Home Hub: If You Build It, They Will Come

The multimedia home hub is a good concept that no one--not even the great minds at Apple--can master, even though digital devices and platforms hope to interface with what remains media's most universal outlet: the television.

There are complicated and logical reasons for this void. As the best of all disparate content formats, devices and platforms rise to the top, facilitating their union in the home has been challenging. Apple TV promised to lead hardware manufacturers' home hub crusade, but has become hampered by the walled garden around its iTunes video content. On the content side, film studios, TV networks and niche channels such as ESPN remain skeptical about the fees and revenues lost in the interactive exchange bank. Analysts say all key players working on the home hub solution are more concerned about protecting their turf than building something bigger--and lasting.

Furthermore, sufficient storage for the torrent of video, audio and email that will be downloaded, managed and uploaded from a central hub is no small matter. There is also the issue of more cautious consumer spending, as well as the replacement of electronic staples, such as televisions and media playback devices.



To put that in perspective, YouTube utilizes about as much bandwidth as all Internet use required in 2000. Online video viewing will grow about 30% this year. ComScore reports that domestic Internet users are viewing more than 9 billion videos monthly. Just think how fast those user numbers would multiply if consumers could afford to interact with their video, communications and audio on a revolutionized home TV.

In recent months, TiVo has sought to reinvent itself as an all-purpose interface to help fill this nagging marketplace void. Among other things, TiVo has added Internet connections allowing Net movies and music to be downloaded to its digital recorder, added the Photobucket and Google photo-sharing sites and worked with marketers to preserve the value of their advertising and consumer connection.

While TiVo's biggest challenge may be changing the consumer and industry perception that it is morphing into a more advanced digital hub, it is admirably striving to succeed where the swaggering Apple TV has failed.

Forrester analyst James McQuivey recently noted that proprietary set-top boxes are a dead end. "TiVo is the best proprietary set-top box on the market, yet in all of its versions, it only attracts 1.7 million subscribers. ... There's little reason to believe that the Apple TV (with less than 400,000 in use) or the newly released VUDU pay-per-view box can catch up or surpass TiVo," McQuivey said. "We see satellite, cable and telco providers in the best position to put millions of these boxes into consumers' homes, even if it takes until 2009 for them to dare to add Web video."

The online TV market and promise of an IP TV hub will remain up for grabs as long as Apple and others continue down their disparate paths. Indeed, Bernstein Research analyst Toni Sacconaghi has captured a general sense of frustration of why a definitive IP TV home hub remains elusive. "Most of the IT vendors have blown it, failing to capitalize on the emerging digital home opportunities. The notable exception is Apple, which has a meaningful potential opportunity to morph Apple TV into the media hub and center of our digital home that we have all been waiting for."

He estimates it may take another three years before hardware manufacturers are able to bridge the TV and the PC, and traditional and IP video, in a more meaningful, cost-effective way. By 2010, the digital home should drive $272 billion in revenues. Even with more than half of all U.S households broadband accessible--and most have wireless networks--manufacturers of PCs, cable set-top boxes, video game consoles, digital music systems and media extenders have barely gotten their foot in the door.

It is too soon to know who will dominate the home hub. Given the early, enthusiastic response to streaming video and the entrenched place television has in most homes, it is safe to assume that the digital revolution eventually will be televised.

Despite the proliferation of mobile phones, the universal third screen, the functionality of the Internet-connected PC and the popularity of video game consoles, the TV screen is the only place where they all come together in a constructive, lucrative way. And it's yet to be conquered.

The promise of a multimedia in-home TV hub is strewn in bits and pieces across the digital landscape. It is in devices such as TiVo and Slingbox, cable and satellite operators' digital set-top boxes, and hardware from various tech giants. Meanwhile, the massive HD flat-screen TVs selling like hotcakes are quietly waiting for a full-blown invasion that places social networking, email and e-commerce on par with network television, theatrical films and video games. The mass market is ready for a coordinated interactive assault on the living room.

While traditional television is not dead yet, it is about to become part of a partnership to funnel video, audio, text and transactions in and out of the home, via digital devices and platforms. Only then will the foundation for this digital convergence be complete.

The buildup has seen the growth of television consumption in the form of TV content and advertising on all interconnected devices, and vice versa, extending from the home TV to cell phones, PCs, iPods and other Internet-enabled devices. While families watch an average 57 hours of television weekly in various places, they also spend considerable time communicating and transacting on the Internet. When all interactive activity moves through a central home hub at a price point that the masses will embrace, the digital revolution will take a giant leap forward.

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