COMMENTARY--In most debates about the future of home entertainment, the real question is not whether homes will become digitized, but how, and who'll profit from it. Like the Betamax/VHS battle, there's a split developing right now between the two main companies vying to rule the digital entertainment roost: Apple and Sony. The two have different strategies and different technologies, but truly reinventing the consumer electronics market may require a combination of their approaches.
Apple believes that the computer should be the hub through which other devices, such as MP3 players, digital cameras, and PDAs, are managed. This makes sense for Apple, given that it excels in combining software, hardware, and industrial design to create elegant products that make digital entertainment seem fun -- instead of daunting. Already Apple's iMovie, iPhoto, and iTunes programs are the most intuitive way to manage content on a computer. Now Apple has started developing portable devices, like its recent iPod, that will work in conjunction with a computer.
Before the iPod, there were plenty of MP3 players on the market, but they all had problems. They tended to be either too big and bulky with low battery life, or they had good battery life but could store only one CD's worth of music. The iPod manages to be tiny (a mere 6.5 ounces) and has 10 hours of battery life, yet its 5-gigabyte drive can store 1,000 songs. Apple sold 125,000 of the players in six weeks.
More than any other MP3 player, the iPod represents the reinvention of the Walkman (ironically enough, one of Sony's staple products), because it was designed from the computer out. Its playlist software replicates the way that iTunes works on a Mac, making it easy to search songs by title, artist, album, or any other category you want. The scroll wheel is similar to an Apple touchpad in that it accelerates through song lists as you turn it faster with your thumb, and the 400-megabit-per-second FireWire connection lets you download an entire CD in less than 10 seconds (while recharging the battery at the same time).
Smart stuff, and it seems unlikely that Sony could have come up with something even close. While Sony is a master at creating cool hardware interfaces that require buttons, dials, and pleasing physical forms, it still has a lot to learn about software interfaces. If Apple's vision of home entertainment wins out, you can imagine a whole line of products like the iPod that will be designed to plug into Apple's digital hub: iStereos, iTVs, iCameras, iAnything. Some of them could be produced by Apple and some by other electronics companies, but if they're cool enough, it's not hard to imagine people buying Apple computers merely for the devices those computers let you use. At least, that's what Apple hopes.
Sony, on the other hand, thinks that PCs, TVs, digital cameras, and other devices should be able to communicate directly with one another on a peer-to-peer basis. The company's rather sweeping view is that all digital devices should eventually be connected together through a variety of networks and have enough smarts built into them that they can exchange relevant information and content even if you don't specifically ask for it. To that end, Sony plans to put an Internet-friendly IP address on every consumer device it makes. That way, for instance, you could bring your digital camera within a few feet of your color-screen PDA, and -- through Bluetooth or 802.11 wireless technology -- the two devices would sense one another, establish a connection, and transfer image files from the camera to the PDA screen for better viewing.
Sony also has a concept it calls the AirBoard, a flat-panel tablet sold in Japan that can store movies or other data and wirelessly transmit them to other screens nearby. You could start watching a movie on a TV in the living room, then pick up the AirBoard and take it outside or to the bedroom to finish it on a monitor in there. Of course, Sony will also continue to include Memory Sticks with many of its gadgets, offering yet another way to transfer data between Sony camcorders, digital cameras, PCs, TVs, and stereos.
Unfortunately, there are problems with both Sony's and Apple's strategies. Apple designs fantastic products and has a cult following, but the universe of consumers for those products is pretty small -- just 5 percent of the overall market for personal computers. Apple's iPods don't work with Windows machines -- at least not yet -- and until it expands beyond its own insulated world, few people will be able to enjoy its products, no matter how creative they are.
Sony has a bigger problem. Skeptics say the company will run into serious user interface issues. Think of it this way: The typical consumer most likely has problems using any but the most basic features on a Sony VCR. Now imagine trying to store and manage all the digital photos, music, and movies that people increasingly collect, and doing it all without a central computer. The complexities quickly become apparent.
The best solution may be a combination of the two approaches. If you think about it, Apple's and Sony's views of the world really aren't all that far apart. Take the iPod, for instance. It's only nominally an MP3 player. More generally, it's a portable hard drive that can store anything, much like Sony's AirBoard. In theory, an iPod could be connected to a digital camera to store photos, or connected to a PDA with a color screen to power a slide show, or even hooked up to a mini-screen to watch movies. In these scenarios, no computer needs to be involved. Each device can act as its own hub, and the mini-network starts looking like a peer-to-peer environment.
In fact, one could argue that if you put together components that can act as a hard drive, a screen, a powerful processor, and an input device, then what you've actually built is a PC. But this is an instance where the parts may be greater than the whole -- especially if those parts can be mixed and matched into different configurations that can do different things. The trick, it seems, is finding a way to bust up the PC while keeping all of its charms intact.
As an editor at large for Business 2.0, Erick Schonfeld contributes to the editorial development of the magazine, writes feature stories, and pens a weekly online column (Future Boy). Schonfeld is also a contributing editor for Fortune, where he has written about technology and investing for the past seven years.