New Developments in the “Digital Lifestyle,” Part 1

Last March, I wrote in this space about the next evolutionary phase for the computer industry: the digital lifestyle. I covered ongoing efforts by industry giants to become the center — the hub — of the home network. Microsoft, AOL Time Warner, Sony, and Apple are all showing signs that they share the same vision, and the battle for supremacy is taking shape.

Because of events going on this week, it’s a good time to revisit this topic and see what progress has been made over the last year or so. The Consumer Electronics Show (CES) kicked off this week in Las Vegas, and Apple’s annual Macworld show got rolling Monday in San Francisco. So far, Microsoft has unveiled a number of new initiatives, announcing that DVD manufacturers would be supporting its Windows Media technology, debuting a tablet-like wireless computing device called the Mira, and introducing a new gizmo developed in partnership with Salton called the iCEBOX — which is expected to provide TV reception, play DVDs, offer high-speed Internet access, and even link to home security systems.

Before the MacWorld show, the Apple hype machine was in overdrive, and the company hasn’t disappointed. Unveiling the new flat-screen iMac at the end of his keynote address, CEO Steve Jobs declared: “This is the complete digital hub for the digital lifestyle.”

Since my deadline was actually on the eve of those two important keynotes, I’m going to divide this piece into two parts. The rumor mill isn’t buzzing about anything revolutionary from Sony and AOL Time Warner this week, so I’ll write about them first. In two weeks, I’ll be stealing Eric Picard‘s slot, and we’ll go on to talk about Microsoft and Apple, discussing the potential impact of their latest introductions.

The premise here, you’ll recall, is that whoever is at the center of the home network will be the gatekeeper for all digital communications to and from the house. As devices evolve, new advertising platforms may also emerge.

Let’s have a look at each company’s progress.

Sony

The PlayStation 2 (PS2) launch was probably the first consumer device that sparked media predictions of these digital lifestyle strategies.

When I wrote the original article last March, Sony really looked poised to be the leader here. The company has been producing solid Windows-based computers for many years, and the industrial design team is perhaps the best in the Windows world (though it has been severely outdone by Apple as of late in terms of elegant, smart, and beautiful design). Sony is a true cross-media conglomerate, featuring huge Hollywood studios and major record labels. Combine those media assets with the company’s extensive experience in manufacturing and marketing consumer electronics devices, and you’ve got a formidable force to be reckoned with.

But like many PC makers, Sony seems to be stumbling as of late. Its stock has fallen. The PS2 seems to have been marred by a late launch, and the gaming community seems to be paying more attention to Nintendo’s GameCube and the Xbox from Microsoft.

However, Sony has quietly launched a very interesting experiment recently. Two of the latest VAIO lines feature integrated television tuners and the capability to record direct to hard drive. This creates TiVo-like personal video recorder (PVR) functionality on a desktop PC. Sony has also achieved success with digital still cameras and camcorders recently, and the VAIO line could become a powerful audio/video hub.

Yet what I think is most interesting about the PVR-on-desktop-PC feature is that it seems counterintuitive. My guess — and I think a lot of industry analysts would agree here — is that people don’t want to watch TV on their PCs. And I’d bet that few people actually have their primary PC in the same room as their main TV. Every other player in this market seems to acknowledge this and is focused on delivering an experience that revolves around the TV. For example, AOLTV, TiVo, Wink, UltimateTV, and even Mira, Microsoft’s latest entry, which previewed at CES this week (we’ll talk more about Mira in Part 2).

The other intriguing piece of this puzzle is that Sony is the first computer maker to incorporate this functionality in a desktop PC. While other major media outlets quibble about digital rights management, Sony is moving forward.

Sony has other approaches as well. The company manufactures TiVo boxes, and even though the PS2 has stumbled slightly it may well become a key device in the Sony strategy.

AOL Time Warner

The effects of the merger are becoming quite apparent, particularly as they relate to several big Warner Brothers movie releases over the last year or so. The marketing machine was in high gear, and I continue to be surprised by the vast reach of this behemoth.

But it seems like AOL Time Warner may have been distracted by integration issues. The company has made a few deals related to its highly touted AOLAnywhere strategy, but very little has changed for consumers. The AOLTV platform has languished, with no significant enhancements since last March. Despite a deal with TiVo and rumors that the PVR functionality would be added to AOLTV, we’ve seen nothing actually become available.

AOL’s broadband service is a significant asset in this emerging realm. But, with Comcast’s recent acquisition of AT&T’s broadband business, it now has significant competition. The effects of the demise of Excite@Home are yet to be seen, but it looks as though Comcast will pick up the slack.

So What Does It Mean?

Basically, what we’ve got from AOL Time Warner and Sony is some small experiments. Of the four companies we are focusing on, these two have the greatest breadth of assets. And perhaps the nature of those multimedia conglomerates puts them in a position of strength — one in which they can afford to move a little slower than the competition.

The really exciting news will have just been released by Apple and Microsoft by the time you read this; and we will address those companies in two weeks. Stay tuned.

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