News

Consumer Demand for Home Networks Continues to Decline, Necessitates Strategic Shift Among Vendors (4/4/2005)

Research from The Diffusion Group finds that declining "manifest" demand for home networks will require vendors to adopt new strategies that focus on "push" distribution channels.

While home networking vendors have enjoyed a few years of robust consumer demand, especially via retail channels, new research from The Diffusion Group suggests that manifest or overt consumer demand for home networks is at an all-time low, having declined for each of the last three years.

"There is no doubt that manifest demand for home networks continues to decline," says Michael Greeson, President and Principal Analyst with The Diffusion Group. "TDG's most recent analysis found that approximately 10% of non-networked broadband households are interested in buying a home network, with 5.9% (more than one-half of this group) being 'somewhat interested' and only 1.4% stating they would 'definitely' purchase a home network during 2005. This is the lowest level of interest we've seen in several years, and is indicative of a flattening of the demand curve and a requisite shift in channel strategy."

At year-end 2004, approximately 18 million US households owned a home network, the vast majority (almost 16 million) being households that also subscribe to broadband Internet service. More than 60% of these 18 million households purchased their home network in the last two years, reflective of a very dramatic ramp in demand for home networks that took place between 2003 and 2004. While this impressive demand attracted attention from technology vendors and VCs alike, consumer research suggests that this rapid uptake is about to be exhausted - that is, barring any radical shift in network marketing and distribution strategies.

TDG's new topic paper, "Understanding the Shifting Demand for Home Networks, evaluates why demand for home networks continues to decline and offers a prescription for how vendors can address the pending market shifts. Combining empirical data as well as insights from diffusion theory, the topic paper presents a common-sense, pragmatic approach for vendors and service providers looking to survive and grow market share during these next transitional phrases. The topic paper is now available for free download.

www.tdgresearch.com