Parks Associates Blog

Monday, May 07, 2007

More consolidation in the consumer storage business

It's good to be back blogging again! The analysts were swamped the last few weeks with travel and the preparations for last week's CONNECTIONS™ conference. If you weren't able to join us last week in Santa Clara, we're sorry that we missed you. The level of speakers this year was excellent. With the keynotes coming from the likes of Motorola (Ray Sokola, Chief Technology Officer and Corporate Vice President) Texas Instruments (Greg Jones, General Manager for DSP Systems Strategic Marketing), Cisco Systems (Daniel Scheinman, Senior Vice President and General Manager, Cisco Media Solutions Group), Verizon (Shawn Strickland, Vice President, Video Solutions), HP (John Orcutt, Vice President, Managed Home Business), and Yahoo (Patrick Barry, Vice President, Digital Home), it led to some very visionary thoughts and statements. At the same time, since our analysts were moderating another 27 plenaries and break-out sessions, it provided a very granular look at the specific opportunities and challenges facing our industry. The blog is going to reflect some highlights from the CONNECTIONS conference over the course of the next few weeks, so stay tuned!

In the meantime, the industry continues to move forward. Last week, it was reported that NETGEAR is acquiring Infrant Technologies, the developer of the ReadyNAS™ line of consumer storage products. It's yet one more step, we feel, in a trend to greatly enhance consumer storage by building more tightly-integrated solutions (such as home networking components) around the storage platform, and beginning to implement more media server capabilities within the home network framework.

At the same time, I think you're seeing a real shift away from some of the messaging that is coming from the consumer storage and NAS companies. In the past, the major message that appeared to be coming from these players was mainly one built around the "fear-and-doubt" scenarios involving consumers and media. The common example, of course, is a hard drive or other type of catastrophic computer failure, where years' worth of digital photos are lost forever. Granted, consumers' own lack of awareness about the risks associated with digital media is low, as are the actions they are taking to properly secure their media in a safe backup mode. Our own studies (recently, Managing the Digital Home: Installation and Support Services) finds that more than one-third of consumers aren't even backing up their data and digital media at all! Further, among those who do, the majority are writing to CDs or DVDs, which leads us to believe that they're not doing this on a terribly frequent basis.

So, while increasing consumer education and stressing the importance with secure backup is important, a common refrain now being echoed today is centered mainly on two messages 1) How the NAS and other online storage and content services are helping to diversify the amount of content available to consumers; and 2) that the storage platform can serve as a centerpiece for consumer's desire to share their own content in the form of digital photos and home movies. And, in our opinion, this is a really effective strategy. After all, one of the key data points that came from last year's groundbreaking study Digital Media Habits is that "I want to share" is a desire from consumers that resonates loud and clear. So, you're starting to see systems built around this consumer driver. Not only is a very robust platform for storage a centerpiece, but you see companies paying more attention to building online tools such as portals and media showcases around that storage.

HP's John Orcutt touched on this kind of strategy last week in his keynote address titled The Connected Entertainment Ecosystem. Obviously, HP has made some recent changes to its connected home strategy. No longer will it push the Digital Entertainment Center (DEC) strategy, which relied on a living room PC form factor. Instead, HP's focus is on its MediaSmart TVs and Server devices. Using home networking (which obviously has improved much in the past few years), HP's gamble is that well-developed user interfaces, access to a wider variety of content (from a number of HP partners, including some of the online movies-on-demand services), and a server hidden in the background that is performing many automated back-up features but also key to allowing consumers to share their personal content with friends and family will be a winner. And, based on what we saw in the presentation, we'd have to agree. The user interfaces are beautiful and intuitive, and we love the fact that HP is not talking about "mirrored drives" and "RAID" as key concepts, but developing messaging around ease-of-use and sharing.

Storage will continue to be the heart of the connected home, whether it's in a fixed (media server) or mobile/portable (music player) device. It's a really interesting time to be following this space, as last week's conference and the news announcements leads us to believe that it's going to be front-and-center among a number of key vendors who are putting the connected home pieces together.

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