Devices No Longer Rule in Emerging Connected CE World, In-Stat Says
By 2015, the average Apple household will own a minimum of four iOS devices, not counting products not yet introduced, said Keith Nissen, research director at In-Stat. He was commenting on a recent report In-Stat released on the digital content world. “Google will not be far behind,” he told us, adding the caveat that Android’s long-term growth could be stunted “if they cannot expand into the video market.”
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In-Stat expects Apple to “expand their vision of themselves beyond making elegant devices,” Nissen said. More than 40 million U.S. broadband homes currently own an Apple device, according to In-Stat research, and Google’s expanding line of products based on the Android OS is expected to double its size over the next five years. With an ecosystem encompassing more than 137 million installed devices in 2010, Apple holds a “significant” competitive advantage in the connected electronics space, In-Stat said. It said the CE industry has moved beyond a single product category focus, and digital ecosystems combining devices, services and content create consumer value “far greater than is possible from any single product or company."
The days of CE devices being independent “are long gone,” due to the convergence of devices, services and content, Nissen told us. “You need all three, or your product or service will not be successful.” Apple has capitalized on the trend of connected CE devices and the “comprehensive digital ecosystem,” leaving media giants including Microsoft, Disney and Sony to develop their own competing, and possibly complementary, strategies, he said. That leaves more narrowly focused companies -- device manufacturers, operators, and online portals -- to navigate and position their products among the dominant digital ecosystems, he said.
Mobile devices and the “multi-screen world” are driving the new CE business, and “consumers are now in control,” Nissen told us. Consumers expect to view their content when and where they want and on “the screen of their choice,” he said. “There is no going back to the days of LPs and cassette tapes where content producers controlled distribution, and scarcity justified high prices.” Multi-screen accessibility is the future “whether the device manufacturers, service providers or content producers like it or not,” he said. The challenge for each is how to make money in the connected world where business models are changing, he said.
In addition to Apple and Google, Microsoft and Amazon will benefit most from the new CE world order, Nissen said. Disney “has enough market power to command special treatment within digital ecosystems,” and is also large enough to build its own ecosystem, he said. All entertainment content, services and devices “must fit into at least one of these digital ecosystems,” he said. Consumers will choose to be an Apple household or a Google household, for example, “and that decision dictates what devices, services and content are available to them,” he said. “It will be competition between digital ecosystems, rather than device versus device."
"If Apple does not offer access to the content people want, then it diminishes the value of their devices,” Nissen said. Small companies can benefit from the opportunity to leverage all the elements of the ecosystem -- including applications, content and distribution -- without having “to build it from scratch,” he said. The downside of the new world is that a few companies will dominate a market worth billions of dollars, he said. Companies such as Sony and Samsung “might not have the ability to introduce new devices or features,” unless they are supported by Google, Microsoft or Amazon, he said. “This could restrict innovation, even if it spurs more industry R&D partnerships.”