The CES 2006 Story: Silicon Valley and Hollywood on a Date

Content is King

Its not news that content is becoming more and more important to everyone and everything that touches consumer electronics and computers. We have seen this trend developing over the past year and even before that.

News, however, is the fact that it is content that has begun to drive or restrict innovation in IT and CE. The company with the best content in its archives is an enviable entity these days that can be sure to be approached by numerous IT firms that are willing to go that extra mile just to be able to make audio and available for their products. Semiconductor firms, software developers, consumer electronics giants and search engines alike struck partnerships with premier media conglomerates and initiated a trend that is likely to infect many more traditional firms throughout the IT and CE industry.

While content owners such as Sony, CBS or Disney need the support of hardware and software companies to securely distribute their music and videos and open up new revenue channels, many traditional tech firms believe in content as the next big opportunity for growth. Attractive content can create a very convincing reason for consumers to buy that new more powerful computer - and that is exactly the strategy the Intel's, Dells and Microsoft's of this world are betting their assets on.

Lots of popular Hollywood actors and singers promoted digital content and devices, even if they have trouble iunderstanding it, such as Tom Hanks.

Let's have a closer look: Intel padded the launch of its Viiv entertainment PC platform with content partnerships with NBC, AOL, XM Satellite Radio, AEG as well as Clickstar, a movie distribution service, which the company co-founded with actor Morgan Freeman. CE giants such as Pioneer and Philips bagged similar deals - the latter with CBS. Even darlings such as Google and Divx have begun considering the content game to conquer new business opportunities: Google already announced a commercial video store with content licensed from several entities such as the NBA or CBS. Divx will follow in the second half of this year and not only will license its technology, but also offer commercial downloads of licensed content.

Content owners already exploit their favorable situation to force IT and CE into compromises that never have been possible before - it is more or less a take-it-or-leave-it opportunity for the big content owners. Disney & Co. will be able to enjoy this environment until the market will find a natural balance. And while Sony's chairman and CEO Sir Howard Stringer apologized for the recent audio-CD root ware embarrassment, it is rather unlikely that we will see dramatic change in the short term: "There have been misunderstandings," he said. "But this is what happens in a marriage."

Unfortunately, the consumer has been left out of negotiations and will have to rely on industry executives to figure out what content will be available on which platform. After visiting CES, it is our understanding that there are many misunderstandings left, which cannot be sorted out in the near term. Technology carries a different business philosophy than entertainment. This was one of the most apparent revelations at CES.