DEFINING THE FUTURE OF TV : How the U.S. Won Round One in the Battle Over Standards

After spending billions trying to bully America into doubling the video resolution of its analog television sets, Japan finally conceded that the D in HDTV will have to stand for digital . The very next day, the Japanese commenced a furious backpedal--right off a cliff.

But all this sound and fury signifies nothing. Even Japan Inc. can’t impose an outdated technology by group incantation. America’s model of manipulable multimedia will thus succeed Japan’s vision of high-definition video. The Federal Communications Commission and U.S. companies, not Japan’s Ministry of Posts and Telecommunications or Sony or Sega, will set the world’s technical standards for tomorrow’s generation of living room media.

In short, we won!

At least for the moment. Of course, there’s nothing inherent in the new FCC-Zenith standard that would deny a Sony, Matsushita or Samsung the opportunity to dominate digital TV sets the way they’ve ruled the manufacture of today’s televisions. Creating a standard does not guarantee any market share; just ask RCA.

Yet American media companies have become far more sophisticated than their global counterparts about the role of standards in defining competitiveness. Today, innovative standards--not merely innovative technologies--have become the true battlefield for global multimedia. A standard has to be more than a product, a service or a technical format. It must be a framework for innovation.

Creating new standards is not like developing new products: Your competitive edge comes not from what you keep secret and proprietary, but from what you make open and accessible. Successful American companies understand this. Most Japanese companies still do not.

For example, Sony’s Betamax VCR failed not because it was an inferior technical offering but because the company managed it as a product rather than a platform for design. (JVC and Matsushita managed VHS less as a global standard than as a set of technical specifications to gang up on Sony.)

More than a decade ago, the launch of the audio compact disc standard by Sony and Philips was brilliantly managed, but the Dutch electronics giant’s recent efforts to establish CD-interactive as a multimedia standard have been a failure. Similarly, 3DO’s new multimedia player--though technically intriguing and sponsored by the likes of Matsushita and AT&T--has; been a disappointment, not merely because the software isn’t there to support it, but because hardware firms insist that the business incentives to make it a standard just aren’t there.

The collapse of Japan’s HDTV initiative didn’t just reflect the technical triumph of American digital over Japanese analog. It also reflects a sober business assessment that it would be very hard for anyone but the Japanese to make real money supporting this standard. As a global business proposition, HDTV’s standards infrastructure was poorly designed and poorly defined.

Who understands the business of standards better than anyone? Probably Bill Gates and Microsoft. Microsoft really isn’t in the software business; it’s in the standards business. Microsoft succeeds not because it writes the best code but because it sets the best standards.

Microsoft Windows--the personal computer software that made Gates a multibillionaire--was nurtured and developed to be a standard, not just another operating system. Prices are kept low, third-party suppliers can easily make lots of money and the system is constantly and collaboratively upgraded to keep it supple.

Microsoft’s goal was emphatically not the maximization of revenue or even market share; it was creating relationships with customers, software developers and microprocessor firms such as Intel to give as many good reasons as possible to support--strategically, financially and technically--Microsoft’s operating systems.

These networks of relationships--not superior technology or marketing savvy--are what make a standard something more than a product. The standard is not the product of a company, it’s the byproduct of these networks. Managing the standard means managing these networks.

IBM understood this too late. Apple understood but failed to act. Nintendo understood but didn’t care. The FCC understood, and that’s why its digital HDTV standard has just conquered Japan.

Of course, Microsoft is chatting with John Malone’s TCI and the cable TV industry about how to bring Windows to the set-top box, and the company recently announced it would collaborate with Sega to create a new standard for video game technology.

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Unlike Nintendo, which parlayed a proprietary standard to riches but is now suffering as a result, Microsoft seems likely to bring its brand of standards to home entertainment. It will be interesting to watch how standards intersect when Windows comes to digital TV. Don’t touch that mouse! Or remote control . . . or joystick . . .

Paradoxically, standards have become so important in media technology that there is now a strong market incentive to make them unimportant. Why not design a new generation of technologies that, rather than rendering existing standards obsolete, merely makes them irrelevant?

How do you do that? Microprocessors and memories are getting ever faster, ever cheaper. Use the technology to supersede the standards. Why not a television set or a cable box or a “media converter” that’s smart enough to play whatever media standard is plugged in? Load the operating system right along with the program.

For example, your CD-ROM can be in Windows or Macintosh or Unix or HDTV--it doesn’t matter. Your player would simply load up the appropriate standard on its chips and the program you wanted to play--then off you go. Or your set-top box could configure your digital TV to play NTSC, PAL, SECAM, Nintendo, Windows or whatever format your fiber-optic line piped down into your cable TV.

In other words, tomorrow’s technologies could make all the effort being invested in today’s media standards irrelevant. Are the Japanese working on this new generation of silicon? What do you think?