Home networking is a simple idea. Whether through a wired or wireless system, the home network enables you to access your PC and entertainment content on any media device in the home. The home network is designed to add both entertainment and efficiency to our lives. And a recent CEA survey found that more Americans are embracing that concept. The number of U.S. homes that have a home network has jumped from 14 percent to 23 percent in the last year. While the overall numbers may not seem impressive – still less than a quarter of U.S. homes have home networks – the percentage increase is 64 percent. Any new electronics product or technology would be thrilled with a 64 percent increase in one year.

More studies confirm the growing awareness, and perhaps, growing enthusiasm for home networking. The Internet Home Alliance (IHA) released a survey in 2004 showing that 42 percent of U.S. single-family home owners (26 million households) are interested in installing a connected home. And there’s evidence that home networking is spreading rapidly across the globe. Research firm InStat/MDR says that 35 million homes worldwide had home networks by the end of 2004 and that number will jump to 98 million by 2008.  

Source: CEA Market Research, 1/05

The numbers understandably have many industry officials excited. They believe that home networking ultimately will lead to increased sales of new entertainment services such as MP3 players, on-demand programming and videogame consoles (and more hardware such as PCs and media centers.) The theory is, if consumers can access these services regardless of the room, they will be more likely to use them.

A Parks Associates 2005 study confirms that theory: twenty-five percent of home network owners say they are interested in purchasing multiple services from their telephone or TV providers, against just 14 percent of non-network owners.

However, despite the industry’s success in reaching beyond the early adopter audience, there seems to be a large wall just ahead. Several studies published in the past year suggest that many Americans have little or no interest in home networking. And, it appears that their reluctance to embrace the new technology is deeply felt. For instance:

•  A Harris Interactive survey, released in January 2005, found that 75 percent of Americans don’t have a home network and don’t plan to install one in the near future.

•  The Diffusion Group, another research organization, said in a 2005 study that consumer interest in home networking has fallen to its lowest level in several years. The firm said that only about 10 percent of non-networked broad band households are interested in buying a home network. Even worse for the industry, Diffusion found that only 5.9 percent said they were “somewhat interested” and only 1.4 percent said they would “definitely” purchase a home network during 2005.

“There is no doubt that manifest demand for home networks continue to decline,” says Michael Greeson, president and principal analyst with The Diffusion Group. “ This is the lowest level of interest we’ve seen in several years, and is indicative of a flattening of the demand curve and a requisite channel strategy.”

The Diffusion study suggests that interest in home networking started to decline soon after it got past the early adopter crowd. According to the group, more than 60 percent of networked households purchased their systems in the last two years. Normally, an increase like that would trigger a new wave of purchases via word-of-mouth. However, the numbers suggest a large “interest gap” between current owners and the rest of the population. And if you dig deeper, the Diffusion Group’s conclusions seem to have support.

Parks Associates, a Dallas based research firm, says that America’s interest in home networking may be somewhat overstated. The organization issued a report in 2005 that found that the average home network is merely the connection of two PCs, not the elaborate wiring of multiple entertainment devices. When many consumers say they have a home network, they are defining it broadly.

In 2004, CE Vision magazine, published by CEA, drew a similar conclusion after it surveyed a dozen home networking installers across the country. The installers told the magazine that most people are not interested in connecting their entertainment devices, at least at this time. As with most new technologies, they said people first want to take small steps to lessen the cost and remove the intimidation factor of installing a home network. The concept of wiring an entire house – even if it’s done via a wireless connection – can be overwhelming for many consumers.

“I’m talking to people who hardly know that they have a computer or know what it does,” said Chaz Cories, owner of T-Rex Software, an Atlanta-based installation firm. “They can’t comprehend the idea that you can connect the entire house. They just want a Net connection on their desktop and maybe their laptop.”

*Includes notebooks and desktops sold through consumer channels, average price includes monitor. Source: CEA Market Research, 1/05

The consensus is that the industry must do more to promote the benefits of connecting entertainment devices in the home. The Parks Associates study says that 27 percent of consumers who describe themselves as “enthusiastic” about digital content and services are “highly interested” in a networked storage device that would enable them to store and transfer video and music files from one room to another.

In a report entitled “Digital Home Media Networking,” ABI Research concurs, saying the two biggest factors that will drive home networking are first, the consumer’s ability to retrieve media content from the Internet rapidly and second, alleviating copyright concerns of content owners, to encourage them to offer more content on the Net.

Source: CEA Market Research, 1/05

Entertainment seems to be the key to bringing the home net­work to a mass audience. Tim Woods, vice president of the Internet Home Alliance, a trade group for installers, told CNET’s News.com that interest in home networking now is focused on applications such as security systems. But he said entertainment will drive future sales.” Consumers get the whole idea around home entertainment. They like the idea of being able to move video and audio around the house, and that’s going to drive a lot of decisions.”

Source: CEA Market Research, 1/05