PND market needs to be 'more realistic'
Only a year ago, there was optimistic talk of 100m PNDs a year from some quarters, which is unrealistic given the size of the available market and the increasing competition from other platforms. At a fundamental level, this market isn't as large as other consumer device markets, such as cameras or MP3 players- there are only so many cars on the road after all.
However, sentiment is now in danger of swinging back the other way. With a weakened global economy and a lack of innovation and product evolution, manufacturers face a number of challenges. A dominant characteristic over the last 2 years has been the reduction in device average selling prices, suggesting the PND market is in danger of becoming a commodity market, with few key product differentiators. From a mass market point of view, much of the current high-end feature set is "nice to have" rather than "need to have". Without innovation, these are likely to move down the product tiers and become commoditised, much like basic navigation.
Even in its current volatile state, the PND market is now mature enough to sustain medium term momentum. There are a lot of eggs being placed in the cellular connectivity basket at the moment and more specifically traffic. But the current revenue models and service packages do not typically have mass market appeal.
IMS Research believes that TomTom's current 30% subscription rate is quite impressive, considering it is the first serious foray into connectivity by a leading PND OEM. However, it also does not constitute "mass market", particularly considering many initial users are likely to be professional or daily navigation users. What will really test this market is the uptake from occasional users, who represent a large percentage of the overall market. Traffic updates and a few other fringe benefits at 10 Euro a month is not compelling.
The problem of connectivity is exacerbated by cellular operators, who are still reluctant to offer competitive flat rate internet. This has greatly affected the cellular LBS market and will continue to do so until this situation is rectified. This is why strong operator partnerships will become key in this market.
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