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On the Future of Portable Media Centers a Topic Paper by TDG Research The Diffusion Group On the Future of Portable Media Centers A Topic Paper by TDG Research Authors: Dale E. Gilliam III, Analyst Michael Greeson, President & Principal Analyst © TDG Research 2004 Contact Info: TDG Research 5800 Granite Parkway Suite 300 Plano, TX Actionable 75024 Intelligence for New Consumer www.tdgresearch.com Technologies [email protected] TDG Topic Paper On the Future of Portable Media Centers Potentiality versus Actuality Though research suggests there is strong early interest in Portable Media Centers or PMCs1, thatThe does not necessarily mean that there will be strong demand for these devices. While early Consumer Likelihood in Purchasing a PMC interest may hint at the potential (Among Internet Heads-of-Households, n=1,044) Group success of a product, determining the chance of actual success requires a number of other factors to be considered – above and beyond consumer research. Price curves and feature sets are two such factors; substitute products another. At this early stage of the PMC market, all of these © 2004 TDG Research factors will greatly impact actual The potential for these devices looks very promising with 43% expressing an interest in purchasing a PMC. However, demand for PMCs. this chart does not reflect the amount these potential adopters are willing to spend, nor does it consider the threat of alternative products. For a more in-depth analysis, Substitute Products Abound see Consumer Interest in Portable Media Centers as well as TDG’s upcoming PMC analysis and forecast. PMCs support a variety of media applications including the storage and consumption of video, music, and photographs. While the fact that a single portable device can support all of these applications may be unique, there are a number of application-specific products available at much less expense. (1) Video Storage and Playback Arguably the most unique attribute of the PMC is its video playback capabilities. This feature allows the PMC to receive and store TV or video programming that 1“PMC” refers to portable media center devices that may or may not use Microsoft’s reference design. The name “Portable Media Center” is often used to describe Microsoft’s specific PMC reference design, but it does not constitute the entire product category. There are several PMCs that do not use MS’s reference design. 2 TDG Topic Paper has been recorded either directly to the PMC (as with the RCA Lyra or Archos AV400) or on another device (in most cases the PC). Once stored, the user can view that content on an “anytime/anywhere” basis. However, Theif a potential buyer is simply looking for a way to view videos “anytime/anywhere,” there are several other products that may prove more attractive than a PMC. For example, portable DVD players can be purchased for as littleGroup as half the price of a PMC and offer a larger screen (7” in most cases versus the 3.5” display of most PMCs) and provide a better quality viewing experience – these devices are optimized for viewing digital video. Though a larger and heavier device, the advantage still goes to the portable DVD player since video viewing is most often done when one is sitting down or stationary, not jogging or engaging in other physical activity. List Price/ Video Description Value-Add Cost Plays Cartoon Network cartoons - Nintendo Gameboy Advance $79 playtime is roughly 45 minutes per cartridge Casio TV 980 $79 Handheld TV 2.3" LCD Casio EV 4500 $209 Handheld TV 4" LCD Polaroid PDV-0700 $189 Portable DVD - 7" display Toshiba SD-P1400 $299 Portable DVD - 7" display Panasonic DVD-LS50 $399 Portable DVD - 7" display Portable TV - 7" display, 802.11a/g Sony LFX5 $1,000 and Ethernet connectivity A second alternative to the PMC is the portable television. For $79, consumers could pick up a Casio handheld TV at Best Buy. Yes, these devices enable only 3 TDG Topic Paper live TV programming (versus recorded TV programming) but they are 1/6 the price of a PMC and thus constitute a viable substitute. On the high end, Sony has introduced a new portable digital TV that utilizes a wireless InternetThe connection to receive streamed content. Though this solution costs in excess of $1,000 and its portability is limited to Wi-Fi hotspots, with a little volume, a year’s worth of Moore’s Law, and more widespread availability of hot- spots, Groupeven these devices will constitute a threat to those videophiles leaning toward a PMC for the purposes of watching video. (2) Music Storage and Playback Let’s just state the obvious: any consumer who wants to listen to portable digital music is much more likely to buy an MP3 player than a bulky, expensive PMC. Creative’s Zen PMC weighs in at about ¾ lb., with the lightest PMC weighing more than ½ lb. In time, these devices will be improved with smaller, lighter batteries and hard drives; for now, however, PMCs are too bulky when compared to MP3 players, not to mention the fact that MP3 players can be purchased for a fraction of the cost. For many, a 20GB hard drive may be overkill and a Flash memory MP3 player, costing $100 or less, will suffice. In other words, even the most music hungry consumers can save $200 to $300 by simply purchasing a 20GB portable digital music player instead of a PMC. List Price/ Audio Description Value-Add Cost GPX BA800 (Bantam) (256Mb) $109 Music player with photo viewer iRiver IFP-880T (128Mb) $119 Portable music player Creative Zen (20Gb) $239 Portable music player iPod (20Gb) $299 Portable music player Of interest, new MP3 players are adding additional media functionality. GPX (formerly Bantam) offers a 256MB MP3 player that supports digital photo viewing on its 1.8” color screen – for only $109. Is adding video capabilities worth an 4 TDG Topic Paper additional $400 above the cost of a portable device that supports both digital music and photos? Consumers will be the final arbiters. (3) Photo Storage and Viewing The photo Theviewing capabilities of the PMC seem to be more of a “why-not?” feature than a “killer application” – that is, PMC designers probably said “why not” add support for viewing photographs given that the PMC already has a 3.5 inch displayGroup and more than enough video processing power to support photo viewing? Though useful, portable photo storage and viewing is unlikely to be a driving factor in a consumer’s decision to purchase a PMC. If photo support is important to a buyer, there are simply too many alternatives that support this application and which cost significantly less than a PMC. List Price/Value- Photo Description Add Cost $0 additional View photos stored on camera via Digital Camera cost LCD display CD less than $0.50 Photo CD other card reader $15-$30 USB Flash card reader Digital photo album - must Sandisk Photo Album $49 connect to TV to view Digital photo album - portable; Nikon CoolWalker $499 supports JPEG, TIFF, and RAW files The most economical option for transporting digital photos is a 50¢ CD or, for no additional purchase, consumers can merely use the camera as a photo storage and viewing device. For a little more, one could purchase a flash memory card reader such as Sandisk’s new $50 digital photo album, which sports TV outputs and a remote control. Such substitutions also support several (higher quality) video file types not supported by PMCs such as TIFF and RAW files. Moreover, if the consumer already has a laptop or a PDA, they do not need another device for storing and viewing photos. Success of the Application-Specific Alternatives 5 TDG Topic Paper Simply stated, PMCs will be relegated to high-end novelty items if consumers’ media needs can be satisfied by application-specific devices that are less expensive and optimized for individual applications. Though all convergence platforms areThe inherently threatened by devices that are optimized for specific applications (that is, devices that have just the right balance of processing power, controls, and storage to deliver a specific application and keep the price as low Groupas possible), PMCs face other unique challenges. In order to enjoy widespread adoption, all-in-one devices such as PMCs generally have to wait until single-function solutions are widely adopted and have achieved sufficient economies of scale. Among the various applications that PMCs support (that is, digital music, digital video, and digital photos), only the digital music player has diffused successfully into the mainstream market. But convergence devices base their value on the fact that they are more than the sum of their parts — or rather it is only because PMCs are the sum of their parts that they have any value. Given that PVRs have yet to establish a significant market presence, portable PVRs makes no sense whatsoever – except, perhaps, to those that already use a PVR in their home. The adoption of a multipurpose device whose primary differentiator is PVR functionality will inherently be limited by the total demand for PVRs – a rack upon which few would be willing to hang their hat. To add insult to injury, the dominant PMC reference design (Microsoft) requires users to own a Microsoft Media Center Edition software-enabled PC to record video before transferring to the PMC. While not surprising to those who follow Microsoft, this necessarily limits the market for Microsoft-based PMCs to those that already have or will soon buy a Media Center PC. The Silver Lining So how does a device with multiple substitution products, an uncertain value proposition, and a price well beyond the tolerance of most consumers grow a market? 6 TDG Topic Paper The good news – it is simply a matter of time before converged portable media platforms such as PMCs become more commonplace.
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