Digital convergence is not only a case of familiar devices coming together — the stereo, television, radio, DVD or VCR, electronic gaming system, PC and phone. But it is coming to the point where they can all talk to each other and to the outside world over a single line or wireless connection.
This has enormous implications for vendors, telecommunications companies, and resellers. Homes will be fully networked, with a hub and storage unit playing the central role in forwarding digital entertainment throughout the house.
People will have access to vast libraries of entertainment content, including movies, music, games and education. Whole new billing and distribution schemes will be worked out. And resellers will increasingly find themselves in competition with home entertainment and department stores.
Although this may have a futuristic ring to it, it's all beginning to happen now. The devices are already on the market, and the networking technology is available. All that is really needed is critical mass. So it is imperative that resellers pay close attention to this space. It will be affecting market development for many years to come.
"In general, as a phone company, we don't get involved in the user experience, but here we are building an industry," says Telecom new media and business development manager Ralph Brayham. "It's an exciting part of the business. The biggest issue is selling the vision of broadband, since most new media services will be delivered over broadband, either wireless or wireline. The real power of broadband is that it's always there; it enables an immediate experience with rich media content."
What is happening is convergence, as all home entertainment areas become interconnected. In this scenario, you won’t have a VCR in the lounge, but will have a disk somewhere in the home that will record and serve all video and sound. However, it all comes back to the "chicken or the egg" problem. The first hurdle is to convince people to use the new converged broadband devices. Until there is a critical mass of people using them, the devices won’t arrive here. The first version of a rich media player came out in 2002, but it did not arrive in New Zealand because there were not enough potential users. Industry structure and "ecosystem" barriers need to be removed.
"The first objective is to get broadband to the house,” says Brayham. "Then to get it throughout the house where users can employ it. This can be through either standard wired home network or WiFi. Recently, more people [are] going to WiFi. New Zealand has an interesting advantage for home networking, with most houses being wooden and resting on pillars, it is relatively easy to run cables. After home networking, the challenge is in the device space — and we are watching this closely. Two broad categories [are] emerging. Media centres, or hubs, that try to integrate all home rich media devices; and specialised single function devices. We feel that they will both have a place in the market."
In the end, it is important to make it easy to get on and use broadband resources in a secure way. Customers need to have some certainty around security. Telecom wants to provide a DSL and/or WiFi connection so that security is set up correctly from the start. The company moved into providing specific modems in early days of PCs to ensure reliable connections. It now believes there may be a strong reason to do same with DSL/Jetstream.
"The largest areas of new development are in TV and video, with rich media PCs coming on stream," says Brayham. "TiVO-like devices, for example. At the moment, this needs to be enabled by TVNZ and SKY. But TV over DSL should be viable at some time. We haven't sorted out timing on that, and there are issues such as digital rights that still need some work.
"Overall, for us, the fastest growing area is simple broadband access DSL and WiFi. We are on track to reach our 250,000 broadband user target by December 05, with bandwidth defined as at least 256kbit/s. There will be variable speeds for different types of services. For using the internet, 256kbit/s provides simple access to internet files. Gamers using real time action need speed; they might want to provision basic 256kbit/s, and open another internet connection specifically configured for gaming when they start gaming. This is a feature that we call multiple virtual circuits, and it is a medium-term network priority. It is the future of service provisioning, however."
Resellers need to understand that they are getting into the home, and therefore they require a level of knowledge to ensure the customer experience is secure, Brayham cautions. Configuration knowledge and expertise is required. Home consultation, or a lot more preconfiguration will be needed. It’s exciting and useful stuff, but a bit more complicated than most things sold into the home.
Hewlett Packard is an IT vendor with a specialty in bringing consumer IT products to market. Key consumer strategies are in the digital entertainment and digital photography areas. "We are seeing lower price points in the entry-level desktop space, which have increased the need for education and awareness of the benefits of high-end PCs and Media Centre systems," says Kirstin Kane, product marketing manager, Personal Systems Group. "We have a number of interesting new products in this space that are becoming available soon. These include:
· Intervideo HomeTheatre Software
· HP ImageZone Software
· Dual layer/dual format DVD Writers
· The Dc5000 Home Movie Writer
· The HP Pavilion dv1000 Entertainment Notebook, featuring Quickplay with remote control
· An all in one entertainment cable to connect the PC with the home theatre system.
· Home Theatre enabled projectors
· The Lightscribe direct disk labelling system
"The New Zealand home entertainment sector has seen huge growth. But resellers need to understand what their key value proposition is. The industry is moving away from product/price sales and moving to service-based solutions. Longer product lifecycles mean upgrades are more likely, and ability to sell options is paramount."
Recent developments in the home entertainment area are opening new niches for resellers. One example is specialisation in outfitting of homes with entry- to high-end solutions — PCs in the kitchen, projectors and LCD TVs in the lounge all connected to a central HUB — the home server concept. Relationships with customers are key to developing a specific niche market which is profitable for the reseller.
"We are definitely see[ing] a major convergence between the TV/Home Entertainment sectors in store with the PC/laptop sectors," says Kane. "There are more digital entertainment lounges, and areas in which multiple devices are shown working together rather [than] one product line ranged on a shelf. This has led to growth of the "store in store concept" for selling these types of systems."
In the networking area, HP is involved in educating the customers as to how these technologies will benefit them in the future. The company relies on local partners — specifically Telecom/Xtra, Microsoft and Vodafone — to assist in providing a complete solution in this area.
Of course, the most recent development in this sector is Microsoft's roll-out of its Windows Media Centre Edition. According to Country Manager Wilf Robinson, there has been "overwhelming consumer demand" for this product. Microsoft's OEM partners have responded with plans to release new PCs which include Windows Media Centre in time for Christmas. OEM availability is part of a pilot launch of this product in New Zealand.
Media Centre PCs are loaded with a version of Windows XP and designed to meet the needs of home entertainment. The specification is to provide a PC system that is equipped with all the necessary hardware to deliver both computing and home entertainment. A Media Centre PC may include a remote control, a remote infrared sensor to work with the remote and also control a cable or satellite set-top box, an advanced graphics card, TV tuner, hardware TV encoder, TV output, and digital audio output to allow integration of digital audio from the computer into an existing home entertainment system.
New Zealand is late in having Media Centre available. Users for converged multimedia entertainment are only now reaching numbers that make a marketing concentration in this area possible. But growth is likely to be swift. Microsoft's action will inevitably serve as a trigger for other vendors in rolling out new products that take advantage of broadband networking and the digitisation of the home lounge.
At the "building blocks" level, Intel has been working with Digital 5, Netgear and RealNetworks on the development of a standards-based Digital Media Adapter (DMA), that will permit consumers to move protected premium content from the PC to other devices on the home network. At issue is not only the centralisation of content, but the protection of copyrights — without which, content such as commercial music and mainstream films will never be widely available on home networks. This effort is creating the technology needed to make this type of access a reality.
"A consumer will soon be able to purchase a Netgear DMA, hook it up to their TV and access their favourite premium movie content via the internet," said Kevin Corbett, vice president and chief technology officer, Intel's Desktop Platforms Group. "Unlike common scenarios today where consumers have access to limited premium content and limited flexibility on when and where they view it, these new products will allow consumers to access this content anytime, anywhere and on any device in the home."
D-Link, a maker of networking equipment, sees a huge opportunity for resellers. "Convergence is bringing together networking, file sharing and a wide variety of devices,” says Aus/NZ marketing director Maurice Famularo. "At the moment, everything is still PC-centric. However, with an entertainment hub like the DSM-320 Wireless Media Player, it is no longer necessary to put the PC in the centre of the system. You can plug in wireless devices and access them from anywhere in the home. People spend more time in the lounge than anywhere else; we say 'leave entertainment centred in the lounge.' Bring digital photos, movies, music and other media there through networking. With wired or wireless networking, the centre can link external networks, hard storage, and DVD recording capability."
For resellers, Famularo notes, this opens a whole new marketing territory. "Resellers and integrators in the home entertainment market will find it difficult learning to integrate home entertainment. We are likely to see a new breed of people from IT moving to the home entertainment market, and movement of home entertainment people into networking."