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Digital Home Discussions Dominate PARA

5/13/2005 08:50:00 AM Eastern

Coronado, Calif. — The Professional Audio Retailers Association (PARA) is holding its 26th annual Management Conference this week at the landmark Hotel Del Coronado, the first meeting since PARA became a division of the Consumer Electronics Association last year, with the evolution of the digital home dominating much of the discussions.

Bill Mannion, marketing director of Microsoft’s Windows consumer product group, discussed recent developments with its Media Center PCs and the opportunities it provides to PARA dealers, while a five-member panel lead by Noah Herschman, principal of the Plug & Play Marketing consulting group, discussed alternatives.

In an extensive presentation, which outlined the current technology market and demonstrated Media Center to PARA, Mannion, a former Panasonic and Sony executive, remarked that this PC format “is an unprecedented opportunity” for PARA dealers “as technology changes.” He noted that 2 million Media Center PCs have been sold since its introduction two years ago and that 1 million have been sold since October 2004.

The “accelerated convergence” of technology, the “demand for simplicity,the transition to a digital infrastructure, HDTV demand being on the rise and the entertainment landscape changing,” makes the PC “the most flexible device” to handle these new demand, Mannion said.

Convergence is calling on systems to become hardware neutral so content such as downloaded music, CDs, video, audio from satellite radio, etc., can be played “simultaneously in the home” on HDTVs and PCs, or carried out of the home by portable digital media players, MP3 units, cellular phones and other devices, he said.

In this new environment PARA dealers are facing challenges, according to Mannion, mentioning the familiar overcapacity of production in HDTV. Digital media standards are often incompatible and confusing to consumers and “the big-box stores are entering your business, offering installation services,” he said.

The opportunities for PARA are with consumers who “want solutions, and you sell them better than anyone. Home networking is rising dramatically,” he noted. “With digital technology on the increase the ability to differentiate solutions is vitally important.” And Mannion said that “service providers” like cable, satellite TV and other providers “want consumers to experience” their offerings. They want to reach the same customers you already have.” Content providers want the same thing, he noted.

The industry is moving from “selling items” to “selling solutions” and that PARA dealers “have more expertise in this area than anyone else,” which is why Microsoft wants to work with such dealers, Mannion said.

While he put the Media Center PC through its paces, displaying how it can store and play digital pictures, rip CDs, share HD-quality videos and camcorder videos, download music and trailers from the Internet, he warned that the technology “can do these things today and is being sold at retail” and said if PARA dealers do not get involved in such applications they will be sold “without PARA and without PARA’s input.”

While impressive, during a brief public Q&A after the presentation, Mannion did mention that while discussions with the cable and satellite TV industries continue there are no tuner cards available yet for Media Center.

One of the leading software packages developed for the Media Center PC platform is Life/Wear by Exceptional Innovation, which enables multiple levels of control and functionality for the system.

Mike Seamons, sales and marketing VP for Exceptional Innovation, was one of the panelists on a presentation led by Herschman, called “Show Me The Money!,” which discussed the connected digital home and included Bill Schafer, residential products national sales manager for Crestron Electronics; Dave Tovisi, custom sales and installation VP for Tweeter; Will West, CEO of Control4; and Mitch Witten, sales and marketing VP of Sonance.

Seamons said that his company is backing Microsoft’s Media Center because it is “easy to install, it is hardware neutral ... and can provide more functionality.” The Life/Wear software enables consumers to handle not only media, but communication, security, thermostats, lighting and other uses, he noted.

When asked about Media Center providing only around 15 to 22 margin points, Seamons said, “The computer provides 20 margin points but the software adds a 40-point margin, plus other additional functions. And it must be installed by a professional.”

Schafer of Crestron is not sold on Media Center, saying, “You don’t make money on a 20-point product that will be discounted on the Web in six months. It is designed to eliminate [PARA-type dealers]. What you can never find blister-packed at Best Buy is your installation time and your expertise.”

He noted that products that Crestron provides can provide dealers and installers with “40 to 50 margin points and give you a better look. With our system you don’t have to stop a movie to change a thermostat.”

Control4’s West said, “The reality is that retail is tough. Wal-mart changed the world. A few years ago they weren’t even in electronics and now they are second to Best Buy. More retailers are getting into your space, Best Buy with the Geek Squad for instance. Changes are happening. The Geek Squad will not take away all your business, but some of it.”

West added that the digital home, no matter the format or configuration, “is complicated. You can’t just flip a switch.” What custom installers and retailers should do is “establish a relationship with consumers. Make them dependent upon you.”

Sonance’s Witten, whose company introduced the iPort product to enable an iPod to play in sophisticated home systems, said iPod is “an aspiration market. Everyone wants one.” Custom installers and retailers “must find out about iPod and own one to find out what the buzz is all about.” He said that consumers will use iPod for distributed audio, saying “it is a lifestyle decision.” The iPod will enable retailers to “educate consumers about distributed audio and sell it.”

Tovissi of Tweeter diplomatically waded through the claims and counterclaims, saying that most can be used to get “content distributed throughout the home, or in a car or on a plane.” But the goal of Tweeter and other retailers and installers is to “sell as many boxes as possible and sell more installations.”

He noted that the choices for consumers should be limited so installers can provide a predictable result. Installers won’t be reinventing the wheel with every installation because “there are endless solutions” so that productivity can remain high. “You need to pre-engineer what you will be doing. It allows you to install the same types of systems over and over again cutting installation costs.”

Tovissi also said that PARA dealers “own the entertainment side of the business, own entertainment networking. That is ours and we can’t ignore it. [PC makers] can own the productivity network, with all its problems.”

He added, to sell entertainment systems correctly, “You need to sell warranty packages and accessories. That is where the profits are.” Tovissi’s argument is that those types of products can generate as much margin as selling a Media Center PC unless you “find a system bundle that adds software to a Media Center PC and generate more than the current ... 20 percent margins.”

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