news / tech talk

I recently wrote about the new game consoles coming in the next year (XBox 360 and Sony Playstation 3) and how they are being positioned as consumer media centers with the capability to play DVDs, CDs, surf the Internet, etc. What I did not touch on was where some of their competition might be coming from.

Competitors range from such unlikely sources as cable companies, movie rental companies, mobile telephony companies, and who knows where else. Cable companies are probably positioned best. They are already eating the video tape and DVD recorder markets with Digital Video Recorders (DVRs). These compete directly with the popular Tivo devices that created the market. Both of these gizmos are essentially computers that record television shows on hard disk. Some of the advantages over the VCRs of yesteryear are high quality, easy programming, high capacity, fast random access to shows. The next likely step is to advance the technology to include an ability to download rental movies to the DVR (or DVR-like device) and watch them when you want. This would put pressure directly on business paradigms like Netflix. No need for mailing anything, just select the movies you want and they are downloaded overnight or in an hour or so. Netflix itself forced a business shift on Blockbuster; essentially making them give up their late fees in order to stay competitive. Cable can cause a bigger shift; its currently the fastest way into your house and its just about everywhere already.

Hard disk capacity is getting larger everyday. 500GB drives are on the market now from Hitachi, that's half a Terabyte. Since DVR's are computers anyway, so their evolution will likely include a web browser function. Afterall, if you download movies and program your TV shows to be recorded, why not offer the ability to surf and shop online? As controllers of media transport, cable companies will be able to leverage advertising deals with local merchants (or national ones) to customize marketing. They have a huge advantage that the game consoles will have a tough time beating. Microsoft already offers Media Edition PCs that are intended to do some of these functions but its still too computer-based for the majority of consumers.

Cable companies are successfully competing with telephone companies for provision of Internet access (cable vs DSL) and now they are providing telephony service so that some people I know get all their services (cable TV, Internet, and telephone) through their cable company. Voice over IP technology is yet another logical step for cable to get a further stranglehold.

So who can compete? Well, there are still lots of players and cable companies are so large, they seldom move nimbly in any direction. Besides, rapid technology growth makes for competition from unexpected directions. For example, the latest generation mobile telephony 4th Generation (4G) technology is now being tested in some asian markets with Internet speeds going to a mobile telephone faster than DSL and some cable connections. Once this becomes mainstream, why would you need another Internet service if you could connect your PC to your mobile phone to get broadband speed? Especially when your mobile phone is always with you, has a browser built into it, can play music, check your email, etc.? The biggest loser appears to be traditional telephony companies as they try to reinvent themselves.

All of this technology, convergence, and migration will change the marketing landscape. If you are a business owner, your challenge will be to watch, analyze, and adapt quickly to survive and thrive in the continuing information age.

Lee Le Clair is the CTO at Ephibian. His Tech Talk column appears the third week of each month in Inside Tucson Business