[IP] more on The digital home - Science fiction?
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From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Date: September 4, 2005 11:08:20 AM EDT
To: Dewayne-Net Technology List <dewayne-net@xxxxxxxxxxxxx>
Subject: [Dewayne-Net] The digital home - Science fiction?
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The digital home
Science fiction?
Sep 1st 2005 | SAN FRANCISCO
From The Economist print edition
<http://www.economist.com/displaystory.cfm?story_id=4342418>
Technology firms are pushing a futuristic vision of home
entertainment not because consumers are desperate for it but because
they themselves are
RECENTLY, at one of the fast-proliferating conferences devoted to the
“digital home”, John Burke, an executive at Motorola, a maker of
mobile phones and digital gadgets, showed a video that presented his
company's version of this vision. In the clip, a youngish man wakes
up to a rock video that automatically starts playing on a screen next
to his bed. He gets up to have breakfast and the rock video follows
him to a screen in the kitchen. He moves into the living room and up
pops the rock video on yet another screen. When he leaves his flat
and gets into his car, the video starts playing on a screen in the
steering wheel.
To ordinary humans this sort of thing must seem like silly—or
downright frightening—marketing claptrap. In fact, even Mr Burke's
audience of self-selected technophiles seemed sceptical. “Did you
notice that the guy was a bachelor,” said Tim Dowling, the boss of
Pure Networks, a software firm in Seattle that helps users to set up
and troubleshoot home-computer networks. “That alone tells you that
they're out of touch. I thought: How dumb.” Real people do not want
to be hounded through their home and their life by some video stream,
he argues; they just want help with basic headaches, such as getting
the kids' laptop, mom's Apple Macintosh and dad's Windows machine to
share the family's printer.
Whether or not computer, software, consumer-electronics, telecoms,
cable and internet companies are in fact out of touch with consumers
may be the biggest question facing these industries today. That is
because the “digital home”, a concept and category hugely hyped in
executive circles but still rarely heard in discussions among
consumers, represents their greatest hope for revenue growth. Demand
from corporate buyers of technology has barely recovered from the
dotcom bust and is widely expected to be unimpressive for years. By
contrast, the homes of consumers appear to technology vendors as a
barely tamed analogue wilderness. Darcy Travlos, an analyst at
CreditSights, a research firm, estimates the market opportunity of
the digital home at $250 billion in America alone and $1 trillion
worldwide in three to seven years.
“We view the digital home as critically important,” says Craig
Mundie, one of three chief technology officers at Microsoft, the
world's largest software company. “The home is much more exciting
than the workplace.” Computers have already led to small revolutions
in boosting productivity in the office and helping people to
communicate and to be creative, he says, so “we're pretty confident”
that computers will have a similar effect on the way people consume
entertainment. Intel, the world's largest semiconductor maker,
recently reorganised itself into new business divisions including,
prominently, one called “digital home”. Last week it formally
launched Viiv, a bundle of chips intended for use in digital-home
PCs. Consumer-electronics firms such as Sony, computer-makers such as
Hewlett-Packard (HP) and Apple, telecoms giants such as Verizon or
SBC, cable companies such as Comcast, internet firms such as Yahoo!,
networking-equipment companies such as Cisco—all agree that the
digital home is where the action will be and are investing furiously
to make sure they have a good chance of playing a leading role.
Their first challenge in stimulating any sort of consumer interest is
the difficulty of merely explaining what the digital home is supposed
to be. You might think, for instance, that the term refers to the
long-established trend away from analogue and towards digital media.
In music, most people have completed their migration from vinyl
records and tapes to digital CDs. In films, the trend from videotapes
to DVDs is not far behind. In photography, traditional film is fast
being replaced by digital cameras and pictures. TV and radio
broadcasters are also shifting to digital transmissions, with Britain
leading the way.
Confusingly, however, that is not what vendors mean when they talk
about the digital home. Instead, they invariably mean a home in which
all sorts of electronic devices—from the personal computer (PC) to
the TV set-top box, the stereo, the game console and, in some
versions, even the garage door and refrigerator—are connected, both
to one another and to the internet. Hence the Motorola marketing
video that Mr Burke was showing. Its purpose was to illustrate what
Motorola, like Microsoft, calls “seamlessness”, as digital content
hops automatically between various devices and screens. The
excitement, therefore, is not so much about content being digital,
but about its delivery switching from physical things (such as CDs)
to photons (such as wireless downloads or streaming), because this
requires consumers to buy new gadgets.
Believers in this future point to encouraging statistics. Parks
Associates, a research firm in Texas that specialises in the digital
home (and which organised the conference at which Mr Burke gave his
keynote address) surveyed a group of internet users and found that
84% of them use their PCs to store digital photos, 59% to store
music, 36% for video clips and 26% for personal videos. If one
includes devices other than PCs—such as TiVo, a popular digital video
recorder—17% also store movies and TV shows. In theory, these people
could soon avail themselves of new wireless-networking technologies,
such as an emerging standard called “ultrawideband”, to pipe all this
content from their collections to electronic picture frames, screens
and portable devices.
Joined-up thinking
That is not at all what they want to do today, however. Another study
by Parks Associates found that 89% of people with a home-computer
network felt that the relatively modest goal of sharing internet
access is its most important function, with printer-sharing the
second priority. Worse, 27% of people who bought network gear said
that they ran into problems during configuration, leading many to
call the help desk of their internet service provider (who may or may
not be responsible for the problem) at an estimated annual cost of
$1.4 billion to that industry. Even downloading entertainment, as
opposed to buying it on discs, appears over-hyped. According to a
study by the OECD, there were over 230 websites offering 1m tracks in
America and Europe at the end of 2004. But these online sales
accounted for less than 2% of total music revenues; even with fast
growth, they are projected to rise only by 5-10% by 2008.
All this points to a huge problem with the digital-home vision: the
lack, among most consumers, of any sense of crisis about the status
quo in entertainment. “We don't think many folks are looking for an
electronic nerve centre in their homes,” says Pip Coburn, who runs
Coburn Ventures, a technology-consulting and investment firm. After
all, popping in a DVD, say, is so easy and works so well. By
contrast, getting a digital home up and running promises several lost
weekends of fiddling with manuals and settings, and hefty expenses in
new gear. According to Mr Coburn's formula for evaluating new
technologies, whereby adoption is a function of the users' sense of
crisis (ie, motivation to change) outweighing their perceived pain of
switching, the digital home ranks as a clear “loser”.
This miscalculation—if that is what it is—by the large vendors stems
from their history of catering to companies rather than people, says
Pure Networks' Mr Dowling (who used to be at Intel and who hired some
40 of his 60 employees from Microsoft). During the information-
technology boom, the industry sold its wares mostly to chief
information officers or chief technology officers with big budgets.
These are customers who tend to be receptive toward buying
“solutions” rather than products, and often hire consultants such as
IBM Global Services to pull together hardware and software from
various vendors. But “consumers don't buy as an IT manager does,”
says Mr Dowling. “They buy spur-of-the-moment and hodge podge; they
buy things, not systems.” To the extent that the digital home is not
a thing but a solution, he thinks, “the vendors are all fooling
themselves.”
The vendors, naturally, disagree vehemently. “When you ask customers
what they want, they will never tell you. You have to show them
first,” says Microsoft's Mr Mundie. That is why Microsoft has, since
1994, had an impressive (or, to some people, intimidating) mock
digital home on its campus in Redmond, Washington State, which it
updates with the latest gadgets. Intel, NETGEAR, HP and most other
self-respecting technology firms have similar mock-ups for display.
There is, argues Motorola's Mr Burke, a huge “need to educate
consumers about the value of a connected home and lifestyle.”
Talking the same language
Outside the controlled environment of a mock home or conference
demonstration, however, educating consumers tends to backfire. That
is because real-world digital homes usually do not work very well.
The premise of the entire vision, remember, is that heterogeneous
devices talk to one another and readily transfer content to wherever
the consumer wants to access it. This requires compatibility
—“interoperability” in the jargon—among vendors involved in two
technological categories.
The first is file formats and codecs (short for coder-decoders),
which encode digital information—such as a picture, song or film—
compress it for transmission and storage, and decompress it again for
viewing and listening. The second is digital-rights management
software, or DRM, which protects such content against piracy and
unauthorised copying. DRM allows the copyright holders of content—
film studios and record companies, in essence—to define such
parameters as when a film or song that is downloaded “expires”, or
how many times it can be copied to another device, such as a portable
player.
The trouble starts here, with a bewildering list of acronyms that no
ordinary consumer should ever have to know, but currently needs to
know, to set up a digital home. The Moving Picture Experts Group
(MPEG) is an industry body that defines widely used codecs such as
MPEG-2 for video and MP3 for audio. But the big vendors prefer their
own codecs—Microsoft its WM9 (short for Windows-Media-9), Apple, the
market leader in online music sales, its AAC, and so on.
In DRM, the situation is even more chaotic. Microsoft pushes its
Windows DRM; RealNetworks, which makes rival media software, has
Helix; Sony has OpenMG; Apple likes FairPlay, and so on. The upshot
is that consumers cannot mix online services, gadgets and software
from different vendors and be sure that the content they have paid
for actually works. Music bought online from Microsoft's MSN or
Yahoo!, for instance, does not work on Apple's iTunes or iPod, and
vice versa.
This challenge is daunting because DRM technologies should not only
be compatible today, but for all eternity. Otherwise, consumers will
be afraid to pay for content, and will stick with CDs and DVDs, which
seem painless and safe by comparison. “If consumers even know there's
a DRM, what it is, and how it works, we've already failed,” says
Peter Lee, an executive at Disney. The same goes for codecs. “The
user shouldn't know or care what format they're using,” says James
Poder, an engineer at Comcast, America's largest cable company and
broadband internet service provider, because “consumers don't want to
be IT administrators for their own home.”
Prisoner's dilemma
It may seem ironic, therefore, that vendors are refusing to make
their technologies interoperable, thus potentially killing their own
vision. On the other hand, it makes sense for each to try to make its
own proprietary technology the winner, in order later to grab a
disproportionate share of the market. The starting point of cable and
telecoms companies, for instance, is as providers of broadband pipes
into the home. So they are investing in IPTV (internet-protocol
television), a vision in which content resides on the network and is
pulled into the home on demand. Thus, says Cyrus Mewawalla, an
analyst at Westhall Capital, a broker in London, America's Verizon
and SBC and others are investing hugely in laying fibre-optic cables
to homes (at a cost of about $1,000 per household), hoping that IPTV
and the necessary set-top box could “evolve into the primary gateway
to the digital home.” By controlling this gateway, they could offer a
bundle of telephony, internet and entertainment, in effect “owning”
the customer.
This would at the same time help them to parry their biggest threat:
Microsoft. Microsoft has itself invested in IPTV, ostensibly in
partnership with telecoms and cable companies. Like its loss-making
investment in game consoles (called Xbox), however, Microsoft intends
this as a purely defensive hedge, says Matt Rosoff, an analyst at
Directions on Microsoft, an independent research outfit near Seattle.
Instead, thinks Mr Rosoff, Microsoft's strategy is to establish the
Windows-run PC as the uncontested hub of the digital home. Hence its
all-out push to establish its codecs and DRM as the standard. This
would allow Microsoft to keep selling Windows upgrades and to earn
royalties from hardware and from consumer-electronics companies that
make “spokes” for the Windows hub, such as portable music and video
players, screens and online services.
[snip]
Weblog at: <http://weblog.warpspeed.com>
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