COUCH POTATOES! NOW IT'S SMART TV The marriage of television's images and
personal computers' brains is giving birth to dazzling offspring that could
revolutionize both industries. (FORTUNE Magazine)

By Brenton R. Schlender REPORTER ASSOCIATE J. B. Blank November 20, 1989

(FORTUNE Magazine) – IF YOU THINK TV sets and computers dominate our lives
already, wait till you see Andy Hertzfeld's new toy. The impish computer hacker,
pictured here with his latest creation, is best known as a key software designer
for Apple's innovative Macintosh personal computer. Now he works for a Silicon
Valley startup company called Frox. He is one of a group of engineers who have
built a prototype of what he calls ''an information center for your house that
also happens to be the world's greatest TV and stereo.'' Frox's home
entertainment system is clever enough to read the TV listings and pick out and
record programs Hertzfeld might want to watch later -- and it can edit out the
commercials to boot. It also catalogues and plays his CDs on command and shows
on the TV screen the cover art and liner notes for each disc. The TV is the
focal point of the system, but what makes it all work is a built-in computer as
powerful as an engineering workstation. Soon the machine will simultaneously
monitor electronic databases for news or other information of particular
interest, answer the telephone, watch for incoming electronic mail, and control
additional home appliances even as it runs the TV or stereo. In essence, the
Frox machine is an ambitious effort to give the boob tube some real smarts.
Don't rush out to buy one for Christmas. The Frox system isn't supposed to make
it to market for two years. If and when it does, at first it will probably cost
-- gasp -- $10,000. (As with most electronic marvels, the price is sure to head
downward if it catches on.) It's a harbinger of a whole new genre of electronic
devices arriving in the next few years that will blend the realistic, compelling
moving imagery of TV with the brains of computers. Already, titans of both the
computer and consumer electronics industries -- as well as hungry smaller
companies like Frox -- are plotting what shapes these new machines will take.
The big lure is the prospect that the new hybrid technology will bring powerful
computers into the home at long last. Like Frox, other consumer electronics
companies, most of them Japanese, are working on ways to make TVs more
intelligent and versatile so the viewer can take better advantage of the
plethora of programming available through the airwaves, over cable, and on tape
and laser disk. Both IBM and Apple, the PC kings, are already touting
''multimedia'' -- the combination of text, sound, and graphics -- as the wave of
the future in personal computers. They are working on the TV-PC matchup from the
opposite direction by putting full- motion digital video into their already
brainy machines in order to make them more engaging and entertaining. The goal:
desktop video computers that users interact with, not merely another box for
couch potatoes to sit and stare at. These video computers would usher in video
encyclopedias and other interactive educational and training tools. They could
read and display patterns of stock price quotes, and would make possible
hundreds of new and elaborate computer games. Ultimately just about anybody will
be able to create electronic productions that mix snippets of moving video and
sound with conventional text and computer graphics. FOR EXAMPLE, you could write
your mother a letter including video highlights of your daughter's birthday
party or your trip to Europe, with commentary dubbed in. You would mail it to
her on a single computer disk -- or, better yet, transmit it to her computer
almost instantly over telephone lines. One day, video computers may even act as
the futuristic ''videophones'' that telecommunications companies have promised
for decades but never really delivered. ''It's time to change the face of
information in the home,'' declares Nicholas Negroponte, director of the Media
Laboratory at the Massachusetts Institute of Technology. The Media Lab, the
world leader in research on the technology of mixed media, is organizing an
American, European, and Japanese consortium of big-name computer, consumer
electronics, and telecommunications concerns to set standards for the television
of tomorrow. Says Negroponte: ''Our ultimate goal is to make personal computers
and televisions as one.''

Plenty of technological and marketing hurdles must be jumped for Negroponte to
realize his grand vision, or for IBM, Apple, and the TV makers to carry out
their more modest plans. For one thing, the nature of video imagery requires
vast amounts of data storage space, computing power, and memory. That means
video computers or smart TVs will be frighteningly expensive at first, and hence
will probably be aimed initially at business and education rather than home
users. Moreover, many experts aren't so sure that ordinary people can master the
exacting techniques necessary to put together a comprehensible video program,
even if it's just an edited home movie. Indeed, some contend that most people
would really only need or want a ''multimedia player'' -- a TV or computer that
allows them more control over prerecorded, professionally produced interactive
video programming. Despite the technical obstacles and marketing debates,
manufacturers are pressing ahead. IBM and Apple are already sniping at each
other over what form desktop video will take. Big Blue contends that people
mainly want players for preprogrammed material, while Apple believes that
computer users will want to ''roll their own.'' IBM, which entered the PC
business only after Apple pioneered it, badly wants to be first out of the chute
with PCs that offer digital video. Analysts expect the company to unveil a
production model as soon as next summer. Big Blue isn't discussing its plans for
a multimedia computer in any detail yet but concedes it is working closely with
Intel Corp., maker of the microprocessor chips that are the brains of IBM's
previous PCs, and Microsoft Corp., designer of the operating system software
that controls them. The initial goal, according to Intel and Microsoft
officials, is to build a computer costing less than $3,000 that functions as a
conventional PC but incorporates color graphics, stereo sound, and loads of
memory. It would include a special disk drive that can read CD-ROMs -- compact
discs permanently etched with sound, still images, or ordinary words and
numbers. Intel is also developing a technology called DVI, for Digital Video
Interactive, that will allow IBM's computers to convert video images from
cameras, tapes, or laser disks into digital data that can be speedily edited,
enhanced, and manipulated. It will be added late next year, or as soon as Intel
gets costs down and performance up. THIS MEANS that at first the IBM machine
will be primarily a player of interactive media, allowing the viewer to choose
among programming from many sources but not to produce his own. It will display
only still images, but the user will be able to make them expand, contract, move
across the screen, and generally do visual cartwheels. ''People will find that
they couldn't care less about full-motion video, and that still video images
will give them a lot to work with,'' insists William Spaller, director of
advanced planning for IBM's entry systems division and the man in charge of
developing the new machines. Consequently, he says, at the outset full-motion
video will be optional. The dawn of this new industry shows IBM and Apple
awakening to oddly unfamiliar roles. IBM has the home as much as the office in
mind as the primary market for its new machines. That's something of a switch,
given the company's original name and historical orientation. Conversely, Apple,
which started out building PCs for hobbyists, sees desktop video as strictly for
business and schools, at least until late in the 1990s, mainly because of cost.
EVEN THEN, Apple officials don't seem quite so optimistic as IBM's that video
computers will displace conventional TVs. ''The desktop video computers will
require a completely new media form that is very different from passive TV,''
says Apple Chairman John Sculley. He adds, however, that the marriage of
computers and TV could give television ''a second chance to live up to its
potential.'' Apple remains skeptical that digital video technology in its
present form is particularly useful. ''We don't want to make the equivalent of a
Swiss army knife with nifty, underpowered features that can't do any real
work,'' says Jean-Louis Gassee, president of Apple's product division. ''We'll
give people an affordable way to send Mom a video letter, but not until the
technology is good enough.'' The trick to making digital video work in a
personal computer is a technique called video compression. The process relies on
complex mathematical formulas and special high-powered processor chips that
reduce the amount of raw data needed to draw video images. Compression systems
look at video pictures frame by frame to identify consistent shapes and patches
of uniform color that don't move much, and then ignore the redundant data in
each frame. Without compression a standard compact disc, which holds 75 minutes
of music or 30,000 pages of text, can store only seven minutes of full-motion
video. A floppy disk holds only a fraction of that. Without compression, too,
most PC memories would choke while processing only a few seconds of video.
''Whoever said a picture is worth a thousand words didn't know how right he
was,'' says Nolan Bushnell, the roller coaster high-tech entrepreneur who
founded Atari Corp. Bushnell now heads privately held Aapps Corp., which makes
$400 add-on boards enabling Macintosh computers to display live television
images. Intel's DVI technology uses one form of compression; Apple is working
with Sony and other companies to develop another. To get what Intel calls
''presentation quality'' video out of a DVI-equipped PC, the user must send his
original videotapes to Intel to be compressed into digital form compact enough
for the desktop video computer to edit. The process takes three or four days.
(In a year or so, the DVI boards for PCs will do it all themselves, Intel
officials promise.) Apple hopes that its approach, still under development, will
yield faster, tighter compression. One of the biggest skeptics about digital
video computing is Steven P. Jobs, the Apple co-founder who now is chairman of
Next Inc., a workstation maker. Says he: ''In order to compress and manipulate
video images you have to throw away a bunch of data, and with it much of the
picture quality.'' That leaves the images fuzzy and jerky. ''As regular TV
viewers,'' Jobs argues, ''we all have high standards for what this stuff should
look like. So unless you solve the compression issue in a serious way, it's all
just fluff.'' WHILE THEY WAIT for compression technology to evolve, companies
like Apple and Commodore, maker of the Amiga personal computer, are devising
ways to connect their computers to laser disk players. That makes possible
interactive viewing of prerecorded video through a conventional TV monitor
without first converting the data into digital form. These systems don't allow
editing on the computer, but they make good multimedia players for use in
instruction. ) At Apple's multimedia laboratory in San Francisco, researchers
have developed an elementary-school teaching aid called the Visual Almanac, an
interactive encyclopedia illustrated with both still pictures and moving video
clips. Students can browse through the almanac at their own pace, jumping
instantly from subject to subject. The system isn't cheap. It requires a
computer, a separate television monitor, a laser disk player, stereo speakers,
and a large hard disk -- for a total cost of more than $6,000. (Commodore sells
something similar for around $4,000.) IN JAPAN, Fujitsu is a leading
experimenter with multimedia. This year the company started selling the FM Towns
computer. Like the forthcoming IBM multimedia PC, it has a built-in CD-ROM drive
for displaying still images. The machine is available only in Japan. So far the
consumer electronics industry's move into smart TV isn't as well focused as the
PC industry's. The various manufacturers seem content to add one feature at a
time to their existing TV sets. Now, for example, VCR manufacturers are building
in circuits that will allow PCs to control them. Magnavox, a brand of N.V.
Philips, the Dutch electronics conglomerate, has a TV that allows viewers to
display a small black-and-white version of a broadcast or cable TV program in
one corner of the screen while playing a tape or laser disk recording in full
color on the rest of the screen. Sony is experimenting with a computerized home
entertainment system called Avina that controls a roomful of audio-visual
equipment. Because the consumer electronics companies' efforts are so diffuse,
video technology experts think the PC makers have the inside track on making
truly intelligent and interactive video devices. ''The challenge isn't making
smart televisions, but how to create an environment that allows people to
manipulate images as easily as words,'' says Kristina Hooper, a former MIT Media
Lab researcher who now heads Apple's multimedia laboratory. ''It's one of the
great business issues for both the PC and consumer electronics industries. I'm
betting the PC companies will figure it out first, mainly because we know so
much more about what makes computers easier for people to use. After all, how
easy is it even today to program a VCR?'' BECAUSE ITS ROOTS are in the computer
business, Frox thinks it can provide the know-how the consumer electronics
industry lacks. Frox was founded last year by Hartmut Esslinger, a West German
whose Frogdesign firm helped devise the striking ergonomic look of most of
Apple's personal computers and the Next machine. He hatched the plans for Frox a
couple of years ago; the privately held company is backed by Frogdesign and
several other European investors. Steve Jobs helped Esslinger refine the idea
last year but had to back out to devote full time to Next. Esslinger continued
on his own. To build the prototype he enlisted the help of Andreas Bechtolsheim,
one of Sun Microsystems' founders; Peter Costello, another top Sun engineer; and
Hertzfeld. Despite all that impressive engineering talent, so far Esslinger has
been unable to win financial backing from an American computer or electronics
company. Now he is attempting to market the technology himself but may have to
try to interest foreign manufacturers as partners. ''It has been very
frustrating,'' he says. ''We wanted to help America reinvent the consumer
electronics business, and they treat us like donkeys.'' MIT's Negroponte sees
technological nationalism and the fractiousness of the consumer electronics,
telecommunications, and computer industries as the biggest obstacles to
realizing the promise of smarter televisions and video computers. ''These
industries and technologies have been moving toward each other for more than two
decades, and the closer they get, the bigger the stakes become,'' he observes.
With the backing of his main sponsor, the government's Defense Advanced Research
Projects Agency, Negroponte is trying to impose some order on the blending of
the technologies, partly by encouraging agreement on standards. He's not finding
it easy. While the big names and big industries duke it out, some little guys
are discovering ways to bring video and computers together on the cheap. A good
example: Bushnell, the Atari founder. ''This new market is a mishmash of lots of
old markets and carries with it all that extra baggage, so introducing the new
technology seems kind of like herding ducks,'' Bushnell says. Even so, he adds,
''this is one of those special moments when several pieces of technology have
gotten good enough all at the same time to make a quantum leap at affordable
prices.'' Just like when Atari introduced Pong, the first videogame -- and look
at the lasting impact mere videogames have had. Smart TVs and video computers,
by contrast, will be useful tools as well as playthings. They may take a few
years to get established in the marketplace, but once they do they aren't likely
to pass quickly from the scene. They'll probably be among the most important
innovations of the 1990s, simply because they are the offspring of two of the
most pervasive and powerful electronic technologies man has yet devised.