The Bridge on the River Kwai
Friday, March 13th, 2009
By Stephen Baker, Vice President, Industry Analysis
More and more today’s netbook market reminds me of the movie “The Bridge on the River Kwai.” In that classic, Alec Guinness commanded a group of British POWs in Southeast Asia during WWII tasked to build a bridge for a Japanese railway. But in his zeal to build the bridge, Guinness’ character, Colonel Nicholson, lost sight of its true purpose and only saw it as means to an end, whereas it was really an end in and of itself. The netbook market is headed in this direction too. We are in process of taking a limited-use, purpose-built PC, designed to do just a few tasks and turning it into a viable alternative to what was delivered previously. The end result - a product that will soon be far better than it should or needs to be and will end up destroying the market it was supposed to build.
Over the past weeks we have been treated to every netbook component moving away from the merely adequate and towards mainstream. Screens have enlarged, drive sizes have grown, designs have improved, and components have been upgraded as netbooks look for their sweet spot. And coming soon, new thin and light form factors which promise to offer consumers an even better experience for only slightly more money in a more traditional form factor, potentially undermining the value proposition of the products above and below them. Inevitably the fallacy in the concept of purpose- built computers is that the purpose can be limited, however, the computer industry has never shown such restraint before, why will it now? Today’s netbooks can do much of what a notebook two years ago could do, and even then, most of those capabilities were far beyond what most consumers needed. We are now threatening to create products that far exceed the market’s needs at pricing that undervalues what is being delivered.
More than ever I am convinced that the trajectory of the netbook market is going to undermine much of the financial foundation above it. Prices will be driven even further down to unsustainable levels by the mistaken belief that delivering better value than the market demands is a long-term strategy and not an expedient short-term reaction to market saturation and economic dislocation.
In the movie Alec Guinness didn’t realize the folly of his ways until it was too late which ultimately led to his death. I suspect that over the next years the industry will look back at the carnage netbooks caused, and like the British POW’s doctor look around at the value destruction and mutter “Madness, Madness.”
Tags: netbooks
Consumer Technology | Stephen Baker, Vice President, Industry Analysis | 
March 13, 2009 11:26 am
4 Comments
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The no-man’s land of the 5” screen | Out of the Box — April 17, 2009 @ 8:58 pm
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By Adam Turner, March 13, 2009 @ 4:17 pm
Enjoyable read, Steve! Great reference.
By Robert Heiblim, March 13, 2009 @ 5:44 pm
Stephen,
Once again, a spot on analysis. Not only this, but the “bundling” of these devices with data plans will cause even more of a price shock. When one can get a netbook for $99-199 with persistent network connection it will be hard to convince consumers of spending even $500 and so cause an even bigger problem for retailers and all concerned. Still, like you I think this is moth to the flame.
By Fall, with dual core Atoms, Nvidia Ion graphics, and better styling why not buy a netbook? As well, with these prices, I can anticipate corporate buyers outfitting sales and other field forces with them since they are expensable and disposable.
I am concerned about how any company will be able to manage in the environment which then requires bundling services and attachments to make any money. While it is clear that the largest can do it, it is as you comment not clear for how long. Smaller companies that cannot get subsidies or partners may not get into the game, and so how does innovation and profit come along.
By Robert Wolf Mirasol, March 26, 2009 @ 5:31 pm
As a happy owner of a Dell Mini 9 (for which I paid a mere $199), I can imagine a future where netbooks are subsidized by companies like Starbucks and McDonald’s, who can use the sale of an inexpensive laptop tied to their wireless service as a means to draw customers to their sites.
Nobody pays full price for their cellphone. The purchase of a cellphone is subsidized by the carrier. If a subsidized netbook can be used to sell WiFi service along a the quad venti low-foam latte and a pastry or two- why not? I look forward to the day when Quantum strikes a deal to manufacture co-branded netbooks with SBUX, MCD or GOOG.
The netbook genie is out of the bottle. Look out Kindle! Au revoir over-spec’d laptop!