Apple Will Fail As A Digital Hub Provider Without Digital Video Recording Capabilities

If Apple is to ever have a chance of becoming a provider of "life-style digital hub" technology, it better stop ignoring a key "life-style" activity, namely, watching television. Currently, no digital video recording technology to access scheduled broadcasts exists for Appleis platform. This is a curious position for a producer of "digital hubs." Products like ATIis Radeon All-In-Wonder card, and newly announced nVIDIA analogues, provide PC users with the ability to record and view broadcasts more conveniently than is possible with traditional television technologies. In short, Wintel users have easy and affordable access to TiVo-like functionality (see sidebar) while Apple users do not.

What Is TiVo?

For those unfamiliar, TiVo produces a Digital Video Recorder (DVR). This device allows you to program it to record television shows without your interaction, but is much more than a mere digital VCR. TiVois boxes are powered by Linux, and record video in MPEG format.

The great advance TiVo brings is the ability to record all your shows by programming the device only once. For example, if you select a "Season Pass" to Star Trek, your TiVo will load up with Star Trek episodes no matter when they air. You donit worry about the start time, the end time, or any such details. You can make similar choices based on a variety of criteria, e.g., key word searches of all broadcasts, and sometimes TiVo will spot patterns and make recordings it thinks you might like.

You can also program it like a traditional VCR to record according to channel and time. When you get home, you have a list of all your favorite programs waiting for you. It will even do neat things like pause live television. What this tends to do is make the TiVo consumer into a network programmer. You have a list of all your favorite programs waiting for you to watch when you like, not when the networks deem appropriate.

Itis Not Just Audio That People Want to Use

This critical oversight in Appleis digital-hub strategy, if left unaddressed, may become a bigger strategic mistake than its failure to capitalize on the growing CD-RW phenomenon. Television broadcasts occupy a significant, if not, major part of the average personis consumption of media. If you doubt the import of such functionality, you need only search a service like Morpheus for your favorite Seinfeld episode to verify that a growing number of people are making use of such technology (Iim sure much to copyright holders’ horror, but thatis a story for another day).

So how does this relate to Apple? Well, some TiVo users get into the guts of their DVRs. Some just add more hard drive space so they can view more programs. Others attach network capability so they can transfer the MPEG files to their PCs. These modifications are not for Joe or Jane consumer, but they do show people forging a Digital Home Media Network (DHMN). This lends more credence to Steve Jobsi insight that there is future in the consumer sector by becoming a provider of digital hubs. Another DVR producer, ReplayTV, has announced higher end DVRs that provide greater capacity and networking facilities, but only at a substantial cost.

PC Only Is a Problematic State of Affairs for a Digital Hub Provider

The problem is that you canit really converge peopleis digital media needs with Appleis current products at an affordable price, but you can with a Windows-based PC. Let me explain. Right now ATI and nVIDIA make their DVR enabled video cards only for Windows. That means there is no easy way to create a Digital Hub Server (DHS) in the home with Apple products that allow a consumer to orchestrate both their video and audio media requirements.

Conversely, on the Wintel side of the fence it is easy to envision such a DHS. For example, one might foresee setting up a PC next to oneis big screen television and stereo. By putting the cable line into an ATI All-in-Wonder card on the PC for example, one can get TiVo like DVR functionality on your television by way of PC; i.e., assuming that one attaches the video out from the ATI card into your big screen television for viewing. There are several PC remote controls that even allow one to control the PCis functionality. However, such a DHS would offer superior functionality over that of a simple DVR such as a TiVo. A DHS would allow one to hook the audio output from the PC into the audio input of your stereo receiver and thereby turn your DHS and MP3 collection into a home stereo jukebox. A DHS would also allow a consumer to access streaming movies and/or other content through broadband connections. By connecting the DHS to preferred output devices such as consumer televisions and stereos, Internet based content may be experienced by a wider audience. What is more interesting yet, by adding an 802.11b wireless card, you can enable laptops and other wirelessly enabled devices throughout the home to have streaming access to your audio and video recordings from your DHS.

Although there are several products that allow for video-in, and TV tuning (some by USB port) on a Macintosh, none provide such DVR scheduling functionality as a TiVo or ATI/nVIDIAis DVR enabled video cards. Currently, Mac usersi easiest route to doing this would be to buy either an actual TiVo and hack in network capability or buy an expensive ReplayTV unit with integrated networking, and then serve the contents of the TiVo/ReplayTVis drive. This is far from consumer friendly.

An Opportunity Exists

Although the absence of this functionality does inhibit the progression of Appleis digital hub strategy, there is also a great market opportunity if it acts. Currently, none of the PC manufacturers have really targeted this market segment even though all the hardware components are readily available. If Apple can persuade nVIDIA and/or ATI to produce such a DVR enabled video card for the Macintosh, and if Apple makes consumer friendly software for the product, then Apple could market a true DHS to consumers. Mix together a headless iMac, an Airport, a custom RF/IR remote, a DVR enabled video card, and a couple of USB and FireWire ports all into a unit that fits the dimensions of a stereo rack component, and you have a true home DHS. Heck, if Apple were to go one step further, they could even throw in an AM/FM tuner to provide TiVo like functionality for radio programs so youill never miss your favorite talk radio program again; just download it to your MP3 player and skip past the commercials while you are on the go. For Apple, this may be achieved by simply adding some software and options for a DVR enabled video card to current Macintosh models. Such a unit could play MP3s, it could be a TiVo/VCR replacement, it could be a (wireless) router/hub for a home Internet connection, and more. It might also act as an entry into interactive TV with some picture-in-picture functionality to simultaneously view broadcasts and tie together with associated web pages for enhanced advertising and other opportunities. Such a product is very achievable, and in fact, many home media hobbyists have constructed devices of this flavor to varying extents. The problem is such constructs are not all-in-one units, they certainly are not consumer friendly, and/or require a relatively high capital outlay.

What is of further interest, such a device could provide an opportunity for Apple to provide ISP and .NET like functionality way beyond Microsoftis plans. You can see Granma and Granpa simply adding their grandchildrenis address into a "Family Network Members" box, and constructing on-the-fly Virtual Private Networks sharing all of the familyis media. (Yes, it could be a security and intellectual property/digital rights management nightmare, but that too is another issue for another day).

Apple could probably produce such a device with great iHome software (e.g., mix in one part iTunes, iMovie, iDVD, and create some iTV software) for $399 or less. For $1,000 with a writable DVD, it would be a bargain compared to simple recordable DVDs currently out in the consumer market. This product would sell. This would not be a WebTV, Pippen, or black MacTV box redux; this would be the first DHS in the consumer market that Granma and Granpa would benefit from.

This Is Not Your Fatheris Change of Paradigm, Itis Your Grandfatheris

Such a device would bring about fundamental change in the average household and in the consumer entertainment sector. In the consumer market, Granma and Granpa would finally be able to make use of todayis gadgets. Synching Palms, making use of digital (video) camera imagery, making CD/DVD mixes, etc. are all too complicated for the average consumer. The consumer is left baffled with first finding the appropriate connector, installing and configuring the appropriate software and drivers, figuring how to move data, etc. Apple has already demonstrated some Mac OS X technologies that automatically recognize these devices and allow for eased moving of data; in essence the new OS X based technology allows for passive data synching. Passive data synching allows for the synching of information from external devices into a DHS with little or no action on the part of the user. Simply by plugging into or coming within proximity of the DHS initiates recognition of the device, and a transfer and/or synching of information between the external device and the DHS.

Imagine a home where the wireless DHS probes your Palm and digital camera as soon as you walk into the house, automatically synching your address book and uploading your camerais pictures. Imagine a situation where your car audio deck is Airport and MP3 enabled and simply driving the car into your garage will automatically initiate a retrieval of your newly recorded talk radio broadcasts from your DHS. Just having a simple box that Granma and Granpa know where to plug in their camera without having to install or configure software would be a big boon to consumers.

The DHS would also play well with the college crowd. Students could take such a DHS "entertainment boom box" to school and stream TV to their own and others’ iBooks (or perhaps even more wacky, simply make their iBooks into roving DHSs). Students could "TiVo" their streamed lectures and experience their classes with greater flexibility, e.g., scheduling classes around their hangovers. Furthermore, there is no reason why a DHS couldnit also be used as a game console.

I can foresee the ads already, "any media, any time, any place." If Apple still wants to change the world, then creating a DHS is its latest opportunity to reestablish itself as a significant player in the industry. Perhaps more importantly, itis an opportunity for Apple to affect a wider audience rather than remaining in its relatively obscure niche.

Apple has a market opportunity here; the question is do they believe enough in their vision to make it a reality before someone else does.

John Kheit is an intellectual property attorney at Morgan & Finnegan, L.L.P., who in a seemingly previous life worked in the software industry.