Consumer Electronics Show is the flattest ever, but digital technology is coming around the mountain

According to people who have been attending the Consumer Electronics Show for the past dozen or so years, this year’s winter event in Las Vegas was the slowest in memory. But while there was almost nothing new on the show floor, attenders and exhibitors alike were quite aware that a sea of change is sweeping through their business: new ideas, technologies and concepts in consumer products — most of which are digital — will be arriving soon.

Produced by the Electronic Industries Association (EIA), a Washington, DC-based industry trade association, CES does for dealers what Comdex does for computer retailers — gives them the chance to get close to vendors and their latest offerings. Though much of the EIA’s membership was opposed to the move, a lackluster market has caused the organization, for the first time in its history, to open the summer CES show in Chicago to the public. The EIA hopes the move will build consumer excitement for new products.

There were really very few products or trends of note at CES, but those that were notable were quite so. Here’s a look at the cream of the crop.

APPLE ANNOUNCES THE PDA

Probably the biggest news at CES was also a show first: the kickoff speech by John Sculley, chairman and CEO of Apple Computer, was the first time the head of a computer company gave the keynote speech at the consumer show.

Even if Apple hadn’t recently started a consumer products division, Sculley would have been a solid choice. Frank Myers, chief executive of the EIA, claimed that Winter CES had seen a “significant increase” in computer and home office exhibitors, mirroring the market’s increase in home office equipment sales.

Sculley, however, probably gave the audience much more than it bargained for. He laid out for the first time Apple’s philosophy and strategy for its entry into the consumer electronics business with what he called Personal Digital Assistants, or PDAs.

“Books with batteries.” Sculley’s PDA vision includes single-purpose computing devices fulfilling such functions as executive organizers, wireless communicators, electronic books and multimedia players. (A detailed look at Apple’s consumer strategy begins on page 12.)

Apple’s appearance on the scene is likely to be perceived as an ironic turning of the tables by one CES exhibitor. Franklin Electronic Publishers, the New Jersey company that in a previous incarnation was known as Franklin Computer and was sued by Apple for allegedly cloning the Apple II, beat Apple to the punch by more than five years with an entire line of PDAs that it has been selling since the mid-1980s.

Franklin’s electronic reference products — the company calls them “books with batteries” — are clearly far more single-purpose than Apple has planned, however. The company sells everything from crossword-puzzle-solving and speaking dictionaries to medical spelling correctors to Big League Baseball Electronic Encyclopedias, at prices ranging from $40 to $400.

The company is profitable, according to a spokeswoman. Its products are sold in more than 30,000 stores and used in more than 5,000 schools across the U.S.

WHAT’S NEW? DCC AND VIDEOPHONES

The only truly new products on the show floor were prototypes of Digital Compact Cassette (dcc) players and recorders and the VideoPhone 2500 from AT&T.

Preparing for battle. AT&T demonstrated for the first time a picture phone that operates over standard phone lines. At a hefty $1,500 each, the VideoPhone 2500 won’t be a runaway hit come the Christmas season, but the purpose was not necessarily to make a million dollars on this product. The goal, which AT&T met, was to be the first on the telecommunications block to have a video phone that works over standard lines.

It has a 3.3-inch LCD monitor and camera lens attached to a standard telephone handset. But at what AT&T claims is two to ten frames per second of color video, the VideoPhone is not exactly a barn burner. In fact, during a demonstration, it seemed more like a frame every second and a half; and the delay between voice –which worked just as it does on a regular phone — and image was a good (bad, actually) two seconds long. It was quite disconcerting.

However, until recently most people thought it would be impossible to run video and voice communications over a standard phone line, so even limited video is a noteworthy breakthrough.

[[not sure if this is a headline]]Rentals may be the dark horse. It’s highly unlikely that AT&T will sell more than a couple thousand of these phones. Their extraordinarily high cost, combined with the video’s sluggish performance, isn’t exactly conducive to big sales.

However, it does seem likely that the company will have a surprising degree of success with its planned overnight rentals. At $30 per day, they could be a great addition to special events where geographically dispersed groups of people wouldn’t otherwise be able to see each other — family reunions, company meetings and the like. When they finally hit the market, the 2500s will be available for rent from AT&T Phone Stores.

FYI: more to come. The buzz on the show floor was that AT&T’s decision to show the 2500 at CES was a preemptive strike against a coalition that’s prepared its own specifications for a video phone. It’s said the coalition is made up of five of the seven Regional Bell Operating Companies, which were not yet ready to show the product.

DCC FOR DAYS, BUT WHERE’S SONY?

DCC decks were shown in prototype form by half a dozen companies on the exhibit floor. These decks can play analog cassette tapes. They can also record digital audio with a new compression algorithm that removes all musical information outside of the average human’s hearing range. The technology, developed by Philips, Tandy and Matsushita, has been licensed to every major consumer electronics manufacturer.

No “golden ears.” Even though the compression method loses data, Philips’s tests have shown that only half the people who said they could tell the difference between a dcc cassette and a compact disc were able to choose correctly. Statistically, this group of “golden ears” could have guessed and gotten the same results.

Tandy even hosted a concert by jazz pianist Peter Nero, who, after playing some cuts off his new dcc tape, proceeded to “perform” three numbers with his band, pretending to play the piano (hand-synching?) while recorded music played. As became readily apparent, Nero is a great keyboardist, whether he touches the keys or not. The concert left listeners pondering the obvious question: Was it live, or was it Memorex? (Memorex is a division of Tandy.) In all, it was a very effective demonstration.

With the support of the major record labels already in place, dcc machines will be rolling into stores this year.

Conspicuously absent. Sony’s absence from the show was conspicuous, especially with dcc all over the floor. Sony was apparently unable to produce working Mini Disc players for demonstration. (Mini Discs are recordable optical discs, about two inches in diameter.) In addition, Sony has had trouble getting the support of the recording industry, which would have to produce enough prerecorded material to make the purchase of a Mini Disc player attractive.

The product line was conceived for mobile applications (car stereos, personal disc players, etc.). However, almost from the start, it was seen as a competing product to dcc. While Philips and Sony have agreed to cross-license the technologies (meaning each can manufacture either or both players), the dcc format has received much stronger support from the recording industry.

AUDIO HOME RECORDING ACT

DCC’s presence underscored the success of an agreement hammered out between the recording industry and the manufacturers of digital home recording equipment about home recording rights. (See Vol. 1, No. 3, for a look at the making of the agreement.) The Audio Home Recording Act, when passed, will codify the right for consumers to record music at home.

With the Act meeting little resistance from Congress, the major negotiators of the bill gathered to bask in their success. Though this gathering was proposed to be a discussion of what the Act would mean to those affected by its passage, negotiators at the session downright avoided any real debate of issues raised by the bill.

No mean feat. Certainly the Act is a monumental achievement. Never before have recording artists, producers and equipment manufacturers sat at the same table without threatening to commit mayhem, much less walked from the table with a historical document. Tandy chairman John Roach is largely credited for pulling together the group, which included the Recording Industry Association of America, the National Music Publishers Association and the EIA.

In exchange for explicit protection from litigation regarding home recording, the Act requires that manufacturers install Serial Copy Management System (SCMS) chips on all digital home recording devices to prevent third-generation copies from being produced. They must also pay a tax on digital recording hardware and blank media. That money will then be distributed to the artists and producers who claim to be losing income from home recordings.

There are larger issues. Gary Shapiro, group vice president for the EIA, said that at the request of Congress, the agreement drew a “bright line” around digital audio home recording and nothing else mattered or was affected.

Certainly every industry has its own modus operandi when it comes to licensing material. But in an age of digital media, where there are few precedents to look to for guidance, every new piece of law will be examined very carefully for its effect on others. The motion picture industry, for example, is already scrutinizing this legislation.

[[headline?]]They will surface again. While members of Congress have no interest in further confusing the issues before them (especially technology issues), it is naive to believe that this legislation will not significantly affect the larger question of copyright and digital information. Within a few years, the entire issue will surface again for a new group of players.

No one in this session, however, was willing to address this bigger issue publicly. As one observer said, “They don’t want to scare Congress before the bill is passed.”

However, the mere fact that such an agreement now exists — whether passed into law or not — gives us hope that multimedia producers, the movie and television industries, the recording industry, publishers and anyone else facing questions of intellectual property in the digital world may actually be able to cooperate in creating agreements, not lawsuits, to determine value, rights and responsibilities.

OFFSITE, SKYPIX DEMOS DIGITAL VIDEO

Digital video is not far behind digital audio in terms of both technology and products. SkyPix, for example, was demonstrating its digital direct broadcast satellite (DBS) system at a hotel suite off the Vegas strip. Using a proprietary compression algorithm, SkyPix has been able to cram eight channels of digital audio and video onto a satellite transponder meant for a single analog signal.

With a recent infusion of cash and hardware support from Mitsubishi, SkyPix will be operational, with 80 channels of on-demand, pay-per-view movies, by April 1992.

Automatic billing. Each home that subscribes to the SkyPix system will be able to select movies via remote control from an onscreen, online selection guide. The user will automatically be billed for the movie, at prices competitive with video rentals. In addition, agreements with many of the major movie houses allow SkyPix to beam a movie to the home unscrambled (for a reasonably higher price) so that the viewer can record it.

Such an agreement is welcomed by movie producers and studios, which today are completely cut out of video rental revenues. They will receive compensation for the “sale” of the movie to SkyPix customers.

The return information, delivered from the customer’s home to SkyPix, is carried out through a modem in the satellite decoder via an 800 telephone number. Since each subscriber is individually addressable by the system, it is possible to contact SkyPix, and for SkyPix to contact individual subscribers, over the television. In addition, subscribers will be able to send each other messages over the system.

RUMORS OF GRYPHON CATCH CD-I AND CDTV OFF GUARD

Philips was a major presence at CES with its Compact Disc-Interactive (cd-i) players. In one of the biggest booths on the show floor, Philips Interactive Media of America (PIMA), the organization overseeing the production of most of the cd-i titles, was demonstrating a broad range of titles for the players.

Philips, however, did not own the floor. Commodore produced an advertising campaign that hit during the show, emphasizing the extensibility of the Commodore Dynamic Total Vision (CDTV) system and CDTV’s ability to be upgraded to a full Amiga computer and to network with other machines.

Both were probably caught off guard, however, when one of the show dailies ran an article about a new multimedia player being produced by Tandy, code-named Gryphon. While no one at Tandy would talk about such a product, it is very much in line with past statements from both Tandy and Microsoft. Those statements claimed that such a player was in the works, and that it used some variant of Windows as its operating system. More news will follow on this topic, to be sure.

David Baron and Denise Caruso