The dominance of the CD and DVD formats means a slow, steady death for blank audio and video cassettes. CEA predicts factory sales for audio cassettes will dip to an anemic $46 million in 2006, down from $57 million in 2005, while video cassette sales will slide to $403 million, down from $422 million.

Flash Media Sales To Dealers Dollar Sales (millions)
2001                                                           $   643
2002                                                           $   910
2003                                                           $1,346
2004                                                           $3,102
2005                                                           $3,600
2006p                                                         $3,840
Source:  CEA Market Research

The largest and fastest-growing digital storage segment remains entrenched in the portable sector. The need for storage for digital cameras and portable MP3 players has reached critical mass, and storage in the form of compact flash, Memory Stick, MMD, SD, XD and others all are benefiting.

 While not escalating exponentially like they were three years ago, flash media sales continue to rise and are projected to reach $3.8 billion in 2006, up from $3.6 billion last year and $1.3 billion in 2003.

Blank Audio Cassettes Factory Sales
Unit Sales           Dollar Sales (millions)             (millions)
2001                          246                         $129
2002                          186                           $98
2003                          149                           $77
2004                          128                           $65
2005e                        116                           $57
2006p                          96                           $46
Source:  CEA Market Research

Storage technologies are getting cheaper, smaller and more efficient. As storage companies continue to cram more storage into smaller spaces in an effort to please consumers, there's no telling how much capacity they'll be able to squeeze out of those tiny drives. Already, new technologies such as perpendicular recording — in which the digital bits stand end to end, saving real estate on the hard disk — are under development to push hard drives into new storage heights. In terms of capacity, 1-inch drives are already starting to rival the storage on 3.5-inch hard drives from just a few years ago.  

Meanwhile, the industry is working on 0.85-inch drives that lop off 15 percent of the surface area from the outside of the platter, amounting to disk drives that are about half the size of their 1-inch cousins. It's unclear at this early stage, however, whether 0.85-inch drives will ever see wide adoption. That's because "flash" technology, a solid-state design with no moving parts that now is used in countless small devices, has made huge advances in the last couple of years. At lower capacities, flash drives often are favored over hard drives.

In the end, experts admit that much of the storage future is up in the air. "It's a futuristic battle going on between flash and hard-disk drives," says Tom Coughlin, president of Coughlin Associates and founder of the Storage Visions Conference. "This is going to be driven by the applications."

The jostling between flash and hard-drive technology has become more heated as consumers clamor for small devices with increasingly robust memory requirements. Some hard-drive advocates argue that flash drives will eventually become inadequate in most devices. But for now at least, flash memory has a number of advantages when applied to portable gadgets: First of all, small-capacity flash drives generally costs less to produce than hard drives with similarly low capacities. In addition, they suck up less battery power and are generally more rugged than hard drives because the moveable parts in hard drives are more easily damaged upon impact.

So for portable devices that might get dropped or otherwise banged around, flash has become a popular option. Of course, hard-drive advocates say the ruggedness argument gets overplayed. "If you actually drop your iPod, your LCD screen is likely to crack before your hard drive," says Jeff Janukowicz, senior strategic marketing manager at Agere Systems, which supplies integrated circuits to hard-drive manufacturers. With hard drives, the most common damage occurs when the armature (similar to a needle on a record player) scrapes the disk platter when jarred. Agere Systems has already added sensors, "so if it does sense motion, it automatically will move the armature and park it so it won't damage the drive," he says.

Flash has other downsides. At higher multi-gigabyte capacities, flash becomes prohibitively expensive for consumer devices. This explains why Apple Computer's popular iPod device uses flash for its 512-megabyte "Shuffle" MP3 player but employs hard drives for its four-gigabyte "Mini" devices, as well as its higher capacity iPod models that store as much as 60 gigabytes of data.

While the flash-versus-hard-drive dynamic plays out in the portable device market, it's less of an issue when considering non-portable CE devices such as DVRs, digital jukeboxes and other household consoles. In that realm, hard drives remain the storage medium of choice. Not only is power consumption and ruggedness a non-issue in the home, but the hundreds of gigabytes required for modern digital storage requires hard-drive capacities.