Classifying Entertainment Networks
In the traditional sense, home entertainment networks have allowed consumers to route audio or video throughout the house to different receivers (primarily TVs and stereo receivers/speakers). In the past, such networks have typically required advanced entertainment controllers and the work of an installing dealer. The requirements for home entertainment networking have shifted, however, with the introduction of new technologies and players. Parks Associates classifies the emerging/digital entertainment networks in the following way:
Point-to-Point: Allowing a television (or stereo) to link with a PC. These networks allow existing consumer electronics products to receive content from the Internet or a stored source (such as a computer’s hard drive).
* Distributed (Multi-room): Enabling video and audio signals (digital and analog) to be transmitted from one device or appliance (such as a personal video recorder or DBS receiver) to a television or stereo in another part of the home.
* Cluster: Enabling entertainment products to “announce” themselves to a network, digitally configure, and communicate via a high-speed connection so they can share processing and storage resources. This will enable a new generation of applications that coordinate the control of several consumer electronics devices simultaneously and simplify operation of devices by the consumer.
How Will Entertainment Networks Manifest Themselves?
The conventional wisdom regarding the configuration of an entertainment-centric network in the home recognizes two methods. The first method involves network “kits” that will be purchased by consumers (either as separate components or in conjunction with another entertainment system, such as a direct-broadcast satellite, or DBS, system). These “kits” will create point-to-point and distributed (multi-room) network configurations that will link home computers to consumer electronics devices. Using the storage capabilities on the home computer, consumers will be able to stream audio and video clips to other parts of the home and enjoy content away from often inadequate computer speakers and small monitors.
There is growing evidence that the home computer will become a key component in the home network, as evidenced by Parks Associates’ recent E-Home 2001 study, a survey of more than 700 consumers in U.S. households with Internet access. In this study, we found a large number of U.S. consumers who are already downloading and storing MP3 files on a home computer (Figures 1 and 2).
As home computers evolve to embrace more entertainment activity, it is a logical assumption that a growing number of consumers might seek connectivity solutions to enable networking between PCs and consumer electronics devices. We asked our consumers in Internet households about their interest in home networking solutions that connect PCs to CE devices, and a significant number of them responded favorably (Figure 3). Furthermore, a large number of these consumers also appear ready to buy these networking solutions now – even at price points reaching $200 per “kit.”
The second way that home entertainment networks will find their way into homes involves embedding networking solutions in end-user products that are considered “network-capable” (that is, they come with embedded home networking solutions such as Ethernet or “no-new-wires.” This will create point-to-point, distributed (multi-room), and cluster network configurations.
Although there is much room for debate about what exactly is an “network-capable” entertainment product, Parks Associates believes that it is a non-PC device purchased by a consumer that leverages the Internet, processing power, and perhaps a level of hard drive storage to play video, stream audio (music), play games, and perform other similar functions. It is considered “entertainment-centric” because this device has some kind of LAN connectivity – likely Ethernet or IEEE 1394 (“FireWire”). These devices may not necessarily be considered part of an entertainment network, because a true network would require two-way connectivity between two or more devices. So a receiver that picks up MP3 files from the Internet and connects to a set of speakers cannot be automatically considered as part of a cluster entertainment center (the speakers by themselves may not be capable of true two-way messaging back to the receiver).
In 1999, as Parks Associates was first projecting the markets for both PC and entertainment-centric networks, it was perceived that efforts such as HAVi (Home Audio-Video Interoperability) would quickly lead to deployment of a wide variety of “mainstream” consumer electronic devices that would serve as hubs (or nodes) for an entertainment network. We believe that – at least for the near-term future (say, at least the next five years, for example) that many of the entertainment-centric products produced will be a new class of “information appliances” – devices that are network-capable, connect to the Internet, and can also connect to legacy devices such as DVD players, VCRs, stereo speakers, and televisions (Figure 4).
As consumer demand increases for these devices, strong growth is anticipated for network-capable entertainment devices. As Figure 5 indicates, more than 100 million devices will be connected in an entertainment network by the end of 2006.
However, as with almost every bold prediction made in the technology space, there exist caveats to the statement made in the preceding paragraphs. Entertainment networks will manifest themselves in U.S. households in other ways beyond the installation of network-specific “kits” or the purchase of new consumer electronics devices. For example, the installation of a structured wiring system (primarily into a newly built residence), in combination with the appropriate video and audio distribution modules, will also enable whole-house entertainment networks. In fact, Parks Associates projects that as many as 48% of all newly built homes will have a structured wiring solution installed by the end of 2004. Many of these homes will have the capabilities for distributed entertainment.
The Entertainment Network: Hold the Wires?
In analyzing the market for connected home equipment sales, it is often convenient to lump all applications related to home networking together to create a huge market forecast. Although this makes for good press release fodder, we don’t believe that it provides the most accurate portrayal of growth opportunities for specific vendors (such as chipset manufacturers developing solutions under a specific specification (such as HomePlug, HomePNA, or the various RF networking solutions).
This is most true in the case of forecasting chipset sales for entertainment networks. Although the market for home PC connectivity is beginning to firm up in terms of the types of solutions projected to grow rapidly (RF and HomePlug), the market for entertainment connectivity solutions is wide open. We sense plenty of hesitation among consumer electronics manufacturers in taking the plunge to embed home networking solutions into their products. Why might CE manufacturers be hesitating at present?
* In adding additional cost to a product (perhaps as much as $30), are consumer electronics manufacturers convinced that home networking – as it stands now – provides a significant value proposition to an end-user to warrant a price increase?
* A dearth of content. Debates over digital rights management and content protection have limited the type of content available for streaming and downloading. Without the storage of compelling content, the home entertainment network loses a great deal of its value.
* Nascent business models. Frankly, I don’t believe that any consumer electronics manufacturer simply wants to sell a network-capable product and walk away from the relationship. I believe that many of the “big guns” in consumer electronics are preparing business models that focus on pay-per-play applications (downloaded content, including music, games, and video). However, many of these business models are downright suspect at a time in which content is limited (see previous bullet), and many questions remain as to how much consumers are truly willing to pay for new content services.
* Questions about technology. Yes, we’re still debating the merits of one “standard” versus another. This is most certainly true in the case of RF, where manufacturers are struggling to decide where to place their bets (802.11b, 802.11g, 802.11a, HomeRF, Ultra-wideband, HiperLAN2, DECT, etc.). This is also certainly true in the case of powerline where, although HomePlug has a decided edge, other specifications may challenge it. We believe that consumer electronics manufacturers still have a great deal of homework ahead of them as they discern which solutions are best suited to the applications they seeking to deliver to the end-user.
Caveats and concerns aside, the next two years promise to bring significant development in the field of connected entertainment. Growth will come from partnerships between platform developers and service providers (think set-top boxes), new forms of content, emerging business models, and a growing awareness and acceptance among consumers for these applications.
Kurt Scherf is vice president of research for Parks Associates, a Dallas-based market research and consulting company that studies emerging trends in residential and SOHO technologies. He is the author of Networks in the Home: Emerging Technologies and Standards and Analysis and Forecasts. For more information on this report, call 1-800-727-5711 or e-mail firstname.lastname@example.org . Mr. Scherf is available at 972-490-1113 or at email@example.com
Parks Associates will be presenting at IIR’s Home Networks European Congress (June 17-21) in Geneva, Switzerland. Parks will host a full-day workshop on Friday, June 21. Titled “Thinking Beyond the Box: Achieving Interoperability in Cross-Category Home Networks,” this workshop will focus on home networking from three distinct applications – PC and data networking, entertainment connectivity, and home control – from both the U.S. and the European market perspectives. For more information on this conference, please click Home Networks – European Congress