Seagate at helm of sea change

Hard drive maker, distributor might hold keys to media 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 movies, TV shows, user-generated content and anything else you can think of. Seagate CEO William Watkins recently spoke with The Hollywood Reporter West Coast business editor Paul Bond.

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

William Watkins: 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 (in) 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 60GB, someone must pay $300 for it. But you can buy a 60GB 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 40GB hard drive that gets people to move from the physical distribution of content to electronic distribution. When that happens, we benefit.

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 it's 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 (a) 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'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 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.