CES, Macworld Point the Way to 2003 Consumer Trends

This week, two key industry trade shows will help determine the consumer technologies we can expect to see vendors roll out in 2003. Most of the computer industry will set its sights on the 2003 International Consumer Electronics Show (CES), held as usual at the palatial Las Vegas Convention Center. This year, CES has broken floor space, exhibitor, and attendee records, bucking industry trends at other large shows such as COMDEX. Also bucking trends is Macworld Conference & Expo, hosted once again at San Francisco's Moscone Center near Apple Computer's home turf. Macworld boasts a respectable 88,000 attendees this year, although exhibitor numbers have fallen dramatically for the past few years. But despite Apple's relatively small market share—about 2.5 percent worldwide at last count—the Macintosh maker boasts an unusually high amount of "mind share," with Mac-friendly journalists and publications continually boosting the company's public image. Say what you will about Apple; the company's style and sheer panache has kept it viable through some tough years.

CES—What's Ahead for the PC?
As with last year's show, CES will continue its focus on digital-media and home-networking technologies, with an emphasis on gadgets that enhance, rather than replace, the PC. Although 10Mbps 802.11b wireless technologies will probably continue to dominate the market in 2003, many vendors are starting to move into faster 54Mbps speeds with technologies such as 802.11a and 802.11g. And vendors will replace last year's crop of unwieldy and expensive entertainment set-top boxes with more economic digital-audio and -video receivers that interact with music and movie content on your PC through your home network. These devices let you consume digital media in the room in which you probably keep your best stereo equipment—without usurping the PC's key strengths for acquiring that content.

On the digital-media front, working with digital audio, photos, and videos has never been easier. Thanks to the success of Windows XP and its bundled digital-media experiences and the low cost of digital cameras and digital- video cameras, tens of millions of consumers are now working with these exciting technologies for the first time. Predictably, Microsoft isn't sitting still with XP. The company is shipping several free and low-cost XP upgrades, including Windows Media Player 9 (WMP) 9 Series, which supports the company's new Windows Media Audio (WMA) 9 and Windows Media Video (WMV) 9 formats and provides new features such as Auto Playlists and a bundled Advanced Tag Editor; Windows Movie Maker 2, a friendly yet powerful movie editor with dozens of free titles, transitions, and video effects and an innovative Auto Movie feature for automatically editing your home movies; and Plus! Digital Media Edition, a $20 XP add-on that Microsoft is selling as an online download. Plus! Digital Media Edition includes several cool applications, such as Plus! Photo Story—for creating zooming and panning slide show movies from your photo collection—and Plus! Analog Converter—for converting cassette, LP, and other analog audio content to the PC. My full review of Plus! Digital Media Edition is available now on the SuperSite for Windows.

Microsoft has also made a strong case for XP Media Center Edition (XP MCE), which is now bundled on a variety of machines from several PC makers. At CES, Microsoft will announce more hardware partners and two partners—Alienware and Toshiba—that will soon offer Microsoft's innovative digital-media-oriented XP version on high-end desktop replacement laptops aimed at enthusiasts and power users. Let's hope the next step is a standalone XP MCE version that any XP user can purchase. Regardless, digital video recording (DVR) is here to stay and is a natural for PC and consumer electronics integration. Microsoft will also announce several initiatives surrounding its Windows Powered Smart Displays, including more hardware partners and interestingly alternative uses for the devices, such as controlling home-automation equipment.

Other trends that will likely go mainstream in 2003 include DVD moviemaking and data backup and High-Performance Media Access Technology (HighMAT) CD-content creation. And new hard disk-based portable video devices will probably do for digital video what SONICblue's Rio and Apple's iPod did for MP3 audio.

Macworld—What's Ahead for the Mac?
The Mac side of the picture is a little more uncertain. Historically, Apple gives few preshow clues about the products and services CEO Steve Jobs intends to discuss during his highly anticipated keynote address, and this year is no different. However, the company recently released an update to iCal (version 1.0.2) and the final version of iSync, both of which are free. I'll review both products soon. (The short version: iCal 1.0.1 was so buggy that Apple quickly released version 1.0.2, but iSync is a master work that offers seamless integration among your Mac's address book, iCal calendars, .Mac account, Palm OS-based PDA, iPod, and various Bluetooth-based cell phones.)

As I write this commentary, a lot of rumors are floating around about Jobs's keynote address, but little concrete information is available. For example, Apple might begin to charge for certain "iApp" (e.g., iMovie, iDVD, iPhoto) upgrades in 2003, and the company is expected to offer a second digital appliance to accompany its successful iPod.

But a larger concern for Apple and its fans is the success of Apple's "Switch" campaign and retail stores, both of which Apple designed to increase consumer awareness of its brand and product lines, and, the company hoped, to snag some market share from the Windows juggernaut. Although Jobs's spin will be interesting, some facts remain: As 2002 ended, Apple had sold fewer computers than the previous year and dramatically fewer than 2 years ago. The company's most recent quarter resulted in a financial loss, and Apple's market share has fallen in the 6 months since the "Switch" campaign started. None of these results mean that Apple is doomed—the company has more than $4 billion in cash and fiercely loyal users—but its recent high-profile initiatives and new products such as the flat-panel iMac appear to have had little effect on the bottom line. In 2003, Apple will have to sell more machines and appeal to a wider range of users if the company hopes to remain viable.

But Wait—There's More
By the time you read this newsletter, Jobs will have given his Macworld keynote address and Microsoft Chairman and Chief Software Architect Bill Gates will have kicked off CES with his own speech, so we'll have a clearer picture of where Apple and Microsoft are taking consumers in 2003. There's never been a better time to pursue the digital lifestyle in your connected home. And we're looking forward to another year of providing timely news, advice, and information while answering your questions about these often-confusing technologies. If you want me to tackle particular topics in Connected Home EXPRESS this year, drop me a note at [email protected]. Happy New Year!