The suddenly competitive realm of set-top video-on-demand
took a turn toward the skies this month. Microsoft's WebTV allied with EchoStar, and
start-up TiVo formalized a nationwide pact with DirecTV.
Both deals center on new set-top boxes that will put
gigabytes of storage directly in the path of
satellite transmission. The arrangement gives viewers new
options for downloading and retaining hours of video programs, while raising new
challenges to cable.
WebTV's deal with EchoStar's Dish Network goes
far beyond the alliance that WebTV struck with Scientific-Atlanta Inc. in December to put
Internet-surfing capability into digital-cable converters. The satellite pact includes Web
access via satellite, but, more important, it puts 3 GB of storage -- enough to hold at
least one or two movies -- into EchoStar's new set-top box.
It's the first step along the path that WebTV revealed
last year to include several-dozen hours of storage in set-top boxes.
Meanwhile, another new set-top-storage vendor -- Replay
Networks -- has unveiled its $699 set-top unit, which is also able to store up to 20 hours
of video. Replay doesn't have a digital satellite supplier (yet), but, like WebTV and
TiVo, it is also courting cable programmers for alliances to draw attention -- and, in
some cases, ad revenues -- to the new category.
Although some cable VOD advocates pooh-pooh the set-top
approach as merely "a next-generation VCR," the new high-capacity digital
devices may prove to be formidable competitors -- especially when married to high-capacity
delivery systems, either airborne or wired.
For WebTV, the deal starts with satellite delivery of
Internet access, with the return path supplied by telephone lines. But the real value of
the EchoStar deal is that it lets WebTV (and parent Microsoft) download vast digital
packages for set-top storage.
Eventually, that digital cornucopia could include
customized material sent overnight or via dedicated and compressed channels, ready for
playback with full VCR functionality whenever a customer wants to watch.
Indeed, Replay -- the newcomer without a satellite deal --
candidly proposes that its system could become the savior of cable pay-per-view, enabling
PPV customers to capture programs when they are transmitted, then to play shows back with
full pause and replay functionality -- in effect, customized VOD.
The satellite deals are handy launching pads, but TiVo and
the others are courting cable companies, too. And let's not overlook the investments
that Paul Allen's Vulcan Ventures has made in both TiVo and Replay. Although the
amounts have not been revealed, this is not merely a case of cautious Allen covering the
With Allen's recent purchase of Charter and Century
cable systems (and more to come?), there's an obvious and inbred migration path
available through the cable environment for one or both set-top VOD suppliers.
Cabal-sniffing conspiracy seekers believe that Allen still
consorts with his Microsoft cofounder, Bill Gates, suggesting that WebTV's agenda is
ultimately also tied into Vulcan's plans.
Of course, it's not all good news for TiVo, Replay and
WebTV. If the set-top-storage concept works, brand-name electronics makers such as Thomson
and Panasonic could swiftly plunge into the business.
That's why TiVo and Replay are hustling to line up
equipment-maker deals, assuring that their systems will find shelf space and branding --
and, in the process, perhaps set themselves up for acquisition.
TiVo and DirecTV have already lined up Philips as a set-top
equipment maker; Philips, Sony, Mitsubishi and others already make WebTV boxes. Replay
says it is close to a couple of consumer-electronics deals. They'd better hurry,
because none of the companies appears to have strong enough patent protection. If their
technology succeeds in the marketplace, other suppliers -- with bigger names -- could
swoop into the space.
Meanwhile, in the best arms-merchant tradition,
hard-disk-drive manufacturer Quantum Corp. supplies equipment to both TiVo and Replay; it
has also put money into both companies. (Another drive-maker, Seagate, is allied with
Quantum proudly acknowledges that it has introduced TiVo
and Replay to its computer and consumer-electronics clients, with an eye toward creating
new markets for its own products if the deals fall into place.
Quantum has given a brand name, "QuickView," to
its drives aimed at the consumer-electronics manufacturers, touting features such as
"instantaneous time-shifting," "broadcast pause" and "jump to
content" that are impossible in linear media such as videotape.
The three systems -- TiVo, Replay and WebTV -- have a few
distinctly different characteristics so far. For example, only TiVo has a real-time
slow-motion feature, and WebTV cannot yet pause live-TV transmissions. But those
differentiators will soon disappear, leaving the market to find other reasons to favor one
or another of these systems.
Most important, this HDD-based VOD paves the way for
nonvideo downloads, such as video games or other interactive video content, which may
benefit from the speed of set-top presence. Without the latency of a server-based
architecture, an entirely new range of content can bubble up.
TiVo, Replay and WebTV -- with others sure to come -- will
find that downloading digital content is more than just another data dump.
I-Way Patrol columnist Gary Arlen enjoys a daily download.
Weekly digest of streaming and OTT industry news
Thank you for signing up to Multichannel News. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.