Sony Web Tv

New York--Will consumers soon be shouting, "I want my WebTV?" Sony and Philips certainly hope so. WebTV Networks, a year-old company started by three techies from Apple Computer, launched its TV-based on-line service last week, featuring set-top boxes from the two consumer electronics giants.

With other"convergence" products like Diba's information appliances, Apple's Pippin and Intel's Intercast already well under way, analysts warn that WebTV faces plenty of competition in an untried but potentially vast new market.

Formed in April 1995 by Steve Perlman, Bruce Leak and Phil Goldman, WebTV has developed a hardware reference standard as well as a software interface and browser for cruising the web. It includes a set-top box and remote, with optional wireless keyboard. The set-top box features a 33.6 kilobit-per-second modem, a 112MHz R4640 Orion MIPS RISC processor from Integrated Device Technologies, and a total of 5MB memory, including 2MB SGRAM, 1MB flash ROM, and 2MB Mask ROM. According to WebTV, the box provides D1-class video and CD quality sound, and is compatible with NSTC, PAL, SECAM and MPEG-1 and -2 audio. WebTV also supplied its patent-pending TVLens image enhancement technology, which is designed to eliminate onscreen "flicker."

Sony and Philips are the first announced licensees of the hardware standard. Both stated they plan to have products in stores by this fall. Although neither company would reveal target pricing, both companies indicated prices would be competitive for the consumer market, with Philips senior VP Ed Volkwein stating his Magnavox WebTV product would be aimed at the 40 million U.S. households that do not own and do not plan to own PCs. When asked about projected sales, Mr. Volkwein joked, "My number is huge," while Sony executive James Bonan added, "I'm going to say a lot."

With its licensees providing the hardware, WebTV Networks has positioned itself as essentially an Internet service provider. Users go on-line with one click of the remote, beginning a shielded log-on process that takes them directly to WebTV's home page without any user involvement in the dial-up sequence. WebTV selects the actual access provider from a variety of subcontractors, with Cupertino, Calif.-based Concentric Networks announced as the first alliance.

Once on-line, users cruise the Net using WebTV's own browser. Features include a guide with links to selected Web sites, so users may, for example, click on "sports" to view a list of sites with reviews, then click again for access. Alternatively, they may conduct on-line searches with the Excite search engine. Users may "save" favorite Web sites or information on the network. The system also supports up to five E-mail addresses per household, with the set-top box including an LED that flashes to signal new E-mail.

Although the launch provided ample detail on exactly how the device will work in homes, many factors affecting just how they will get there remained unclear, including shipment dates, the actual structure of Internet access arrangements and--most importantly--pricing. One thing, however, is certain: WebTV is entering a soon-to-be crowded field. With Apple's Pippin set for a September release (EN, May 20), and the Zenith-Diba NetVision TV not far behind (EN, July 8), the Web may soon encounter gridlock. Sega and Sony are both adding Internet options to their game consoles (EN, May 20), while Intel, as always, continues to go the PC route with its Intercast technology.

Intercast offers an interesting alternative to the myriad devices seeking to put the Internet on TVs. Instead, it allows users to receive simultaneously-broadcast Web pages and TV programming on PCs, via an add-on board with a television tuner and video capture. While the system is somewhat cumbersome, requiring an additional modem hook-up to be truly interactive, Intel has made alliances with important content providers, including NBC and MTV (EN, July 1).

So how does WebTV stack up against the competition? While a detailed technical comparison may be premature, analysts agree that WebTV has made a strong initial showing. Rick Doherty, director of the Envisioneering Group, stated: "They are clearly ahead in terms of their implementation and their business model." Gary Arlen, president of Arlen Communications, noted WebTV has a "tacit endorsement from some pretty high-end manufacturers." Ross Rubin, senior analyst with Jupiter Communications, likewise cited the venture's "excellent partners."

However, WebTV also faces many potential pitfalls in a new and untested market. Despite its zippy 33.6Kps speed, bandwidth remains a primary concern, especially given WebTV's position in a market which is less familiar with computers and presumably far less patient. "When people get on-line, they will need to see seamless integration of their information," said Robert Fagin, a research analyst with IDC/Link. Envisioneering's Mr. Doherty noted that the company "has really pushed this model to the limits of what the phone system can do today." He predicted that when users are faced with inevitable waits for downloads, "They're going to click that remote a second and a third time and find themselves three URLs away."

The issue of whether the Internet really has a place in the living room is also far from resolved. As Mr. Fagin stated, "The main issue right now is, is this something customers want?" Mr. Arlen noted that much of the content currently on the Web is designed to be viewed at "arm's length," adding, "It would be dreadful to look at that from 18 feet away." Although technologies like Java have enabled some intriguing applications, WebTV is not yet compatible with Java or Shockwave. While Mr. Perlman stated it would be Java-enabled by next year, some analysts expressed doubt that it would be ready so soon.

WebTV's access provider business model also could present a problem. While it obviously provides a potentially lucrative, long-term revenue stream for the company, analysts wonder whether consumers will buy a component which allows only one way to access the Web. Unlike traditional proprietary services like America Online and CompuServe, which incidentally cannot be accessed through its device, WebTV offers little original content.

IDC/Link's Mr. Fagin described the service as "very little value-added,' although, he noted, "that may not matter." Mr. Doherty of Envisioneering also noted that with the advent of Intercast, WebTV must compete against completely free content. Ultimately, no one knows whether consumers will place a higher emphasis on the simplicity offered by products like WebTV or the freer choices offered by many of its competitors.

Keeping hardware costs low will certainly help, although Mr. Arlen currently estimates the set-top box may reach a pricey $300-$400. Rentals and unified products, perhaps resembling Zenith's NetVision, also might encourage customers to use the service. Analysts noted that neither Sony nor Philips provided exact descriptions of the devices they would bring out this fall, leaving the path clear for a WebTV-enabled set.

Mr. Doherty of Envisioneering stated that the traditional "razor-thin" margins of the consumer electronics market provided a powerful incentive for manufacturers to adopt the "value-add" of Internet access. Notably, many companies are placing bets on several technologies, with Sony also offering Web access on its Playstation and Zenith holding membership in the Intercast Industry Group.

Ultimately, analysts, along with the TV industry, are enthusiastic about the wealth of new convergence products for a market that, although untested, is also wide open. "We're going to see enough families trying enough of these solutions to get Nielsen upset," Mr. Doherty predicted. And IDC's Mr. Fagin, for one, thinks there may be plenty of triumphs ahead in the brave new Web-based world. He said, "There's a lot of room to bring people online in the living room and there's a lot of room to bring people online on the PC...people who come up with an innovative technology will win."

COPYRIGHT 1996 Reed Business Information
COPYRIGHT 2004 Gale Group

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