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Mega-mergers, infinite channel choices for entertainment and information, and telcos vying for your business. Making sense of the constant change in this dynamic industry is no small task. Sun Microsystems Senior Vice President of Communications, Media, and Entertainment Glenn Edens, speaks with Boardroom Minutes readers on the catalysts for this change and how you can leverage this change to optimize your business.

Q: What are some of the key trends in the communications, media, and entertainment industry?

A: One of the key trends is the conversion from analog content and distribution to digital. This conversion has been a big effort and is just about finished. Another trend is the availability of broadband access, which is having penetration of over 50 percent in many countries. The advent of digital satellite, radio, TV, and the Internet is providing consumers with more communications and entertainment choices. If you're an entertainment or media company, the impact is one of audience fragmentation. Primetime isn't meaningful in a TiVo world. The traditional success factor for media was aggregating the largest possible audience, but in a world where consumers are as intertwined in their own content (text messaging, blogging, reality TV) as they are in packaged content, there are simply more avenues for getting information.

Competition is getting fierce in the communications sector. Telcos are competing with cable companies, cellular companies are competing with wireline companies. Is Google a search engine, a broadband service provider, or a media company? The lines are blurring. Traditional barriers and market segments are dissolving, which is making it all quite interesting.

Q: How will these trends impact the way executives run their businesses in the near future?

A: There are two sides to that question. If you're an executive in one of those businesses I just mentioned, you're facing new competitive and strategic pressures that are both exciting and daunting. If you're a customer of one of those companies, you have more options for how you select and deploy telephone, email, and internal communications (video, audio). Consumers have more choices for purchasing music, movies, and games, and for how they communicate with family and friends.

In general, the increased competition is lowering prices. Network service providers are having to work harder to increase average revenue per user (ARPU). Getting to scale is a key component of competing today, so you're seeing big consolidations like Vodafone's growth throughout the world and SBC's acquisition of AT&T. The goal is to address more customers and do so more efficiently.

For business customers, there are advantages because the costs of communications and media delivery are stable or declining. The difficulty comes in picking vendors to provide you with those services and getting them to integrate with one another. The Internet is allowing a direct link between suppliers and customers. Whether you're UPS, FedEx, or Amazon.com, you need a Web presence that ties into your fulfillment systems. This puts pressure on the design of your business infrastructure.

If you're an advertiser, how do you spend your dollars? Do you continue with the old TV model? How do you diversify your portfolio? What part is influence marketing vs. direct marketing? The whole landscape of talking to customers more directly is exciting, yet actually creating an effective CRM system that ties into wireless, broadband, and the Web is very complicated.

Q: How can business leaders tap into the growth of this market?

A: As I've mentioned, competition is good, so if you're an executive, this is good news. But that savings needs to be balanced with the complexity being added to your business systems and how you integrate everything from the Web, to on-demand media, to digital content, to electronically distributed media. If you can embrace this, you can dramatically lower the time it takes to get content into your distribution channel. What used to take six months to put into the distribution channel can now be done in a couple of days. Just know what you're incurring in order to do that.

Understand your customer channels. Which ones are mass media, which ones are individualized, and what level of customer communications do you want? Can your goods be distributed electronically? The broadband infrastructure offers many options for communicating with customers and creating "buzz." This is what's driving the blogging world and is going to change the entire structure of advertising.

There are technology requirements to do this, however. Incredibly complex data systems are required. You can't just put up a Web site. You need content delivery, multimedia content capability, interactive tools (chat, messaging), online ordering, fulfillment, online order logistics and tracking, federated identity, electronic interchange (service-oriented architecture). You must be able to electronically interface with suppliers and distribution and you need an interface to communicate directly with existing and prospective customers.

Q: What is Sun's play in this market?

A: Sun has been in these markets for a long time. Communications, media, and entertainment are a large portion of Sun's revenue. We've been a key supplier to the telco, cable, satellite, and mobile industries for two decades, selling equipment and software to carriers, content owners, aggregators, networks, and device manufacturers. There are about 2 billion licensed Java devices out in the marketplace. Sun is also heavily involved in the TV industry through activities with OCAP, MHP, and DVB, which are international digital TV standards. We just became the applications platform for the Blu-ray DVD standard.

Sun is in a unique position because we bring combined experience in these areas thereby allowing companies to connect directly with customers through broadband technologies. Whether you need a service-oriented architecture (SOA), messaging, content delivery, or technology that goes into devices on the network, we've got broad experience and incredible success in all those areas.

In our labs we're actively developing an end-to-end IPTV/digital TV solution. Stay tuned for more details on this in the next year or so — in the meantime, check the Sun Labs site for updates on our research and development.

Q: Are certain technologies driving change in this market?

A: The biggest technology driver is common off-the-shelf (COTS) hardware and software that performs the function of previous generations of proprietary systems. We're to a point where computers are fast enough that the functions of the distribution chain can be done with off-the-shelf hardware and software (for example editing, encoding, and transcoding for broadcast). This is creating a dramatic shift in technology development and how systems are deployed — moving to IT vendors from proprietary system vendors. Sun servers and software are killing proprietary hardware and software for niche markets. Costs are decreasing in the entire food chain. This is what happens when computer industry products hit volume. High-performance computers are replacing proprietary systems. Sun is driving that change with its new computer architecture, system software, Java Enterprise System, and Java client solutions.

Q: How will all of this change be managed?

A: The key issue is to get agreement on open standards and break down some of the toll gates that are being erected. For example, we have too many digital rights management systems (i.e. you can put music in your iPod, but it's hard to get it out). This is a problem brewing — we're overloading consumers with technology choices. The Open Media Commons is a step in the right direction. Open Media Commons is an open source community designed to create an open source set of royalty-free digital rights management standards.

Storage is another factor. A lot more information is going to be stored in the network. The requirements for storage are exploding. (See Boardroom Minutes October story.) Consumers want assurance that their information is safely stored somewhere. This will be a huge opportunity for network operators.

Q: Any predictions as to what the industry might look like 10 years from now?

A: There are four influential factors. The first is that Internet protocols are going to replace proprietary communications protocols — everything is going IP.

Second, the post-production and distribution costs of content will continue to fall while the number of devices that play, access, and interact with content increase at an amazing rate. (According to IDC, there will be 17 billion devices connected to the Internet by 2012 and as many as a trillion sensors).

A third factor is that carriers will be able to deliver upwards of 100 megabits per second, making every device functionally the same. The only reason you can't get TV on your cell phone today is that there isn't enough bandwidth, and that is changing fast.

Finally — audiences are going to continue to fragment. Personalization and identity are going to become the key technologies for providing content and communicating with customers.

The bottom line is that the difference between communications, entertainment, and information is blurring. How we as business leaders and consumers manage that change, and the technology decisions we make today, will help determine the impact these trends have on our lives in both the near and long terms. We need an open Internet based on open standards.

About Glenn Edens

Glenn is the senior vice president of the Communications/Media/Entertainment business at Sun and is the director of Sun Labs. He has an extensive background as a researcher, entrepreneur, strategist and executive in telecommunications, entertainment and computer technology design.

In 1979, Edens co-founded Grid Systems Corporation, the company that developed the first laptop computer. In 1985, Glenn founded WaveFrame Corporation, which developed the first all-digital audio workstations for the motion picture, television and recording industries worldwide. WaveFrame received an Oscar from the Academy of Motion Picture Arts and Sciences in for its pioneering work in digital audio.

From 1992-1998, Edens was at Interval Research Corporation in Palo Alto, managing research and the transfer of research results into Vulcan's portfolio companies. As president of AT&T Strategic Ventures (1998-2001), he also served as VP of Broadband Technology for AT&T Laboratories. Prior to joining Sun Microsystems, Glenn served as vice president, Strategic Technology, for Hewlett-Packard. He has also held positions at NBI, Apple Computer, National Semiconductor, and Xerox Corporation.