Q&A: Home Integration Game Is A Solutions Play, Forrester Analyst Says

Ted Schadler, vice president for consumer technology and media at Forrester Research, follows PCs, HDTV, digital cameras, MP3 players, digital rights management and home networks. Earlier this year, he released a controversial report estimating that retailers were losing up to $4 billion annually because they couldn't talk about consumer-electronics products as part of broader solutions, suggesting ample opportunities for home integrators.

In an interview with CRN Editor Heather Clancy, Schadler discussed the home solutions market--including the home strategy of digital media kingpin Apple--as well as the interplay between retailers and home integrators and the potential impact of the blogosphere on VARs who aspire to make it in the digital home. For more coverage, see CRN's Home Integration page.

CRN: What role do you see Apple playing in the home integration movement?

SCHADLER: They do have a strategy. They don't talk about it much. They've made a pretty significant bet on a technology called Rendezvous. It's an open-source standard for digital media, discovery and streaming. It's the basis for their AirPort Express product, which is their 802.11 offering. Plug it into the wall, and it's got audio output and a printer output. So it's kind of below the surface. It's not their main message. But if you buy one of these things, a home router, you can stream from your iTunes library on your PC, your Macintosh or your Windows PC to a stereo. That's clearly home integration.

They use the same technology in the Mac mini. I don't know if you saw the announcement back in the winter when they made the move to Intel, [but] they gave it the 10-foot interface and a remote control and the ability to stream not just audio, but also video from your iTunes library.

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So that's their home integration story at the moment. They're not making a big fuss about it because it is kind of low-fidelity, and it's not really at the core of their model. Their main model is still very PC- and iPod-centric. ...

That's very different from what Intel and Microsoft have done, which has been been to make a big investment in the UPnP [Universal Plug and Play] stack and to try to go straight to HD [high definition]. To go straight to HD, that's hard--maybe a little more than mainstream consumers are really ready for. So, for example, if you're going to stream HD, you need a better wireless standard or you need wires, because 802.11g and 802.11b don't cut it. So they--Microsoft and Intel--have had to make a bet on 802.11, and it's just not that widely available. Now they're all waiting for 802.11n, which is still a ways off.

CRN: How much do you think the Apple phenomenon is tied to the Apple retail stores?

SCHADLER: It all fits together. You can't really tease apart the Apple brand and Apple products--particularly the iPod--and the Apple Store. They kind of go together as components of a strategy.

A lot of times, people point to one thing and say, 'That's the strategy.' And it's usually not a complete look. For example, Southwest Airlines' strategy is lower than low-cost fares. It's also every airplane is a 737, and they use airports that are outside of town and are lower-cost. And they fly point to point and not through a hub, book online and allow people to switch without cost. These are all parts of Southwest's strategy. The same thing is true for Apple. So if they fall down with their products, the Apple Stores won't be as interesting. CRN: So would that be a reason Apple's stores succeeded whereas Gateway's couldn't cut it?

SCHADLER: Yeah, well, Gateway went into the market in a very sort of incomplete and certainly different way. Gateway built destination stores, for example. You had to get in your car and drive somewhere to go to a Gateway store, and people weren't just that interested in doing that. Apple didn't do that. Apple put stores in high-traffic shopping districts.

CRN: What interplay do you expect between big-box computer and electronics retailers, particularly Best Buy, and the home integration channel?

SCHADLER: I think there's going to be a coexistence. The home integrators right now don't get any price preference or service preference at Best Buy. That sets them up as competition. But if you look at what happens in home construction, there's a channel that serves the builders and then there's the channel that helps the builders in the same way as Home Depot. So Home Depot is a not a primary bumper deliverer to the home builder channel, but it is very happy to open its doors early and give them a separate checkout line and--I don't know this for a fact--probably better terms. I don't know about better pricing, but certainly better credit, for example. So that's an example of a retail outlet also serving the professional channel. The same thing could happen with big boxes and home installers. It certainly hasn't happened yet, but it could as the home market matures.

CRN: In what way do you see them working together on service?

SCHADLER: On service, probably not. That's probably where there will be competition, and they'll serve different sectors of the market. Best Buy will be for the do-it-yourself buyer, and the home installer will be either for the high end, the specialty market or maybe an upfront service relationship, but not an ongoing one.

CRN: What's the application with the most potential for the home market right now?

SCHADLER: The hot application right now is whole-home audio, because it's doable. To do whole-home video is really at the very, very high end, because the cost of putting in a video server and ripping all your CDs is very high. It's really only for the Prince of Monaco, literally. You talk to some of these high-end video server customers, and those are their customers. So it's not, in any way, even just an affluent play. It's really a wealthy play.

CRN: When you look at the digital video recording (DVR) world, what do you think the long-term prospects are for prorietary platforms?

SCHADLER: I think you're going to see a lot of proprietary video technologies that sell through a specific channel. So cable and satellite--certainly cable--will ultimately make a big investment in multiroom DVR. And there are a lot of vendors to support them today. TiVo is not one of them. Of course, Motorola and Scientific-Atlanta are two of them that are pushing toward multiroom DVR. That won't be an installer market. That will be a cable market.

CRN: Will the gaming market also be a carrier market?

SCHADLER: Gaming is going to ride right on top of home networking. Home networking ... everybody is going to use that. I'm not sure you'll see a professional install market for gaming. That will just be one of the apps that they support.

CRN: Is the idea of the game boxes--Microsoft's Xbox and the Sony PlayStation--under pressure from the Intel and AMD platforms? Or is there still a case for this totally separate box, a server focused on gaming?

SCHADLER: You can't make a blanket statement. It depends on the kind of gaming. For first-person shooter gaming, you'll always have a dedicated box because it will always provide a better visual and response experience. Gaming has been stalled at about 37 percent of households for 10 years. It hasn't changed for almost as long as we've been tracking it--10 years and maybe longer, certainly five years. There's not a new market opening up with a new generation of products.

When we get to revision three, which we already have with Xbox 360 and will have with the Playstation 3 and new Nintendo Wii, it's the same market as before. For more casual gaming, it sits right on top of the home network, and that's been a market that appeals to a very different segment today. And it's a bigger market, more like 60 percent of PC owners.

CRN: What's your take on Intel Viiv vs. AMD Live? What's the benefit or advantage of either platform, and what's the early market buzz?

SCHADLER: If you talk to the peripherals makers, they are very different things, Viiv and Live. Live is really just a program to support PC makers who want to support digital media on their PCs. Viiv is a lot more than that. Viiv is more of an interoperability spec, as well as a description/parts list for a PC maker. And I don't think Intel has done a great job yet telling that story. But they've got a logo program in place already that certifies non-PC products for digital media readiness.

So if you think of Viiv as a media server specification for [digital] audio, video and photos, those three sources or content types, then you can't really tell the difference between Viiv and Live in terms of what the product is about. It's about a parts list to create a media server.

But where Viiv is very different and much bigger than Live or PlaysForSure or the UPnP compliance is that Intel will certify your products. That's good for everybody. If the products work together, they stream to a television because a television is Viiv-certified, then you create a level of trust with consumers that you can't create any other way.

CRN: What impact do you think the blogosphere will have on the home integration market?

SCHADLER: That's a very interesting question. Let's go at it from two directions. The first direction is the Long Tail direction. People who are into a particular genre, say, of video, will find better recommendations and get more access to more video because of downloadable, broadband Internet-delivered video. And that's driven by the blogosphere, by people who want to put their stamp of approval or their recommendations on the world.

And so the Long Tail argument is that people will find video or music that they might not otherwise know about through the blogosphere. That's a big benefit to the home integration market because it brings the PC into the living room. You're going to watch video that you can't buy on a DVD, you're not going to get broadcast over cable and you're going to have to download and cache. That's related very much to the Long Tail. And the blogosphere and the Long Tail go hand in glove.

So that's a big play. It's not a direct play; it's an indirect play for the integrators. They're not going to go and start blogging. They're going to make the connection for people.

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