Questions Raised Over Future Of Dedicated Devices

When did you last purchase a device that performed just one primary function?

Purchasers of Amazon’s Kindle line, a Flip digital video recorder, an e-reader or a digital music player manufactured by a company such as Sony could probably answer “yesterday.” But as Apple’s Sept. 9 event in San Francisco demonstrated, the era in which a consumer buys a piece of equipment that serves one function could very well be coming to an end.

For a while after the 2001 debut of the first-generation iPod—a device whose form factor, while distinctive, seems positively clunky when compared with its descendants the iPod Nano and iPod Touch—Apple’s digital media players did one thing: played music.

Then Apple began to layer additional functionality into the devices. There was video and games and—with the release of the iPod Touch—the chance to download apps from the App Store. Now, the new iPod Nano, which the company rolled out during the 9 Sept event, is capable of taking video. That new functionality certainly represents a direct competitive threat to devices such as the Flip, which have been marketed on their ability to do one thing well: record digital video at a low unit cost.
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Of course, by this point, Apple had also released the iPhone, which allows its users to make calls in addition to listen to music, play games and perform other functions. Other smartphones, including Research In Motion’s BlackBerry line and the Palm Pre and Pixi, have likewise embraced as a core tenant the idea that a device should be ever-more-capable of multitasking across wildly different areas.

The next stage may come with the release of the long-rumored Apple tablet PC, predicted to roll out sometime in 2010. Scuttlebutt about that particular device has focused on its 7- to 10-inch multitouch screen, and supposed running of either the iPhone OS or Snow Leopard. Piper Jaffray analyst Gene Munster, in a 7 Aug research note, suggested that the tablet would offer “best-in-class Web, e-mail and media software” and “compete well in the netbook category even though it would not be a netbook.” If priced at an average of $600 per unit, it could potentially produce revenues of up to $1.2 billion per year for Apple, according to Munster.

In a 9 Sept interview with The New York Times, Apple CEO Steve Jobs reiterated Apple’s product strategy with regard to multi-functionality.

“I’m sure there will always be dedicated devices,” Jobs said, “and they may have a few advantages in doing just one thing. But I think the general-purpose devices will win the day. Because I think people just probably aren’t willing to pay for a dedicated device.”

That statement would likely be news to Amazon.com CEO Jeff Bezos, who has previously suggested that sales of his company’s Kindle e-reader constitute 35 percent of the online retailer’s book-related sales. Analysts have predicted that the Kindle will rack up $1.2 billion (£724) in sales in 2010 and $3.7 billion by 2012, although Amazon.com has declined to provide exact sales or revenues figures.

On the other hand, Apple isn’t the only company potentially exploring the touch-screen and tablet market. Further rumors erupted in August 2009 that Dell and Intel are collaborating on a touch-screen tablet due for release in 2010, while Microsoft is adding touch capabilities to its upcoming Windows 7 operating system.

“Windows Touch and multitouch features provide a natural, intuitive way for users to interact with PCs,” said a July posting on the Windows Team blog. “Companies such as Roxio, Corel and Cegid are all enabling Windows Touch in their applications.”

Between Apple and other manufacturers, the creation of an ecosystem of multitouch devices, paired with increasingly general-purpose media players, has the potential to crowd out dedicated devices such as the Kindle, particularly if the latter continues to retail at a particularly high price point.

A 1 Sept research note by Forrester analyst Sarah Rotman Epps suggested that mass-market adoption of digital-book readers may be unobtainable unless those prices come down.

“The cost of the display component is high and sales volumes are still modest, yet consumers demand and expect ever-lower prices,” Epps wrote. “The bottom line: E-reader product strategists will have to educate consumers and innovate to bring prices down. Even if they are entirely successful at both of these feats, e-readers will never be mass-market devices like MP3 players.”

But a bigger issue may be, if the functionality of other devices continues to expand, then dedicated e-readers, camera devices like the Flip and MP3 players may all find themselves in serious market-share trouble.