What the ‘Cable Business’ Can Teach Tech Companies

For a change, this isn’t about “cable” as in cable television. Thanks to Comcast (NASDAQ:CMCSA) and other players in that space that have developed a sudden interest in streaming video, the news has been full of stories about Web-based streaming video developments and some of the related gear that’s in the pipeline.

The Globe & Mail recently published a product review for a wireless audio and high-definition video device. The review was headlined “Untangle HDMI cable snakepits…” This required a double take.

It was only a decade ago that researchers started working on the HDMI standard with the goal of eliminating the tangle of audio and video cables that plagued home theater systems. The idea of a single cable carrying all audio channels as well as high-definition video promised that the days of having to plug three component video cables plus left and right channel audio cables into a TV for just one high-definition media source were over. Five cables reduced to one.

It took a while (it wasn’t until 2007 that TV companies were including an HDMI port on most models), but HDMI is now the standard for connecting most video sources (including video game consoles, set-top boxes and Blu-ray players) to high-definition TVs.

A once-touted solution now shunned?

HDMI was designed largely to eliminate the “snake pit” of audio video cables (it also has content protection uses, but that’s another story), but only five years after gaining widespread adoption, it’s being demonized.

High-definition cable manufacturers like Monster Cable can make a considerable amount of money (privately held Monster’s revenues are estimated at $100 million annually) by charging audiophile customers $120 for premium HDMI cables while other companies offer $5 versions that perform just as well in tests. They won’t be happy with the prospect of living rooms going wireless.

If the current rage for streaming extends beyond supplying content ala Netflix (NASDAQ:NFLX) and into eliminating cables altogether, there are going to be ripple effects in the industry. And if wireless-connectivity tech takes off, you can bet that intermediary boxes like the device reviewed by the Globe & Mail are going to multiply. Only they’ll soon be pushed out, because if wireless connectivity between TVs and other components becomes the new standard, Sony (NYSE:SNE), Samsung (PINK:SSNLF), and other manufacturers will incorporate the feature into their products, eliminating the need for a box to do the work.

The lesson for consumers? Standards are changing faster then ever and these changes often make devices “obsolete” well before they reach the end of their useful life. If wireless connectivity catches on in the living room, the next time you upgrade your TV you may need to upgrade everything else if you want to connect them — or hope someone still makes one of those intermediary boxes.

And the takeaway for tech companies? Besides the fact that, increasingly, streaming is in and wires are out, the rapid changes in the consumer electronics industry mean that manufacturers need to make enough money to recuperate development costs in a shorter timeframe than ever. Maybe that means charging premium prices (as Monster Cable has done and Sony is attempting again with its HDTVs), cutting back on research and development, or more strategic partnerships to spread the cost among multiple companies.

The odds of having a decade to amortize the R&D costs needed to launch a new product — like Apple (NASDAQ:AAPL) enjoyed with its iPod (the current Classic model is largely unchanged 11 years after the iPod’s introduction) — are getting longer.


Article printed from InvestorPlace Media, https://investorplace.com/2012/03/what-the-cable-business-can-teach-tech-companies-sne-ssnlf-aapl/.

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