Several mentions of SFA and PowerTV...not all favorable...
Good luck,
Eric
Tech firms that made TVs smart are set to lose edge
By Lucas van Grinsven and Jana Sanchez
LONDON/AMSTERDAM, Nov 30 (Reuters) - The TV set is rapidly becoming the smartest device in the home after a decade of false starts, and a host of technology companies is eager to cash in.
But will these firms turn the promise into profits?
Technology companies may have made smart TV possible, but they could have drawn the short straw, specialists said.
Chips and software run a big risk of becoming commodities, while the most valuable assets sit with network operators and the producers of movies, sports and television shows.
Technology companies are the first to acknowledge that the smart TV industry is very different from the PC era in which microprocessors and software makers ruled unrivalled.
Germany's set-top box maker Grundig put it very clearly when it told a set-top box conference in London this week that it is "at the bottom of the food chain."
"We get squeezed all the time," said Martyn Gough, director of Digital Strategy at Grundig.
Others agree, such as Dan Sutorius, marketing director of Motorola's set-top box unit. "Content is king," he said.
Ironically, smart TV has only been made possible by the technology companies which have delivered powerful chips, superfast fibre optic data networks and vast computer memory.
TECHNOLOGY ADVANCES MADE TELEVISIONS SMART
Experiments with smart television started as early as 1990 in the U.S., but failed because of huge costs and technology constraints. Until recently, the set-top box, a computer which sits atop the television, served only to receive and unscramble the cable or satellite television signal.
But computer technology has made leaps in the past 10 years, with computer memory and microprocessors almost halving in price every year, meaning that operators can give away cheap set-top boxes that will turn any tube into a computer.
Consumers can then surf the Internet, send e-mail or shop in electronic malls. Set top-boxes will let viewers store shows, fast-forward, skip ads, order movies and play games.
Smart television has such potential that cable networks, terrestrial television network providers and satellite TV companies are each investing hundreds of millions of euros.
Very soon they will be joined by operators who will offer smart TV over supercharged copper telephone wires, a technology known as Digital Subscriber Line (DSL). British Sky Broadcasting , already a European powerhouse in satellite TV, was reported this week to be preparing to launch DSL early in 2001.
These operators, such as pan-European cable operator UPC, France's Canal Plus, Britain's ONDigital are best placed to reap the rewards from their investments, said analyst David Mercer at Strategy Analytics.
"If the companies that control the networks don't make money, no one is going to make money," he said.
Adrian Dowle of C-Cube, a chip producer for set-top boxes, agrees "only the content providers will be making money. The rest are screwed because these boxes have to be offered for free to consumers, meaning the technology has to be cheap."
TECHNOLOGY COMPANIES FIGHT FOR SLICE OF CAKE
But technology companies claim they can still make decent returns in the next few years by adding features and tailoring to complex networks which have not been standardised yet.
With only about 25 million out of the total one billion television households using digital interactive TV services worldwide, the market is still in its infancy.
But which technology providers will benefit most is unclear, Jack Myers of Myers Reports said.
"There are so many competitors and so much confusion, it's difficult to assess the likely outcome and winners," he said.
In chips for instance, IBM told Reuters this week it is confident it can grab a 35 percent market share for key set-top box microprocessors by late 2003, from its current 10 percent.
It will steal share from established players such as ST Microelectronics, because the industry is making a transition from simple decoders to complex digital boxes which need to be upgraded instantly.
In set-top boxes, the two U.S. leaders, Scientific-Atlanta and Motorola, add value by selling end-to-end solutions.
This situation is different in Europe where market leaders Pace, Philips and Nokia fight for orders with a dozen rivals and face continued stiff competition.
NOT ANOTHER MICROSOFT
Then there's software. Analysts are struggling to predict which middleware -- the software that builds the framework inside a set-top box -- will dominate.
ING Barings analyst Spencer Wang, says predicting the eventual winner is too difficult this early in the game.
"I see consolidation coming. You will probably have two to three major players out of the current five or six," he said.
"OpenTV is clearly the market share leader. Liberate has deployed about 400,000 boxes. Microsoft is playing catch-up," Wang said.
Market leader OpenTV, with an installed base of 11 million boxes, has locked in the big satellite TV operators, but more complex software may be needed for true interactive TV.
Microsoft, used to the luxury of a virtual monopoly in PC software, has commitments from cable operators for about 15 million boxes, but faces big delays in rolling out software to UPC and U.S.-based AT&T.
"There are a lot of barriers to Microsoft getting a foothold in this market," said Gartner Group analyst Paul O'Donovan. Operators and consumer electronics makers fear Microsoft, because it would limit choice.
This plays into the hands of Liberate which recently struck a deal with America Online that added to its clout.
European players, including CanalPlus Technologies, Rupert Murdoch's NDS, but also PowerTV, are seen as less
likely to prevail. PowerTV, the software division of set-top box maker Scientific Atlanta is seen as too close to its parent company to sell to other hardware makers, analysts said.
There is also a host of applications that sit on top of this middleware. Because of the fragmented nature of the market, operators can shop around for cheap yet exclusive services.
"It's a highly fragmented market. Competitive operators want exclusivity and don't need inter-operability," said Guy Bisson, editor of market research journal Screen Digest.
(additional reporting by Scott Hillis in Seattle) |
