E-reader success drives carriers into embedded devices market: Expect more experimentation with business models

While e-readers and personal navigation devices may be popular “embedded device” gift items this year, their success also will drive the emerging sector to bring even more innovative products to market in the next 12 to 18 months. The potential of the space also will drive carriers to experiment with a variety of business models.
Hot devices ahead
Amazon’s Kindle electronic book reader was introduced into the market place two years ago, and is testament to the potential of marrying consumer electronics and wireless connectivity. And success breeds competition. Today, Barnes & Noble, Sony and others are introducing e-readers into the marketplace, each with cellular connectivity embedded into the consumer product. The Barnes & Noble Nook is already sold out for the holiday season, and the book chain is taking orders for January delivery.
Everyone interviewed for this article believes we will see more innovation in the e-reader market. Look for color support, perhaps comic books offered on e-readers, new form factors, including fold-up devices, and the like.
Jeff Orr, senior analyst for mobile devices at ABI Research, breaks the embedded devices category into six sections: PNDs, e-readers, personal media players, digital cameras, video camcorders and gaming devices. “Of the six categories, two are important today – the PND and e-book readers.”
TomTom and Garmin have both introduced personal navigation devices (PNDs) that offer driving directions and more, including real-time traffic updates, gas station location finders and price comparisons, and local search options like movie times, said Macario Namie, senior director, product marketing at Jasper Wireless. PNDs are priced in a number of ways, either as a two-year prepaid contract, or a three-month contract with the option to continue service. Jasper has carrier agreements with AT&T Mobility, Rogers Wireless in Canada, Telcel in Mexico and KPN in Germany, Belgium and the Netherlands.
A handful of embedded consumer electronics devices are in the marketplace today, but even more should be commercial by the “dads and grads” shopping season this summer, Namie said. One product set to hit the U.S. market early next year is a digital photo frame offered by Isabella Products on the AT&T Mobility network.
Digital picture frames with embedded cellular are likely to gain traction when Isabella Products introduces its Vizitme product early next year. The device primarily is a “gifted” product, geared at grandparents, and designed to be plug-and-play. For example, a family with a new grandchild buys the device and ships it off to the grandparents, who simply plug in the frame. The parents, who bought the device, can upload photos from their PC to the frame. “The grandparent didn’t have to set up Wi-Fi, or set security settings or register or accept anything,” Namie noted. The frame is already shipping in Japan. Beyond buying the device, customers will have to buy a service plan.
Other products are probably a little further out before consumer electronics manufacturers find the right mix of product and business model to hit the market.
Devices like digital camcorders and cameras will be an interesting space to watch because there is likely a need for consumers to offload their content from these devices, but there may be bandwidth constraints in offloading a video, for example, ABI’s Orr noted. Also, consumers may not have a good experience offloading the content because wireless networks have slower uplink speeds. “I like the category, though, because it breaks the mold,” Orr commented.
Gaming devices with embedded connectivity also are likely take off slowly because the business model is more complicated. While it may make sense for gamers to be able to download content from the network to play offline, multi-player gaming may take up too much bandwidth or be too expensive to gain traction – at least in the United States.
In Brazil, where most TVs are not high-definition widescreens and most families don’t have a lot of extra money to spend on an Xbox, some digital gaming devices are coming to market and may be successful, Jasper’s Namie said.
Business models
All of the players in the ecosystem are moving in tandem to drive the marketplace, Orr said. “One of the issues in the past has been the management of all of these non-phone,non-modem devices. How do you price it and how do you manage the service with so many players involved.”
Finding the right business model – that consumers will pay and that makes financial sense for all of the players in the process – is an important component if the space is to really take off.
“The Kindle is the poster child for looking at different business models,” said Mike Euland, VP and general manager, North America, at Telit Wireless Solutions Inc., which manufactures embedded modules. Amazon’s Kindle e-reader showed wireless operators that a pay-per-use business model works, Euland said.
“The business model feels like it’s starting to make sense,” said Steve Pazol, who leads nPhase, a joint venture between Verizon Wireless and Qualcomm, focusing on the machine-to-machine communications space. As such, carriers will begin to experiment with usage-based models, including advertising-sponsored options. The GSMA is working on an M2M initiative because it is complex and varies depending on the company or carrier branding the product and service. While the ecosystem likely will continue to experiment at perhaps as many as 30 business models, eventually ecosystem players will whittle that number down to four or five, Pazol predicted.
Competition ahead
Further, as the secteor develops, ABI’s Orr said he expects there to be more competition and more experimental pricing in this segment. For example, some e-reader users may want to be able to check their e-mail from the e-reader. He also expects to see competition in the space from netbooks and smartbooks. “There are those who will look for devices with general computing platforms like MIDs and smartbooks, that have all of these types of functions (like the embedded device segment) can be performed on them.”