Joshua Topolsky, editor-in-chief of The Verge, recently penned a column in which he argues that “we have now become defined by our penchant and desire for the upgrade.” His thesis is that heightened consumer interest in technology initiatives across most major industries, including finance, transportation, science, food, and more, is fueling “a collective dream” of revolutionary, epochal change at a faster pace than ever before.
Topolsky’s large-scale envisioning of a coordinated push for a massive social and cultural “upgrade” seems a little too hyperbolic and optimistic. On a smaller-scale, though, I think his use of “upgrade” as a talisman for 2014 is unintentionally prescient. I predict the following three kinds of “upgrades” will gain increasing prominence in 2014 and will become central to our cultural economy over the next three to five years.
1) Component Upgrades
Phonebloks, a modular phone concept created by Duth designer Dave Hakkens, attracted a social outreach of 36 million people in the last four months of 2013. The Phonebloks device features a base motherboard that allows the user to “plug in” other components – the screen, battery, processor, camera, etc. – based on his/her preferences or needs. Hakkens created the concept as an alternative to current phone and electronic manufacturing conventions, wherein one broken or outdated component requires scrapping the entire device. His goal was to decrease needless electronic waste and allow for greater personal customization.
Google and subsidiary Motorola liked what they saw. In late 2013 they brought Hakkens on to their Project Ara team and announced that they were developing hardware to make his vision a reality.
The powerful social and corporate response to Hakkens’ concept suggests there is substantial demand for technology that features easily upgradable components. Hakkens correctly identified the financial and ecological inefficiencies in many of today’s products and his insight resonated with consumers- it really does cost a good deal of money to upgrade your phone, computer, tablet, game console, and other electronic devices every product cycle. Creating devices that allow for lower-cost incremental upgrades is a logical and potentially profitable solution to this problem.
Other tech companies seem to agree. Razer recently announced its Project Christine PC concept, which features similar swappable hardware modules designed to make modding or upgrading performance a hassle-free experience. I wouldn’t be surprised if other tech firms hop on the component upgrade bandwagon over the next year, especially if Google is able to create enough buzz about Project Ara by previewing working prototypes. Expect pushback from entrenched companies like Apple, but the swappable, component upgrade platform seems like a concept that’s going to become a prominent alternative pretty quickly.
2) Ownership Upgrades
The purchase of digital files and software is not the future of media ownership. Billboard reports that music download sales fell 5.7% to 1.26 billion units in 2013. eBook sales were only up 4.8% through the first eight months of 2013, compared to double-digit growth rates in previous years.
The streaming database model is replacing the necessity to buy digital files. Netflix, of course, is the company exemplar for why streaming is profitable, but other firms are starting to offer subscription services in additional media sectors. Spotify is credited for the reduction of music download purchases in 2013 and recently received a fresh injection of $250 million in investment money. eBook subscription services like Oyster and Scribd seem poised to attract new customers in 2014, especially if they can agree to licensing terms with additional publishing houses. Microsoft’s push for Office to become a subscription, cloud-based service indicates that software ownership is trending away from the cyclical upgrade model too. My guess is that video games are the next industry to take the plunge; perhaps Valve could negotiate some sort of a package “rental” service that gives gamers access to large swaths of its Steam catalog for a (relatively hefty) monthly fee.
The purchase of a digital file is increasingly a less preferential option for consumers, who can spend their money on supplementary services that offer equivalent accessibility and additional variety. The concept of digital ownership will become increasingly unpopular as customers choose to upgrade to subscription models.
3) Physical Upgrades
Of course, there are some products that simply won’t be available via subscription service- a given out-of-print album or a movie that’s not included in Netflix’s catalog. In these cases, physical purchases will become an increasing norm instead of digital file purchases. Look for publishers to increase the value that their physical products provide by offering additional services and benefits inaccessible in a digital subscription model.
Vinyl sales were up by almost 33% in 2013 to 6 million units and account for 2% of album sales. This is still far short of digital album sales at 40.6% of the market, but vinyl offers superior sound quality as well as the option for bonus physical products bundled with the music. (CD sales allow for the same bonus packaging as vinyl, but their inferior sound quality makes it more likely that they’ll continue to bottom out in the forseeable future.)
Hardcover book purchases were also up by 10% in the first eight months of 2013. As consumers spend more and more time working with screens and consuming content on mobile devices, there will be a market opportunity for print books to be a “digital overload alternative.” Lavish book covers and high quality designs will allow for physical books to be reborn as luxury items that serve a decorative purpose beyond functional reading.
The popularity of subscription services presents an opportunity for publishers to show why their products are valuable enough to warrant a specific purchase. In this sense, I am bullish on the prospects of print and physical sales as an alternate kind of upgrade to digital media purchases.
Taken together, these three trends suggest individuals will pursue consumption patterns that involve:
- Pooled streaming software and content that involve higher recurring costs
- Occasional physical purchases that supplement the streaming pool
- Interchangeable hardware that features lower, more infrequent costs
Hardware will still be integral to consumer purchases, since the device is the medium to access the content, but it seems that the trend going forward will be decreased annual spending on hardware upgrades. This decreased spending might instead flow towards software and content.
Content subscription services are no sure thing, of course. There is a wide discrepancy between Netflix’s soaring stock price and Spotify’s inability to turn a quarterly profit. Sustained consumer interest in modular hardware is also not guaranteed, since there will always be demand for self-contained devices that guarantee form and content work in perfect synergy (such as the iPhone).
Yet the relative affordability of subscription services (at least with respect to their marginal utility) coupled with increasing market permeation suggests that streaming companies are poised for significant expansion in the coming years. And the significant interest in interchangeable hardware products indicates this is an avenue worth pursuing in the short term. These kind of upgrades might not precede the macro technological revolution that Topolsky envisions, but they do promise more choices and easier information accessibility going forward. That is cause for celebration and, indeed, (moderate) excitement.