Looking Ahead To 2001: What To Expect At Retail

Staff -- TWICE, 12/18/2000

During what will technically be the first year of the new millennium, six types of consumer electronics devices will highlight new products in stores.

These six classifications are discussed below, with comments about some of the key companies involved, and the pivotal challenges and opportunities each sector will face in the real CE market place of tomorrow.

Before that, however, three prime trends- affordable choice, ubiquity/portability and proliferation of content -are worth noting, and worth watching, because they continue as themes for one successful CE product after another.

Digital satellite radio: This service, which is also known by the acronyms DSR and DARS (Digital Audio Radio by Satellite), will deliver hundreds of digital radio signals via numerous satellites to users across the continent for a relatively low monthly subscription fee of about $10. Affordable choice is quite applicable here, along with ubiquity and mobility, most obviously.

The new satellite-delivered radio service will, like direct-broadcast satellite about seven years before it, completely change the way we have done things in several environments-not the least of which is inside many of the United States' 200-plus million registered automobiles.

DSR will tap into a huge pent-up demand for ad-free, reception-anywhere audio services. Two companies, Sirius and XM Satellite Radio, will carry all the signals, and between them they have allied with automakers including Acura, BMW, DaimlerChrysler, Ford, General Motors, Honda, Jaguar, Mazda and Volvo, as well as Freightliner Trucks and Sterling Trucks.

Sirius and XMSR are also notable for their ability to forge an alliance allowing consumers to operate a common, standardized hardware unit, from which they can buy either or both services.

For CE retailers, the real opportunity here will be in the automobile aftermarket, as consumers buy DSRs for autos they already operate.

Personal video recorders: The Carmel Group estimates that personal video recorders, or PVRs, will move from approximate year-end 2000 sales of 375,000 units, to about 13 million by 2005. Yet, the real success story in the PVR space will not be the stand-alone devices, but rather the subscription service that will be built into cable and satellite set-top boxes (STBs).

The better part of this STB market will begin benefiting CE dealers closer to the year 2005, when cable will have to begin making its set-top boxes available for purchase at retail.

Integration of PVR content and capabilities into existing devices will become the norm, allowing a new generation of TV users to forge beyond the VCR technology of the '80s and '90s.

WebTV, ReplayTV and TiVo have been this segment's first-generation pioneers, followed more recently by companies and services such UltimateTV by Microsoft, Metabyte's MbTV, News Corp.'s NDS service XTV, and similar hard-drive offerings by Philips and other set-top box manufacturers. Content proliferation (and a user's control of that content) is a theme worth observing in this sector.

DVD: DVD has already risen to the top of the list of "fastest growing CE products of all time," and DVD for video monitors and personal computers is expected to continue showing its CE potential during this year's holiday buying season.

There is continued great potential for DVD products, especially because of their small size and versatility, and for the fact that several of the new game consoles will soon also offer DVD capability. With DVDs, content proliferates yet again. By year-end 2000, there will be 10 million installed DVD players distributed into the CE market place.

Price points are continuing to drop into the range of $100 for lower-end models, which further serves to bring these products into the mass-market arena and brings them closer to the perfect affordable choice that so drives CE products.

Game consoles: The presence of companies such as Microsoft (with its Xbox), Nintendo (Gamecube), Sony (PlayStation2), Sega (Dreamcast) and InDreama-with each offering new game set-top box devices in the $199-$299 range-gives great credence to this sector of today's CE industry.

Once video-on-demand finds its way into these types of game consoles, their ability to deliver a new form of the much-appreciated affordable choice will be further enhanced, which should further enhance their sales.

Additionally, the higher memory performance and processing capability of these new game consoles will often exceed that of today's cable and satellite set-top boxes, further allowing and exemplifying proliferation of content. Personal digital assistants/Internet appliances: This sector has its own share of high-profile participants, including such companies as Palm (with its new color PalmPilot), HandSpring (Visor), Casio (EM-500YW), Creative Labs (Nomad) and Diamond Multimedia (Mako). Fairly soon, several of these companies will begin experiencing a major surge in profitability.

This, in turn, will allow for more marketing and further propel more and more consumers toward taking and networking their information from their offices and homes to a portable device and vice versa. Once again, content proliferation and ubiquity/mobility become the rule.

MP3 players: Epitomizing the trend of "music anywhere," ubiquity and mobility for music will surge with the introduction of MP3 players that will hit the CE marketplace with lower prices, and thus greater proliferation, in 2001.

Most importantly, these devices will include greater memory for storage capacity, which will double the number of songs that can be stored compared with previous versions. In fact, it is expected that in 2001, Creative Labs' Nomad, a portable MP3 player, will be able to store an astounding 100-150 CDs.

All along, however, this sector is expected to keep its collective mind closely tuned to the wisdom behind the trend toward affordable choice.

Jimmy Schaeffler is a consumer electronics analyst at The Carmel Group (www.carmelgroup.com), the Carmel-by-the-Sea, Calif.-based publisher and consultancy that specializes in telecommunications, computers and the media. His e-mail address is jimmy@carme lgroup.com; telephone (831) 643 2222.