New Web gadgets connect

THE BALTIMORE SUN

SAN JOSE, Calif. -- The time when a camera was just a camera, or a DVD player was just a DVD player, is over.

This year's Consumer Electronics Show is expected to demonstrate that just about every type of gadget will be connected to the Internet and each other - giving people access to more digital entertainment including music, video and games.

Just how big a factor will the Internet be in new gadgets in 2006? Consider this: For the first time, Google Inc. co-founder Larry Page and Yahoo Inc. chief executive Terry S. Semel will make speeches at this year's show, which is the showcase of the latest hardware innovations. This year, 2,500 exhibitors are expected at the four-day event that starts tomorrow in Las Vegas.

"That is the biggest theme and shift, where every device is connected and always on," said Tim Bajarin, an analyst at Creative Strategies International in San Jose. "If devices are connected all the time, it changes the way you design a product."

"Always on" Internet access is one of the drivers of a long-predicted digital convergence that is bringing the computing, consumer electronics and communications industries together. As more devices need to talk to each other, high-tech companies must think about new business models that may align them with competitors.

The hottest example these days is video. Several companies are positioning themselves to be the center of your living room, with entertainment centers connected to the Internet. How these on-demand services - such as TiVo, iTunes or even cable providers like Comcast - will evolve is still up in the air. But their mantra is to allow you to take video on your personal devices wherever you're headed.

Even router and switches giant Cisco Systems Inc. is getting into the fray, with its purchase of TV set-top box maker Scientific Atlanta. And ESPN offering a Sprint cell phone for sports freaks is just another indication that the walls between disparate devices are coming down.

People want to move content from the Internet - movies, games or music - to any of their devices, and view that content wherever they want. And while they want the functions the Internet provides - like instant feature or software updates - they don't want the hassle of logging into a network.

"For you to get your best use out of something, it has to connect to a bunch of other devices, like a DVD player, music player, the stereo," said Stephen Baker, an analyst at market researcher NPD Group.

"Connectivity is not a sexy thing, but it's important and it takes a long time to build it into all these devices. In the long run, the value comes in stitching these products together, like an iPod and your stereo speakers. Now you want to connect your TV to the PC, the cell phone, the iPod."

Computers began the evolution of being constantly connected to the Internet. With broadband access in more and more homes, now TV sets, DVD players, camcorders, portable media players, car entertainment systems, security cameras and even refrigerators are coming ready to connect.

Those seamless connections are giving birth to all sorts of new innovations. San Francisco-based eCast has given new life to the music jukebox, with models that download huge catalogs of songs from the Internet. Eastman Kodak Co. introduced its first wireless Internet-enabled EasyShare One camera at the show last year, in which you can upload photos to a Web site at the local Starbucks. Bajarin now expects dozens of camera models to follow suit.

George Bailey, an International Business Machines Corp. consultant and co-author of a book about consumer electronics, says there's no easy way for manufacturers to make money on stand-alone hardware anymore.

"The fundamental reason that people are looking at new business models is that the economics of consumer electronics hardware don't work," Bailey said. With an average 2 percent return on consumer electronics device sales, Bailey added, "I can do better with savings bonds. It's definitely a new era where companies are trying to see what will work."

For gadget designers, connected hardware allows people to download services and software from the Internet, giving companies more ways to make money than just the piece of hardware. But there are concerns: Those same hardware providers can't charge for services that consumers can find free elsewhere, and gadgets must be hacker- and virus-proof.

Sam Lucente, director of brand, design and experience at Hewlett-Packard Co., says designers have to think beyond the hardware itself to the overall experience that consumers get from the product.

"No longer are you designing a product," he said. "You are designing an ecosystem."

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