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Tech Industry

Net TVs falling by the wayside

Sharp and Mitsubishi are pulling out of the market, while Sanyo and NEC may be next to go.

    Amid the "convergence" craze that's merging the PC with TV, some products are beginning to fall by the wayside.

    Like the U.S. manufacturers that scaled back their PC-TV ambitions after poor sales, major Japanese electronics makers are abandoning the Net TV, big-screen televisions assembled with ready-made Internet access.

    Sharp and Mitsubishi have stopped producing Net TV models and will exit the market once inventory runs out, according to industry sources quoted the Nihon Keizai Shimbun. Rivals Sanyo and NEC have temporarily ceased manufacturing.

    Sharp has sold just 8 ,000 units in Japan in the last 18 months, while Mitsubishi has sold 7,500, according to the business daily. None of the four companies markets a Net TV in the United States.

    The failure of these companies to turn this hybrid box into a hot product will not be a first. The PC-TV, a straightforward joining of a PC with a big-screen, performance TV, failed to capture widespread U.S. consumer imagination. Major vendors Gateway and Compaq jumped into the market in 1997. Less than one year later, Compaq began edging away.

    The entire American PC-TV market went from sales of 7,000 units in 1996 to 10,000 last year, reports International Data Corporation (IDC). Gateway has enjoyed some success selling to the education and corporate-use markets, but demand will peak at 11,000 in 1999 before declining to 3,000 in 2002, IDC predicts.

    Both PC-TVs and Net TVs are priced beginning around $2,500. As late as January, however, Compaq's PC Theatre sold for upwards of $5,000.

    Price and basic consumer appeal have proven two of the biggest problems, according to Sean Kaldor, IDC's vice president for consumer research.

    PC-TVs and Net TVs (or enhanced TVs) "have always been oversized TVs, facing a tricky transition to digital TV, [and] always been at premium price points, well over the price of simply combining the two technologies," he said.

    Further, combining technologies that are advancing at different rates is problematic, Kaldor noted. Using the related example of putting a VCR into a TV chassis, Kaldor pointed out that VCRs break frequently, while TV technology is highly stable.

    High tech TVs also now face the problem of converting from analog to digital signals, while Internet technologies are rocketing ahead in unpredictable directions.

    "Fifteen years from now, when the Internet stops advancing from the rate it is now, then you could release a product with the Net integrated. But we're far away, and to get from here to there, we need to have these bridge products," Kaldor observed.

    Despite the dim demand for these fancy products, other convergence boxes show promise. Digital TV set-top boxes such as the WebTV models sold by Philips, Sony, Mitsubishi, and others seem to better match consumer demand, in Kaldor's eyes. Coming set-top boxes from Tele-Communications, Incorporated (TCI) and other cable companies could also do well. All of these devices are comparatively easy to understand and use, and are (or will be) priced beginning at $200.

    Another bright spot could be TV tuner cards. These add-in circuit boards allow computers to receive television signals. Last month's release of Microsoft's Windows 98 meant built-in software support for these devices for the first time, and shipments could reach 7.7 million units this year, according to IDC.