Why this year’s Consumer Electronics Show is already a dud

CES is where guys like this try to sell you things
CES is where guys like this try to sell you things
Image: AP Photo/Jack Dempsey
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One hundred and fifty thousand people have descended on Las Vegas, Nevada, for this year’s week-long International Consumer Electronics Show, the largest—and increasingly, the most irrelevant—of its kind.

Consider: CES cornerstone exhibitor Microsoft will not even have a booth at this year’s show. Apple, which never bothered with CES, will not be present either, nor Google or Amazon. Stalwarts like Nokia, Hewlett-Packard and Dell will also have significantly scaled-back presences.

In part, this is due to the changed nature of product launches and their hype cycles—the internet is after all the most effective consumer electronics catalog ever invented. But it’s also indicative of larger trends in the technology industry.

68% of consumers are happy with the technology they have now

That’s according to market research company NPD. The same survey revealed that only about one in 10 said they couldn’t leave the house without their internet connected device (like a smartphone). This has electronics makers scrambling to generate demand with “innovations” like smart forks. It seems that users are at once happy with the utility of their connected devices, and increasingly selective about how they use them. Not leaving the home without your device isn’t the same as not being connected, as more and more of our communications tools move to the web, where they can be accessed from whatever PC, tablet or other device is handy.

Revenue is stagnant in consumer electronics

“Consumers are buying less [consumer electronics] because what they have today serves their needs, and the promise of what we are offering tomorrow is of very little interest to them,” writes NPD vice president Stephen Baker. He also asserts that revenue is not increasing for companies that make consumer electronics because users are simply buying less of the stuff.

Yes, technology has always been driven by early adopters, but absent category-defining new devices, consumers are running out of pain points for startups—and especially hardware makers—to address. As smartphones and tablets eat almost every other consumer electronics category out there—from cameras and GPS devices to PCs and home theater systems—the idea that consumers are hunting for “gadgets” to solve their problems seems increasingly dated.

It’s not about gadgets anymore, but apps

CES has traditionally been a trade show about things you can hold in your hand—it’s where the VCR, camcorder and CD were all introduced. But these devices have been consolidated and dematerialized, their functions reduced to software. Devices that used to be expensive and bulky are now slapped into versatile, transforming, Swiss-Army-like packages we call “mobile devices.” And they are so dominant that now no Samsung or even Microsoft wants to wait around until CES to unveil their latest. CES is still home to developments from an array of interesting new startups, but increasingly, the wares they have on display are just a few upgrade cycles or one app launch away from becoming features in some manufacturing giant’s smartphone.

On the hardware side, what’s left at CES is reduced to bigger, better televisions that few consumers seem to want, plus a rather ho-hum race to the bottom in terms of price as Chinese manufacturers move up the value chain and attempt to get their cut-rate wares in front of consumers outside China.

Discretionary spending on tech toys has been replaced by technology as an unavoidable fixed expense

Most early adopters still treat their consumer electronics purchases like toys, but increasingly, the larger consuming public cannot. It’s not just the global economic slump; part of it is that devices that used to come out of individuals’ discretionary spending are now competing with fixed expenses like broadband and wireless connectivity.

Technology has become a service—and not one most of us feel we can do without. Half of all US consumers are paying more than $100 a month for mobile connectivity, and many smartphone users are upgrading their devices every two years, at least. It’s not just the rich countries where this is playing out. In emerging markets, users are spending 8-12% of their income on mobile service.

The irony here is that we are more dependent on technology than ever, so we are in some respects less likely to take risks in our spending on it. As the CTOs of our own households, we’re more likely than ever to go with the safe choice: for example, to stick with our existing smartphone, and buy whatever tablet is part of the same ecosystem. What’s left of CES is largely about smaller companies—this year there are over 3,000 vendors—showing off new hardware in new form factors. But now that everything is about ecosystems, much of it is simply accessories for our existing mobile devices.