THIS WEEK IN CEON:

Report From Sony Line Show:
* Sony Plugs Back Into HDTV With Trio For
  Fall Equipped With ATSC Tuner/1394/5C
* Hi-Scan 1080i Capable PTVs & Wegas,
  Main Line Wega and PTV Summary
* DVD Gets Stylish, DVD Packages Play SACD,
  Plus More Multichannel SACD Players
* Targeting Gen Y, MiniDisc Makes Headway,
  CD Mavicas Add CD-RW Support
  Other HDTV/DTV News:
* Senators Blast Broadcasters' DTV Delay
* DTV Sales Surge In January
* CBS, Mitsubishi Team Up For Final 4 In HDTV
* Curtain Rises On 1st Broadway Show Beamed In HDTV
  For Electronic Cinema, Also On Home Sat In HDTV
Plus:
* Geocast Ends Operations
* Philips Sells Marantz Control
* RadioShack Setting Up Electronics
  Boutiques In Blockbuster

REPORT FROM SONY LINE SHOW:
SONY PLUGS BACK INTO HDTV

Though Sony once again chose the same location for its annual press open house, the emphasis on February 28, 2001 was different from last year's event at the Sheraton Meadowlands in New Jersey. This year, Sony spotlighted its DTV efforts and re-introduced new HDTV models after delaying the sets' market introduction indefinitely last June. This fall, Sony will market three HDTV models -- all widescreen, including one Wega direct-view and two rear PTVs. They qualify under Sony's definition of high-definition TVs since the sets integrate ATSC tuners, i.Link and 5C copy protection like the models the company postponed last year.

The HDTV trio were joined by more Hi-Scan sets -- both PTVs and flat-tube Wegas -- that are capable of displaying in 1080i when connected to set-top boxes. Sony also showcased an expanded Wega direct-view line, new DVD packages that add SACD playback plus more standalone-SACD models, a uniquely designed DVD player, and new digital still cameras that record on CD media. These products are the focus of this report, with additional new models -- in portable audio, accessories and other categories -- covered in the next edition. Sony's new line was also shown to eastern regional dealers at the New Jersey hotel before moving on to make other stops for dealer open houses in Chicago and San Francisco in March.

DTV FINALLY GATHERING STEAM

Explaining Sony's renewed commitment to HDTV, Vic Pacor -- president of Sony Electronics' Home Network Products Company -- said, "The transition to DTV is finally gathering a little steam." Sony was "plugging back into DTV" because the broadcast industry had "reached a consensus to maintain the 8-VSB transmission standard," noted Pacor. According to the Sony official, "It is our belief that i.LINK (IEEE-1394 interface) is still viewed as the cornerstone of the digital home networking model not just by the CE industry but also cable MSOs and
others."

Though acknowledging that DTVs could feature "additional interfaces in the future" (in an apparent indirect reference to DVI), Pacor said that since i.LINK utilizes 5C -- supported by Sony Pictures and Warner Brothers -- Sony's HDTV models provide the content community with security. In keeping with previous company positions, Sony still sees i.LINK -- with its two-way capabilities -- "as the most important element to turn DTV sets into one of the four gateways of the digitally networked home of the future," and it hopes that by adopting 1394, the company "can spur industry agreement on this lingering issue," explained Pacor.

Sony's decision to bring new HDTV products to market this year was actually foreshadowed in CEON's recent coverage of Sony Broadcast's stepped up efforts to sell HDTV equipment to TV stations (CEON, Feb. 17). In that recent edition, we also noted comments made by top Sony officials in Japan that changes were afoot in the company's U.S. HDTV marketing efforts.

HDTV TRIO DETAILS

This fall, Sony will offer three full HDTV models -- with ATSC tuners/1394/5C -- in its XBR series, and all are widescreen. They include a 34" direct view with a Wega flat tube, the KD-34XBR2 at $4,000, and two rear-screen PTVs, the $5,000 KDP-57XBR2 and the $6,000 65" KDP-65XBR2. Though Sony announced 4:3 full HDTV models last year -- in PTV and direct view -- the company did not announce any for 2001 at last week's line show.

The second generation of Sony's direct-view Wega HDTV features Digital Reality Creation (DRC) Multi-Function, CineMotion, and Multi-Image Driver X (MID-X). Sony's DRC upgrades NTSC broadcasts and DVD titles to either 960i or 480p resolution, and standard definition digital (480i) can also be displayed as 960i or 480p. The CineMotion 3:2 pull-down process minimizes motion artifacts caused when 24 fps film is transferred to 30 fps video. When combined with DRC, the result is more detailed pictures with improved sharpness and enhanced image dimensionality, according to Sony. New MID-X chipsets permit simultaneous viewing of NTSC and HDTV side by side with Sony's Flexible Two Tuner PIP and provide the ability to display images in 480p.

The new HDTV direct-view model also features new 3D digital comb filter circuitry, two rear i.LINK ports, two component video inputs that handle 1080i, 480p and 480i sources, a scrolling channel index and a new bit-map graphic menu system. The new PTV HDTVs share several of the technologies found in the direct-view HDTV (ATSC tuners, dual i.LINK ports, DRC, MID-X, etc.). They also incorporate a new HD "Microfocus" CRT, for improved picture clarity and sharpness, and a high contrast protective screen with double anti-reflective coating to reduce screen glare and reflection. Other features include a fully automatic digital convergence system, rear and subwoofer outputs and an optical Dolby Digital output.

HD-CAPABLE Hi-SCAN PTVs AND WEGAs

Other HD-capable 1080i sets (but without ATSC tuners and 1394/5C) -- come in Sony's Hi-Scan series, available in both direct view and PTV. Sony shipped its first 16:9 Hi-Scan series PTVs this past fall -- in 57" ($4,499) and 65" ($5,499) -- to fill a widescreen hole in its line that was left when its 2000 full HDTV models did not ship. Last week, Sony announced two new widescreen Hi-Scan models -- a 51" ($3,500) and 57" ($4,000) -- both available in October. The company will also offer its first 43" 4:3 tabletop Hi-Scan at $2,500, and continue to support 4:3 Hi-Scan with new 53" ($2,800) and 61" ($3,300) PTVs models that also arrive in August along with the 43".

Joining the 40" Wega announced at CES ($4,000, October) -- Sony's largest direct-view flat-tube TV -- were four more Wegas with a Hi-Scan chassis. Two each -- in 32" and 36" 4:3 -- are in Wega Hi-Scan and Wega XBR Hi-Scan. The Wega Hi-Scans will sell for $1,900 and $2,400, and the XBR Hi-Scans for $2,000 and $2,500, for the 32" and 36" models respectively. All the Hi-Scan direct views feature DRC and MID-X, with the XBR models also incorporating CineMotion.

OTHER HDTV PRODUCTS: SEEN AND UNSEEN

In other HD-related products, Sony's first ATSC/DirecTV HD set-top ($799 without dish) is arriving this month. Last year, Sony was planning to offer a special i.LINK/5C-equipped DirecTV HD set-top that omits an ATSC tuner, designed to link with its later postponed HDTV models. But last week, the company did not announce such a product for 2001, but it may very well be in the works: At this point, consumers who buy Sony's new full HDTV models this fall and want to receive DirecTV's HD (and standard) signals will have to purchase a set-top that incorporates the requisite DirecTV IRD and a redundant ATSC tuner.

Another HD-related product not mentioned last week was a device that records and plays back HDTV signals. Though Sony showed a prototype optical disc HDTV recorder at CES, the so-called DVR-Blue model appears several years away from commercialization. Introduction of an HDTV recorder based on existing solutions -- such as a hard-disk drive (HDD) or D-VHS -- will to have to await resolution of copyright-related issues, cautioned Sony officials.Sony currently sells an integrated TiVo/DirecTV set-top ($399) and standalone TiVo ($399) that record standard definition signals on a hard drive. The TiVo-based models will be joined by Sony's first UltimateTV/DirecTV unit -- with dual satellite tuners -- that is slated to arrive in March at $449 (including wireless keyboard).

Speaking generally about Sony's plans, Vic Pacor declared, "We want you to know that we're committed to taking a market-driven approach to DTV product developments. Stay tuned, because we've just begun."

MAIN LINE WEGA AND PTV

In Sony's highly successful main Wega line of flat-tube TVs, the company will offer new entry-level FS models and the step-up FV line in 20", 27", 32" and 36" screen sizes. New FS and FV direct-view models feature an improved two-way speaker system, amp and control panel. Most of the models will also incorporate two-tuner PIP. The 2001 FS and FV models will be available in July with prices ranging from about $350 to $1,800. Sony's analog PTVs include the entry-level S and step-up V in 48", 53", and 61" screen sizes. Also available in July, these PTVs will sell for about $1,700 to $2,200.

DVD GETS STYLISH

Joining the DVD decks that Sony bowed at CES was a new design -- shown for the first time last week -- along with two new home theater packages. Sony moved into the "stylish" DVD category, introducing the DVD-F21, which is a slim, slot-loading, silver-toned DVD player that can be used vertically, horizontally or mounted on a wall.

Available this fall for $300, the next generation DVD model -- to be followed by other stylish units later this year -- also embodies a cross generational appeal, explained Sony. The DVD-F21 can fit into many environments ranging from a Baby Boomer's livingroom and office to a Gen Xer's dorm or bedroom -- used as a primary or complementary DVD player. The model plays CD-R/RW discs, but it does not include component video or progressive scan outputs. It features TV Virtual Surround circuitry for connection to a TV in non-home theater situations and an optional, self-powered speaker system -- with two speakers and a subwoofer -- will be sold later this fall at a price to be announced.

MULTICHANNEL SACD INSIDE NEW DVD PACKAGES,
MORE MULTICHANNEL SACD PLAYERS

After last year's introduction of its successful "DVD Dream System" -- Sony's answer to home theater in a box -- the company will market two new systems in 2001. Both new packages add multichannel SACD playback as well as other features. The new single- and five-disc systems center around an integrated DVD/CD/SACD unit with built-in Dolby Digital and DTS decoding, full digital amp, and offer increased system power. The $600 DAV-S500, with 280 watts of total system power, features a single-disc player, while the $800 DAV-C700 is a five-disc model at 350 watts. Both available in July, the DVD Dream Systems are equipped with five matching micro satellite speakers for front, center and surround; a passive subwoofer; and color-coded speaker connectors.

Also in SACD, but in a dedicated audio component, Sony bowed two new multichannel SACD players at very different prices, which will both be available in September. Sony will market a five-disc model, the $800 SCD-C222ES, in its premium ES series, and a single-disc player, the SCD-XE670, which at $300 becomes the industry's lowest price multichannel SACD player. Like the multichannel SACD players that Sony introduced at CES -- two, five-disc models, including a $400 mainstream unit and a $1,700 ES -- last week's debuts do not support DVD playback. Sony said that introductions in other home AV categories would be addressed in future announcements.

TARGETING GEN Y, MD MAKES HEADWAY, VAIO NEWS

Joining Pacor as speakers were Mark Viken, president of SEL's Personal Network Solutions Company, and Ron Boire, president of SEL's Personal Mobile Products Company. Though the products Boire showcased will be covered next week, we will mention now that Sony is targeting Gen Y, ages 12 to 24, described as, "The fastest growing segment and now representing a quarter of the U.S. population," by the Sony official. According to Boire, "They also spend about $153 billion annually or $84 per week of their own money" and Sony will continue its Walkman campaign during 2001 to reach Gen Y.

Boire reported that MiniDisc finally took off in the U.S. after Sony repositioned MD in 2000 as a digital music player that could record from the Internet. He cited NPD Intelect figures from December that ranked Sony's MD model MZ-R70PC as, "The number one selling digital music player both in units and dollars." According to Boire, "Portable MD sales for the industry were up 34%, driven by the success of PC-to-MD bundles."

Mark Viken -- based in San Diego with PNSC -- noted that Sony's notebook business, "Has reached and maintained the number two market share at retail both in units and dollars." This month, Sony is launching a year-long national TV and print campaign to support its VAIO efforts that helps, "Consumers understand the enjoyment technology can bring to their lives." Turning to digital imaging, after noting the new models Sony had recently introduced at PMA, Viken announced the two newest members of the CD Mavica line.

CD MAVICAS ADD CD-RW SUPPORT

The 2001 models are less expensive than 2000's initial CD Mavica model and they also add the ability to use CD-RW media along with CD-R discs. The MVC-CD200 ($800) and MVC-CD300 ($1,000) -- with 2.1 and 3.3 megapixel resolution, respectively -- follow Sony's first CD-based camera, the MVC-CD1000, introduced last year at $1,300 (CEON, June 17, 2000). Both of the new models will be available in June, and will sell for around $800 and $1,000, respectively, and both feature 3X optical/6X digital zoom, with the CD300 incorporating a Carl Zeiss lens.

Sony's new CD Mavica cameras, like last year's model, record images to an 8cm (3") CD-R disc that costs about $5 and provides 156MB of storage. But they also take CD-RW discs, which run about $8 per disc and have the same 156MB capacity, but can be erased and reused for hundreds of cycles. With 156MB capacity, the CD can store more than 1000 VGA still images and over 90 minutes of MPEG video. The cost-effective media is also directly compatible with virtually any PC, which simplifies image transfer.

Next week, we turn to Sony's portable audio models -- including its new MDs and colorful Psyc line aimed at Gen Y -- plus other products.

SENATORS BLAST BROADCASTERS' DTV DELAY

As Sony plugged back into HDTV, there were other encouraging pieces of news last week on the HDTV front -- which we will get to shortly -- even as Washington legislators blasted broadcasters for DTV footdragging. During last week's Senate Commerce Committee oversight hearings on DTV, chairman Senator John McCain and other members criticized broadcasters and suggested steps to speed the transition so the government can reclaim spectrum worth an estimated $70 billion. Senator McCain minced few words when he told the NAB's representative, "Congress gave you the spectrum and you pulled a classic bait and switch." In a question that was more like a statement, he asked, "You're going to reach 85% of the homes in America by 2006? You're going to comply with the legislation? There's no one in America who believes that."

Senators' suggestions included providing consumers with incentives to buy new TV sets and charging broadcasters rent for using analog spectrum after the 2006 deadline for ending NTSC broadcasting. Experts testified that the switch to DTV could take until 2020 unless Congress and the FCC act. The broadcasting industry's NAB called for requiring all new TVs to include DTV tuners, a move McCain and others questioned. Gary Shapiro later issued a statement reiterating CEA's opposition to a DTV tuner mandate, saying, "We estimate that such a mandate could add hundreds of dollars to the cost of almost every television set, pricing many lower-income Americans out of the market and severely slowing the DTV transition."

Shapiro urged Congress to: insist that broadcasters transmit an amply supply of HDTV, ensure that any copy protection solutions protect noncommercial home recording rights, and direct the FCC to make sure that cable systems carry broadcast DTV programs. However, Senator McCain admitted that there was no consensus now in Congress to pass new DTV legislation. But the committee will hold more hearings in hopes that more members of Congress will "recognize that is was a serious mistake to give away the spectrum," said McCain.

DTV SALES SURGE IN JANUARY,
FINAL FOUR IN HDTV COURTESY OF CBS/MITSUBISHI

Moving to more upbeat DTV news, CEA reported that January 2001's figures indicated that DTV sales continue to grow. Factory-to-dealer sales of DTV products exceeded the 80,000 unit mark this past January. Sales of DTV televisions and monitors reached 81,629 units, representing a 234% increase over January 2000, with dollar sales of more than $159 million.

Mitsubishi will sponsor NCAA men's basketball Final Four and Championship games in HDTV on CBS. Last year, Thomson underwrote the sporting event when it was held in Indianapolis. Mitsubishi has been sponsoring events in HDTV on an case-by-case basis as part of a continuing relationship with CBS, which included this past September's U.S. Tennis Open. CBS Sports' coverage of the college basketball event will be broadcast live in 1080i on Saturday, March 31 (5:30 to 10:30pm ET) and on Monday, April 2 (9:00 to 11:30pm ET) from Minneapolis.

CURTAIN RISES ON FIRST BROADWAY SHOW BEAMED IN HDTV FOR ELECTRONIC CINEMA, ALSO ON HOME SAT IN HDTV

On Saturday, March 10 the curtain will rise on the first non-film program distributed for electronic cinema display. Broadway Television Network (BTN), which specializes in shooting and distributing Broadway musicals, will launch BroadwayCinema day and date with its PPV telecast of "Jekyll & Hyde: The Musical" starring David Hasselhoff. Members of the public will be able to view the production at theaters in seven cities on Texas Instruments DLP projectors. Consumers, with the required home equipment, will also be able to see the show at home in HDTV via satellite on EchoStar and DirecTV, as well as on "standard definition" satellite channels.

Jekyll & Hyde was recorded by BTN at Broadway's Plymouth Theatre using 10 HDTV cameras and over 70 microphones. BTN plans to distribute three more shows for digital cinema exhibition. The technology team behind the presentation includes the DLP Cinema technology group at Texas Instruments as well as Boeing Digital Cinema, QuVIS, Barco Digital Cinema, Christie Digital Systems and Dolby Laboratories.

SCHEDULES, LOCATIONS

Based on current information, the HDTV satcasts will be at 8pm and 11pm (ET), but we suggest you check the EchoStar and DirecTV listings. The electronic cinema presentations -- priced at $19.95, the same as the home satellite PPV event -- will be presented at theaters operated by National Amusements, Cinemark USA, and Harkins Enterprises. The show goes on at 7pm and again at 10pm on March 10 at most, but not all, of the theaters. If you are interested in attending, check your local movie listings -- and confirm the time in the zone -- if you live in one of the metro areas included.

National Amusements, outfitted with DLP projectors by Barco and Christie, will offer the event in four of its Showcase and Multiplex Cinemas in metro Boston (Randolph, MA), greater New York/New Jersey (Edgewater, NJ), Cincinnati (Springdale, OH) and northern Virginia/Washington,DC (Merrifield, VA). The presentation will also be shown by Cinemark USA in Dallas suburb Plano and Cleveland suburb Valley View, and by Harkins Theatres in Phoenix suburb Peoria. Both chains have DLP installations provided by Technicolor, which has been acquired by Thomson Multimedia.

GEOCAST ENDS OPERATIONS

The future of datacasting via the DTV spectrum was dealt a blow when Geocast Network Systems announced on March 1 that it has suspended business operations. The Menlo Park-based company said it is currently in discussions to sell off its assets.

As we have reported, Geocast initially planned to distribute its personalized data and information service on broadcasters' terrestrial DTV signals to home PCs (CEON, Dec. 11, 1999). Geocast's investors included station groups Belo and Hearst-Argyle, Thomson, game publisher Electronics Arts, Philips, Liberty Media, and several others. Thomson's planned Geocast PC peripheral/DTV receiver was originally slated for mid-2001. Last year, facing a number of DTV-related issues (including questions about ATSC's modulation scheme) and competition from other broadcaster-backed datacasting operations, Geocast pursued other digital TV distribution. In October 2000, the company announced that EchoStar would carry the Geocast service to PC users via satellite -- giving Geocast national coverage beyond its 40% terrestrial DTV reach. Geocast hoped to launch both its terrestrial- and satellite-based data services during Q3 2001.

Last week, in announcing that Geocast was ceasing operations, company chairman/CEO Joseph Horowitz explained, "To reach the final stage of execution we needed additional funding. The current market environment was simply not conducive to our efforts in this regard."

PHILIPS SELLS MARANTZ CONTROL

Also on March 1, Philips said that it would give up control of Marantz to Marantz Japan Inc. (MJI). MJI will buy from Philips the Marantz trademark and the European and American sales organizations. In addition, Philips intends to sell 1.5% of its stake in Marantz Japan Inc., reducing its ownership from 50.5% to 49%. MJI currently owns the distribution rights for Marantz-branded products in Asia, including Japan.

Marantz is considered the third largest premium AV brand in the world, according to the official statement, "and has been growing consistently over the last few years." Both Philips and MJI believe it is important to have single ownership of the global Marantz business in order to improve its value chain, said the joint announcement. According to Kazuya Suetake, MJI CEO, "The new situation provides Marantz with the freedom it needs to fully pursue its own interests." The companies said that existing working relations will be maintained in many areas, with SACD specifically mentioned.

RADIOSHACK SETTING UP ELECTRONICS
BOUTIQUES IN BLOCKBUSTER

RadioShack -- the CE chain famous for featuring other companies' products in stores within its stores -- will introduce another version of the concept. But in this case, RadioShack is the company coming in and setting up shop, or "mini-Shacks," in another chain. Through a newly announced strategic alliance with video rental chain Blockbuster, RadioShack will establish and staff "boutiques" within up to 5,000 Blockbuster stores. RadioShack will pay a license fee to Blockbuster for each location and both companies will share in the cash flow and other economic benefits.

The RadioShack stores within Blockbuster will sell consumer electronics, telephony services, high-speed Internet access and emerging connectivity technologies along with "other fun gadgets." according to the announcement. RadioShack's current store-within-a-store partners in these categories include RCA, Sprint and Microsoft though specifics regarding the involvement of these companies were not announced. But Blockbuster and RadioShack did say, "A wide selection of RadioShack's most popular product and service offerings will be featured" noting, "specific inventory for the stores will be determined as the program moves forward." Apparently, Blockbuster's DirecTV sales efforts -- established through kiosks in many of its stores last summer -- will now be integrated into the RadioShack stores.

REACHING MORE WOMEN, TEENS

The RadioShack-Blockbuster alliance follows Best Buy's acquisition of the Musicland software chain, which like Blockbuster, attracts more women and teens than traditional CE chains. Both Best Buy and RadioShack, by establishing a presence in software chains, are expanding beyond their mainly male and adult customer base. RadioShack's Blockbuster boutiques, like Best Buy's plans for Musicland's software stores (such as Sam Goody and On Cue), will also mean that more CE products will become available at more retail locations throughout the country.

RadioShack and Blockbuster will launch the first phase in about 130 selected Blockbuster stores this summer in four markets: Las Vegas, Tulsa, Austin, and Norfolk VA. The second phase, national rollout, is expected to occur in 2002. The size of the RadioShack merchandising areas will vary depending on the size of the participating Blockbuster store, but will range from kiosks to 600-square-foot sections.

Separately, but related to RadioShack, the company recently announced that 2000 was its best year in history in terms of profits. RadioShack reported that its adjusted net income grew 21% to $367 million during the 12 months ended December 31, 2000.

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