Three strands dominate: trends based on technology; trends related to the broadband revolution changing society, new ways that people are using technology and transformation of the value chain; and shifting consumption trends based on demographics and other factors. The complexity of consumption gradually is driving more decentralized, more user-centric solutions.
The Macro Trends
1 BROADBAND is setting the stage for new developments in devices, transportable storage solutions, network technologies and DRM. Nearly three-quarters of U.S. Web users connect at home via broadband, according to Nielsen/NetRatings. The Internet is transforming society. HDTVs connected to media center PCs are expected to triple in 2007, according to Pacific Media Associates. Small boxes from NetGear, DLink's Media Lounge and Apple are changing the face of television distribution letting consumers download and purchase content online and seamlessly experience it through their television sets. Similarly, Microsoft with its Xbox and Sony's Playstation3 are positioned as broadband-enabled entertainment gateways into the home while Nintendo plans to introduce a broadband Wii later in 2007.
2 WIMAX takes off with major investments by two powerhouses. Intel invested $600 million and Motorola contributed an extra $300 million in Clearwire, a company led by cellular pioneer Craig McCaw. This will likely spur adoption of this wireless technology within the next two years and stimulate demand for laptops and other portable devices.
3 MOBILE DEVICE PENETRATION AND SERVICES continue to show strong growth. About one billion mobile phones will have been sold worldwide in 2006, according to Strategy Analytics, with cameras becoming a ubiquitous feature. Conventional wireless industry wisdom is that consumers seek a single wireless device with multiple capabilities built into the handset, but In-Stat studies show that most users carry redundant devices, with more than 15 percent carrying two wireless phones. Watch for new features, capabilities and devices coming from handset makers and carriers like Cingular and Verizon. Sprint recently introduced Sanyo's Katana with built-in GPS from TeleNav. Mobile TV is in the wings, but music distribution via the cell phone has taken off in a big way. More than 250 million out of one billion phones will be music-capable, according to Strategy Analytics, and it estimates music phone shipments to grow to 800 million by 2009.
4 The democratization of video production is unleashing social change and networking in a connected world. With the recent $1.6 billion purchase by Google of YouTube and News Corp's $580 million for MySpace, online social networks are big business. It's more than just repurposing existing content. The combination of digitization, technological advancements in data storage and the ability to personalize how content is consumed is fueling new opportunities and challenges for CE vendors and content providers. Traditional broadcast and cable are on a collision course with new players such as VOD, HD, IPTV, broadband and mobile competing with each other. Each has its own programming requirements. The worldwide subscriber base for IPTV services is expected to expand by a factor of more than 26 from 2005 to 2010, spurring a competitive battle between video providers both old and new, says iSuppli Corp. These analysts predict that the number of global IPTV subscribers will grow to more than 63 million in 2010.
5 SEARCH ENGINES will continue to grow more important. Comparison shopping engines will become more crucial to online and brick retailers. About 30 percent of people who purchase online use comparison-shopping engines, according to Forrester Research. Sites like Shopping.com, Shopzilla, and PriceGrabber are competing with newcomers such as Like.com, Jellyfish or ShopWiki. Unlike comparison shopping sites that rely on data feeds from retailers, ShopWiki uses Web crawling and extraction technologies to index products from about 120,000 online retailers. It also incorporates user-generated buying guides and video reviews of products vetted by ShopWiki staffers. Perhaps most importantly, ShopWiki has developed sophisticated technology to better understand visitors' queries.
6 THE PARADIGM OF CHANGE will be big for digital imaging in 2007. Given the increase in digital camera sales, according to CEA market research data, consumers are shooting more pictures than ever. The question is how many get printed? Interestingly, the online printing and sharing marketplace is heating up, and is catching the interest of major companies. Last year, HP bought online photo site Snapfish and Yahoo Inc. purchased photo-sharing site Flickr. Ofoto, an earlier competitor, was bought by Eastman Kodak Co. in 2001 and now is known as Kodak EasyShare Gallery. Shutterfly decided to go it alone and filed an IPO to sell up to $92 million in common stock-at a time when a slew of new websites like Tabblo, Photobucket and Riya are entering the market. Many newer companies also are building technology for social networking and other interactive features within the digital imaging arena. Big-box companies, like Wal-Mart Stores and Costco Wholesale also are getting into the printing business with in-store kiosks.
7 THE "GREENING" of consumer technology and electronic waste is becoming a major public concern. Eco-consciousness is on the rise as electronics products become obsolete and is an important public policy challenge. CEA is working on behalf of the industry to develop a public policy national solution that is based on market-driven environmental design initiatives, such as federal and state government programs on purchasing of environmentally-preferable devices. The industry shares responsibility for introducing environmentally friendly products.
8 Industry marketers must pay closer attention to their customers and their digital lifestyles, since broadband and networked devices are reaching millions of connected digital consumers. As the market expands, the ability to target critical groups of consumers will separate winners from losers in a digital universe defined by infinite choice. Eighteen-to 26-year-old Gen Yers are integrating technology into their lives at a faster rate than any other generation, according to Forrester Research. Females are emerging as the key electronics buying decision-maker, according to CEA. Understanding how people use the Internet and Web-based services also is important says Strategy Analytics. Some companies are pigeonholing their customers by age and income; while others are taking a different approach that includes segments ranging from "Affluent Technostyles," "Prudent Nesters," "Connected Aspirers" to "Practical Mainstreamers." Knowing your customers and understanding consumption habits are critical for vendors and retailers to achieve competitive strategic advantage.
These trends will reshape the economics, production, distribution and marketing of digital products and services in 2007.
