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TG Daily: Content appears to be a big factor in entertainment PCs.
MacDonald: We are working with companies such as Click Star [a joint venture between Intel and actor Morgan Freeman] so you can get content close to theatrical release. We also work with Cinequest and the local film festival; for example, they had 2000 movies submitted, 200 were selected and only one got national distribution. There are 199 great movies that did not get any distribution. In the Viiv usage model, we have access to new content. For that new content, I am happy to pay for - before it comes to TV. We think that's a whole new industry.
TG Daily: Intel tried before to make an impact in the consumer electronics industry, with devices such as the Intel microscope and the Pocket Concert MP3 player in the early 2000s - all products that had very little success and were removed from the market. Does the Intel brand need more consumer electronics appeal to be successful with Viiv?
MacDonald: I don't think so. We are not designed to be in the finished product business. We always do best with our core strength, which is supplying silicon as an ingredient. What we need are our vendors and channels to come up with products that can explain what Viiv is. Our brand is secondary.
TG Daily: But you have to admit that you are playing with Viiv in a different market. In the end, a Viiv PC is a PC that has to attract someone who is buying a consumer electronics device. Buyers of consumer electronics products have very different expectations from their purchase than PC buyers.
MacDonald: Yes, that is a big challenge. We have to be careful what we are developing and what we are marketing. From a development side, Viiv was designed to do three things. Ease of use, simple connectivity and very high performance. Viiv version 1.5 is designed to be easy to use and provide simple connectivity. The software is a big challenge, because people don't want to have an IT experience in the living room. That's why the new crop of Viiv PCs include things like an HDMI port.
TG Daily: The debut of Viiv at CES revealed that there is a huge gap between IT and Hollywood in a sense of how business is being done. There's a certain way how Hollywood wants to make money with digital content and then there's a completely different approach IT companies such as Intel are pursuing. Do you still have to learn how Hollywood thinks?
MacDonald: Absolutely. Generally, Hollywood is against technology. They are paranoid for two reasons. One, they do not want the quality of content experience to be degraded. Second, they don't want to get ripped off by content getting stolen. But they very smart and every time a new technology comes along, they learn how to monetize it.
We have been active for several years and asked them 'why don't you provide a better consumer experience by using technology? In the end, that's the key thing you do - you deliver a better experience. And consumers pay for the content - most people do not steal content. It was an evolution from the cinema to the television, from there to cinema television, VCRs and DVDs and now to the Internet. Technology can help you to make it very simple.'
We still need to make Hollywood feel comfortable that the technology is reliable and that there is a good quality experience. When you look at the evolution of the industry, it always happens over a period of time. Just because we launched Viiv in Q1, doesn't mean that we are done in Q3.
TG Daily: But everything appears to be revolving around content and not so much technology. Does Hollywood depend on technology or does technology depend on Hollywood?
MacDonald: I would have to say that we depend on Hollywood. People don't buy a set top box just because it is a nice set top box. They want to watch that movie. But services are the other component: Devices are a necessary precursor for services or content. Hollywood is just behaving as it always did. 'Let us do the things the way we always have'. In that way, you could say that this is why those changes are so important. We realize that the Internet change is happening and it is happening without the studios.
TG Daily: Intel has taken side with the HD DVD camp and does not support the Blu-ray group. What are the reasons and will you support Blu-ray in the future?
MacDonald: What we care about is the view of the consumer. HD DVD and Blu-ray use similar technologies. Both use the next-generation content protection system AACS. We are very firm advocates to say 'I want to copy my discs legally and I do not the DMCA to be used against me. I am not a criminal'. The HD DVD group said they will embrace AACS including a function for a mandatory managed copy. We believe that the interest of consumers is best served by allowing legal copies of their disc. HD DVD does it, Blu-ray does not promise this. That's the number 1 reason why we support HD DVD over Blu-ray. If Blu-ray were to provide the same consumer friendly features than we would reconsider our position.
TG Daily: Thank you for the interview.