Study: ‘Digital Home’ Device Sales Grew by 500 Percent in 2005

The era of the networked home has finally arrived, as sales are soaring for Internet-Protocol-enabled multimedia devices.

According to a new study by Boston-based Strategy Analytics, sales in the U.S. of IP-enabled devices rose by more than 500 percent to 16 million units in 2005, as consumers rushed to purchase digital video recorders, entertainment PCs and gaming consoles.

The report, entitled “Quantifying the Digital Home Opportunity,” forecasts that by 2010 American households will own more than 330 million IP-enabled devices that will be able to share and access music and video across networks.

Sharing Content, Applications

Major technology purveyors, like Cisco/Linksys, Intel and Sony, are heavily promoting a new era of digital consumer electronics centered on the connected home network. Early success stories include portable gaming devices from Sony and Nintendo, Microsoft’s Xbox 360 and TiVo’s latest DVRs.

“Consumer technology vendors who ignore the fundamental industry shift toward IP-enabled devices will be left behind,” Peter King, director of connected home devices research at Strategy Analytics, told TechNewsWorld. “Our research finds that seven percent of the digital consumer electronics market was IP-enabled in 2005, compared to only 1 percent in 2004.”

This trend is likely to continue this year as more and more manufacturers add connectivity to flat panel TVs, DVD players, digital cameras and mobile phones. “Technology vendors must analyze each market segment on its own merits: connectivity will penetrate some segments faster than others,” said King.

Riding the Wave

David Mercer, vice president of the digital consumer practice at Strategy Analytics, said that the digital home industry will be transformed as new entrants embracing the connected home take share from established players. “Successful vendors will focus on helping consumers overcome the complexities of installing and using networked entertainment devices,” he said.

If last month’s International Consumer Electronics Show in Las Vegas is any guide, simplicity for the user is a prescient trend. Approximately 20,000 new products debuted at the show from an array of manufacturers, and many boasted easy-to-use features.

Sony, for example, said recently that it has synchronized its PlayStation Portable system with its “Location Free” service for access to live TV and video content from almost anywhere in the world via local hotspots.

John Koller, senior product marketing manager, Sony Computer Entertainment America, said this kind of technology has “given us a glimpse into the future regarding how a platform once limited to gaming can have broad appeal.”

Expanding the Market

Other independent research firms confirm the home networking trend. Dublin, Ireland-based Research and Markets said video-game consoles and handheld game consoles are greatly expanding the market for online gaming in the home.

Overall, console and handheld online gaming subscribers increased to 3.4 million in 2004 and could grow to more than 30 million within three years, according to the firm.

“Whether Sony continues to offer free online console subscriptions or goes to a paid subscription service [model], when it releases the PlayStation 3 in 2006 it will have a big impact on subscriber growth and revenues over the next few years,” the firm reported.

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