Sad rant about convergence / consolidation (was re: wearables)

Jeff Bone
Fri, 04 Jan 2002 12:30:38 -0600

The main thing hindering convergence / consolidation of various kinds of
functionality isn't technological or people's willingness to adopt, it's
hardware vendor's own business models / profit motives and people's
*eagerness* to adopt.

Take the living room AV stack, for example.  Consider Sony, Phillips, etc.  I
can buy a Tivo.  I can buy a WebTV.  I can buy a Dish receiver.  I can buy a
Dish+Tivo.  I can buy a Dish+WebTV.  Why can't I buy a Dish+Tivo+WebTV?
Those boxes have about 90% the same internal BOM.  The issue is that Sony,
say, gets X profit on that BOM.  They can sell you that BOM once and get X
for a consolidated device, or they can sell you those things separately and
get at least 2X by selling you the same parts twice.  Frankly, I'm surprised
that they even offer a satellite receiver with either of the other packages
of functionality.

And we don't give them any incentive to consolidate, either.  We gadget
freaks are just putty in their hands, hardly better than crack whores at a
crackhouse;  we *must* have the newest toy, first generation, and we'll pay
3x the appropriate mainstream pricepoint;  we'll add the boxes to our stack
and live with growing complexity;  and we'll let them work out all the bugs
and issues on our dime.

Then there's the "who owns the interface" issue.  WebTV wants to be the
primary interface, with TV viewing subsumed --- TV as an added feature of Web
surfing;  TiVO wants to be the primary interface, with the Web presumably
eventually subsumed into the normal TV viewing interface, TV augmented with
the Web.  Neither has an incentive to relinquish the position, and Sony et.
al. don't have the wherewithal to create a consumer AV operating system that
these other things can develop on and extend.  (And if they do, you can bet
it will be proprietary, a misguided attempt to create value-chain lock-in by
controlling developers.)  You can bet Microsoft will be there eventually by
default, with a crappy offering and an 85% market share.

Then there's the freaking cable box.  They want to be the primary box, too.

Then there's the service package issue.  All of these guys (TiVO, WebTV,
connectivity+content networks, etc.) are in the business of selling
subscriptions.  The box is the razor;  the monthly premiums are the blades.
All of them want $10-20 a month, minimum, and none can really be profitable
on less.  So the service package for a converged box is going to run towards
$100, and anything above $50 / mo is going to be out of "impulse" range for
most consumers.  They can sneak their annuities by selling us $10-20 subs one
at a time, but we'll have to think twice about biting off on more than that.
And what are we getting, really, with those subs?  For WebTV, we're getting
an ISP --- but most of us already have that, who needs the complexity of
another one, more balkanization of our online presence, mail, etc.?  And TiVO
is just selling us TV listings.  Don't get me wrong --- I'm happy to pay
TiVO, as it's a qualitative lifestyle improvement, worth every penny --- but
at the end of the day, the value-add from the service itself isn't really
that much value.  (I.e., it's the whole package of functionality that makes
it worthwhile.)

These kinds of problems are endemic anywhere we start talking about
consolidating functionality.  The jokers haven't yet figured out that the key
to the success of the PC space has always been the general purpose and
extensible nature of the PC.  Everybody wants to sell special-purpose
devices, and to the extent that these help us manage complexity, that's
fine;  but with new functionality packages appearing monthly, the complexity
of simply adding another box, another phone connection, more balkanization
and redundancy / consistency issues with profile, configuration, and other
data and functionality, another remote control etc. quickly outstrips any
complexity benefits gained by simple, turnkey appliances.

IMO, the ideal stack is 2-3 boxes with nothing but a power LED on each bezel:

Media Box - dual multiformat disk reader/writer + huge storage
AV Server -w- TV / Web-based UI, broadband and 802.11b interfaces
* opt as needed:  auxiliary storage boxes for adding storage capacity
* opt as needed:  AV hub
Wireless keyboard(s)
Touchscreen extensible remote

Then there's the portables segment.  Think about the converged phone / PDA
devices.  Why have they all sucked?  It's not because the technology hasn't
existed to build good ones, it's because most of the efforts to build one
have been half-hearted.  Those that have been brought to market are
half-hearted attempts to throw the ultrageek / early adopter crowd an
(expensive) bone to feed our gadget jones, while making the rest of the
market live with two separate devices as long as they will.

Think about the various audio convergence issues.  Sony won't sell you an MP3
disk recorder.  Why?  They're afraid of MP3, they make all their money on
content and can't think forward enough to figure out a revenue model that
works if the bits are "freed" from artificial constraints.  (It's simple,
Nobuyuki-san:  content vendors need to get together with the RIAA and
*invest* in Napster-like technology, rather than fighting it:  create a
framework on which digitial content *distributors* besides yourselves can
build and profit, and strike revenue-sharing agreements with them.  You have
to give up on the notion of end-to-end integration and control of the
channel;  you have to de-integrate.  Push the distribution technology rather
than defend an ultimately unworkable business model.  Everybody on the planet
would pay $4.95 a month for unhindered access to *all* possible music
content.  They aren't going to pay even $4.95 a month for access to a
crippled Napster-alike with only RIAA-approved and marketing-endorsed
content.  Learn the difference between broadcast and broadcatch;  understand
that the cat is out of the bag;  understand that your economic model has
changed;  understand that you no longer control the channel;  understand that
bits and atoms are fundamentally different.  Learn these things, live them,
love them.  Or be obsoleted.)

I don't know how we change all this, really.  For my own contribution, even
though I'm a gadget freak to the core, I've tried to curtail my early adopter
behavior.  Now, I only buy new things when there's a qualitative critical
mass of new functionality embodied in a device.  I've stopped upgrading
devices for purely quantitative benefits;  now, I only replace something when
the old unit is physically broken or completely obsoleted.  I've stopped
buying gen one of anything.  I've tried to maintain a static number of boxes
in the stack.  I've stopped buying content on media for the most part;  if I
can pirate it, I will for now --- until they sell me licenses to bits or
(better) access subscriptions to bits rather than a worthless yet expensive
single piece of media.  (Mostly, though, I've just stopped listening to new
music, at least from the major labels;  pop is a total wasteland;  Brittany
and 'N Sync (for example) are fine examples of what happens when the content
companies think they completely control the entire channel from demand
creation to creative.)

Just a random rant.  Any thoughts on how to encourage the box vendors,
network operators, content owners, platform builders, and related parties to
speed along convergence and consolidation at the rate the technology allows
much appreciated...