Wednesday, April 20, 2005

Is convergence good for entertainment?

For the moment, home entertainment includes plenty of choices for the type of distractions we're looking for- radio, TV, stereo, computer. More and more, we're moving to an era where these gadgets won't be part of your choices anymore. Instead of deciding which one to use, we'll have them all in one place. Ideally, that's what's supposed to happen but there's a lot of kinks to be worked in that model.

To start with, we already have our computers equipped to not just surf the Net or store data but also ready to play music, access video and stream radio stations. But the problem is that the other electronic gadgets in our lives are jealous and want to expand their range. In an article from Sfgate, Cable wants to be more, we learn about the promise of TV's reach outside of the usual channels and into the Net. This has been promising this for years and though it's coming in some way or shape, it won't be easy. Remember how easily the currency of the euro was accepted through Europe? The lesson there was that when you have lots of standards for lots of different places (or industries) to agree on, it ain't a smooth road. Any technological innovators also have to be careful about backwards compatibility- if it instantly renders all everything we've used before obsolete and unusable, you'll have an instant consumer revolt and backlash. Even if you can convince people that the new gizmos are better than your crappy old computer/TV/stereo/phone, the laws of technology are that any first generation of new products or software are going to be full of bugs and problems- that means you're gonna want to wait until they sort out all of the fun issues. That's not even mentioning all of the issues of security, rights and downloading that have stifled a lot of innovations in the tech industry from happening in the first place.

Not that this is stopping the phone companies from trying to hone in on the act. As we see from the article Wireless outfits will face the music (Business Week), the major providers see this as cash cow and they want in but the problem is to what extent can they get there. The advantage that the phone companies already have is the number of cell phones that are already out there but once you try to teach this tech dog some new tricks, the problems start. As it is, the phones aren't equipped with the memory or battery life to handle songs adequately and then there's the question of what do you do with all those songs on your phone. As small as the screen is on MP3 players, the cell phone face is even smaller so you can imagine how long it's going to take you to find or play a song there. Once you get past that problem, the phone companies then face the same problem that gives them a leg-up on the market- name recognition. Apple and to a lesser extent Napster have that for the MP3 market and they don't- these companies also have the advantage of running these systems and knowing the market pretty well while the phone companies don't. If these companies try and make their own music marketplace and screw it up, which is inevitable when you start out, then Apple and the rest will be glad to step in with other companies to provide better service and in all likelihood, take over a good part of the market.

One interesting observation from the Business Week model is the idea that consumers don't necessarily want their cell phones to be their whole entertainment center. In the L.A. Times article Will Your Music Hub Be a Phone? they note Motorola's iRadio program (note relation to the word "I-Pod") to connect your phone to your car or computer. But they also note also that some analysts are skeptical of convergence, especially with technical limits of cell phones and getting people used to new ways to utilize old devices. The popularity of Sony's Playstation Portable (P2P) might change that but so far, the few studies that have been done on multi-tasking devices like this are that users aren't comfortable with using them to access every type of media that's out there (music, movies, etc.). That's understandable not just because it's going to take some time for users to understand how to flip through all the different types of media all in one place but again, the viewing size is going to be a strain- are you really going to look at a palm-size monitor for two hours just to watch a movie? You probably won't.

There are more modest ideas like this: Infinity Plans to Broadcast to Cellphones in U.S. (Yahoo/Reuter). The idea here is to broadcast its programs to mobile phones in the United States, and include text data for subscribers "which would include "artists' names, check concert dates, buy tickets, ring tones and other content." Since we're already used to sending and reading text on our mobiles, this is a much more practical idea and more than you can get from an MP3 player right now.

Another L.A. Times article (iPod Killers?) also talks about telecomm rivals taking aim at portable entertainment market. Since phones are just as portable (and more ubiquitous) than MP3 players, it seems to make sense to exploit them more and try to get more out of them. Once they get over their tech hurdles (battery, storage) and offer music stations and the ability to share music with other users on the same system, you have a real challenge for Apple. But since this is a new market to these companies, they're still vexed over pricing. They're used to charging $2 for ringtones but that's double what online songs cost now. Ideally, they'd like a more flexible model that lets them bump up the price for hits and discount some of the back catalog. The question is how peachy will this be with consumers- other than having to shell out more for songs, having a supply/demand cost scale is confusing even if that model is used offline for discounting certain items to bump sales up. And maybe once you have a company like SK Telecom offering all-you-can-eat music for $5/month, how many consumers are going to pig out at their musical troth?

Other than salivating at the prospect of getting in on the online music market, the phone companies also have reservations about Apple, worrying about one company dominating the market: see Music moguls trumped by Steve Jobs? (CNET) While the major labels love him for helping to revitalize their sagging profits, they also hate him for being too big for his britches right now- not just dominating the market but also dictating terms to them, i.e. pricing. If the phone companies can offer better deals and bigger markets than he can, the majors might put their money and resources there instead, which would leave Apple high and dry. The majors aren't dumb enough to quickly abandon a cash cow like I-Tunes but they could also slowly shift themselves away, with new titles, promotions, etc.. As the CNET article also explains, Apple gets by now with sales of the I-Pod itself and not the songs on I-Tunes. Can the phone companies do the same? Maybe because as the Business Week article notes, the phone companies can live to tiny profit margins too.

So what kind of portable devices are going to be left after the dust settles? Obviously, we're still going to need cell phones but the question is how much more do consumers want them to expand. Though millions love the I-Pod now, it's survival is by no means as secure unless Apple branches out and makes a deal with one of the phone companies on a sleek and easy-to-use model that reflects the I-Pod. Adding games and movies to the mix is already happening but they're nowhere as popular as ringtones and that should tell you something- small and simple is the way that people want their bells and whistles on their phones. And you can't blame them for not wanting too many bells and whistles- how convenient is it going to be to switch between a movie you're watching and a phone call while you're traveling around? In the past, each medium that sprang up was seen as competition to existing media but now the push to put them all in one place is unprecedented. We'll soon find out if we can process all this stimulus in one place and keep track of it without losing our minds.


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