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Convergence: Just a fancy technology term, for now

Convergence: Just a fancy technology term, for now

Convergence is just a fancy technology term for watching television on your PC. We have been able to do that for years, so what is all the fuss about?

The IT industry needs "next big things" in order to excite consumers and make a dollar so, like it or not, we are all being herded headfirst into convergence. Microsoft is leading the charge with its Media Center Edition (MCE) of Windows XP but there are also many low-cost, third-party products that can turn an ordinary PC into a TV, hard-disk recorder, FM radio, DVD player and stereo. All MCE does is provide a cohesive interface to make it a bit easier to use these capabilities.

Launched in Australia last October - with Microsoft's usual marketing flair and promise of great things to come - MCE is the software giant's long-term strategy to control the convergence market. It is about the eventual integration of every electronic device in the household including security, intercoms, doorbells, clocks, air-conditioning, lighting and entertainment devices. All of these - together with digital content, Internet and online shopping - will be controlled using an MCE-enabled PC as a server.

Sales of genuine MCE PCs have so far been patchy at best. It will probably take a decade or more to become the dominant domestic technology but Microsoft is prepared to wait because there is potential gold in this market.

It is interesting to view the acceptance of convergence from four perspectives - that of the consumer and the three main types of business competing for their dollars: mass merchant electrical stores; specialist hi-fi retailers; and specialist IT resellers.

The consumer has been conditioned into shopping at mass merchant electrical stores to buy a TV or video recorder. This shopping habit is not going to die easily. They don't want to know what is under the bonnet - the experience is all about wow factor related to picture quality and simplicity of operation (there aren't many rocket scientists out there in consumer land). Of course the four-year interest-free credit gimmick helps too. MCE devices are just another expensive TV to these shoppers, with more features that they might never use.

Electrical retailers do not want to confuse the consumer by trying to sell a $3000 PC running MCE 2005 to go with that lovely, expensive and profitable widescreen plasma. Why would they when the margins are so lousy? It is much more profitable to sell discrete components like a high-definition TV complete with set-top box and hard-disk recorder. So we have a primary problem to the uptake of MCE systems - there is no reason for mass market retailers to embrace convergence. They know that, and have the mass market advertising budgets to slow down any potential growth.

Specialist hi-fi retailers have vested interests too. One leading retailer told me convergence was still very much a niche market - sales of separate TVs, flat screens and hi-fis were stronger than ever. He said the image and sound quality on an MCE system, together with ease of use issues, meant they were still pretty ordinary compared with specialist offerings. In short, they are at best a compromise.

IT resellers are faced with a dilemma. Should they jump into the convergence market with both feet or just offer it as a value-added service to well-heeled clients with an IT bent? With LCD and plasma flat panels still costing a few thousand dollars (and prices dropping daily) it's a lot of money to tie up in stock just in case the occasional customer wants an MCE system.

Those that have seriously tried to enter this market have installed home theatres replete with lounge chairs, Dolby sound systems, large plasma screens and, of course, the expensive MCE PC. Feedback has been less than enthusiastic. The stark reality for IT resellers is that no one comes into a computer shop looking for a TV, so it is always a value-add sale at best.

Over the next couple of years, PCs will contain more and more multimedia components and capabilities as standard. Windows Longhorn, the long awaited replacement to XP slated for late 2006, will have all the MCE capabilities. So, like it or not, most users of new PCs will have digital media capabilities anyway - and that is the real crux of Microsoft's long-term strategy.

But it isn't all doom and gloom. IT resellers are far more adept at making convergence products work once consumers get them home. Mass market electrical retailers may find themselves selling lots of product at low profit margins but lacking the expertise to get it all working. This could present an opportunity for the IT specialists.

My advice? Keep up with the technology and have an MCE machine on display, but don't try to compete with the mass market or hi-fi specialists. Sell the different pieces of the digital dream to customers that ask for them and make sure you are there to pick up the pieces when this technology matures.


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