I found this article on another thread, potential RMBS inside?
Goodbye to TV As We Know It: Thanks to smart new VCR-like
machines from
Silicon Valley, the viewer is king, media moguls are fretting, and
advertisers are terrified.
Brent Schlender
08/02/1999
Fortune Magazine
Time Inc.
Page 219+
(Copyright Time Inc. 1999)
It beggars belief that a revolutionary gadget launched from the
valley of digital hype--a
technology that promises to transform TV at least as much as
cable and satellites
have--could somehow slip in beneath our radar. Maybe it's
because we Silicon Valley
journalists are so fixated on Internet startups, IPOs, and
e-everything that we forget
lowly consumer-electronics devices can be cool too. Or maybe
it's lousy marketing on
the part of TiVo and Replay Networks, the rival startups
promoting this technology.
They've been so busy trashing each other's nearly identical
products that they haven't
even settled on a name for what customers quickly agree are
amazing gizmos.
I'm talking about a genre of TV set-top box that has been
called the PVR (personal
video recorder), the PTV (personal TV), the TVHD (TV hard
disk), and more
whimsically, the Time Machine. (Check out FORTUNE's
contribution to the
name-that-puppy debate in Joel Dreyfuss' review of the TiVo
and Replay machines in
this section. He dubs them DVRs, or digital video recorders.)
These boxes, which look nondescript and retail for $500 and up,
are a cross between a
PC and a VCR, without the complexity of either. A DVR
incorporates a hard-disk
drive, a modem, and silicon circuitry. It converts TV programs
entering your home via
cable, satellite dish, or antenna into digital bits (up to 30 hours'
worth) that the hard
drive can store for you to view at your convenience. Thanks to
the modem and
computer smarts, the DVR provides up-to-date, annotated,
interactive onscreen listings
of what's on TV this week. With a single click of the remote, you
pick what you want to
see now or record for playback later. The DVR even sets its
own digital clock.
Sounds like a fancy digital VCR, doesn't it? The DVR is far more
than that--though it
lacks the VCR's ability to play pre-recorded tapes. It's a
Trojan horse that could
surprise couch potatoes, gadget makers, media moguls, and
advertisers with radical
change. For viewers, it offers convenient control over when you
watch your favorite
shows. What's more, because the DVR records whatever you
have on, it makes
watching live TV more like viewing a tape: When the phone rings,
say, you can pause
the ball game to take the call, then pick up where you left off.
For consumer-electronics makers, the DVR not only breathes
new life into the television
set but also promises to spawn multibillion- dollar markets for
products that combine the
smarts of computers, the interactivity of the Internet, and the
easy familiarity of TV. The
effect on broadcasters will be greater still. If DVRs catch on--
Forrester Research of
Cambridge, Mass., predicts that 13% of U.S. households will
have one by 2004, an
adoption rate faster than that of VCRs--they will force TV
stations and networks to
rethink how they schedule and distribute programs. That's
because, yes, DVRs let you
skip commercials with ease. Advertisers will feel added
pressure to come up with ads
"sticky" enough to keep viewers from zapping them.
The boxes raise fascinating questions, says computer-industry
columnist Stewart Alsop,
my FORTUNE colleague whose day job is as a venture capitalist.
His firm, New
Enterprise Associates, in Menlo Park, Calif., is a primary backer
of TiVo. "What is the
function of a broadcaster if it no longer controls when people
watch what it airs?" he
wonders. "What is the relationship between broadcasters and
advertisers if viewers
have the option of skipping the ads?"
Small wonder that Replay Networks founder Anthony Wood
spends much of his time
negotiating with business-development guys from companies like
CBS, Disney,
Matsushita, and Sony, which fear being caught flat- footed by
the DVR. It's why he
hired former Hollywood TV production exec Layne Britton as his
right-hand man. It's
why General Electric's NBC was so curious about DVRs that it
leaped at the chance to
become a TiVo investor.
The idea of storing video on hard drives is nothing new. It is
attractive for the same
reason it's nice to have music on CDs rather than tapes--the
quality is high, and you can
jump from track to track without having to rewind or
fast-forward. Years ago a Silicon
Valley startup called Frox tried to build a smart TV that could
pull off the feat, but it was
stymied by costly and inadequate chips and hard disks. Now
digital video compression
and huge, cheap hard disks make it practical to store video as if
it were a massive
computer file.
Wood ran up against technology limitations when he tried to
start Replay six years ago.
Instead he fired up an Internet software startup and sold it to
Macromedia in San
Francisco in 1995. In 1997 he bolted and started Replay with the
proceeds from the
sale. "It was strictly a hardware concept," he says, "but by
early 1998 we realized that
the network service that goes with a DVR is what could provide
the real revenue
stream." This is, finally, what differentiates a DVR from a VCR:
The former is a service,
the latter, just a box. A DVR has a two-way connection, so TiVo
and Replay can
provide you with customized listings, personalized services like
home shopping, and
easier pay-per-view programming. The two-way connection also
lets advertisers learn
about your habits and direct targeted advertising your way.
To get a sense of how ambitious all this may be, consider some
applications that the
geeks at Replay and TiVo are coming up with. In the next year,
some cable and satellite
channels will begin broadcasting electronically scrambled movies
during "dead time"
after midnight. DVRs will record these for unscrambling and
viewing later. If the
customer who orders a movie actually watches it, the box
notifies the Replay or TiVo
network server, which bills him and pays the broadcaster. If
the customer never gets
around to watching, he isn't charged. DVRs also make it possible
for users to order
custom channels that collect, say, every episode of Friends or
that scan news programs
for segments about particular sports teams or companies. The
downloaded channels
could be sponsored by advertisers, whose logos might float in a
corner of the screen or
who might send along interactive ads.
TiVo and Replay also envision that DVRs will merge with other
devices. Sony has plans
to make TVs with DVRs built in. Panasonic will soon produce
Replay machines with
built-in DVD players. Cable operators are thinking about
replacing set-top boxes with
DVRs.
The DVR is likely to outgrow its Silicon Valley roots to become
the first
consumer-electronics hit of the millennium. Unlike Microsoft's
WebTV, TiVo and
Replay realize that while many people use computers, most
prefer to watch TV. Says
TiVo co-founder Jim Barton: "Sure, there's hard-core
technology in these boxes, but
this isn't the computer industry riding in to save TV. We just
want to make it easier for
people to find something decent to watch." |
