CES Countdown #8: Can smart HDTVs bypass the 'media PC' altogether?

AR Communications Senior Vice President Carmi Levy presents his views on how interactivity could conceivably be integrated into the home entertainment environment, without the inclusion of the media PC as it was first introduced four years ago.

Continuing to build capability on top of PC-based architecture is a zero sum game. The market demands simplicity, and computer-based solutions fail miserably in that regard.

MEETING OF THE MINDS

We're already seeing early, tentative moves to incorporate richer hardware capability into living room, non-PC-based equipment such as televisions, Blu-ray drives, and home theaters. But until the hardware also includes industry-wide standards, we're dead in the water.

DRM remains the elephant in the room, as the industry still hasn't reached consensus and different vendors in different spaces - content creators, distributors and aggregators, hardware vendors, software developers and carriers - are still squabbling over which paradigm will prevail. Until the copyright holy war ends, the vast majority of consumers will keep their heads down and refuse to buy in to whatever comes next. Until they know that that "next" entails, they won't commit their hard-earned cash to next-generation devices.

When the stakeholders finally hammer out a peace treaty and establish the requisite standards, the solution will lean heavily on thin appliances that are not based on PC architecture. Unfettered access to content is, and will always be, the highest priority for mainstream consumers. Vendors that fail to hit that mark will soon find themselves watching from the back of the pack.

BRANDING

I suspect the dominant brand on the ultimate device won't be any we've seen before.

TiVo came out of nowhere to define the PVR/DVR experience. Although it has since stumbled, it remains the standard by which other services and offerings are judged. All the major players -- Panasonic, Intel, Microsoft, et al -- have stumbled badly as they've tried to define their own roadmap, and there's no reason to think that this will change anytime soon. Too many cooks will dilute the end result.

Alliances and industry partnerships are well underway in other tech markets, such as wireless smartphone platforms. But even there they're far from rewriting history. The most likely scenario is that the living room experience of tomorrow will be rewritten by one innovative company that's otherwise unencumbered by legacy thinking or the need to protect existing revenue streams. In this instance, a startup would come out of nowhere with an innovative, elegant content distribution and management solution totally unlike anything proposed or developed by existing providers.

Incumbent players may get involved through acquisition or partnership deals that would allow the startup to scale its ability to meet growing market demand, but in and of themselves they lack the cultural agility necessary to incubate radically new solutions for use by an audience unaccustomed to using PCs as primary entertainment devices.

In any case, the company that hits this home run may not even exist yet. But given the historical propensity for great innovations to emerge from severe economic downturns, the wheels are likely already in motion for this next great leap forward.

PRICE POINT

The Blu-ray experience illustrates the difficulty in convincing consumers to buy into a new platform at any point in time, let alone during an economic slowdown. When your job is either in jeopardy or gone for good, you're going to hold onto what you've got and won't be investing in anything new.

Even older entertainment platforms take a hit during times like this: purchases of standard-def DVDs, for example, are shelved as homeowners trim expenses. Mortgages get paid and older DVDs are watched again. Anything over the magical $100 discretionary line is deferred. $500 may be sufficient to attract early adopters, but it's still too high for mainstream adoption. As price points descend below each multiple of $100, additional swaths of consumers come into the market. But while initial acquisition cost gets consumers in the door, total cost of ownership remains the real key to ultimate adoption.

Will these new devices require additional monthly fees? Will they constrain consumers' ability to use their content as they wish? Will they bust the monthly budget with another bill over and above the cable, phone and Internet access subscription? Unless this new capability can be delivered without layering another burden on already weary consumers, enriched media content distribution and management will remain the domain of the well-off early adopter and will fail to achieve any form of market dominance.

Long story short, a $200 appliance with no or minimal additional monthly fees would rewrite how we're entertained from the living room couch. Anything more and skittish consumers won't bite.