Home Services | Advisory Report

| Analyst: Larry Hettick, Principal Analyst, Digital Home Services

A tough economy, market saturation and an overall lack of technical innovation will all contribute to 2009 as a year of gradual evolution rather than one of revolution in the digital home services market. In some ways, the 2009 evolutionary stage has been set by technology advances that took shape in 2008 while in other ways, market forces in 2008 beyond technology will affect competition. In one example of technology evolution, commercial video programming delivered from the Internet to the TV set is now available on dozens of devices, such as those from VUDU, Apple and Netflix. However, business issues (e.g., limited content and monetization) and technology limitations (e.g., ease of use) still stand in the way of an Internet TV revolution. In another example, time-shifted video over the broadcast TV network moved beyond the domain of standard video on demand (VoD) with Time Warner Cable’s “Start Over” feature and with Microsoft Mediaroom’s “Reverse Gear” over IPTV. Yet the carriers’ cost for VoD servers in the absence of a way to better monetize dated programming puts a business case limitation on unlimited program caching.

Market forces beyond technology in 2008 will create a “cause and effect” on competition in 2009. For example, as service providers increase broadband speeds to differentiate their Internet services, they also fostered an environment ripe for “bandwidth hogs” to create network congestion—a factor that must be elegantly addressed in 2009 as the number of “hogs” multiplies. While technology advancements and consumer demand allow two steps forward, business issues and technology limitations bring digital home services one step backward, thus creating an environment for a gradual evolution while prohibiting a service revolution in the near term. This report will provide topical analysis of five digital home service issues, providing guidance that will characterize the digital home market in 2009 and beyond.

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| Client access - Report in Digital Home - U.S. | More information

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