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____________________[PRO] Countdown to a battle for the living room

alterantive ways to manage entertainement/digital content in the house: PC-based vs consumer electronics

Countdown to a battle for the living room
By Paul Taylor and Scott Morrison
Published: January 13 2004

Microsoft's Bill Gates calls it "seamless computing", while Panasonic's Fumio Ohtsubo prefers the term "life-stream". But, however they choose to describe it, the two high-technology visionaries are essentially talking about the same thing: developing easy-to-use electronics devices that will serve as a central living-room entertainment system with which consumers can watch TV, play their music, edit photos or view their favourite films.

But, though their goals are similar, Mr Gates and Mr Ohtsubo are approaching the challenge from very different points of view and - not surprisingly - they are proposing widely divergent visions for the digital entertainment hub of the future.

A crucial difference is that the computer approach stresses technologies based on industry standards, while many traditional consumer electronics companies are loath to give up the proprietary technologies and software that they argue help make their products easier to use and ensure optimum performance.

Until recently, it might have seemed ridiculous to imagine Microsoft and Panasonic, the consumer brand of Japan's big electronics group Matsushita, facing off for control of the living room. But digitisation has changed the landscape and blurred the lines between the computer industry and traditional consumer electronics.

Once music, video, photography and mobile telephony become digitised - converted into strings of ones and zeros - recording, replaying and editing become an exercise in applied computing. The hard drives and "flash" memory chips found in computers are essentially the same as those used in new consumer electronics products.

This has turned consumer electronics into a free-for-all, with competitors from both industries vying to establish their own technology as the new standard for living-room entertainment.

The prize is huge. The US consumer electronics market alone is expected to grow by 5 per cent to $101bn (£55bn) in 2004, according to the Consumer Electronics Association. Not surprisingly, traditional electronics makers such as Panasonic, Sony and Toshiba are not happy about new competitors invading their territory. The sniping has already begun.

"We're going to make products people want," Mr Ohtsubo, president of Panasonic AVC Networks and senior managing director of Matsushita, said last week at the Consumer Electronics Show in Las Vegas.

"Consumers have powerful ties to their products and it's about their time and how to maximise it - and about their memories and how best to cherish them. Some of our friends in the personal computer industry think this is easy," he said.

But Microsoft has repeatedly shown it is not easily deterred. As music, films and photographs go digital, the software group is spearheading an attempt by the PC industry to ensure that machines built using the standard PC architecture and Windows software form the central hub for capturing, storing and distributing this digital content around the home.

And Microsoft has powerful allies, such as Intel, the big chipmaker. Paul Ottellini, Intel's chief operating officer, talked in Las Vegas about replacing the stack of home hi-fi components with a single machine that Intel has dubbed "the entertainment PC".

Microsoft and Intel - and Hewlett-Packard, Dell and Gateway - envisage storing this digital content on PC hard drives, using flat panel television sets for display and high-speed wireless networks based on industry standard technology to distribute it around the home - perhaps even to a digital media player in the family car.

Most significantly, perhaps, they believe users will control these media systems with a TV-style remote control and sit 12ft away from the display, rather than jammed up in front of a PC screen. "It is a sit-back rather than a lean-forward" vision, explains one Intel executive.

In this respect, the Wintel (Windows running on Intel) vision is quite similar to that of traditional consumer electronic companies such as Panasonic and Pioneer, which last week presented their own hard-drive-based "media servers" - devices that on the surface look very much like the entertainment oriented PCs that Intel and Microsoft are touting.

But there are crucial differences between the computer industry and consumer electronics groups, which are reluctant to let Microsoft become the emerging standard on which the rapidly changing industry will come to depend.

Sony has been one of the strongest proponents of non-standard proprietary technologies and has long argued that the TV set rather than the PC will be at the centre of the digital home. Nobuyuki Idei, the group's chief executive, said last October that Sony would combine its PlayStation game console and a TV set to come up with a "unique product".

The company's PSX device combines a hard disc drive, a DVD recorder, an analogue satellite TV tuner and a PlayStation 2 game console. The PSX, which went on sale in Japan in late 2003, is expected to go on sale in North America later this year.

Even groups such as Panasonic and Toshiba, which have unveiled hard-drive-based media servers, are loath to let Microsoft get a foothold in their market. Most of their next-generation media servers on display at the Las Vegas show were built around either the Linux open-source operating system or their own proprietary software and none looked anything like the traditional Windows desktop.

"The real question is whether you want a PC in your living room or an easy-to-use system that switches on immediately, doesn't crash and does what you want it to do," said a consumer electronics company engineer. "I might be happy with the PC, but I know my mother would not be."

There are other differences. For example, most PC industry vendors plan to rely on a mixture of hard-wired connections and wi-fi wireless networking to distribute digital content around the home. Consumer electronics companies are not convinced that wi-fi is robust enough to handle content-intensive formats such as high-definition TV.

Instead, groups including Toshiba and Samsung have introduced an alternative wireless technology called ultra wideband. Others are developing technologies that will transmit data over co-axial cable, currently used for cable TV. Another invention flagged by Panasonic enables household electrical circuits to transmit data at very high speeds.

Economics would suggest that pressure from the PC industry over time will probably force consumer electronics vendors to replace proprietary technologies with standards-based systems. Industry observers also believe the entry of PC makers into the market will inevitably shorten product cycles and reduce margins to razor-thin levels.

Given their market experience, PC makers appear to have a critical advantage here but consumer electronics veterans counter that the battle is far from over. They note that the PC industry has made similar raids in the past and point to early attempts to sell PC-TV sets and Microsoft's ill-fated WebTV initiative. The consumer electronics industry believes it has an edge when it comes to providing easy, reliable systems.

Hideki Komiyama, Sony Electronics chief operating officer, said at Las Vegas that competition was likely to be tough. "Five or six years ago it was a peaceful market. Now people from the outside are coming in like hunting tribes," he said.

Ultimately, however, insiders from both industries admit that when it comes to the battle to control the digital living room, consumers will decide who wins.
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