The 2006 Gadget Parade: A New Era of Convergence and Convenience

As the new year begins, a long-anticipated era of convergence in consumer technology products draws closer, according to Wharton faculty and technology analysts.

By No Analyst or Consultant

January 24, 2006 — CSO —

Apple's iPod again ruled beneath the Christmas tree in 2005 after the latest model of the iconic music player was outfitted with a video screen. And as the new year begins, a long-anticipated era of convergence in consumer technology products draws closer, according to Wharton faculty and technology analysts.

Cell phones that play video, e-mail delivered to handheld computers, telephone conversations over the PC and hundreds of other glimpses into Christmas future were on display at the annual Consumer Electronics Show in Las Vegas last week. The stepped-up presence of digital giants, including Microsoft, Google, Yahoo and Intel, signaled the companies' ever-increasing interest in expanding from the office into consumers' living rooms. "The theme of seamlessness is one I am pleased to see happening, and it will accelerate in 2006," predicts Wharton marketing professor Peter Fader.

Manufacturers are beginning to respond to tech-impaired consumers with new systems that make it easier for different devices to work with one another. "The market demands this .... It's a natural evolution," Fader notes, adding that consumer electronics manufacturers and their digital hardware and software partners may continue to offer dueling standards. "But it's not a competition that we, as consumers, have to deal with."

According to Tim Bajarin, principal analyst at Creative Strategies, a Silicon Valley consulting firm, the rise of the Internet is driving a new era in electronics in which "everything is connected. Devices are connected to the Internet or to each other via a home network. We have been talking about convergence for I don't know how many years, but without us realizing it, the thing that's bringing convergence about is connectivity."

The Internet has become a powerful distribution medium for mail, images, text and, most recently, video, he says, adding that electronics manufacturers must now focus on the three major screens in consumers' digital lives: the PC, the TV and the cell phone. A fourth screen, the iPod or another portable media player, is also emerging. A manufacturer of digital cameras, for example, needs to know how to connect the device to all three screens, he says. "When you start thinking about these three screens, you have to start thinking about consumer electronics as part of a larger digital ecosystem."

Stronger Brand Identities

Convergence is evident among large technology companies that once focused on business systems but are increasingly looking to expand into consumer electronics and entertainment, says Saikat Chaudhuri, Wharton management professor.

Google, known primarily as a search engine, has announced plans to offer downloads of video and movies. Chip-maker Intel Corp. has teamed with video-content suppliers as part of its new marketing initiative called Viiv focusing on the digital home. Microsoft is pushing a new media software package called Vista and has formed an alliance with MTV to open its own music store, Urge, to compete with Apple's iTunes.

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