The consumer media electronics market is fertile ground for technological innovation, but entrenched interests among content companies — particularly the movie and recording industries — are holding such innovation back through intercompany agreements and the threat of litigation. This refrain was struck repeatedly by a panel of experts from all areas of the consumer media electronics industry in a debate at the Embedded Systems Conference in San Francisco.
The heel-dragging of the entertainment companies is just one example of the challenge the panel's moderator, Jeff Bier of Berkeley Design Technology, described as central to any efforts to bring products to market in the consumer media electronics space: the complexity of the “CE ecosystem.”
Though consumer entertainment is one of the healthiest segments of the electronics industry, Bier began, it's complicated by the large number of organizations that must collaborate to produce viable products.
“It takes more than tech to succeed,” he said. “By themselves, CE products do nothing. They need content. They also need distribution. Most good business models require a number of companies to supply these separate components.”
Bier's first question — what is the role of litigation in the CE ecosystem? — was directed toward panel member Fred Von Lohmann, an attorney with the Electronic Frontier Foundation.
Von Lohmann said that litigation was a tool that companies used to assert their interests, but, he added, “Increasingly, content companies want control over the kind of innovation they're willing to tolerate. So your partners in this business are not going to be friendly partners. They prefer models like DVD, where licensing bodies control the destiny of the technology.”
As an example, Von Lohmann suggested that in the future companies would try to use licensing agreements to eliminate analog outputs entirely.
The conversation then turned to the issue of piracy, which, panelists said, the major media companies often invoke when pushing their cause.
Andrew Wolfe, an independent consultant, said emphatically that “piracy problems generally have nothing to do with consumer electronics.”
“That's not the case in satellite TV, where we estimate there are about two million people pirating worldwide,” said Jimmy Schaeffler, CEO of the Carmel Group consulting company.
Talking about the impact of piracy on record sales, Von Lohmann said that while “monitoring consumer behavior is very difficult, there's no doubt about the toll litigation takes on innovation.”
Scott Smith, an investment banker for Neveric Capital, offered an illustrative anecdote. In the story, he was invited to have dinner with a number of recording industry executives. Smith asked whether any of the other guests had in their personal collections an album that was no longer available commercially. None of them did, but the daughter of the executive hosting the dinner didn't understand the question. Why, she asked, would you worry whether the album was still in stores when you could find the files on the internet? Moments later, she did just that.
Schaeffler said that the daughter's attitude toward piracy was shared by the majority of young consumers, who have grown used to getting their music without paying for it. He said that audio content providers would probably have to make the same adjustments as the television industry, which originally gave content away for free, but moved to a subscription model with the advent of cable and satellite television.
The picture the panelists painted of the nontechnical obstacles to success in consumer media electronics was so bleak that Bier asked whether design companies should even bother trying.
Jimmy Schaeffer encouraged developers to”innovate, but do your homework,” to avoid possible licensing and legal entanglements.
The panel debate's last remark came from Andrew Wolfe, who pointed to the bottom line:
“This is still a dangerous market,” he said, “but it's an area where people will spend their money. People spend more on entertainment now than they ever have before.”