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Dataquest Predicts Conference in San Jose” –>
Introduction
Every year Dataquest, now owned by the GartnerGroup, hosts their ‘Dataquest Predicts’ Conference to share statistics and to give an outlook for numerous segments of the electronics industry. The 2000 Conference was held at the Santa Clara Convention Center in Santa Clara, California. Among other things the industry analysts discussed whether the PC will survive or be replaced by an Internet appliance, or what is happening in the consumer electronics space.
For about two years now we have been hearing rumors about the nearing death of the PC industry. It will be replaced by Internet appliances or by a little box that plugs into our TV and then Internet-enables the whole entertainment center. Well, the good news is the number of shipped PCs is still growing, from about 114 million in 2000 to 201 million in 2003, and that the PC remains the No. 1 device for accessing the Internet. However, the bad news for the industry is that PC prices continue to drop and with them revenues and profits for the computer manufacturers. The winner is of course the consumer, for a change. Finally, we might enter a period when computer manufacturers must distinguish themselves from the competition not only with good products but also by offering better customer service. This almost sounds too good to be true, doesn’t it?
Show Me The Money
Fact is that the PC industry faces the challenge of selling more PCs to counter the dwindling profit margins. According to Dataquest six out of every 10 desktop PCs – including monitor – will cost less than $1200 by Q4 of 2001. One solution is to speed up the replacement cycle. Today, most consumers replace their old PC about every 3 years, mainly because the technology is out of date and a new processor generation has come along. But this trend should actually slow down even more, since the average user owning a computer based on a Pentium-II, -III, K6 or K7 chip hardly needs more computing power to run common word-processing or financial software, spreadsheets and to access the Internet. Only the relatively small group of game fanatics is willing to upgrade their PC for the best performance money can buy.
So what could entice consumer to replace their old PC? Dataquest thinks that more stylish models could be the answer: smaller form factors, more appealing designs in different colors. Especially if the prices continue to drop, consumers might consider buying a new computer sooner if it looks ‘cool’. Apple’s iMac already proved that color does matter. According to Dataquest, style is the second criterion after the price/performance ratio when buying a PC. This is actually a no-brainer – we have always cared about the looks of the products we buy, whether it is a car, a bicycle, a stereo system or a telephone. If two things cost the same, but one comes in a more stylish package, most people would go for style. It is a way to express our individuality.
Another approach for selling more PCs is to leverage other markets. In the US this mainly means low-income households and small businesses. Both have been neglected by the big PC manufacturers so far, because they have different needs than the large corporate environments – and of course will not spend as much. Only now are retailers like Gateway and Dell beginning to figure this one out and started to offer tailored solutions for these markets.
Show Me The Money, Continued
Is the reign of the PC really challenged by alternative computing platforms like mobile devices (Internet-enabled cell phones, PalmPilots, Blackberry Exchange Edition) and home information appliances (Internet terminals, Web tablet, set-top box, game console, web phone)? Not anytime soon, says Dataquest. In the next 3 years the PC will lose some market share and growth rates may continue to flatten, but as an Internet device the PC will still be dominant. In the mobile phone segment consumers are going to upgrade their services, but handhelds do not overcome the PC as an e-commerce platform.
But what about the consumer electronics space as a new market for PCs, especially since the consumer electronics world is undergoing a huge change from analog to digital? Well, it’s all about entertainment and not about data. And entertainment rules. Contrary to what most home networking companies think, it is not the PC that drives home networks. According to a Dataquest survey, consumers are interested in home networks because it allows them to send an AV signal to another TV or stereo. Sharing a high-speed Internet connection is seen more like a by-product. Traditionally consumers are also willing to pay more for entertainment than for Internet services: a monthly cable fee of $40 is no problem, but most users would not pay more than $20 for monthly Internet service.
Two companies that are on the right track: TiVo and ReplayTV. According to Dataquest they will change the way America watches TV. They might be the death sentence for the current TV advertising model, because these digital VCRs allow skipping the commercials. Isn’t that THE FEATURE we have all been waiting for? But the ‘commercial’ relief will very likely be short-lived. I am pretty confident the advertising industry is going to come up with an idea to force their often excruciatingly stupid commercials down our throats again. Once digital VCRs come down in price and really take off, we may see the actors in a TV series do the advertising by promoting the products. Just like it was before the commercial break was invented.
Once TV becomes truly interactive, things could get really scary. Just envision this: the actor in a TV series mentions a product, and up pops a window asking you whether would like to buy this product online. Your credit card information is already stored in your TV/set-top box/digital VCR. All you have to do is push the ‘Buy’ button on your remote control. It is the AOL experience all over again. Maybe that’s the real plan behind the AOL/Time Warner merger…
