His new company is working on a stealth home entertainment set-top box, but it also provides Internet content production, live Webcasting, 3D printing and real-time motion capture. Three of his employees are currently in Jamaica, researching a historical screenplay he's writing.
Clearly, Steve Perlman has a problem with boundaries.
And that, say people familiar with the WebTV inventor's current plans, lies at the heart of his recent success in wooing many of the entertainment and technology industry's most powerful players--led by America Online--to give his latest venture, Rearden Steel, a financial endorsement of unprecedented proportions.
Now armed with $67 million in Series A funding, Perlman is said to be designing a set-top box as omnivorous as its inventor is in his interests, one that funnels all kinds of satellite, cable, traditional broadcast, Internet, and other digital content through the same piece of hardware and into the television.
A disrespect for the boundary between the computer and the television set spurred Perlman to his meteoric rise to fame and fortune when the then-34-year-old tinkerer jiggered together the first WebTV prototype. Twenty months later, after mortgaging his house to meet payroll, and several other corporate near-death experiences, he sold WebTV to Microsoft for $503 million.
WebTV ultimately proved a disappointment to both its inventor and its acquirer, with its customer base stalling at about a million. Perlman's WebTV unit has gone on to create Microsoft's interactive television initiative, UltimateTV. Long before UltimateTV launched, however, Perlman had left Microsoft to take some time off and put his mind to the problems that intrigue him most, those preventing the widespread consumption of converged digital media and televised entertainment in the home.
Q: Critics say you're entering a tough market, that DVR (the digital
video recorder) can't survive on its own and that a new player is going
to
have a very difficult time of it.
A: I think if you look at one of the things that's tough for TiVo and
ReplayTV, it's that people look at PVR (personal video recorders) or
DVR--they're the same thing--as more of a feature than a product. That's
not to say it's a trivial thing, but it's hard to build a whole business
around that capability.
We can't look at any of these things that are on the market today and
call
them a runaway success. I saw this same situation when I was with
General
Magic and we were looking at handheld devices, what we now call a
palm-top
computer.
Now you can look back with 20-20 hindsight and say what you
need
is something that's simple, light, and has a long battery life. Before
that,
there were a lot of different ways to approach the problem. Before,
analysts would say "this hasn't taken off because there's not a market
for
it." Others took the position that some day, someone's going to figure
out
how to do it and the market's going to take off.
I feel that way about home entertainment. We are on the cusp of a complete revolution in home entertainment. It's the same as it was 100 years ago when you could go to the Nickelodeon, but people hadn't figured out the studio model and how to build a profitable industry around it.
What needs to be done to break the logjam?
I think all the pieces are there, but to get around the
fundamental problems that are getting in the way of home entertainment
technology, there are some tough problems to be solved. I wasn't sure a
year and a half ago that they were solvable, so I wasn't comfortable
going
to the venture capital community and asking for money. So I funded it
myself.
I took some time off, and characterized (Rearden Steel) as an incubator. It was an incubator in the sense that I was exploring a bunch of different things. The pot of gold at the end of it was that if we could make these things work, we would change home entertainment forever and get around these issues that the industry's been trying to get around. When we did get through some of these fundamental problems, it was time to start the company.
We're now in a full transition. We have some of the strongest names in the industry backing the company. It's one of the largest Series A (funding) in history when market is at one of its worst states in history.
AOL Time Warner has a heavy investment in TiVo. Now it's leading
your Series A.
Will there be a conflict?
What we are doing is quite different than what TiVo's doing. AOL can be
behind both companies. A few of those people at TiVo are working at
Rearden
Steel now. There's no issue there. (AOL unit CEO) Barry Schuler has
oversight with all
these different partners they're working with, and they wouldn't do it
if
they didn't think we could work together.
How did Rearden Steel get started?
I left WebTV in 1999 after
designing (UltimateTV's) Solo2 chip, which is named after my German
Shepard
Solo. I had some time, and I did something I don't do much and took some
time off. I went to Tahoe, and I said "Where are we with consumer
electronics and entertainment?" There are lots of interesting products
that
have been developed--TiVo, UltimateTV, the dish player, all sorts of
things--but when you get right down to it none of these things were
runaway
successes.
There's no way to build something that works unless you find a way, come up with a breakthrough, some fundamental invention. I started working on that with Rearden Steel and began incubating a bunch of ideas. I funded everything myself and got some things to work. Rearden Steel Technologies launched in January 2000. We brought people together, and it wasn't until later on this year that we presented what we had to partners and we had the phenomenal response that led to this funding round.
You've bought all of Geocast's intellectual property, which has led
some to speculate that your new product will implement some kind of data
reception technology like what they were working on.
There are modules across the whole thing that we can use. We're not
using the Geocast system as a whole, operating it the way they intended
for
their own products. Data reception wasn't the center of what we were
interested in. Even just a module that does low-level drivers could save
us
a month of work. There are lots of useful things they've done, but a lot
of
it was more in a research vein and needs to be productized.
My sources tell me you bought the Geocast IP for $1.8
million.
I can't comment on the exact numbers. They had $90 million in financing.
So when you're paying a very small amount of money, you don't have to
worry
about the details. It wasn't essential. To be frank about it, we
wouldn't
use the system as they had originally conceived it. It was not something
viable as a product, which is why the company ran into some difficulty.
And
it was particular to the hardware that they did.
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