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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: NY Stew who wrote (6559)	9/19/1999 10:56:00 AM
From: Mike Buckley	Read Replies (4) \| Respond to of 54805

Stew, Frank and everyone, Stew mentioned that he thinks Gemstar is already a gorilla though he understandably "treads carefully" when mentioning that in this folder. Unlike Stew, I have no fear of how deep my footprints go. :) First, let's have a brief (if you can believe that!) discussion of their market for one-touch programming of VCRs that use the four to eight digit numbers published all over the world. I think they are probably a king in that market though they might be a gorilla. That decision has to do with whether you believe it is the proprietary technology that took them to market dominance or the ability to get all the publishers around the world to publish the broadcast codes. It's very much like the question about whether the chicken or the egg came first. Whether we think Gemstar is a king or a gorilla in that market, it's important to remember that the company dominates it to a greater extent than Microsoft dominates the operating software market. Regardless, the exciting future of Gemstar doesn't lie in its one-touch programming. It's all about electronic program guides, a market that is unequivocably a gorilla game. Electronic program guides have probably crossed the chasm because they've been adopted by the satellite broadcasters. But I don't believe they have gone into the tornado yet because they have not been adopted on a wide basis by the cable folks. However, I think we are on the brink of the tornado. Some cable operators are adopting the product (though not Gemstar's.) Everything I read says that virtually every next-generation set-top box (even the least expensive of them) will contain an electronic program guide. There has been reason for cable operators to offer their customers next-generation set-top boxes but it hasn't happened fast enough; such is the nature of monopolies. To change that, the U. S. has a federal mandate that consumers (in June or July?) will no longer be limited to the set-top boxes provided by their cable operator. Next year consumers will be able to choose from products made by the major international consumer electronics manufacturers. The gates are about to be blown open by the fierce winds of a tornado. The best evidence of that is Motorola's announcement this week that they will purchase General Instrument, the largest set-top box maker in the world. It will be no surprise to wake up one morning to learn that #2 Scientific Atlantic has also been acquired. If I am right that electronic program guides have not entered the tornado, I am also correct that Gemstar is not yet the gorilla of electronic program guides. According to strict definition, Gorillas are produced only by tornados. However, I want to repeat here once again that Stew and I do agree that the results of upcoming litigation or negotiations to settle out of court will be for Gemstar what the Ericsson agreement was for Qualcomm. Stew mentioned my "hybrid concept" a long time ago that no one bought. If I remember correctly, it's not that no one bought it. It's that no one disagreed or agreed. Now that there appears to be a lot more interest in the Gem, I'll propose my idea again. Long, long ago in another folder in a distant galaxy :), I proposed that an electronic program guide is a hybrid of applications and enabling software, that it is not clear-cut one or the other. Using the manual, the distinguishing factor of applications software is that it is used by the end user. Certainly an interactive program guide meets that criterion. However, a guide isn't just that top layer with which a consumer interacts. There is also a lower layer, the enabling layer, that makes it possible for the many kinds of interaction to take place. Think of the guide as the operating software that makes it possible for many interactive technologies to be added on. That's the part of the guide that the consumers don't use, meaning it's also the enabling part. Hence, Stew's reference to the hybrid and his nod to the idea that Gemstar might be rewriting the book on enabling and applications technologies. More important, because electronic program guides will be the consumer's roadmap to everything on their television (or converged television and computer), the guide will probably be the most valuable piece of real estate in boradcasting. And when you follow the money, that's where it takes you. Having gone on far too long about all of that, I'm gonna read that 38-page report from Stephens again! (And Cha2 wonders why I'm not interested in researching new companies. Just kidding.) --Mike Buckley