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Consumer Electronics - History, The Modern Marketplace, Trends, Miniaturization, Digitization, Convergence

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“Everything that can be invented has been invented.” This comment, commonly attributed to Charles H. Duell, commissioner of the U.S. Office of Patents in 1899, is intriguing, if not entirely accurate. At the end of the nineteenth century, it did seem as if everything that was absolutely necessary for a rural/agrarian or an urban/industrial mode of living had been invented. By the end of that century, transportation innovations including the railroad and the steamboat were flourishing, the nascent automobile had been developed, and experiments with flight were beginning to show promise. Communications systems had been advanced to include the telegraph, telephone, and radio telegraphy. Both factory owners and farmers benefited from machines that could do jobs faster and better than humans could do them. Few could have predicted the revolution to come that led the world beyond the industrial age and toward the information age. The twentieth-century innovations that would forever change almost every aspect and sphere of human behavior would not be foreseen until the final decades of the century, by which time they had spawned a multibillion-dollar consumer electronics industry.

History

The term “consumer electronics” encompasses a variety of products ranging from home theater systems to cellular telephones to personal computers. Though no one person can be identified as the “founder” of consumer electronics, Thomas Edison would be most deserving of the title. Edison’s invention of the electric typewriter in 1872 and the phonograph in 1877 suggested the early potential of a new breed of business and entertainment devices. It was his discovery called the “Edison Effect,” patented in 1883, that actually led to the creation of consumer electronics. Using the Edison Effect to control electricity, Edison opened his first experimental power station in the early 1880s. Though later perfected using the alternating current (AC) system, the electronics age commenced with Edison’s power system. Over the course of the twentieth century, appliances and household devices were either redesigned or created to take advantage of modern electrical service to the home.

The radio, not the phonograph, can be considered the first consumer electronic device. Though the phonograph was invented and sold decades before the radio, it was initially marketed as a mechanical device, while radio was introduced to the public as a fully electrical device. Radio history is rooted in nineteenth-century wire transmission technologies that gave rise to the telegraph (1820s) and the telephone (1870s). Guglielmo Marconi, generally considered to be the inventor of radio, first transmitted telegraphic dots and dashes without the use of wires in the 1890s. In the early twentieth century, tremendous advances led to radio telephony that allowed voice and music to be transmitted without wires. Radio sets of the 1900s and 1910s were limited to a growing number of tinkering enthusiasts. The general public did not own radios until the 1920s.

In 1920, the first radio stations began operation. Public displays that were held at department stores showed consumers the magic of the new device, with its ability to carry live music and information. These displays were effective and led to the initial acceptance of radio sets. Radio networks that were created later in the decade introduced programming that further advanced receiver sales, and radio supplanted the phonograph as the most popular consumer entertainment device. Much like the phonograph sales in the nineteenth century, radio sales did not take off until there was software that consumers found of value. The software of the phonograph was recorded music on discs and cylinders; the software of radio—and later television—was live programming.

One cannot underestimate the importance of the radio and the phonograph in the modern consumer electronics industry. These innovations had a direct effect on the development of a new breed of consumer electronic devices, including television, stereo systems, cassette and compact disc (CD) players, and home theater systems. By the end of the twentieth century, more than 98 percent of the U.S. population owned radios and televisions, and more than 90 percent owned videocassette recorders (VCRs). The information age had blossomed.

The Modern Marketplace

More than 250 million people lived in the United States by the end of the twentieth century. The Consumer Electronics Association (formerly the Consumer Electronics Manufacturing Association) reported in 1998 that the number of consumer electronic devices in the country was estimated at 1.6 billion, with annual sales exceeding $80 billion. The average person owned about six consumer electronic devices, with the average household spending about $1,000 annually on electronics. More than six million U.S. jobs were attributable to some aspect of the consumer electronics industry. This suggests the dramatic maturation of an industry in an extremely short time period.

Consumer adoption of new technologies is occurring faster than at any time in human history. The MP3 handheld music devices that download music files from the Internet became so popular in such a short amount of time that music distribution was forever altered virtually overnight. Digital satellite systems (DSS) and digital video, or versatile, discs (DVD) reached one million sales in a time period of eighteen and twenty-six months, respectively. It took fifteen years for cable television and four years for the VCR to reach that same mark of one million sales. Because consumers so quickly adopted a wide range of consumer electronic devices (see Table 1), the electronics industry introduced more consumer electronic devices and gadgets in the final twenty years of the twentieth century than it did during the first eighty years of the century. Some of these innovations have become commonplace; others failed to make an impression.

There are individuals who will buy almost any new gadget. They are referred to as “early adopters” because they want the newest and best consumer electronics gear. For products to be successful, however, they must reach a “critical mass” that includes a much wider base of consumers. This critical mass is divided into the “early” and “late” majority of buyers. A person who is the last to purchase a technology is referred to as a “laggard.” Consumer electronics that reach a “critical mass” are considered to be successful, while those that are unable to sell beyond the early adopters are considered to be failures.

The DSS satellite dish, the DVD, and the MP3 player are examples of major success stories that occurred in the consumer electronics industry during the 1990s. However, for every success, failures litter the marketplace. The digital compact cassette (DCC), Atari Jaguar video game system, digital video express (Divx), and a number of interactive television applications were among the misfires. It is difficult to explain why one technology succeeds where another fails. A body of research called “diffusion of innovations” helps to identify why consumers, over time, either accept or reject new consumer electronic items. Diffusion research suggests five important attributes affecting the success of a new technology: (1) relative advantage, (2) complexity, (3) reliability, (4) observability, and (5) compatibility.

The first four diffusion attributes are straightforward. The issue of relative advantage concerns how much better a new innovation is than the method that existed before it. The cellular telephone had an advantage over previous telephones because of its portability. Complexity deals with the ease of operation of the item. One of the chief advantages of radio was that the user interface was so simple, almost any family member could turn it on and make it work. Reliability is the measure of the consistency of the device over time. A 4-mm videotape system brought to market in the 1990s proved to be a failure, in part, because the tapes were easily damaged. As a result, the reliability questions were cited as a primary reason for the demise of the format.

Compatibility involves two different issues: (1) the technology’s compatibility to the lifestyles of the consumers, and (2) the technology’s interoperability with existing equipment. Consumers found that the time-shifting and video software playback features that were offered by the VCR were compatible with their busy lifestyles. As a result, the VCR became one of the most successful technologies of the 1970s. Interoperability of equipment is a more complex area that involves technical standards.

A consumer must determine if a particular computer peripheral or software works with an existing home system. The manufacturer usually places information on the packaging that explains compatibility issues. When groups of products work together, some form of technical standard has been established. Technical standards of consumer devices fall into several key categories, including first-agent standard, industry-wide agreement, and de facto standard.

With a first-agent standard, a single manufacturer or small group of companies will introduce a device, but they allow other companies to license the device. This type of industry agreement led to the widespread success of the CD player, which was jointly developed by Philips and Sony. The companies made one CD system available to the music industry in 1982, and consumers had a clear choice in the audio field. Consumers were able to buy CD music software and play it on any CD player.

An industry-wide agreement takes place when several companies that may be developing their own incompatible technologies agree to one standard device. Before the DVD was introduced, Sony and Philips had plans to release the MMCD (multimedia CD), while Toshiba was scheduled to release the similar, but incompatible, super density (SD) disc. The companies were urged by both the software industry and other manufacturers to agree to one DVD-type of system to avoid the compatibility problems of sustaining multiple formats. Industry-wide agreements can be fostered by congressional and/or Federal Communications Commission (FCC) actions. Government standards have been established for specific television set features, including closed-captioning and V-chips that screen out shows with violent content.

The de facto standard is established in the open marketplace. Consumers decide the format battle at the cash register. De facto standards have been developed with devices that include VCRs (VHS becoming the standard in many countries and supplanting the Beta format) and audiotape (the cassette defeating the eight-track, digital audiotape [DAT], and the DCC). Even after an industry-wide agreement was reached to release one format of DVD, Circuit City released the competing Divx format in 1998. The DVD became the de facto standard in 1999 when Divx was discontinued. Compatibility issues are a major factor in the ultimate success or failure of a consumer electronic device.

Trends

While it may have appeared to some by the end of the nineteenth century that everything necessary for leading a comfortable agrarian or industrial life had been invented, it will not so easily be accepted that everything needed to function in the information age has been introduced. Internet connectivity, cellular telephones, fax machines, laptop computers, and personal data assistants (PDAs) allow consumers to receive and send data instantaneously from almost anywhere in the
world. Just as it was misguided to predict the end of change at the end of the nineteenth century, it would be a mistake to assume that innovation in the consumer electronics industry will cease in the near future. Several major trends continue to stimulate innovation in the electronics sector. Included in this list are miniaturization, digitization, and convergence.

Miniaturization

The modern consumer takes for granted the portability of electronics devices such as Walk-mans, cellular telephones, pagers, and portable DVD players. Such portability of electronic devices has not always been the case. Early models of the radio, television, and computer were not considered portable. The processor of ENIAC, the first computer that was ever produced, included eighteen thousand vacuum tubes. As a result, ENIAC filled an entire room and generated a great amount of heat. Contemporary computers use semiconductor chips that are microscopic when compared to ENIAC’s “brain.” The widespread use of chips and transistors has allowed designers to create personal communication devices that are highly portable.

Cellular telephones, Palm Pilots, and laptop computers are among the items that have decreased in size while providing more options than ever before. This trend will continue as designers have unveiled prototype MP3 players that can be placed in a device the size of a wristwatch and in other wearable computer devices. Consumer electronics firms will continue to make “smarter” portable devices by packing miniature chips into devices that may include smart pagers and language translation devices.

Digitization

The gravitation of communications-related software and hardware away from analog and toward digital will continue to drive the consumer electronics industry. The recordable DVD and hard drive-based personal recorders such as TiVo and Replay are poised to replace the analog VCR, just as the CD basically replaced the vinyl record album. The broadcast industry is also undergoing a major transition from an analog-transmitted medium to a more dynamic digital medium. The conversion to high-definition television (HDTV) and digital audio broadcasting will hasten the demise of analog television sets and traditional AM/FM radios.

The conversion of entertainment and communications to digital ones and zeroes has made software more portable and easily transmitted. The MP3 has allowed music fans to download music with ease and to send music as e-mail attachments. Video-streaming concepts will be the next stage of development as people will be able to exchange home videos and video clips in the same manner as MP3s are exchanged. Digitization and the widespread sharing of digital files over cellular, satellite, and telephone lines does raise significant concerns about piracy of copyrighted material and issues that are related to the privacy of the individual who is receiving and sending digitized communication. However, the great advances that are offered by digital communication will continue without interruption as new generations of improved digital camcorders, personal computing devices, and still-frame cameras are introduced to the marketplace.

Convergence

Probably the most important trend for consumer electronics is that of convergence. The computer, the telephone, and broadcasting were always considered distinct from each other. The consumer electronics industry has long realized that devices that are useful to consumers could be created by combining the power of telecommunications with the power of computing. The rise of modems to provide Internet service on personal computers, cell telephones that provide e-mail and online services, and televisions that allow for Internet connectivity demonstrate the notion of convergence. The merger announced by AOL and Time Warner in 2000 lends further support to the fact that the boundaries within the various communication-related industries have been obliterated.

All technologies that were once considered “wired” are converging toward wireless delivery modes. Both telecommunication and Internet devices have become less dependent on traditional telephone lines. Cellular telephone systems use a series of radio transmitters to provide interconnectivity. The next wave of convergent devices may use the same type of system to provide increased interconnection. The most promising of the wireless standards is known as the “Bluetooth” standard. Bluetooth would allow for the wireless networking of television, home theater, and Internet equipment. Furthermore, Bluetooth could provide a wireless interconnection between MP3 players, Palm Pilots, pagers, and cell telephones. This would allow for the wireless transfer of entertainment and information between devices, thereby eliminating the wire connection. The ease of interoperability between electronic devices suggests a dynamic and convergent future for a new breed of consumer products.

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