Tech firms focus on TV

Guess what? The tube is the centerpiece of home entertainment, after all.

Ever since Edward R. Murrow and Ed Sullivan were doing their thing in black and white, the living room television has been the centerpiece of home entertainment.

Then, somewhere along the way, a lot of folks in the high-tech industry got it into their heads that families should gather around the PC to watch their favorite TV programs.

Guess what? The tube still rules. So it's little surprise that the tech industry, led in a most unlikely way by computer networking giant Cisco Systems, is looking to the TV to finally, once and for all, get out of the home office and into the living room.

On Nov. 18, Cisco announced the $7 billion acquisition of video set-top box maker Scientific-Atlanta. Microsoft has a deep home entertainment strategy built around the TV. And Apple Computer watchers speculate that Steve Jobs & Co. are preparing a new TV-centric product. What exactly that product is, or whether it even really exists, is still a mystery.

"For a lot of companies like Cisco and Microsoft, growth opportunities in their traditional markets may be diminishing," said Joe Laszlo, an analyst with Jupiter Research. "But home entertainment is one of the few places left that will grow in the future. And the TV is a centerpiece of that."

For a lot of companies like Cisco and Microsoft, growth opportunities in their traditional markets may be diminishing.
--Joe Laszlo,

Focusing on the TV as the cornerstone to a home entertainment strategy seems like a no-brainer for technology companies, considering nearly 99 percent of all households in America have a TV set, and most often more than one. On average, American households spend between three and seven hours per day watching television.

By comparison, 55 percent of American homes had a Web-connected PC in 2003, according to U.S. Census data. That's more than triple 1997's total, but still a long way from TV's home penetration.

"TV watching is one of the few activities that most people spend time doing," said Albert Lin, an analyst with American Technologies Research. "It has tremendous mass market appeal."

But the TV market is gearing up for big change as more and more shows and movies are digitized, and as new competitors enter the market. Telephone companies like Verizon Communications and AT&T (formerly SBC Communications), for example, are building new networks to deliver TV service.

Internet companies such as America Online, Google and Yahoo are also getting into the video market. On Tuesday, AOL announced it is funding a start-up called Brightcove, which helps programmers syndicate shows across the Web and collect money from it. Content providers like CBS are also seeking out alternative distribution channels for their shows. CBS recently said it was talking to both Google and Yahoo about helping it distribute some of its TV shows, such as episodes from the "CSI" franchise, across the Internet. Google and Yahoo have both been dabbling in video.

"It's gotten so cheap to deliver video over a network using IP (Internet protocol) that anyone can do it," Lin said. "The biggest expense is getting the rights to the content."

TV is changing in other ways, too. Viewers are using digital video recording services, such as TiVo, that allow people to record and store TV shows and movies and watch them at a later time. Thanks to cable operators, which are now offering similar digital video recorder services, the trend is hitting the mainstream.

But once people have one DVR, they'll want it for every room there's a TV--or so the gadget-happy theory goes. This means that devices are needed to network or shuttle video around the house to different TVs in different rooms.

Tech gets in the act
That's where executives at companies like Cisco, Microsoft and Apple believe they can play a role. Cisco and Microsoft are helping the phone companies and cable operators build networks that can deliver more interactive TV over an Internet protocol network. They're also in the home, helping users view what they can already get on their PCs on their TVs.

"There used to be talk that all entertainment, including video, would converge onto the PC," said Laszlo. "But I think now we're seeing that clearly isn't happening. It's all about bridging the gap between your PC and the TV, so that you can watch TV shows and movies streamed over the Internet on your TV."

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