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Digital Living Room 2005

On March 7-8, 2005 I attended Digital Living Room: Where Silicon Valley and Hollywood Meet. It was held at the Crowne Plaza Hotel in Foster City, California. It was organized by iHollywoodForum which hosts several conferences of this type. This show is interesting because a large number of Venture Capitalists attend.

Announcements

The first morning, we were informed that Howard Stringer was the new head of Sony. The feeling was that this was an exciting development that could be very good for Sony.

Sony announced that PSP (PlayStation Portable) will be available in the US in 3 weeks. It plays games, photos, music, and video. It uses Universal minidisk, memory stick, and wireless. $250.

Samsung announced that it can produce 82 inch LCD panels (2up) on the Gen7 fab that it built with Sony.

It just has to work

Once again was the call to make things easy to use. People do not want a computer experience. If it is not easy, people will not accept it. It just has to work. The audience gets the final vote. This is said many, many times.

Computers are better at searching and organizing than CE devices.

I think that the Digital Living Room (or Digital Home) is being driven by computer companies that have very little experience in designing products for normal people.

There will be new services and new products. Content will be delivered to multiple platforms.

There is hope at the US companies that Digital Living Room will allow the US to reestablish itself in Consumer Electronics. A VC suggested that CE companies are organized vertically (by products) and that computer companies are organized horizontally (by technologies). The vertical organization is better at cost reducing, but the horizontal organization is better at creating synergies across the company.

It was suggested that Apple is a software and hardware company and that is why it is doing well, while Sony is just a hardware company and it is not doing as well. (I think that that ignores the fact that Apple's computer business is failing and it has not proven that its success with the iPod is sustainable.) A product company must be excellent at both hardware and software.

If you have a home theatre with a beautiful big screen, why would you want to move the content over the home network to an old 13 inch screen?

Walter Mossberg

Walter Mossberg writes a technology column in the Wall Street Journal. He sees virtually all of the new products. He is optimistic about the Digital Living Room, but he said "We're not there yet, not by a long shot."

TiVo is the most successful new product of the convergence, but it has only 3M subscribers. Pathetic. (There were lots of TiVo owners at the conference. TiVo is very successful with new media people, but not with the general public.)

He listed these general problems:

Do not treat every consumer like a criminal.

He said the Broadcast Flag is really scary. (He got the details of the Broadcast Flag wrong, but his general warning was correct.) We need to put pressure on Washington.

The opportunity is real, but don't get giddy. There is still lots of work to do.

DRM

Yair Landau, Vice Chairman of Sony Pictures Entertainment, said that consumers will require that the Studios eliminate the Windows of Exclusivity. This is the smartest thing I heard from someone from a Studio in a long time. He said the people love DVDs, and that people will not want to download HD movies because of their size.

The DVD Forum does not allow consumers to burn secure DVDs. This is because they were afraid that it would lead to the breaking of CSS. However, CSS has already been broken. If they allowed consumers to burn secure DVDs, then a business of downloading DVD content to the home could make more sense.

Todd Basche of Macrovision predicted that it will be 5 years before there is a common DRM scheme. In the meantime, the only protection scheme that works is Macrovision's analog annoyance products.

Jim Flynn of EZTakes said that you can't compete with free (sharing) by adding complexity and inconvenience.

DLNA

I talked with the CTO of Digital 5, a company that makes DLNA devices. I told him about the problem I found in the DLNA Guidelines:

The DLNA home network becomes a vector for delivering viruses, assault advertising, and spam programming to every digital media device in the home. DLNA will make it possible for people to experience everything they hate about their computers and the Internet with their TVs. Viruses that take over the PC will be able to take control of all home media. Viruses can change channels, delete programs, replace programs with evil programs, and possibly infect the other devices. A virus in the computer can launch a Denial of Service attack against the TV. DLNA has no security mechanism of any kind to protect the home system.

He said that no one would create such attacks. I reminded him about the current state of email and spam, and then he admitted that the attacks were likely. He suggested that a solution might be to have the TV and computer authenticate each other. I showed him why that wouldn't work. He then suggested that people would need to get firewalls in their home between the computer and DLNA devices. I explained why that was also a really bad idea. Finally he expressed optimism that eventually DLNA will eventually identify and solve the problem somehow.

I think that the computer-engineering approach to convergence can be just as wrong as Hollywood's approach. Consumers do not need and have not asked for the Digital Living Room. They will reject it if it is not really easy to use, or if it does not deliver high value and convenience, or if it introduces problems. The media companies have looked at the threats but not the opportunities. The technology companies have looked at the opportunities but not the threats.

Advertising

A study of DVR owners showed that

An advertising executive declared that "The wheels have come off," meaning that the business of intrusive 30 second spots is ending. Advertising spending will go to other forms and media.

I believe that this will lead to the failure of broadcasting. Terrestrial broadcasting will not survive the digital transition.

CE

An LCD panel is 1/3 of the cost of a TV set. 27 inch is now $900 and falling, which is increasing demand. 32 inch will be $1K this year.

There were predictions that hard disk drives will be in TV sets in 2006, but I think that it may still be too early for that level of product integration.

As prices fall, confusion is reduced. The cost and likelihood of making a bad buying choice are reduced as the market shakes out.

The most important factors:

  1. Price.
  2. Usability
  3. Design

Bluescreens on the TV are bad. The user experience is more important than standards. Consumers want it to work. They want it all to work together painlessly. They like single function devices because they are easy to understand and use. They like trusted brands. They like cheap. They hate complexity and unreliability. They don't like wires. They like remote control, but they don't like too many remote controls. They don't like having to pay for things that they think the are entitled to (like support). They don't like reading manuals. They like to do research on the net and talk to friends.

This is not a business for the weak of heart. It requires constant reinvestment.

Serial ATA seems to be the CE standard for hard disk drive interfaces.

Photos

Online services like Google and Yahoo are offering photo sharing services. So is Kodak and some cable operators. The trick is getting the photos to the TV. Apple is supporting DVD burning. Kodak has WiFi in its new 4MP camera. This allows for annotation at the time of capture. It has WiFi and Bluetooth. $599 in June.

Most photos are taken by women. The entire process must be easy.

People take more pictures with digital cameras. (Most of the extra pictures are not very good.) Picture collections tend to be unorganized. People do not have time to organize the pictures they take.

Display resolution is not keeping up with camera resolution.

Product Ideas

Sometimes when I am in conferences I get ideas:

Perpetual Wireless Photoservers in Gravesites. When mourners are near the grave, they can see the loved one's photos on their portable media devices.

Digital wireless microphone automation for conferences. It automatically opens and closes mics. It sets the correct levels and eliminates feedback. It allows for quality audio presentation at conferences that do not engage professional media crews.

Refrigerators with large built-in LCD displays. They can be used for calendar and schedules, notes, recipes, and photos.