Hewlett-Packard Combats TV Commoditization with Networking Technology

As creeping commoditization depresses prices and zaps profits for flat-panel television makers, Hewlett-Packard Co. (HP) announced plans at the Society for Information Display 2007 Symposium to offer a new line of networked sets that will make the television the center of the home digital-entertainment experience. "There is no way to eliminate the commoditization of displays," Jim Sanduski, vice president and general manager of HP’s digital television solutions group, said during a talk. "It’s the nature of the industry. However, by adding networking to television, we can slow \[it down\]." Sanduski said the High-Definition Television (HDTV) market is transitioning from standalone sets—which he described as part of the HDTV 1.0 generation—to networked sets, which he dubbed part of the HDTV 2.0 generation. "HDTV is at a crossroads," he said. "Displays could continue to get bigger, better and cheaper, but there’s a better direction for the industry: HDTV 2.0 networked television." Current first-generation HDTVs integrate features like HDMI interface connectivity, MPEG-1 and 2 decoding, Dolby Digital audio, and support for over-the-air, cable and satellite video sources. Such sets also support time-shifting technologies like digital video recorders. New HDTV 2.0 sets will add support for place shifting, enabling content derived from Internet-connected PCs to be displayed on them. The sets will use Ethernet and wireless networking connections on HDTV sets, allowing them to link to home networks. Beyond digital content from PCs, HDTV 2.0 televisions will be able to display video from Internet Protocol Television (IPTV) downloaded from computers or sourced directly from home servers. Such televisions also will allow consumers to view their own content, including user-created pictures and video. Since HDTV 2.0 televisions will be more expensive than conventional HDTV 1.0 televisions, HP intends to see higher margins and healthier profits. Best known as a PC and printer maker, HP is devoting considerable resources to its HDTV 2.0 television initiative. Beyond network-enablement, HP’s HDTV 2.0 sets will sport the company’s MediaSmart software, which allows consumers to browse, select and buy movies from third-party services. The networked TV will be at the centerpiece of HP’s Managed Phone initiative, which envisions a home media network focused on the PC. Sandusky hopes the company’s line of televisions will propel it into the top-tier of TV makers. HP has a long way to go, however, since the company is not among the world’s "Top 36" makers of televisions in the fourth quarter of 2006, according to iSuppli. "Adding features to the television will reduce the commoditization of the product," said Sweta Dash, director of LCD and projection research for iSuppli. "With nearly everyone in the LCD-TV supply chain losing money, they are looking for a way to improve product margins. HP’s approach will give at least some hope that they can improve their profits." The move to offer networked television may provide particular benefits for a company with an extensive background in Information Technology. "The success of IT players has been limited so far in the television market," said Paul Semenza, vice president of displays for iSuppli. "They need to bring their skills and core competences into it." Networked television has a strong future, according to iSuppli. The company says Global shipments of televisions with integrated networking will rise to 21.3 million units in 2009, up from 1.6 million units in 2006.The network-equipped television market will nearly triple in 2007 alone, with shipments rising to 4.3 million units this year. iSuppli also predicts a strong future for IPTV. Global IPTV subscribers will rise to 103 million in 2011, expanding at a whopping Compound Annual Growth Rate (CAGR) of 92.5 percent from 3.9 million in 2006.