There was a time when watching television was a passive activity. Your selection of what to watch consisted of whatever was on one of four to six channels available in a given market. If you didn't like what was on, you changed the channel or shut off the set. It was that simple.
No more. Today, watching television is anything but passive. Hundreds of channels means there is more to watch, and roaming through all of the cable or satellite channels every day is enough to cause repetitive stress injury. What's more, the ability to record shows to hard drives and to use home networks and fast Internet connections to stream them around the house or around the world has turned the TV universe into a bonanza where consumers have a lot more power over what they watch, when they watch, and where they choose to watch.
Linking TVs with PCs
In recent years, companies large and small have sought to invade the living room, coaxing people off the couch by offering new methods of watching TV shows on computers, portable devices, and even cell phones. Most companies are offering add-on gadgets that aim to bridge the hard-to-cross gap between the TV set in the living room and the personal computer. Get them working together, the thinking goes, and TV programming that used to be viewable only in the home can go anywhere. Recorded shows can be copied to a notebook PC. Live shows tuned in on a home TV can be seen on computer screens thousands of miles away.
TiVo (TIVO) was an early entrant—its first product hit the market in 1999—into the quickly accelerating market for digital TV add-ons. Its hard drive-based recorders brought some badly needed modern dash to the humble video cassette recorder, adding a pause feature for live TV, making recording easy to understand, and giving consumers the ability to program their TV recordings from an Internet-connected PC. As of the company's most recent quarter, 1.7 million TiVo boxes were in use, while another 2.5 million people had DVRs running TiVo software.
It wasn't too long after TiVo entered the scene that Microsoft (MSFT) got into the act, launching its first Media Center PCs with Hewlett-Packard (HPQ) in 2002. Putting a TV tuner inside a PC turns a PC into a TV/PC hybrid. Why not record your favorite shows to the PC's hard drive, then burn them directly to a DVD if you want to keep them?
Piercing the Mental Firewall
Consumers didn't exactly flock to the concept. Indeed, who wants their TV set to be subject to the bugginess of Windows? But even today, nearly 90% of home computers sold during the month of August are equipped with support for Media Center features, according to Toni Duboise, analyst with market researcher Current Analysis West. "The features are included with Windows Vista Home Premium edition," she says. "It's good for organizing music and video clips, but the vast majority of people are not running their TV through their PC."
Consumers, she says, have drawn a sort of mental firewall around the living room, where for the most part, the PC may not enter, at least not in the permanent manner that a new TV or stereo system might. "No one wants to have to turn on their PC in order to watch TV," she says.
Realizing that, Microsoft has since embraced the idea of the Media Extender, devices that can put videos downloaded from the Web on TV screens over home networks. The company is readying a second generation of these devices, from companies like Cisco Systems' (CSCO) Linksys unit, that will hit the market in November.
Slingbox and Apple TV
But Microsoft and Cisco are far from alone in the space. Scores of other gadgets are competing for the same space in the entertainment center near the TV set. One gaining attention is the Slingbox from privately held Sling Media, soon to be a unit of satellite TV concern Echostar (DISH) (BusinessWeek.com, 9/25/07). The Slingbox connects to a TV set-top box and to a broadband Internet connection over a home network. Why would you want to do that? So you can watch what's playing on your home TV on your notebook PC or cell phone from anywhere you happen to be—say, a hotel in Europe or an airport lobby waiting for a delayed flight. According to market research firm iSuppli, Sling Media has sold some 590,000 consumers on its idea of "place-shifting," and Echostar will probably include its features in future set-top boxes. For now prices on Sling Boxes range from $129 to $249, depending on the model.
"It's a niche market so far," says iSuppli analyst Chris Crotty. "The more it grows the more it runs the risk of incurring the wrath of the copyright holders." So far Sling has had generally positive relationships with media companies, except one: Major League Baseball considers using a Slingbox to watch a baseball game a "rebroadcast," something it forbids. Baseball executives have made threatening statements against Sling in the last year. Meanwhile, other sports leagues have partnered with Sling to varying degrees.
If place-shifting isn't your thing, there's still the basic appeal of moving your video and music off the PC and into the places where you can enjoy it most—like the living room. That's where you're more likely to have a big-screen TV and a nice set of speakers. Apple's (AAPL) new set-top device, dubbed Apple TV, with a starting price of $299, pushes video and music purchased from the iTunes store, which would otherwise be stuck on a hard drive, to the TV set over a home network. And it also gives consumers access to video clips from YouTube, Google's (GOOG) Web video service, on a TV set, effectively making YouTube an on-demand TV channel of sorts. Crotty reckons that Apple will sell fewer than a million units this year.
Imitation Stokes Competition
But as executives from TiVo can tell you, getting into the TV accessory business can be risky. It's tough to maintain a competitive advantage based on relatively straightforward ideas. TiVo may have been the first to market with the DVR, but most DVRs in use don't bear TiVo's brand. Cable and satellite operators got the idea to put a hard drive in a set-top box. ISuppli's Crotty figures that more than 28 million DVRs shipped worldwide last year, compared to Tivo's slice of the market, which amounts to 4 million units and change.
Maybe that's why Echostar moved to acquire Sling Media. Owning the technology behind a great new feature can be a good thing. But Sling isn't the only place-shifting player out there: Sony (SNE) has just launched its latest version of a product called LocationFree that does largely the same thing. It doesn't necessarily take great minds to think alike.