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September 2, 2010

Digital Convergence At Home

The media convergence is happening simultaneously as a consumer driven and business driven processes. It means that there are both plenty of technologically advanced digital content solutions pushing to markets, as well as a lot of new user needs that are not satisfied. The opportunity lies in places, where those two meet in mutually fulfilling way.

Most of the time it feels like there are technologies that do not find buyers. Or there are user needs that cannot be solved easily with anything there is available of the shelf. On top of this there are the eager salesmen that sell solutions to buyers who really do not know what they exactly need. It is quite obvious that the content and technology must converge in user friendly manner, but who is in the right position to do it completely.

There is a theory that the digital convergence solutions succeed if they manage to combine ease-of-use, interoperability and convenience into right package. The value addition part is the interoperability. For example the Apple application store follows this logic. The iPhone is only as good as the users rate it. Currently the touch screen seems to be still the big thing. Eventually there will be the next thing, which replaces the high end device user experience. Thus, the value of the device is the usage value of what is the cool thing. Same way the content is only as valuable as the price people are willing to sacrifice to it, e.g. the value of one song or a movie. The users are not willing to pay more, but they might be ready to purchase more if they are kept in close contact. Thus, the application store is the most important application as it allows people to browse and try-out new things. If they find something interesting one time, they will return and try something else. It is only possible to sell customer more drinks, when he is still in the pub.

The systemic value at home is a totally different ball game, now that TV is no longer the sole home media king. There are number of different devices for the content and one must buy content for each independently. Just think about DVD players, game consoles, digital music players, etc. For each there are different ways to get the content, they are often used in different parts of home and different ways. All of them have their unique user experience. A few years back the living room was lifted as the key battleground for digital content. In truth, it really was only for control of the living room media applications. In the kitchen there will be another battle and the war will continue through the house into mysterious places like sauna.

The digital media convergence at home will require solutions that focus on the full content usage. In this game the key is not a single device, but the interoperability between the devices. There are technologies to offer this, but how one sells UPnP or DLNA Compatibility? And how those increase the systemic value?

With the new Apple TV launch Apple is trying to build a stronghold at home. Their products and services work in unison creating more value together than the sum of the independent offering. The Apple TV device is a simple device that allows content to be streamed from iTunes Store or from user's iTunes server. You can start viewing a movie in an iPhone and when you enter the living room you can stream the rest of the movie to the Apple TV with a simple click. Nice and easy, if you are happy with the use cases Apple has selected for you and you are willing to buy all Apple house.

Who's in a position to build a heterogeneous ecosystem for the home providing the user experience required for this to take up? Maybe Google TV will create an ecosystem similar to Android for home. They don't have the retail channel nor track record in innovative consumer electronics designs. We shouldn’t underestimate the broadband service providers either. They already have a customer relationship with the consumer and a presence at home.