It used to be said that the home storage market was not worth
bothering about because of low margins, cut-throat competition and
limited opportunities. But things have changed and with the
emergence of set-top boxes and other storage-hungry devices, the
sitting room is fast becoming the next sales battleground.
There are several areas vendors are pinning their hopes on, with
set-top boxes forming a large part of the expected market growth.
But equally important are hand-held portable drives and flash
memory drives to support digital cameras.
"You couldn't base your business on it at the moment, but there is
a move towards digital content by consumers," says Grant Morgan,
managing director at SmartDisk.
He places the television, rather than the PC, at the centre of the
digital lifestyle that will provide vendors with opportunities to
get involved with making storage devices for set-top boxes, PDAs,
digital cameras and MP3 players.
"The days are over for large amounts of growth in the computer
market [for storage devices]," he claims.
Television potential
One school of thought argues that
traditional PCs are expected to decline in importance for hard disk
drive (HDD) vendors as time goes on to be replaced by the
television. It doesn't take a genius to realise that the potential
market for TVs is considerably higher than for PCs and as users
start shifting towards digital there is an opportunity to sell
large numbers of units.
That view is naturally enough not held by firms involved with
making PCs as well as selling storage. John Osterhout, director of
marketing for the storage technical division at IBM, says the PC
market is cyclical and will make money again in the future.
"The PC has a lot of life left in it and it does perform useful
functions in the home," he argues.
What most vendors do agree on is that increasingly in the home
space, the PC is no longer the single dominant interest for storage
suppliers and it will be joined by televisions, set-top boxes and
digital devices in the near future.
Chasing consumers
Not surprisingly, there are a healthy
number of vendors moving towards the consumer electronics market
trying to come up with low-price, high-capacity devices. The
considerable market for CD-Rs has demonstrated that users are
prepared to take advantage of devices helping them store
material.
Where most of the attention is being focused is around the
television, as HDD manufacturers try to get deals to supply set-top
boxes and vendors attempt to get involved with plans that could
include digital TVs coming with their own HDDs.
"The people who control the set-top box are those who are providing
the content and that won't change in the short term, but in the
long run the set-top box will change into a mini-computer using the
TV as an output device," claims Morgan.
The impact of HDDs turning up in TVs and set-top boxes should
switch a few more people on to the benefits of storage.
"As people start purchasing set-top boxes with an HDD in, they will
become more aware of it and the HDD will come more to the fore and
make people's lives more enjoyable, like personal video recorders,"
claims Karen Laing, business development manager for CE products
Europe at Seagate.
She expects the influence of consumer electronics to grow. Seagate
has a facility in California, CETEC, testing out where future
systems might work and where the need for storage will be.
"What we have is a completely new area. If you think about the PC,
it took years to develop and we are at the early stages of what
will develop," she adds.
The consequence of targeting the emerging consumer electronics
market is having a repercussion on vendors more associated with the
dry business-to-business market.
Fun entertainment
Neil Ewan, business development
manager for the retail channel Europe at Imation, says it has been
actively marketing itself to retailers and entered into a
sponsorship with the Jordan Formula One team to get its brand
associated with fun entertainment.
"We are trying to promote technology in an exciting way," he
explains. "Our approach is not to have huge blanket TV advertising,
but work with the channel where the products are actually
sold."
How much the market could be worth is debatable and in all
likelihood, storage players will keep supplying the enterprise, SME
and retail markets rather than settle for just the home
market.
Some analyst firms have predicted the potential market for devices
requiring some form of storage support could reach large numbers
(see box), but there are doubts over whether large numbers of units
will translate into large amounts of cash.
"The price of the devices is very low and it might be big in terms
of volume, but not necessarily in terms of value," warns Sue
Clarke, senior researcher at the Butler Group.
She reasons that the future direction of the market is far from
certain and some vendors are expecting a big take-up in hosted
storage that could eventually be offered to home users.
For those vendors that do decide to target the consumer electronics
market, it is not going to be easy playing in a market which
demands cheap, reliable product.
Meeting market expectations
"The key price points have
to be hit and the challenge is to get the price, economies of scale
and be able to do development and bring prices down in line with
the expectations of the market," claims Osterhout at IBM.
Those difficulties will keep some vendors out of the market to
remain focused on enterprise and SMEs. For those that do go into
the consumer space, it will be impossible for them to say no one
warned them of the challenges.
"In that area you have to have something that is cost-effective and
the margins are under pressure, so you will need to sell a lot of
product," concludes Andy Walsky, European marketing director at
Quantum Snap.
Consumer electronics' future
According to analyst firm
IDC, the worldwide market for consumer electronics is set for rapid
growth. Over the next three years, the growth areas will be largely
games consoles and personal video recorders (PVRs), set-top boxes
and Web TV. On top of that, there will be large sales of video
cameras and audio players.
By 2004, the market should have topped 45 million units, a huge
rise from an expected six million units this year.
The sorts of devices driving forward this growth include the
following:
TVs with HDDs Standalone PVRs
Web TVs Net hi-fis
Set-top boxes PCs
MP3 players PDAs
Video phones Web-enabled games consoles.