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  • 1. 1 Digital Display Technology 2 Convergence of Wireless Devices 3 Digital Imaging 4 Flash Memory 5 Electronic Entertainment/Games C o n s u m e r E l e c t r o n i c s A s s o c i a t i o n w w w . C E . o r g
  • 2. Page 3 Digital Display Technology Page 9 Convergence of Wireless Devices Page 13 Digital Imaging Page 19 Flash Memory Page 23 Electronic Entertainment/Games CEA President and CEO Senior Manager Publications Production Artist Gary Shapiro Cindy Loffler Stevens Angel Cruz Vice President of Senior Creative Manager Contributing Writers Communications and John Lindsey Alan Breznick Strategic Relationships Jeff Joseph Graphic Specialist Robert MacMillan Philip Toups Catherine Applefeld Olson Director of Communications Production Manager Ron Schneiderman Lisa Fasold Patrick McMahan Phil Swann
  • 3. INNOVATION CONTINUES Welcome to the latest edition of Five Technologies to Watch. Once again, the Consumer Electronics Association (CEA) has accepted the considerable challenge to identify five of the most promising digital technologies in our industry. It was tough to choose the top categories that may prove beneficial as you move forward with your business plans. But this year CEA examines digital display technology, the convergence of wireless devices, digital imaging, flash memory and electronic entertainment and gaming as areas to explore in more depth.The technology trends share some common ground: smaller, faster and in many cases, mobile. The caveat, of course, is that this issue is meant to whet your appetite to learn more about the valuable technologies that already are enhancing our workstyles and lifestyles as well as the emerging technologies that hold unlimited promise as we move forward. Which naturally leads me to the perfect educational forum to learn and see first-hand the latest technolo- gies—the 2003 International Consumer Electronics Show (CES). As always, CES is known as the most advantageous launching pad for new products, and this show again will debut an abundance of new digital devices and services. Thanks to innovative products, we forecast U.S. sales of consumer electronics goods from manufacturers to dealers will reach $96 billion in 2002 on target to set a new annual sales record for the industry, representing three percent annual growth. Consumer demand for digital video products, including game consoles, digital camcorders, digital television and DVD players is expected to continue to be strong. So note in your Palm or your calendar the dates that you won’t want to miss in Las Vegas, Nev., January 9-12, 2003.This is your opportunity to see the most innovative, advanced products that entertain, inform and con- nect consumers. Come see plasma display technology, convergence devices like the camera/mobile phone/ multimedia messaging unit, the latest gaming software and removable data storage devices at the largest consumer technology trade show in the world—The 2003 International CES: Defining Technology’s Future. Gary Shapiro CEA President and CEO 5 Technologies to Watch O C TO B E R 2 0 0 2 1
  • 4. 1 Digital Display Technology OVERVIEW screens which can be rolled up when not in use, informa- The introduction of high definition television in the United tion displays on roller-blinds, and light-emitting clothing for States is a remarkable breakthrough in visual technology. safety or fashion applications.” If Professor Samuel is cor- However, during the next several years, television promises rect, you will be able to customize the shape of your televi- to take a major leap forward in technology. Experts say that sion as if it were an article of clothing. TV images soon will become life-like, or perhaps even more real than life. In fact, some already are predicting we will One could argue that digital display technology has yet to one day see something called “H-TV”—or Hologram TV— capture the nation’s attention because of the subject’s com- where the characters of our favorite show will magically plexity.The technology often is described in arcane, engi- surround us in our living rooms. neering lingo that could intimidate the average person. However, here is a layman’s look at the basic terms that But television also will become more pervasive in our cul- explain how digital display technology works: ture.Video screens will be everywhere, from the gas station pump to the paneled wall of an elevator to the backseat of DIGITAL LIGHT AMPLIFICATION (DLA) a taxi.The New Television will change the way we receive This is an electronic valve technology that uses liquid crys- and watch programming and advertising messages. And digi- tal on silicon. Developed by JVC, DLA enables manufactur- tal recorders will change how—and when—we watch.Yes, ers to create a brighter picture on a larger screen. the tube will get smarter, more powerful and even more important to our lives. DIGITAL LIGHT PROCESSING (DLP) Developed by Texas Instruments, DLP uses a digital However, while much of the attention is focused on the micromirror device to modulate reflected light. An optical advances in high definition pictures and digital recording semiconductor chip also adds brightness and clarity to a features, manufacturers are making incredible strides in large screen picture. On opening day in 1998, the Texas changing the very shape of the television itself. New digital Rangers baseball team used DLP technology to display an display technology (DDT) is enabling engineers to create HDTV picture of the game on an 18-foot diagonal screen. widescreen TVs, flat TVs, wall TVs and, eventually, televisions that you can fold up like newspapers. Professor Ifor Samuel, LIQUID CRYSTAL DISPLAY (LCD) who is doing research into new organic semiconductor LCDs, which now are used on everything from digital technology at the University of St. Andrews in Scotland, clocks to microwaves, are thinner and require less power says, “In a few years, it will be possible to make television than cathode ray tubes (CRTs) found in most televisions. Many TV makers are using LCDs to create ultra-thin sets that can display HDTV pictures. Sony, for example, is plan- ning to launch a 30-inch flat-panel LCD TV by year’s end. “ New digital display technology (DDT) is enabling engineers PLASMA DISPLAY TECHNOLOGY Plasma technology, which does not require a tube, enables manufacturers to create a larger flat-panel TV, up to 60 inches. (Samsung, in fact, is working on a 63-inch version.) A to create widescreen TVs, plasma display consists of cells, better known perhaps as pixels; gas in the plasma state reacts with phosphors in each flat TVs, wall TVs and, eventually, sub-pixel to produce what engineers call “colored light.” That’s how a plasma TV can display such a clear picture televisions that you can fold with the lights on.The term, plasma TV, has become synony- mous with flat TVs. But the plasma TV has yet to capture a up like newspapers. 5 Technologies to Watch ” wide audience due to high prices. O C TO B E R 2 0 0 2 3
  • 5. “ inch set which included a fold-down screen. But it was not As thin as a credit card, until the 1980s and 1990s that the size and shape of TVs really started to change.Thanks to display technology,TV the OEL screen produces makers introduced widescreen sets—and screens large enough to fill a living room.The creative designs were amazingly bright colors and embraced quickly by the public, leading to more experimen- tation by set makers. crisp pictures. ” Today, the high definition television is the subject of vigor- ous debate in the United States. But, over the next decade or so, HDTVs will be in every American living room. The increased resolution of HDTV displays was designed ORGANIC ELECTRO-LUMINESCENT for optimal viewing distance 3-times the picture height (OEL) DISPLAYS (vs. 5-7 times the picture height for NTSC). The wide Most experts say the OEL is a few years away, but it could screen high resolution display then immerses the viewer have the most potential of all new display technologies. As in programming, bringing the home theater viewing experi- thin as a credit card, the OEL screen produces amazingly ence to reality. And the picture will only get more power- bright colors and crisp pictures. Sony displayed a 13-inch ful. HDTV, which now comes as large as 70-inch sets, will OEL at a 2001 trade show, but the company acknowledges be displayed on flat screens that take up entire walls. With that it’s not ready for a consumer launch. flat screen displays the need for higher resolution becomes more pronounced especially with larger screen HISTORY sizes, 50-inch and higher. That places the viewer at the The sudden advance of digital display technology is even optimal viewing distance. The screen will display multiple more remarkable when you consider that the first con- channels, enabling family members to watch different sumer television had a 4-inch screen, a small motor with a shows at the same time. And televisions will come in all spinning disc and a neon lamp. Introduced in 1928 by GE, sizes and shapes, customized to the needs and desires of Popular Mechanics called the set a “laboratory plaything.” the consumer. Only four sets were ever produced. But how does the new display technology hit critical mass? In the 1930s, RCA and DuMont introduced the “electronic” How does it get from concept to everyday reality? And television, which broadcast 343 lines, 30 frames per second. how quickly will it happen. But the concept of viewing images at home still had not caught on with the American public, particularly since there THE BARRIERS was little programming available. (Sound familiar?) But, like There’s no question that new display technology is finding a some of today’s new TV technologies, television found a market. Sales of flat TVs, for instance, are increasing rapidly. home among early adopters in Great Britain. In 1937, 9,000 However, before we drill down to look at the potential of sets were sold in the U.K. after the broadcast of the coro- DDT, let’s examine the technological and marketing barriers nation of King George VI. that stand in its way. Television began to generate bigger numbers in the 1940s TECHNOLOGY:TOO GOOD FOR ITS and 1950s, but the shape of the set hardly changed at all. OWN GOOD? The average TV was a squat, unattractive console, which Industry officials often say that consumers will not buy new had a large tube protruding from the back. But in the late products because they fear they will become obsolete in a 1950s, Philco started experimenting with the actual design. few years. Ironically, in regards to digital display technology, In 1960, the company introduced the “Continental,” a 21- the industry itself is wavering. Some companies are unsure inch mahogany wood cabinet that was shaped like a trian- whether to mass produce—and promote—new DDT sets gle. However, the technology had yet to catch up with the because they believe a better technology is just around the designers.The television, which had a specially designed corner. For instance, Sony, which just launched a $5,900 30- “short-neck” picture tube, was a consumer’s nightmare.The inch LCD flat TV, is working on a much thinner OEL display. Continental’s picture constantly went out and, eventually, so Richard Chu, an analyst for ING Securities, told Reuters did Philco.The Ford Motor Company bought the struggling that Sony is not banking on its current flat-screen model. company in 1962. “They don’t think this is the future of TV technology.This is just a transition period,” Chu said.Yoshinori, Onoue, deputy The 1970s witnessed a re-birth of new TV designs. president of Sony’s Home Network Company, acknowl- Panasonic introduced the “Flying Saucer” TV, which featured edged that the company is not in a rush, “We debated a bubble-like rectangle screen. In 1978, JVC launched a 7- whether it would be right for Sony to rush LCD and plas- 4 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 6. ma models to market, but we wanted to put out products cessing. In addition, the phosphors inside the plasma have that were as good as or better than a CRT (cathrode ray a short lifespan, which can lead to early and frequent pixel tube) television.” dropout.The industry is developing solutions for these glitches, but any picture imperfection will turn off con- When color television was first introduced, electronic com- sumers.This is another reason why the industry may pro- panies could market it confidently to the masses, knowing ceed cautiously with full-scale production and promotion that the basic technology would not change for years. of current models. However, today, they are victims of their own success. Engineers have been so creative in developing new tech- DDT: IT’S TIME IS COMING nologies that companies are reluctant to invest heavily in Digital TV is currently holding center stage in the world of the latest discovery. (One could argue that this reluctance new TV technology.The media and industry are emphasizing leads to a greater uncertainty among consumers.) For new DTV developments, whether it’s the FCC’s vote to example, let’s say that in 2003 Company X decides to gam- mandate digital tuners or a network’s decision to expand its ble heavily on new flat-screen TVs.The company kicks off a HDTV programming. Consequently, DDT is not on the massive marketing campaign and produces millions of sets. radar screen of most consumers; people have difficulty Then, shortly after the campaign is launched, Company Y absorbing new information on more than one category sub- announces that it has unlocked the secret of the OEL dis- ject at a time. For example, the recent popularity of DVD play. Suddenly, consumers shopping for a flat-screen TV players has probably contributed to the slow growth of dig- might pause, thinking that Company Y will launch the new ital video recorders (DVRs); how many consumers will buy and improved version later in the year. Company X’s multi- a DVR if they just purchased a DVD player? Compounding million dollar gamble could go down the tubes, and along the DVR’s problem is that the media is devoting more time with it, an entire division. (Remember Philco’s disaster with to the DVD industry. “The Continental.”) Of course, many digital TVs will include digital display technology, such as wide-screen sets. However, the con- LCD LEADERS sumer’s primary focus will be on the set’s picture, not its shape. This could make it more difficult to sell non-HDTV DDTs, particularly to consumers who can only afford to 2% Sony buy one new TV. (No spouse wants to explain why he/she 3% 1% Panasonic Sanyo came home with an expensive new TV that does not 5% deliver a high definition picture. “But, honey, look how LG Electronics/Zenith thin it is!”) However, in a few years, after DTV takes shape in the U.S., things should change for DDT.The media will be on the lookout for a new angle on TV technology. And the industry 86% will likely devote more promotional resources to build up Sharp a new category. DDT CHALLENGES The FCC’s vote to mandate digital tuners in all sets by 2007 (and sets 36-inches or higher by 2004) demonstrates the federal government’s support for DTV.Whether you agree with the FCC or not, it’s clear that the feds will not stop until every home has a DTV. However, the advance of DDT will be based solely on the marketplace—do consumers Source: DisplaySearch. Stats based on worldwide sales, 2001. want and/or need televisions that come in different shapes and sizes? So, in the battle for consumer mindshare, DTV has a tremendous advantage thanks to the federal mandate. TECHNOLOGY: GOOD,YES, BUT IT COULD In addition, DTV prices should drop even further because BE BETTER the federal policy will ensure that manufacturers increase Digital display technology is a work in progress. For exam- production volume. However, DDT sets will remain pricey ple, the plasma display has a fixed image resolution, which because production will be limited until market demand is means it displays the best picture when the incoming signals established.This widening of the gap between the DTV precisely match that resolution.This usually isn’t a problem, price and the DDT price could slow DDT growth in the but signals that fall short require a difficult digital signal pro- next year or two. 5 Technologies to Watch O C TO B E R 2 0 0 2 5
  • 7. IT’S THE ECONOMY prices. But, by 2008, the group says LCD will account As we just noted, the prices of most plasma and other for just 53 percent of shipments and 35 percent of DDT sets likely will remain high for the foreseeable future. revenues. Plasma shipments will jump to 34 percent However, the United States and much of the world is and it will account for 56 percent of all flat panel TV undergoing an economic recession, and it’s unclear when revenue. Strategy Analytics agrees that Japan is the the recovery will occur. Concerned about plunging stock world leader in flat panel sales, but says that will prices and devalued 401k accounts, many consumers are change in the next few years. less likely to make a big-ticket purchase. DTV sales are up, but that’s because many sets now can be purchased for But, outside of the numbers, there is growing evidence that around $2,000. If the economy does not turn around soon, the industry is taking the business more seriously. Several it could have an impact on DDT sales. A TFCInfo study, pub- TV makers this year said they were increasing production lished in July 2002, found that 50 percent of affluent con- of DDT sets. Perhaps accordingly, Circuit City, the retail sumers would buy a plasma TV if the price were $4,999 or chain that is often a weather vane on emerging technolo- lower. However, when the same question was asked of all gies, said in February 2002 that it would re-organize its consumers, 50 percent said they would only buy one if the video departments to “better display plasma and LCD TVs.” price dropped to under $3,000. Later in the year, Circuit City said it would drop VHS video- tapes from its shelves and boost its DVD line, a policy that However, some disagree that the economy is having an was soon adopted by other specialty retailers. And Sears impact on new sales. Mike Piehl, a plasma line product man- announced in August that it was adding its “expensive” line ager for NEC, says that plasma TV has been a rare “bright up of plasma TVs to more than 650 stores. spot” during the down times. “Even after September 11th, our sales haven’t missed a beat,” he says. “The newness of the technology is still very attractive.” PROJECTED FLAT PANEL TVS THE FORECAST Despite the barriers, the industries—and analysts—are bull- ish on the potential of digital display technology. For instance: s DisplaySearch, a research group specializing in DDT, says it expects annual LCD TV sales to reach 14 mil- lion units, or five percent of all TVs, by 2006. (Less than 300,000 LCD TVs were sold in 2001.) The com- pany projects LCD revenue to jump from $1.4 billion in 2002 to $13.8 billion in 2006 worldwide. Source: Strategy Analytics, 2001. DisplaySearch, however, says 80 percent of LCD sales thus far have been in Japan where houses are smaller and thin sets are more appreciated.The industry’s “More Sears customers are investing increasingly in top- challenge is to persuade Americans that a flat-panel quality home entertainment because Americans are TV would improve the overall décor of their homes. spending more time at home with their families with the Interestingly, marketing for high-end televisions is tar- recent decline in personal travel,” said Ray Brown, vice geted usually at the male. But a flat-panel set could president and general manager of Sears’ consumer elec- appeal to women looking for ways to better organize tronics business. “The convergence of these two the living room;TV makers could do well by focusing trends…makes this the ideal time to introduce the their DDT advertising campaigns on both sexes. largest selection among national retailers of flat-panel plasma and LCD brands.” s The Japan Electronics and Information Technology Industries Association projects that worldwide plasma In addition, there has been a slight increase in media cover- display sales will hit 3.35 million by 2006, almost 20 age of flat-panel and LCD sets.The coverage nowhere times higher than in 2001.The group says one million approximates the space given to digital TV, but it’s a start of those sales will come from Japan with 900,000 and it will help generate greater interest among consumers. from the United States. THE PLAYERS s Strategy Analytics forecasts that flat panel TV sales As a whole, the consumer electronics industry is devoting will jump from 2.2 million in 2002 to 37.8 million by more resources to manufacturing and selling LCD and plasma 2008.The research group says LCD sets now account sets. However, there are some clear leaders in the field. for 80 percent of units shipped, largely due to lower A year ago, DisplaySearch reported that Sharp is dominating 6 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 8. the LCD market with 86 percent of the worldwide market DIGITAL VIDEO RECORDERS share. Sharp reports that it sold 500,000 LCD TVs worldwide in 2001 and expects to sell 3.6 million by 2005.According to Industry experts say that the digital video recorder (DVR) will replace the VCR by decade’s end. But what’s taking so long? The DisplaySearch, LG Electronics/Zenith was second with five DVR is in less than two million homes. But it already has turned percent; Panasonic was third with three percent; Sony was the entertainment industry upside down. fourth with two percent; and Sanyo had one percent. TV networks are developing new ways to deliver advertising mes- However, most CE companies have stepped up DDT plans in sages; consumer electronics companies are hinting they will dis- the last year. In July, for instance, Hitachi announced the for- continue VCR production; and the movie studios are hiring extra mation of a new digital media unit that would develop and lawyers to guard against illegal digital copying. sell new products based on LCD and plasma technology. "DVR technology and perhaps TiVo, in particular, will revolutionize SO,WHY WOULD CONSUMERS WANT IT? the way people watch TV,” says Murray Arenson, an analyst with And that’s the most important question. Already over- Morgan Keegan, aWall Street investment firm. whelmed with new technologies, why will consumers be interested in digital display technology? And, in some cases, However, the DVR, which permits viewers to pause live TV, skip why would they spend thousands of dollars to buy it? commercials and record more than 100 hours of programming, has yet to capture the nation’s fancy.TiVo, the brand leader in the DVR Here are some reasons: category, has generated just 500,000 subscribers since its launch in 1997. Why haven’t consumers embraced this new technology? PICTURE Three reasons: New digital display technology can dramatically improve the clarity and brightness of the picture, particularly in a well-lit 1. Comfortability: History shows that very few technologies room. It will no longer be necessary to turn out the lights become overnight successes. Whether it’s the microwave, the to view your favorite movie—unless you have other rea- portable music player (Walkman) or the television itself, the aver- sons to do so. DDT sets also provide distortion-free images age person needs time to become comfortable with a new tech- at the corners and edges of the screen. A DDT set with nology. Once that occurs, word of mouth spreads and sales sud- HDTV will deliver the best picture available on the market. denly take off. This may be happening now with the DVR. TiVo For many consumers, particularly affluent ones, this will be a reports that 97 percent of its customers have recommended the terrific lure in the coming months. product to a friend, an extraordinary high rate. The company also reported a sharp increase in sales for the last two quarters of 2001, perhaps as a result. PROJECTED LCD SALES 2. Price: Until late last year, the price of a DVR ranged in the hun- dreds of dollars. That was too much for consumers who believed the product was just a newer version of a VCR. However, the industry has cut DVR prices to under $200, closer to the price of a VCR. Plus,TiVo, which also requires a subscription fee, is experi- menting with reducing the monthly charge. TiVo has announced that monthly subs for DIRECTV customers will be reduced from $9.95 to $4.99, effective November 1. 3. Marketing: Industry analysts say that early marketing efforts lacked focus and clarity. DVR companies couldn’t seem to agree on the technology’s biggest selling points. Consequently, broadcast and Source: DisplaySearch, 2001. print ads rarely delivered the same message; one ad would spot- light the pause feature while the next would focus on the com- mercial-skipping function. For a new technology, this was death. FLEXIBILITY Consumers couldn’t figure out why they should buy the thing. The slimness of a flat panel TV will give consumers more However, thanks to experience, DVR companies have sharpened options in organizing the home. Many Japanese residents their focus in the last year. Research shows that consumers now now hang their ultra-thin sets on the wall, eliminating the have a better understanding of the DVR’s main attributes. need to reserve a large part of the living room for the tube. As we mentioned earlier, this feature could attract The DVR industry still has a long road ahead. It needs to persuade female buyers as well as male. In addition, as new technol- consumers to replace one perfectly acceptable technology, the ogy develops, sets will come in even wilder shapes and VCR, with another – always a difficult task. However, due to the sizes, all designed to fit a certain consumer need. Experts price reduction and marketing shift, the industry could start to see say that the fold-up TV will be launched soon and you will dividends in 2003. see “wearable” TVs, similar to the wearable PC now avail- 5 Technologies to Watch O C TO B E R 2 0 0 2 7
  • 9. “ A DDT set with HDTV will deliver the best picture available on the market. ” able from Zybernaut. The television will no longer be a fixed station in your living room. STYLE Few can look at a flat-panel TV without saying, “Wow.” The set is so much sleeker—and yes, sexier—than a CRT set that many wealthy people might want one for decorative reasons.The fact that it delivers a great picture is an added bonus.The style factor will go up when the first company introduces an OEL display, which promises to be as thin as your credit card. INFORMATION DISPLAY As television becomes more interactive, the LCD and plasma screens will be ideal for displaying text and other data. ENERGY SAVINGS It may seem odd to suggest that people will buy an expen- sive TV because it can save on electric bills. But the plasma display set does save energy because it does not have a tube.When set prices eventually come down, this feature will become more important. It’s already an issue in Japan where energy prices have escalated. PRICE Yes, price. Many Americans now would like to buy a plasma set, but the price is cost prohibitive. But, in time, prices will come down, fueling even greater interest among consumers. As with DTV, consumers will view a $2,500 set as a bargain when it used to be $6,000 or more. So the eventual lower- ing of prices will attract a significant number of new buyers. SUMMARY DDT will change the way we think about television.We will be able to customize a set to fit our needs and desires rather than conform to its immobility.Want a video screen to place in your briefcase? No problem.Want one on the wall? No problem.Want one that folds up so you can place it your hip pocket? It’s done.The days of the living room console seem far away. But DDT will likely struggle to gain a wider audience in the next few years.The technology is plagued by everything from industry uncertainty to high prices to consumer overload. However, once the barriers are overcome, consumers will quickly embrace the new television, which, in turn, will lead to even greater techno- logical advances. s 8 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 10. 2 Convergence of Wireless Devices OVERVIEW for PDAs with integrated cellular connectivity at 59 percent What would you rather carry around, a Swiss Army knife, of total PDA sales in 2007. or a Batman utility belt? Remember when Apple Computer captured so much attention at the International Consumer A PICTURE IS WORTH… Electronics Show (CES) in Chicago in 1992 by introducing a The worldwide PDA market has cooled in recent months. It handheld computer called the Apple Newton? The $700 increased slightly in revenue in the second quarter of 2002, Newton, one of the most hyped consumer products in his- but slipped in unit sales, according to Gartner Dataquest, a tory, hit the market in 1993. Unfortunately, it didn’t work research and management advisory firm. Gartner says Palm very well. And neither did several attempts to copy it. still leads with more than 40 percent market share. Sony, HP and Handspring are close together but still trailing well Enter the Palm Pilot in 1997. This personal digital assistant, behind Palm.That could change and quickly, according to or PDA, as the industry and media quickly dubbed it, did several market analysts, with the addition of just one fea- work and was quickly followed by several other consumer ture to their products—digital cameras. electronics manufacturers with PDA versions of their own. Since then, the race by manufacturers to add new Japan’s leading wireless carriers already are having huge suc- things in order to differentiate their products—has cess with camera-equipped cell phones. NTT DoCoMo, changed PDAs from plain old passive mobile computers to Japan’s leading wireless carrier, has shipped more than a mil- two-way interactive wireless communications devices with lion camera-equipped mobile phones since introducing new features like cell phones, e-mail and Internet access, them in June. J-Phone, the country’s only carrier marketing digital imaging, games, GPS navigation and streaming audio a photo phone, started offering phones with integrated digi- and video. tal cameras about 18 months ahead of DoCoMo and now has more than six million camera phone users, nearly half of But do consumers want several different functions in a sin- its subscriber base. Sharp Electronics produced DoCoMo’s gle device? They love television because of its simplicity and initial digital camera phone; in mid-July DoCoMo introduced capacity to entertain, but will they put up with tiny screens two more camera phones, produced by Mitsubishi Electric and keyboards in a handheld device that may require more and Fujitsu. KDDI, Japan’s second biggest wireless carrier, than intuitive skill to use all of its impressive features? In and other Asian and European wireless operators are either Japan, the answer is already a resounding yes.The jury is onboard with digital camera-equipped PDA/cell phones, or still out in the U.S. soon will be. A survey conducted two years ago by CEA Market “Sony made a big splash with the Clie NR70V, which inte- Research called “Convergence in the CE Industry” and grates a tiny digital camera,” says Todd Kort, principal ana- more recent studies by independent market research organizations, have generated mixed reviews to the all-in- one Swiss Army knife approach, with a device that is small “ enough to fit in your hand, but that can handle both voice and data—including e-mail and Internet access—has all the Japan’s leading wireless functions of a sophisticated electronic organizer and more. carriers already are having huge The CEA study found that when wireless phone owners were asked about their preferences for converged versus stand-alone products, more than half wanted a combination success with camera-equipped wireless phone and PDA. A more recent market study by London-based Strategy Analytics Ltd., projects the market 5 Technologies to Watch O C TO B E R 2 0 0 2 cell phones. ” 9
  • 11. lyst for Gartner Dataquest. Handspring, says Kort, is moving in the same direction, gradually withdrawing from the tradi- tional PDA market, focusing instead on smart phones with new features, such as cameras. “ To be a positive experience for consumers, convergence In the U.S., AT&T Wireless and Sprint PCS have been quick devices must provide the right to jump on board with clip-on cameras for their new cell phone models. Integrated versions are expected to follow. hardware, content and service, “The integration of digital imaging capabilities into handsets be easy-to-use, and enhance and PDAs may be just what the doctor ordered,” says Chris Chute, a senior analyst for IDC’s Digital Imaging Solutions consumers’ ability to use, transfer and Services unit. Chute expects worldwide shipments of these fully converged (PDA/digital/digital camera) devices to reach 151 million units in 2006. “In time, camera phones will outsell digital cameras world- and create content. ” wide,” says Randy Roberts, director of imaging of Nokia’s to enabling camera phone users in the U.S. to send and Imaging Business Unit, one of three new business units receive images. And almost all U.S. wireless carriers are Nokia formed about four months ago. According to expected to offer 2.5G service by the end of this year.This Roberts, the new business groups are part of a plan by is important if digital camera-enabled phones are to send Nokia to segment markets into specific applications. In addi- and receive still digital images by e-mail, via multimedia mes- tion to digital imaging, a new Entertainment & Media Unit saging, to a printer using Bluetooth or infrared (IR), or to a was established to develop mobile phones that are opti- photo album on the Internet. mized for MP3s and other features.These devices would probably not function as a PDA or feature a digital camera. The IEEE 802.11b wireless local area network standard, also A Business Applications Unit is expected to focus on devel- known as Wi-Fi, may be a sleeper as a totally new integrat- oping PDA-centric devices, but with integrated phones. ed feature for handhelds.While it does not offer the seam- less mobility of cellular networks or the security, several “Camera phones will be an essential tool in driving handset computer and telecom companies, including Intel, IBM, replacement rates in the next five years, especially in sluggish Verizon Communications and AT&T Wireless, have been markets such as Western Europe,” says Neil Mawston, a sen- discussing the joint development of a nationwide wireless ior analyst with Strategy Analytics.“In the U.S.,” he said,“we high-speed network for handheld and other portable com- are forecasting that the growth for camera phones will be puters that could access the Internet. Despite its limita- noticeably slower than Western Europe due to network inter- tions, some analysts believe Wi-Fi will be used more often operability issues, lagging short messaging service uptake, and than Bluetooth, particularly among well-traveled consumers the relatively high cost of devices and per-event photo mes- and business/professional users. saging.” For North America, Mawston expects camera phones to account for 13 percent of total PDA/digital hybrid sales in For one thing,Wi-Fi is considered to be a more robust sys- 2007, compared with 21 percent in Western Europe in 2007. tem than Bluetooth. Also, despite its spotty coverage at the moment (mainly in some Starbucks, public areas in hotels HIGH-SPEED NETWORKS and major airports), Kagan World Media is projecting that New high-speed data links, such as 2.5 generation (2.5G) public access to Wi-Fi will increase a hundredfold in the and third generation (3G) wireless networks, are the key next 10 years. Intel, a charter member of the Bluetooth PRODUCT PREFERENCES * OVERALL 18 TO 34 35 TO 54 OVER 54 Prefer converged wireless 58% 62% 62% 50% phone/Palm PC Prefer two stand-alone products 42% 39% 38% 50% *among owners of a wireless phone Source: CEA Market Research, 2001. 10 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 12. PRODUCT OWNERSHIP * OWN PROVIDED BY OWN & PROVIDED DO NOT PERSONALLY EMPLOYER BY EMPLOYER OWN Notebook Computer 24% 13% 2% 61% Pager 15% 15% 1% 70% Win CE Palm PC 2% 0% 0% 98% Palm Pilot 7% 1% 0% 91% Other type of Handheld 4% 1% 0% 96% or Palm PC *among owners of a wireless phone Source: CEA Market Research, 2001. Special Interest Group, is aggressively promoting the Wi-Fi age rates than mobile phones.” More likely, she says, PDAs development program, and already has announced plans to and HPCs will become Bluetooth-enabled through adapter provide 802.11 functionality in all of its microprocessors for products such as compact flash cards and clip-on devices. mobile computing products beginning in January. Strategy Analytics is projecting that only one-third of PDAs will offer There are pluses and minuses to convergence, according to integrated Bluetooth in 2007. the CEA study.To be a positive experience for consumers, convergence devices must provide the right hardware, con- Karen Walsh, the author of a new report for the ARC tent and service, be easy-to-use, and enhance consumers’ Group, another U.K.-based market research house, believes ability to use, transfer and create content.The downside that the introduction of 3G, with its faster wide-area net- comes with a steep learning curve, when there is no back- work capability, will increase the value of Bluetooth phones ward compatibility with a previously owned device or soft- and other devices, and will provide new opportunities for ware, and when net benefits fail to exceed those provided all players in the Bluetooth value chain, but she doesn’t by a currently owned product. Another issue: it shouldn’t expect mobile phones to drive the market for Bluetooth be difficult or more expensive to upgrade. on their own. Apple may take another crack at the PDA market.Apple “PDAs and handheld PCs (HPCs) will play a big role in early reportedly has a new device, called the “iPhone,” that offers Bluetooth adoption,” says Walsh,“especially among profes- voice access and wireless data via an Apple Mac operating sional users. But these mobile computing devices will be system.Apple is expected to use its licensing agreement with available with integrated Bluetooth in much smaller percent- Pixo, the company that developed the software for Apple’s tiny iPod MP3 music player, to add music to its new handheld. Dell Computer also says it is seriously considering offering a handheld mobile computer with wireless capabilities “ Despite the high expecta- tions for digital imaging as a among other applications. LET THE GAMES BEGIN Despite the high expectations for digital imaging as a major major near-term market driver near-term market driver for PDA/phone hybrids; mobile entertainment, particularly games, is another potentially huge growth opportunity. Cahners In-Stat/MDR, a market for PDA/phone hybrids; mobile and statistical analytical firm, says, “Downloadable games will prove to be a lucrative revenue steam for network entertainment, particularly games, providers.” It is this potential that led Ericsson, Motorola, Nokia and Siemens to form the Mobile Games is another potentially huge Interoperability (MGI) Forum last year to define technical specifications enabling a variety of mobile games to be growth opportunity. 5 Technologies to Watch ” played on different devices. O C TO B E R 2 0 0 2 11
  • 13. “ Designing these new, increasingly complex devices PRODUCT EXPECT TO OWN FIRST Palm Pilot OVERALL 16% MALE 17% FEMALE 15% will continue to be a challenge, Wireless phone with 47% 51% 44% web browsing/email particularly as consumers Don’t know 37% 32% 42% demand smaller, lighter, Source:, 2001. and less expensive models type communicators and other convergence devices.The new fuel cells are currently available for the Handspring Teo with new features. ” series, the RIM Blackberry 5810 and 5820, mm02’s xda, and the Audiovox Thera. But the fuel cells come as stand-alone units or in combination packages with car adapters, USB adapters and travel chargers. Then there’s video. In Japan, KDDI has announced plans to launch a service in October that will enable users to send The adoption by consumers of new mobile technologies and receive videos on their mobile phones. KDDI believes also seems to be as much an issue of age as it is cultural the new service and new phone (made by Toshiba) will help (what sells in Japan, for example, versus the U.S.). it sign up seven million 3G subscribers by March, about five Confirming CEA’s market study findings, a recent survey by million more than it has now.The phone can store as many IDC found that younger users have a clear migration plan as 555 video clips of five seconds in length, and takes mov- for adopting new wireless technologies, depending on the ing pictures that can be attached to e-mail and sent to device.When it comes to interest in PDAs equipped with other mobile phones and PCs.The new Toshiba phone also integrated wireless features, nearly 23 percent of the 20 to features GPS. 29 year olds and 24.5 percent of 30 to 39 year olds said they plan to use an integrated wireless PDA in the next 12 France Telecom also is experimenting with a software pro- months.These results decline in all other age groups. gram that will create a video link between existing PDAs with cameras.The carrier has demonstrated the system Similarly, only the over 54-age segment indicated a strong using a Compaq iPAQ Pocket PC. preference for stand-alone products in the CEA study, sug- gesting that this group associates convergence with com- plexity. Overall, 38 percent of wireless phone owners FREQUENCY OF CARRYING responding to the CEA study said they wanted a phone THE PHONE that could view e-mail, a percentage that jumped to 50 per- cent among 18 to 34 year olds. 2000 1998 All the time 33% 28% “The key toward growth in the mobile market going for- Most of the time 38% 31% ward will be in delivering solutions to younger generations Some of the time 10% 28% of consumers, who have not settled into specific usability Almost none of the time 4% 13% patterns dictated by past devices and applications,” says Source: compilation of research forecasts, 2001. Randy Giusto, IDC vice president, wireless and mobile devices and PC technology. “Younger people are less averse to change and will be more eager to accept converging Designing these new, increasingly complex devices will technologies and new converged devices that sprout from continue to be a challenge, particularly consumers demand the wireless landscape ahead.” smaller, lighter, and less expensive models with new fea- tures. Chipmakers are already targeting wireless and mobile The market research seems to validate the direction that computing applications with smaller and more efficient inte- several PDA producers already are taking; that is, develop grated circuits and other components. At the same time, highly segmented products, focusing heavily on younger battery and fuel cell manufacturers are developing and users with a steady stream of new features, while also launching new products for this market segment. Electric addressing the needs of business and professional users Fuel Corp., which makes zinc-air fuel cells, has introduced with application-specific devices of their own. For others, Instant Power Chargers for inherently power hungry PDA- there is still the plain vanilla PDA. s 12 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 14. 3 Digital Imaging OVERVIEW sold separately—have cut through the tangle of wires and When Paul Simon immortalized the glories of “Kodachrome” brain power once needed to retrieve, edit and store in the early ’70s, neither he nor anyone else could have images. Additionally, several savvy manufacturers, such as imagined the digital revolution that was to transform so Nikon, have begun including “Image Transfer For Dummies”- many daily activities, even the simple pleasure of taking type written and visual information with their cameras. If a picture. the cameras aren’t quite user-ready out-of-the-box, they are getting close. Digital cameras and camcorders have been broadly available to consumers since 1997 and today 40 percent of U.S. households owns a digital camera, while 50 percent of all ACTIVITIES RECORDED WITH camcorders in U.S. homes are digital.Although early adoption CAMCORDER * rates are sluggish when compared to that of other digital Family gatherings 87% lifestyle products such as the CD and DVD, they are begin- ning to soar. In fact, digital still camera sales are on track to Vacations / sightseeing trips 78% overtake sales of film cameras in about a year’s time. Significant life events 69% Random events around the home 60% The reasons for the digital imaging phenomenon’s slow trot Sporting events 25% out of the gate are varied and valid. Poor resolution. High price points.The need for a degree in electrical engineering to Making movies or short takes 8% retrieve images.Truncated battery life. Limited storage space. Source: CEA Camcorder Owner Profile Study, 2001. Fortunately, manufacturers have addressed many of these concerns during the past few years, although the road to Software support for digital imaging today is abundant. Both mainstream usage of digital photography still is dotted with Microsoft Corp. and Apple Corp. have infused their new potholes—both real and perceived. operating systems with software to manage digital images. Hewlett-Packard Co., for another, is releasing some 50 new Thanks to technological advances, pictures that only a year digital imaging products this fall and into early 2003, a five- or two ago were not great quality now vie for their place fold increase over the amount of peripherals it has hawked on the nightstand with their analog counterparts. At the in years past. Company reps hit the road a few months ago same time, prices have dropped to a level where, particular- in a grass-roots promotional tour to show consumers first- ly in the still camera arena, digital photography is approach- hand the wonderful world of digital imaging. ing the threshold that separates high-priced hobby and broad-appeal usage. Now that they’ve somewhat successfully righted digital pho- tography’s initially tarnished image, camera and camcorder In the still camera market, the price of a two to three manufacturers are spreading the word about their products’ megapixel camera (the baseline for printable photos) is flirt- benefits which are bountiful. ing with the $250-and-under mark. A quality digital cam- corder can be had for $600.These price points are beckon- The majority of digital camera owners—48 percent, accord- ing a wide array of demographics that stretch the digital ing to CEA research—cite the desire to post pictures to a camera/camcorder’s universe from hospital delivery room website as the main reason for purchase.The ability to to traveler’s knapsack to college dorm. immediately view an image, store only desired images and then transfer them to a variety of platforms are just a few Companion docking cradles, USB cables and other periph- of the reasons that two-thirds of digital camcorder owners eral devices—both packaged together with the cameras or have upgraded from a prior analog camcorder model. 5 Technologies to Watch O C TO B E R 2 0 0 2 13
  • 15. And it looks as though a picture does indeed paint a thou- ately after consumers took the first digital cameras for a sand words, as digital photography quickly is becoming part test run.Today, most cameras incorporate either heightened of the greater communications lexicon. Accelerated by a internal storage capacity or come with some sort of flash shrinking footprint, this new trend finds camera functionali- digital storage product/card—many with 16-megabyte ty being plugged or embedded in a host of mobile devices capacity—that can be inserted, and then popped, out of that would, for example, facilitate a user in snapping an the camera. image and sending it through his cellular phone on the fly. By most accounts, the storage capabilities that come packaged In addition the relative lifetime ownership costs vary dra- with most cameras fall short of consumer expectation. In matically between analog and digital cameras. Not having to short, this means buyers should be prepared to chalk up addi- develop film saves consumers a great deal in time and tional cash to purchase any number of the removable storage money with a digital camera. Combine that with a falling devices, which range in price from about $30 up to $200. pricepoint and you have a cheaper device over its life. As is the case with most digital add-ons, there are different options for different needs. Some storage devices are proprietary to a particular manufacturer’s technology, THE ONE THING CAMCORDER OWNERS or even to a specific camera line. Others can play in more environments. WANT IN NEXT PURCHASE Longer lasting battery 26% While storage concerns largely have been allayed, if at an Easier transferring or copying 19% incremental cost to consumers, battery power remains an albatross around the neck of the digital camera/cam- LCD view screen 12% corder industry. Better picture quality 9% More advanced features 7% When asked what they would most like to see improved in Improved sound quality 3% their current device, the majority of digital camcorder own- Improved focusing capabilities 3% ers would opt for longer battery life. LCD is a particular More memory 2% drain on batteries, and the inadequacy of many batteries Source: CEA Market Research, 2001. to support a lengthy recording session is among the major reasons owners leave their cameras in the case. With its growing mass appeal and a windfall of complemen- And standard AA batteries—still the status quo for many tary usage products bombarding the market, the question cameras—are simply not up to the job to support robust for digital cameras and camcorders now is when, not if, they digital functionality.The dilemma has spawned several will overcome their analog ancestors. responses, with varying success. STORAGE AND BATTERY LIFE In a play for the mass market, Panasonic Battery recently Shortcomings in storage capacity surfaced almost immedi- launched the PowerEdge, the first disposable battery designed SATISFACTION WITH DIGITAL CAMERA ATTRIBUTES OVERALL MALE FEMALE Portability 79% 78% 81% Weight 79% 76% 83% Size 78% 74% 80% Ease-of-use 74% 72% 76% Download to PC 71% 68% 74% Memory 65% 63% 68% Resolution 64% 61% 68% Camera Durability 62% 62% 64% View Screen 62% 61% 64% Source: CEA Market Research, 2002 14 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 16. HOURS OF RECORDINGS PER MONTH LENGTH OF OWNERSHIP Analog Digital < 1 Year 1 Year to 4 Years Camcorder Camcorder Overall < 4 Years or More Owners Owners 1 hour or less 65% 42% 59% 78% 67% 43% 2 hours 15% 22% 19% 10% 14% 24% 3 hours 7% 12% 8% 4% 6% 13% 4 hours 5% 12% 6% 2% 5% 7% 5 hours or more 8% 13% 10% 5% 8% 14% Source: CEA Market Research, 2001 specifically for use in digital still cameras.The batteries, which WHO IS BUYING DIGITAL CAMERAS? are priced at $5.99 for a four-pack, are beginning to turn up at Although men buy more digital cameras, women take the retail outlets from grocery stores to camera shops. majority of digital pictures (57 percent).The "Marketing to Mom: Profile of the New Digital Camera User" study con- DOUBLE DUTY ducted by the Photo Marketing Association International Rare is the technology that at some juncture does not found that among all households that own digital cameras, enter the world of multitasking, and digital cameras and women are the primary users of 46 percent of digital cam- camcorders are no exception. But like the combo PC/print- eras and 41 percent of digital camcorders. Women also are er and TV/VCR before them, they walk a fine line between more likely than men (27 percent versus 23 percent) to versatility and focused performance. make prints of their digital images and are more likely to cite e-mailing images as a primary reason for using a digital With the advent of removable storage devices, many mid- camera (73 percent of women compared to 69 to high-end digital camcorders have the ability to shoot still percent of men). photo images. At the same time, newer camera models tout the ability to capture a 60-second or longer streaming FASHION STATEMENT video clip. Taking a cue from the mobile phone industry, camera and camcorder manufacturers are seeking to parlay Thus far, the dual functionality has raised more eyebrows in the increasingly diminutive size of their products into the camcorder market than among still camera purchasers. a fashion statement. Camcorder companies with higher-end models tend to advertise the still photo feature more often, and they are Many of the smaller, more expensive models soon will be advancing the capability at a faster rate, with at least one available in a rainbow of contemporary color and design new model incorporating two megapixel resolution. patterns. Close to market-ready, too, are accompanying lines of belts, chains, cases and clips—developed both in-house Nevertheless, manufacturers in both camps are not heavily and with third-party fashion firms—that will enable trend- promoting the cameras’ ability to step into each other’s shoes for fear of further confusing an already fragile marketplace. SATISFACTION WITH ASPECTS SIZE MATTERS OF DIGITAL CAMERAS The bigger the better is a rule of thumb for many con- sumer electronics gadgets. In the digital imaging space, it’s OWNED 3 OWNED 5 just the opposite. OVERALL YEARS YEARS Ease of Operation 76% 80% 73% Fourth-quarter 2002 and early 2003 will usher in dramatic reduction in the size of devices from many top-name manu- Quality of Pictures 68% 69% 71% facturers, with several camera and camcorder models shrinking to the point where they comfortably can fit in a Features 48% 50% 51% shirt pocket.With size and weights rivaling a pack of ciga- Cost of Film 39% 43% 34% rettes, they no longer are relegated to being unleashed only for special occasions but can be carried anywhere, any time, Cost to Develop to capture those life moments that occur while planning Pictures 34% 36% 31% the next big event. Swivel lenses and a host of other capa- Source: CEA Market Research, 2002. bilities keep the units ergonomically functional. 5 Technologies to Watch O C TO B E R 2 0 0 2 15
  • 17. WHY PEOPLE USE DIGITAL CAMERAS (By gender of primary user) ALL HOUSEHOLDS FEMALE MALE To send photos by e-mail 71% 73% 69% To preserve memories 69% 68% 69% To share later with others 69% 69% 69% For pure enjoyment 63% 64% 62% Like to take photographs 46% 51% 41% To use photos in a 39% 36% 40% computer for a hobby To give away as gifts 18% 19% 16% To master the skills involved 18% 19% 16% To use photos in a computer 15% 16% 14% for business To use photos for business 15% 14% 15% As artistic expression 14% 16% 12% To earn income on a 2% 3% 2% moonlighting job To earn income for a regular job 2% 3% 1% Other 7% 9% 5% Source: Photo Marketing Association International, 2001 conscious consumers to strap on their camera just as they chasing their PDA specifically for its camera capability, with would a watch. prices ranging all the way down to $200 for a “hiptop” wireless convergence device developed by Palo Alto, Calif.- The move is a clear play for younger consumers, who are based Danger Inc., these devices should begin to attract a as in tune with what’s cool to wear as they are with new broad audience. technology. Select presenters at the recent MTV Music Awards “wore” versions of Sony’s new Cybershot U cam- The camera/mobile phone/MMS (multimedia messaging) eras, heralding a new campaign that will reach out to the 18 combination is perhaps the most exciting, but also the most to 24-year-old demographic. elusive, development in this area. But what would happen if you tossed a wireless communications engineer and a digi- MULTIMEDIA tal camera designer into the same room and threw away As it develops in its own right, digital still camera functional- the key? Two phones that incorporate such functionality are ity is making inroads in a host of mobile devices ranging from Nokia and Sony Ericsson, respectively and will get from personal digital assistants (PDAs) to mobile phones.To their debut in select European markets but will see scant be sure, the resolution today is not as good print, but the action stateside in the near future because the U.S. is still convergence offers a variety of new lifestyle possibilities. chasing robust 3G wireless technology. In the handheld arena, a growing number of models accom- Nokia’s 7650 phone incorporates VGA resolution along modate a digital camera plug-in and increasingly are incor- with MMS capabilities and a 176 x 208 pixel color display. porating the functionality. Users can store images to a Sony Ericsson’s T68i boasts a similar roster of functions. device’s internal memory or to a removable storage medi- The phones also incorporate Bluetooth wireless technolo- um and then retrieve them in complementary products gy and fast modems.The idea is that you could snap an such as a camera or PC.While it’s safe to say no one is pur- image of the sun setting over the Seine while vacationing in 16 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 18. “ The camera/mobile phone/MMS (multimedia Phones," Strategy Analytics also predicts that one out of every five cellular handsets sold in 2007 will contain an embedded camera. Another design combines a digital camera with MP3 messaging) combination is capabilities. Kodak's MC3, for example, is a small still and video camera that doubles as an MP3 player. Intended for perhaps the most exciting, the active lifestyle, the Kodak MC3 is designed for single- hand operation.To use it, simply flip a switch to select still but also the most elusive, (640 by 480 resolution), video (320 by 420, 20 frames per second) or MP3 mode (only one mode can be employed at a time). development in this area. ” The unit serves as a fully functional MP3 player.The MC3 also can record 20 seconds of video for each MB of remov- able memory recording at 10 frames per second (fps), so Paris and instantly send it to your buddy to whom you on a 64MB CompactFlash card users can store more than are describing the scene by phone. Or simply take an 20 minutes of continuous video in Quick Time format. For impromptu photo to further personalize your electronic better quality video, recording at a 20 fps rate translates phone book. into 4 seconds of video for each MB of memory. Ericsson’s CommuniCam camera transforms a mobile Meanwhile, Polaroid’s PhotoMax MP3 takes still images and phone into an instant imaging device; simply snap the stores photos and MP3 audio files on a 16MB CompactFlash camera on to the end of a mobile phone, flip the phone memory card.Transferring songs or photos with a PC up to the eye and shoot. Ericsson’s first imaging product, requires only a drag and drop exchange, which is facilitated the CommuniCam can be used with any of the company’s via a USB cable. Just switch the camera to MP3 player mode mobile phones that are equipped with a modem.The and press play to listen to music through earphones.The images can be sent as an e-mail attachment with an average PhotoMax also comes with an audio out for music and a transmission time for a single image of only about a minute, video out to display photos on a TV. the company says. Up to five images can be stored in the camera for later use. CommuniCam users also can link to ONE-HOUR PHOTO the Ericsson Mobile Internet portal and create a personal Despite massive inroads in digital photography, no amount album of images.These images can then be edited on-line of technological dazzle can overcome an engrained or downloaded from the website to a PC. behavior pattern. Another way to capture and send digital pictures is to take Currently consumers drop off more than 200 million rolls digital photographs directly on a Handspring Visor PDA of film each year at their local camera shop, grocery store with an IDEO eye module-series camera module that snaps or mass merchant, and then return one hour or 24 hours into the Visor's Springboard expansion slot.Then, by using later to retrieve their stack of developed pictures. Electric Pocket's BugMe! Messenger wireless e-mail soft- ware, users can hand write a caption directly on the image The wrench the digital camera has thrown into this routine and the photo can be instantly e-mailed directly to friends, cannot be overestimated—nor can the disappointment in family or colleagues. In effect, this allows users to create quality still reported by the vast majority of consumers and send a personalized electronic post card. who print their digital images at home. But the tide is about to turn. Research and consulting company Strategy Analytics pre- dicts that 16 million camera-enabled cell phones will be Several grand-scale marketing campaigns are on tap to sold worldwide this year, with sales ramping up to 147 mil- spread the word that thousands of locations—including sev- lion by 2007. Although 22 million digital still cameras will eral major chains—will be open for the business of “devel- likely be sold worldwide during 2002, the research firm pre- oping” digital pictures. Camera and camcorder owners sim- dicts a significantly slower growth rate of 34 percent for ply can pop out their media storage unit and drop it off as these products as well as sales of 95 million units by 2007. they would a roll of film and pick up a photo-album ready However, camera-enabled PDAs will not be so widely pack of prints.This phenomenon already is established at adopted, claim researchers.They are expected to account several Web-based companies and a small number of brick- for just 6 percent of all PDA sales worldwide by 2007. In a and-mortar stores, but it has yet to catch the fancy of many report entitled "Strategic Perspectives on Cellular Camera digital camera owners. s 5 Technologies to Watch O C TO B E R 2 0 0 2 17
  • 19. 4 Flash Memory OVERVIEW more powerful, the cartridges, discs and “sticks” that han- Clever wags in the entertainment and technology fields like dle the memory are crammed with more capacity to store to say that we’re living in a wired world.Would that they data than at any other time in their nearly five years on had done their homework. the open market. People in ever-growing numbers are shedding their adher- In fact, as with laptops, shrinkage is not just a compliment, ence to all sorts of technology that need to be plugged in, it’s key. and gradually moving toward the ideal expressed by George Jetson when he folded up his compact plane/car and stuck WHAT IS IT? it in his briefcase once he got to work: small and wireless. At some point in the mid ‘80s, someone somewhere proba- bly realized that all they were getting with their massive The most piquant display of this “Jetsonization” in the early ghetto blaster was a stiff shoulder and sound in one ear. years of the 21st century is portable digital media—the From that point on, it was up to the finest engineering gadgets that let you listen to music, surf the Internet, take minds in the consumer electronics business to make per- pictures or nearly whatever else you want—as well as the sonal entertainment on the go a convenient thing—and miniscule memory devices that you plug into the hardware more unobtrusive than a massive portable stereo atop to make it work. one’s body. The trend might have started with portable transistor As with most kinds of personal electronic devices, it was a radios, and evolved into mobile cassette and compact disc question of developing technology that allows people to players, but now Americans can take all their music, pic- experience more and better sound and vision, while not tures, computer data—whatever they want, really—and being forced to lug around an arsenal of battery packs, take it almost wherever they want to go. And much like wires and moving parts. notebook computers, portable digital media devices are get- ting smaller in rough proportion to how much memory In theory, the steady decrease in the size of personal tech- they can store—more riches on less real estate. nology knows no bounds, especially considering the rise of nanotechnology. As for the beginning of the 21st century, Not only are the playback devices, digital cameras, person- however, data storage on cartridges and sticks that are the al digital assistants and other media getting smaller and size of a piece of gum or a teabag seem to be the most hip and comfortable way to carry data. The concept is elegant because of its size and simplicity: “ Much like notebook computers, portable digital media Take a digital camera, a computer, a digital music player or your personal digital assistant.You can take pictures, play music or whatever you want to do.To store that data, why use a compact disc that could skip while you walk, or other devices are getting smaller in rough kinds of storage devices that are too bulky to carry around. Instead, you notice that all of your hardware—from camera to computer—comes with a small port where you can stick proportion to how much memory in a solid-state storage medium that will hold all the data you want. they can store—more riches on Most kinds of portable data storage products rely on flash less real estate. 5 Technologies to Watch ” memory technology using Electrically Erasable O C TO B E R 2 0 0 2 19
  • 20. REMOVABLE STORAGE MEDIA TIMELINE YEAR EVENT 1991 The first 1.8” IDE drive. 1991 The Kodak Professional Digital Camera System (DCS) is introduced. 1992 First Type II PCMCIA-ATA (PC card). 1993 Apple introduces the first personal digital assistant (PDA). 1994 Kodak and Apple release the first consumer-level digital still cameras. 1995 Panasonic, Sony, Sharp and JVC introduce the first digital camcorders for the consumer market. 1995 The first SmartMedia card (originally called SSFDC) is available. 1995 The first CompactFlash card is available. 1996 Kodak introduces the first digital consumer camera with removable memory. 1996 Palm Computing introduces the first mass-market PDA. 1997 MultiMedia Card (MMC), the smallest solid-state device is introduced. 1998 The first Memory stick is available. 1998 The first 2.5” and 3.5” flash drives debut. 1998 Diamond Multimedia introduces the first portable MP3 player in the U.S.. 1998 IBM Introduces the Microdrive. 1999 The one millionth DV camcorder is sold in U.S.. 1999 Digital still camera sales top $1 billion worldwide. 1999 The secure Digital (SD) card, smallest secure solid-state removable device is introduced. 2000 Digital camera sales revenues outpace film-based camera revenues. 2002 DataPlay write-once-read-many format is introduced. Source: Digital Tech Consulting, 2001. Programmable Read-Only Memory (EEPROM) chips, though Group, some of the dominant players in the market—includ- IBM has developed a very small hard drive that serves the ing Sony and IBM—have lowered the cost and upped con- same purpose. EEPROM-based flash memory chips are rela- sumer desire to get a hold of this still-growing technology. tively cheap, contain room for several megabytes’ worth of storage and are ideal for recording and playing back these WHO’S FLASHING? reasonably small packets of data. Lining up the various flash memory cards reveals an initially confusing array of abbreviations and catchy names, not to These chips are packaged as small cards that then can be mention individual lists of hardware with which each one is fitted into hardware that is designed to take each particular compatible. model.With some flash memory cards, people could store a bunch of songs, say, or maybe the equivalent of a couple Sony Corp. has been making a splash for several years of rolls of film.The problem with such small products as of with its proprietary Memory Stick flash technology, but the end of 2002, though, is that you can’t stuff a half-hour it’s proprietary. Holding up to 128 MB of data (at up to sitcom on one so you can watch it on the subway. Entire $2 per megabyte), the Memory Stick stores data for digital feature films, of course, still are also out of the question. cameras, camcorders, MP3 digital music files and personal digital assistants. What is nice, especially on the wallet, is that the price per megabyte for flash memory has dropped. Following fairly Toshiba has introduced SmartMedia flash memory (once lackluster sales over the past year, as reported by the NPD called Solid State Floppy Disk Card) and SanDisk came with 20 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 21. CompactFlash, both of which claim their own adherents. CompactFlash: CF technology was introduced by SmartMedia cards are one millimeter thick and hold about SanDisk in 1994, and now is supported by a number of 256 MB of data at about $1 per megabyte. CompactFlash operating systems. Along with Sony Memory Stick and cards are a little thicker—3.3 or 5.5 millimeters—and Toshiba SmartMedia, it features widely as an item for sale at many in September 2002 released the first one gigabyte capacity of the largest consumer electronics retailers. Some of the CompactFlash card. Both formats can be used to store data companies that use CompactFlash include Canon, Casio, for digital cameras and camcorders, MP3 players and PDAs. Epson, Hewlett-Packard, Kodak, Minolta, Nikon, Panasonic and Polaroid. CompactFlash and SmartMedia both are considered domi- nant players in the flash memory arena, but more than 100 DataPlay: This company has made several of its flash mem- companies also have joined the four-year-old MultiMedia ory devices available, but at significantly cheaper prices than Card Association, which promotes the widespread adoption some of its competitors.Whereas some high-powered cards of its MMC flash memory device.Working in a similar man- run up to $800, plus the extra $30 or $40 you might have ner to the Sony Memory Stick, MMCs can handle up to 256 to pay for a card reader, some retailers’ websites are offer- MB of data, costing around $1.50 to $2 per megabyte. ing DataPlay flash cards between $5 and $10 for up to 500 MMC serves the same types of products as do the other MB. DataPlay also has fashioned compatibility agreements formats mentioned above. with companies such as BMG, EMI Music Distribution, LG Electronics, Pretec, Samsung, SmartDisk and Toshiba. Secure Digital (SD), developed by Toshiba, Matushita and SanDisk in 1999, also works for these formats and holds up Memory Stick: Works with Sony products, but several to 256 MB of data, again for about $1.50 to $2 per companies have designed “readers” that can download megabyte. Unlike some other systems, it features copy pro- information from CompactFlash cards and Memory Sticks tection under the Secure Digital Music Initiative (SDMI). into your computer. IBM’s Microdrive, which is a small hard disk drive, holds up MicroDrive: IBM’s system works with many products to one GB of data, but only for 38 to 68 cents per from a host of other companies, including Apple, Canon, megabyte.Although Microdrive is not specifically a flash Casio, Eastman Kodak, Fuji, Hewlett-Packard, Hitachi, memory product, IBM said that devices containing the Minolta, Nikon and others. CompactFlash Type II slot should be able to read the format. MMC: This postage-stamp-sized flash memory card fea- Finally, DataPlay has developed a series of small audio play- tures widespread industry support, including Aiwa, back devices, as well as mini-cartridges for holding up to Audiovox, Canon, JVC, LG Electronics, Nokia, Panasonic, 500 MB of data for as little as a penny a megabyte. Sanyo, Sharp and Thompson. WHO’S WORKING WITH WHOM? SD: New SD products work with MMC products, creating From this field of sometimes competing, sometimes coop- some comfortable interoperability conditions. erating data storage forms, it’s anyone’s guess as to which one will become the de facto standard—or whether inter- SmartMedia: Originating with Toshiba and Samsung, com- operability will eliminate the need for that question. As for panies working in the SmartMedia Forum include Acer, now, however, some key alliances are emerging. Canon, Casio, Eastman Kodak, Fuji, Hewlett-Packard, Leica, REMOVABLE STORAGE MEDIA TYPES PLATFORM CONSOLE BOX U.S. LAUNCH DATE FEES CompactFlash Just under $1/MB Digital cameras and camcorders, MP3 players, PDAs 384MB SmartMedia Just under $1/MB Digital cameras and camcorders, MP3 players, PDAs 128MB Memory Stick $1.25 to $2/MB Sony digital cameras and camcorders, Sony MP3 players, Sony PDAs 128MB SD $1.50 to $2/MB Digital cameras and camcorders, MP3 players, PDAs 128MB MMC $1.50 to $2/MB Digital cameras and camcorders, MP3 players, PDAs 64MB Microdrive 38 to 68 cents/MB Digital cameras, MP3 players 1GB DataPlay Unknown Spring 2002 500MB Source: Digital Tech Consulting, 2001. 5 Technologies to Watch O C TO B E R 2 0 0 2 21
  • 22. Minolta, Mitsubishi, Motorola, Nikon, Olympus, SanDisk, “We’re also seeing increased usage in MP3 and other digital Sharp, Sony,Texas Instruments and Yamaha. audio players, as well as multimedia handheld devices such as the Compaq iPaq and HP Jornada.” WHERE ARE WE NOW? As with most goods that compete for your attention, Full-length video and other data-heavy applications still may removable data storage devices contain some benefits and have a ways to go before flash memory cards are capable drawbacks—the task for most customers is to read the of storing them and playing them back with any ease. product specifications closely to determine what works best for their needs. “Many users need high-capacity storage to make full use of these devices [like Pocket PCs],” Osterhout said. “In partic- The most popular application for these devices now, most ular, devices that are intended to store and ‘play’ music, business executives agree, is the digital camera.While the movies, games, what we refer to as entertainment content, cameras may work best for particular types of flash memo- need high-capacity storage.” ry, other uses are on the rise, such as MP3 players and per- sonal digital assistants. If the bottom line for consumers is price, then MicroDrive and DataPlay offer more megabytes for fewer dollars. “In the consumer market, primarily digital still cameras (DSC), However, while DataPlay is cheap and durable, it requires are the driving force behind the demand,” said Brian Kumagai, an optical drive mechanism and only can be written to business development manager for NAND flash memory and once. MicroDrive, with moving parts, also is sensitive to memory cards at Toshiba America Electronic Components dropping, at least more so than solid state cards. Inc.“We anticipate that DSC sales will increase in the fourth quarter, especially due to the Christmas season.” On another note, MicroDrive also consumes power faster than systems like CompactFlash. Kumagai added that PDAs, game systems such as the PlayStation and notebook PCs also will show increased One additional DataPlay advantage, however, is the compa- demand for the diminutive cards. ny’s apparent trend of scoring deals with record companies like BMG, which has planned DataPlay-format releases of John Osterhout, business line manager for IBM Microdrive, big acts such as Pink, Aaron Carter and the seemingly ubiq- agreed. “Digital cameras seem to be the most popular end- uitous Brooks & Dunn. user products for removable digital storage today,” he said. WHERE ARE WE GOING? Storage capacity issues, as with so many other envelopes in AMONG ALL THE PICTURES CONSUMERS the technology world, will continue to be pushed and mas- TOOK IN THE PAST 12 MONTHS,WHAT DID saged until the limitations that face us are erased.Toshiba’s THEY DO WITH THEM? Kumagai, for example, said that his company would like to see consumer-oriented flash memory products cost as little as 10 to 20 cents per megabyte (for solid-state).Then, he said, “Consumers will be able to store a two-hour video at an attractive price point.” 13% Made He suggested that notebook PCs, in particular, will use flash prints memory to replace floppy disk drives. 18% One area of the market that has received more than a tra- E-mailed ditional setback, he said, has been MP3 playback, which he 69% attributed in large part to the demise of Napster. “The Saved, stored future trend will be for other types of equipment to inte- or kept grate MP3 players, which means that there won’t be as [much] equipment dedicated to MP3 use.” Whatever the particular uses are, however, analysts and business executives agree that the trend toward multi-use digital products will continue (think: cell phones-cum-PDAs- cum-nearly whatever digital function you need), and if there Base:Total pictures taken with digital still cameras is one method to achieve this goal, it will be through com- Source: 2001 PMA Camera/Camcorder, Digital patible—and companionable—flash memory. s 22 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 23. 5 Electronic Entertainment/Games OVERVIEW GROWTH IN ELECTRONIC GAMES SALES In the immortal words of Rodney Dangerfield, electronic games don’t get no respect.The latest consumer research indicates that about 60 percent of Americans over the age of six, or a staggering 145 million people, now play some kind of computer and/or video games some of the time, and the number keeps growing swiftly.Yet Wall Street, the mainstream press and other powerful influencers of public opinion still too often treat electronic games as a silly, wasteful pastime for addicted, pimpled kids and geeky grownups.They also see gaming as a solitary, somewhat unsavory pursuit for boys and young men in dark, lonely rooms. And they view most electronic games as violent, even sadistic, smash-and-crash, mind-numbing diversions for the lowest common denominator, not stimulating, challeng- ing strategic matches, sports contests and educational tests for the overwhelming majority of players. But most of these outdated notions are far from the truth. In fact, the electronic game industry is a large, steadily growing business, generating a record $6.35 billion in U.S. software sales alone in 2001, according to NPD Funworld. Similarly, sales of game consoles and other equipment for video games reached a record $3.25 billion in 2001, accord- Source: NPD FunWorld, May 2002. ing to CEA Market Research data. Adding up these two totals, the entire game industry produced somewhere around $9.6 billion in revenue last year. Digital software SETTING RECORD STATS developers sold a stunning 225 million computer and video Besides being big business, electronic games also seem to game units in 2001, or nearly two games for every U.S. be largely recession-proof. Despite the sluggish economy of household, far more than the number of pro sports tickets the last two years, sales of video games, which account for sold last year. more than two-thirds of all electronic games sold, climbed steadily in 2001 after a slight dip in 2002, according to NPD. Defying the conventional wisdom, electronic games are also In particular, video game sales jumped 10 percent to $4.6 not just for kids, at least not anymore. Indeed, the average billion in 2001, more than offsetting a slight 1.7 percent dip game player is actually a surprising 28 years old, according to $1.75 billion for computer game sales. Overall, NPD to the latest annual consumer survey conducted by the says, sales of both video and computer software games Interactive Digital Software Association (IDSA) in spring climbed 7.9 percent from $5.9 billion in 2000 to reach the 2002. Furthermore, the IDSA says, 90 percent of all games record $6.35 billion total last year. CEA Market Research are purchased by people over the age of 18, albeit many as pegs the 2001 total at an even higher $6.7 billion, a 15 per- gifts for children. In another surprise, women now make up cent increase from the 2000 figure. 43 percent of all gamers. Finally, the ISDA finds, most gamers play with friends and/or family, and 18 of the 20 By all accounts, this growth spike has continued, if not best-selling games in 2001 rated as either “E” for everyone accelerated, in 2002. In the first quarter of the year, total or “T” for teens. video game industry revenue soared to $1.9 billion, up 20 5 Technologies to Watch O C TO B E R 2 0 0 2 23
  • 24. GROWTH IN VIDEO GAME GROWTH IN TOTAL VIDEO GAME EQUIPMENT SALES INDUSTRY SALES (in millions of dollars) Q1 2001 Q1 2002 CHANGE Consoles $467 $548 17% Console Software $716 $895 25% Console Accessories $190 $205 8% Portable Hardware $67 $81 21% Portable Software $138 $179 30% Portable Accessories $36 $32 -13% TOTAL $1,600 $1,900 20% Source: NPD FunWorld, May 2002. GROWTH IN ELECTRONIC GAME SALES Source: CEA Market Research percent from $1.6 billion the year before, according to NPD. Breaking the numbers down, video game consoles, console software, portable hardware and portable software posted double-digit sales gains ranging from 17 percent (consoles) to 30 percent (portable software). Market research analysts credit this phenomenon at least partly to increased “cocooning” by Americans since the Sept. 11 terrorist attacks in 2001. Schelley Olhava, senior Source: NPD FunWorld, May 2002. analyst for IDC’s Consumer Devices division, says that even if people stop taking vacations and going on trips in hard times, they still lay out plenty of money on home entertain- draws to a conclusion.That would amount to a 15 percent ment. In fact, consumers may feel justified in spending even increase from the $10 billion in game industry sales that a greater amount on home entertainment than before CEA calculated for 2001. because they’re making sacrifices in other areas and hanging around the house more. Olhava also notes that even in a GAME PLATFORMS VENTURE recession, kids continue to spend the money they make INTO CYBERSPACE from after-school and other odd jobs. Plus, she says, elec- Another major trend in the electronic game industry is the tronic games and video game consoles still make very pop- rush to go online by video game console makers. In a much- ular birthday and holiday presents. touted effort to catch up with the smaller but more Web- savvy computer game business, which has offered Internet As a result of this continuing growth and an industry-wide games over the PC for years, the three major rival platforms push toward more Internet game play, analysts project that are taking their first steps into the online world. Using the total electronic game sales will top $11 billion this year and advanced consoles that they’ve introduced in the last couple may even reach $12 billion by the times the books are of years, they aim to keep their customers from deserting closed. For example, CEA Market Research estimates that video games for the PC variety.They also hope that the long- game software and hardware receipts will come close to awaited push online will draw new customers to the video- $11.5 billion for the year once the holiday shopping season game universe, which now has about 45 million players. 24 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 25. Sony hit the market first in 2002, introducing online gaming no wonder, then, that many console gamers already have for its market-leading PlayStation 2 machines in August by invested in broadband connections. handing out console network adapters.With the popular PlayStation consoles already in 11 million homes in North The trouble is that while broadband keeps expanding, it America and 30 million worldwide, Sony intends to lure has spread across the nation slower than many industry many existing and potential customers to the Internet by observers had hoped. At the end of August 2002, 14 million designing a large batch of suitable games itself and offering U.S. homes had either high-speed cable TV modem or an open platform to independent game developers.To phone DSL connections to the Internet, according to encourage use, Sony is offering its online adventures to Kinetic Strategies Inc.That amounts to 13 percent of all customers for no charge and allowing both broadband American households, pretty good for a niche product and dial-up Internet subscribers to toy with the games. but not nearly enough for a mass-market service. So video game hardware and software makers find themselves As usual, Microsoft, which entered the video game business dependent on two other, rival industries—cable and late last year with its Xbox console, is taking a distinctly dif- phone—to transform their broadband dreams into reality. ferent path. Unlike Sony, Microsoft—which has sold about four million Xbox machines so far, nearly all of them in the If broadband does blossom as hoped, the extension of high- U.S.—plans to roll out its online game service Nov. 19, just speed Internet connections to game consoles and TV sets before Thanksgiving and the start of the most frenzied part has broader implications as well. For one thing, the adoption of the holiday shopping season. Also unlike Sony, Microsoft of broadband by more gamers could spur even faster, greater is taking a walled garden approach, creating the infrastruc- growth for the high-speed medium, bringing fast Internet links ture and interface for game developers to use. In other into tens of millions of American homes over the next couple departures from Sony’s approach, Microsoft is charging cus- of years. For another, the broadband-video game marriage tomers $50 for its console adapter and making online play could accomplish what WebTV, AOL TV and other Internet available to broadband users only. TV devices and services have failed to do: turn the living or family room, rather than the den or home office, into the Nintendo is sticking its toe more slowly and cautiously into family’s prime place for tapping into the Internet. the online waters. Nintendo, which focuses on younger game players than Sony and Microsoft, aims to unveil Internet In turn, the game console box could replace the PC as the capabilities for its GameCube machines in Japan in October chief Internet-access device in the home and the cable or and in the U.S. a bit later.With about the same number of satellite TV digital set-top box or the VCR as the family’s advanced consoles shipped and sold as Microsoft, Nintendo home entertainment center. It would then only be a matter will sell its adapter in Japan for about $32. of time before consumers could begin using their increas- ingly sophisticated console machines to download music, order video-on-demand (VOD) movies, play DVD videos ONLINE VENTURES OF MAJOR and pursue other entertainment options. “It’s (the broad- VIDEO GAME PLATFORMS band-connected console) just a likely candidate for bundling PLATFORM CONSOLE BOX U.S. LAUNCH DATE FEES things like VOD or downloading software, music and movies,” says Sean Wargo, CEA senior industry analyst. Microsoft Xbox Nov. 19, 2002 $50 for adapter Microsoft’s Xbox already has taken a step in this futuristic direction, incorporating a digital hard-drive and music capa- Nintendo GameCube Fall 2002 $32 for adapter bility into its console. Sony PlayStation 2 Aug. 27, 2002 No charge ONLINE GAMES: NICHE SERVICE Source: CEA Market Research, Sept. 2002. OR MASS APPEAL? When the dust from the holiday season battle clears in early January 2003, analysts expect the video game business BROADBAND MAKES THE KEY DIFFERENCE to have a modest share of online players.The consensus In their drive to go online, a large wild card for all three view is that somewhat fewer than one million gamers will video game console developers is the extension of high- sign up for online play by then, CEA’s Wargo says. IDC’s speed broadband links to American homes.Thanks to Olhava is more bearish about the initial rollouts, predicting broadband’s wide pipes, game players can tap into online that slightly fewer than 600,000 video-game households will games faster, compete in multi-player games easier, down- engage in online play by the start of next year. Analysts say load games to their hard-drives sooner, communicate with Sony will likely capture the biggest early share among the other gamers through text messages or voice over IP quick- three major rivals, thanks to its three-month head start on er and more clearly, see sharper pictures and graphics, and Microsoft and the far greater distribution of its PlayStation hear crisper sound on their console-connected TV set. It’s 2 machines. 5 Technologies to Watch O C TO B E R 2 0 0 2 25
  • 26. BROADBAND CUSTOMERS OF CABLE TV AND PHONE COMPANIES RESIDENTIAL DSL RESIDENTIAL CABLE TOTAL U.S. Subscribers 4.45 million 8.99 million 13.44 million Canada Subscribers 1.14 million 1.78 million 2.92 million Total North America 5.59 million 10.77 million 16.36 million Subscribers North America Q2 502,005 1.01 million 1.51 million Added Subscribers North American 34.17% 65.83% 100.00% Market Share Source: Kinetic Strategies, Sept. 2002 These early numbers, however, are probably not terribly sig- undoubtedly trail way behind online play by PC gamers. nificant.The much bigger issue is whether online video Roughly 10 million of the 20 million or so PC gamers pay games will develop into a mass-market business or merely a for Web-based games now, as opposed to a small handful nice, tidy niche market. Analysts lean toward the latter, pre- of the 45 million video console owners. But the gap may dicting that online gaming won’t really take off until at least be even several times larger than that. Estimates are that 2005, when the next, even more advanced generation of up to 58 million of the nation’s 60 million-plus computer console boxes is expected to start rolling off assembly lines. owners will play either free or pay-for-play games on the Wargo, for example, forecasts that only about 12 million Internet by the close of 2002, easily dwarfing the potential video gamers will go online by the end of 2006. video-game market for online games. Analysts pin the blame for this on low broadband penetra- tion and little interest and awareness among most video COMPARISON OF ONLINE PC AND gamers. Olhava notes that it could take years to educate consumers about online gaming’s benefits, just as it took VIDEO PLAYERS years to educate the public about the benefits of VCRs, PLATFORM # OF GAME # OF ONLINE satellite TV dishes, CD players and most other new techno- OWNERS GAMERS logical products. She also notes that the console and soft- Video Game ware makers still must work out their business models for Consoles 45 million 0 the service. As stated above, Sony is starting out by offering online play for free, while both Microsoft and Nintendo will Home be charging extra for their network adapters. Computers 15-20 million 10 million Source: CEA Market Research, Sept. 2002. PC WILL STILL TRUMP VIDEO IN ONLINE PLAY Much of online gaming’s success, of course, depends upon the quality of the online video games that Sony, Microsoft, ELECTRONIC GAMING HITS THE ROAD Nintendo and the independent game developers design for Along with the growing adoption of broadband and the this new medium.The three platform providers and the launch of online video games, another major trend in elec- major independent developers busily are all creating and tronic entertainment is the increasing portability of game pumping out games with new online capabilities and fea- play.Thanks to a new generation of smart mobile phones, tures. But, as in the offline world, analysts don’t see too Web-enabled PDAs, handheld game consoles, MP3 players many online games running on all platforms, primarily and laptop, notebook and other small but powerful comput- because Sony and Microsoft steadfastly will keep their plat- ers, players are gaining the ability to tap into their favorite forms proprietary. “Sony would never, ever allow its games games from multiple points of access. In other words, to be played on Xbox,” says IDC’s Olhava. “Nor would mobile devices have started making it possible for gamers Microsoft (allow its games to be played on PlayStation 2).” to leave their video-game consoles and desktop PCs at home and play anywhere they happen to be, as long as they No matter what happens, video-game online play will have a dependable online connection. 26 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 27. REVENUE PROJECTIONS FOR GLOBAL over the board. Frost & Sullivan projects that the global WIRELESS GAMING (U.S. dollars) mobile game industry, which produced $436.4 million in revenue in 2001, will generate $9.34 billion by 2008. Ovum ANALYST FIRM PROJECTED YEAR sees global mobile game revenue climbing to $4.4 billion by REVENUES 2006. Finally, In-Stat/MDR expects global wireless gaming In-Stat/MDR $2.8 billion 2006 revenue to reach $2.8 billion by 2006. Ovum $4.4 billion 2006 Frost & Sullivan $9.3 billion 2008 THE GAMES PEOPLE PLAY Source: compilation of research forecasts, Aug. 2002. Among other things, what all these moves mean is that it’s a great time to be a developer of game titles.The explosive Hailing wireless games as “the next Internet gold mine for combination of better, nearly three-dimensional graphics, entrepreneurs,” Datamonitor forecasts that an impressive broadband enhancements, online capabilities, multiplayer 200 million people in the U.S. and Europe will be playing games, mobile gaming and stiffer competition among the mobile games by 2005. Revenue projections, though, are all three main video-game platforms puts game makers in the A DOZEN WAYS TO ESCAPE ELECTRONICALLY GAME CATEGORY DESCRIPTION First-Person Shooter Players look out from behind the eyes of the character. Objective: Seek out and destroy. Ex.: Quake, Doom and Unreal. Third-Person Shooter Players view the game from the side or the rear of the character. Main objective here also is to ‘shoot-em-up’. Ex.: Max Payne. Adventure Player must complete a series of tasks while venturing through a make-believe world. Played primarily from the rear third-person perspective. Ex.: Myst, Tomb Raider, Mario and Crash Bandicoot. Role-playing Gamers play with one or multiple characters to carry out quests or missions. Objective is to enhance the skills and levels of the character. Ex. Diablo II, Everquest and Asheron’s Call. Arcade These games have a simple interface and objective. Generally, they are two- dimensional. Examples include all the classic arcade games, such as Frogger, Asteroids, Pac Man and Final Fantasy. Gambling Primarily an online category of game. Includes Slots, BlackJack and Poker. Family Games with an educational and/or family-oriented theme. Ex.: Monopoly, Rugrats and Who Wants To Be A Millionaire. Fighting Players fight against others in boxing, martial arts or wrestling matches. Ex.: Tekken III, Mortal Kombat and WWF Smackdown. Driving Simulation Player controls a vehicle usually from behind the wheel. Ex.: Crazy Taxi and Gran Turismo. Flight Simulation Player flies a plane or spacecraft from the behind the pilot’s seat. Ex.: Flight Simulator and Mig 29. Sports Games centered on a sport, such as football, basketball or hockey. Ex.: NFL 2K1 and NHL Face Off. Strategy Games played from a god’s perspective. Players control resources to build civilizations and/or troops to conquer the world. Ex.: Civilization, Age of Empires and The Sims. 5 Technologies to Watch O C TO B E R 2 0 0 2 27
  • 28. driver’s seat these days. Developers can sign pricey exclu- sive agreements with any of the four main platforms, includ- ing the PC world, limited exclusivity deals with one or more platforms, or non-exclusive pacts that make their “ Software designers are excited about shifting their titles available to every platform. In other words, as CEA’s Wargo puts it, “they can hedge their bets.” games from the static, one-time, All these technological and market changes also make it off-the-shelf purchases they now easier for game developers to tinker with different, more enticing distribution and revenue models, including subscrip- are to continually expanding, tion and pay-per-play methods. Software designers are excited about shifting their games from the static, one-time, updated products that generate off-the-shelf purchases they now are to continually expand- ing, updated products that generate regularly recurring revenue. A few early successes indicate that these different revenue models could work. It’s still too soon, however, to really know the kinds of titles, if any, for which gamers will regularly recurring revenue. ” pay and the kinds for which they won’t. tion technologies succeed or fail in the next few years, electronic games are bound to keep getting bigger. As the Certainly, the range of escapist, interactive games is broad. real world becomes a more serious, somber, even deadly Despite the misconception that electronic games fall into place, the demand for fun-filled, safe fantasy worlds will just a couple of categories, there are actually about a dozen only grow, among both young and old. As people feel they types of titles from which to choose. have less control over national, international and other earth-shaking events that seem to have no rhyme or rea- WHY DO PEOPLE PLAY ELECTRONIC GAMES? son, they have all the more reason to retreat to other, parallel universes with clearly defined rules and conse- REASON PERCENTAGE OF quences that they can understand, master and control. In TOTAL SAMPLE short, Americans need their escapist games now more than ever simply to cope with life. Games Are Fun 87.3% In fact, video and computer games are already America’s Games Are Challenging 71.4% favorite way of having fun, both home and away. In its annual survey of consumers in 2001, the IDSA found that an aston- Like Playing with ishing 35 percent of all Americans see computer and video Family/Friends 42.4% games as the most fun entertainment activity.TV watching came a distant second at 18 percent, followed by surfing the Lots of Entertainment Internet (15 percent), reading books (13 percent) and going for Price 35.6% out to the movies (11 percent). Like to Keep Up Plus, gamers are showing no signs of quitting or even slow- with New Technology 18.9% ing down. In the IDSA’s 2002 consumer survey, 60 percent of the most frequent players say they’ll be playing computer Interested in Stories 17.9% and video games in 10 years as much as, if not more than, they do today. Among PC gaming homes, an average of 1.6 Like Music and/or family members play computer games regularly, or at least Celebrities Involved 15.5% five hours per week. In households with video-game con- soles, two people typically play games regularly. And a Do Same Thing in whopping 87.3 percent of gamers play games because Real Life 13.1% they’re fun, while 71.4 percent play games because they’re Source: Interactive Digital Software Association, May 2002. challenging and 42.4 percent participate in games because they like playing with friends and family. THE FUTURE: GIRLS (& BOYS) JUST WANT So maybe it’s finally time that we all took electronic games TO HAVE FUN a bit more seriously and treated them as legitimate, even One thing’s for certain: Computer and video games aren’t first-class, home entertainment for the many, not the few. going away. Indeed, no matter which delivery and distribu- Perhaps then, we could all have a bit more fun. s 28 O C TO B E R 2 0 0 2 5 Technologies to Watch
  • 29. Consumer Electronics Association 2500 Wilson Blvd. Arlington, VA 22201- 3834 (703) 907-7600 main (703) 907-7601 fax