Out of the Box

Sirius and XM have convinced the Department of Justice that its merger won’t create a monopoly in the radio, or more broadly, music playback, space. While the FCC is expected to follow suit with the DoJ, there is a rush of parties that are looking to add terms and conditions to the merger. Censorship on satellite radio? What would be the point of a premium alternative to terrestrial?

It’s certainly true that there are far more options available for high-quality digital music playback since the time that XM started broadcasting from space. The iPod is frequently brought up as a competitor, but I’ve never really thought of it as a major one. First, the iPod accelerated its move into the vehicle rather late in its rise to popularity and many of the solutions are primitive or awkward.

I’suspect that I, like many MP3 player owners, have music on their players to which they’ve never listened. Mostly, though, particularly for Apple’s ecosystem that has never been as aggressive about music discovery as, say, Rhapsody, iPods are about playing back what you have, not what you don’t. And keeping them fresh requires round-trips between the house and car. So, what satellites really buy the companies better than any competing technology today (save terrestrial radio, which was around at its launch) is direct and unfettered access to the vehicle

Wireless technologies such as 4G and WiMAX have the potential to present a credible no-hassle alternative to satellite radio, but the cost structures don’t support the infrastructure required to deliver it for the foreseeable future. One could argue that they didn’t for XM or Sirius, either. But with a reduced customer acquisition marketing burden, their expenses should become more manageable. In the meantime, the Slacker Portable satellite add-on looks like it will be promising alternative when it arrives.

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There’s a pretty exciting report coming from the Financial Times that Apple is negotiating with the major music record labels to build in access to their catalogs into the price of the device. Such a move would be consistent with rumors of an Apple DVR in that it would show that Apple is intent on keeping the value on its hardware products, the roots of the company. As many have speculated, while Apple has sold over four billion songs, the iTunes store hasn’t been a major profit center.

According to the FT, the labels want $100 per device, which would be prohibitive for where popular models such as the iPod nano are today. Also, I’m not thrilled with the idea of the license being tied to a device. That seems like a step backward from the trend of DRM-free music sales; even DRM tracks can be used on an unlimited number of iPods.. Nevertheless, if Apple (or any other company, for that matter) and the labels can pull it together, it would represent a digital music renaissance, taking us full-circle back to the early days of “free” digital music and the explosion in discovery that went along with it.

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Recent Apple patents showing a flip-design iPhone and a DVR that might be able to exchange guide data with an iPhone (as well as give talk show hosts really bad haircuts) remind us that, while Apple has shared technology (operating systems, video and graphics support, iTunes support) among its entrants in each of the “three-screen” products — Mac, iPhone/iPod, and Apple TV, there really hasn’t been that much active collaboration among them at this point outside of being able to start a TV show or movie on one device and finish it on another (a cool feature, to be sure).

It’s fine for Apple to move slowly here. Consumers don’t buy “synergy”, they buy products. But just as I’ve credited the Apple store with providing an environment for letting consumers experience the iPod and expose the iPhone (particularly during the holiday season), Apple’s retail presence could make some of these difficult home networking concepts more palatable. The living room is definitely the weakest link and while the DVR market has been an extremely tough not to crack, Apple TV remains Apple’s weakest link in the chain.

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Today, Pandigital, one of the most successful digital photo frame vendors, takes the wraps off a new display product aimed at the kitchen. The kitchen is often an activity hub of the home, but limited progress has been made turning it into a digital hub. Nonetheless, that hasn’t been for lack of trying, particularly for Internet appliances. 3Com’s ill-fated (and perhaps just simply ill) Audrey was targeted at the kitchen, as were a few incarnations of the pricey Icebox device, which integrated a television, DVD player, and Web browser along with a washable keyboard. The PC most explicitly designed for use in the kitchen today is the HP TouchSmart PC.

There have also been a few specialized grocery list organizers and simple digital reminders, such as the Simpliciti Aurora, the inexpensive Jenda, the even more recent SmartShopper, and the imminent Audiovox Digital Message Centers. Like the Audiovox product, the Pandigital Kitchen HDTV/Digital Cookbook/Digital Photo Frame (yes, that’s its real name), includes a digital photo frame, reflecting Pandigital’s main business. And like the Icebox, it includes a TV (albeit a digital one). There aren’t may details about the digital cookbook part.

The 15″ screen with 512 MB of RAM will cost $399 whan it’s released in June. The TV will support 720p output. The specs say it will be able to display pictures from Picasa Web so there is probably some network connectivity. At $399, it will be a relatively niche product, but Pandigital will try to cover the decor bases by offering black, white and stainless finishes for this unique hybrid.

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Yesterday Slacker released a firmware update that addresses some of the glitches I described in my post yesterday, including the WPA password key problem and some stuttering I was occasionally hearing twoard the beginning of songs (anathema for flash device). The firmware upgrade was transparent and the Portable now automatically connects to the last access point used, which is the way it should be. By the way, unllke the Zune, the Slacker Portable can sync over Wi-Fi even when it is running on batteries.

However, I’d still like to see better status reporting on the home screen (or maybe even in the less prominent About screen) when a sync is complete because clicking “Connect” to see the status starts a sync again.

Glitches aside, it’s worth noting that the Slacker Portable provides a positive and unique portable music experience, picking up on some of the best aspects of last year’s innovative Sansa Connect, which unfortunately was tied to a premium music service that is slated to be shut down.

Slacker’s PR team also tells me that the Portable’s battery is indeed removable by inserting a pin into what looks like a reset hole.

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This weekend I had some time to check out the Slacker Portable, the device component of its free-tiered streaming music service. I’ve got more pictures after the break. Slacker describes the device simply as a “personal radio.” I was never fond of the “personal video recorder” term for describing devices like TiVo, but at least this has no “digital” or “Internet” techie nomenclature.

Some first impressions:

• Immediate out of the box experience is very good. Since Slacker knows the details of your account, they can populate the device with your custom stations. Unpack and press play (well, sort of, since there is actually no “Play” button on the device, just a “Pause” button that does double-duty).
• On the other hand, the first sync attempt failed without an error message. The new station that I added appeared on the opening menu, but there was no music available in it. A follow-up attempt closer to my access point worked just fine, except that the Portable isn’t remembering my network access key, which is quite annoying.

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FT.com is reporting that Sony is talking with Microsoft about the possibility of Blu-ray drives on the Xbox 360. This could come in two forms, of course — a new SKU with an integrated Blu-ray drive or an external drive similar to the one Microsoft offered for HD DVD. The case is tough for either one, though.

If Microsoft thought there was value in adding a high-definition or high-capacity disc format to the 360, it had a choice of two during its development before Microsoft had kicked HD DVD evangelism into high-gear. Of course, after Microsoft did that, it still didn’t add an internal HD DVD drive to the 360, citing concern about not forcing such a drive on consumers. Especially now, with a significant title library out there, it doesn’t make any sense to add cost to a home console. The 360 is clearly competitive as is.

Then there’s the external drive scenario. It made more sense for Microsoft to offer an external drive when there wasn’t much choice for HD DVD drives at retail. Microsoft was able to deliver a low-priced option by piggybacking onto the console. While I’m sure an add-on Blu-ray drive for the 360 would cost less than the standalone players out there, there are many more companies offering Blu-ray players, and now that there is no direct format rivalry, the number is bound to increase while the average prices decrease, further removing the incentive. Without an evangelism imperative, Microsoft can now focus on other means of getting high-definition video to its game console.

Are there any Xbox 360 owners out there who want an external Blu-ray drive for their console?

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Could Toshiba become the most progressive consumer electronics company when it comes to digital distribution?

As I and others have noted, HD DVD was never the primary factor in slowing the adoption of Blu-ray. According to NPD’s research, satisfaction with existing DVD players was the most cited reason among those who had no plans to purchase a high-definition disc player when we surveyed consumers last year. Therefore, the end of HD DVD has not meant a free pass for Blu-ray.

In an interview with the WSJ, Toshiba’s Atsutoshi Nishida points out the value of a diversified corporate portfolio, noting that HD DVD was but one of 45 strategic product groups within the electronics conglomerate. He also divulges plans to stay or become relevant in the twin forces squeezing Blu-ray from the past (upconverting DVDs) and the future (digital downloads) to continue to compete indirectly with Blu-ray. Nishida points to wired technologies that are becoming wireless (a reference to HDMI?).

Of course, Toshiba’s PC strength to which Nishida refers is in notebooks, and most of the connectivity scenarios he discusses have been focused on stationery PCs (although that is changing). In any case, it seems clear that Toshiba will have more occasion to work closely with its HD DVD promotion partner Microsoft. The conspiracy theorists may have been wrong, but the format war has brought at least one major electronics company to look beyond the disc.

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In speaking with several reporters about the victory, I noted NPD’s research last year that found satisfaction with existing DVD players to be a more common reason for abstaining from the high-definition disc market than the format war with HD-DVD. As digital media gadfly and PR veteran par excellence Andy Marken notes, “The difference is now the BD folks won’t be able to blame Toshiba for holding back the success of high def disc sales.”

Blu-ray was the second must-win AV standards war after LCD vs. plasma that the company has won in the past few years by leveraging selective specification superiority — curious for the consumer electronics company that is so frequently identified with being a lifestyle brand. Blu-ray’s main technical difference vs. HD-DVD was that it offered 50 GB per disc as opposed to 30 GB.

Sony and the BDA didn’t make the capacity argument directly to consumers as much to the trade media, particularly before studio support became more relevant. However, Sony was the first company to proselytize 1080p or “full HD” to consumers, which has helped to give large-screen LCD the upper hand.

Further momentum behind BD can only help promote 1080p TVs (not that they seem to need much help). It will also be very interesting to see how much the standardization of Blu-ray now helps sell the PS3 after the PS3 was kind enough to do the same for Blu-ray since 2006. Sony’s content holdings may not have been enough to overcome the challenges of UMD as a movie format, but the virtually guaranteed support of Blu-ray by Sony Pictures was a validation of Sony’s integration of hardware and content. Of course, the equal loyalty of Disney and Fox was critical as well.

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Jeremy Toeman and Dave Zatz weighed in yesterday on the Netflix announcement that it will be partnering with LG on what it hopes will be the first of “100 Netflix-capable boxes” (putting its aspirational numbers significantly behind the thousand gPhones that Eric Schmidt is pursuing).

Jeremy notes the challenges of bringing a “fifth box” into the living room. It’s true that the standalone home network/broadband content access device has struggled for a number of reasons that I’ve explored in depth elsewhere. The alternative is easier said than done, though. Jeremy writes:

The “smart” marketing of the (rumored) $799 HD/Blu-Ray player will simply label it as having Netflix “built in” or something like that.

Right idea, wrong Trojan horse. The problem is that no amount of smart marketing will dramatically expand the market for a $799 dual-format high-def disc player, which is being hampered by nearly as many problems as Internet set-top boxes. There are standard-definition DVD players, of course, but that market has been completely commoditized.

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