2005 Outlook: Consumer Tech II –

There are more questions than answers about the sizzling consumer technology market, and that’s just fine with Oren Zeev. A partner at private equity firm Apax Partners, Zeev says confusion breeds opportunity. “The opportunity for creating new, exciting companies always exists when there is a big paradigm shift,” he says. Even though there is lots of uncertainty, there is one thing that isn’t in doubt: As more content gets digitized and more platforms become available, consumers want more choices about when and where they have phone conversations, listen to music, watch movies and play games.

Q Consumer tech investments are getting a lot more attention. Do you think the space is getting over-invested?

A No, I don’t think it’s over-invested. I don’t want to give other VCs ideas, but I think that there are many trends that are happening together. These are long-term trends. Broadband penetration has increased and continues to grow. IPod-like devices are getting more popular. The other big story is cell phones and data applications. There will still be room for high-end iPod-like devices, but I think that a lot of the functionality will move to cell phones. They’re going to have mp3 functionality and hard drive storage. The cell phone will play a much greater role. Most of us use it for voice, but it won’t be that way in the not-too-distant future. The data moving across them could be music or video or games or other types of content. Jamdat, one of our portfolio companies, makes games for people to play on their cell phones. Another company that I’m on the board of, Audible, does digital spoken word content. People use iPod-like devices to play those, but in the future it will be cell pones.

Q Are there any particular technology trends that will impact consumer technology in 2005?

A Absolutely. One technology that will be relevant is Ultra Wide Band-wireless technology that enables very high data rates at a low cost. It’s primarily used in the home. It’s low-cost, low-power and high-bandwidth, but it’s only good for short distances, like 20 to 30 feet. Wisair, one of our portfolio companies, is probably the first company with a working chip in this space. They will be shipping in 2005. I think the first applications will be point to point as a replacement for USB, to sync devices that have a lot of data, whether it’s music or digital pictures. For example, what if I recorded the “Sopranos” and wanted to watch it in another room in the house? Right now I can’t because I only have one DVR, but what if I had a multimedia network in the home that enabled high-bandwidth video? I think that in 2005 we will start to see the first products ship with this technology, and 2006 and 2007 will be the years for volume.

Q What else are you excited about?

A The other interesting thing is that there are four different industries, if not more, that are moving in the same direction: consumer electronics companies; PC companies (Apple, Dell, Microsoft); carriers (wireless, wire line or cable); and the Internet guys (the AOLs of the world). They don’t see growth in the PC business, they see the growth in the consumer area. This is good, from a VC perspective, because it creates demand for new technologies. These large companies aren’t going to pay up unless they think their leadership is threatened.

Q What’s the overarching theme?

A We’re moving to an on-demand world, where you can watch or listen to entertainment when you want it on the device of your choice. On-demand poses a big problem for the broadcast and advertising models. And wherever there is a threat there is an opportunity.