PERSPECTIVES: The trouble with bubbles

PERSPECTIVES: The trouble with bubbles

May I introduce you to the technology that will revive our flagging industry, resuscitate dormant companies and stimulate pent-up consumer spending. May I present home networking (please smile for the digital camera).

But first may I show you our bubble machine. This is where we take optimism and turn it into inflated expectations. Then we add some hype turning what has a chance to become the next good thing into an absolute certainty that it is the next great thing.

This is the very same machine that built the famous dotcom bubble. Mind you, there were a few technical problems with that one. It was supposed to just lose air. But as you know, it burst. And when it burst, it caused shockwaves we are still feeling today. But this time we have it right.

We are cranking up the bubble machine to tell you about the opportunities available in the home of the future. It has plasma screens hanging on every wall and brilliant speaker systems that flood each room with sound that is actually superior to what you would hear in person. Media centre PCs store and send the audio and video to these systems, including the digital recordings and photos you create yourself. Of course, we have also automated our house with security systems, appliances and lights all run by our PC.

We’re talking mass market. We’re talking big bucks. We’re talking bigger than Ben Hur (which, by the way, I Tivo’d earlier and am sending to the plasma screen in the lounge).

Unfortunately, there are a few little problems before this bubble will float. They are:

Broadband: We can’t sell home networks to people who don’t have residential broadband. Right now, about 10 homes in 100 have broadband in Australia. More than 90 per cent of those homes have television. Even with Telstra’s aggressive pricing campaign we’re a long, long way from even looking like mass market on this one.

Legacy: I am not scrapping my pre-digital sound system just so I can play songs stored on my media centre PC. Same for my TVs, my DVD player and just about every other home entertainment product I have purchased. So if this home networking is going to take off, we will need lots of adapters that can link pre-digital consumer electronics (CE) products into the system. Foxtel is giving these free to customers. Or to be more precise, it is building in the cost of providing adapters. It is a high-stakes game, the sort usually only played by the likes of Telstra, Packer and Murdoch.

Ease of use: Consumers want these products to be easy to install, to provide obvious value and to be affordable. They also want to be certain that products will work together and be future-proof. Until all of that happens, they will continue to buy digital cameras, digital camcorders, MP3 players and even media centre PCs. However, without those value propositions, they will not invest in home networks to connect them.

PC reliability: Which brings us to another issue — consumer perception of PCs. We need to remember that only about two-thirds of Australian homes have PCs. And if the media centre PC is acting as the server for this home network, which connects to the outside world via broadband, then that PC will be considered (and probably is) vulnerable to hack attacks, malicious code, viruses, worms and the whole nasty lot. Care to put your home security system there? Are you ready to risk losing all your family photos? No, there are problems to be solved.

Virtually no consumer demand: Oh, here’s the really significant problem. For us IT folks, it’s called the Killer App, the reason that people buy. Right now, people have embraced the fairly obvious issue of connecting TV, DVD player and audio systems to create a home theatre. However, it is hard for them to figure out why they want their PC to be part of the network.

A recent survey in the US looked at 1079 households with Internet. From that, it identified 198 users who had actually created a PC network in their home — in other words, the early adopters who are the most likely to go the next step and create a fully networked home.

Guess what? Fewer than one in five wanted to connect their TV, stereo or home security system to their network. Less than a third of the whole sample had any interest in getting audio or video from their PCs into their CE products, and only about 22 per cent cared about having the ability to play MP3 from one source on multiple systems.

Oh dear, I fear I may have let some of the air leak out of the bubble we were creating. And yet the sale of digital home entertainment products is booming. Consumers are spending their discretionary income big time on home theatres, digital cameras, camcorders, MP3 players and the like. Most of the hurdles I listed above are today’s barriers to home networking, not to consumer acceptance of the digital products. There will be a continued and dramatic uptake of digital products.

I believe that once consumers have begun to make significant use of digital products they will instinctively want to connect them to one another.

Of course, the reseller channel will require significant information to keep pace with the change in technology and the inevitable shift from being a provider of IT solutions to becoming a provider of home entertainment and productivity systems.

This time, though, I think we should leave the bubble machine in storage. The market is too good for us to be disappointed if hyped up expectations aren’t met.

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