A Convert To ConvergenceA Convert To Convergence

With the International Consumer Electronics Show--one of the biggest trade shows in the country--quickly approaching, Gary Shapiro, chairman and CEO of the Consumer Electronics Association (CEA), spoke with Digital Connect Editor Jeff O’Heir about the major market trends that have emerged in the industry over the past year.

DC: What are some of the most important overall changes you’ve seen over the last year that are affecting the industry?

SHAPIRO: The economy is doing much better, but there are still concerns. We’re seeing a lot of cash coming in because corporate profits are higher [after the] tax cuts went into effect. So the economy is going to be very positively affected; there’s no question about that. On the other side, the increase in the cost of gasoline, the fact that wages haven’t gone up and the uncertainty with the war in Iraq has caused consumers to be a little skittish.

DC: What about changes in the CE industry?

SHAPIRO: The price of displays is coming down rapidly, and it’s having a very positive impact. There are so many stories out there about what you can do in your home with cool things, networking your home. So the consumer awareness of the benefits of this industry is growing rapidly. It’s now a hot industry. Five years ago, IT and the telecom were the hot industries. Now there’s no question that it’s consumer electronics. It’s all about connecting things in your home.

DC: Did you ever think that we’d be seeing this type of integrated technology going into the home?

SHAPIRO: I was very skeptical about convergence for many years and said that the only successful convergence product was the Swiss Army Knife. But the reality is that products have converged. There’s a tremendous amount of products that have multiple functions and features. But, within the home, consumers don’t care about the technology, they care about the solutions. … I do believe there is a market for digital integration.

DC: How has the CEA membership changed?

SHAPIRO: We brought on more integrators when we merged with the Home Automation and Networking Association two years ago. We are working to elevate and unite the professional integrators so the consumers know they can rely on them for installation. We’ve created a tech home referral database.

DC: So is it safe to say CEA has seen an influx of this new breed of digital integrator?

SHAPIRO: We are getting more and more integrators into CEA, there’s no question. There are two things happening. One is the marketplace is growing for the digital integrators. It used to be just A/V products, now you have to have knowledge across the board. The second thing is we’re seeing tremendous consumer interest about what is going on. People want all their stuff to work together. They want a seamless solution. They don’t want to know about technical details. It’s not just about audio/video; it’s about everything. So we have more and more independent dealers and more and more installers focusing on what we’re doing.

DC: How is public policy shaping up?

SHAPIRO: There has been a phenomenal shift in the last year as the content community has tried to restrict the ability to shift content around your home, your office. It kind of came to a head when Senator [Orrin] Hatch thought he had a slam dunk with the Induce Act that would have made anyone liable for inducing a copyright violation. They thought they had the support of the Senate, but we successfully killed it this year. It drew the entire electronics community together saying our future is shifting content around the home and the office.

DC: How about overall growth in the industry?

SHAPIRO: There’s a tremendous growth in the industry. Our trade show has done tremendously well as a result. It will be the largest in our history. What we’re focusing … on now is actually controlling the attendance of the show. … We want to make sure [the attendees] have a legitimate interest in the industry.

DC: How many attendees do you expect?

SHAPIRO: We had 132,000 people last year. This year we’re looking at 120,000 as our target. What also has shifted is that the products [used to] start in the IT world, then went to the consumer world. Now they’re starting in the consumer world and going to the IT world. The CIOs used to control the budgets for everything bought for a company. Now people are buying their own cell phones, BlackBerries. … And with Wi-Fi, they’re buying more and more for themselves. At CEA, our membership is up 41 percent over last year; we have over 1,700 corporate members.

DC: With more IT-centric companies moving into the CE space, such as Microsoft, Hewlett-Packard and Intel, do you see any shortcomings in the way they’re designing products or delivering them?

SHAPIRO: I think the IT companies bring a lot to the ball game. I think they have good brands; they’re well-respected by the consumer. They understand how to sell directly to consumers and indirectly. They understand low margins. They understand the concept of customer service as something they have to expect and deal with. They understand that the consumer really wants simplicity, although that’s not how they’re portrayed. But the reality is that they have reliable products that are easy to use and are designed well.