Controlling the Living Room

By Eric Taub

Could your televisionís next set-top box be made by Nintendo? According to a professor at MITís Sloan School of Management, the idea is not as inconceivable as you may think.

Americans pile DVD players, video game machines, surround sound amplifiers, TiVo recorders, and cable or satellite boxes under their televisions, but there is only so much space to stack them. (And there are only so many remote controls that people will tolerate).

The company that can combine many of those services into one single box can control the living room, and reap the financial rewards.

According to Professor Pai-Ling Yin, the current advantage goes to the cable companies, given that they have the one box that everyone needs.

But as an industry, Prof. Yin says, they have come close to blowing their lead. Cable companies were slow to respond to the TiVo phenomenon, and only gradually began to integrate their own, less-elegant P.V.R. technology into their set top boxes. ďHow long can they wait and still sweep in as a second mover? They have not done the best job.Ē

When entertainment hardware companies add features to their existing technologies, they are not doing it just for fun, but rather because they understand that the more consumers rely on their devices for their leisure needs, the stronger they will have wedged themselves into the home.

Apple, for example, gained traction by integrating first video playback and then telephony into its music storage iPod, Ms. Yin says, and thereby created an electronic Swiss Army knife.

According to Prof. Yin, it is the video game console manufacturers, including Microsoft, Nintendo, and Sony, that may be best positioned to gain a foothold in the living room. With their razor and razor blade model, the companies sell their hardware at a loss and make up for it in software sales. By integrating high definition DVD playback and Internet access into their units, they are taking the first steps necessary to eventually make a deal with a cable company to put all their features into just one box; for want of a better word, a WiiDVDCablePVR unit.

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