Everyone Wants Piece of Your Home Living Room
Well you’ve got to hate the bad folks over at Dow Jones and Barron’s. Although they have a really insightful piece on the battle for living room they only offer it up at their paid site — or you can always pick up a copy at the Newstand.
Normally I’d just refuse to post on an article that can’t be accessed for free — but I can’t resist writing about the Barron’s piece as it is a very meaty analysis of the battle for your living room and the form that your digital media might eventually take.
Companies covered include Microsoft, TiVo, Scientific Atlanta, Motorolla, Comcast, Diego, SBC, Verizon and all the rest of the usual suspects. The article has lots of quotes from people like Jupiter Media’s Michael Gartenberg and Joe Belfiore, general manager of Microsoft’s Windows XP Media Center Edition.
I really would suggest picking up a copy at the Newstands.
A few of the memorable quotes:
The Size of the Market
“It’s an enormous opportunity. Shane Robison, the chief strategy and technology officer of Hewlett-Packard (HPQ), puts the annual revenue from all the affected markets north of $1 trillion. And the roster of combatants eager to snatch a piece of that enormous prize is vast.”
It’s the Cable Provider’s Game to Lose
“No group appears better-positioned than the producers of television set-top boxes and their customers: the cable guys. Yes, these once sleepy businesses are under challenge from an array of new competitors, including Microsoft and its allies in the personal-computer business. Nonetheless, this still is the set-top and cable crowd’s game to lose.”
The Hurdles for TiVo
“Despite years of trying, TiVo hasn’t persuaded any cable companies to distribute its services. That leaves TiVo stuck selling its wares primarily at retail, a difficult competitive position given that cable companies will lend you a dual-tuner, high-definition set-top box with a DVR for an upfront cost of zero.”
Microsoft and Comcast and Gartenberg’s Take on the Situation
“Microsoft has been trying to get traction in the cable market for a decade or so, to little avail. It has found only a handful of takers for its Foundation Edition cable-set-top-box software. In its most notable success, Comcast in 2003 paid Microsoft an undisclosed amount for the right to roll out the software to five million set-tops. So far, Comcast is using the software in just one market — Microsoft’s hometown Seattle area. Though the software offers some features not available on the standard cable guide Comcast offers — there are some simple games, for instance, and text-oriented news pages Comcast calls i-channels — it has been slow to catch on with domestic cable-system operators. (It’s also in use in some Latin American cable networks.) Microsoft says Comcast will roll out the software in a second market this year. But, in general, the software giant seems to be shifting its TV ambitions elsewhere.”
“Since 2002, Microsoft (MSFT) has been pushing Media Center, a version of its flagship Windows XP operating system specifically designed for home-entertainment applications. Just as the original version of Windows hid the underlying complexity and ugliness of DOS, Media Center obscures the complexity of Windows, with a simple menu of choices that can be navigated by a remote. At the Consumer Electronics Show, Microsoft said more than 1.4 million Media Center PCs had been sold to date; the software can be purchased only with a new PC. The software is indeed impressive, easy to use and powerful. Michael Gartenberg, an analyst at Jupitermedia, contends that Media Center is “on a par with the best experiences out there” when it comes to managing digital media. He thinks that Microsoft will eventually make it “the de facto consumer Windows technology.”
The Hurdles for Microsoft
“Media Center PCs aren’t likely to become the heart of the digital home. One reason is cost: Prices for HP’s DEC line start at $1,499. (Compare that with a $99.99 entry point for a low-end TiVo, or zero for a set-top box from the cable guys.) Another issue is complexity: People watching TV don’t want to worry about their set-top box crashing or succumbing to a virus or spyware.”
The Need for not Just a CableCARD but a Bidirectional CableCARD
“TiVo, Microsoft and the companies making Media Center PCs are counting on the eventual deployment of a new version of CableCard that would be bidirectional.
“The fact that cable companies have had a proprietary lock on set-top boxes has held things back,” says TiVo CEO Mike Ramsay. “It’s more expensive for consumers, and they get less capability.” Ramsay compares the situation with the pre-breakup Ma Bell, when customers had to buy their telephones from AT&T.;
“It needs to be opened up.” However, nothing is likely to happen until 2006, at the earliest — and the cable companies are showing no interest in pushing the process forward, to the annoyance of the consumer-electronics industry. Even if the CableCard standard were upgraded, why would cable customers, in effect, buy a set-top box when the cable company will lease them one free?”
Akimbo Does Microcontent
“Josh Goldman, Akimbo’s CEO, contends that some people would pay for things like Hindi language films, or surfing videos, or Pakistani cricket matches. For the moment, Akimbo offers service via yet another set-top box, which doesn’t do anything other than help a user find, download and watch Internet-based content without the need for a PC. If nothing else, it solves the problem of how to download films onto a TV from online rental services like Cinema Now and MovieLink.”
What About the Bells?
“Over time, the biggest challenge to the cable industry’s strong position in the digital home will come from the regional Bells. Verizon (VZ), SBC (SBC) and BellSouth (BLS) are all in various stages of rolling out video systems over new fiberoptic networks, using a technology called IP TV, for Internet Protocol Television. The terminology suggests the kind of free-wheeling downloading of content that Akimbo will offer. In reality, the phone companies simply want to use “packetized” content to take the cable companies head on. And their chief ally on the software side is Microsoft.
Indeed, IP TV just might offer Microsoft its biggest opportunity to make a major dent in the television business. SBC and Verizon have both committed to using Microsoft software for their yet-to-be-launched TV offerings, and BellSouth is running trials. Microsoft asserts that since the service is all digital, it can do tricks that conventional cable can’t, like instant channel-changing and multiple picture-in-picture streams without a need for a multiple TV tuner, which would let a viewer do things like watch a baseball game from a number of angles.”
The Need for a Robust Digital Media Platform
“For the set-top-box companies and the companies they serve, the challenge is to change from providers of cable access to enablers of a robust digital-media platform with far greater flexibility. TiVo is already there: It has introduced features like TivoToGo, to move content from a DVR to a laptop. It has also launched a service called HME, which lets third parties develop their own content for the TiVo service. (One user-developed offering provides a TiVo link to Flickr, a red-hot online photo-posting service rumored to be a potential acquisition target for Yahoo!.) Microsoft has developed a more controlled but similar approach for Media Center called “O
nline Spotlight.” It allows access to a group of Websites, including movie- download sites MovieLink and CinemaNow.”
The Upcoming Battle Between Microsoft’s Bill Gates and Comcast’s Brian Roberts
“Digeo CEO Jim Billmaier sees the digital home evolving through a struggle between Microsoft’s Bill Gates and Comcast’s Brian Roberts. “Bill is trying to eviscerate the value of anything but his software for getting bits into the home,” he says “He doesn’t care how those bits get there. Brian, on the other hand, as a big provider, needs to sell packages that include technology and content.” Billmaier sees Roberts using Digeo’s technology to improve his competitive position.
In the end, the battle for your living room will be a clash of the titans.
And as one investor in Scientific-Atlanta, notes, the cable and set-top-box companies start with a major advantage: “Inertia wins the day,” he says. “The center of entertainment is still the living room and the television. And net net, they still control the keys to that kingdom.”
Good, good stuff. Check out the issue. You won’t be disappointed.