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Saturday, January 1, 2005

LiveTV: Fad or Future of IFE?

Are in-seat screens and live satellite television on commercial aircraft just the latest craze in a growing IFE industry? Or are they the new standard, offering something airline passengers rarely receive--choice?

Matthew Matarozza

In 1925, a "media event" took place in the skies over London. On a converted World War I Handley-Page bomber a projector and screen were set up so passengers could view what would become the very first in-flight movie. They delighted in the black & white film, "The Lost World," and became a part of in-flight entertainment (IFE) history. Thirty-six years later, another historic first would take place. In 1961 TWA would begin an ongoing program by showing the first in-flight movie on a regularly scheduled commercial flight. Lana Turner and Efrem Zimbalist Jr. lit up the airliner's overhead screen in MGM's "By Love Possessed." The next year American Airlines and Pan Am installed television monitors in their first-class cabins and just like that, an industry was born.

IFE has come a long way since those early days. While the overhead screen and single (usually bad) movie choice are still the industry standard, air carriers have realized that a happy passenger is a repeat passenger and are scrambling to offer newer, better entertainment options on their flights. And they're not afraid to dig deep into their wallets to offer these options.

Binny Prabhakar, an IFE analyst and project manager with Frost & Sullivan, expects $2.2 billion to be spent on IFE options in 2005. She also predicts a 19 percent compound annual growth rate on IFE and connectivity spending through 2010.

It appears that the days of leafing through the in-flight magazine are ending.

JetBlue's Edge

Air carriers long have realized the importance of IFE. But low-cost carrier (LCC) JetBlue Airways took entertainment beyond reruns. Like many other LCCs JetBlue has thrived on low-cost, point-to-point service. But it is best known for introducing live television. Since April of 2000 the airline has offered free in-seat television programming on all flights.

What sets this technology apart is the freedom of choice. On any given JetBlue flight, a mother can watch a program on A&E, the father can get the latest scores on ESPN, and their children can enjoy their favorite shows on the Cartoon Network or Nickelodeon. All of this is made possible by a company called LiveTV.

LiveTV is a Melbourne, Fla.-based company that became a wholly owned subsidiary of JetBlue in 2002. Not surprisingly, LiveTV's motto is "At Home In The Air." The company wants to put all the entertainment options of one's own home in a commercial airline cabin.

The LiveTV system, which costs about $1 million to install in each airplane, allows passengers to view programs from their own 5.6-inch (14.2-cm) diagonal screens situated in the seatbacks in front of them. Each unit has its own headset and channel control unit in the armrest. The user can select a channel to view, set it to an appropriate volume and enjoy the program.

LiveTV uses DirecTV, the leading U.S. digital television service provider, to offer 24 standard channels of live programming. (JetBlue's system has 12 additional channels.) These stations include the previously mentioned A&E, ESPN, Cartoon Network and Nickelodeon, as well as CNN Headline News, the Food Network and the Discovery Channel, among others. In addition, LiveTV offers 100 channels of XM Satellite Radio on JetBlue flights. This includes news, sports, talk, children's programming and an extensive list of music channels.

JetBlue also has inked a deal with the Fox Entertainment Group to add Fox programming and movies to its LiveTV system. The system will allow passengers to view classic films such as "The Sound Of Music" and more recent films like "Moulin Rouge," as well as episodes of "The Simpsons," free of charge. Once the testing phase is over, JetBlue will offer first-run films and other Fox programming on its flights for a fee.

Today LiveTV is available on more than 14,500 airline seats. There are outstanding orders and options to outfit more than 87,000 seats. LiveTV's initial success was so impressive that Frost & Sullivan conferred its 2001 Technology Innovation Award on the company.

According to Glen Latta, vice president of corporate development for LiveTV, the system boasts a reliability rate of over 99.5 percent. The usage rate on airlines that offer the service for free is over 95 percent.

Others Climb Aboard

With a reputation like this, it's no wonder that other airlines have clamored to get LiveTV service on their planes.

WestJet, of Calgary, Alberta, offers the system free on its flights. Instead of DirecTV, WestJet's LiveTV system uses the Canadian equivalent, Bell ExpressVu, to provide its live satellite signal. While the service is offered on only five of the Canadian carrier's Boeing 737s, WestJet plans to include the LiveTV system on all of its next-generation aircraft.

Denver-based Frontier Airlines also offers the LiveTV system. For $5 a passenger can enjoy DirecTV's service on the company's fleet of 34 Airbus A319s.

Frontier tries to differentiate its service from potential look-alikes. In addition to its fee-based 24 TV channels, the carrier's own channel, Wild Blue Yonder, is available free of charge. This companion network to the carrier's in-flight magazine features destination-specific information, arts and entertainment features, shopping and music videos. Passengers on Frontier flights also can tune into the Cloud 9 Film Festival, the first such offering in flight. Cloud 9 includes a collection of short films. Some are exclusive to Wild Blue Yonder, while others come from the film festival circuit. After viewing the films, passengers can go to the company's Web site and vote for their favorite film.

No figures are available to measure Frontier's success and the viability of its fee-based approach to TV service. But Joe Hodas, a company spokesman, says: "We're doing OK with it. We're definitely covering our costs." Frontier remains optimistic about the service's continued success, as "a great differentiator," he says.

LiveTV Competition

Not to be outdone by JetBlue, Delta Air Lines created its low-cost carrier, Song, to compete directly with JetBlue on most of its major routes. Instead of using LiveTV, however, Song had eFX installed. Matsushita designed eFX, which employs the Dish Network service to provide the satellite signal. Song's offering is similar to LiveTV's, with nearly identical channels. But eFX also includes 24 channels of MP3 audio files, the equivalent of 150 CDs' worth of music.

This system also may find its way into other airline cabins. Matsushita recently inked a deal with Independence Air to put eFX on the carrier's 28 new Airbus A319s. Due to the company's recent financial woes, however, it has yet to install the systems. Independence Air states that it is exploring its options and plans to announce the final decision to equip its fleet in the coming months.

Despite its live television system, Song's success has been hampered by larger issues. Delta's much-publicized financial problems have put Song's future in question.

In these difficult times, what do other airlines think of putting live television in their cabins? The only one to speak openly on the subject has been American Airlines, which has stated that it has no plans to install seatback screens and live television on its planes and would not try to keep pace with "fads." But American, which has the world's largest air transport fleet, with more than 780 airplanes, recently announced that it would test a personal entertainment appliance (PEA) on its flights.

The PEA is a 3-pound (1.4-kg), modified laptop, about the size of a hardbound book. It will feature movies, TV shows like "Frasier" and "Without A Trace," audio and text books, newspapers, games and music videos. For an undetermined fee, passengers would gain unlimited access to this content for the duration of the flight.

Fad or Future?

Is live television in airline cabins the new IFE standard or is it a fad, as American Airlines has suggested?

Richard Salter, an IFE analyst with Richard Salter & Associates, says that most major airlines are looking into IFE options that emphasize personal choice, and live television is just one of those options. Though the company has competition, Salter believes it will maintain an important role in the IFE industry.

Salter believes that live television will have a big impact on domestic IFE because of its technological advantages. "LiveTV simplifies the logistics of content delivery," he states. It is also a "good entry point into IFE" for JetBlue and the other LCCs. The novelty of this technology has not yet worn off, and that's good news for them.

Thus far, the novelty of its offering has allowed JetBlue to carve out a substantial niche in a saturated market, a circumstance that led to the formation of Delta's Song and United's Ted. And it could cause even more airlines to expand IFE options in the near future. Though tight-lipped on the subject, Southwest Airlines, whose previous IFE offerings included magazines and friendly flight attendants, is looking into a more contemporary form of IFE. According to Salter, "It's common thinking that they need to compete with JetBlue."

Competition Heats Up

Prabhakar predicts success for live television both domestically and internationally. But she warns that some of these numbers could be deceiving. "Very few revenues are being garnered from that market. It's going to be an indirect revenue source because of the differentiation that it could be giving."

Make no mistake, airlines are spending money on IFE, and those numbers will increase as more people continue to travel and demand options. The United States is having a record year with airline travel. Air carriers are on track to carry 685 million people in 2004. The Travel Industry Association of America (TIAA) estimated a 2.9 percent increase in domestic leisure travel for 2004. That number is expected to grow by another 2 percent in 2005.

Business travel is also up. TIAA has predicted a 4 percent increase in business travel over 2003. This number is expected to grow again in 2005, when business travelers will make a projected 149 million trips, an increase of 3.6 percent over 2004. International travel to and from the United States also is projected to increase over the next few years, causing many to speculate that live television will move into the international market.

Already LiveTV's influence is being felt on the other side of the world. Virgin Blue, Australia's premier LCC, has teamed up with LiveTV and Australian satellite television providers Foxtel and Austar to provide live satellite TV on its flights. For a $5 fee, Virgin Blue will offer unlimited use of 24 satellite channels during its flights. The technology will be phased on board by mid-2005, subject to regulatory approval from the Civil Aviation Safety Authority.

Virgin Blue is the first airline outside of North America to provide live satellite television, but it won't be the last. Says Latta, "LiveTV has plans to offer the service in all parts of the world where direct broadcast satellite (DBS) service is available."

But a move into Europe might not happen as quickly as some would expect. Prabhakar thinks live television won't make its way to Europe for at least three or four years. "In Europe, languages and broadcasting rights and connectivity across different countries would be an issue. They aren't exactly difficult to overcome, but they'll be issues which need a little more ironing out, unlike the U.S."

Future Developments

But the live television concept may have to be modified. One of its biggest issues is "real time." LiveTV's onboard aircraft signal is the same one that is used by terrestrial receivers. So, if you board a flight at 11:15, you may have missed the first 15 minutes of a program. The answer to this, Salter believes, may lie in Tivo-type servers like those in homes today.

With a Tivo-like server, programs can be cached and then played back, so a passenger doesn't miss any of the show. "The Tivo technology we have on the ground will be directly applicable to airborne," Salter says. In this scenario, only about four channels would need to be truly real-time--news, weather, sports and financial information. All other content could be recorded on the server and doled out when requested. Salter adds, "We should be able to save a lot on satellite bandwidth and store this stuff on servers on board unless it really is live sports or live news."

How LiveTV Works

The LiveTV system is installed at LiveTV's Orlando, Fla., facility with some provisions now offered as a standard option at Airbus' factory in France. At Orlando the retrofit process requires three days, including one day to transport the aircraft for mod work. On the second day, the antenna is attached to the top of the aircraft and the racks and processor/receivers are installed in the rear equipment bay. The third day includes antenna alignment, equipment installation (mainly seats with LCD screens), systems integration, and test and completion. After this, the aircraft is ready for service.

The LiveTV system itself works quite simply. The external antenna section includes a GPS antenna, the DirecTV digital broadcast satellite (DBS) antenna, and the antenna control unit. The satellites beam signals to the DBS antenna, which sends them to the rear equipment bay for processing. Two Multichannel Receiver Modulators (MRMs) act as tuners that demodulate and decrypt the information sent from the satellites. The MRMs then send the decrypted signals to the seatback screens, using a carrier network similar to closed circuit television.

The seat electronics boxes (SEBs) then distribute the signal. The SEBs are daisy-chained together from each column output of the radio frequency (RF) distribution assembly (RDA). One SEB works for three seats. The RDA has eight video outputs, one for each zone on the plane. Each zone serves five to six seat rows.

The video display unit is a 5.6-inch (14.2-cm) diagonal, active matrix thin- film transistor screen with an integrated credit card swipe. The passenger control unit (PCU) in the seat arm controls the functions of the screen. The controller features buttons similar to a home remote control that moves the channels and volume up or down. The PCU also includes buttons that adjust the brightness of the display.

The TV programming options are determined by the route each plane takes or its destination. Certain features and messages will not be available on all routes. If a flight is particularly short, then certain longer programs will not be offered. The pay-per-view movies will be incrementally loaded by wireless data links via a dedicated, encrypted network and will be delivered to passengers by a new four-channel digital video server.

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