Apple, Microsoft, Sony, And NetFlix: The Myth Of Convergence

The New York Times rans a breathless article about Silicon Vally start-up Vudu. The company makes an internet-ready set-top box that can deliver films from the company’s 5,000 movie archive. The strength of the technology is that the films can be played immediately. Most current systems require a download time before content plays.

Convergence has been the Holy Grail of content and technology companies for a decade. The dawn of broadband helped convince PC and TV companies that the two platforms could be married. Intel (INTC) and Microsoft (MSFT) both built components for PCs that could be used for video viewing. The new Xbox and Sony (SNE) Playstation3 both have the ability to connect to the internet and play DVDs on the TV screen. Tivo’s (TIVO) primary product allows shows to be recorded and played instantly. Amazon (AMZN) has launched the UnBox. And small private companies like SlingBox also have products that serve part of the covergence market.

The trouble with convergence is that it was dead before most of these devices were launched. A digital cable TV will give consumers the opportunity to play thousand of movies. Fast-forward. Rewind. The works. The telephone companies will offer the same thing with fiber-to-the-home.

Inventors want Wall St. to think that DVDs have become too inconvenient for the video crowd. But, they can be picked up in food stores, gas stations, Wal-Marts, and plenty of other locations. Or, NetFlix (NFLX) or BlockBuster (BBI) will put them in the mail.

Many homes already have a set-top box, a DVD player, and perhaps a VHS or Tivo attached to the television. Most consumers cannot work the three remote controls that they have now.

The UnBox, that Xbox movie functions, and the Vudu are competing for a market the TV viewer does not need. He already has too many options.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.