The Secrets of Business Revealed!

The latest blog entry by Robert X. Cringely looks at consumer electronics. First he notes how manufacturers manipulate us:

The consumer electronics industry is built on the idea of every few years getting us to throw away everything we own and replace it with something entirely new. In home audio the transition was 78/33/8-track/cassette/CD. In home video it was Beta/VHS/DVD/Blu-Ray. Each time we not only had to buy new equipment, we generally had to purchase again our audio and video libraries. And we did, much to the joy of the music and movie industries, though the jury is still out on Blu-Ray (more on that in a couple days).

Unlike automobiles, where there is a robust second-hand market, the consumer electronics food chain is simple and clean: whatever we invested in before is suddenly worthless. But for these technology transitions to be truly successful we ALL have to switch, which doesn’t always happen. Many people never owned an 8-track player, for example, or even a cassette deck, jumping straight from vinyl to CD. But that jump to CD’s, since it was an all-in 100 percent market transformation, was enough to power the audio business to record profits for more than a decade even without a lot of new hit songs. That’s how the Beatles still make $100+ million per year even though the group disbanded in 1970.

Then he notes how hopeless they are at delivering the goodies we want at a good price:

If this simple change were to take place the cost of 5.1 and 7.1 audio equipment would drop and consumers could more easily enjoy the true potential of their new TVs. The result for the consumer electronics industry would be even more profound, though – a 50 percent increase in net profit per TV sale. That’s HUGE.

So why doesn’t it happen? That’s because these bozos, as they have shown us time after time, can’t bring themselves to agree on a new technical standard without first enjoying a bloodbath in the market.

There are chipsets available right now to achieve everything I have described. The one I am most familiar with comes from Eleven Engineering in Canada, maker of high-end wireless audio technology for customers like Bose. But there are alternatives to Eleven. All the consumer electronics industry has to do is choose one – ANY ONE.

I love reading Cringely's articles. He combines a savoir faire with a baleful eye at the foibles of human nature. OK, translate that as: he knows what he is talking about and he makes it fun to read!