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“The digital experience journey”
HP Digital Experience press conference
Miami, Florida
August 27, 2004

© Copyright 2004 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP.

Good morning.

The digital revolution has been called the creativity revolution, and I think we just saw an example of why, because in the digital age, if you can dream it - you can do it. If you can envision it - you can create it. If you can see it - you can shoot it. That's what digital technology is all about. There used to be a limit to creativity; there used to be a limit to what technology could help you do. In the digital age, the only limits we face are the limits of our own imagination.

Eight months ago at the Consumer Electronics Show in Las Vegas, I said that we were moving into a new era - a new era where every process and all content is becoming digital, mobile, virtual and personal; an era in which technology can democratize creativity; an era in which technology can put consumers - individuals, in charge. And I said eight months ago that HP was not only going to take this journey, it was our goal to help lead it.

On that day, we announced that the natural evolution for HP was to apply our intellectual property in digital imaging and photography, in computing, hardware and software, in information storage and management; to apply the innovation that comes with being one of the top 10 most innovative companies in the world; to leverage the largest channel and supply chain in the industry, and a retail presence comprising 10 percent of the world's total retail shelf space - to bring digital entertainment to market in a way that was both affordable and easy to use.

At the Consumer Electronics Show eight months ago, we said that over the next year, you would see HP extending its lead in digital photography while applying our innovation and our IP to four new markets: music, television, home projectors and digital entertainment hubs. And today, we're here to show the first steps in that journey.

Behind me and in the room next door and upstairs, you're going to find nearly as many innovative products as there are P. Diddy sightings on South Beach this weekend. And I did understand watching the television this morning, that now it's all about the size of the yacht, but we won't go into that. But as we saw in that video, the real story here is not just about new products; it's really about the tens of millions of simple, rewarding experiences that these technologies make possible.

Sit on your couch with a remote control and manage all of your music, movies and photos on your big-screen TV - today, you can.

Take digital photos of your daughter's soccer game or your son's play, and conveniently print them at home, all for the same price that it takes to print them at your local retailer - today, you can.

Go to a friend's house and take with you an instant cinema experience with a high definition projection screen, crystal clear surround sound and a DVD player, all in one compact unit - today, you can.

Take all your music with you in the palm of your hand, and then personalize your digital music player just like you personalize your play list - today, you can.

Put your digital photographs in an album for your great, great, great grandchildren to enjoy a century from now, and know that they will be as clear then as they are now - today, you can.

This is a story of digital experiences that are affordable, easy to use, and work seamlessly together. HP is a company that is known for partnerships, and we are very pleased to have our partners along with us on this journey. And we are particularly pleased to have our newest partners here with us today.

Judy McGrath is the chairman and CEO of the most valuable media brand in the world, reaching more than 137 million consumers aged 12 to 34 in an average week. She is the chairman and CEO of MTV.

Today, we are proud to announce that in a first of its kind agreement, HP and MTV are launching a global partnership. HP is now the sole digital photography and digital entertainment sponsor for the MTV Video Music Awards around the world this year, and together, we are also creating a global competition that celebrates creativity and music as seen through the eyes of young people - and nobody knows young people better than Judy McGrath. So it's my pleasure to welcome Judy to the stage.

[Judy McGrath speaks]

Carly: This is a journey that began with our entry into digital photography. In 2004, 258 million images will be saved and shared each and every day - that's 94 billion in a year - and an increasing share of those are done on HP cameras and printed on HP printers. Earlier this year, our new digital camera, the R707, was even called "the camera that will make your mother's day." Why? Because it's easy, it's affordable, and you just can't take a bad picture.

And this is just the beginning. Today, digital cameras are in one third of all American households, and that number is expected to reach up to 60 percent within three years. But consumers are telling us that despite progress in digital photography, it is still too expensive to print at home. They really aren't sure how long their digital photographs are going to last, and they don't completely know how to manage their pictures once they've taken them. And so today, we are taking the quality, the affordability and the ease of use of digital photography to the next level.

Today, two out of every three photos printed at home are done on an HP printer. And for all that innovation, there is one thing we have never done: We have never branded new inks - that is, until today.

Today, I am proud to introduce you to our new HP Vivera inks.

Now why are we doing this? What do HP Vivera inks bring? The first innovation is affordability. Today, we take away the last barrier to affordable home printing. HP has always had affordable 8x10 and 5x7 prints, but with Vivera, we are now introducing the 29 cent solution for 4x6 prints, which means you can print in the convenience of your home for just 29 cents, for every print; not just the first one, as you are limited in many retail outlets. And here, you get to discard bad photos electronically before you print.

The second innovation is longevity. Consumers like to know that their precious memories are going to be protected for years to come, and so with HP Vivera inks, we have extended the life of photos from 20 years to 80 years using a three-ink system; and from 75 years to 110 years, using an eight-ink system. So for the first time, this guarantees that digital photos will last longer than traditional photos.

The third innovation is convenience and speed. HP Vivera inks work as a system with new HP printers and specialty papers to produce prints up to 40 percent faster.

Now VJ's going to talk more about the HP Vivera inks in a couple of minutes, as well as steps that we're taking to make digital cameras ever more affordable. For instance, you can now get all the award-winning features from the R707 in our new R607 - for just $299.

Now at the Consumer Electronics Show in January, I said that the real digital revolution was not just about gizmos and gadgets; it was about making the whole system work better together. It was about creating and enabling experiences as the only company involved at every step in the value chain - from content creation, to content distribution, to content enjoyment. I said that we were the only company that could put all of these pieces together.

Borrowing terminology from the enterprise market, our goal was to create a data center for the home, if you will, allowing you to manage all of your music, movies, photos and television from one central location to create simple, rewarding experiences.

Two years ago, you may remember that we were the first to market with our Media Center PC to manage movies and photos. And today, we bring ease of use to a whole new level with the next generation of the Media Center for the living room, which we call the Digital Entertainment Center.

I feel like Vanna White up here. …

In any event, the first thing you're going to notice about this is it will fit in your entertainment center. In one unit, it combines a personal video recorder, a digital video recorder and a DVD. And that means with this one unit, you can watch, record, rewind live TV; you can burn and play DVDs; you can manage your movies, your photos, your music through a unique iTunes experience - and I'll say more about that in a moment as well. And you can do it all without leaving your couch, thanks to a 10-foot user interface that operates off remote.

It is a couch potato's dream.

Starting today, you can do it all while also watching an HP flat-panel TV on either a high-definition or enhanced-definition 42-inch plasma screen, a 30-inch LCD, or a 26-inch LCD. And they are beautiful. This is a natural evolution for HP because if you stop and think about it, 80 percent of our IP for digital imaging, digital rendering and the science of color is the same technology necessary for creating great image quality in TVs, and it shows. The quality is spectacular, the design is sleek and the color is a beautiful black, all of which we think is worthy of being the centerpiece of your living room.

Now, all of us wish we could have a home theater, but for too many people, it is still too expensive, it's too hard to set up and it's too hard to use. And so today - thanks to HP innovation - you can not only have a home theater; you can have a portable home theater.

It is my pleasure to introduce you to the HP Instant Cinema Home Theater.

This little device brings together 5.1 capable surround-sound, with a crystal clear DVD picture and the visual impact of a big-screen movie - all in one simple, portable, affordable package. It's kind of like a boom-box for movies, and the best thing is, it truly is simple. In 30 seconds, anybody can set up and work this device. You take it anywhere, you plug it in, you push play and you go.

In fact, just to give you a sense of how good this device is, the quality and the sound are so good that DreamWorks is using HP's projector technology in the world premiere of its next animated feature, "Shark Tale." They are doing so in the first-ever outdoor screening at the Venice Film Festival, and then they're going to use it again in September, at an outdoor screening of "Shark Tale" in Central Park.

And so, this is a great example of HP's ability to play across the entire digital entertainment system. Not only was "Shark Tale" developed using HP's servers and rendering technology, we can now show it to consumers using our HP Instant Cinema that is a complete soup-to-nuts - maybe soup-to-popcorn - experience.

The dynamic duo of VJ and Duane are also going to tell you about a different kind of viewing experience with HP's new Entertainment Notebook, and for the first time, you can have a personal entertainment device and a full-blown PC, all in one great design. It comes with - yes, it is a beautiful product. It comes with a cool, new innovation called QuickPlay, which cuts the startup time for a DVD down from two minutes to about eight seconds, and an all-in-one cable which combines the AV and power cord all in one.

You might even get nostalgic for the old spaghetti wires days…

Now, we've also expanded the capabilities of our award-winning iPAQ, and added some new capabilities so that it doubles now as the coolest remote on the planet. So, an iPAQ now will not only change the channels, it will also allow you to stream video, photos, music and TV easily and virtually from one room to another. And Duane's going to tell you about that in just a moment as well.

Now speaking of music, at CES, you may remember that we also announced that we were going to bring digital music to the mass market. And so we're proud to be one of the top 10 most innovative companies in the world, as I mentioned, and today we are generating 11 patents a day. But as much as we invest in our own innovation, or perhaps because we invest so much in our own innovation, we also very much admire the innovation of others. And our innovation strategy is to really focus our efforts where we can make a unique contribution and lead - that's a high bar - and we partner for the rest. So, when we thought about music, we thought about creating our own devices and our own music service, but when we looked at the devices and all the services on the market, as I said in January, we saw one company whose innovation we very much admired, who had both the best music device and the best music service by far. We think Apple's done a great service for music lovers with both the iPod and iTunes.

And so, we were pleased to announce then that HP and Apple had signed a first of its kind agreement to bring Apple's iPod by HP to the Windows world. So starting in early September, you will be able to buy what we call the Apple iPod from HP at a store near you. And we also announced that all of our HP Consumer PCs and desktops will come loaded with Apple iTunes. In fact, this year we will ship more than eight million of our PCs with this great music service.

Now, we're also bringing our own innovation to the Apple iPod from HP. One thing we know about today's consumers is that they want to connect emotionally to their product. You know that you can, for example today, go online and order sneakers from Nike personal to you. You can custom-order a Mini Cooper right down to the very last detail. And so starting on September 15th, with HP, you can now customize your iPod just like you customize your play list, because today we are introducing HP Printable Tattoos. These printable tattoos will enable music lovers to personalize the look of their iPods with album art from the hottest bands and recording artists, or to wrap their iPods in their own printable art and photos.

So starting on September 15th, you will be able to go into your local retailer or online at hpshopping.com, and you can buy a pack of pre die-cut media, go to HP.com, download cover art or create your own, print it, and then wrap it around your iPod. It is really cool. And to create some of the coolest tattoos around, we have partnered with the Universal Music Group and key artists like Sting, like Vanessa Carleton, and like The Who to have the cover art from their newest CDs as well as other designs, available for consumers to print and tattoo their iPod. It is a great example of HP taking our digital imaging experience and combining it with music.

Let's talk a little bit more about integration among HP products. One of the really cool things that you can do with an iPod is store all of your digital photos on an iPod hard drive. You don't need a PC. And all you do is download the photos you take with your digital camera, store them in your iPod, and then you can hook the iPod up to our HP Mobile Printer with only this, and print the photos you want in stunning color. That is easy, fun and affordable.

While we introduce all these new products and many more that you'll see upstairs and behind us, you're going to continue to see us every year. Last year, we launched our new You + HP advertising campaign, and starting this fall, we will take the next step: We're investing in innovative brand and go-to-market programs to reach consumers. For instance, we are piloting new immersion centers with retail partners like Best Buy and Circuit City to give customers a really hands-on experience of what's possible. We're also rolling out a new experience tour that we call "You Rock HP". I don't know how many of you have seen those outside, but they are pretty cool, as well.

I've used the term "journey" a couple of times here today. We are on a journey. In some ways we are only at the beginning of the era in which all physical processes and analog content become digital, mobile, virtual and personal, so I want to give you just a peek of some other really cool things that we're working on in HP Labs. They're not products yet, they're concepts. So as a great example of what we mean by digital, mobile, virtual, personal, I want to invite the legendary DJ Gavin O'Connor, to come up on stage. He has been collaborating with us in HP Labs, and I'd like him to talk to you a little bit about an innovative new technology that we are piloting called the D-JAMMER. So Gavin, come on up.

[Gavin O'Connor speaks]

Carly: Thanks, Gavin. And I hope you really will take the opportunity to go see what Gavin can do with this. This is a device that allows you to interact with both analog and digital music, allowing analog and digital music to seamlessly interoperate. This is a device that allows anyone in a digital, mobile, virtual, personal way, to do all the things that a DJ traditionally has done - scratch, up and down the tempo, up and down the pitch - it's an amazing little device, and I think it will bring home what we mean by digital, mobile, virtual, personal.

Now obviously, we're really proud of all these products, and we're proud because we think these products are going to be good for consumers. But we're also proud because we think they're going to be good for our bottom line as well. We see this year's holiday season as a big digital entertainment Christmas. And it is why all of our products are hitting the market just in time for back-to-school and the holiday season.

We believe we have just begun to scratch the surface of what is possible. The market for digital entertainment devices and services worldwide stood at $500 billion in 2003, with growth year-over-year expected to be in the 6 to 8 percent range. Portable music device sales in the U.S. alone were $1.2 billion in 2003, with growth expected of about 19 percent year-over-year. Music downloads and subscriptions in the U.S. were $99 million in 2003 alone, with a growth rate of 173 percent expected year-over-year.

We think the total addressable market for all digital products is probably $360 billion by 2007. We think we have a unique opportunity because we have leadership positions and intellectual property at every stage of the value chain. And so, we see this as a huge growth opportunity for HP for many years to come and the beginning of the transformation of physical processes and analog content to digital, mobile, virtual, personal. And we think that is a journey that is not just for this company; it is a journey that really the whole world is taking. This really now is an era about the democratization of creativity - whether it is a going-away party for a friend, or a small device that fits in your hand and allows your favorite DJ to go digital, mobile, virtual and personal.

Digital technology promises to help more people accomplish more things in more places in more ways than we ever thought possible. And together with our partners, we are very proud to be leading this revolution and to create simple, enjoyable experiences for all consumers, and we look very much forward to continuing this journey together.

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