[GEEK] Information Appliances (Why SONY Will Win)

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From: Ian Andrew Bell (ian@cafe.net)
Date: Thu Jan 06 2000 - 18:01:22 PST

Silicon Valley is looking at cashing in on the next wave of the Internet
and it's widely believed that this will be in cheap, highly-connected
consumer electronics devices. Predictably, as the bandwagon roars up for
the long journey ahead every cool CEO in the know is trying to make his/her
company look like a Consumer Electronics maker. People you wouldn't expect
-- Sun, Cisco, Intel, Oracle are all hopping aboard with this or that
gadget or strategy that's gonna Rock Your World(tm).

But amid all of this hoopla there's a disturbing trend underway in the
consumer electronics industry -- everybody seems to be afraid of the
customer. Sun, Cisco, Intel, even Oracle routinely are bringing to the
forefront new technologies which they CLAIM will propagate internet and
web-enabled technologies to every home product from the blender to the

Yet read their press releases carefully, and you'll see a common
thread. It's a subtle line that reads something like "Although
Cisco/Intel/CompanyX will not be selling these products directly to
consumers, they will be offering them to the Service Providers and
Telecommunications Companies that make the devices work."

This implies three things:

1) That telephone companies (and their emulators) are better at building
businesses that support and educate customers.
2) That telephone companies see this kind of high-touch customer
relationship as their long term future.
3) That telephone companies et al are excellent marketers who can drive
these technologies into our homes, our refrigerators, our freezers.

Uh... Hello? What part of history have I been missing out on? Let's
address my experience vs. those assumptions in order:

1) TelCos are now swamped with so many products and services that
effectively communicating how each of them can help improve our lives is
difficult -- I call this "Brand Saturation".
2) When I last worked at a TelCo (two years ago) the entire focus was
reducing the level of touch between provider and customer because: a) the
margin wasn't there, b) the union employees made the costs too high, and c)
it simply didn't scale.
3) Telecom carriers are relative newbies to the marketing game. My former
employer still refers to their customers in some documentation as "applicants".

Silicon Valley these days, however, is a culture that likes to have an
answer to everything. As NASDAQ's performance during 1999 illustrates, it
doesn't particularly matter if it's the right answer, or even a good
answer, it just matters that the empty void is filled with some sort of
foggy idea. So if the question was: "Given that you don't have any
existing channels to the consumer market, how do you plan to propagate
these technologies?" the answer becomes: "Oh, well... we'll just use the
telcos." Again, I'm not sure who thought this was a Good Idea(tm).

So while The Valley starts backing their 18-Wheelers into the loading docks
of the embattled, unsuspecting telecom companies; let's just assume that
because of their propensity for slick, open, hot ideas that it really will
be better product: interactive, interoperable, extensible, and fully

Enter SONY. Sony likes consumers. Sony has embraced the consumer market
and has done very well at it. With a Market Cap of 86,784,810,000 (Cisco
is at 342,122,200,000) they'd have to. SONY is also entering the
Highly-Connected Consumer Electronics market (duh..) and in fact their
components have been talking to each other for two years. They've already
got a PC interface to their 100-Disc Plus CD Jukeboxes, as just one
example. Throughout their line of products - Digital Cameras, CCD Video
Cameras, MiniDiscs, Televisions, etc. - there is one common
theme: integration.

The PlayStation 2 is coming out soon and it will be an end run around,
well... everything. SONY has a concept that the Valley should wake up
to: They will put it in STORES. Contrary to popular belief, most people
still make their major consumer electronics purchases after seeing,
touching, hearing, and using the object of their grandest desire. SONY was
impatient and didn't wait around for things like JINI and JAVA and
HomePNA. They charged ahead into the unknown with proprietary standards
and protocols that got the job done.

Someday soon the faithful will wake up to realize that the SONY VCR they
bought two years ago at Fry's already can receive downloaded slide shows
from their new SONY digital camera. Yes -- SONY's stuff is nearly (except
for FireWire) all proprietary, and will probably stay that way. So
what? They already dominate in most of the Consumer Electronics
markets. Look at Microsoft: Market Dominance = Desktop Standard.

SONY are also poised to wrench the PC from its position as the single-most
important piece of processing power in the household with the PlayStation2,
which will signal a major shift in the battle for
who-owns-the-integration-point. Behold a Brave Statement: I think that
the PlayStation2 will outsell PCs for home use in 2001. Don't sue me if
I'm wrong.

So SONY's strategy is a submarine approach. Make CE products that are so
cool that everyone wants them. Then, after they've all bought them, remind
them that they can all work together. Use that interoperability to sell
them more goodies. That approaches genius. IMHO very few companies could
do this successfully.

So the moral to this story? Let's say you're a big successful data
networking company who needs to make sure that they have a strategic
position in the explosion of personal networking, but you don't want to
sell your goodies in stores because people are just SOOOO painfully messy.

If you were out there looking for someone to propagate your technology and
make money by furthering the encroachment of IP into our daily lives, would
you pick service providers? Or would you pick arguably the most successful
marketers of consumer electronics devices in business today? You wanna
partner with someone? Partner with SONY.

I don't understand why nobody has figured this out.


At 01:18 PM 06/01/00 -0800, Gregory Alan Bolcer wrote:
>Intel looking to expand their wings.
>"There will be little ones and big ones, but there will
>be a lot of them." Claude Leglise, vice president of
> Intel's architecture business group and head of its home
> products group
>Intel is working with Lucent, for example, on a so-called
> unified message mailbox that would deliver both voice- and
> e-mail in one device. "By offering these services as options
> and integrating them into our platform, then we can help our
> customers create more consumer services," Leglise said.
>Greg Bolcer
>email: gbolcer@endtech.com
>web: http://www.endtech.com
>work: 714.505.4970
>cell: 714.928.5476
>fax: 603.994.0516

604.306.3615 http://ian.cafe.net

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