Technology

Reframing Digital Entertainment


As prices fall and services expand, digital frames are poised to become the new media hearth

As Alan Phillips' family gathers around the table in their kitchen's breakfast nook, they're greeted by a massive, 22-inch wall-mounted photo frame. But it's not displaying shots of the kids, or the latest trip to Orlando. This frame serves as a screen that broadcasts news headlines, box scores, and traffic snarls around Boston's Big Dig.

The frame picks up these feeds from FrameChannel.com, a sort of a YouTube for digital photo frames, owned by Frame Media, a startup run by Phillips. The service lets digital frame owners sign up for more than 300 types of content such as National Geographic nature shots, Garfield cartoons, and Bible quotes, delivered to subscribers' frames through wireless Internet connections.

Sales Are Taking Off

Phillips is hoping to benefit from demand for digital frames, which has taken off thanks to tech advances and the proliferation of in-home wireless connections. Digital frames could eventually supplant other electronic devices, including music players and some computers. The Consumer Electronics Assn. expects 3.26 million digital photo frames to be sold this year—more than double the figure for 2006—generating $310 million in revenue. For the first time, digital photo frames made it onto the CEA's list of consumer electronics best sellers this year a group that includes Apple (AAPL) iPod accessories and GPS navigation devices.

Digital frames are hardly new. Eastman Kodak (EK) first released one in 1999, for $300, but at that price it found few takers. Microsoft (MSFT) tried to breathe new life into the devices in 2004, with the company's chairman, Bill Gates, demonstrating one at the Consumer Electronics Show that year. But interest in digital frames is on the rise as frame prices plummet and more homes adopt wireless fidelity, or Wi-Fi, Internet connections that make it easy to zip photos and other content from device to device.

More than half of all digital frames sold in 2010 will be able to connect wirelessly to a network, up from 4% currently, according to Steven Joe, CEO of frames maker D-Link Systems. These devices won't just display news headlines and some of the 1.7 billion digital photos snapped each day around the world. They'll also play songs, Internet video, and Web radio broadcasts. "Once the frame becomes wireless, it becomes an information appliance," says Frame Media's Phillips. "We believe this will be the fourth screen, and it will be in multiple rooms within the house."

And with a broader range of screen sizes (a 40-inch display is expected to debut some time this year), digital photo frames might also compete with PCs, TVs, and other electronics for users' time and attention. "Frames could supplant portable media players," says Jack Rieger, a product marketing manager for Kodak's consumer digital group (BusinessWeek,com, 1/30/08). "There are so many directions this category could go into, it could bump into a lot of different products."

An All-Purpose Device

Typically used in kitchens and bedrooms, frames can double as alarm clocks and electronic calendars, notifying users that a movie they've wanted to watch is about to start, or that school got canceled this morning. Researchers at Microsoft, which recently teamed up with electronics maker Samsung on digital photo frame software, are developing programs that would turn frames into gateways to online social networks, offering a rundown of what friends are up to. "I see the frame becoming a social experience, a window into the world of friends and family," says Georg Petschnigg, senior program manager at Next Media Group at Microsoft Research.

A wide array of tech players hopes to tap digital frame demand. Besides Kodak, there's Philips Electronics, and display maker ViewSonic, along with some 50 startups with names like Smartparts and PhotoVu, in the U.S. alone. After exiting the market around 2004, Kodak came back last April with frames selling for $70 to $250. Sales have been brisk since. "Although digital frames have been around for a while, the market has just reached a tipping point," says Keith Morris, vice-president for marketing at Ubicom, which supplies chips to makers of network routers and digital photo frames. "We see it as a market that could get as big as a router market very fast."

Increased ease of use is playing a big role in that. Whirlpool (WHR) has recently begun incorporating special connectors into its fridges that allow digital photo frames to be easily incorporated into the appliances' doors. Newly minted digital frame maker D-Link, better known for its Wi-Fi routers, has developed a way to simplify installation: Users will be able to register the new D-Link frame, coming out in the next few months, online. That will enable the frame's software to update itself automatically. "Our goal is to take all that complexity out," says Joe.

Reaching Consumers

Another reason for this sales explosion: Digital photo frames enjoy much wider distribution than nearly every other type of consumer electronics. The devices are found everywhere—from mass merchants like Target (TGT) to home decor stores and gift shops to consumer-electronics retailers. "It's a category that crosses a lot of retail lines," says Stephen Baker, an analyst at consultancy NPD Group. And that distribution could widen further: While, historically, Americans have mostly bought the frames as gifts, consumers are starting to buy wireless frames for their own use, says Kodak's Rieger.

It's not just the possibility of high hardware sales that's attracting industry players: There's also the potential to make money off serving ads and providing Web services to digital photo frames. FrameChannel.com, a free service which will eventually require its subscribers to view ads on their frames, should generate $7 to $8 in ad revenue per user per year, Phillips estimates. "It's really about a race for the eyeballs," says Ubicom's Morris. "Photo frames are just another way to reach consumers."

Check out the BusinessWeek.com slide show for a roundup of some of the newest digital frames.


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