Subject: ZapMedia Betting On Convergence
From cksla
PostID 14521 On Thursday, September 21, 2000 (EST) at 6:38:32 PM
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September 21, 2000 ZapMedia Betting On Convergence
by Dan Mitchell
Companies currently offering set-top boxes operate in a fragmented market, with each box touting a different set of features. Eventually, nearly all makers of set-tops will simplify choices for consumers by competing head-to-head with the same products and services, tying together all home-entertainment devices and letting consumers digitally store and organize video and audio.
That, at least, is what Atlanta-based ZapMedia is counting on as it prepares to introduce a product it calls the ZapStation. The box, due out this Christmas, is designed as a sort of hub for home entertainment. In addition to connecting to the Internet, it sports a hard drive and DVD/CD player, a remote control and a wireless keyboard. It plays MP3s and streams Internet audio and video. The device is designed to let users record, store, and organize digital movies and music.
It all sounds a bit like a high-end personal computer. But don't tell that to ZapMedia CEO Ken Lipscomb. ''We're looking ahead to a post-PC world,'' he said. Indeed, eschewing the PC is a big part of the company's marketing line. The ZapStation is meant to display video on the television, and send audio to stereo speakers. The aim is to take Internet content off of PCs and put it on appliances people are used to. ''People want to enjoy their media in an environment to which they are accustomed,'' Lipscomb said.
One thing the ZapStation can't do -- yet -- is retrieve and store television programming. That service has been dubbed ''personal video recording,'' a moniker that belies the real functionality of the features offered by the two dominant players in the market -- TiVo and ReplayTV. Personal video recorders act like a VCR, but go much farther. They essentially allow viewers to watch what they want, when they want -- the closest thing yet to video on demand -- by automatically capturing and storing pre-selected shows as they are broadcast.
So far, TiVo and ReplayTV aren't offering features like those offered by the ZapStation. Neither offer Internet connectivity, but ''it's a safe bet that they will soon come up with similar products,'' said Milosz Skrzypczak, an analyst with the Yankee Group.
ZapMedia wants to offer TiVo-type features in the ZapStation ''within the next 12 months,'' Lipscomb said. The timetable seems ambitious, considering a whole new level of technology must be added, not to mention securing necessary partnerships with TV listing services and cable companies. Still, it appears likely that in the near future, set-top makers will all offer mostly similar services, competing only on ease-of-use and the quality of service.
For now, ZapMedia's needs are more modest. The company's partners are those that will help it simply get a product to market. Its biggest investor by far is Gannett, which publishes USA Today and owns dozens of newspapers and TV stations around the country. Gannett in June took an equity stake in ZapMedia worth $270 million. The media giant will give ZapMedia $250 million worth of advertising over the next decade, and about $20 million in cash. ZapMedia will make Gannett its preferred news provider.
Earlier this month, ZapMedia announced it had secured a fresh funding round from Harman International, a maker of consumer electronics, Eastern Asia Technology, and two Atlanta-based venture capital firms. It seems likely that Harman and East Asia will assemble the boxes.
Besides the Gannett money, ZapMedia has raised $28 million in its 17-month history.
Crucial but missing partners are Internet enablers. The company plans eventually to provide its own service a la WebTV. But in the meantime, it needs deals with existing ISPs. Lipscomb said the company is now ''in discussions'' with at least one big ISP.
Most of ZapMedia's other partnerships are with Internet content companies such as Movieflix.com and Max Broadcasting.
The company won't make much money from sales of the ZapStation device itself. The box is priced at $599, but with rebates and other promotions, most consumers will pay a lot less than that. ZapMedia plans to make most of its money by directing users to partner ecommerce sites, through advertising, and by taking a cut of user subscriptions to services offered by content partners.
ZapMedia could also make money licensing its proprietary back end to other vendors. It helps that the software is cross-platform and written in Linux. And unlike, say, WebTV, it supports Java. If the software proves successful, ZapMedia could become a platform used widely by all kinds of set-top makers and consumer electronics manufacturers. Indeed, TiVo, ReplayTV, or even both, could conceivably end up using the so-called ''ZapMediaEngine'' in their own respective boxes.
But for now, that's only one of many possible outcomes. ''What form convergence will take is anyone's guess right now,'' said the Yankee Group's Skrzypczak. About the only thing he's sure of is that ''a device with a lot of features will have an edge over devices that do only one thing.'' And in that, at least, ZapMedia could find its edge.
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remember all the Gannett brief stories re Treo and think about potential linkup between treo and this; as others have noted- eastech connection as well
AI
