Have Partnerships & Acquisitions Become a Necessary Evil in CE?

Looking back at all of the companies that have either partnered up or followed through with a complete acquisition, I'm wondering if this activity has become a sort of necessary evil in the consumer electronics space. Do these companies need to join forces in order to remain competitive within the market, or are the moves made strategically in an effort to boost profits?

The latest company to join the rumour mill of acquisitions and partnerships is D&M Holdings, the parent company to brands like Denon, Marantz, and Boston Acoustics. The company is reportedly auctioning off a major stake, and several sources cite that current bidders include mammoth retailer Best Buy (yes, you read that correctly), Merrill Lynch, the Advantage Partners LLP, and, most recently, a joint bid with Kenwood and Bain Capital. The press section of the D&M Holdings Website states that “recent press reports concerning the potential sale of D&M shares is not based on any information provided by the company.” When contacted, D&M Canada said that the company had “no official announcement to make at this time.”

Although that information is merely based on speculation, Blockbuster's recent bid for Circuit City is indeed true. As mentioned in a previous post, this move was in an obvious attempt to revitalize a business that has been experiencing tremendous pressures as of late. Blockbuster likely hopes that, in combining its DVD rental business with Circuit City's consumer electronics hardware offering, it can become a sort of one-stop-shop for consumers.

Back to the manufacturing side, it appears that many partnerships are forged in an effort to remain profitable rather than gain additional profitability. Take the flat-panel arena, for example, where companies like Toshiba and Pioneer have partnered with Sharp on LCD TV initiatives (with both companies also providing specific technologies and expertise to Sharp). Pioneer also recently announced it would outsource plasma panel manufacturing to Panasonic, while Philips has inked a similar deal with Japanese manufacturer Funai. The reasons for these partnerships are obvious: reduced costs, simplified manufacturing process, and the need to keep up with the increasingly competitive market. Flat-panel pricing has come down tremendously over the years, while new entrants are being added to the foray by the dozens. Will we reach a point where all TV brands eventually lead back to just one or two factories?

In the audio manufacturing arena, Canadian manufacturer API, maker of the Mirage, Energy, and Athena Technologies brands, was acquired by Klipsch Audio Technologies back in 2006. In many cases (like this one) the acquired brand or company remains an independently-operated entity. Was the acquisition made to strengthen the brand? After all, API is one of the biggest speaker manufacturers in the world!

The list goes on and on. In some cases, partnerships are indeed made to strengthen a company/brand by utilizing resources that the other can provide. In others, it's to "take out" the competition. But it appears that, as of late, we're seeing more and more traditionally considered "competitors" looking at one another and saying "I need you and you need me. We can't do this alone."

Whatever the reason, is the competitive nature of this industry in danger?

Rock Band Motley Crue Releases Single Through Rock Band, The Game

Video game makers everywhere just carved another notch in their belts. Popular rock band Motley Crue announced that it would use the video game Rock Band as the launchpad for its new single, marking the first time that a song has been released through a video game.

Rock Band consists of a "mock" guitar and drum set, along with a microphone. Players can simulate actually playing in a rock band by hitting buttons or the coloured drums in time with musical bars that slide down the screen. As you strike the notes correctly, the tune continues to play. If too many notes are missed, you'll get boo'ed off stage! (If you've never seen Rock Band in action, just search for it on YouTube.com and you're bound to find hundreds upon hundreds of user-generated videos of kids and adults playing the game). Rock Band comes with a number of tunes pre-loaded, but game players can log into online accounts using the PlayStation 3 or Xbox 360 and download additional songs. Motley Crue's new single Saints of Los Angeles will be one of those options, which means that customers can learn to "play" the song while they're hearing it for the first time.

This is yet another way that the music industry is fighting to remain profitable in the ever-changing distribution landscape. If the kids won't buy CDs and are trying to download music for free, how else can you get their attention? In this case, the answer is through a means that we already know they actively engage in: video games!

When you think about it, it's sort of sad that someone will frown upon paying $0.99 to download a song through a legitimate Website, yet they'll purchase that same song to play on Rock Band without breaking a sweat. Is there something wrong with this? Probably not. It's just the way the industry is going. People want to do more with their music simply because they can, whether it be to transfer it to other devices, stream it through the PC, or yes, simulate actually playing it through a fun video game. Ahh, technology.

Analyzing the Gen-Y Worker

There have been tons of studies in magazines, newspapers, and Websites trying to analyze the true nature of the Generation-Y worker, which, according to Wikipedia, characterizes those born between about 1980 and 1994. Many say they're arrogant, others claim unprofessional, and others still report that many hang on to their parents for dear life, scared to get out into the "real world". Is this all true? U.S. advertising agency JWT set out to find out by surveying 1,250 Americans, 238 of which fell into the 21-29-year-old age group.

What JWT found was that some claims are indeed true. For instance, Generation-Y employees do like to "play" at work, engaging in activities like video games, and just plain joking around. Is this such a bad thing? If you ask me, a lightened up office environment can help foster more productivity than an uptight one any day! It was also revealed that millennials, as JWT calls them, pay more attention to the work-life balance than their older colleagues. "They want to schedule work around the rest of their life, not vice versa," said the study. Finally, according to JWT, millennials do in fact want their employers to adapt to them rather than the other way around. Interestingly, however, those in the 50-something age category weren't far behind, with 51% of them agreeing to this sentiment as well versus 46% of millennials.

Although these perceptions were deemed true by JWT's study, a few others were squashed as just myths. For example, although the perception is that many Gen-Y kids return to live with their parents after school is over, in actuality, only 15% of them do. In fact, 25% live with a spouse and children, and 18% and 19%, respectively, with either a spouse or "partner". Do Gen-Y workers feel like they should be able to wear whatever they want to the office? Not quite. JWT's study found that 67% believe that formal appearances are important, which was higher than any other age group! Forty-somethings ranked attire the lowest, with just 54% saying that dressing up is required.

One of the most interesting findings was that, despite popular belief, millennials rank employer loyalty high on their moral scales. Sixty-six per cent agreed that an employee owes loyalty to his employer, versus just 60% of 30-somethings, 67% of 40-somethings, and 72% of 50-plus. Another popular belief is that the young 'ens are just downright disrespectful to corporate America, and want to do things their way. Not so much. JWT found that 42% of Gen-Y workers have a high degree of respect for corporate America; compared to 36% of 30-somethings, 31% of 40-somethings, and 32% of those 50 and up.

Despite the rumours that may be squashed by this study, there's still no denying that there is a significant generational difference between Gen-Y (and even Gen-Xers!) and the older generation. The youngest workers of the lot can't imagine a world where a picture you just snapped doesn't instantly appear on an LCD screen for review, or when you couldn't "Google" something you needed an answer to right away. Likewise, the older generation doesn't understand the unjustifiable perceived sense of entitlement or increased focus on technology. Either way, based on the results of this study, it appears that there's plenty that every generation can learn from one another.

Blockbuster Won't Give in; Bids for Circuit City

For years, it seemed like the writing was on the wall for movie rental outlets like Blockbuster. First, there was on-demand TV through cable services that essentially let you order a movie right from your couch. Then, there was nifty inventions like TiVo that made it really easy to record a movie at 4 a.m., then watch it whenever you felt like it. As if that weren't enough to put pressure on the traditional DVD rental business, out came Netflix, a company that let you order a movie online, and they'd deliver it right to your door!

Lately, however, it seems like Blockbuster is pulling out all the stops to ensure that the company isn't left in the dust as technology continues to move forward. We've already seen what happened to music retailers like Music World and Sam The Record Man that refused to change their business plans to keep up with the changing ways of music distribution. Blockbuster obviously wants no part in that when it comes to its business, and is making sure the company stays on the cusp of development.

The strangest move came today, when Blockbuster Inc. put in a bid to buy U.S. consumer electronics retailer Circuit City. Huh? You'd think that, if anything, it would be the other way around! But Blockbuster is offering more than US$1-billion for the mammoth CE retailer, stating that a combined company (worth approx. US$18-billion) would be "uniquely positioned to capitalize on the growing convergence of media content and electronic devices." Could we see Blockbuster stores now not only renting DVDs and video games, but also the devices needed to watch or play them? Or perhaps creating promotions whereby you receive a free movie rental with the purchase of a Blu-ray player from Circuit City? It might even be more than that.

Reports all over the 'net claim that Blockbuster is planning to launch its own set-top box that would allows users to stream movies to a connected TV, a la Apple TV. Content would reportedly come from Movielink's massive library, a company that Blockbuster purchased last year.

It looks like Blockbuster has finally bitten the bullet and realized that it needs to make bold moves in order to remain competitive, and not be eaten up by all the new players. In addition to its attempt to buy Circuit City and the rumoured set-top box device, Blockbuster has also been ramping up its Blu-ray DVD offerings to keep in line with consumer demands. It's even putting dedicated Blu-ray kiosks in store, demonstrating the quality of Blu-ray versus standard DVD.

Most people seem puzzled by Blockbuster's moves, but it's better than sitting back and watching other companies take over an area where you were once king. Kudos to Blockbuster for taking steps to improve, and for attempting to find interesting synergies that will add further value to its business. Sure, a consumer electronics retailer is very different from a DVD rental company, as many reports have pointed out. But maybe there's more synergy between the two than we realize. If, as I've argued many times, the content drives the hardware, it makes perfect sense for Blockbuster to grab a piece of the hardware pie to complement its diverse software offerings.

Corporate Sponsorships: When Does it Go Too Far?

I'm obviously into every form of media: television, movies, magazines, Websites, music, you name it. And across every platform, I've been looking at corporate sponsorships and wondering just how far can one go without delving too deep that it becomes detrimental to your brand.

As I just mentioned on our sister Website, http://www.marketnews.ca/, Universal’s Island Def Jam record label is joining forces with mammoth household goods manufacturer Proctor & Gamble to create a new music label. The label will be called TAG Records, in obvious synergy with one of Proctor & Gamble’s brands, TAG body spray. What does this say for the quality of music, or the integrity of the record label? Similar partnerships have been around for decades, of course, whereby a company might sponsor a concert tour or CD launch. We might even see a coupon for $5 off a particular CD when you buy a box of cereal; or a free digital download when you buy X product from X manufacturer. This is fine and dandy, but is creating a major partnership with one company for an entire record label division going too far?

Granted, the music industry has been feeling the pain as of late due to digital downloading and online piracy issues. So something has to be done in order to maintain profitability.

As mentioned in the aforementioned article from Marketnews.ca, technology company Apple had the clever idea of taking unique, TV content from popular show American Idol and offering it as downloadable audio or video files via the iTunes Website. But there are only so many TV shows, and even that industry is feeling the heat from digital downloading, not to mention from the recently ended writer's strike.

Speaking of TV shows (as well as movies) I've seen the same sort of over-indulgent corporate sponsorship in everything from blatently obvious product placements (more so than ever before) to subtle (yet not so subtle) brand plugs within dialogue. Sadly, I've even noticed the same thing in recent novels I've been reading. Have these "mentions" been paid for, or are they legitimate choices by the noveslist? I often wonder.

The typical "brought to you by" sponsorships are no big deal. Every piece of content, whether it's a movie, TV show, or music concert, has to be paid for somehow. But it seems as of late that corporate entities are dipping their hands a bit too much into the creative pies. Iconic artist Madonna has already reportedly made tons of money from her new CD (which, by the way, hasn't even been released yet!) through corporate commercials that feature its songs (like Sunsilk shampoo). I can't even begin to count how many indie artists have skyrocketed in popularity after having their songs featured in an Apple commercial. It appears that commercials now lead the music industry in determining what "good" music really is! Not to mention how many "celebrities" have become increasingly popular through their own lines of clothing, perfume, shoes, heck, even books when none of these things are considered their primary "talent"!

I'm not claiming that all of this is totally wrong or unjustified. After all, maybe it's a necessary evil in order to survive in industries where the Web is quickly cutting into profits and distribution channels. I just think that, no matter who's backing one's music, TV program, acting career, or what have you, integrity and creative control needs to remain in check. Otherwise, music, TV, and every other form of media will no doubt lose touch with the very people it's trying to reach in the first place.

Sharp Caters to the Ladies, Teaches About HD

According to Sharp's research, 75% of the consumer electronics purchases within the home are made by women (or at least "OK'd" by them), yet just 2% of females actually feel confident on their knowledge of high-definition TV. Given these staggering numbers, the top LCD manufacturer hosted an educational event for about 25 journalists to teach them about HD, answer questions, and squash myths. Surprisingly, the questions came flooding in so much that an official presentation almost wasn't needed.

What's the difference between LCD and other technologies? Asked one woman. What does 720p, 1080i, and 1080p mean? Chimed in another. Questions even touched upon topics that us in the "tech" field often take for granted. What's a bezel? inquired a puzzled female journalist. Sharp Canada's Kevin Andrews calmly explained that it's just the tech industry's term for the frame around the TV. This gal wasn't dumb, nor was she uninformed. But we often don't realize that people really don't recognize these terms, nor buzz words like 1080p, 16:9, or letterboxing. Just because we use them every day doesn't mean they do! Questions continued on to span topics like how to clean a flat-panel when your kids run their grubby hands across it, and where would one buy such a solution?! Attendees even touched upon issues of energy consumption, proper viewing distance, and yes, surround sound. Apparently women do understand that you need a good surround sound system to go along with your high-def flat-panel TV, but they just needed some reassurance from a reputable source.

A demo showing the movie Enchanted playing via a standard-definition DVD player on the left and a Sharp Blu-ray player on the right (both on Sharp's new special edition AQUOS SE94-series LCDs) provided further evidence that the high-definition experience really is worth it. Rogers Cable provided the high-definition set-top boxes for the demo, while reps from both companies were on hand to answer questions related to both flat-panel technology and source devices.

After the demonstration, which ran for about an hour and a half, I was able to chat with some of the journalists, none of whom worked in the technology sector. When I asked one gal whether the demo convinced her to buy a flat-panel TV (she's still living in the CRT world), she explained that, although she wasn't jumping out of her seat to buy one today, she certainly feels more confident having been educated on the technology. It's just like buying a car, after all. No one wants to walk into a store or sales office being vulnerable or uniformed.

Interestingly, one journalist told me that she didn't even know she could connect most flat-panel TVs (like the aforementioned Sharp AQUOS models) to her computer or notebook and view digital photos, or even surf the 'net, on the big-screen. "That's a huge selling feature for women and moms," she said, "and companies should really focus on features like that." Many attendees also seemed pleasantly surprised to learn about Sharp's AQUOS Net feature, which provides real-time tech support whereby a rep can actually adjust your TV settings remotely to optimal viewing. (This feature was officially announced at CES in January 2008).

The main reason I attended this event was to gain some insight into where the "average" consumer stands with HDTV, and I was truly blown away by how many terms, buzz words, and high-tech features are taken for granted within the industry. Imagine that, while we spend so much time focusing on the minutia of picture quality, something simple like PC connectivity makes all the difference with the core buying audience. It was truly an enlightening experience. Kudos to Sharp for taking the initiative to start educating consumers on the benefits of HDTV, and how to get it. The more customers that jump on the bandwagon, the better.

Stay tuned for video footage from the event, including eye-opening commentary from some of the female attendees.

Photo: (l-r) Sharp Canada's Chris Matto, Bill Friend, Eteinne Kwan, and Kevin Andrews were on hand to answer questions, and demonstrate the differences between SD and HD content.

Is Apple Biting the Hand That Feeds it?

Is Apple biting the hands that feeds it, i.e., itself? This very question was posed to me the other day by a colleague who was trying to figure out Apple's strategy of offering iPods with massive capacities, yet iTunes songs as paltry 128 Kbps (or, in some cases, 256 Kbps), digital files. It's highly unlikely that the average consumer could fill an 80 GB iPod with tunes of such a small size (it would take approx. 20,000 128 Kbps 4-minute tracks to do so!), so what does Apple expect us to fill these nifty devices with?

The obvious answer is "other stuff". Higher-quality songs ripped from physical CDs, downloadable videos, including podcasts, TV shows, and full-length movies (much of which can be obtained from iTunes), and even photos. Let's face it: iPods aren't just for music anymore, which is why capacities are getting so huge. Not to mention that content loaded onto these portable players won't always be exclusively from iTunes, despite how this might be the ideal scenario in Apple's eyes.

Nevertheless, my colleague, who's a heavy iPod (and iTunes!) user, pointed out the obvious paradox between what's offered in the hardware and what's offered in the software, and how this can be perceived by dedicated music lovers. We'll give you massive storage capacities, like 80 and 160 GB, but the best quality tunes we can offer for you to load within these hard drives is 256 Kpbs ? "The last song I downloaded from iTunes sounded horrible," he told me. "I'm thinking of just going back to buying CDs and ripping the music onto my iPod."

Realistically, if most people thought this way, it would be the answer to the music industry's prayers! Is it all a conspiracy? A strategically concocted plan to offer semi-mediocre content online so that, once consumers get over the initial honeymoon phase of digital downloading, they go back to appreciating pristine audio quality again and buy CDs? I doubt it. But it does leave something to think about.

Going forward, my colleague predicts a significant drop in iTunes downloads as more and more consumers become fed up with the audio quality of digital tunes and move back to buying CDs that they can rip and load onto their iPods. After all, they have to fill those massive hard drives somehow! I tend to think the other way: that, rather than consumers moving away from downloadable sites like iTunes, the tracks offered by such sites will become better in quality as time goes on, and DRM (hopefully) becomes a thing of the past.

As for today, iTunes just surpassed Wal-Mart for the title of number-one music retailer in the U.S. The download site has more than 50 million members, and has sold more than four billion tunes since it launched back in 2003.

Which way will things go? Only time will tell. What's your prediction?