Qualcomm Inc (QCOM)

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Where's the next killer app?

by Ed Sperling at Electronic News

Friday 27 May 2005

http://www.electronicsweekly.com/articles/article.asp?liArticleID=39804&liArticleTypeID=4&li...

Electronic News sat down to discuss the future of consumer electronics with David Milne CEO of Wolfson Microelectronics; Michael Maia, VP of Marketing at Portal Player; Jarreth Solomon, director of technology at Lexar Media; and Allen Leibovitch, semiconductors program manager at International Data Corp. What follows are excerpts of that conversation.

Electronic News: What is the next big thing?
Leibovitch: This year, there’s certainly going to be a continuation of the iPod phenomena. But the Sony Playstation Portable is certainly going to be at the top of retailers’ minds this December.
Milne: But that’s already here. The next thing is the convergence between phones and multimedia. That’s not really here in a format that’s usable at this point.
Solomon: We’ve been trying to figure this out by looking at what happened in the past. Ten years ago we were asking what was going to happen to the PDAs and the cell phones. Well, PDAs absorbed voice capabilities. Now the phone is absorbing the PDA with Windows Mobile, MPEG 4 encode and decode, MP3, e-mail.
Leibovitch: But most of those things aren’t even traditional PDA functions. They’re multimedia functions. Phones are absorbing PDAs and PDAs are absorbing phones. But the phone that absorbs the PDA is winning. The crucial technologies in all this are multimedia. Even the PDA vendors trying to stay alive are adding multimedia because PIM [personal information management] functions are not that exciting.

Electronic News: Then the next big thing is convergence of things we already have?
Maia: The all-in-one smart phone is not where it’s going. It’s going to be things more highly tuned toward specific needs. The cell phone is the next battleground for multimedia, and clearly audio is the battleground. It’s not video for anytime in the near future until Hollywood begins to reposition the content to fit better, which is what they are starting to talk about - re-parsing the shots so the heads are larger and the shots of the horses are bigger so they fit better in the little screen. Those will be snippets - 15 seconds to three minutes.
Milne: There are two markets. There are sports events, which are adult viewing, and there is music and the clips that go with the music. There’s also another dimension in Japan, where they’re watching television downloaded onto their cell phones. That’s peculiar to the Japanese way of life, where they have long commutes and ultra-crowded conditions. You certainly can’t walk down the street watching your television.
Leibovitch: There are two things we see. One is video. That’s almost launching as a food chain, and Qualcomm is a driver behind that. That’s everything from the chips in the phones all the way up to the towers and the content. Qualcomm is doing a very good job of blurring the lines between what is broadcast and what is circuit-switched over their phone network. Ideally, the carrier can put as much onto the broadcast as possible. A lot of things like headline news and sports you can easily broadcast, and to some extent even some of the video content. There’s also content you might want to request. It’s kind of a mix. Even before that, the current battleground is audio. The technology in mobile phones is leading the content. The wireless carriers are nervous about how audio played out over broadband, where the ISPs really had no control over the content and how it was getting out there. There were major issues over licensing and content.
Solomon: The infrastructure is not there to stream live broadcasts. There is CDMA and 3G, which is in its infancy in the US. In Japan, it’s more adopted, but realistically pushing legal downloaded media to a mobile device needs to be taken into consideration. Recently IP TV has been put on hold by companies like Disney because it’s a new battleground that they’re going to have to compete in against small players. It’s going to be something that needs to be played out.
Maia: That’s happened recently with Motorola and Apple wanting to roll out a service but getting a lot of pushback from the carriers, who want to own delivery of services. They don’t want Sony, Siemens, Nokia, Motorola or Apple telling them what to do.

Electronic News: Isn’t this a case of everyone wanting a piece of the action?
Maia: Absolutely. The battleground is really which services the carriers are going to carry. Will it be like iTunes, where it only works in an iTunes product? Then it gets into the digital rights management problem. iTunes has its own fair play thing, Microsoft has its own, Real Networks has its own, which means you can’t play them on other people’s devices. For the consumer, you become a carrier-based content holder.
Leibovitch: The issue for the consumer is if they download a song with a particular digital rights management scheme to their handset. If they can’t put it on their iPod or their home media server, that becomes an issue for them. Consumers are going to resist re-buying content.

Electronic News: One of the biggest hurdles to the next big thing is that we haven’t ever come up with the perfect form factor. How do we solve that?
Leibovitch: You will see little bits of different technologies in different devices. We might see mobile phones with decent gaming capability and MP3, but they’ll still be primarily phones. And we’ll see game machines with the phone built in. There will be convergence, but each device will be targeted toward a specific technology and do one thing really well and a bunch of things okay.
Maia: Today, cameras on phones are a secondary item. You buy a phone and you get the camera for free. It costs them $20 to add the feature. In the next generation, besides just taking the picture you’ll have lots of problems. I think you’ll have the phone and the service behind it, which combined is a valuable product to the consumer who already is into that infrastructure. In Lexar’s case, and in SanDisk’s, as well, getting lots of memory to store photos and other things will appeal to another category of consumer. There will be things that instead of supporting 10 features, support one or two really good features.

Electronic News: But will it be an all-in-one solution?
Solomon: Traditionally, a God-box that does everything hasn’t done very well. It’s more specified products. The convergence of technology is a re-hash of a number of technologies that are being made smaller, combined and integrated into different products. What made the iPod take off was that it was a very easy system to use. It came bundled with an iTunes package and it was a very attractive user interface. That’s one of the things consumers are looking at now. As new products come out, the user interface has to be easy to use in order to be mass adopted.
Maia: That is the critical thing. If you hit that nail on the head, you’ve got a winner.
Solomon: Yes. Take a look at Kodak. It very recently took a leader position in the digital camera space because of the Kodak EasyShare. You plug your camera into a docking station, push a button and it prints. You don’t have to deal with Photoshop or adjusting colors; 80 per cent of the population out there doesn’t have that kind of expertise or the time to do that.
Maia: We use the iPod as a cliché. But it’s a market that other people have to participate in. It’s a very active thing. But you start to see the hockey stick with Sirius and XM in the US and overseas. That’s a completely different experience. A guy who buys a car clicks on the kind of music he wants and goes from there. That’s going to take off faster. Things we don’t have to program are going to be big.
Milne: In Europe, the XM equivalent hasn’t taken off. It’s there, and it’s been around for a relatively long time in terms of the broadcast side, although there hasn’t been the hardware to use. But it’s still pretty small. What I think will be important everywhere is WiFi. The connection to the Internet will be a major way for content to get into portable devices rather than using the phone network, which is where people are getting it at the moment. I don’t see any reason why with WiFi connections you won’t be able to pick that up all over the place much more easily.
Solomon: You have to look at the convergence of standards. There are too many WiFi options out there now. There’s [802.11] a, b, g, n -- you’re getting these large companies backing their own standards. Realistically it’s a question of who’s going to support what. On the consumer level, you have to support multiple different aspects of what WiFi will be. There are companies moving out into supporting 54 megabits per second. Ultra-wideband is moving out. Wireless USB is the next big thing everyone is talking about. Realistically, there needs to be more of a standard where consumer electronics can download media through a network that will support it.
Leibovitch: Bluetooth came out of the handset space. All those other things came out of the PC space. Portable devices need very different technology. There are companies looking at it today, but the power envelope is way too high.

Electronic News: Is the next level of convergence going to be the ability to fuse together your network from your home to your car to work?
Solomon: We are headed toward a convergence where everything will be plug and play, but there need to be standards to make it work. People will adopt it if it’s easy to use. One of the things Microsoft is working on now is a plug-and-play network, where they will stick a USB flash-card device into it and it will automatically program your network - put your firewall together, do your wireless Internet, do your wireless printing. Anything that will have a USB device can be programmed by a USB flash card. The goal is to make a network neutral to any devices that will accept a wireless connection.
Milne: The American perception of the world is very much computer driven, and that comes through clearly in what you’re saying. The rest of the world comes at it much more from a pre-configured arrangement.
Solomon: You only configure this once. After that, it works. You take the configuration out of the end user’s hands.
Leibovitch: With all of this content, whether you’re talking multimedia for consumers or enterprise data, it comes down to whether it’s a PC-centric view or not. I agree with David that the US is very PC-centric. We have Intel and Microsoft driving a lot of that view. The PC is by nature a multi-purpose device. It has a lot of storage, it has power to convert formats, and now we’re seeing connectivity between the PC and other devices. This is what Intel and Microsoft will continue pushing. That’s one direction. There are other ways to get content. One is over the TV pipe. There’s also the wireless pipe, which is more important in other regions of the world.
Maia: In the audio world, it’s a digital rights management problem. Unless you’re doing a streaming version of that content, you have rules and regulations that prevent you from taking that SD card and putting it into another device. Over the next year to 18 months, we’re going to see a whole issue of rent vs. buy. The rent model opens up a new method of distribution in the home and among friends and with people who own the same technology.
Leibovitch: I think the rental model makes more sense with video than music, because a lot of video content is disposable -- especially TV shows, news, and sports. Movies, if you really want it you’re going to buy the DVD. With music, people want to download it and own it.
Solomon: One of the challenges with that is the majority of people listen to music while they’re driving in their car. We’ve talked to several different companies and there is no plan to come out with a [digital rights management] car radio.
Maia: But I think what they’d like to do is to take a wireless communication protocol into the head-in unit. That is absolutely something going on now.

Electronic News: Does the content follow you or does the device stay with you?
Maia: Today it’s the content. Tomorrow it’s the device.

Electronic News: But now you carry it around on one device and move it to another device. Will you be able to just carry one device?
Maia: In the Starbucks WiFi world, you could.
Leibovitch: Eventually you could, but that will require some pretty serious bandwidth. The wireless networks of the world, whether they’re WiFi or 3G, just can’t bear that. Maybe in some future 3.5 or 4G WiMax world, that will be possible.

www.idc.com
www.lexarmedia.com
www.portalplayer.com
www.wolfson.co.uk