Seagate at helm of sea change

Hard drive maker, distributor may hold keys to showbiz kingdom

As the digital delivery of Hollywood content goes mainstream, Seagate Technology might be in the sweet spot -- building and selling the hard drives that store music, movies, TV shows, user-generated content and anything else you can think of. Seagate CEO William Watkins recently spoke to The Hollywood Reporter West Coast business editor Paul Bond.

THR: You predict that in the future every TV sold will have a hard drive in it. Why?

Watkins: When people have the opportunity to record the whole season of 'The Sopranos' or whatever, that's what they'll do. They're enjoying their content the way they want to, without commercials. In the U.S., the cable and satellite companies subsidize the DVR in their boxes because once people have all their content stored on their DVR, they don't leave the service. This model is now rolling out in Europe and Asia. Soon, every TV in the world will have a hard drive either in it or near it.

THR: Are hard drives in TV sets the death of TiVo?

Watkins: The opportunity for TiVo is the new FCC rules that require the cable and satellite TV companies to sell you a card that gives you the option of choosing your own DVR.

THR: You make hard drives for the video iPod. Some on Wall Street are concerned that Apple will switch to Flash memory.

Watkins: It's not a big market for us. But if the Flash makers are willing to subsidize the iPod, Apple may go that way. The spot price for Flash is $5 a gigabyte, so if you want 60 gigabytes, someone must pay $300 for it. But you can buy a 60 gigabyte hard drive for just $55. What's important to us is that people are using content in their hand because it drives a phenomenal amount of storage at the enterprise level that's backed up, and at the desktop level, again backed up, and at the Internet. In order to deliver content electronically to your hand, it takes six storage systems replicating the same data, and Seagate will get five of those every time.

THR: Any thoughts on Apple TV?

Watkins: It's a 40 gigabyte hard drive that gets people to move from the physical distribution of content to electronic distribution. When that happens, we benefit.

THR: Won't people miss having a collection of DVDs and CDs on their shelves?

Watkins: Hey, we used to deliver content by Pony Express, then trains and airplanes. We've been changing the business models of content delivery forever. Every time you change the distribution model, you put tremendous pressure on the old model.

THR: Do car radios need a hard drive?

Watkins: There's a storage solution opportunity there. When you hear a song, push a button and download it for 99 cents.

THR: Hollywood has got a ton of content they're not using. What's preventing it from delivering it digitally and getting paid for it?

Watkins: That's the key -- getting paid for it. At Seagate, we're working on the right security on the hard drive so that it's not given away free. Content that's 10 years old that there's not a lot of demand for, it doesn't make sense for big DVD runs. But it becomes easy to sell a bunch, especially if the access through an Internet Web site is very cheap.

THR: So is the Netflix model in danger, where DVDs are mailed to subscribers?

Watkins: Netflix would look at us as a competitor because we want to remove physical distribution.

THR: What's your biggest growth opportunity.

Watkins: The consumer -- in the hand, at the home, at the TV, in gaming. Think about PlayStation and Xbox, they have hard drives but they also drive Internet gaming, then we sell storage to Yahoo!, Google, Microsoft.

THR: What amount of storage will the consumer need in a decade?

Watkins: If you add up all the storage in your house now, including your notebook, DVR, iPod and everything else, I bet you'd come up with a terabyte. The idea of a 5 terabyte home in five years wouldn't surprise me at all. I've got 6 terabytes of storage at my house, with home movies, music, pictures. Just stuff. Storage devices are like closets -- you put stuff in there that you never give up.

THR: What's the coolest, most disruptive change headed for media?

Watkins: The Internet. It was first about information, then it was a purchasing vehicle for the eBays and Amazons, now it's becoming a content distribution model that's phenomenally efficient globally.

THR: So my 70-year-old dad will download a movie from the Internet?

Watkins: If it's easy. But more important, my daughters are learning to do it, and that's the only way they'll ever think about it as they get older. My 17-year-old daughter was punished recently. We gave her a choice of losing her car or her iPod, and she pleaded with us to take her car.

THR: What's Hollywood not doing that it should be doing?

Watkins: My concern for Hollywood is that if they continue to drag their feet, other people will define their business models for them. Look what happened with music. The hardware guys broke down the CD into single songs, and they set the pricing. I come from a business where people tended to give away the hardware so they could sell services and software. But in the modern world, people seem to be giving away content in order to sell hardware. The point is, the people who own content are being slow to embrace this technology.