bill@neothings . . . . . . . . . . . . . . . . www.neothings.com

I haven’t decided yet if HDMI is an business school example of creating a market where one did not previously exist, or should be a case study of being in the right place at the right time. For the uninitiated, HDMI is the High Definition Multimedia Interface that has made it’s way into most digital displays and set top boxes as the ‘new way’ to connect video and audio together. Whether it was a carefully executed plan, or they stepped in it and can’t get it off their shoe, we observers will never know. In either case, here we are with HDMI being deployed without much competition.

“So what is the problem, and isn’t digital a good thing?”, you might be asking. Problems come in several varieties. There are problems in performance, there are business problems, and there are even rollout problems of continually changing features. More about that below. Digital can be a good thing when it is used to address a problem, but the state of analog video is so highly refined that many users get equal performance from analog component video vs. HDMI. So it is not quite the difference between black and white vs. color, or even scratchy LPs vs. CDs. Back to the problems…

I won’t go into all the ugly engineering details of the performance problems, but in summary they are; HDMI plus HDCP encryption, and the lack of standard testing has resulted in several incompatible devices on the market, the HDMI connector has insufficient retention, and can either fall out or cause intermittent contact, and the physical electrical spec causes a length limitation that prevents traditional integration of large systems, like whole house video. The first issue is addressable, the second issue is addressable with some pain to the market, but the third issue is inherent, and although some third party band-aid type products may help, the length issue will still cause whole house systems to be designed differently to overcome the issue. Consumers are slowly becoming aware of theses technical issues. Based on my own polling, 15%-20% of DVI/HDMI users have some issue that prevents them from using it.

The business issues are things that effects really small companies, and really big ones. Really small companies have a tough time absorbing approximately $20K per year for an HDMI and HDCP license. If company XYZ were to ship 1,000 specialty products with an HDMI interface, that is a $20 burden per unit. However in all fairness, this barrier to entry exists with DVD, Dolby, DTS, and many other licenses needed to make common consumer electronics. On the other end of the spectrum are high volume PC manufacturers. The annual fee ($30K) is not a factor for them, but there is also a per unit royalty of 15 cents, assuming they don’t want an HDMI logo on the front of their box. There is also the factor of DVI, the predecessor of HDMI. PCs can have a DVI connector with no royalties, so why bother with HDMI?

The third major category of HDMI issues is their continually changing specification. I’ll make a SWAG and say that the average consumer will upgrade a display or other equipment every 5-7 years. Adding to that, they will not do it all at once, rather one piece at a time. So as a result, they will have various ’snapshots in time’ of technologies sitting in the family room. Over several years, we have seen the introduction of big screens, Dolby Pro-Logic surround, Widescreens, Dolby Digital, and HD. These upgrades have been on a more reasonable timeframe, and the early adopter types have been able to keep up with the changes. More importantly, even with outdated equipment the consumer can still enjoy current content. However with DVI and HDMI there has been several steps in the spec that have either caused incompatibility or contributed to consumer confusion on compatibility, all within a few years time. For example, the original offering of digital displays with the DVI interface did not have HDCP encryption. As a result, some displays bought as recently as three years ago cannot be used with common things like cable boxes or satellite receivers. The displays are not even obsolete yet, just made incompatible by fast moving technology. This moving spec cycle has not settled down yet either. HDMI is currently on version 1.2, with 1.3 eminent, while equipment manufacturers are just getting 1.1 equipment out the door.

So how did HDMI get where it is today with all these issues around it? A very good question indeed, one that I am still looking for the answer. DVI was created by Silicon Image back in 1998 with plans on being an interface for PCs and PC monitors. I am guessing that at some point they realized they could use this for the coming HDTV displays. What I don’t think happened is anyone at Silicon Image took a careful look at the consumer electronics industry to determine if it would meet everyone’s needs or not. It certainly did meet the needs of Hollywood though, who had been searching for a method to prevent copying of movies and TV content. Notice that I did not say prevent pirating. If you consider Hollywood to be in the driver seat in this situation, then perhaps Silicon Image realized that and made a smart move by pushing a technology that they would approve of. On the other hand, if you consider the end consumer to be in the driver seat, then perhaps they have made a critical error by pushing a technology that takes away benefits from the consumer, leaving a window for a more consumer friendly technology. The next few years will answer that question. The mass market consumer has just started to buy into this technology, and when HD movies become available, the consumer will begin voting with their wallets.