Monday, March 22, 2004

The new definition of "cable-ready" televisions

BusinessWeek Online has an article describing the new generation of "cable-ready" televisions. The terminology is interesting because I remember when televisions were advertised as "cable-ready" as set-top boxes were in their infancy and cable service was nowhere near as pervasive as it is now. In this case, however, "cable-ready" is being used to describe TV's that have cable tuners built into them that are activated with a card that is mailed to you by the cable company.

The advantage for the cable companies is obvious -- a card management system is much easier than trying to manage and stock set-top boxes. Additionally, according to the article, the loss rate (i.e., the number of set-top boxes not returned when subscription is terminated) runs about 30%.

Many of you that are like me and receive new DirecTV cards by mail 2-3 times per year are very familiar with this card process. Granted the cards are designed to be inserted into the DirecTV set-top boxes, but you could certainly envision the same process with the only difference being that you put the card into a slot on the side of your TV.

What does this mean for the set-top manufacturers? Well, this seems to be what Andrew Grove would refer to as a "strategic inflection point" for the industry. The article does say that there will probably be a market for the premium set-top boxes that provide TiVo-type service combines with HD decoders and other bells and whistles. However, set top manufacturing giant Motorola is already pushing into the consumer electronics market with home theatre equipment and is expected to provide its own line of "cable-ready TV's."

I would argue that this change from set-top boxes to card-based access is exactly the kind of change that will allow home media centers to firmly take hold in the home. Why use a premium set-top box with your TV when you could have a full-featured that can perform all of the premium set-top box functions plus give you all the computer functions that you want? LCD TV's increasingly include inputs for direct-from-PC cables, support picture-in-picture functions between TV and computer signals, and media center systems increasingly are manufactured and encased to resemble home theatre components. Consider also that next-generation video game systems are expected to be more of home media centers than strict video consoles -- rumors regarding the Playstation 3 and Xbox 2 seem to confirm that both devices will have the ability to act as home media centers and/or act as part of home media networks.

One of the interesting DirecTV problems with card-based access is that if you get DirecTV to waive your need for a land-based phone line (this has to be an increasingly bigger problem for DirecTV as more people choose cell phones as their only phones), you could theoretically take your activated card for, say, NHL Center Ice to your favorite bar, pop it into the bar's receiver, and everyone at the bar could watch the game. I wonder what kind of controls the cable companies are building in to prevent these types of actions?

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