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In the Spotlight: Gary Shapiro

On the eve of International CES, Shapiro spoke with Dealerscope about his new book, International CES, and the industry as a whole

January 10, 2013 By Nancy Klosek
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Dealerscope: One of this year’s CE Hall of Fame honorees, Bjorn Dybdahl, is a CE specialty dealer who forged a reputation as one of the great industry evangelists and an educator of new technologies. Do you think the role of specialty dealers can be preserved, despite all of the challenges they face?

Shapiro: Definitely, ecommerce has made it more challenging, and it’s a new form of competition for everyone, but 30 years ago, the big thing was catalog showrooms, and they scared the heck out of everyone. And there were the department stores that were going to kill everyone. There’s always something new that’s going to come on and threaten something old; that’s what our industry is about.  Half of my career has been spent fighting the old industries.

For instance, there’s the fight on Capitol Hill now between Pandora and the radio industry. Pandora is paying half their revenue to royalties; radio broadcasters pay zero, so they’re trying to preserve paying nothing and they want the new guys to pay a lot. That’s who we are, and what we do.
One challenge is the Internet sales tax issue; that’s something we’ve worked on for over a year. And that could be voted on in this Congress.
I still think, with things like Ultra HD, which I am passionate about, that it won’t be a huge Internet product, at least not for a while.  The specialty dealer has to show how that works and introduce people to it. You can’t get a sense of what it is unless you physically see it. It’s big, and it should be installed, and there’s a service opportunity for this new technology. There are the Bjorns, and there’s Cowboy Maloney’s in Mississippi, and people like Dan Pidgeon at Starpower. He has this gorgeous place in Dallas and is tearing it down and renovating it to build something better. And Michael Pope of Audio Video Interiors in Cleveland, who showed me what he’s done in partnering with others who design wine cellars and kitchens to create a great experience area, a space where you’re even able to play golf electronically. And there was just an LG Ultra HD event at California’s Video & Audio Center, where the lines were out the door.
The opportunity for independent dealers is still there. You’re not going to get that golf system or Ultra HD television at the beginning unless you see it demonstrated.   The point is that there are pockets of excellence all around; I’d love to meet more of these dealers and have them engage more with CEA, but one challenge we face is that because they are so stretched for time, we have trouble engaging them.
And we have our Retailer Council. One of the things I’m proud of is we’ve expanded to open up to retailers, to small companies, and to all sorts of different industries.
The CES tent is always large and we have a whole bunch of principals. And even if you disagree with someone, as we often do in Washington, you still invite them to speak, and be on our panels and present their views. Though we might be fiercely fighting and debating them in Washington, we’re always polite.  You can still have a debate and be civil.

Dealerscope: What is the ‘next big thing’ in CE? 

Shapiro: Ultra HD is one thing. It’s going to be big and expensive at first, but people want big TV sets, and that’s very, very exciting.
In the long term, I’m excited about the driverless car; it has huge implications for society. I’m excited about 3D printing. I think that will be a really big deal and change a lot of things. I’m also excited about robotics. There are still so many new products to be invented.
Between the Internet and wireless, I am concerned about available spectrum and whether we have the infrastructure to deal with all that. I’m also concerned about the health of the U.S. economy, and about the health of retail. But I’m also concerned that government doesn’t try to do good things and inadvertently do bad things that would hurt innovation.

Dealerscope: When you joined CEA (then known as EIA/CEG) full time in 1982 as general counsel, you had already worked on the Betamax case, which established that consumer use of VCRs for time-shifting was not copyright infringement but fair use. Around that time, the CD was just being introduced and Apple was gearing up its first l launch. When you look back on your beginnings in the industry, did you have a sense then about the profound impact these products and technologies could make in everyday consumers’ lives?

Gary Shapiro: My turning point was attending the first CES, the Summer Chicago show in June of ’82. I was an outside lawyer then, and I fell in love with the concept of the CES and the excitement, how companies market themselves, and the technologies.
At the same time, I also felt the VCR was the best thing in the world, and how could it become illegal? I was passionate about that. I remember I bought a bunch of CDs at the show, and then bought a CD player. The VCR was a liberating product. It was the first new technology to allow you to have a theater in your home and watch what you wanted when you wanted to watch it, without the expense of a babysitter.  It was a product that conveyed personal freedom. And that was still not too far from the gas lines [of the ’70s], so I argued that it would save gas and was energy-efficient.
While there were those who talked about time-shifting being the important aspect, I passionately believed that it was the movie aspect which made the difference. When legislation was first introduced, which put a royalty on every VCR and videocassette and we opposed it, buried in there was a provision that also banned video rentals. That was horrible. I went around the country and organized these fledgling video stores into an association. I said video rentals were more important than time shifting, that these video rental stores were going to be our grass roots. I was 100 percent certain I was right, held my ground, and it turned out that video rentals were much more important, and did create this business, and the grass roots did help us.
It took a few years for the Supreme Court to actually rule; my goal was [for the video industry] to survive long enough so the product sold, so the prices would come down, so average politicians and court justices would understand what they were, and fall in love with them.  The Court heard the case in 1984 and it was argued twice. There was a 4-4 split, and it could have gone either way.
We did argue at the time that it’s very dangerous to cut off a whole new area of technology when you don’t know what the possibilities are, and certainly, we also argued the same point about music recording. It all happened very quickly together.
Early on, with the Internet, we were very involved with that, and I remember testifying in Congress. There was a proposal to make it so that anything you did on the Internet, where you passed along anything copyrighted, including someone else’s email to you, was an illegal act.  Boy, did we argue against that and fortunately we prevailed. The Internet was viewed by the content community as the world’s largest piracy device, and they were very negative on it.
Then, our whole focus became how do we get broadband deployed so people can enjoy more into their homes. Even today, there’s a lot more things to go, and some are similar themes like privacy or copyright or intellectual property protection, or creating new categories, or environmental issues.
But in terms of where we’re going, and the possibilities? The only area where I’m certain we’re going, and we have to just get there, is driverless cars. In terms of other things? The possibilities are endless, still.
I’m the luckiest guy in the world to be part of the most exciting industry and the industry that’s made the difference in the most lives in the world.  The automobile made a difference, of course, but there are more people with smartphones than automobiles and more people with access to the Internet, and more people with televisions, by far, in the world, or that fly in planes. You almost have to look to the health and biotechnology world to say that something has had more influence on lives.

Dealerscope: Another of the seminal events in our industry that you played a part in was the transition from analog to digital TV. Did you think it would go as smoothly as it did?

Shapiro: I was less concerned than almost anyone involved. I was called into a congressman’s office and told we had to support the proposal to give every consumer a coupon. CEA did not support that proposal; we felt it was a wasted billion dollars. We never ask the government for money; that’s one of our core positions. My position was that it’s just television. If your TV doesn’t work because you haven’t bought one of these cheap boxes, you can turn on the radio, open a newspaper, do something else; the world’s not going to end. I was called into the office of the guy who’s now the head of the Federal Trade Commission, seven years ago, and he was concerned about the transition. I said to him that with all respect, you have a much bigger problem. This is just TV. If someone doesn’t get service for a day or two, they figure it out. The issue is really going to be that millions of Americans are going to lose their homes because they’re signing mortgage documents they do not understand. Why not focus on that? A home is much more important than a television. And he said, you’re right. This was in 2005, before the mortgage crisis.
What we did do that was very important, I think, is we had a whole DTV strategy which the Association adopted and which I pushed, working with other industries focusing on a common message, getting the facts out to the public, reassuring them we had to be very delicate – it was a dance not to hurt existing analog sales and promote digital television sales. We wanted the industry to speak with common words and a common theme. Then I reached out to my colleagues in the broadcasting and cable industries and, as the transition was a couple of years out, I sat down with them and said guys, we’re going to hang separately or hang together, so let’s work together and come up with a common campaign to the public about what this is and how it’s going to happen. If it screws up, it’s all our heads that are on the line. We agreed on common messaging and a common campaign, and got in all these other interest groups. While we stayed away from the government money part of it, we all had the same reassuring language we spoke to the public. And I’ve yet to hear any complaints about the transition. It was totally seamless.  I’m so proud of the HDTV transition that when I die, I want a 16:9 aspect-ratio tombstone.
Our strategy was that we laid out everything. We had an awards program; we had conferences; we got different industries together; we had retailer education and demos all around at Circuit City, Best Buy and independent dealers; and did so many different things. And it worked. It was the best example of a government–industry partnership—it was absolutely terrific.
There were other issues. A lot of people didn’t think HDTV was important; they thought only digital was important. And there were those of us that were passionate about HD being the best standard for the U.S., and fought for that all the way against companies who thought 480p was good enough. The biggest thing we were wrong about was we thought that over-the-air broadcasting would be the major driver of digital TV sales, and it turned out to be that DVD was, even though DVD was not HD at the time.
Now, people like John Taylor, Peter Fannon and David Arland, who were involved then, are involved in the transition to Ultra HD. We have such great expertise in our room. Ultra HD is a big deal, and will be a great product. We’ve succeeded already in getting the industry to agree upon a name. That took three or four years with HD; for Ultra HD, it took six months. 

Dealerscope: Talk about your work in developing the Consumer Electronics Show into a flagship for the industry and broadening it overseas. In what other possible ways can the show grow? Where will you take it in the next five years?

Shapiro: Our focus is to make it the global show for innovation. We broadened the definition of what consumer electronics is, and have broadened its reach internationally.  It is ‘the’ international event, and we have small CESes around the world.
The strategy has been multifold. Jack Wayman created a wonderful, wonderful thing and obviously, we couldn’t have grown the show unless the industry had grown, but part of our strategy in broadening it is that it now includes wireless, and automobiles, the content and entertainment communities, and Madison Avenue.  We did so much to get to this point. Part of the strategy was to define the Show by the keynoters. Even though not that many people go to keynotes as a percentage of the show attendance, they help define the show.

We have 25 Tech Zones for emerging technologies, and we go after the smallest entrepreneurs and companies. We’re very quick and responsive. As soon as MacWorld was canceled, within three days we created iLounge, and now iLounge has 440 exhibitors, and is bigger than most trade shows in the country.  With Eureka Park, we have 140 startups. And we’re really helping them in Washington in all sorts of different ways. We’re getting the reputation of being the ‘innovation association.’

The challenge we face, of course, is that the U.S. isn’t the market it once was. So when you talk about major international companies, you have to make it relevant.

And that’s why international and media attendance is so important. The major buyers could fit in a small room, and the independent dealer base has been challenged. So it’s not just about the buying audience, it’s about buyers seeing non-traditional products, it’s about non-traditional buyers, it’s about the financial community—it’s the audiences we attract. It’s also about keeping it selective; there’s a lot of people we don’t let come to the show. We don’t want to go much above 150,000 because the Las Vegas infrastructure can’t handle more.

Dealerscope: What have been some of your other career highlights and proudest achievements? 

Shapiro: Defining and pushing home theater as a concept. We promoted the hell out of it; we spent money and time, and it became a concept that people understood and appreciated. That’s fueled a lot of the things we’ve done.

Then there’s the promotion of broadband, and the 15-year-old strategy on that that the U.S. should be great at broadband, although we’ve shifted from the wired to the wireless market. Getting more spectrum is something we initiated that I’m proud of, that President Obama signed this year.

Preserving video rentals—that’s part of that old history, but there’s a whole world of video rentals which Hollywood tried to kill and would have, unless someone stood up and noticed it and organized against it.

Connected to that is everything having to do with the copyright wars. It’s not just about the VCR. There’s so many things that follow from that, including most recently the biggest event that’s ever happened in American politics: last January, the SOPA-PIPA Internet blackout [to protest anti-piracy bills]. Everyone thought it would be hopeless to be fighting this thing, but we got five million contacts to Capitol Hill in 24 hours, over 30 members of Congress withdrew their names from legislation and now SOPA-PIP is dead.
Also, CEA is now one if the 15 largest associations in the Washington, D.C. area. Since I took over in 1991, when we had 50 companies, it’s grown to over 2,000. We’ve won so many awards—some for marketing, some for our trade show, some for being green, and all sorts of awards for being a family-friendly place to work. I’m pretty proud of our team and our staff that we’ve put together; they’re incredibly great people. We do a lot of market research for the industry but we also do research and surveys about the things we do, and what kind of experiences people have.

Dealerscope: The boomers are moving into another phase of consumerism.  Is serving the aging population a high priority at CEA?

Shapiro: I was a keynoter at the mHealth Summit in December. We’ve created a foundation focused on the aging and disabled population and are funding something in New York where there’s a project connecting people who are homebound through technology to other people, and are doing a lot with the disability community as well. We also have the whole Silvers Summit and have really expanded CES in terms of personal physical health and products aimed at different demographics. We try to educate our industry about what products are available and how to design products for and sell to the disability community. It’s a huge, growing market out there. It also goes to some of the home control/home automation features, monitoring and recurring revenue streams. It used to be just nanny cams, and now it’s shifted over to cameras that detect movement. And there are all sorts of ways of getting help. At the same time, it’s technically assisted living; it’s not nursing homes. So there’s a lot of opportunity there.

Dealerscope: You’re a columnist and an author of two books; the first of which touches on the importance of innovation, and the second implies that ninja tactics have been used to innovate within the most successful CE companies. What ninja tactics have worked best for these companies, and what do you hope that your readers will take from the examples?

Shapiro: CEA owns the books and gets all the profits from their sale. The second book is much less public policy-oriented—it’s focused on companies, people and industries, and to an extent, government, and what kinds of strategies you have to have to be innovative. My favorite chapter is about CES, and I also talk about the HDTV transition. It’s about how you do things, how you set goals, how you work with a team, how you think outside the box, how you brainstorm, how you encourage risk/rewards. It’s a business book focused for the most part on the consumer electronics industry and the CES, and great things big and small companies have done. It’s got to do with my experience of over 30 years in the consumer electronics industry and it’s about what I think works, and about some mistakes I’ve made and companies have made. DS


 
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