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Set-Top Boxes Go on Holiday (Sale)

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Apple's announcement that it expects to crack the 1,000,000 mark for its newest version of the Apple TV is impressive, but more for the way it has benefited the market than for the actual number of shipping units.

The re-emergence of Apple's "hobby" on to the market has been instrumental in educating the consumer on several fronts, raising the bar for set-top box user experience and accelerating the overall demand for inexpensive set-top streaming boxes.

Education for All
Apple's attempt to push the consumer away from reliance on internal storage, emphasized by the lack of a hard drive in the new Apple TV device, as well as the company's advocacy of high-definition streaming (or progressive download) and adaptive bitrate (ABR) delivery, has resulted in a level of education for consumers that had been lacking.

The typical Apple approach is to take care of the complexities in the background, and the new Apple TV certainly rates high on that front. Beyond the basic education of "it just works" for consumers, though, the last few months of Apple's renewed push in the market also seems to be providing a much-needed education for an industry intent on competing at a scale level.

For instance, consumers have been forced to wait for many minutes-sometimes even hours, in extreme cases-to view content. The culprits for these delays range from faulty HDMI handshakes, which have since been updated as part of the device's firmware upgrade, to more ominous domain name services (DNS) issues.

Joe Maller, an Apple TV owner who is more tech-savvy than most, posted his findings on his blog about the interactions between Apple TV and global DNS services.

"Last night we tried to rent an iTunes movie on our newish Apple TV," Maller posted earlier this week. "Instead of starting right away, the Apple TV said it would be 2+ hours before we could start watching."

Maller is one of the fortunate minority in the United States to have a very high-speed connection, so he shouldn't face the issues that the recent FCC report reveals face the majority of American "broadband" users: a connection speed lower than that of the average HD-based set-top box.

"I've got a healthy 15-20Mb/s connection and a clean wire to the Apple TV," said Maller, "so this shouldn't be happening. A little bit of research turned up a surprising fix: Don't use Google DNS."

Maller goes on to explain that the use of a global DNS service wreaks havoc on distributed content models, such as those used by content delivery networks, and the Google DNS thwarts the CDNs ability to determine location.

"I switched to my ISP's DNS servers and now HD rentals on Apple TV are ready to watch in 10-20 seconds," said Miller, concluding with a comment about a problem with general consumer education for early adopters.

"Since most people don't know what a DNS server is," he said, "this problem primarily affects the 'tech-vanguard' and those fortunate/unfortunate enough to be inside our circles of helpfulness."

In other words, even the tech geeks who adopt these products early on are in need of education.

User Experience
Another area where the new Apple TV is raising the bar is the aspect of consistent user experiences.

Like the iPhone, where Apple controls both the hardware and the basic software, the Apple TV has a simplified user interface, designed to drive a consistent and minimalist user experience.  Apple prides itself on providing the consumer with the "magic" delivery of content, and it does so by shooting for an old-school user experience mark: allow consumers to video HD videos with less physical effort and fewer clicks than it would take load up a DVD or Blu Ray disc.

On the competitive front, the Xbox gaming console is another example of a high-quality user experience, for the same reason that the Apple TV excels: Microsoft controls both the hardware and the software for the device, refining the user experience.

It's little wonder, then, that Google is potentially curtailing the release of newer Google TV products, in order to better enhance the user experience.

A recent New York Times article noted that Google may be asking Sony-a company that released one of the first Google TV set-top boxes-along with other consumer electronics manufacturers, to hold off on releasing new Google TV products at the Consumer Electronics Show in early January.

The reason? According to the Times article, quoting sources familiar with the company's plans, Google asked the TV makers to delay their introductions, "so that it can refine the software, which has received a lukewarm reception."

One of those lukewarm receptions came from the Times' own David Pogue, who panned early Google TV devices for having a poor user experience.

For those of us who have had the chance to play with several Google TV devices, the issue isn't just a poor user experience on one device, but an inconsistent one across the various Google TV offerings: from button-heavy remotes to oddly positioned keys on a keyboard, the interface on the device, and the interface to access content, are highly inconsistent user experiences .

It appears that Google is learning rapidly, though, and the delayed launch at CES could put the company on a better footing to compete with Apple, Microsoft and smaller firms like Roku and Tivo.

Sales Uptick
Despite the limited appeal of the Google TV devices and their hefty price tag compared to the Apple TV, there is a segment of the market that is benefiting from Apple's educational push: inexpensive set-top boxes such as those provided by Roku and the private-labeled Boxee Box.

Anthony Wood, CEO and founder of Roku, who has keynoted previous Streaming Media events, says that Apple's entry has actually helped double sales.

According to an interview with Business Insider, Wood claims that Roku's pre-emptive strike to lower its prices to prices below Apple TV has paid off.  For those who may not know the back-story, Roku pulled a bold move on the day prior to Apple's announcement of the new Apple TV, cutting the price of all its units: two of the units sell for less than the $99 Apple TV and the third, flagship product-which provides 1080p streaming capability that Apple does not-sells for the same price as Apple's competing product.

Woods tells Business Insider that the company expects to double sales this year, ending the year by selling its 1 millionth box. Revenues are also expected to double, from $50 million to more than $100 million in 2011.

A spot check of sales of the Roku boxes on Amazon, which accounts for approximately 25% of Roku's total sales, led Business Insider to reveal that all three of Roku's players sit in the top fifty of Amazon's consumer electronics list.

"The $80 Roku XD streaming player is #9 on Amazon's best-selling gadgets list," Business Insider reports, "while its $100 XDS player (more features) is #11. Roku's low-end "HD" player is #42. Meanwhile, the $100 Apple TV, which is backordered at Amazon, is #23. Logitech's Google TV box is #110."

The Boxee Box by D-Link, the private label version of the often-discussed device also made the list, at number 171, so it's safe to say that the tide is rising for almost all companies involved in the delivery of streaming / progressive download content. 

The Streaming Media crew will be out in force at the CES show, covering this and other topics, when the event kicks of January 6, 2011, at the Las Vegas Convention Center.

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