Consumer Electronics Crystal Ball: More Devices Doing More ThingsConsumer Electronics Crystal Ball: More Devices Doing More Things

With the International Consumer Electronics Show (CES), one of the nation’s biggest trade shows in the country, set to kick off in a couple of months, Consumer Electronics Association President and CEO Gary Shapiro spoke with Digital Connect Editor Jeff O’Heir about the major market trends that have emerged over the past year.

DC: What are some of key changes you’ve seen in the industry over the past year?

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. This tax bill that just passed the Senate, to be signed by the president shortly, is going to have some immediate, short-term impact. All of a sudden, major companies like Microsoft and Intel are providing dividends, so that’s going to have a very positive impact. 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 consumer electronics sector?

SHAPIRO: The price of displays is coming down rapidly, and it’s having a very positive impact. We have a printing service that’s been totally overwhelmed in the last year. There are so many stories out there about what you can do in your home with cool things, [such as] networking your home. The products are out there. It seems that over the last year it’s been almost logarithmic in terms of the number of stories written directly to the consumers. 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 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. Now you have Blackberries with telephones, digital cameras on telephones, PCs that do everything. 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 CEA membership changed?

SHAPIRO: We brought on more integrators when we merged with the Home Automation and Networking Association two years ago, and we’ve successfully integrated them. 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. It’s a one-stop site for customers to select integrators from a local area, and it includes our suggestions on what to look for when hiring a Tech Home installer. We have a connections guide that’s an interactive resource so consumers can understand how to connect their audio-visual products, and future editions will have networking entertainment products. We have a home networking standards committee, publishing standards for home networking and Web-based protocols.

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

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 digital integrators. It used to be just A/V products, but now you need 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. They want stuff that works. It’s a matter of making sure that they can go to someone that’s competent. 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 and your office. It kind of came to a head when Senator [Orrin] Hatch [R-Utah] 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. At the same time, there’s stuff that the Senate will be considering when they come back from the election that will make it a criminal violation, [punishable by] up to three years in jail, if you download over 1,000 songs. So the Department of Justice could be putting kids in jail. There’s scary stuff going on, but still it’s just been a watershed year in terms of public policy battles on so many different fronts

DC: Any movement on broadband issues?

SHAPIRO: There has been tremendous recognition from both candidates for the presidency--which wasn’t true a year ago--that broadband deployment is absolutely essential to this country. There’s a sense that the U.S. is behind Korea and other countries in the deployment of broadband and that we have to do something about it. A lot of our future depends on it. There’s also good news coming out of the wireless world. Wireless is growing quickly, and you have new ways coming to the forefront with wireless broadband. So there are choices of getting broadband into the home. We want as much competition among different media as possible so the consumer has a choice of how to get broadband into the home. I think broadband is the most critical thing for consumers.

DC: CEA has been very active in driving awareness of HDTV. Are consumers catching on?

SHAPIRO: HDTV has clearly become huge this year. It’s past the tipping point. People love what it looks like, and they want it all around their home. You combine that with a flat screen and all the developments in display technology, and you can have them connected to all sorts of things. You combine that with broadband and phenomenal competition among cable and satellite broadcasts, and you have so many competitive sources with broadband and media that I think the consumer is going to be quite the winner here. All of this is boding very well for the consumer and for our industry.

DC: How about overall growth in the industry?

SHAPIRO: There’s tremendous growth in the industry. Our [International CES] 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 don’t want unqualified people coming, especially with the demise of Comdex. We want to make sure they have a legitimate interest in the industry.

DC: Has the makeup of those attendees changed at all in the past year?

SHAPIRO: It’s hard to tell. What’s changed is that our scrutiny this year is much higher than it was last year. What we don’t want is the people who used to go to Comdex to tire-kick. What we do want are the people that are connected to IT, the people that are connected with the fact that they are seeing the products on a business basis. What we’re trying to keep out is the individual consumer.

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 because we want to make sure that Las Vegas works for everyone, that we’re not overwhelmed with people from the public. What also has shifted is that the products used to start in the IT world at Comdex abd 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. They buy everything themselves. 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: Are there any exciting products or technologies that are charging you up?

SHAPIRO: The growth in display technology is a virtual explosion, and combine that with the strategy we’ve employed for HDTV, which has worked miraculously. HDTV is a phenomenally successful product that took five years of people cursing me out and saying it’s a failure, that it will never work and no one will want it. HDTV is what people want. I still think we’re in the infancy of this digital revolution. There are products out there that can change the way people receive information, education and entertainment so they can have a better life. We’re basically changing the standard of living in the entire world, we’re connecting people and I think we’re making the world a much better place.

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? Is there anything they should recognize and change?

SHAPIRO: I think the IT companies bring a lot to the ballgame. I think they have good brands and are 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.

DC: What affect do you think Microsoft’s Windows XP Media Center Edition 2005 release will have on the home networking market?

SHAPIRO: I think it’s exciting that Microsoft is embracing high-definition television, that they understand the value that consumers put on it. I think there will be a marketplace for it but, obviously, it’s yet to be determined how large. Microsoft has a strong following. I think they’ve done some good things with audio and video content, and I think it’s a natural extension of what they do. It’s a matter of consumer preference. Microsoft is creative and innovative, and they listen to their customers. Consumers are familiar with Windows, and they will find good new uses for [Windows Media Center]. I think it will work.