The VCR is about to reel into the digital age.
At the U.S Consumer Electronics Show in Las Vegas, it's clear that traditional analog VCRs are passe. Now digital video servers and services for the home are all the rage, and two start-ups are "caching" in to challenge enhanced-television maker WebTV Networks.
Replay Networks and TiVoare showing off the digital age's answer to the VCR. The two firm's set-top boxes are equipped with extremely large hard drives that let consumers pause live TV shows while viewing them and that can search out particular kinds of shows and record them for later viewing.
The vision: so-called time-shifting. No longer will the TV's schedule rule the customer -- the customers will watch TV whenever they want.
"This is about making all television available all the time," said Jim Plant, director of marketing for Replay.
Although this may good news to consumers, it's not as good for WebTV Networks. The Microsoft subsidiary is best known as the maker of a box that allows you to surf the Internet on your television. But enhanced WebTV also throws in several features such as on-screen listings that enhance TV watching.
With their ability to combine computer smarts with the TV, the two new players could stunt the growth of WebTV.
TV services the winner
All three companies are headed in the same direction: The creation of a new interactive TV service.
WebTV definitely has the advantage of being already established. At the end of 1998, the company boasted 700,000 subscribers to its service, a feat that took almost three years and the deep pockets of Microsoft to help along.
And WebTV is not waiting for the little guys to catch up, either. On Thursday, the company announced a deal with digital-satellite-TV company EchoStar Communications to include the guts of the WebTV box in an EchoStar satellite receiver. The key piece of the new box: An 8GB hard drive that stores video and Internet data - similar to Replay and TiVo.
"I think what those guys are doing is great," said Perlman, "but it is still just a VCR. We are trying to put that feature into the whole enhanced-TV experience."
Simple values
TV-on-demand is the feature that consumers want the most, said Edward MacBeth, vice president of business development for TiVo. "Delivering better TV is such a mainstream feature that is has an enormous amount of value," he said.
TiVo unveiled a deal late last week similar to WebTV's EchoStar pact. The start up announced that it would work with DirecTV and Philips Electronics to build TiVo technology into a DirecTV satellite set-top box. The company expects to sell the box for $US499 with its service costing about $US10 a month.
Even WebTV admits that consumers may like simplicity better. "There is no question that what they are trying to do is easier for a salesperson to explain," admitted Perlman.
The network is the money
"The network is how we are going to make our money," said Replay's Plant. "We are not going to make a living selling set-top boxes."
All three companies like to think of their service as a portal to all TV content. "It's like Yahoo! meets television," said TiVo's MacBeth
Both TiVo and Replay are looking towards sponsorship deals and advertising to generate the lion's share of income. Also late last week, Replay announced a deal with E! Entertainment Television Networks to make E! content and recommendations available to ReplayTV's customers.
"The service itself is what makes TiVo interesting to the TV industry," said MacBeth. "And it is their interest that is making the box affordable."
Even WebTV is getting into the advertising act.
In mid-December, the company announced a banner-ad strategy that puts full-motion video behind ads -- click on the banner and a video commercial pops up.
As video servers catch on -- and viewers can fast forward over regular commercials -- such new methods of advertising will undoubtedly become more common.
ReplayTV and TiVo think that simple is best.
While they dicker over features, the companies agree where the profits will be had.
