Chip-maker Broadcom Corp. is counting on snow, surf andskaters to help seed the market for advanced set-top boxes and modems powered by itssilicon.
The Irvine, Calif.-based company's investment andongoing collaboration with Broadband Interactive Group Inc. (B.I.G.) represents an effortto boost demand for its platforms and services by expanding the limited availability ofcompelling, broadband-oriented content.
"They have the hardware solutions, but themarket's not ready for it because there's not the content," Dataquest Inc.chip analyst Jay Srivatsa said of Broadcom. "It looks like they've looked at thecontent market as the one that needs to drive their silicon market."
B.I.G. comes out of the gate having acquired the portfolioof outdoor-sports-oriented broadcast, Internet and publishing properties created bysurfwear and media enterprise Gotcha International, aimed at a demographic that Gotchasaid accounts for more than 23.5 million people spending some $91 billion annually.
Executives said the Gotcha properties are the cornerstoneof plans to buy more Internet-related businesses and to develop others that may includethe media rights to big-league sports teams and content from cable programmers.
"Now it's about solidifying our existing positionand expanding our product offering," said Matt Jacobson, the former News Corp.executive who is B.I.G.'s CEO.
At launch last week, B.I.G.'s backers includedBroadcom, the dominant maker of integrated circuits for standards-based cable modems anddigital set-top boxes, and surfwear and media enterprise Gotcha, with properties includingthe Gotcha.com Web site, magazines, trademarks generating $100 million in annual revenueand the Gotcha Pro surfing events.
Individual investors include Broadcom CEO Henry NicholasIII, Broadcom cofounder Henry Samueli and Gotcha CEO Marvin Winkler, who is nowB.I.G.'s chairman. The companies did not disclose the amount of its financing or therespective investments, although Broadcom does not have a controlling stake.
Jacobson came over two months ago from News Corp.'sNews America Digital Publishing electronic-publishing division, where he headed its globalInternet ventures.
Gotcha's content portfolio targets the age 10 through24 "Generation Y" demographic with text, streaming video and programmingcovering such events as skateboarding, snowboarding, surfing, motocross and BMX cycling.
Those are so-called lifestyle sports that Jacobson saidcarry a powerful community aspect, translating to a high "stickiness" orcommitment among the high-spending young consumers who visit or view Gotcha's eventsand Web sites.
By connecting through the new B.I.G. enterprise, Jacobsonbelieves his content creators and aggregators can have a more open, collaborativerelationship with Broadcom's technology developers than they might as a simpleelement of Broadcom's wide-ranging investment portfolio.
The content wizards at Gotcha and other properties want togive Broadcom specific ideas for how they want viewers and Web surfers to experience theirprograms, events and data.
Then, Broadcom's engineers would determine how tosupport those wants technically and in a cost-effective way that appeals tooriginal-equipment manufacturers developing faster, more capable broadband-access devices.
"The real advantage Broadcom brings is the technicalknowledge of what the next-generation set-top box will look like," Jacobson said.
B.I.G. is already working on a couple of major new contentdeals. One is with a cable programmer it would not identify at press time. Another couldbe the media and interactive rights to Major League Baseball's Anaheim Angels and theNational Hockey League's Anaheim Mighty Ducks.
Nicholas -- who was recently rumored to be a potentialbuyer of the teams from The Walt Disney Co. -- said he is only interested in helpingDisney to find a buyer from which he can acquire the media rights.
Broadcom's move reflects how hardware and componentproviders have been spreading into new service- and content-oriented businesses to helpfoster the market for their core products.
Microsoft Corp. two weeks ago said more than 35corporations had joined in launching the "Microsoft Windows Media BroadbandJumpstart" initiative.
The effort is aimed at doubling consumer broadband adoptionin the coming year by fostering the growth of broadband content and access services suchas digital subscriber lines and cable modems -- all areas Microsoft and the others havetargeted as key businesses.
Other recent forays into content and services have beenannounced by chip-maker Intel Corp., which launched a Web-hosting service for customerssuch as Excite@Home Corp., and by digital-TV-set maker Mitsubishi Digital ElectronicsAmerica Inc., which is underwriting CBS Corp.'s costs to produce its fallprimetime-program lineup in high-definition form.
Besides seeding the market for broadband interactiveservices, component makers are eyeing a future in which prices for their gear or softwareprograms continue dropping and business growth slows.
"If you look out 10 years from now, hardwaremanufacturers all have to participate in the recurring revenue because selling thehardware becomes a meaningless commodity business," said Gerry Kaufhold, analyst forCahners In-Stat Group (a sister company to Multichannel News).
Kaufhold said component-makers such as Broadcom were alsolikely to fare better in promoting content development than providers of end-usersolutions like Microsoft or set-top box manufacturers, which might raise worries aboutdominating any market they try to enter.
"The component-level guy has a tougher unit/marginproposition that he needs to fight through," Kaufhold added. "He needs therecurring revenue, and he's viewed in the market as being more benign becausehe's a step removed from the set-top-box company."
Some observers said it was unclear how well Broadcom wouldwork with content developers, given the fact that the area is outside of its coreexpertise.
"I have my reservations on how focused Broadcom'sgoing to be going forward," Srivatsa said. "If they were to work with theDisneys, the NBCs of the world and somehow try to develop content in association withthem, I think that would be just as effective as opposed to starting your owncompany."
He added, "They don't need to get into content toadd value for their OEMs and customers. They're just looking around and saying,'There's no point in coming up with the next generation of silicon yet because the market isn't providing content for it.'"