What’s next for the digital living room?

Fifteen years ago, Microsoft, Sony, Dell and HP were some of the leading companies jostling for supremacy in the digital living room — where computers, TVs and content came together to deliver home entertainment. Microsoft’s new Xbox 360 console not only played video games, but also DVDs and CDs. It streamed music from MP3 players and connected to the company’s Windows Media Center on PCs. Sony’s TVs, sound systems and computers formed an integrated entertainment hub, while Dell and HP had “media-ready” computers that also acted as content servers in the home.

Today, these four players have been overshadowed by Amazon, Google, Apple and Facebook. Fueled by a leap in broadband adoption in households and the advent of smartphones, tablets and other devices, the digital living room is no longer a TV-centric area in the home. Amazon’s Alexa digital assistant and connected devices are changing the way people search for and consume content. Google is doing the same thing with Google TV, Google Home and YouTube, as is Apple with its HomePod, Apple TV and Siri. Meanwhile, Facebook has become a source of content for people as they interact within the social media site’s platform.

But while the digital living room may look vastly different now, it still isn’t the unified and open ecosystem consumers want. “We’re certainly much further along, but there still isn’t true integration of all the different devices and services,” said Kevin Werbach, Wharton professor of legal studies and business ethics. True integration, he said, is a digital environment where consumers can link “every device and every piece of content on every service and be able to experience them together.”

This quasi-utopia remains out of reach because of competing business interests, Werbach said. Companies race to become the main provider of video and music in the home but also seek to dominate in digital services more broadly to corral consumers into their ecosystem. “The economics make it difficult,” he explained. “For the foreseeable future, it’s going to be this co-opetition (cooperative competition) landscape where it’s never quite in anyone’s interest to give consumers what they want, which is one subscription and one set of devices that give them everything.”

Back in the mid-2000s, Werbach recalled, the challenge in the digital living room was “hardware systems not talking to each other.” These days, the issue is less about technical ability but rather content fragmentation. For example, he said that while he has access to plenty of good content through his cable provider’s ecosystem, it doesn’t offer everything he wants to watch. “Now that we have all these streaming services, we increasingly have the problem of content not being available across different platforms — and that’s getting worse,” Werbach noted.

As more streaming services popped up, content became further siloed. “For a while, if you paid for Netflix, you got most of the stuff you wanted to get. Now there’s Netflix, there’s Amazon, [there’s the upcoming] new Disney service and AT&T/Time Warner [service] and so forth,” Werbach said.

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