14 Feb '05 - + 0 - 0 Sorry Carly
MSNBC has an article on the PC industry, and this quote seemed notable:
"Rollins was boasting that Dell reaps more than 100 percent of the profits in the entire industry. Sounds weird, but think of it this way: Dell is making big money while everybody else combined is operating at a loss. Sorry, Carly."
Welcome to the next stage in pc commoditization allowing for the profits to sink out from under the big playa's. Wait till it hits the printers.. Personally that will be more exciting because the printer conglomerates have prevented bubble jet technology from moving out of the "proprietary" stage up to this point, by doing something that border trade legalities. Some year soon, that "bubble" will pop and then printers for everybody! Just like computers.
ten stones, bouncing:
The commoditized hardware market is
so 2001. Technologies which increase the longevity of computing equipment, combined with other technologies that will scare some consumers into not upgrading (DRM being a prime example) so that they can continue to have fair use of their stuff are all converging to make being in the hardware business a royal pain in the arse. I think what you’re seeing now are all of the hardware manufacturers (Dell included, by the way), re-arranging the deck chairs on the Titanic. The commodity prices for computing equipment are going to continue to fall, as are profits. So, don’t be too hard on Carly: Dell ain’t that far behind, in my not-so-humble opinion.
Andy (link) - 14 February '05 - 04:27
Its when the product moves from proprietary to almost standard where the sweet spot is for major profits are though. That and servers. One of the only things that keeps HP alive right now is their printer biz, so as printers move more towards the commodity markets their profits will dwindle further unless they wake up. I put my money on portables/appliances (sub $200.00 notebooks anywone?)[1] and servers.
[1]
http://news.bbc.co.uk/1/hi/technology/42..
[nathan] (link) - 14 February '05 - 06:39
As distasteful as it sounds, actually, I put my money on content providers. Or I would, were I without scruples. Because that’s where the money is going to be made. The electronic gadgets will get cheaper and cheaper, but the stuff to use them for will become a premium expense.
Andy (link) - 14 February '05 - 07:50
hmmm I am not sure where the provider money is, do you have an example?
I mean there are nothing but artificial barriers to being a content provider. We are all content providers (this site, your site) even to portable devices (through RSS). If we are willing to pay to be content providers for free, what motivation to users have to pay for the content? If I charge access fee’s, my audience would dry up.
Artificial barriers with the proprietary WAP extentions on WinCE devices and blackberry etc set up artificial premiums but have a fairly short lifecycle between the provider and the device. I am not even sure if those services are even profitable. As more appliances reduce their cost by going open (Tivo, SMS auto-updates) it reduces the benefits of being a proprietary content provider.
Tivo is even struggling keeping subscribers because their content is not so special (tv listings are free in the newspaper..) and there are free (open) providers that will push the same free stuff to equivalent appliances.
As I see it, the provider would need some value added that is not available somewhere else for cheaper to make money. Otherwise content will continue to be the loss leader so you buy that next Dell Axim to view the RSS off my page… :)
[nathan] (link) - 14 February '05 - 08:04
Nathan, are you stating a position about hardware/software commoditization or are you simply making observations? Either is fine, I’m just curious because I can’t make it out.
In reference to content providers, you say they “would need some value added that is not available somewhere else for cheaper to make money.” I think there is always value that can be added, and that can be paid for. Today’s technology, and presumably future technology, will always have a market in our increasing wants and needs. We pay for things we want now that we couldn’t have fathomed 5 or 10 years ago. The industry is not static – there will always be something that the consumers can be convinced they need to pay for. (Please note that my use of the word “always” assumes a continuation of past and current trends)
Think of it like television. First, there was broadcast network television on cathode ray tv sets. On the “hardware” end, televisions have come a long way – lcd’s, plasma screens, HDTV, etc. (not to mention VCRs, Tivos, DVDs and the like). Yes, you can buy a tv fairly inexpensively now, but you can also buy the top-of-the-line new shit and pay a lot more. (Ironically, as televisions get bigger, computers get smaller) On the “software” end, network television has expanded to cable and satellite and “premium” channels. If you can’t get enough out of the basic premium channels like HBO and Cinemax, you can buy even more content from the likes of Pay-Per-View and those sports packages. Obviously, television is regulated and operates differently than the computer world, so not everyone can pay to provide free content as they do on the internet, but I think the analogy still has merit.
What I’m trying to say is that the added value you say is necessary for content providers (and I don’t disagree) is always going to be available. People want more and better – it’s in our nature. And, yes, other people may be able to provide it down the line for less cost (or no cost) to the consumer, but by that time there will be someone else with something new the consumer will pay for. The evolution of computer-related hardware and software is occurring right before our eyes, before we are really able to comprehend what has passed.
tp - 14 February '05 - 11:06
p.s. I admittedly know nothing of which you speak – just my observations and opinions. And I love the new pics of baby Aby – keep them coming!
tp - 14 February '05 - 11:13
Just making observations.
>you can also buy the top-of-the-line new shit and pay a lot more.
This is a good example of what I am talking about. The newest plasma is still at the top of the S curve and are still proprietary. Consequently plasma will probably never get to become a commodity. Partly because it will be replaced quickly by better kit, but also because the patents and IP monopolies currently granted in the US will prevent it.
I think your statement “people want more and better” requires clarification. People want more and better as long as it does not remove its utility. People buy CD’s and then make MP3’s. The new CD’s which are “improved” prevent MP3’s from being created. People do not like that type of “more and better”
Anyway, what I was trying to say about the content providers, is that content is currently free so trying to get people to pay for it will not happen unless the costs change the supply/demand curve. Say the gov’t decides to tax internet and web pages to tim-buck-too (especially if the dem’s win after Bush) Then both demand and supply will drop. Hopefully they are smart enough to affect the supply side.
[nathan] (link) - 15 February '05 - 01:56
I think content providing for profit is a paradox.
You want more readers and the easiest way to gain readers is to write something interesting and give it away. If demand gets high enough, you can charge a premium but that has not been shown to work so well where the ‘net is concerned because there is no content monopoly and the barrier for entry is increidibly low. Why pay to read my page, when your page is free? (assuming the content for both is equally interesting)
This is an economic principle, but man, my mind just did a brain dump. Give me a minute…
[nathan] (link) - 15 February '05 - 02:00
I think it’s incorrect to define “content” so narrowly as to make it sound like we’re talking about online news and such. To be sure, the market for that (if there ever was one) came and went some time ago. I’m talking about the new brand of content: intellectual property and/or art. iPods, iRivers and the like are getting cheaper and cheaper to produce, and soon the margins will fall like a brick (even for my beloved Apple Computer, Inc). But as those prices decrease, the demand for stuff to put on those devices will continue to surge. Right now, for instance, iTunes is a loss-leader for the iPod. If things hold to form, in three or four years, it might be the reverse.
Andy (link) - 15 February '05 - 06:52
I almost touched on iTunes, I see more problems with Intellectual Prop that the only way to prevent is to keep it proprietary. Apples format is still not open and I think it will die and thus the money (what little there is) will also die.
Free p2p mp3 content providers still flourish despite the lawsuits, its just going underground. I was trying to find a 10 word way to include a scenario but am lacking that talent at the moment.
[nathan] (link) - 15 February '05 - 07:16