2009 Predictions: Hardware

In pre­vi­ous posts, I looked at macro-economics con­di­tions and media related issues in 2009. In this entry, I’m ven­tur­ing in the hard­ware space to attempt to divine what new gad­gets we may see in the com­ing year.

Tele­vi­sions: Con­nected and Flat

It’s been 15 years since the Inter­net rev­o­lu­tion started to take hold and about 3 since video on the Inter­net has become a more viable option. With the rise of devices con­nect­ing por­tions of the Inter­net video space to your tele­vi­sion (for exam­ple, allow­ing to buy movies or TV shows from the iTunes store or down­load video streams from Net­flix), we’re see­ing more ways to con­nect the Inter­net to tele­vi­sion with­out requir­ing a com­puter. I sus­pect this trend will only con­tinue and expect this year to mark a turn­ing point with some of the first ethernet-enabled tele­vi­sions appear­ing. This type of con­nec­tion will be avail­able first from Sam­sung and LG, who have already built such con­nec­tiv­ity into their Blu­Ray play­ers so I would expect them to port those capa­bil­i­ties to TV sets shortly.

The other improve­ments in the TV space will include the intro­duc­tion of more OLED screens on the high end, pro­vid­ing a third option in the flat screen space ( LCD and Plasma being the other two.)

The econ­omy will pres­sure many of the com­pa­nies in the space to drop their mar­gins on tele­vi­sions and I wouldn’t be sur­prised if flat screens start drop­ping under $500 by year end. This will force some of the last CRTs off the mar­ket, leav­ing Plasma as the cheap choice, LCD as the aver­age one, and OLED as the high end one.

Blu­Ray: Los­ing to Downloads

2009 ought to have been a good year for Blu­Ray. Hav­ing killed its main com­peti­tor in the next gen­er­a­tion phys­i­cal disk for­mat (HD-DVD), Blu­Ray appeared to have the field open to itself.

But through both blun­ders on the part of peo­ple in the media and con­sumer elec­tron­ics space, Blu­Ray has suc­ceeded at paint­ing itself in a cor­ner: hav­ing priced disks at a pre­mium, exec­u­tives have to jus­tify the advan­tage. The approach they took was that Blu­Ray was a higher video and audio qual­ity expe­ri­ence than reg­u­lar DVD. But this has rep­re­sented a major hur­dle for them as most con­sumers are fairly happy with the qual­ity they are get­ting from their exist­ing DVDs.

The other issue is that the war for a next gen­er­a­tion for­mat was not about a phys­i­cal medium, as they had expected. Sure, Sony and Toshiba tried hard to make it about that, because roy­al­ties on sell­ing rights to such for­mats can go in the bil­lions of dol­lars over sev­eral years, but truth be told, the mar­ket bypassed phys­i­cal as a medium almost half a decade ago.

With the rise of the iPod, peo­ple have grown more com­fort­able with the idea that they could buy a media asset (a song, a TV show, or a movie) elec­tron­i­cally with­out hav­ing to deal with the piece of plas­tic that car­ries it. The rev­o­lu­tion started with music because those files were smaller but, as band­with avail­abil­ity increases, the amount of time required to down­load a TV show or movie is drop­ping. Along with the avail­abil­ity of stream­ing video, this has changed the level of expec­ta­tions when it comes to media con­sump­tion in such a way that, increas­ingly, peo­ple want access to their media with­out hav­ing to deal with a phys­i­cal com­po­nent to carry it (one could argue that the on-demand shows pro­vided first in hotel rooms in the 90s and on most cable boxes in the last few years fall in the same space.)

So down­loads are going to be the thing that undoes Blu­Ray. As a result, I expect Sony to start tout­ing down­load­able media more heav­ily than Blu­Ray in its PS3 mar­ket­ing. I also expect most Blu­Ray play­ers to offer some way to access inter­net media either through direct part­ner­ships with the providers (Net­flix, for exam­ple) or through the cre­ation of an open for­mat con­tent providers could leverage.

Mobile Phones: Smart is in but so is Simple

The recent suc­cess of the iPhone has got­ten every phone providers to focus on devel­op­ing more smarts for their phones, essen­tially turn­ing them into multi-use devices. This trend is hardly new (I’ve owned a smart­phone since around 2000, start­ing with the first Treo) but its accep­tance by the gen­eral pub­lic is.

What I expect to hap­pen in the space this year is a con­tin­ued drop in prices as new con­tenders enter the space. Palm will make a play at the space with a new net-centric phone and oper­at­ing sys­tem that will come with a under $100 price-tag to fol­low the recent suc­cess of their Cen­tro offer­ing. This will, in turn, force Windows-mobile and Google Android-based phones to come down to the same price range, with some of them even being offered by car­ri­ers for free with 2 years con­tracts. Apple, on the other hand, will keep its $199 price tag and may offer a soft­ware upgrade that would turn on video record­ing on the iPhone. RIMM, with its Black­berry offer­ing, will con­tinue to be the dar­ling of the busi­ness world but most of its efforts in the con­sumer space will be rebuffed.

Mean­while, on the other end of the spec­trum, we might see the rise of phones that have a sin­gle fea­ture: mak­ing phone calls. Those phones will be mar­keted to two dif­fer­ent seg­ments of the mar­ket: elderly peo­ple, who barely use com­put­ers and want some­thing that has as lit­tle com­plex­ity as pos­si­ble and the first grade set, with some level of parental con­trol being avail­able on the devices.

Com­put­ers: Smaller, Cheaper, and More Wireless

Net­books started mak­ing the news last year. Sport­ing a web-browser and gen­er­ally less power than tra­di­tional com­put­ers, PC mak­ers have dis­cov­ered that there is a large audi­ence for such devices. This is a prob­lem with chip mak­ers like Intel and AMD who have relied on Moore’s Law to get faster and beefier proces­sors out the door at heav­ier costs to con­sumer. The prob­lem they are faced with today is that most proces­sors are good enough for what peo­ple want to do (ie. read email, go on the web, and maybe edit a few doc­u­ments). So I expect net­books to be the only real growth sec­tor for PC mak­ers. This rep­re­sents quite a chal­lenge as mar­gins on such devices are low and the busi­ness model around them is a vol­ume one.

The mar­ket is now frag­ment­ing into 4 segments:

• Net­books, which are prob­a­bly good enough for most people.
• Pow­er­house machines, which are used pri­mar­ily by com­puter gamers.
• Office machines, which will demand more secu­rity fea­tures (eg. Lenovo)
• Lux­ury machines, which are more in line with the fash­ion space than the elec­tron­ics one (eg. Apple MacBooks)

I expect a slow­down in the num­ber of machines sold in the com­puter games mar­ket and a flat­ten­ing in the office mar­ket. This leaves net­books as the growth area and I would put a ques­tion mark on the lux­ury machine mar­ket as I’m not sure it could see more growth if the eco­nomic cli­mate con­tin­ues turn­ing sour.