CES 2007: Harbinger of Change

By Mike McGann
Posted Saturday, January 6, 2007

While there will be a number of interesting new technologies unveiled at this week’s Consumer Electronics Show, like Neosonik, the question on most people’s minds is going to be the fate of high definition DVD and whether the old mainline consumer electronics brands are going to be able to adapt to a new marketplace.

Clearly, consumers have spoken: less than 250,000 HD DVD or Blu Ray players have been sold — despite market projections of more than 750,000. As we have suggested on these pages, consumers aren’t willing to buy one format and get locked out of their favorite movies. And the low sales numbers finally have the attention of the knuckleheads responsible.

Two quasi solutions appear to be in the offing at CES: LG will introduce a new player that plays both Blu Ray and HD-DVD. All things considered, it’s not a bad idea, although the combo SACD/DVD-Audio players never really caught on. The problem is this: using both formats makes a player pretty expensive and doesn’t solve the issue of scarcity of the Blu Ray lasers, which has already hampered the launch of PlayStation3.

One other, and maybe more promising, option seems to be on the horizon: Total HD. This is a new disc format that will play in either kind of player, and on first blush seems like the best option. Because of the way the disc is made, it can’t also carry the normal DVD content (and can’t be used in regular DVD players as many of the HD-DVD and Blu Ray discs can) but it might be the kind of thing consumers will embrace.

While it appears Warner Home Video will support this format, the other studios need to get on board and support it, and quick. The need for High Def. DVD is a tough sell already for non-enthusiast consumers, but at least having one format will make it a bit more attractive. The major players in the industry need to move quickly toward a single format, whether it be Total HD or not, and do so quickly.

Another interesting trend is the changing of the guard in home video. While most of the old line companies are struggling through their transition to flat screen TVs, new comers such as Vizio, Olevia and Sylvania are exploding on the scene with inexpensive, yet well-made flat screen TVs, grabbing large hunks of marketshare. Already we’ve seen all of these companies push large screens through major price barriers in the lead up to CES, with product that performs just about as good, and sometimes better, than that sold by traditional brands. and while computer makers such as Hewlett-Packard and Dell have tried to move into the business, so far, it’s been pretty much a failure.

The good news is this: because of the new players and new pricing, flatscreens, plasma and LCD TVs, will continue to see explosive growth. Traditional CRT TVs are all but dead and you have to wonder whether rear-projection DLP and LCD TVs are going survive when 60-inch plasmas can now be had for less than $3,000.

The same things is happening in the retail market. Specialty retailers are getting gutted by Best Buy and Wal-Mart. Why? Price. Why buy a 23-inch Sony LCD HDTV for $999 at Tweeter when you can get a 37-inch set for the same price at Wal-Mart? I love the guys at Tweeter and have even bought product from them, but unless they can adopt more aggressive pricing, they will continue to lose marketshare. Speciality retailers used to be insulated because low-priced product was often not that good. But new makes such as Vizio have changed that equation, with value-priced gear that’s darn near as good, and sometimes better, than traditional brands.

Of course, more is changing than just the kinds of TVs we buy and where. We’re on the cusp of major changes in how we receive our programming. Already, iTunes and other online content providers (including the TV networks) are increasing the amount of programming on the Web. And while Microsoft’s Media Center hasn’t been a resounding success, it’s been adopted by a lot of people to record programming and bring Web video to the TV.

Just down the road, though, are a couple of other products: IPTV, which Microsoft and AT&T have rolled out in a handful of markets. This uses your internet connection to double as cable TV, and should, in theory make it easier to broaden channel offerings. Apple Computer will introduce a new device, codenamed ITV, at Macworld (which takes place at the same time as CES) which will, at minimum, connect to your home computer and allow you to put Web audio and video on your TV — I suspect it does more than that, as it appears to be designed to stack on top of Apple’s Mini computer and become a must-have piece for your home theater system (replacing your DVD player).

Expect some surprises, a few completely bogus announcements and some that are very intriguing. Watch also to see how the traditional players in home video respond to these incursions by upstarts — how they respond might well write the story of whether they survive and prosper or wither on the vine.