Abstract

Emphasis on Introduction of Multimedia Functions into PCs

The PC vendors have based their digital home architecture around home communication networks and audiovisual/multimedia data exchange. The underlying goal of their digital home products and services is to provide users with high-performance audiovisual and multimedia processing systems. This strategy is reflected in HP's Entertainment Center and Media Center, in Dell's XPS series, and in display hardware such as Apple's iPod, the Cinema HD Display, and Dell's widescreen flat panel monitors.

Focusing on Different Product Categories

The differences between the product strategies adopted by Apple, HP, and Dell can be attributed to the differing digital home vision that each company has adopted.

The iTunes service is the core element in Apple's product planning; it underlies the development of storage and player hardware such as the iPod, iPhone, and iPod Hi-Fi. Apple has provided consumers with the products and interfaces they need to enjoy audiovisual content from the point of view of a service provider. Therefore, they developed the Apple TV, which is capable of transmitting iTunes digital content for playing on a wide range of different display devices. With the Apple TV, consumers will be able to use their existing audiovisual entertainment equipment to enjoy Apple's online digital content services. The key difference between Apple's product mix and those of HP and Dell is that, compared to HP and Dell, a larger share of Apple's products fall into the Transmit product category.

By focusing on Transmit products, adopting the DRM-free concept, and providing full support for Intel-based computing systems, Apple is trying to make its products more compatible with other vendors' systems. This new approach represents a major change in Apple's strategy for establishing itself as a major force in the digital home market.

Both HP and Dell have made PC hardware the core element in their digital home solutions. Their digital home product mix includes Entertainment Center, Media Center, and Media Vault, along with the LCD monitor, plasma TV, and LCD TVs to go with them. As integration is the underlying theme of HP's and Dell's hardware design. they have added TV tuner and FM tuner function to the Entertainment Center system and PC systems, and multi-card reader and 802.11a/b/g WLAN functions to their own-brand TVs.

HP and Dell are trying to change the hardware that people use to enjoy audiovisual entertainment within the home. Therefore, their digital home strategies are a continuation of the strategies that they have employed to maintain dominance in the PC market.

As HP and Dell are both weak in content services, they have concentrated on upgrading the functionality and performance of their hardware and have been relying on strategic alliances to compensate for their weakness in service provision. The series of acquisitions that HP's printing arm has implemented recently suggests that HP is likely to to make online printing service a key element in its digital home content services strategy.

Dell seems undecided as to what business model it should adopt for developing the digital home market. Dell attempts to formulate a more comprehensive digital home product roadmap by creating new channels for direct communication with consumers and establishing the Global Consumer Organization in 2007 to help Dell to identify consumers' real needs. It remains to be seen whether Dell will go a step further by establishing its own content services website.

Apple Setting Examples for PC Vendors in Digital Home Development

It will be some time yet before digital homes with home networks become the norm. For the environment needed for high digital home penetration to take shape, three prerequisites must be met. Firstly, the necessary infrastructure ?such as home networks ?must be in place. Secondly, the platforms must be efficient and provide easy, convenient connectivity between different products. Thirdly, a wide range of content ?such as the audiovisual content provided by iTunes ?must be available.

Given the need for all three of these requirements to be met, the optimal strategy for the leading PC vendors would appear to be to follow Apple's example by positioning themselves as service providers, or identifying service and content providers with which they can collaborate. They will then be in a position to implement short-, medium-, and long-term product and interface planning in line with their own core business areas and technologies.

One major problem affecting the digital home environment at present is that different platforms are not yet able to communicate and link up with each other seamlessly. Apple's Transmit products offer a provisional solution to this problem by allowing consumers to enjoy high-definition online audiovisual content on their existing equipment. The integrated products that HP and Dell are trying to develop will have a chance of replacing traditional audiovisual equipment (coupled with Transmit products) until platform interoperability improves and home networks reach a higher level of maturity.

From the point of view of PC vendors, integrating hardware with content services would appear to be the best strategy for developing the digital home market. PC vendors have to be involved in content provision so that they can identify the types of hardware that are needed, thereby developing an appropriate product mix and provide consumers with a comprehensive range of hardware and software solutions.

Opportunities for OEM/ODM Providers

When planning their own digital home product strategy, ODM/OEM providers and component suppliers will need to realize that the leading PC vendors will either be developing their own content services or else collaborating with content service providers. They have to identify the PC vendors' weakness in product lines and digital home technology, and collaborate with the PC vendors in line with their short-, medium- and long-term product roadmaps to develop the products and interfaces the vendors need.

Compared to Apple, so far neither HP nor Dell has been very successful in developing mature products/services in the Content Services and Transmit segments. There may be opportunities for ODM/OEM providers and PC component suppliers to form strategic alliances with the leading PC vendors. By providing technologies and products in areas where these two PC vendors are weak, they will be able to work together with them on the development of the digital home market. 

Appendix

Glossary of Terms

List of Companies