At MacWorld 1997 Bill Gates appears to broker a deal to let Apple survive. At MacWorld 2005, Jobs announces a deal with Sony President Kunitake Ando to make 2005 the year of HDTV.
It was the summer of 1997, and the prodigal son had just returned from exile. The company that he and Steve Wozniak had created in a Silicon Valley garage was thought to be dead … again.
Apple Computer was caught in a downward spiral, another apparent victim of Bill Gates' relentless efforts to dominate the future of personal and home entertainment computing. With a virtual monopoly on the PC business, Gates had set his eyes on a new target — the TV. The TV was the exclusive turf of the consumer electronics (CE) industry — an industry now dominated by Japanese and European companies.
Early in 1997, the FCC adopted the Advanced Television Systems Committee (ATSC) standard for terrestrial digital television broadcasts. That same year Microsoft went to NAB telling broadcasters that it had a better idea for digital television. The company announced the acquisition of Web TV and the formation of the DTV Team, with several PC industry partners, including Intel.
Broadcasters were not impressed with either the FCC decision or the DTV Team approach. By the summer of 1997, they were putting pressure on Congress to take the teeth out of the DTV transition timetable, which was advanced by the FCC.
By early that fall, Congress would render the timetable meaningless as it attached the now infamous 85 percent rule to the 1997 Balanced Budget Act.
Steve Jobs stood below a massive standard definition screen as he delivered his Macworld keynote in the summer of 1997, trying to reassure the Mac faithful that all was not lost. The PowerPoint presentation on the screen was replaced with a larger-than-life image of Bill Gates, looking very much like Big Brother, as portrayed in the classic Apple 1984 Super Bowl commercial that launched the Macintosh. Gates glared down at Jobs; the crowd groaned.
Jobs announced that Microsoft was making a $700 million investment in Apple and a commitment to keep supporting the Mac platform. The investment would help Apple turn the corner and would assure the world that Microsoft would not pull the rug out from what was left of the company.
2005: The year of HDTV
Gates built his empire by following the lead of Apple and gobbling up virtually every competitor. But could he lead the PC industry in an all-out assault on a turf dominated by the CE industry?
Bill Gates has appeared at CES every year since Microsoft announced its intentions to put a PC in the family room.
Each year, Gates updates Microsoft's latest vision of the emerging digital lifestyle. Last year, he announced the software underpinnings for the Microsoft Media Center; this year, Media Center PCs were vying for the attention of other CES exhibitors and attendees.
Apple and Sony are joining forces through products like the Sony HDV camcorder and Apple iMac.
The concept of a PC as a media hub, PVR and DTV tuner was heavily promoted at this year's CES, but it took a back seat to the big star of the show — HDTV.
During the past year, HDTV sales in the United States passed an important tipping point. According to the Consumer Electronics Association (CEA), more than 7 percent of U.S. homes now have an HD-capable display. Seven percent penetration for any CE product has typically been used as a benchmark to indicate that sales are about to take off. CEA Market Research projected that 6.97 million DTV units would be sold in 2004. (A final sales figure for the year was not available at the time when this was written.) This research projects that 10.77 million HD displays will be sold in 2005, 16.77 million in 2006, 23.25 million in 2007 and 27.05 million in 2008.
HDTV dominated the exhibits at CES as the traditional consumer electronics (CE) vendors tried to upstage one another with the biggest LCD or plasma panels. Meanwhile, virtually unknown manufacturers in China and other emerging nations introduced low-cost LCD panels. Competition from these low-cost competitors has been a significant factor in the rush to develop HD-DVD, as profit margins for the current generation of SD-DVD players have vaporized.
DIRECTV used the CES platform to announce that it will use MPEG-4 part 10 video compression (H.264) to launch local-into-local HDTV service in the nation's top 12 markets later this year. Several weeks later, Echostar, which operates the Dish Network DBS service, bought the rights to a satellite and additional orbital slots owned by Cablevision's ill-fated VOOM HDTV satellite service. It is likely that some of these assets will be used to deliver local HDTV signals to Dish subscribers. DIRECTV also announced that it would begin to offer a homegrown PVR service to subscribers; the company will continue to support the TiVo PVR service, which it has offered for several years, but this move is likely to undermine the largest deployment of TiVo PVRs to date.
At CES, TiVo announced a major change in direction, seeking to compete head-to-head with the set-top boxes and PVRs being deployed by cable systems nationwide. TiVo is planning to offer a digital cable-ready set-top box with multiple tuners, capable of recording HDTV programming. Several weeks after CES, TiVo decided to compete with Comcast, rather than working with it.
The “other” CE show
How to get HDTV content into the homes of consumers continues to be the subject of intense debate and inter-industry squabbling. It is becoming increasingly clear that DTV broadcasts are not very high on the list of alternatives, at least from the perspective of the CEA and its members. The CEA released a new HDTV Buyers Guide, which provides a good overview of what the marketplace is really doing. (See the Web links on page 16.) It also announced a new HDTV brochure co-produced with STARZ!.
Even as CES was drawing more than 140,000 attendees to Las Vegas, there was an interesting undercurrent at work. Many analysts noted the absence of one company at CES — Apple. Analysts were casting a nervous eye to the west, where Steve Jobs was preparing to deliver his next MacWorld keynote. Jobs opened the keynote with an interesting comment: This would be the first MacWorld keynote delivered using HDTV projection. Later he claimed that 2005 will be “the year of HDTV,” as he announced a variety of initiatives by Apple to bring HDTV to the masses.
One of those initiatives is support for H.264, the new video compression codec from MPEG and the ITU. OS-X 10.4 and QuickTime 7.0, which are likely to be released in time for this year's NAB, will support H.264 for applications that span the range from creating and delivering video to cell phones, to that big HDTV plasma panel hanging on the wall.
To illustrate one of these new initiatives, Jobs invited the president of Sony, Kunitake Ando to the stage. Jobs announced that Apple was working with Sony to support Sony's consumer HDV format.
The iLife application suite ships with every Macintosh. Along with iMovie, it includes iTunes, iPhoto, iDVD and Garage Band. These applications turn a Mac into a digital media hub, supporting the sharing of your digital media content between computers and portable media players.
As Ando spoke, Jobs was recording his comments with the Sony HDV camcorder that Apple will sell in its online and brick and mortar stores. The scene spoke volumes — just as the image of Gates glaring down upon Jobs had done some seven years earlier. This time the role reversal was not lost on the analysts. Apple now dominates the music player market that Sony created.
But it was not just the delivery devices that Ando was seemingly in awe of. Ando praised Apple's software and the way that it integrates a variety of devices and services to create a new infrastructure for selling and enjoying music. And he hinted at future opportunities for the companies to work together, as they will do with HDV. In return, Jobs expressed enthusiasm for the Blue-Ray DVD format, which he wants to integrate with the Apple product line.
Then Jobs introduced the Mac Mini. This computer is the size of an external drive enclosure, yet the tiny box is large enough to include a 40GB or 80GB hard drive and optional wireless networking, Bluetooth for local peripherals and WiFi for network connections. It also includes a modem, 10/100Mb/s Ethernet, USB 2.0 and Firewire (IEEE-1394). But the Mac Mini is missing three traditional PC components: the display, keyboard and mouse. Apple aims the Mini at traditional PC users who have resisted buying a Mac because of the perceived higher cost. The strategy assumes that PC owners can use their existing display, keyboard and mouse.
One feature that really sets the Mini apart from the low-cost PCs is video and graphics support. The mini includes an ATI Radion 9200 graphics chip with 32MB of dedicated graphics RAM. And it offers both VGA and DVI outputs that can drive displays with more than 2 million pixels, like the Apple 23in Cinema Display — or your new HDTV or LCD panel.
The DVD playback capabilities rival current DVD players that scale the output up to HD resolution.
Could Jobs be thinking about more than just inducing a few PC enthusiasts to switch to the Mac? He claims not to be interested in the Media Center concept, noting that the cable industry is a monopoly. However, he is also famous for misleading analysts.
Robert X. Cringley, the technology guru at PBS, speculates that the Mac Mini is all about movies. (See the Web links on page 16.)
I agree with Jobs that 2005 will be the year of HDTV, at least for Apple. Will it also be the year that broadcasters wake up and smell the bits? Producing HDTV content can no longer be used as an excuse now that viewers can acquire and edit HD for less than $10,000.
Web links
Craig Birkmaier is a technology consultant at Pcube labs, and he hosts and moderates the OpenDTV Forum.
2005 HDTV Winter Guide
www.ce.org/publications/books_references/dtv_guide/HDTV_Guide_Winter_05.pdf
CEA/STARZ! Brochure
www.ce.org/shared_files/resources/HDTV Brochure_2005final.pdf
December 2004 Download: “Will your next PC be an affordable DTV?”
http://broadcastengineering.com/magbroadcasting_next_pc_affordable/index.html
Robert X. Cringley: “Is the Mini about Movies?”
www.pbs.org/cringely/pulpit/pulpit20050120.html
Send questions and comments to:cbirmaier@primediabusiness.com
