OK. Here is the first part of the analysis of the evolving "connected home" market. First task in understanding any new trend is defining the problem statement. I will start with Internet video since that is perhaps the most dynamic of the three.
People like to watch TV. A lot of TV. Ever since the big black and white piece of furniture arrived in the home people were hooked. Families gathered around. To be informed, entertained, made to feel like they were connected to the rest of the world, which with the help of the TV was growing increasingly small. In many ways, TV served a big role as the “homogenator” of American culture. Early on, there were only a few major channels that everyone watched, so together with the Big Screen of Hollywood, what people watched on the tube became the parlance of severals generation. You could pretty much count on the fact that your jokes rooted in TV allusions would get a laugh, your concern about world events a shared sigh, and your assessment of movie heroes a communal nod. And folks were so thrilled to get out of Kansas (virtually), they didn’t ask for much more than that.
Then things changed. New stations emerged. Content was scarce and re-runs got, well, re-run. Cable TV was like an egg put in the microwave too long—it exploded television competition and necessitated a renaissance of content creation that gave us HBO, CNN, and eventually some really good, and really bad, reality shows on MTV and TLC (I prefer “Little People: Big World” and “Jon and Kate Plus 8” over the mildly spooky and deafeningly flat Duggar family of “17 Kids and Counting”). Like the rest of our busy lives, it became harder and harder to keep up. While Alan Greenspan was hailing the productivity of the American worker, most folks just felt stressed out. The problem was people needed TV even more as an escape, but traditional broadcast and Cable TV schedules forced them into impossible routines that made it more difficult to watch their favorite programs at times convenient to them. And competition and the fight for advertising eyeballs gave us more and more shows we didn’t have time to watch. Even more troubling, reality shows and episodic dramas required some level of commitment to keep the story line straight—miss a week and you might as well wait until the series comes out on DVD.
Tivo and DVR-enabled cable STBs helped to solve some of this problem through what has become known as “time-shifting”. Folks could more easily record their favorite shows to watch later. Sure, there would be fights over who gets to record what and when, and recordings could get erased, but this was still progress. Still took a little effort though since the DVR is still tied to the schedules and menus of traditional TV. But what is missing from the equation? There is still too much complexity and hardware to get this all to work properly. There is always a certain psychological fatigue associated with being “proactive.” It’s the same feeling as making your bed in the morning. You know it will look nice throughout the day, only to be rumpled again in a few hours. All so tedious. How do we free ourselves from all that? Is Internet video the answer? Stay tuned for Part Two when we take a deeper look.
The music business is quite a different animal from TV. For one thing, variety has always been in demand. Lots of radio stations. Lots of genres. You don’t like what’s being spun on the radio, you buy your own vinyl record. Music is more an extension of yourself, your personality, than TV is, which has very tribal, very communal roots. While it might take a village to produce a TV show or a movie, all it takes is a guy on the street corner with a spoon and a plastic bucket to make music. Always has been that way (if you don’t agree, try to explain why once “niche” genres such as bluegrass and jazz found followings and became mainstream—nothing stifling creativity there). So, while there are many parallels to the underlying forces driving Internet video and audio, it is important to understand the differences as well.
One common challenge to both media was one of storage. Video tapes took up a lot of room for the collector of home movies and the best from Tinseltown just like vinyl records and audio tapes did. An interim step for both forms of media was to digitize them into smaller storage devices—CDs and DVDs. Ahhh, but this opportunity for folks to buy all the same music they had already paid for also came with a big catch for the content rights owners—digital media is much easier to copy. No worry, the industry figured out a variety of digital rights management (DRM) schemes and technologies to minimize this risk. But Pandora’s box was indeed opened, and before both consumers and industry insiders really understood what was happening, we had Napster, we had iTunes—the iPod was born. The networks of our friends the Internet service providers (telecom and cable) began to choke on illegal file sharing using new peer-to-peer (P2P) technologies. Perhaps music was a communal activity after all? So how is Internet-based music better? Portability? Variety? Community? Price? We look at these driving forces in Part Two.
It’s funny to think that perhaps the most difficult of the above three got the earliest start. While Internet audio and video streaming and downloading are fairly insignificant technical challenges, Internet telephony is another matter altogether. Telephony has always been tough, ever since the first mechanical switches were mass produced. The calling scheme had to be defined. The network connection had to be maintained. And the voice quality had to be above reproach. Everything had to work perfectly in real time, no large delay allowed, no buffer.
My hats off to my telephony comrades in arms, who over the past decade have really made Internet telephony a mainstream service. And while many of us would like to think that it was all the special new features that Internet telephony made possible, most of us know it was the cost savings, both to carriers and to subscribers that drove this market. In fact, the success of this service was due in large part to the telecom service providers’ ability to hide this as anything new or weird or difficult to understand. This was an important lesson for all service providers, as Internet telephony has become a platform service for a “triple play” package of Internet protocol (IP)- based voice, video, and Internet services. But what about all the fancy services made possible by way of Internet telephony? What about “true” Internet telephony services such as Skype? How do they fit into the larger trends driving the digital home cornucopia of entertainment, communication, and information? Stay tuned for Part Two of our analysis. Where we will name names and talk about the winners and losers. And perhaps we will hand out our first “Trender Awards” when I get back from the CES show in Vegas. Yes, let’s do that. Trenders, start your engines and send me your thoughts and comments please.