File making mp3

Conglomerate sues sonicblue over replayTV: It's like MP3 all over again, analyst says - Diamond Multimedia Systems' Rio MP3 player

It's like MP3 for your TV.

ReplayTV's latest digital video recorder lets you copy a program off the air, automatically recording it without commercials, and send it over a high-speed Internet connection to as many as 15 people.

Like the controversial MP3 distribution service Napster, ReplayTV refers to its Send Show feature as file sharing. And just like Napster and the trailblazing Diamond RioMiP3 player, the media establishment has turned to the courts in an attempt to stop the product from reaching the market Disney, Paramount, NBC, CBS, ABC and others are jointly suing ReplayTV and parent company Sonicblue Inc. over the commercial-skip and file-sharing features. In the legal complaint, the media companies allege that Santa Clara, Calif.-based Sonicblue's "unlawful scheme attacks the fundamental economic underpinnings of free television."

While commentators have been quick to draw parallels to the Napster case, analyst Mike Paxton of Newton, Mass-based Cahners In-Stat said Sonicblue's current legal battle with the media industry has more in common with the case of the Diamond Rio MP3 player. (Cahners In-Stat is owned by Cahners Business Information, the parent company of Electronic News.) The Recording Industry Association of America (RIAA) sued Diamond Multimedia over its Rio product in 1998. The RIAA lost, and Sonicblue went on to buy the Rio brand. Andy Wolfe, Sonicblue's CTO, said the media conglomerate's current lawsuit is a preemptive strike to stop his company from getting into the content distribution business. Sonicblue plans to introduce a ReplayTV service next year that would allow consumers to go around the cable networks and purchase content directly from producers with Sonicblue taking a cut as the middleman.

PCs are far more capable of video piracy than the forthcoming ReplayTV product, but media companies realize it is too late to try to control the PC market through the courts, Wolfe said.

"The things that we are doing with this box are far less offensive to copyright than what you can do with a PC, but because we have made it easy to use, that scares the networks," he said. "The networks are making a lot of money, and they would like technology to go away."

Sonicblue plans to start shipping the ReplayTV 4000 series before the end of November, Wolfe said. He said the chances of the media companies getting an injunction to stop the product reaching the shelves before Christmas were slim.

Digital video recorders need a lot of storage capacity. The four models in the ReplayTV 4000 series come with 4oGbytes to 320Gbytes of hard disk space. Each gigabyte can store about an hour of television, according to a Sonicblue spokesman.

AsPC sales level off, hard disk drive makers are hoping consumer products, such as digital video recorders, will be the next big growth-driver for their industry. Cahners In-Stat estimates 2.1 million disk drives were shipped into that worldwide market segment this year. That number is expected to rise to 16 million in 2003.

"Most PC companies are forecasting growth in the low, single digits," said Robert Pait, global marketing manager for consumer electronics at Seagate Technology LLC, a hard disk manufacturer based in Scotts Valley, Calif.

"We know that enterprise growth is basically going to be flat, so this really represents the growth opportunity for companies involved in storage," Pait said.

Seagate has established testing centers in Singapore and Colorado with around 100 engineers between them to help consumer electronic companies build hard drives into their products.

Pait said advertisers would have to adapt to this new digital world where viewers have more control over what, when and how they watch television.

A Japanese advertising company is working on a kind of e-commerce-enabled product placement for this new breed of set-top boxes, he said.

"If you like the shirt a character on TV is wearing, you will be able to press a button and buy it," Pait said.

While other hard drive manufacturers are eager to embrace new opportunities, they are more sympathetic to the networks' concerns.

"If you pull the rug out from under advertising, you don't have television because television is the business of serving audiences to sponsors," said Bentley Nelson, manager of strategic marketing for Maxtor Corp.'s consumer electronics business. "Napster is absolutely the poster child of what not to do. Anybody looking at Napster and trying to emulate that model should definitely look at the legal issues involved," he said. Nelson was a television producer and director before he moved into technology marketing.

As digital video recorders try to become the gateway to the digital home and networking standards continue to evolve, programmable logic companies are also sensing an opportunity. If the MP3 world is any guide, encryption techniques for digital video will also keep changing.

The ReplayTV 4000 series has a Spartan PLD from Xilinx Inc. inside, said Robert Bielby, a senior manager in charge of end-market development at Xilinx.