The New York Times’ Brad Stone fell prey to a common occurrence at this year’s CES show: vendor pitch intoxication. He drank in the impressive demos by set-top tech suppliers Motorola, Scientifc Atlanta, Tivo and Digeo and the more he drank, the better all their products looked to him.
Stone has this piece today about how boring old cable set-top boxes are going to have to give way to newer, glitzier models that come equipped with all kinds of bells and whistles such as high-speed modems, big hard drives and advanced picture-in-picture capabilities. Consumers just aren’t going to accept the crappy boxes with crappy software that cable operators fob off onto them, all the vendors told Stone, because Tivo’s got a new HD box and Apple’s iTV unit, Apple TV, will make them all hunger for the best stuff, blah, blah, blah.
“Set-top boxes are becoming the central piece of equipment in the home for accessing entertainment and information,” said Joshua Goldman, chief executive of Akimbo, a Silicon Valley start-up trying to bring programming to the TV over the Internet. “Consumers will buy their own device if they feel like they are not getting the services they want from their television operators.”
Oh how I wish I had a buck for every time I heard this pitch, for every time I sat through yet another eye-popping demonstration by yet another vendor who had a better set-top technology for cable operators — and that was in the 1990s. And yet today, consumers still have cheap boxes with bad functionality.
Why? Because great set-top boxes are expensive, and worse, they represent capital costs for cable companies, which eat into an important financial metric called free cash flow. Moreover, although consumers like high-end boxes, these costly devices don’t deliver services that generate enough additional revenue to justify their expense. It’s hard to charge for a better interactive program guide, it’s hard to charge for picture-in-picture.
Stone cites a recent FCC decision that forces cable operators to make their set-tops work with any manufacturers’ devices, even those not made by the industry’s top two vendors, no later than July 1 of this year. That mandate, which has its origins in the 1996 Telecom Act, forces cable companies to offer set-tops to new customers which have separable conditional access, or security, technology in the form of cards, CableCards, to be precise.
Although a step in the right direction toward allowing any consumer electronics makers to sell cable set-tops — with the operator in control of only the security technology, in essence — don’t look for consumers to rush out and buy new boxes after July 1. Any set-tops that aren’t picked by cable operators won’t work that well for a variety of reasons, and how many consumers, really, yearn to buy cable set-tops?
So cable operators know that they’ve got plenty of time to upgrade their boxes and they’re not going to rush around spending scads of capital on new set-tops or new set-top technology any time soon. But, if they were so inclined, those cool demos by Motorola, Cisco, Diego, etc., would surely turn their heads.
Cynthia Brumfield at 9:30 AM|Comments(0)
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