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Little black boxes get big features By Mike Snider, USA TODAY 2000-07-17 Whether perched atop the TV set or hidden in an entertainment center, the unsightly set-top box has been a necessary evil for couch potatoes since cable TV signed on. But a new breed of smarter, sleeker boxes is about to come on the scene, from a variety of companies billing them as the next must-have entertainment gadget. All are positioning themselves to be sitting on top of your set in the next few years as the world goes interactive. "Basically, the time for this is now. It's really happening," says Josh Bernoff, an analyst with Forrester Research in Cambridge, Mass. Until recently, he adds, "we didn't have the Internet, we didn't have boxes cheap enough, and we didn't have standards and competition. Now, the cable operators are building out their systems, and satellite is a real force." Today, about half of U.S. homes have at least one set-top box, Forrester says. By the end of 2002, more than 25% will have new boxes for digital cable or satellite services. By 2004, consumers could be spending $9 billion to $10 billion on new digital and interactive TV services -- with ads producing billions more in revenue. Consumers have always had a love-hate relationship with set-top boxes, which typically come with a cable subscription -- sometimes free, sometimes for a fee. Kirk Bayne, 43, an Independence, Mo., engineer and programmer, still cringes when thinking about a cable box from the early '80s. The box delivered just 35 channels, but every one was a digit off (channel 4 became 3, and so on). "This caused problems when using the local TV program guides," he says. Congress passed a law in 1996 requiring the industry to create a standard that lets consumers buy their boxes at retail. Those interoperable boxes, expected this year, could be used with all cable systems, so if a subscriber moved, he could pack up his set-top box and use it in his new home. That and the advent of broadband Internet services have led to the formation of alliances including mega-corporations such as Microsoft and Sony, cable companies (AT&T, Cox), Net giants such as America Online and start-ups such as ReplayTV and TiVo, which turn set-top boxes into personal video recorders (PVRs). Joining a digital gold rush The first PVRs from TiVo and ReplayTV have been out for less than a year (costs start at about $500), but similar features are being built into many boxes on the way. A PVR uses a hard disk to record video (broadcast, cable or satellite) digitally and allows users to pause and replay live TV broadcasts. About 11% of US households expect to purchase a PVR within the next year, according to a recent random survey of 1,000 homes conducted by the Consumer Electronics Association. Manufacturers are attempting to outdo one another with cheaper, easier-to-use boxes that are packed with more features, including PVRs. "We're combining boxes so it makes it more convenient for the consumer," EchoStar's Marc Lumpkin says. Last year, EchoStar introduced its DishPlayer set-top box ($399; a $199 rebate offer runs through July). DishPlayer combines Dish Network satellite TV programming with a PVR and WebTV service. EchoStar unveils its DishDVD system ($399, in stores next month), which merges a satellite receiver with a built-in DVD player, on Wednesday at the Satellite Broadcasting & Communications Association show in Las Vegas. The show runs through Friday. Other recent announcements: > AOL sees such promise in set-top boxes that it has announced plans to acquire 30% of TiVo. Next month the company introduces its first AOLTV set-top box, built by Philips ($249). AOLTV boxes with TiVo or DirecTV satellite service are in development (due by Christmas, no prices yet). > Microsoft has its own set-top box on the way, built by Thomson (RCA). It promises a souped-up version of WebTV called UltimateTV, with PVR and DirecTV ( expected to be around $400). UltimateTV will take WebTV's interactive TV features (besides e-mail and Web access) and expand them. "Consumers by virtue of the Internet phenomenon are much more used to interacting," says Ed Graczyk of the Microsoft TV platform group. Microsoft owns WebTV, which it purchased in 1997, and also creates software that cable and satellite TV companies can use in consumer set-top boxes. > Among other companies expected to announce products this week are DirecTV and Sony. Sony is building boxes for Cablevision and selling a Digital Network Recorder ($400) with a 30-gigabyte hard drive and TiVo's service to navigate TV listings and record 30 hours of programming. "It's simpler than videotape and easier to time-shift," Sony's Mike Fidler says. > ZapMedia of Atlanta got $270 million in funding from Gannett, parent company of USA TODAY, to develop the ZapStation, a set-top box (due by Christmas, no price yet) that surfs the Net, plays DVDs and MP3 music files, and has a PVR. Linking the box to everything Set-top boxes are needed because the average TV lasts 12 to 15 years. So while the TV you bought years ago still works, the worlds of electronics and programming continue to evolve. Boxes translate and funnel new cable, Net and satellite services to the TV. Early adopters may snap up the latest boxes, but those who wait may be rewarded with cheaper boxes and more features, says Forrester's Bernoff. Bayne, who founded the Internet discussion group alt.video.digital-tv, envisions buying a box that handles all forms of TV, plus phone and Net services -- with an upgradeable hard drive. The goal, says Thomson's Enrique Rodriguez, is a box that handles TV and tells the user " if I got e-mail, an instant message or a voice mail." For those who despise the ugly black set-top boxes, manufacturers eventually will build the devices' features into TVs, he says. One Thomson set already has a built-in DirecTV receiver. Imagine that -- the TV once again standing alone. Then we can put flowers or family snapshots on top. Copyright 2000 USA TODAY, a division of Gannett Co. Inc.