The Pendulum Swings

Is our most fervent technology infatuation about to reverse course?

Without question, smartphones are awesome, and they have dramatically changed our everyday lives. We measure our self-worth by the number of bars we have. When our phones are fully charged, we are happy. When they are discharged, we are in full panic mode. Kids today probably can’t fathom how anyone functioned before the advent of smartphones. They ask, “Dude, how did people post pictures of themselves on Facebook while water skiing?”

But you know what? I think the bloom is off the rose. Smartphone sales are hitting a plateau. Their technical evolution is slowing down. They aren’t as cool as they used to be. And that’s a good thing because, ominously, smartphones took an enormous chunk out of the audio/video industry. Now I think it’s time for payback.

Call it the honeymoon effect. When a new technology bursts upon the scene, everything is lovey-dovey. We are fascinated by the novelty, intrigued by the possibilities, excited by the hotness. And then, inevitably, the infatuation wears off. Sure, we love our smartphones and always will. But technology can only evolve so fast; the days of startlingly quick innovation are over. Now new phones are better than old phones, but not spectacularly so. Would we still camp in front of an Apple store to buy one, or throw ourselves under a bus to save one? Perhaps not.

The numbers bear this out. Currently, Apple share price is down nearly 30 percent from its all-time high of $702, set in September, 2012. The latest Samsung flagship, the Galaxy S4, fell short of sales expectations—by perhaps 30 percent or more. There are literally warehouses filled with unsold S4s. In the second quarter, cellular subscriptions grew at the slowest rate since the birth of the cell phone boom. Mobile carriers added only 139,000 new connections to their networks; that is a decline of 95 percent from a year earlier. Plenty of growth is still possible, but the U.S. smartphone market is maturing. Although it hasn’t happened yet, over time, smartphones will become just another commodity.

As smartphone excitement cools, consumers will start looking for something else to fall in love with. And that’s where it gets interesting. What will be the next big technology? Clearly, tablets are hot. Then what? Google Glass? Something entirely new and unexpected? Or maybe a return to... hold that thought.

The other variable here is what I’ll call the Flight to Quality. Most of the success of smartphones lies in their generational improvements. For example, the video displays differentiated one generation of smartphone from the next. Clearly, customers are very interested in getting the highest resolution. Related to this has been the boom in headphones. Bundled earbuds were only satisfactory for a short time. Soon, customers demanded better audio quality. That demand for audio quality, coupled by the fact that DJs, for the first time ever, made it cool to wear headphones, resulted in a headphone gold rush.

So, let’s tie these two thoughts together. The smartphone honeymoon is waning, and there is a clear demand for audio and video quality. It is not inconceivable to predict a pivot in consumers’ affections and a resurging interest in “traditional” audio/video equipment.

Of course, today’s AV technology is far from “traditional.” It too has evolved nicely, thank you. Contrary to popular belief, the Internet didn’t kill the music industry, it just revolutionized it. In the same way, the Internet and smartphones didn’t kill the AV industry, they revolutionized it. With connectivity, wireless, and 4K thrown in, today’s AV is a whole new ball game.

Will a renewed interest in AV spark a monster explosion in AV sales, or spell doom for smartphones and tablets, and other new technologies? Hardly. But AV has survived the lean, hard times brought on by the smartphone boom. AV is ready and waiting with audio and video that blows away the best smartphones. Consumers who discover, or rediscover, AV might just be smitten.

javanp's picture

I feel like you (and this "alternate estimate" projection) might be missing the obvious here: pretty much every human in the U.S. already has a cell phone. That chart shows cell phone adoption waning at just over 300 million--there's only 314 million people in the U.S. Considering that a significant portion of that population is pre-teen, adoption is pretty much maxed out; as such, sales aren't expanding as they used to be. So I don't know if I'd call that a "cooling off" for the industry, nor an indication that the pendulum is going to be swinging anywhere.

AndrewOfArabia's picture

You couldn't be more wrong. Smartphone adoption still growing very strong around the world, and will continue. Most smartphones that are sold are not iPhone 5's, and do not have the capabilities of one. This business is still evolving in big ways and small, and we're just at the beginning. And in case you haven't noticed, Apple just had its biggest iPhone launch in its history, nearly doubling last years launch. These things are becoming much better, much more capable, and are solving new problems in many new ways. I simply don't buy the conventional wisdom of smartphones being boring. They're simply not new anymore. Some people are looking for a magical new technology to wow them, and I'm sure Apple will deliver that in the next year or two, but it won't be as important as the iPhone is. Smartphones are the lynchpin of the post PC era.

Markoz's picture

My daughter is 20. When she and her friends hear my system they are blown away. Not just by the sound/video quality, but by the price.

My B&W 804s cost me $2,800 Cdn nearly 20 years ago. The new versions are close to $8,000. Using basic cpi numbers the inflated price should be about $4,500. If the improvements were worth the extra cash I wouldn't care. The kids still would because they simply don't have that kind of money.

The biggest improvement is in the mid-fi range of $1,000 a pair speakers and multi-channel amplifiers. Amazing compared to what they were 20 years ago. (OK - there were no multi-channel amplifiers 20 years ago).

The high end is hitting the wall of diminishing returns hard.

The vast majority of consumers will never experience, or even sample, what the high or even mid-fi end of the range has to offer. The radical escalation in prices over the past two decades has seen to that.