Digital Convergence

Revised 11/4/2004

"Any sufficiently advanced technology is indistinguishable from magic." Arthur C. Clarke

What is the future of home entertainment electronics?

I set forth my essential thesis that the PC industry will wind up owning and running this world a number of years ago in a conversation with Steve Kahn and Tim Haley (conversation probably had about 1999). At the time, both immediately dismissed the notion as ridiculous. I opined as how I felt the consumer firms were not remotely prepared for the level of hyper competitiveness that characterizes the computer world. Both gentlemen responded that they didn't think those companies had much to worry about. I wish we had laid on a bet, as I believe more strongly than ever that I will be collecting. More recently I found myself having the same argument with another friend, and he was once again advocating the consumer electronic company side of things. I finally decided I had to set this out in black and white so that I'll get proper credit when all of this comes to pass. For the record, I first wrote about this in late November of 2001. At that time, I projected the outcome would be obvious within 3 years. It's now 2004, 3 years later, and we need to take stock of where we are. But let's begin with a bit more on the essential thesis, move on to assessing how the transition is faring, and finish with thoughts on what it will take to complete that transition.

I started thinking more and more about this convergence issue as I became an MP-3 devotee owing to my Nomad and later iPod MP-3 players. Once you've been exposed to a situation where all of your favorite music can be randomly accessed from a hard disk, anything else seems incredibly clunky by comparison. CD's are a real pain, even when you have the luxury of a fancy Escient system and jukeboxes to manage them. Their only real advantage is that CD's sound better than MP3's, and how much longer can that advantage persist?

The short answer to this question is that the future of home entertainment is the PC. The obstacle is connectivity. Right now, PC's sit in the home office. They're used primarily for lean forward applications. Yes, I listen to my MP3 collection a lot using my Gallo Nucleus PC speakers while I'm working--it sounds great and Windows Media Player makes it all very easy to use. Lean back applications, such as listening to your home stereo or watching TV, happen in a completely different part of the house. Traditional wisdom from the consumer electronics industry is that computer people don't understand consumer electronics customers, and we just have to wait on them to build the right dedicated appliance boxes to do what we need. In fairness to them, they are coming out with a fair number of interesting devices, and they are beginning to support MP3 and the like in a first class way.

Of course, the idea that computer people don't understand the home electronics customer is utter poppycock. I will submit that PC's have penetrated the home so deeply at this point that the two audiences are completely indistinguishable except perhaps at the very low end. Whatever learning the PC industry had to do in order to reach these people has long since been done. Again, the obstacle is connectivity, and aside from this one tiny little problem, the PC holds all the cards.

Before delving more deeply into this connectivity issue, let's ask the question, "Why do you say PC's hold all the cards?". It basically boils down to three issues: computing power, user interface, and connectivity.

When you look at a set-top box, or at the microprocessor power inside of the average consumer electronics device, it is minuscule by comparison to what the average PC offers, even a lowest common denominator box. The reason is simple: as an embedded function of a stereo component or set-top box, the compute power is simply a feature that can only be responsible for a small portion of the total cost of the device. As a PC, it is the whole reason for being, and can represent 100% of the PC's cost. In addition, consumers have shown a willingness to spend more for a PC than for something like a stereo receiver, at least if we leave aside the bleeding edge audiophile crowd. This is interesting, and is an important distinction, because it really limits what can be done in these dedicated appliance devices. Most of them have no hard disk, for example, while the average PC has a huge hard disk.

The second advantage the PC has besides raw power is user interface. Windows itself and web browsers are capable of presenting a far richer user experience than the average 20 button remote control or the knobs and buttons on the front panel of an A/V device. This is significant when it comes to enabling really complex functions. Simpler functions will still be handled with simple remote controls because they fall readily to hand in the lean back world of the couch potato.

Finally, there is connectivity. A/V devices talk to almost nothing except for themselves. Besides exchanging sound and video, they do a miserable job of that. Anyone who has tried to automate complex behavior across multiple components knows this only too well. Computers are adept at connecting to an amazing number of things these days--MP3 players, digital cameras, audio, video, LAN, wireless, PDA's, printers, the list goes on and on. Perhaps most critically, it is the PC that is most likely to be connected to any broadband Internet source in the household. It is also the PC that is most likely to have sufficient hard disk capacity to store whatever media is to be brought down via that fat pipe.

So, we agree that the PC is an ideal nexus because of its superior power and user interface capabilities. Another issue not to be overlooked is that the Japanese (or even the Occidental) electronics firms really don't seem to get computers. Oh, many of them can build a very nice laptop, but they don't really understand the essence of a computer. They are chip assemblers, not software architects. This is a crucial distinction, and here I have to say Microsoft and Bill Gates understand this stuff better than any other entity on the planet. The fact that the PC occupies the performance/UI/connectivity high ground in the home, together with the idea that the generals running the battle on the PC side understand the tactics of the digital age better makes for a compelling advantage. There is a lot else about it they don't understand that I won't dwell on here. Just take my word for it--they don't think about it the way real computer folks do.

Still not convinced? Let me throw one more straw onto the camel's back. As I first wrote this in late 2001, I stopped to compare Microsoft's market cap against Sony's. Sony is the largest and most successful consumer electronics company on the planet. Yet Microsoft could buy every share of Sony's stock for a mere 12% dilution of their own shares. Sony will make less than 1 billion dollars profit this year while Microsoft will put away almost 8 billion dollars. If Sony tries to match aggressive Microsoft loss leading tactics dollar for dollar, Sony will fatally hemorrhage bright red ink through every orifice before Mr Softie feels much more than mild discomfort. If you had any doubts about this, Balmer is on record as saying that the new X-box is capable of being a combination game console, media server, and set-top box all in one. Microsoft already loves to demo this concept at trade shows. The consumer electronics world is firmly in their gunsights, and we need only wait for the traditional 3rd release before Microsoft will have "gotten it right" and shift into world domination overdrive.

Now what about that connectivity issue? If it was easy to transmit any media from the PC to a high-quality video plus 5.1 channels of surround sound needed by a stereo system, we would be in fat city. Throw in the ability for the PC to do anything the stereo component's remote can do because it can generate the IR remote signals and you have a killer opportunity. The software needed to make a slick UI on the PC to control this "media server" would be fairly simple to write. Certainly not a huge challenge for the wizards of Microsoft. How then to provide that connectivity?

The answer to our connectivity conundrum is the LAN. Consumer devices need to sprout CAT-5 jacks on the back. In the long run, they will be far more valuable than yet another set of RCA phono plug inputs. A standard needs to be derived for the transmission of at least 5.1 channels of audio, a video channel, and a control (IR remote) channel over TCP-IP and into that CAT-5 connection. A reliable source tells me their company has "dongles" that cost about $20-40 to build from off-the-shelf parts that deliver composite video and stereo audio over a CAT-5. As soon as this idea catches on, these devices will be boiled down to a single chip costing less than a dollar and we'll be off to the races. By taking the media off the chip as digital, we pave the way for cheap connectivity while allowing the flexibility of very high quality depending on what level devices are used to convert the digital to the analog domain.

Imagine what it would mean if instead of a rat's nest of RCA phono plug patch cables going everywhere, you simply connected a bunch of CAT-5's to a hub in your stereo rack and that was it! Everything would suddenly be controllable from your PC, or a wireless PDA with color touch screen, or your cellphone, or anything else that talks "PC". Signals are transmitted noise free entirely in the digital domain. Even your speakers would take CAT-5 cables, and would contain their own digital crossovers, dacs, and individual amplifiers for each driver. Meridian has already proven that this approach can yield superb sound from surprisingly simple and small speakers. The media, such as MP3 tracks, all sits quietly on your PC, and can be called up over the network by any device on the LAN. When you pull your car into the garage, it's 802.11b WiFi wireless connection wakes up, contacts the PC server, and downloads any new MP3 tracks so they'll already be there for your next road trip. And guess what? It's all cheaper than doing it in the analog domain as we do today. Have you looked at what Monster Cable or the even higher end audiophile cabling costs? I spent circa $800 on cable for each speaker system in my house. CAT-5 doesn't care about cable quality because its in the digital domain, so it is dirt cheap!

Believe it or not, you can capture an interesting fraction of this fantasy today for about $299. Take a look at the Audiotron by Turtle Beach Voyetra. It's a music-only device that sits component-like in your stereo rack. It takes a CAT-5 connection in and puts out digital SPDIF and RCA phono plug stereo. It searches your household LAN to find out where the MP3 files are stored and then lets you call them up on your stereo with a little front panel knob/screen/button interface. You can also control it via a web browser running on your pc or on a wireless pda device. It's very slick. Multiple Audiotrons allow you to play independent tracks in every stereo system of your house. These are capabilities that can cost tens of thousands to set up using traditional CD jukeboxes and dedicated touch panels like I did in my home theater, all available for the low price of $299.

The real fly in the ointment from the software end is that networks are still just a little too hard to get working in the home. Still, I know more people than ever before who have done so. Anyone who has a cable modem or dsl connection is dangerously close to having succeeded, and Microsoft have made it a little easier with each iteration of their operating system. They are working on something new called Universal Plug and Play (UPnP) that promises to fix a lot of these things and make it easy to create LAN appliances. In a short time, this too will cease to be an issue.

So How Is This Convergence Unfolding?

Not as well as I'd like, I have to admit. Since I first wrote this article, the big PC Players like Microsoft are continuing to talk a good game, but they haven't delivered an awful lot. The most interesting development here is the DVR space, pioneered by Tivo, which still counts as Tivo is a Silicon Valley bunch of Computer Guys, not a Consumer Electronic Bastion. Interestingly for the Redmond Bandits, Tivos and most of the other similar devices are Linux-based. Microsoft is pissing away a huge opportunity by not making sure they own this space, even if they can't start out in the space with their typical ream-everyone monopolist tactics.

While I'm on the subject, Netflix is another company that "counts". It was founded by Silicon Valley computer types (one got his start with Unix memory leak detection tools for crying out loud!), and so far it has absolutely triumphed over the entrenched brick and mortar crowd. Tivo and Netflix are great examples of fundamental shifts in the consumer electronics firmament. Add to that Apple's iPod, Creative's Nomad, Apple's iTunes, and I think you've got to see the first stages of the assimilation. What have the "experts" in the traditional consumer companies given us that's really new? Not much since the Walkman.

There is a fun new trend called HTPC's--Home Theater PC's. HTPC's are one-offs built by hobbyists, but they show the potential. Just as my own Hot Rod PC is a generation ahead of the off-the-shelf Dell contingent, HTPC's show us what's possible if we wait a little longer. One of the biggest challenges for HTPC users is their lack of ability to control other devices using the IR that remotes put out. So, for example, your HTPC DVR can't tell your satellite receiver what channel to tune in. DOH!

That stuff has got to get fixed soon, then we'll all have a renaissance of exciting new stereo and home theater gear to step up to!

Let the magic begin!

All material 2001-2006, Robert W. Warfield.