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The January 22, 2004 Issue Provided by System Dynamics Inc.
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CES 2004: The Future Is Here

South Hall at CES 2004 --> Click for larger pictureLast January, after CES 2003, we wrote "Everywhere we turned at CES we saw the influence of broadband, home networking and wireless. If those words immediately conjure up visions of PCs and Internet access, think again. This year they apply at least as much to audio and video entertainment and the ways in which users can get what they want, when and where they want it. Whether it's in the form of zapping HDTV pictures to flat screen displays, viewing recorded TV shows on screens in a different room, or cataloging, organizing and making all your music available around the home, companies were showing how to make it happen."

Fast forward to 2004 and the really good news at CES 2004 was the future is here: those concepts are turning into products that consumers can buy NOW. The industry has toned down the hyperbole and slideware and become more focused on reality and deliverables.

One of the really big stories of CES was that a growing set of companies are working to get music, photos and videos stored on PCs onto home stereos and TV sets. These Digital Media Adapters (DMAs) were so hot at this year's show that we cover them in a separate article, below.

Bill Gates: Microsoft Everywhere

At CES 2003, Gates talked about the transition to a more digital world and about devices, connectivity and services for consumers; he mentioned devices like watches, exercise bikes, sewing machines and magnets. Although we didn't hear about the sewing machines or exercise bikes in 2004, it seems like Microsoft has made significant strides toward embedding its software all the places that really count. Gates said: "We are developing software that's in the car, in the phone, of course in the PC, the set-top box, the watch. All the places where software can run, we want to make sure that we do the best we can to make that connect up and to make it seamless."

Specific announcements that made this tangible included:

  • SPOT watch from Fossil --> Click for larger pictureSPOT Watches--The MSN Direct network is the subscription service that connects people to the SPOT watches described in 2003. The watches have a wireless network receiver that uses a form of FM to connect a powerful computer for downloading software for new channels and ways to present information. The wireless network is in the 100 largest metro areas, and the watches from Fossil and Suunto are being rolled out now. Gates described how users can get information they care about, such as news, weather and (in the future) sports.
  • Portable Media Center--This is what comes after portable music players. Gates showed the Creative Zen Portable Media Center which will be available in 2H04; it will include an updated version of Windows Media Player that introduces a technology called SmartSynch. Supported media include music, photos and videos.
  • Windows Media Center Extender (MCX)--This is the next logical step after the Media Center PC and is Microsoft's version of a digital media adapter (see the article below). It hooks up to your television or AV equipment and connects back to the Media Center PC through a wired or wireless connection. Partners that will make it available during 2004 include Alienware, Dell, Gateway, HP and Samsung. Gateway and HP also have a set of Media Center ready televisions coming to the market. That means people can bring them home, plug the power in, "and the first time that you press the power button on the remote control to turn on your television it will find the home network", "find your Media Center PC" and bring up the digital entertainment interface. An Xbox Media Center Extender Kit, comprised of an Xbox DVD title and a separate remote control, was also announced; it searches for the Media Center PC on the network, starts a Media Center session and gives the person Media Center UI with access to their television and digital entertainment on their PC.
  • Windows Media Connect APIs--This technology is intended to enable seamless media transfer between Windows XP-based PCs and consumer electronics devices. It is designed so hardware manufacturers can develop devices such as Digital Media Receivers (DMRs), which have rich functionality for playing digital media files stored on personal computers over home networks. PC OEMs and consumer electronics device manufacturers including Arcadyan Technology Corp., Creative Labs, Dell, Mediabolic, PRISMIQ, Rockford, Roku, Simple Devices. and Toshiba announced their support. Of course what Gates didn't mention is that the technology supports Microsoft's Windows software, but not entertainment services using competing software such as RealNetworks' Rhapsody and Apple's iTunes Music Store.

(Sandy) The software I'm personally waiting for was discussed by Steve Drucker from Microsoft Research and concerns creating metadata for user-generated content. It filters your photos and videos and helps you organize them based on rich metadata and software, derived by a variety of means including face detection, indoor-outdoor detection, picture clustering by date taken, tools for simple keyword assignment, etc. The vision of being able to have tools to easily manage all of my digital photos had me hoping that the cycle from exploratory to released will not be toooo long; maybe the future isn't quite here yet after all.

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Paul Otellini: Intel and the Entertainment PC

What's Intel's next step when the PC growth curve flattens? Find an even bigger market for those chips--the consumer electronics market. It's the same path that companies like Microsoft and Dell and H-P and many others are following. At CES, Intel's President Paul Otellini spoke about his company's initiatives to move "from inside the computer to inside the home and consumer electronics products." "Our goal is to eliminate boundaries between electronic devices inside and outside the home and we're working with the PC and consumer electronics industries to make this a reality. For Intel in 2004, this effort will receive as much focus as the work we did last year to advance wireless technologies for mobile computing."

Just as Intel Capital was very vocal about putting money into wireless technologies in 2003, Intel announced that they have created a $200 million Digital Home Fund to invest in companies that can help Intel accelerate technology and content development to enhance and simplify the digital home experience. Intel has already has invested in a few "digital home" oriented companies, including BridgeCo, which designs low-cost chips for digital media adapters; Entropic, which designs chips for home networking over coaxial cables; and Musicmatch, which sells software for digital music.

Paul Otellini talked about Intel's new Consumer Electronics Group --> Click for larger pictureAccording to Otellini, Intel has formed a new Consumer Electronics Group (CEG) tasked with optimizing technologies for the CE market. It will oversee development of products such as the liquid crystal on silicon (LCOS) chip for large-screen projection TVs, and work with digital video camera makers, DVR manufacturers, display companies and mobile phone manufacturers to get Intel chips into their devices.

As part of moving from the PC to the TV (or from "the two foot to the ten foot experience", as Otellini put it) one of Intel's projects for the Digital Home is a device for consuming and managing digital content which they call the Entertainment PC. It is a slim PC connected to a television screen, controlled by a remote rather than a keyboard. It runs Windows XP Media Center Edition, acts as a digital media adapter and can serve as a wireless access point. The anticipated price point is around $800 and units are expected in mid-2004. Intel does not plan to build the EPC themselves, but will license the design to manufacturers. This follows the same path that Intel took to get digital media adapters into the market, and as indicated in our article below, that has really sparked innovation and new products in the industry.

Otellini's talk emphasized the importance of standards in enabling the sharing of content across multiple consumer devices. Intel is a founding member of the Digital Home Working Group (see below) which it supports in the goal to drive technology specifications for the benefit of consumers: "The development of industry standards in consumer electronics will enable more rapid innovation at lower cost -- the same positive impact that standards have had in the PC industry." To reinforce the message that Intel is involving entertainment content companies, Otellini played clips by a number of executives from Hollywood companies about standards and the work of DHWG. He also introduced Morgan Freeman who has his own film company and stated that by 2005 he expects the technology will be in place so that he would feel confident making a new film available for paid viewing over broadband at exactly the same time it opens in theaters. That would be a remarkable event.

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Shell HomeGenie

During CES we met with Robin Gaeta, general manager for Shell HomeGenie. Shell HomeGenie is a home management system targeted to the entry level buyer, just getting acquainted with home control and looking for simplicity and affordability. It builds upon the increasing number of consumers who have broadband access, since such access is a prerequisite for the service. It promises to let "the homeowner stay connected to his home, at anytime and from anywhere Internet access is available."

Although Shell Oil is not a company you would normally associate with home management, the Shell Consumer Division is trying to stretch the Shell brand into the home. For this product line they teamed with three information technology companies to develop the system: Motorola makes the residential gateway which is the communications hub of the system; ProSyst provides the OSGi software which enables the system; Xanboo creates Internet enabled devices and technology. Shell is in discussions with broadband service providers for creating business relationships around the product and its service.

Shell Home Genie Home Management System --> Click for larger pictureA starter kit consists of the residential gateway, a programmable thermostat, a wireless camera and a power switch and costs $799, including installation. The unit allows homeowners to remotely access most household heating and cooling systems through the web-enabled Shell HomeGenie Programmable Thermostat; to control lights and select appliances through the Shell HomeGenie Power Switch and permits monitoring of select areas in the home through the Shell HomeGenie Wireless Camera. Many new devices and sensors are expected to be added in the future. Shell has created an introductory flash virtual tour which shows the uses and capabilities.

There will be a $24.95 monthly fee associated with the services provided by ShellHomeGenie and the personal website assigned to the consumer. In addition to the ability to remotely access the programmable thermostat, wireless camera with motion sensor and power switch for controlling selected appliances and devices, the website includes featuring a communication package with personalized email account and calendar program; file organizer package for storing, managing and accessing your camera images and video from home or away; personal home page that provides “mini views” of your Shell HomeGenie services; local weather; and energy reports to help manage home energy usage.

We have several questions which we're discussing with Shell. These will help us better understand what market segments might use the product, and how it relates to other broadband products and applications in the home; we'll provide an update after we learn more. The product is expected to be available in March.

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