Digital Home Entertainment Devices: Quarterly Report Q307

Connected Home Devices Service

Peter King, pking@strategyanalytics.com

Forecast and Outlook Snapshot

Our latest survey of global digital home device markets indicates that revenues are still on track to reach $248Bn in 2007, a growth rate of 26%. Flat panel and HDTVs remain the star products; consumers are expected to spend more than $100bn on these products alone this year, or 42% of the total market. In the medium term we expect the emergence of advanced digital media centers built around Blu-ray Disc and hard disk drive technologies to add significant momentum to overall market growth. This report provides qualitative and quantitative analysis to the accompanying Forecast Datatable, Digital Home Entertainment Devices Global Market Forecast, including summary demand forecasts to 2012. Coverage includes 14 fixed and portable digital home entertainment device segments, including Flat Panel and HDTVs, DVD and next generation disc players and recorders, digital television set-top boxes, digital video recorders, games consoles, digital cameras, MP3 players, digital media players, entertainment PCs and other emerging digital home devices. It also analyses the adoption of IP network-enabled and WLAN enabled devices in each segment, and includes a 6 year demand forecast for these devices.

September 2007

1 Executive Summary

Changes in consumer behavior and new product introductions continue to drive the consumer electronics business in a very positive manner. Consumers are adopting the latest generation games consoles, both portable and fixed devices, the other major products are all clustered around the TV; Flat panel TV, DVD Recorders and DVRs.

• Historically, digital cable and satellite operators have focused on using DVRs to attract and retain customers willing to pay a premium for extra services. These two platforms have controlled the market for DVRs. Now we are witnessing both IPTV and terrestrial (DTT) services entering the mix.
• The 2007 Asia Pacific Set-Top Box forecast which is within the Rest of World section of the forecast has been increased by 14% as sales of both Digital Cable STBs and IPTV STBs start to take off in China.
• The DVD Recorder forecast for 2007 has been further reduced by 26%, US consumers especially have been slower than expected to adopt the technology. This could be due to confusion over different formats, but more likely the low pricing on player only devices. The rest of the forecast period remains more or less unchanged.
• Our view is that over 100 million next-gen DVD players will be installed by 2012. Blu-ray will win the battle and today's prices will seem incredible as consumers automatically opt for a DVD player with an average selling price of around $110.
• We have reduced the 2007 global Games Consoles Forecast by 14%, although the falls are confined to Europe and US. In Japan the forecast has increased 24% primarily due to Nintendo's Wii player.
• During the second quarter this year Microsoft found out the hard way the difficulties in producing hardware. The Xbox 360, which has been giving a significant number of its owners some grief, clearly has a problem that potentially affects all 11.6m consoles sold so far. However, it is still putting up a strong fight in the console market positioning the Xbox 360 as a media player
• Sony has the cell processor and Blu-ray; with all this processing power, it's no wonder that Sony is repositioning the PS3 as the centerpiece of a home theater system and is positioning the game system along side flat-panel TVs and high end audio equipment in some Japanese stores.
• The fact that during the summer in the US the Nintendo Wii outsold the Xbox 360 by 2:1 and the PS3 by 4:1 does not reflect the longer term potential for the better equipped connected consoles (PS3 and Xbox 360). We forecast a strong comeback from Sony in 2008.
• DSC (Digital Still Cameras) just will not go away, despite claims from the wireless (mobile) world that the cell phone will kill the stand-alone DSC, it is just not happening.
• DSC unit sales continue to rise as new innovations such as WiFi cameras, HD capable cameras and in particular the digital SLR categories continue to generate new sales.
• ASPs of entry to mid-range cameras are now falling to attractive consumer level, but the segment market value is being maintained by the higher priced new feature cameras.
• We forecast that DSC unit sales will continue to climb until 2010 when they will start a gradual decline. However, market value will peak this year.
• The 2007 Portable Games Console forecast has also undergone a small change, we have reduced Europe's forecast by 5%, increased the US forecast by 5% and increased Japan's forecast by 15%. There is an overall increase in the Portable Games Console forecast of 4%.
• Nintendo DS continues to outsell Sony PSP in all territories. However there are signs that Sony is fighting back. We have seen a recent raft of announcements from Sony demonstrating how they are trying to breathe new life into the PSP. We forecast that Sony will reduce the 2:1 sales difference in 2008.
• The rest of the forecast remains unchanged this quarter as the year is progressing very much as we expected so far.

1 Executive Summary
2 Overview of the Digital Home

2.1 Convergence
2.2 Home Networking
2.3 Digital Home Entertainment Devices Global Summary
2.4 Network Enabled Devices
2.5 Fixed Media Devices

2.5.1 DVR
2.5.2 DVD Players and Recorders
2.5.3 STB
2.5.4 LCD TV
2.5.5 PC
2.5.6 Games Consoles
2.5.7 Digital Media Players

2.6 Portable Entertainment Devices

2.6.1 Digital Still Cameras
2.6.2 MP3
2.6.3 Portable Media Players
2.6.4 Portable Games Consoles

2 Overview of the Digital Home

Ten years ago Apple was suffering record low stock prices and severe financial losses, while Dell was into a surge that made it the world's largest supplier of PCs. Ten years ago Steve Jobs returned to Apple as iCEO. Currently, Apple's market valuation is $111 billion, not far off double of Dell's market valuation. In those ten years Dell attempted to provide consumer electronics products and failed, Apple did the same but succeeded, because it understood the consumer and was able to crack consumer technology.

The key difference between now and 1997 is broadband and its global reach, which means that those companies that can make devices, software and services for this multi-billion dollar-plus market will be tomorrow's big winners. Worldwide broadband subscriptions will exceed 330 million in 2007. Enabled by increasing broadband speeds, and new ways to access content, consumers are increasingly amassing entertainment content that they want to access in a variety of ways. Today, the empowered consumer is changing the industry. Consumers now expect to consume and access content on their own terms, where and when they want it, and they expect all enabling devices to interact seamlessly.

The key to this connected and interoperable future is IP, the all-IP home may still be some years away but having the ability to bring IP-enabled network-ready devices which consumers can understand and operate remains a challenge which few have solved. As we said in last months Digital Home WiFi Enabled Devices: Global Market Forecast and Outlook Key issues surrounding the technology remain, however, and will need to be addressed if Wi-Fi is to realize its full potential: that of a dependable, easy-to-use and ubiquitous utility. Mention WPA or encryption or SSID or DHCP to a consumer and they will glaze over. Powerline and Ethernet register similar levels of boredom to most consumers. So, we wait and wonder who will be the companies that will understand the connected consumer and who will crack networked device consumer technology. Will it be Apple? - Probably not unless it breaks out of its vertical silo. Will it be an entrepreneurial startup? - Probably not, the stakes are too high for a new entrant. Could it be a Cisco? - Sat quietly in the wings desperately trying to apply everything it learned in dominating the enterprise network market into the networked consumer market via its Scientific Atlantic and Linksys vehicles. One thing is sure, there is no clear leader and there will be no clear winner. There will be plenty of room of multiple winners who devise a clear strategy to engage with the connected consumer.

Many TV designers hold fast to a belief that the Internet will be the future of TV; indeed many of the leading brands are now carrying a networked-TV. Detractors say big cable, satellite and Telcos will define the future of television not the on-line community. Some manufacturers go as far as to suggest that Internet TV is probably going to outstrip telco TV eventually. These over-the-top offerings are entirely feasible and we will be examining device offerings in this area of convergence during H207

Ever resourceful and innovative, and in this case seeking routes to convergence, the UK's Sky is in discussions with Microsoft to make its proposed digital terrestrial pay-TV service available via PC. The plan would work in conjunction with Sky's proposal to launch a pay-TV service on Freeview the UK DTT platform, which is being reviewed by media regulator Ofcom. The service would be delivered to PC via Windows Media Centre PCs that operate as an "all-in-one" entertainment device.

Sky is attempting to cover all the options; pay TV, free TV, mobile TV and PC TV catering for the segments of the population for whom it is the PC, and not the TV, that is the natural epicenter of their entertainment world. The delivery of premium services to Media Centre PCs in this way will ensure the UK's DTT platform maintains its reputation of innovation and position it well in the area of the convergence of the TV and PC industries. It is however all subject to regulatory clearance, if it gets approval from Ofcom, Sky aims to launch a pay-DTT service early next year, using MPEG4 technology to squeeze four pay channels from its existing three channels on Freeview - Sky News, Sky Three and Sky Sports News.

We understand that the service will be a paid-for service to new consumers, using the Microsoft Media Centre product effectively as a DTT set-top box, which would be able to take MPEG4 signals and accommodate Sky's conditional access software.

HomePNA announced it had certified 13 products and eight reference designs as interoperable with the HomePNA 3.1 multimedia home networking specification. Certified interoperable products assure service providers that they can offer reliable high-speed, triple-play Internet services with HomePNA technology over both phone wires and coaxial cables with guaranteed quality of service (QoS).

HomePNA technology facilitates interoperability and convergence of all networked entertainment and computer Internet Protocol (IP) data devices in the home over existing coax and phone wires. The technology enables service providers to reduce installation costs, utilize remote management and diagnostics to reduce operational expenses, and even reduce end-user costs through unified billing.

Newly certified HomePNA interoperable products include: a Motorola set-top box, coax and phone line Ethernet bridges; a Scientific Atlanta set-top box, router and Ethernet bridge; Sendtek routers and Ethernet bridges for phone line and coax, as well as a coax MDU master bridge. Coppergate certified reference designs include eight Ethernet-to-HomePNA bridge reference designs for both phone line and coax.

Certified products are listed and identified with a HomePNA logo www.homepna.org

Changes in consumer behavior and new product introductions continue to drive the consumer electronics business in a very positive manner. Consumers are adopting the latest generation games consoles, both portable and fixed devices, the other major products are all clustered around the TV; Flat panel TV, DVD Recorders and DVRs.

Figure 1 Digital Home Entertainment Devices Global Market Forecast by Units

Figure 2 Digital Home Entertainment Devices Global Market Forecast by Value

This year we forecast over 165 million network enabled products will be sold with a retail value of $US72 Billion. By 2012 the forecast is over 600 million devices with a market value of $US180Billion

Figure 3 Network-Enabled Entertainment Devices Global Market Forecast by Units

Figure 4 Network-Enabled Entertainment Devices Global Market Forecast by Value

2.5.1 DVR

• Historically, digital cable and satellite operators have focused on using DVRs to attract and retain customers willing to pay a premium for extra services. These two platforms have controlled the market for DVRs. Now we are witnessing both IPTV and terrestrial (DTT) services entering the mix.
• As an example of innovation; in the UK, we have seen the launch of the new Freeview Playback brand, a sticker campaign that will denote machines specifically designed to be a Sky-style PVR but for Freeview. The first six brands involved producing machines are Alba (Bush/Goodmans), Humax, Sagem, Sharp, Sony and TVonics. There have been Freeview DVRs around for some time, but this new brand is supported by Freeview and has added functionality to earlier proprietary version.
• And an example of awesome power; DISH Network satellite TV service announced the introduction of its newest high definition (HD) DVR, the ViP722. The ViP722 is a dual-tuner DVR receiver that powers two rooms, one in HD and the other in standard definition (SD). The ViP722 features expansive storage capacity (500 GB hard drive) and the option of recording 55 hours of HD programming in MPEG4, 350 hours of SD programming, and more than 100 hours of movies and shows with DISH On Demand -- for a total of up to 500 hours of programming.

Figure 5 Global Integrated DVR Sales Market Forecast by Platform

Figure 6 Global Integrated DVR Market Forecast

2.5.2 DVD Players and Recorders

• The DVD Recorder forecast for 2007 has been further reduced by 26%, US consumers especially have been slower than expected to adopt the technology. This could be due to confusion over different formats, but more likely the low pricing on player only devices. The rest of the forecast period remains more or less unchanged.
• The reluctance to switch to recorders does not apply in Japan. Most Japanese hardware vendors consider recording an essential function for Japanese consumers. Unlike the U.S. and European markets, where DVD players have driven most of today's DVD hardware sales, the Japanese market has focused more on the sales of DVD recorders.
• We believe the enabling factors to drive mass adoption of consumer DVD recorders include ease-of-use, elegant EPG, better editing control especially with camcorder devices, ubiquitous playability of discs on any DVD playback device, up-conversion of legacy DVD to 1080p, integral digital TV tuners* and the continuing price erosion.
• * Integral digital TV tuners such as Freeview in the UK and US FCC regulations requiring incorporation of digital tuners into all devices capable of receiving an analog signal as of March 1, 2007.
• To compensate for the slower than expected development of recorders we have increased the global DVD player forecast by 7%.

Figure 7 DVD Players Global Market Forecast

Figure 8 DVD Recorders Global Market Forecast

Next-Gen DVD Players & Recorders

• The Blu-ray HD DVD battle rages on with claim and counter claim that one format is winning.
• Just a day after HD DVD's backers claimed 60% share in the U.S., Toshiba lowered its forecast 44% for 2007 U.S. sales. Instead of an anticipated 1.8 million player sales in the N. America this year, Toshiba now expects a million will be sold
• It was looking like Blu-ray was starting to forge ahead when a surprise announcement was made "Paramount and Dreamworks Animation Declare Exclusive Support for HD-DVD." It appears that headline which failed to mention a number of caveats was reported with some extra suggestions that Paramount and Dreamworks together will receive about $150M in financial incentives (cash and promotional guarantees) for their commitment. If this is true it is evidence that this could be a longer war than we first thought.
• Prices on next-gen HD players continue to plummet. Sony dropped the price for its BDP-S300 Blu-ray player to $499. That's $100 less than the PS3 gaming console, which includes a Blu-ray drive. It's also less than half the price of Sony's Blu-ray players six months ago. Panasonic's new DMPBD10A will go for $599. Toshiba has a rebate offer that allows one of its HD DVD models to sell for $299.
• In the connected home the HD DVD format has one big but little known advantage. It will be Q4 before the Ethernet and Java specifications for Blu-Ray are completed. The interactive specifications are still an option on Blu-ray players. So far only Sony's PS3 gaming console has interactivity for Blue-ray discs. Whereas every HD DVD player has to have an Ethernet connection and embedded interactive software. Put simple, early Blu-ray models will not be candidates for home networking or online devices.
• During the summer Toshiba gave a glimpse of what might be just ahead for the rest of the world in the HD disc war when it introduced to the Japanese market two high-definition Vardia DVR and HD DVD recorder combo decks. In addition to a built-in HD DVD recordable drive, the new DVRs also include dual tuners, adding the ability to record two digital HD television programs simultaneously. Networking is supported which allows network streaming of HD content stored in each unit, including copy restricted content, for viewing on Toshiba Regza Z2000 series LCD TVs supporting DTCP-IP. Both DVRs integrate an HD DVD recordable drive that can directly record HD television programs to an HD DVD-R disc or transfer HD images stored on the hard drive to an HD DVD-R disc.
• Our view is that over 100 million next-gen players will be installed by 2012. Blu-ray will win the battle and today's prices will seem incredible as consumers automatically opt for a DVD player with an average selling price of around $110.

2.5.3 STB

• The 2007 Asia Pacific Set-Top Box forecast which is within the Rest of World section of the forecast has been increased by 14% as sales of both Digital Cable STBs and IPTV STBs start to take off in China.
• A couple of interesting developments in the Set-Top world were announced during the quarter.
• Intellon Corporation, a pioneer provider of HomePlug-compatible integrated circuits (ICs) for home networking, networked entertainment, broadband over powerline (BPL) and smart grid applications, announced that its HomePlug 1.0 with Turbo powerline communications IC will provide No New Wires® connectivity for US based DIRECTV's video on demand service that is scheduled to launch later this year.
• DIRECTV On Demand will offer customers access to thousands of titles, including movies, music, popular television shows and more, through their DIRECTV Plus HDDVR. DIRECTV customers who sign up for the new service will have access to a HomePlug-enabled surge protector and a HomePlug powerline-to-Ethernet adapter, manufactured by TII Network Technologies. This will enable the consumer to connect each HR20 set-top box to the Internet for DIRECTV content downloading, using existing home wiring.
• With over ten million HomePlug ICs sold, Intellon is the market share leader in the HomePlug IC market.
• In a similar move BT announced that it was working with DS2 to provide powerline networking on the BT Microsoft TV (now renamed Mediaroom) based IPTV service.

Figure 9 Global Digital Set-Top Box Market Forecast

2.5.4 LCD TV

• Sharp reported selling 6 million LCD TV units world wide in the fiscal year, up about 80 percent from the previous year. In 2007, the company expects to sell more than 9 million units worldwide. In the United States, Sharp is aiming to achieve a 17 percent market share position and a No. 2 rank in U.S. LCD TV sales this year.
• Meanwhile, Sharp expects to field network-ready LCD TVs in 2008 starting with 42W-and-up sizes. The sets will be equipped with Ethernet connectors and network media adapters. What is not clear yet is what network protocol Sharp may employ; it is a supporter of the Digital Network Living Alliance (DNLA), Broadband over Powerline standards and the HomePlug Powerline Alliance.
• Separately, during the quarter there has been some increased activity in OLED TV market with major acquisitions (CDT) and announcements from Toshiba and Sony that they will soon introduce small screen OLED TVs, around 11 or 12 inches. The advantages of OLED being that they are wafer thin.
• Perhaps as a `spoiling technique' Samsung as announced that it expects volume production in 2010 of a prototype 52 inch LCD TV that is only 29mm thick (1 inch = 25.4mm) it weighs 5Kg less than current 52" models and has a contrast ratio of 100,000:1 against 2000:1 today, finally they claim it will use only half the power of today's unit. Sharp also have shown a very similar prototype.
• Truth or fiction? - It makes us wonder why the OLED community is even attempting to enter the large screen TV market.

Figure 10 Sharp Ultra-Thin LCD TV Prototype

Figure 11 Flat Panel TV Market Forecast

2.5.5 PC

• Japan's Toshiba aims to put disk drives for high-definition DVDs on all its laptops next year as it strives to gain an edge in the high-stakes next-generation DVD format battle. Clearly this is an attempt to copy Sony who put a Blu-ray disk in all their PS3s, but we have to ask is there a demand? Do consumers really want to watch their favorite movies in high-definition on the road?
• Best known for its high-end gaming systems and pricey laptops, computer maker Alienware launched the Hangar18 HD Entertainment Center PC during the quarter. This seems to be a Swiss Army penknife type product to us, it appears to do everything. Built around an AMD Athlon 64 X2 dual-core processor, the Hangar18 includes an HD DVR, four TV tuners (two analog, two digital), a 5.1 home theater audio system, wireless connectivity, a DVD/CD player and up to two terrabytes of hard drive storage space. HDMI outputs mean the unit can be incorporated into an existing HD system. It can also stream HDCP content and download audio and video directly from the web.
• The PC also incorporates the AMD LIVE! Home Cinema system that allows manufacturers to consolidate a variety of A/V devices, digital media files and internet capabilities into one set-top box, controllable with a single remote control.
• Again, it will be interesting to watch this development, its features will appeal to many, but its price tag starting at $1,999 will appeal to few.

Figure 12 Global Digital Home Entertainment PC Global Market Forecast

2.5.6 Games Consoles

• We have reduced the 2007 global Games Consoles Forecast by 14%, although the falls are confined to Europe and US. In Japan the forecast has increased 24% primarily due to Nintendo's Wii player.
• During the second quarter this year Microsoft found out the hard way the difficulties in producing hardware. The Xbox 360, which has been giving a significant number of its owners some grief, clearly has a problem that potentially affects all 11.6m consoles sold so far.
• Microsoft announced that it would set aside between $1.05bn and $1.15bn, charged against the just-finished 2007 fiscal year, to cover the costs of extending the warranty for every machine from one to three years, and to fix the many which show the "red ring of death" - three red lights on the front panel control ring, indicating a general hardware failure.
• Microsoft has cut the price of the Xbox 360 in Europe to coincide with the release of the new Xbox 360 Elite. The Core Xbox 360 will retail for GBP179.99, and the Premium edition, which includes a 20GB hard drive, wireless controller, headset and HD cables, and will sell for GBP249.99. The price cut follows a similar reduction earlier this month across the US and Canada.
• The jet black Xbox 360 Elite, which will retail for GBP299.99, packs a 120GB hard drive and HDMI support. Combine the HDMI support (for HD Displays or HD TVs), optional HD-DVD peripheral with Xbox Live and Microsoft now has a very strong offering. When it comes to online services, Xbox Live, as usual, leads the pack...though the subscription fees are getting harder to justify given Sony and Nintendo's free offerings.
• Sony of course certainly has the technology pedigree, Sony's PS3 with embedded Blu-ray disc player, HDMI connectivity and the new Cell microprocessor.
• During the 2^nd quarter Sony announced new firmware for the PS3; Version 1.80 features upscaling games and DVD movies up to full 1080p HD resolution when viewed on a compatible HD TV set. It also allows users on a home network to seamlessly view and play rich media content such as images, music and video on their PS3, that is stored on their DLNA3 enabled devices such as PCs and laptops elsewhere in the house, reinforcing PS3's credentials as a home entertainment hub.
• With all this processing power, and in the case of both game consoles, the cheapest way to get an HD blue laser disc player, it's no wonder that Sony is repositioning the PS3 as the centerpiece of a home theater system and is positioning the game system along side flat-panel TVs and high end audio equipment in some Japanese stores.
• As if to underline this positioning, Sony has just announced PlayTV - PlayTV will be available in UK, France, Italy, Germany and Spain early in 2008, with other PAL territories to follow in due course.
• Designed to reinforce PS3's place in the digital home, the twin channel TV tuner peripheral and PVR software turns PS3 into a HD DVR, allowing users to watch, pause and record live TV. PlayTV will also record programmes PS3 hard drive for viewing later on the family TV, or for transferring to the PSP (PlayStation Portable) for remote viewing outside of the home.
• Operating on the widely available Digital Video Broadcasting - Terrestrial (DVB-T) format, PlayTV uses a 7-day Electronic Programme Guide EPG2.
• The fact that recently in the US the Nintendo Wii outsold the Xbox 360 by 2:1 and the PS3 by 4:1 does not reflect the longer term potential for the better equipped connected consoles (PS3 and Xbox 360)

Figure 13 Global Fixed Games Console Market Forecast

2.5.7 Digital Media Players

• Q2/Q3 has been a busy period for media players and much has been written about Over-the-Top TV technologies. Indeed we will be producing a report on this subject later in H207.
• So what is an Over-the-Top TV device? Basically they perform a similar function to a Set-Top Box. However, most of the STBs we know today are part of a digital TV network which may be a managed network, probably pay-TV, will have QoS and is probably a vertical integration, so that applies to most cable, satellite and IPTV operators.
• Over-the-Top devices are designed to enable access over the internet to materials specifically formatted for TV viewing should be as unrestricted as access to internet materials formatted for the PC browser.
• So why the sudden interest? Netgear, Linksys, D-Link, and Akimbo all have products that provide some of the functionality, the reason is Apple.
• Apple recently started selling an Apple TV product which provides `adequate' video quality for the movies and other content from iTunes. This is a brave move from Apple, no company or technology has had any major success or dominates the situation in the home for Internet-delivered entertainment. Microsoft (Media Center), Intel (Viiv), AMD (Live) and their partners (Dell, HP and the like) have taken a stab at the Internet-connected entertainment market without much success. None of them have made a serious market penetration with products that reside in the living room and are connected to the family's main TV set. Indeed some of them are now distant memories, like Viiv.
• Apple has not set the world on fire with this device, the next version will be better, and the third version will probably fly off the shelves as its technology improves (HD) and consumer awareness increases. Steve Jobs has labeled it a "hobby" and for now, that's what it seems to be. But it has surely raised the awareness of the Digital Media Adapter (DMA).
• Sony is now shipping a device for streaming Web video to a high-definition TV, launching the company's first challenger to the Apple TV. First announced at CES earlier this year, the Bravia Internet Video Link retails for about $300, and will stream video over a broadband connection to compatible Sony Bravia HDTVs.
• In an unusual alliance Microsoft and a major Chinese TV set maker, Sichuan Changhong Electric Co announced they will jointly develop entertainment products linking television and the Internet. The types of equipment, software and other products that might be developed, in which countries they might be sold and other details are still under discussion we understand.
• The project focuses on in-home network digital entertainment - how to connect PCs, TVs and the Internet to provide this digital entertainment experience, according to Microsoft.
• As a part of their deal, Microsoft will become a strategic investor in Changhong, buying just less than 1 percent of its shares for about 94 million Yuan ($12 million).

2.6.1 Digital Still Cameras

• DSC just will not go away, despite claims from the wireless (mobile) world that the cell phone will kill the stand-alone DSC, it is just not happening.
• DSC unit sales continue to rise as new innovations such as WiFi cameras, HD capable cameras and in particular the digital SLR categories continue to generate new sales.
• ASPs of entry to mid-range cameras are now falling to attractive consumer level, but the segment market value is being maintained by the higher priced new feature cameras.

Figure 14 Global Digital Still Camera Market Forecast

2.6.2 MP3

• The Zune from Microsoft will not launch in Europe in 2007. Over 1.2 million units of the jukebox have sold between the device's November 14th, 2006 launch and the end of the recent quarter on June 30^th, all in the US. The result represents over 170,000 units per month and should see the Zune reach the 2 million mark by the device's one-year anniversary if the sales rate remains unchanged. On one hand this does not appear to be great news, only 100 million units behind iPod, but it is worth remembering that it took Apple seven quarters to sell 1 million iPods.
• Microsoft are rumoured to have some new Zunes possibly with flash-based memory that may launch in time for Christmas over in the US and Europe may benefit by receiving the new and improved models.
• Last year Sandisk launched the Sansa Connect, a Wi-Fi MP3 player. The company has gone very quiet on that product, we understand that Sandisk have held up plans to sell Connect anywhere outside of the USA for now and we suspect it may be something to do Yahoo's ability to operate across Europe on a subscription basis rather than a lack of US Connect sales. Certainly opening day/week sales were reported as very good.
• Essentially it means there are no WiFi MP3 Players available in Europe

Figure 15 Global Portable Music Player Market Forecast

2.6.3 Portable Media Players

• In the US, the Consumer Electronics Association's (CEA) Mobile Electronics Committee announced the publication of CEA-2017, Common Interconnection for Portable Media Players. This standard defines electrical and mechanical properties for a connector that will pass audio, video and associated metadata signals, control signals, and power between portable electronic devices and in-home and in-vehicle audio/video systems. It will also allow consumers with products that support the common connector to play and charge their portable media devices in their vehicles and their homes.
• A cross section of companies representing most sectors of the portable device industry, including portable device manufacturers, connector manufacturers, chip makers, accessory manufacturers, automobile manufacturers and the content community were consulted ensuring that all stakeholders had a voice, claim the CEA.
• SA welcomes yet another open standard and will watch with interest to see if this common connector standard will more easily enable device interconnectivity in the homes and cars of consumers.
• In an attempt to stimulate the PMP market Archos is stripping some features from its personal media players (PMPs), making them available as software downloads instead to reduce the devices' retail prices. Software downloads for an Opera Web browser ($30), H.264 and MPEG-2 decoder ($19 each) and Internet radio will be available as plug-ins from the Archos website.
• The new strategy will make the Wi-Fi equipped Archos 605 available in 30 GB ($299) and 160 GB $399) hard drive versions as well as a flash-based 4GB model ($229). The Linux-based line starts with an Archos 105 AV ($170) portable that contains 2 GB of flash memory and can't record TV. It's topped by the 705 PMP, which has a 7W LCD and is available in 80 GB ($399) and 170 GB models ($499). The line started at $299 last year for the Archos 404 featuring a 30 GB hard drive and 3.5" LCD. All models except the 105 have Texas Instruments' DaVinci processor combining TI's 600 MHZ TMS320C64 DSP with a 300 MHz ARM926 chip.
• The lower prices came as Archos took the wraps off PMPs that will be the industry's first to use Wi-Fi to download video directly from authorized websites, including CinemaNow and Daily Motion. The 802.11g-equipped 605 and 705 double as PVRs with an internally developed 14-day program guide that uses program data supplied by Tribune Media Series. The PMPs will add an internally develop HD plug-in that will be available in the fall to allow them to output 720p to a TV. The 605's 4.3" LCD 605 has 800x480 native resolution -- too low for HD.
• The PMPs offer a choice of 1.8" or 2.5" hard drive, the latter also finding its way into the Archos TV Plus set-top PVR that contains 250 GB storage.
• Archos also is expected to complete firmware by fall allowing EchoStar satellite receivers to work with its PMPs. The companies also are working on new versions of the PocketDish players -- PMPs built by Archos for EchoStar -- that also are expected to ship this year. EchoStar invested $9 million in Archos in late 2004 but Archos has so far failed to make any significant impression in the US.

Figure 16 Global Portable Media Player Market Forecast

2.6.4 Portable Games Consoles

• The 2007 Portable Games Console forecast has also undergone a small change, we have reduced Europe's forecast by 5%, increased US forecast by 5% and increased Japan's forecast by 15%. There is an overall increase in the Portable Games Console forecast of 4%.
• Nintendo DS continues to outsell Sony PSP in all territories. However there are signs that Sony is fighting back. We have seen a recent raft of announcements from Sony demonstrating how they are trying to breathe new life into the PSP
• UK's SKY and Sony announced the formation of a Joint Venture company to deliver on-demand entertainment content to owners of the 2.3 million+ PSP owners in the UK and Ireland.
• Sony has unveiled an enhanced design for the PSP (PSP-2000) that has a more streamlined form factor and a video-out port which will become available in stores from September in Japan, North America and Europe.
• Building on the same design philosophy of the current PSP including a 4.3 inch wide high resolution LCD screen, overwhelmingly large for a handheld device, new PSP is 33 percent lighter and 19 percent slimmer than the original version, making the all-in-one handheld entertainment system even easier to carry around at approx.189g in weight (weight of current model is approx.280g) and approx.18.6mm in thickness (thickness of current model is approx.23.0 mm).
• The new PSP will be bundled with Entertainment Packs of games software
• Sony unveiled Go!Messenger, a wireless communications package for PSP due for release in January 2008. Utilising VOIP technology, PSP users can keep in touch with each other, for free, from any wireless internet connection.

Figure 17 Global Portable Games Console Market Forecast