Occasionally we pundits hit the target. A year ago nearly everyone who follows the technology industry predicted that 2004 would be the year that digital entertainment really hit the consumer mainstream. The Apple (AAPL) iPod-driven surge of downloaded music and an explosion of choice in digital televisions, especially oversized flat panels, proved us right.
Looking ahead, 2005 increasingly appears to be the year the entertainment industry will have to decide if it wants to ride this surging tide or continue to fight it. Crucial decisions in coming months will determine just what consumers will get to see on those 40-inch plasma screens, not to mention Media Center PCs and even PDAs and wireless-phone handsets.
The outlook is mixed at best. For example, in 2005 film studios will finally make high-definition movies available on DVD. But the huge file size of HD content requires a new storage format -- and new players. Unfortunately, a format war reminiscent of the VHS-vs.-Betamax struggle of the 1980s seems inevitable. The consumer-electronics industry is favoring an approach called Blu-ray, while most of the entertainment industry has gotten behind a rival standard called HD-DVD.
FOR THE FIRST TIME SINCE VCRs ARRIVED, consumers will see restrictions on what they can do with the broadcast and cable content they receive, especially HD programming. Regulations will require new TV receivers and other gear, including TiVo (TIVO)-type recorders, to honor "flags" that limit whether a show can be recorded and whether a recording can be copied to other media -- such as a DVD -- or otherwise distributed. Broadcast rules allow at least one recording for personal use and distribution of content within a home network. But cable content, such as HBO programming, can be much more severely restricted, including, at least in theory, a ban on recording.
The vigor of the new digital-entertainment media's blossoming will depend on how restrictive content owners -- mostly movie studios -- are. Again, early signs are not good for consumers. Studios are pushing to tighten limits on copying and sharing content by lobbying the Federal Communications Commission, pushing for new legislation, and pursuing a case before the U.S. Supreme Court. As long as Hollywood is driven more by piracy fears than by greed for new markets, the flow of content will be restricted, and the digital-entertainment market will fall short of its potential.
On the information technology side of the industry, 2005 promises to be the Year of Search. With Web search services now an established and profitable business, extending search to your own files and e-mail archives is the new frontier. Google (GOOG) made a test version of its desktop search program available in early fall, Microsoft jumped in with its version on Dec. 13, and Yahoo! (YHOO) has announced plans to distribute a free version of a search program called X1. Expect a proliferation of new search services -- Web and desktop, general and specialized -- next year.
Unfortunately, various sorts of attacks on your computer are also bound to proliferate. The assaults -- increasingly the work of serious criminals rather than thrill-seekers -- are getting more sophisticated and dangerous and can lead to the theft of valuable personal or business information. I hope more service providers will follow the lead of America Online (TWX) and take more direct responsibility for the safety of customers. But in the meantime it's up to you to protect yourself. Windows users: If you run XP and haven't upgraded Service Pack 2, do so now, and make sure to keep your antivirus and antispyware software up to date.
With diligence and some luck, you should enjoy a virus- and spyware-free 2004. I also want to thank all my readers for their support and wish you and yours health, happiness, prosperity, and peace in the year to come.
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By Stephen H. Wildstrom