My earlier post on the “mysteries of convergence” has been redone and updated as a column in this week’s Business Review Weekly. Article over the fold …
No one listens to the fridge
The trend of bundling technologies together seems to appeal to marketers and manufacturers more than it does to consumers.
The convergence dream of the telecommunications industry is that there is a single provider of a consumer’s telephony, internet and cable television services. The dream is not a result of consumers seeing all of these services as the same thing. Instead, it is part of the idea that they are all delivered by the same means: there is a shared network.
From an economic perspective, the potential for convergence can be an avenue for competition or, alternatively, the opposite: the potential for those with market power in the network to leverage it across many services. In the latter case, there is no good news for consumers.
In an article in The Economist (“Your television is ringing”, October 14), technology editor Tom Standage doubts consumers really want convergence – that is, things such as a TV with a phone. And there is a sense in which he is correct.
But the push for bundling occurs elsewhere. In media industries, shared content is the catalyst. Again, it is not that consumers really care whether their trusted news source is the same on TV, online or in print. Instead, it is the same content that can be disseminated in different ways. Once again, there is a fine line between competitive pressure and the leverage of market power. Control of one or more key dissemination “voices” can potentially be leveraged back through shared content to monopolistic conditions across the entire media market.
The final area where convergence seems to be having an effect on businesses is in product development. The pages of internet gadget blogs are littered with products that combine two or more functions that used to be separate. The technologies are such that this can be done fairly easily but consumer behaviour does not always match this.
It is this side of convergence that grabs a lot of immediate attention. Among the most popular blogs in the world are Engadget and Gizmodo. Both essentially report on new and wonderful consumer products. And the ones that are the most interesting are the combinations. There are USB connected devices that allow you to use power from your laptop to keep your coffee cup warm. There are phones in the form of wrist watches. People report on hackers working out ways to browse the internet from game consoles. And there are thousands of new things to put into your car. All cool, most ultimately completely useless. Nonetheless, product development teams across consumer electronic companies are searching for new products that combine two or more others. And the hope for more abounds (such as recent reports of an iPod phone).
There is, in fact, enormous resistance to bundling two or more things that people habitually do. Instead, bundling has succeeded where it has opened up new ways of doing things. For example, iPods reinvigorated listening to music and talk. Cameras have become a staple of mobile phones but their presence has diminished the demand for stand-alone cameras.
My point is not that bundling habitual products will never work, but instead that there is more resistance to doing that than product developers seem to think. How many people will buy a PlayStation 3 for the Blu-Ray DVD function, let alone use that function if they do?
The simple fact is that bundling is not necessarily convenient when it comes to choosing things. It complicates the choice and makes comparisons more difficult. Sometimes it is simply easier to keep things separate. This happens no matter how cool it seems to combine distinct products into two. Everyone loves the internet fridge but no one buys one.
If there is a place for habitual convergence, it is in services. In banking, I like having a single provider of financial products. This is not because they are fundamentally linked but if you can do that it makes it easier to shift funds around.
In utility services, I like having a single biller but thanks to Australia Post (with postbillpay.com.au) I have got that for much of my stuff. I do not have to say my credit card details every time a new bill comes in (a couple of clicks and I am there).
If only I could have that with household services? Something goes wrong, whether it be plumbing or something else, and I ring one person to come and fix everything. How hard could that be?