Internet Appliances Challenging PC Dominance

The PC’s dominance as the instrument of choice for accessing the Internet and online services is being challenged by alternative online appliances, according to a report by Strategy Analytics, which predicts that by 2005, barely half of the online terminals in European homes will be PCs.

The report, “Windows on the Web: The Market for Internet and Online Appliances,” shows that there are three alternatives for consumers wishing to access the web or online services from home: the Internet PC, interactive or online TV appliances, and Web terminals and tablets.


Households with
Internet Appliances

(millions)
Year Europe US
1999 11.3 2.2
2000 21.5 6.3
2001 35.8 17.2
2002 52.0 33.3
2003 68.9 50.5
2004 82.4 63.9
2005 93.6 75.4
Source: Strategy Analytics

By the end of 2000, Strategy Analytics predicts that 39.8 million homes in Europe (26 percent of the total) will have an Internet PC, compared to 21.5 million (14 percent) with other online appliances (interactive digital TV, online games consoles, Internet TV). The leading online appliance market is the UK (30 percent household penetration), followed by France (16 percent) and Spain (15 percent).

By the end of 2000, 52 million US homes (50 percent of the total) will have an Internet PC, compared to 6.3 million (6 percent) with online appliances (interactive TV, online games consoles, Web terminals).

The market for Web terminals and tablets is in its early days, the study found. In the US, early attempts to generate sales (such as Netpliance and Virginconnect) have stumbled because of flawed business models. But major players such as Compaq and Gateway are now entering the market, in the hope that demand for these products will help offset declining growth rates in their core PC business. Strategy Analytics believes their success will depend upon strong distribution and development alliances with service providers and operators: pure retail strategies will lead to failure.

“Consumers will increasingly have a choice as to how and where in their homes they go online,” said David Mercer, director of consumer services with Strategy Analytics. “Service operators must develop multi-window strategies if they are to maximize eyeball exposure.”

The report also predicts that by 2005, 74 percent of European homes will be online, often using multiple devices. Sixty percent will have at least one Internet PC, 57 percent will have online TV and 2 percent will own a Web terminal. Annual shipments of online appliances in Europe will reach 11.9 million units, worth $4.3 billion at retail, in 2000, and rise to 40.5 million units, worth $6.7 billion by 2005, at an average growth rate of 9 percent.

By 2005, 85 percent of US homes will be online, according to Strategy Analytics, often using multiple devices. Three-quarters will have at least one Internet PC, 65 percent will have online TV and 5 percent a Web terminal. Annual shipments of online appliances in the US will reach 5.6 million units, worth $1.8 billion at retail, in 2000, and increase to 31.3 million units, worth $5.4 billion by 2005, at an average growth rate of 24 percent.

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