Setting Precedent for the Next Decade: Big Battles of 2004

As the market starts ramping up for what is likely to be a resurgence in IT spending and a mass attack on the consumer by every technology company on the planet, there will be a few key battles to watch this year. Some will go a long way toward defining the rest of the decade.

For starters, technology vendors apparently see consumers as easy pickings and are bringing out the big guns at the Consumer Electronics Show (CES) this year. Hold on to your wallets, because the number of new products and product categories expected to be announced this week is unprecedented.

Those compelling products include portable media centers (like iPods but with video), media players for cars and the home that are hard disk-based, media servers, 40″ LCD flat panels (current products are 30″ max), higher-resolution camera phones, and low-cost digital cameras with high resolution and burst mode that can take pictures very quickly.

I’ll cover these developments in more detail next week — after the actual announcements. I don’t know about you, but it looks as if my own budget doesn’t stand a chance. I’ll avoid coming to a conclusion about the other big battles of the year, but because my wallet is whimpering in the corner, the personal outcome of the consumer fight seems simply too obvious to avoid mentioning.

HD-DVD: Sony vs. Toshiba

If there were ever a battle that brought back memories of BetaMax fighting against VHS, this battle over DVD standards likely will be it. (The flash-memory battle was like this too, and SecureDigital won.) Both Sony and Toshiba are addressing the need to pump up capacity significantly to address the HD requirements created by the proliferation of HD-capable TVs. Yes, people are buying HDTVs.

As with BetaMax, Sony’s approach to HD-DVD is better in my opinion. You can rerecord it, the disk has built-in protection, and Sony is more credible with digital rights management. Companies like Microsoft, Thompson Electronics, HP and Philips have yet to take sides, and which side they pick will have a lot to do with who wins.

Also, there is every likelihood another competing standard could crop up before this fight is decided. The outcome likely not only would define the successor for current DVDs, but also could take out recordable CDs by the end of the decade. So the fight will be important.

Software Standards: Governments vs. Microsoft

Currently, Microsoft controls or materially affects the majority of the computer standards used by individuals, corporations and governments in the world. Many of these folks have been less than happy with this reality. Governments — from local to national — have begun to use open source as a way to remove Microsoft’s power. However, they are increasingly putting themselves into the power vacuum they are creating.

Governments have been arguing that they should now become the source for emerging software and security standards. But, as with telephony and electricity, getting along with each other is not something government agencies do particularly well. In addition, the need for security easily trumps the need for personal privacy, and national security often trumps the need for disclosure. Does this really sound better than Microsoft dominating the software world? I think not.

In this particular fight, Microsoft seems overmatched unless the company can prove itself to be more effective politically then it has been to date. The company has the resources to make this a fight, but we are talking about governments here, and even Microsoft is small potatoes compared with the resources and power a government has at its disposal.

CRTs vs. LCDs: The King Is Dead, Long Live the King

CRTs get rolled over by LCDs this year. Okay, so I lied about not declaring the victor in another fight. But this seemed too obvious to put off. LCD prices continue to drop like a rock — and disposal costs for CRTs continue to creep up.

When you factor in all of the extra costs now associated with a CRT — the weight, the disposal charges and the hazardous waste fees — plus the shorter service life (3 years CRT versus 5 years LCD), LCDs actually became cheaper in 2003. They will get a lot cheaper in 2004, with new production plants coming online. They are even replacing TVs at a relatively rapid rate.

Cornice Drives vs. Flash vs. Hard Drives

This battle is going to be ugly. Traditional magnetic hard drives have the advantage on capacity and price per megabyte of storage, but they are relatively fragile and use a substantial amount of power. Flash drives are the most robust and power efficient, but they also are the most costly by a significant margin, per megabyte, and Cornice drives fall someplace in the middle. Players based on Cornice drives, for those who are not familiar with them, come in several form factors but are typically about a cubic inch in size and can contain several GB of data.

For MP3 players, this means that in a 256-MB flash player, you get about 64 songs. In a 2-GB Cornice player, you get 1,000 songs, and in a 40-GB iPod you get a call from the RIAA asking for the deed to your house. Practically speaking, when it comes to music, anything more then 1 GB on a portable player becomes very difficult to manage. Given that all of these players now provide high-speed PC synchronization, why would you want to manage them on a player?

However, in 2004, we add video — and a movie can occupy upward of 4 GB of disk space. So, for MP3 players, we do have a fight. But for the new class of Portable Media Centers, traditional hard drives are clearly here to stay.

HP vs. Dell

With IBM sitting on the sidelines for now in the desktop space, the big PC battle in 2004 will be between HP and Dell, the remaining power players. Acer clearly will be pushing the U.S. and European markets hard — and Gateway is refocused and executing in North America. But worldwide it is Dell in one corner and HP in the other.

Dell will lead with price and a solid reputation for reliability, HP with innovation showcased in products like Blade and Tablet PCs, which have the potential to change the market as we know it. In a down market where people are unwilling to take risks, Dell has the edge, but in a recovering market where companies are looking to gain a competitive edge, HP should have an advantage.

In the end, it will come down to execution, and both companies are executing well right now. This will be an interesting battle to watch and likely will keep us well engaged until this time next year.

Thought for the Week

By most measures, the Apple iPod, a relatively old product, was the single hottest product in 2003. This is Apple’s only cross-platform offering and sells more volume, by a substantial margin, to Windows users than to Mac users.

The product is based on standard components and actually carries a premium price to Dell’s substantially less-successful offering, and Dell is considered the company to beat in the PC market today due to its skills with cost containment and distribution.

A standard industry belief is that Apple couldn’t be competitive with an Intel platform product and especially couldn’t be competitive with a Windows derivative. The iPod’s success suggests different outcomes to both scenarios — something to ponder while you are inundated with product announcements from CES and Macworld this week.