Here Come The Next Must-Have Tech Products Loaded with gee-whiz features, digital set-top boxes will replace your cable boxes and VCRs. But some of what they deliver is downright silly.
(FORTUNE Magazine) – Confused by "set-top boxes" yet? I am, and by this fall, you will be too. Walk into Best Buy, Circuit City, or any other major consumer electronics retailer, and you'll see the first manifestations of a brand-new set of digital broadband products designed to make your life simpler and more enjoyable. These are basically replacements for today's cable boxes and VCRs, but making sense of all the offerings can be extremely difficult.
The range of what's coming is amazing. Today you can find boxes from Philips, Sony, Panasonic, and RCA that handle satellite television from DirecTV and Dish Network, video recording from WebTV, ReplayTV, and TiVo (my firm has invested in TiVo, and I am a director), or Internet access from WebTV and AOL-TV. Coming soon are digital boxes that connect to local cable TV systems; then there are cable modems that will fire up your high-speed Internet access. This fall, you might also see digital jukeboxes that you can plug into your stereo, so that you can digitize, download, arrange, and listen to all kinds of music from the Internet. Then there are the digital radios that let you tune in Net radio...and digital picture frames...and network and e-mail appliances...and high-speed DSL modems...and the new generation of videogame consoles like Sega Dreamcast and Sony PlayStation II that come ready with modems...and the home network servers that tie these devices together.
Phew! The good news is that this explosion of products will create brand-new kinds of home entertainment. The bad news is that buying and installing tech products will become even more difficult than it is today; worse yet, these devices and their new digital infrastructure challenge economic models that have supported commercial media to date.
All this will take years to straighten itself out. So how can you evaluate this upcoming change? One way is to consider the three efforts the digital industry seems to be focused on: interactive television, personalized television, and the media-rich Internet.
Interactive television: I recently heard the CEO of OpenTV, which makes software for set-top boxes, describe his company's goal as using the emotional intensity of television to encourage people to buy products. I might be an old fart, but I would rather not be subjected to this. I actually like some TV ads, but the idea that increased product buying goes hand in hand with great TV-watching experience is absurd. On the whole, interactive television seems to me the poster child for technology in search of a problem to solve. The fact that you can make TV interactive does not make interacting with TV something you actually want to do.
Personalized television: I'm biased here. My firm invested in TiVo, whose machines help you customize your TV viewing. The idea that you might want to use digital technology to store television programs until you are good and ready to watch them seems patently obvious.
Unfortunately, whether it's TiVo, Replay, or WebTV, the service allows you to skip ads, and research indicates that early customers have been doing just that. Which raises a big question: If ads are being skipped left and right, who's going to pay the TV industry the money it needs to finance programming?
Media-rich Internet: Some people think the Web is kind of boring. Mostly, you look at text and pictures--not much sound or motion. Well, sound and motion play really well on TV sets. So couldn't you offer a better Web experience by connecting a TV to the Internet? WebTV was the first to do this, and somewhere around a million people bought into it after Microsoft spent a lot of money selling it to them. But I haven't talked to many people who actually enjoy WebTV that much.
Now AOL is taking a shot with its AOL-TV system. AOL knows how to get people chatting with one another, and everybody likes to talk about television. Ergo...AOL thinks that AOL-TV's recipe of chat-plus-TV might be a much more compelling experience than WebTV's Web-plus-TV. My take? I like lying down on the couch in front of the TV and leaving my brain elsewhere, so that I can just zone out. As noted above, I might also be just an old fart.
These are only three ways to start thinking about this new round of consumer tech products. Even more confusion will result from combining them. Dish Network sells a box that has both WebTV and personalized TV. AOL will introduce a version of AOL-TV with TiVo's service. DirecTV is committed to selling boxes that combine its satellite television service with either WebTV or TiVo. Consumer product makers want to integrate these services directly into TV sets or DVD players. And just to add to the mix-ups, consider this: AOL has announced that it will buy up to 30% of TiVo, while prospective merger partner Time Warner owns a piece of ReplayTV. The bottom line: Count on being confused, starting this fall, for at least two or three years.
STEWART ALSOP is a partner with New Enterprise Associates, a venture capital firm. Except as noted, neither he nor his partnership has a financial interest in the companies mentioned. He can be reached at email@example.com. His column may be bookmarked online at www.fortune.com/technology/alsop.