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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
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
Jeff Joseph Graphic Specialist Robert MacMillan
Philip Toups Catherine Applefeld Olson
Communications Production Manager Ron Schneiderman
Lisa Fasold Patrick McMahan Phil Swann
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.
CEA President and CEO
5 Technologies to Watch O C TO B E R 2 0 0 2 1
1 Digital Display
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
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.
” 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
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.
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
Sony buy one new TV. (No spouse wants to explain why he/she
Panasonic Sanyo came home with an expensive new TV that does not
5% deliver a high definition picture. “But, honey, look how
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
will likely devote more promotional resources to build up
Sharp a new category.
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
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
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.
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
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.
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
“ 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.
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.
As television becomes more interactive, the LCD and plasma
screens will be ideal for displaying text and other data.
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.
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.
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
2 Convergence of
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
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%
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
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
5 Technologies to Watch
” played on different devices.
O C TO B E R 2 0 0 2 11
“ Designing these new,
increasingly complex devices
PRODUCT EXPECT TO OWN FIRST
will continue to be a challenge, Wireless phone with 47% 51% 44%
particularly as consumers
Don’t know 37% 32% 42%
demand smaller, lighter, Source: www.80211planet.com, 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.
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: www.80211planet.com 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
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
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
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
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%
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
HOURS OF RECORDINGS PER MONTH
LENGTH OF OWNERSHIP Analog Digital
< 1 Year 1 Year to 4 Years Camcorder Camcorder
< 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
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
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%
To use photos for business 15% 14% 15%
As artistic expression 14% 16% 12%
To earn income on a 2% 3% 2%
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
Phones," Strategy Analytics also predicts that one out of
every five cellular handsets sold in 2007 will contain an
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
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
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
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
REMOVABLE STORAGE MEDIA TIMELINE
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
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
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
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
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.”
He suggested that notebook PCs, in particular, will use flash
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
future trend will be for other types of equipment to inte-
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
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
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
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
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
North America Q2 502,005 1.01 million 1.51 million
North American 34.17% 65.83% 100.00%
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
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
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: www.80211planet.com 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
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
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
Consumer Electronics Association 2500 Wilson Blvd. Arlington, VA 22201- 3834
(703) 907-7600 main (703) 907-7601 fax www.CE.org