At a time of slumping consumer-electronics sales, a number of companies are charging to the next level of digital evolution with devices that promise to deliver the long-hyped convergence of old and new media to the living room.
This equipment can record and transmit music and video from a variety of sources throughout the home. Known as "media gateways," the devices are designed to mix songs or programs grabbed off the Web with live TV, prerecorded programs and audio or video discs.
Although the public has yet to show an interest, a dozen or more such devices are expected to be on display at the annual International Consumer Electronics Show, beginning today in Las Vegas. Consumers are already abandoning many conventional analog products in favor of digital versions. Sharp declines in orders for analog TVs and VCRs helped drive down factory sales of all consumer electronics 2% in 2001, despite huge increases in sales of digital TVs, DVD players, cameras and game equipment, according to a study to be released today by the Consumer Electronics Assn.
Nevertheless, skeptics say it's too early for media gateways, given consumers' chilly response to digital video recorders, home-networking gear and other key elements of the future digital home. But a major satellite operator is committing to a gateway designed by Moxi Digital Inc. of Palo Alto, suggesting that these devices will get a toehold in the market this year.
For consumers, the benefit could be more music and movies piped to any speakers or screens around the home. But it won't be free, because satellite and cable operators expect to charge extra monthly fees for the additional convenience and programming.
Digital technology has been a godsend for the consumer-electronics industry. Not only have manufacturers reinvented all their audiovisual and communications products, they've accelerated the creation, improvement and obsolescence of new devices.
2001 was a watershed year in the digital transition. Analyst Tom Edwards, who monitors consumer-electronics sales for NPD Intellect, noted two firsts: DVD player sales surpassed VCR sales, and digital-projection TVs brought in more revenue than analog projection sets.
The year also saw the introduction of a digital radio service for cars: XM, the first of two new satellite-delivered radio ventures.
Predictably, this year's Consumer Electronics Show will be filled with new models of digital TVs, DVD units, portable music players and other digital gadgets, many of them aimed at wealthy tech enthusiasts. But it also will be the launching pad for a new generation of convergence devices, such as the Moxi media gateway, which has been in the works for two years.
The goal of these new devices is to let consumers enjoy CDs, DVDs, TV channels and entertainment from the Web on any screen or stereo in the house. They do this by combining a disc reader and a high-capacity hard drive with the ability to connect to the TV, the Internet and a digital home network.
Such devices would give consumers a central storehouse for their scattered music and video collections, while providing more control over when and where they tune in media.
However, early attempts at media gateways have been costly, complex and difficult for consumers to use.
Among the companies selling or developing some kind of media gateway are Sonicblue, which has an Internet-enabled audio jukebox and a video recorder that can tune in TV or Web-based video; TiVo Inc., which plans a version of its personal video recorder that goes beyond TV recording; Thomson Multimedia, maker of RCA-brand audiovisual gear; ZapMedia; Kenwood; Escient; and such computer-industry stalwarts as Intel Corp., Compaq Computer Corp. and Hewlett-Packard Co.
Thomson is teaming with Intertainer Inc., a Culver City company that delivers music and movies on demand through secure online networks, to create a limited media gateway, said Jonathan Taplin, Intertainer's chief executive. The set-top box is designed to play DVDs and, by connecting to a home network, receive DVD-quality video from Intertainer through a high-speed Internet connection.
Taplin said Verizon Communications Inc. plans to test the boxes with selected high-speed Internet customers later this year.
The key to widespread deployment of any media gateway is backing from a major service provider, such as a cable TV or satellite company, said analyst P.J. McNealy of the GartnerG2 technology research firm. Moxi has lined up that kind of supporter, he said: EchoStar Communications Corp., which operates DishNetwork and is in a deal to buy DirecTV.
EchoStar officials say they plan to deploy Moxi's technology in advanced satellite receivers, although it didn't say how many or when. Mark Jackson, senior vice president of EchoStar Technologies Corp., said Moxi offers EchoStar a way to sell downloadable music and other new services, while also cutting the cost of serving homes with multiple TV sets.
Formerly known as Rearden Steel Technologies, Moxi designs software and hardware for media gateways, relying on other companies to build the units. It plans to sell its technology to satellite and cable operators, not directly to consumers.
Moxi's main unit functions as a master receiver, recorder and storage bin for media from the consumer's personal collection, the Internet and satellite or cable TV. It would connect to extension units and to home computers through wireless signals or coaxial cable.
A key feature of the software is a media guide that steers users not just to TV channels, but also to recorded and online media related to specific shows or performers. It also can transmit different channels or recorded media simultaneously to different rooms in the house.
Moxi was founded by Steve Perlman, who sold his last invention, WebTV, to Microsoft Corp. for $503 million.
WebTV was one of the first devices to bring the Internet and e-mail to a TV, but its popularity stalled at close to 1 million subscribers.
After founding Rearden Steel two years ago, he raised $67 million from several top-tier media companies and investors, including AOL Time Warner, EchoStar, Cisco Systems and Vulcan Ventures, the investment company owned by former Microsoft co-founder Paul Allen.
Charter Communications, the cable TV company owned by Vulcan Ventures, has prototypes of an undisclosed media gateway that it plans to test this year, Chief Technical Officer Stephen Silva said. "It's one of the things that we're trying to get a good understanding of the customer need and demand [for] right now," he added.
Even some proponents of home networking and media gateways, such as Sonicblue and Microsoft, say the demand isn't there yet. Andrew Wolfe, chief technical officer of Sonicblue, said there aren't enough services available online to justify selling a full-blown media gateway.
A number of online video and music suppliers such as Intertainer are emerging for gateways to tap into. But before gateway providers can build a business around those services, they'll have to wean consumers from services such as Napster that let users copy movies and songs from each other for free.
Larry Gerbrandt, chief content officer for the Kagan World Media research and consulting firm, said Napster taught consumers that they can find content online. "The question is, can you overcome the legacy of Napster and convince people it should be downloaded at a price?"