WebTV founder Steve Perlman, who has kept his latest venture cloaked in secrecy for two years, will finally pull the curtain back today to reveal what analysts say could be a revolutionary consumer product.
The Moxi Media Center, a low-cost, all-in-one set-top box that combines several forms of home entertainment, including digital video recording, DVDs, CDs, cable/satellite TV, e-mail and the PC, will debut during the Consumer Electronics Show, which officially begins tomorrow in Las Vegas. Perlman is scheduled to demonstrate the technology today during a news conference.
"We think it's really the future of media," Perlman said last week during an interview at the offices of his Palo Alto company, Rearden Steel Technologies, which is being renamed Moxi Digital Inc.
Analysts believe the Moxi Media Center could be one of the biggest newsmakers at this year's CES, the annual harbinger of the latest and greatest consumer electronic products.
This year's show, which runs through Friday, is expected to draw more than 2,000 exhibitors and 100,000 attendees, although the recession will likely keep attendance below last year's record turnout of 126,000.
Unlike other interactive or digital entertainment devices that have debuted at CES in the past but have been slow to catch on with consumers, the Moxi technology already has a major customer, EchoStar, that is planning to deliver Moxi technology to its digital satellite TV customers.
"This is the first one that's being supported by a major player," said P.J. McNealy, research director for GartnerG2. "That's what makes it so interesting. "
In a way, Moxi is a descendant of WebTV, which Perlman sold to Microsoft in 1997 for about $500 million. WebTV was designed to give computer-wary consumers an easy way to access the Internet through their television sets.
But WebTV never became a pervasive hit and reached a plateau of about 1 million subscribers. Today, it's called MSN TV, which is part of a Microsoft interactive TV push that includes UltimateTV.
Perlman, 40, said he decided to leave WebTV in late 1999 when Microsoft said "stop innovating" and made WebTV more of a conduit for its own Windows CE operating system.
A weary Perlman retreated to his Lake Tahoe home, which he outfitted with a dream digital entertainment system costing about $1 million. The system ran off a central computer server, which let Perlman play DVDs, CDs, VHS tapes and digital recorder videos all controlled from touch screens installed in every room.
The system spawned the idea of making a similar digital convergence system for the masses, costing hundreds, not millions, of dollars.
Perlman started Rearden Steel in January 2000, but the name was just a cover to throw off potential competitors.
The company received a $67 million investment boost in April 2001 from media companies AOL Time Warner, EchoStar Communications Corp. and the Washington Post Co. That round of investment also included Internet networking giant Cisco Systems, San Francisco multimedia leader Macromedia, and venture capital firms Mayfield, Vulcan Ventures and the Barksdale Group.
Moxi Digital's 117 employees include workers Perlman recruited from WebTV, TiVo, ReplayTV and Apple, where he was a principal scientist.
Before WebTV, Perlman also co-founded Catapult Entertainment, which developed modems for online gaming, and was managing director of advanced products for General Magic, where he designed its second-generation hardware technology.
Moxi Digital won't try to sell a product directly to consumers. Instead, Moxi offers a technology platform that it plans to license to cable and satellite TV providers to install in set-top boxes.
The Moxi technology is built on the Linux operating system and has its own media storage and navigation system.
The plain-looking Moxi Media Center, which was built to demonstrate the technology but will likely look different in its final form, is the working model of the all-encompassing digital entertainment server concept that several other Silicon Valley companies have worked on for years.
The center serves as a home Internet gateway, with a built-in high-speed cable or DSL modem. A separate device connects the main unit to other TVs or computers wirelessly or by cable, and media stored in the main unit can be accessed from the remote locations.
The Moxi supports one high-definition television and up to three standard TVs, and each can play different programs at the same time.
The main unit also has an internal 80-GB hard drive to store video from the digital video recorder, video-on-demand services or an entire collection of music CDs. Audio MP3 files can be sent to a portable digital audio player.
The Moxi also includes a DVD/CD player, although in the future, it could accommodate a rewritable DVD drive, Perlman said. Moxi users can also send instant messages and e-mail.
Software upgrades planned for 2003 will support handheld personal digital devices, telephones and digital video cameras.
The main Moxi units cost about $500, but the units that connect remote TVs and computers cost less than $40 each, Perlman said. That compares with basic digital cable boxes that cost $225 each or advanced set-top boxes with digital video recorders costing $570 each.
Perlman said the low cost of the Moxi remote units makes it possible for cable providers to connect two sets with Moxi for the price of one standard digital set-top box. He noted that a growing number of households want two or more digital set-top boxes.
"The breakthrough here is instead of having an advanced set-top box that breaks the bank, there is not an economic disadvantage to cable operators to deploy this," he said.
Richard Doherty, director of the research firm the Envisioneering Group, said Moxi Digital's plan makes sense and could make the company the odds-on favorite to become the leader in set-top technology, jumping ahead of competitors like Microsoft.
"It's a revolutionary change to the consumer electronic and digital media industry," Doherty said. "We believe they've engineered a set-top solution that different service providers can adopt and actually get to more people."
Marc Lumpkin, spokesman for EchoStar Communications Corp., said his company plans to start testing Moxi's technology this year, but noted EchoStar can easily upload upgrades over time because it makes its own digital satellite receiver boxes.
EchoStar has about 6.4 million subscribers and is buying rival DirecTV.
Getting cable operators like AT&T, which dominates the Bay Area cable market, to replace existing set-top boxes made by firms such as Motorola and Scientific Atlanta will take longer, which means cable subscribers may have to wait at least 12 to 18 months before seeing any signs of Moxi, Doherty said.
GartnerG2's McNealy said it may take two or three years for Moxi to make inroads with the financially struggling cable industry, which won't be eager to spend money to replace existing set-top boxes.
Perlman, though, believes he knows what the cable operators will eventually want.
"This is flowing in the direction I've been going my whole career, trying to finally make digital media easy to use and accessible throughout the home," he said.