Is ease of use a big factor in the other big-selling categories?
GL: I think it is if we make assumptions based on the relationship between the volume of sales in other categories and our consumer panel data. Are consumers buying flat panels, for example, to surf the Internet and view digital photographs or are theyuding them because DVDs look really good? If they have a set-top box the TV picture quality is as good as the DVD quality they are becoming used to? What we are picking up suggests it is the latter. It's all about improving the quality of activities they were conducting anyway. Similar arguments can be used with digital cameras because they are also very simple to use and you have the lack of concern about making mistakes. When you are shooting with film there's a reluctance to get it wrong.
If ease of use is a big driver of discreet device sales, what is holding back the concept as a whole?
GL: I think there are quite a lot of things holding it back. I'm not sure anybody can really define what that concept is. Even when you talk to people in the industry about the digital lifestyle, the definitions vary to a high extent and there is little consistency. Then you have practical issues such as lack of compatibility and uncertainty about the way technologies are going to develop. Even within discreet products like DVD players there is HD-DVD and Blu-ray.
This is very much like the period we went through with VHS and Betamax. Do you have any predictions about which format will win?
GL: No. It's far too early to even hazard a guess at that.
You have talked about the largest value categories but which do you see emerging at the moment?
GL: Of the categories that we measure, the new generation of gaming consoles show great promise. The Xbox 360 has done exceptionally well in its first three or four months.
Our lead feature this month looks at mobile phones. There has been a lot of talk for some time now about this being the device to rule all others. How disruptive do you think IT will be for the digital camera and MP3 player markets?
GL: Mobile phones can already do a lot of things but in the short to medium term I don't think they will have much effect on the purchase of MP3 players or digital cameras as a main product. Where it could have an impact is where the MP3 player and digital camera categories reach market maturity. What normally happens is that multiple ownerships start to build where a first acquisition isn't used as much, is used for slightly different purposes or is handed to somebody else in the household. Within that discreet category the technology will have moved on again so you use a mobile phone as a secondary music player or camera. I can see this eventually having an effect on volumes in the camera and music player categories. I can't really see them having a significant impact as primary markets.
When you say MP3 player you are essentially talking about iPods. Will the people who are walking around wearing iPods feel as comfortable wearing a mobile phone? Another thing driving MP3 player sales is that you can give them an aesthetic that is constrained only by the functionality of the MP3 device. You can make them look as sexy as you like because that is all it has to do. That is much more difficult with a product that has another primary function in mind. Associated with style and fashion is what you can do with the size of an MP3 player. Obviously some people are choosing a particular MP3 player because it is exceptionally small. The size of a mobile phone is constrained because of the keys and the display.
What about turning the argument on its head and looking at MP3 player manufacturers getting together with mobile phone or digital camera vendors to incorporate those functionalities? We have seen Apple join forces with Motorola. Do you think we will see more of those partnerships?
GL: Probably, but again I can't see them impacting heavily on standalone product categories. Where I can see things like that making a difference is that cameras have already had an impact on mobile phones by triggering sales of those particular phone models. The extra functionality helps sales in the phone market but if you are going on holiday a phone would not be the only digital camera you took with you.