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1998: The Dot-Com Apex

8/28/2006 02:00:00 AM Eastern

1998 didn't seem special at the time. The stock market was still cruising, fueled by investors looking to make a fortune on the next hot dot-com venture; the computer industry was still gaining strength on lower PC prices; and the CE category was starting to show signs of breaking out of its new product doldrums, even though it was still far back in the consumers' eyes who were only interested in the PC side of the business. Who knew the good times would not last forever?

With eight years of hindsight, 1998 takes its place as the apex of the dot-com investment age with the Internet bubble burst looming in the very near future.

But in the meantime, the industry continued along its gold-plated path.

The CE world was also on the brink of something big. The acronym HDTV was being bounced about with growing frequency as the year progressed. Flat-panel televisions hit retail, DirecTV was signing up subscribers at a fast pace and Divx was being hailed by some in the industry as the next big video format.

On the computer side, 56k modems began to dominate the market, digital cameras began their march toward dominating their market, entry-level desktop computer prices hit the $800 level and TDK said it would start shipping DVD-R blank optical media early in 1999.

So what were the hot-button items for 1998? For most of the year HDTV was not yet a retail product, but vast stretches of space in TWICE were dedicated to this category. The groundswell started at CES when the first models were displayed. From that point forward, it seemed every company made an announcement proclaiming what their “digital” strategy would be going forward.

This culminated in August with the first model, the Panasonic PT-56wfx90, going on sale at Dow Stereo/Video in San Diego and later at Ultimate Electronics in Denver with a $5,499 price tag, with the required set-top box adding $1,399 to the final price tag.

Pioneer also started selling what would someday become a staple of the TV category. During the spring, it showed a 50-inch plasma TV sporting a dramatic $25,000 sticker price.

Flat-panel TVs were not the only product hitting shelves with initial high prices. Panasonic's first portable DVD player was shown at CES with a $1,299 suggested retail price.

Cellular phones were also at the start of their ramp up toward the high level of consumer saturation they now enjoy. Shipments for 1998 were estimated to hit the 12.8 million mark, up from 8.1 million in 1995.

Divx was also starting out its product life, alas one that was not to last as long as its founders hoped. Divx as a pay-per-view video format, competing with the DVD, was released on a limited basis early in 1998, with the national rollout happening in October; a player cost $399 and 200 titles were available. While the format did enjoy a certain amount of success, 1999 would prove to be a tougher year. In a very odd move, the format was financially backed primarily by Circuit City and a group of Hollywood-based lawyers who felt consumers would rather rent, than own, the ability to view DVDs.

The computer industry was chugging right along. Compaq was still the industry leader, followed by Gateway 2000, Packard Bell, IBM, Hewlett-Packard and Dell, or basically the inverse of the top players today. Desktops had made the plunge below the $1,000 mark the previous year, giving an entirely new segment of the population the chance to buy a computer for the first time.

The year also saw several high-profile executive changes. Carl Yankowski was replaced as CEO of Sony Electronics by Teruki Aioki, and Tandy CEO John Roach announced he would retire at the end of the year with Len Roberts slated to take over.

The five retailers leading the TWICE top 100 list were Best Buy, Circuit City, CompUSA, RadioShack and Sears. However, the list was littered with names of companies that would soon fall to the wayside, such as Computer City (11), Service Merchandise (16), Nobody Beats The Wiz (20) and Montgomery Ward (21). The Wiz was purchased in 1998 by Cablevision in an attempt to turn that chain into a digital destination that would expose Cablevision's upcoming broadband service to consumers. The regional chain Sun TV & Appliance filed Chapter 11 in September.

Zenith was also going through its last few maneuvers to return to profitability by laying off 800 workers and implementing a major restructuring. Audio mainstay Carver Electronics began sourcing products and halted all manufacturing. Carver was forward thinking in one respect: It decided to start selling product direct over the Internet. And Toshiba pulled out of the desktop computer business to focus on its notebook lines. Apple pulled out of every national and regional chain, except CompUSA, to focus on better serving its loyal base of Mac specialty retailers. This was a bold move considering the all-in-one iMac, the computer that many consider to be Apple's savior, began shipping in July. This maneuver is particularly ironic now because some of those same retailers are now suing Apple over what they allege is the unfair practice of giving priority to Apple Stores, over their own, for choice merchandise.







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