Boxee CEO Avner Ronen has been trying to reinvent TV for years now — first by building software for hacked Xboxes and PCs, then with the funky Boxee Box media streamer, and now with his first mainstream product, the Boxee TV. With each iteration, Boxee’s gotten closer to the ultimate goal: making it simple and fun to watch TV. We spoke about the future of the industry — and the future of Boxee.

Putting a computer in the living room has been the holy grail in one form or another for three decades, but it hasn't really happened. Everyone’s still trying to disrupt the cable box.

"The majority of homes are still on traditional set top boxes."

The majority of homes are still on traditional set top boxes — their experience has not changed much over the past couple decades. The biggest change has been DVR and video on demand. Even in homes that have a connected TV or a connected Blu-ray player or there's Netflix on Xbox — if you look at the amount of time spent actually consuming entertainment, the majority of the time is spent with the traditional box and the old UI. That's the reality right now. People want to watch their favorite shows or live TV or news, and that content is available only on a set-top box. That's where people are spending all their time.

Do you see internet content distribution from Apple, Microsoft, Google, Amazon, and others rising up to displace television, or will it just live on the side?

Some — but not all — of those players will have the appetite to make the investment. They're all candidates, but there is an amazing business model in place for TV that’s working very well. It’s very comfortable for content owners and pretty comfortable for service providers. There's writing on the wall: the cost of content keeps rising for consumers, licensing costs for the service providers is rising, and margins are decreasing. There’s definitely pressure that can’t continue.

But for that to break, for the media companies to say, "Everything that we're doing with [cable], we're going to do with Microsoft or Netflix or Apple" — they're saying they’re willing to do that if they can retain essentially the same business model. But if they’re just replicating the model that's on cable and satellite and putting it over the top, that's not a huge breakthrough for consumers.

That's going to take time to resolve, but there's stuff to keep an eye on. Look at the average age at which people are signing up for paid TV service. Even if they sign up, they sign up for smaller packages. That’s definitely going to happen over the next couple of years. You’ll see some of the traditional players taking the position of classic innovators. "We’d better disrupt ourselves rather than let new players come in — we're already spending a lot of money, we'll get some over the top money," they’ll say. I don’t expect the incumbents to wait for the world to change, but for some of them to actually take initiative and get in front of it.

So you're saying that this is entirely content driven.

Yep.

And you're saying there's a huge impact if young people run away. Is the future entirely going to be over the top delivery, on demand delivery? What's the future for actual television?

I'm not sure people want everything on demand. They still want some things live, like sports or reality TV. And there's the water cooler effect that this generation is also experiencing via Twitter — there’s value in watching a show live if there's a conversation going on on Twitter or Facebook. So I think there is still a lot of value in live.

I don't think people care really if they get their shows through the internet or IPTV or satellite. They care what device they can watch it on, how much it costs, and what quality it is, but not necessarily who they're getting it from. If everybody had access to the same content on a level playing field and we competed over marketing and user experience — you'd see a much more competitive landscape.

It’s like Apple going into the phone business and saying "we won’t work on GSM and CDMA, we'll just work on Wi-Fi." There was a rumor at least initially that they thought they could do that. That's where we are today with these new non-traditional set top boxes. We can’t provide you with all the content. We can’t bring our vision to full force.

"We can’t provide you with all the content. We can’t bring our vision to full force."

So will companies like Boxee make broader access deal with the cable companies or are you going to bypass them and go straight to the content sources?

I think there’s a retail opportunity — you buy a device and it works however you get the content. I also think that there are going to be service providers who market the devices.

I'm not saying that cable companies are going to leave the video business and become pipes. I think they want to own the billing relationship and to a certain extent the user experience because that enables them to market and upsell and so on, but they will be more open to run their content through people's devices. There was a resistance to it in the past, a strong resistance. I think it's changing.

That's a very good trend in terms of being able to innovate. They see over the top players release new software every couple of months, with new UIs and A-B testing, and they're starting to say "we want some of this goodness." There's rumors of Apple talking with them, and we're talking with them. I think there's going to be movement there.

If they do open up, will consumers want a more specialized device like the Boxee TV or Apple TV, or a more converged device like Xbox or PlayStation?

I think it's going to be all of the above. I think some people will get a new smart TV and everything will be driven from there. I think some people will have a game console, and other people will buy a specific entertainment device like ours or Apple's.

"They probably need to rebrand Xbox."

Xbox and PlayStation are the market leaders for over the top video by far right now, but it's for a very specific audience. For them to be more aggressive in this space, I would argue that they probably need to rebrand Xbox. They can't remain a game console. You look at game consoles — I'm not an expert, but it's an 8-year cycle, it's a long generation.

The gaming console as a standalone category is going to become a bit more specialized and only for hardcore gamers — for everybody else it's going to be a more generic entertainment device.

So how many boxes should you have under your TV? Right now I have four.

I think it's going to be one. Unless you're an avid gamer and you have to have... something. I think for most people it's going to be one and for some people it's going to be the TV itself.

The problem for the TV is that the innovation cycle is too long. In order to be aggressive you want to have an innovation cycle that’s more like phones — 18-24 months. That's not going to happen with TV's. It's too expensive and there needs to be an industry event — we invented 5D and everybody needs to get it. It rarely happens. It happened with HD, it happened with flat screens. It may be that there's another very specific technology change that can get you to upgrade, but the TV upgrade cycle is more about life events. You're moving, you're renovating your living room. It's a piece of glass. For most people moving from 60Hz to 120Hz is not a big deal.

Do the smarts go in the TV or in the box?

"In order to be aggressive you want to have an innovation cycle that’s more like phones."

Even if they're in the TV, I don't think that they can be embedded in the TV in a way that's not modifiable. I would argue that they need to make TV’s with an upgrade that you do every two years — you pull something out and put in something new and that's it. I think if they want to make sure that they're not bypassed by devices like Boxee TV or Apple TV or game consoles they'll have to let people stay with their experience without replacing the entire TV. They'll come out with those buddy boxes that some of them are doing, or they'll have a plug and play component that you can replace. If they rely on people upgrading their TVs to get the next generation smart TV experience — that's not going to happen.

It may be that you have a simple gateway device in your home which runs all the smarts and there’s a standard that’s seamless enough and the network at home is good enough that there's no smarts on the TV or underneath the TV at all. It's just a display with some standard network connectivity that connects to a box that drives the user experience. There are many people betting on that future as well.

The experience is entirely driven by what you're holding in your hand. You guys ship a remote that's different than the remote you used to ship — you tried a keyboard, now you're off keyboards. Everybody thought it was going to be phones and that didn't work out. What does the remote look like?

"It's depressing to think that we can’t get past a two to five dollar piece of plastic."

It's depressing to think that we can’t get past a two to five dollar piece of plastic.

Voice potentially. Maybe it's as useless as voice on the phone today — but in theory voice if it works flawlessly. The issue with voice is that if it fails a few times you just give up on it.

Google Voice Search is the best I've ever seen.

Voice could be interesting in the TV context as well. You come in and the TV knows you or someone else, and the content it displays is going to be different. You can say "watch election coverage on Fox" and that would work like magic. It's going to take a while. I believe much more in voice than in gesture. This type of stuff [Avner waves his hands wildly] is just not consistent with my views.

The issue with the personal devices is that they’re personal. There's inconsistency. You have an Android phone and your kid doesn't have... anything. The TV needs to be this reliable thing that you can activate and watch. If you're on the phone you can't switch the channel or lower the volume. Even the fact that you need to wake it up is too much friction versus pushing a button. That's way too much.

So can you disrupt the remote? It seems like you can't.

Unless voice becomes so integrated and dominant and consistent and works — you know that you're going to your living room and you can just say something. It could be that people drive a lot of it from the phone, but if you have to launch an app to do that... versus you're in the vicinity of the TV and you have this small immediate thing. Phones are very difficult on that front. If you put a tablet in every room with a TV that's going to be dedicated to that TV, that's going to be an issue.

So what do the next two to five years look like for Boxee?

We have two things that we're doing now. We're doing a user experience that tries to bring together traditional TV with over the top, and then we have a unique cloud DVR offering. They could stay together very tightly or they could have two disparate paths.

Cloud DVR could become the future of DVRs. It could be implemented into set-top boxes and TVs and other devices as DVR technology, and that's a service that stands without the full breadth of user experience that’s in Boxee TV. And then there's Boxee TV as an input one user experience. We’ll try to innovate on discovery and creating a streamlined experience — you turn on the TV and you're in Boxee.

And hopefully the cloud DVR is extremely successful and it enables us to invest in creating a great user experience for video consumption. But I don't know where it's going to go. We have a lot of ideas about what we can do, but it’s going to be very different depending on how we get to millions of homes.

Explore the ecosystems

This week we're taking a close look at the future of TV and the living room — the great unclaimed space of the technology world. Check back each day for a close look at all the major players, along with a full range of interviews with industry players and reports on everything from the state of remote controls to the future of gaming. Tune in all week for the rest. Here’s a sampling:

Tuesday:
Google, Microsoft, Aereo, Boxee CEO Avner Ronen
Wednesday: Amazon, Sony, live sports, TV apps, Condé Nast’s Dawn Ostroff, NBC's Vivian Schiller
Thursday: Apple, the state of remotes, Vizio CTO Matt McRae
Friday: Independents, New Yorker's Emily Nussbaum, Valve