Targeting the projected huge demand for personal-video-recorder (PVR) technology, consumer electronics giant Thomson Multimedia and disk-drive manufacturer Seagate Technology have formed a company to make storage systems for various consumer devices.
The new firm, CacheVision, is a 50/50 joint venture of Paris-based Thomson and Scotts Valley, Calif.-based Seagate. Based in San Jose, Calif., CacheVision won't produce PVRs under its own brand. Instead, its aim is to supply hard-disk "storage modules" on an OEM basis to consumer-electronics manufacturers producing such devices as the popular TiVo and ReplayTV PVRs.
Thomson and Seagate executives say the OEM model is "comfortable" for both Thomson, which already does a healthy business in components such as picture tubes, and Seagate, a leading supplier of disk drives for PCs and video servers. Seagate also provides disk drives for EchoStar's Dishplayer, a satellite set-top developed by EchoStar and Microsoft that combines PVR and WebTV functionality.
Thomson Senior Executive Vice President Frank Dangeard says the two companies are committing "tens of millions of dollars" to CacheVision and expect it to generate $400 million to $500 million in overall sales in three years. CacheVision's major initial competition in the PVR market is Quantum Corp., which supplies its Quantum QuickView disk drives to both TiVo and ReplayTV.
"These two companies have been behind in PVR creation, although the Seagate drive is used in the Dishplayer device," says Forrester Research Principal Analyst Josh Bernoff of the Thomson/Seagate deal. "There's been nothing to stop Seagate from doing what Quantum has done, but Quantum has taken the lead in allowing TiVo and Replay to work."
CacheVision says it will show initial product in October and probably announce deals with consumer electronics firms in January at the 2001 CES Show in Las Vegas. One likely customer is the DirecTV set-top being developed by Thomson and Microsoft that will include PVR functionality.
Another key market for CacheVision is the cable industry, with MSOs becoming increasingly aware of the need to provide PVR functionality in their digital set-tops. Their motivations are two-fold: They want to ensure that subscribers continue to use their electronic program guide (EPG), as opposed to a separate EPG from a TiVo or Replay, and they fear competition from DBS services and their set-tops with integrated PVR functionality.
Bernoff expects cable set-top makers Motorola and Scientific-Atlanta to be "two very important customers" for CacheVision because he thinks MSOs will incorporate disk drives into set-tops and charge customers a monthly fee for the service.
Richard Johnson, a Seagate vice president who has been tapped as CacheVision's president and CEO, acknowledges that PVRs are a source of "contention and consternation in the cable industry." Although Seagate provides disk drives for video-on-demand servers from manufacturers like Seachange, he thinks a larger opportunity lies in VOD services that rely on local storage in consumer homes.
"They'll still make money off the movie being downstream, rather than located on a headend server," says Johnson, who predicts such home-recording devices will be used to record "a mixed bag of content" including Internet data and digital music.
Another significant change for PVRs, he predicts, will be the advent of removable media, such as DVD-ROM disks. So far, the lack of associated tape or disk is the one major drawback to TiVo and Replay, compared with a conventional VCR. The challenge, of course, is the rat's nest of copyright issues involved in providing the ability to make digital copies of premium content.
"You'll see products next year come into the market that will provide PVR functionality with some form of removable media," says Johnson. "There are issues associated with copy protection, and they're still contentious issues. But the consumer is going to demand it."
