Press Release

Information Appliance Study Predicts Continuing PC Market Turmoil

Service Dominates Emerging $23 billion Market

(Alexandria, VA, April 28, 1999) - 4th Wave, Inc. has released the only comprehensive analytical strategic assessment of the Information Appliance (IA) market and it predicts continuing difficult times for the PC. The result of a multiclient effort, the Information Appliance Market Study goes beyond just Information Appliances and examines what is described as the fifth era of computing. This emerging market will completely shape computing in the 21st century. The report looks out to 2009.

The report develops new approaches to evaluating the strategic market forces and these include.

An evaluation of the role of computing in the U.S. Gross Domestic Product (GDP) and the implications this has to the emerging market.

The development of a GDP Price Elasticity Line which predicts the upper limit to what consumers will pay for products and services, irrespective of technology.

The use of two new ratios, Service to Product and Content to Product, that show the importance of casual media as a driver in the emerging market.

The analysis shows an ASP of $70 for products or a service cost of $23/month.

Conclusions from the study include the following.

The key factors which will drive the emergence of the market will be Free MIPS (Millions of Instructions per second) of computing power and Pervasive Connectivity.

Home markets will drive the next era of computing.

A significant part of the markets will be based on services and not products.

The market will be predatory and those under threat include the broadcasters, wireline telephony and cable as a video service.

The greatest asset the over-the-air broadcasters hold is not their DTV (HDTV) licenses for video content but the use of the spectrum for data casting. With near 100% coverage of the U.S. by 2002 the broadcasters have the only low cost broadband infrastructure to homes, individuals and even automobiles.

Winning products and services will be those that ease the burden of individual lives through technology. This is fundamentally no different than the role that technology played 100 years ago when electricity, the automobile, the telephone and radio communications emerged.

The market is not about the Internet but its use as a platform for the delivery of products and services.

Virtually all companies that dominate the PC market today will face significant business challenges in adapting to this market.

The set-top box is too narrowly focused and will be replaced by a new service that is called the home assistant.

Cellular phone services, especially those emerging from 3G, 3rd generation cellular technology, can provide a platform for new services including casual video to the individual.

The market will be segmented based on four locations: individual, home, automobile and work. Each have its own unique characteristics and needs.

The current focus on System-on-a-Chip (SOC) semiconductor technology remains at too low a level to meet the requirements of the fifth era markets.

Low prices and the drive to give away devices will force a functional component approach to the market where products and services only use the components that are required. The requirements of the components will extend from silicon up to the operating system and the application.

Time to market and short product or service lifetimes will dominate the market, especially in the early years. There will be a continual turnover in new services as companies experiment with delivery platforms and business models.

The government will have a much higher level of involvement in these new markets than in the PC market.

The PC market will level off and decline as these new services and products emerge. At the same time the PC will evolve into what is described as the Future Computer whose central component is a screen. The FC will be only one product point in a continuum of products that have free MIPS and pervasive connectivity and use components as essential to the task requirements.

The network is the platform for the services and as such, a major level of infrastructure activity is required to build a robust network that can manage home assistants and casual media, to name only two.

The early market opportunities are in the development of the underlying infrastructure and include communications, networking, operations, applications, hosts and platforms, and technology. Infrastructure development favors large technology centric companies.

In order to achieve mass market scale and ROI a number of product opportunities need proprietary implementations, yet, public policy increasingly sees this as an invitation to move to a monopoly position. Public policy is moving in the opposite direction - open markets where competition is encouraged from the beginning.

A major and complex network infrastructure that will be required that is at least a factor of ten more complex than the telephony infrastructure based on SS7.

The winning markets are those that focus on a high service or content ratio. This will also enable devices to be bundled with the services at no apparent cost to the consumer. There are parallels with the product and service transitions that have taken place in cellular phones and DBS services as they went from a combined product and service offering to a pure service market.

Product and service concepts are developed which illustrate the needs of this market.

The forecast of the market includes the following.

The total market rises to $5 billion by 2001, crosses $20 billion in 2008, and reaches $23 billion in 2009.

The cross over from products to services as the dominant market happens in 2003.

The services market in 2004 is $8.3 billion and the product market is $4.8 billion.

By 2005 Services represent 77% of the market.

In 2004 the rank order services are: Personal; Control/Management; Information Centric, Education; Entertainment and Media Centric.

By year 2009 this shifts to: Media Centric; Entertainment; Information Centric; Personal; Control/Management and Education.

The ASP for products begins at $291 in 1999 and drops to $119 by 2004 and lands at $55 in 2009.

Services remain fairly stable beginning at $217 (annual) in 1999 and going as low as $134 in 2006 and ending at $140 in 2009.

 

The fifth era of computing is going to be radically different than the PC era. This is essential as computing becomes pervasive and the transition is made to the markets of the 21st century.

4th Wave's Information Appliance Market Report is available now for $2,495.

More information about the report and 4th Wave, Inc. can be found at:

http://www.fourthwave.com/report

About 4th Wave

4th Wave is market research and technology assessment consulting firm. It has been in business since 1989. Its areas of specialty are 3D, PC, technology-based out-of-home entertainment, Internet, government participation in markets, and the economic analysis of technologies and business models. 4th Wave has done consulting for many of the major companies in the computer, information, and entertainment industries. Engagements cover a wide range of needs and have included strategic planning, product plan evaluation, product launch, business model evaluation, management consulting, and business development. The company has also used its extensive collection of market databases and understanding of market forces to develop a number of market and economic models in order to simulate future markets and trends.

Contact:
Dr. John N. Latta
(703)360-4800
(703)360-2311 FAX
e-mail: JNL@fourthwave.com
www.fourthwave.com