NEWS RealLife@Retail By Keith Newman, Editor of ChannelMedia

If the term “cautiously optimistic” weren’t so cliché I would be it. The fact is I have concerns. Of course we’ve all heard that total retail sales on Black Friday were up 4.8 percent to $7.2 billion from the Friday after Thanksgiving a year ago, after posting a 6.8 percent gain last year over 2001 results, according to ShopperTrak, which tallies sales at 30,000 retail outlets. For Friday and Saturday combined, total sales were up about 5.5 percent, according to ShopperTrak. The firm still forecasts a sales gain of 4.5 percent for the November-December period, the best performance since 1999, when sales rose 5.4 percent. It based the estimate on sales from stores open at least a year, considered the best indicator of a Retailer's health. Last holiday season's results were unchanged from 2001. So why the trepidation? I visited stores and pinged my network and everything I heard had that tone….you know? “Busy but not great,” was the one that stuck to me as it exemplified the tone and came from a very influential voice in the channel. Oh well, we will see. In the meantime, have a joyous Holiday Season and a Happy New Year! Now here’s my Top 10 this month…….

1. Buy.com’s new co-branding partnership with KBtoys.com doesn’t provide a unique selection of toys, but it does provide Buy.com the chance to cross-sell toys in a unique way, says Doug Marrs, Buy.com’s Vice President of Sales and Merchandising for entertainment and leisure categories. “You won’t find exclusive toys on Buy.com but this presents us the opportunity to explore unique online offers,” Marrs says. Under a deal announced earlier this week, Buy is offering more than 3,000 toys and games from KBtoys.com’s inventory, including Mattel, Hasbro, Fisher-Price, LEGO and other brands. Buy handles sales through its own checkout system, then forwards orders to KB for fulfillment. But though Buy and KB are offering the same products and pricing, they merchandise the same products in different online arrangements. While they each offer Microsoft Corp.’s Xbox video game console for $179.99, for example, their cross-merchandising displays differ. KBtoys.com offers an “Xbox system builder” that lets shoppers choose among numerous accessories, including game controllers, display monitors and assorted games. Buy offers the same console within a “build a bundle” merchandising display, with accessories not displayed by KBtoys, including a racing steering wheel for road race games, cabling for connecting two Xbox consoles, and an Xbox system travel case. Buy also offers lower-priced refurbished Xbox consoles.

2. Staples (SPLS) topped the average analyst estimate by a cent a share for its quarter. Revenue rose 13 percent to $3.5 billion. Looking ahead, the office supply Retailer said it's "comfortable" with the forecast of 41 cents a share, and expects sales growth in the low double-digit percentage range in 2004.

3. Michael Dell, Chairman of the Board and CEO of Dell, Inc., will deliver a 2004 International CES Industry Insider presentation on Thursday, January 8 at 12:30 p.m. in room N250 of the Las Vegas Convention Center. The International CES, the world's largest annual tradeshow for consumer technology, takes place January 8-11, 2004 in Las Vegas. "Dell is a leader in meeting the technology needs of today's consumers and businesses," said Gary Shapiro, President and CEO of the Consumer Electronics Association (CEA), the producer of the International CES. "Whether you are talking about Dell's presence in the world of notebook and desktop systems, wireless, home office, DLP or mobile entertainment, the International CES houses technology advances in each of these segments. We are excited to have Michael Dell return to CES and share his vision of the digital world we live in."

4. MusicNow, Inc., a developer of digital music services, and Best Buy Co., Inc. have launched the MusicNow Download Store on BestBuy.com, they said today. The store will be available only on BestBuy this month, then made available to other Web sites.

5. Napster 2.0, the reincarnation of the former free music file-sharing service, expects fast growth through more clients like Penn State University, which is paying Napster’s tab for students. But it has a long way to go to catch rival iTunes.

6. With Apple’s recent retail store success and new product category introductions (Panther OS, iPods, iTunes, etc.), Apple will continue to expand in the retail market. The introduction of Windows compatible products is creating a new phenomenon from Apple’s traditional niche target market to a mass market. This will further drive the Apple retail store expansion.

7. Electronics Boutique announced financial results for its third quarter ended November 1, 2003, highlighted by a 15 percent increase in revenues. The company's total revenues for the fiscal 2004 third quarter rose to $324.7 million, up from $283 million in the prior year period. Net income for the third quarter was $1.5 million, or $0.06 per diluted share, compared with net income of $3.7 million, or $0.14 per diluted share, for the same quarter last year. For the 39-week period of fiscal 2004, total revenues increased 19 percent to $930.3 million from $783.2 million in the prior year. Fiscal 2004 net income for the same period was $6.3 million, or $0.25 per diluted share. This compares with $5.8 million, or $0.22 per diluted share in the first 39 weeks of fiscal 2003, before the cumulative effect of a change in accounting principle relating to the recognition of Vendor allowances of $4.8 million. In fiscal 2003, the company exited two business lines - EB Kids and BC Sports Collectibles. Accordingly, in the third quarter of fiscal 2003, the company's non-GAAP adjusted revenues were $279.2 million, and its adjusted net income was $2.7 million, or $0.10 per diluted share. For the 39-week period of fiscal 2003, the company's non-GAAP adjusted revenues were $769.8 million and its adjusted net income, before the cumulative effect of a change in accounting principle, was $6.1 million, or $0.23 per diluted share. "During the quarter, Electronics Boutique continued to post positive sales growth in contrast with NPD Group statistics, which reflected a 13-percent decline in industry-wide sales," said Jeffrey Griffiths, President and Chief Executive Officer. "As we enter the fourth quarter, our business fundamentals are healthy. Our strip-center stores and international locations continue to deliver strong results, and our store-opening plan is on schedule. More importantly, we remain on target to report record earnings for the full fiscal year 2004." Comparable stores sales decreased 6.5 percent for the fiscal 2004 third quarter. The decline was primarily due to a difficult software sales comparison and weakness in hardware sales year over year. During the current quarter, the company opened 133 new stores, increasing the total store count to 1,436 as of November 1, 2003. The company had 1,078 stores as of November 2, 2002.

8. Fry’s still plans to open a store in Plano, Texas by the end of the year! Wow, that’s determination.

9. Hal Compton, the CEO of CompUSA and the architect of so many of the positive changes that have taken place at the national superstore retailer over the last decade, is retiring. Larry Mondry was named CEO, Brian Woods got promoted to EVP/GMM when another CompUSA veteran Tony Weiss was promoted to COO.

10. FAO Schwarz is having a going-out-of-business sale — as a result of the bankruptcy filing parent FAO, Inc. It will be FAO's second Chapter 11 filing in less than a year. It last filed in January and emerged in April. FAO, which also runs developmental and educational children's product and toy Retailers The Right Start and Zany Brainy, was recently declared in default by creditors and couldn't pay for holiday inventory. Creditors have given FAO until Dec. 15 to find buyers or liquidate the businesses, including some of the best leases in retail. FAO will try to sell FAO Schwarz and The Right Start and will liquidate the Zany Brainy chain.

Don’t forget: RetailVision 2004!!! April 26-29, Hyatt Grand Champions Resort & Spa,
Indian Wells, California. To qualify for your invitation to the consumer channel's premier Event, call Melissa Park at 603-471-4226, or click on "Contact Us".

Well, it’s certainly small…and in trade shows, size does matter. Folks, this Comdex was small. Many of our readers will remember when Comdex covered both sides of the Main Hall, plus the South Hall, Sands Expo center, Hilton Ballrooms, and even some of the hotels. Comdex 2003 was about half of the Main Hall. That’s it. Lots of analysts, journalists, trade show organizers, etc. were all taking the public position that small means focused, but frankly, this was as unfocused as any Comdex in recent (since 1982) memory. The focus was supposedly B2B and IT, and there were areas of concentration on the floor: wireless innovation, mobility, web services, and Microsoft. Yeah, the Microsoft area had about 15% of the total space on the floor.

MediaLive is the new organizer, raised from the ashes of Key3’s bankruptcy with mostly the same folks on hand to run it. They were selling this whole B2B IT concept pretty hard to anyone who would listen, but we saw a lot of consumer-ish stuff and a bunch of real low-budget and unexciting add-ons: cell-phone faceplates, cell-phone do-dads, etc., mostly from Asian countries. Our staff covered the floor, paying special attention to the unwired world. In fact, we had our best and worst experiences of the show in the unwired world. A very neat pre-assembled hotspot from Zyxel, a Swedish company made its debut. This is a very neat idea for small Retailers (coffee shops, mail-stations, etc.) who want to compete with the Starbucks of the world without investing in a complete T-Mobile program. Low-cost, and a very slick solution. Stuff like this will get the US to 100,000 hotspots in three years, we predict. Also, some peer-to-peer wireless stuff. Interesting, and we can’t quite figure out yet how it will play in business. IM stuff, IM security is an issue. Wireless security is an issue.

Palm had a very odd little space to show off their new wireless pieces by demo-ing a free hotspot. The hotspot was run by Sonic Wall, and that’s where the trouble started. Our staff was carrying the new Tungsten C wireless handheld, just to grab e-mail on the fly at the show (cool, huh?), so the Palm hotspot seemed like a likely place to stop. Well, it didn’t work. Three separate Sonic Wall techs ignored or misdirected our staffer for almost 15 minutes, while he kept trying to make it work. When he finally grabbed one of these lazy clowns, he was told that “yeah, the Palms are all having a problem with our re-direct when they try to log on”. Folks, this was on the third day of the show - they knew about the problem, and hadn’t addressed it!! Palm’s PR flack asked our guy on his way out of the booth if everything was ok….we assure you, she got an earful.

Our crew was not terribly impressed by both Sprint or AT&T Wireless. Both seemed fairly tired conceptually. In fact, like many Comdex shows, the big boys didn’t have a lot of pizzazz - except Microsoft, who leveraged their smaller developers into a maze of neat applications and solutions. We found ourselves spending more time there than anyplace.

Security was a big focus of the show, just like in real life. We saw hardware firewalls, software firewalls, lots of anti-spam products. We’ve written in a sister publication about Ironport, and it just seems like they have a great solution: one box with firewall, anti-spam, anti-virus, etc. Affordable, scalable. Nice solution. Our folks were tracking every manner of similar products, from companies like Global Hauri, a Korean software company with a very slick approach to anti-virus detection and live repair. The multi-product, or suite approach was much in evidence, as shown by the folks from Zone Alarm, who have a sweeping approach to the field, across channels and products. Both Zone Alarm and Panda Software had a similar approach, but with a different orientation….Zone starts with a firewall and adds ancillary modules, whereas Panda starts with an anti-virus and adds from there. Both promise a complete suite of firewall, anti-virus, pop-up blocking, and anti-spam. As you all know, anti-spam is a huge topic, and just about every anti-spam guy and gal was in attendance, displaying their wares. Every approach to anti-spam was being shown: server side, client side, filters, challenge-based, ASP model, subscription, and peer-to-peer. Some of the companies we saw were Aladdin, Cloudmark, Firetrust, and the afore-mentioned Zone Alarm and Panda. Who will be left standing? After talking with each of these companies, they all feel like they’re the “one”. Somebody should tell Neo. Another big area of focus seemed to be VoIP, or Voice Over IP. A couple different approaches; some companies going straight for the infrastructure with scalable solutions, like Entel. We like the consumer-ish stuff though, and saw tons of products around including a nice little suite of hardware products from Octiv called OctivVox. Old pal Saul Freedman is bringing them to market. Nice stuff. I wish him (and them) luck.

A couple of private media-only events had the most exciting products at Comdex. At the Lunch @ Piero’s (we didn’t eat - the food looked too heavy for early afternoon) we saw the coolest thing….a radio station in a box for around $2500. Just think about the potential clients: universities, schools, museums, public buildings, stadiums, etc. Absolutely self-contained, and complete. Just plug it in and start broadcasting. Also some monster video stuff. Gateway, Linksys (Cisco), and others have stuff that will broadcast video and music wirelessly from a computer to a TV, and there were a couple of neat products in that nascent market. Not here yet, but when it does arrive, the wired (wireless?) home will be a very neat place.

ShowStoppers was great as always. Held on the first night of the show, this media-only event features a number of smaller companies not found on the show floor, who have very neat technologies. Sometimes they’re just previews, but often these are full-on market introductions. The food is always great, and the technology is always interesting. We saw a spiffy new desktop organizer that is just ideal for the budding Tablet PC market – Optimal Desktop. Could use a slicker name, but we got a free download, and it’s sort of neat. Griffin doesn’t make it to a lot of shows, but with the iPod now driving Apple’s entire marketing thrust, expect to see these folks, with their complete line of iPod accessories and add-ons at the forefront of this very exciting niche. Now that iTunes is shipping for Windows, expect the best player on the market (yeah, we’ve seen them all, and the iPod is hands-down the best) to dominate. And the Griffin folks seem to be along for the ride. Often, interesting products arrive with little fanfare. Sightspeed has one. With some sort of proprietary software compression, they take regular web cams and plain vanilla broadband (now in 37% of all homes and businesses) like DSL, Cable, etc. and pump out full-motion 30 fps video conferencing with sound. Could this be the real thing for home and small business videoconferencing? We’ll see. And some old dependables were around too. Lexmark had the most beautiful line of printers on the market. Great innards, too. And the folks at Iomega were around with their complete lineup of storage solutions. But we missed some other folks; not much digital imaging (which will be a big focus at CES), no screens (they’ll all be at CES, too), few laptop manufacturers (yep, CES), and small PDA booths (the big ones will be at CES).

Comdex was smaller this year, much smaller. Did that make it better? We think not. Can it survive with this focus? We’re not sure. Networld-Interop has a similar focus, and it’s really on the ropes after this year. Shows are rebounding with the economy. CES is expected to draw in excess of 125,000 to Vegas. Our thought: CES adds a B2B IT area for January 2005, and that kills Comdex for good. We’ll miss it.

Did we miss something hot? Let us know what’s on your mind – we want to hear from you. Contact Steve Cross at steve@crosschannel.com, 702-492-7472

NEWS Comdex? Here’s a Different Take By Dennis Masella, VP, Vision Events

Everyone has an opinion about Comdex. I’ve seen articles saying that it’s dead, dying, reviving, or reinventing itself (see Steve Cross’s article this issue). My own opinion falls somewhere along the Mark Twain expression: to paraphrase, news of its death has been greatly exaggerated. Having just returned from this year’s Comdex in Las Vegas, I certainly experienced a show that has changed in some fundamental ways. I’m sure no one missed the two hour taxi lines, or going from convention center to hotel to hotel to see everything. Other features – the presence of virtually every big industry player, lots of exciting product launches, and the kind of buzz that used to define Comdex – were conspicuous by their absence.

But I believe the real question about Comdex is not the issue of size, but of purpose. I had quite a few significant meetings, which is what Comdex has always been about for me. This Comdex, as in years past, was a central meeting place for a wide range of Vendors, resellers and service providers. This has always been an important function of Comdex, and the industry would be poorer without it. Gartner held a reception during Comdex for past and future clients to thank them for their business, discuss new opportunities and give them a peek into the future according to Gartner analysts. We were looking for 100 attendees, and had well over 100 show up. We knew many of our customers were going to be in Las Vegas, so we wanted to be there too.

It’s true that Gartner Vision Events is in the same business as the producers of Comdex. We both stage technology events. But we have never viewed Comdex as a competitor. What we deliver and what Comdex delivers are considerably different. The Vision model is about executive-level audiences and facilitating seller-buyer face time in intensive environments such as Boardroom Appointments and One-on-One meetings. The Comdex model, even modified, is more about quantity and providing a much broader backdrop. That’s not about to change. But there’s a reason, and a need, for different event models to succeed. In the case of Comdex, the IT industry will always need common ground for different parts of the technology community to come together. The Comdex “Vision” may be different than ours, but we see its survival and even revival as a positive sign for all of us.

Pre-holiday promotions and holiday shopping lists make the fourth quarter the critical segment of the sales year for consumer technology categories. For the past five years, the fourth quarter has averaged 29% of all sales revenue for the year - so clearly, this holiday shopping season will be critical to manufacturers and Retailers. In terms of where we stand as we head into the holidays, the word is, "so far so good" for 2003. As of August, year-to-date sales numbers were nearly 7% ahead of 2002, and that's saying something since during the same period last year, sales were barely up 1% over 2001. 2003 has an up and down year. IT sales were off to a slow start thanks to a lack of must-have product offerings early in the year, and then strengthened considerably in the third quarter, when some products finally caught consumers' attention and made them open their wallets. All eyes are on the crucial fourth quarter, and consumer technology marketers are approaching the holidays with optimism based on the third quarter's promising performance.

What should you be watching as we enter the holiday shopping season? The holiday season's high-potential areas are storage, mobility and imaging. We've seen each of these areas do well independently, but the really exciting story for the holidays is their integration. Consumers want to create, access, share and store their digital files, and they want to be able to move their files among devices and around the home. We're carefully following growth trends in blank media, hard drives, DVD burners and USB thumb drives, all of which address consumers' digital file management demands. Storage media, especially products that help consumers safely archive their digital images for the long-term in an easily accessible way, will be in great demand this holiday season. Mobility, mentioned previously as it relates to digital files, will be an important driver of store traffic and sales this holiday season.

In Q4, look for strength in notebook PC sales and especially wireless technology, which provides the ultimate in tech mobility. If today's wireless networking equipment sales trends continue through the holidays, this segment of the market could see $100 million in retail sales volume in December – and that's a number any tech category would envy. Imaging products are at the top of many holiday shopping lists this year. Manufacturers and Retailers who can satisfy consumers' desires for digital cameras, camcorders, printers, ink and paper will be in a strong position as the holidays approach. Printers, in particular, could be a very strong segment of the IT market in Holiday 2003. All three major printing technologies - inkjet, multi-function and laser - stand poised for growth in the fourth quarter. Multi-function printers should be especially successful during the holiday shopping season, as average selling prices have dropped by about half since this time last year and this market has generated 10 consecutive months of significant growth. New features and aggressive pricing will make this one of the strongest segments of the IT market during this holiday season. In addition to hot storage, mobility and imaging products, we've still got our eye on notebook PCs and LCD monitors, which we expect will help drive sales during the holiday season. If today's sales trends continue in all of these areas, Holiday 2003 may prove a boon for technology product marketers.

NEWS Q&A with Steve Solomon of Fujifilm

Q. We see you everywhere but haven’t spoke with you in awhile. Give us an update on Fuji?

A. Well, as you know, I’m responsible for computer data storage products at Fujifilm and it’s been an exciting time for us, given the growth of so many consumer products that are driving the need for increased storage. In fact, at Fujifilm, we’ve enjoyed several consecutive months of record-breaking DVD recordable media sales as prices of drives continue to fall beyond expectations. Demand for DVD hardware has also been helped by less confusing product offerings, namely dual format drives that are compatible with the two competing formats (DVD+R and DVD-R). This takes the guesswork out of which drive to choose.

And, demand for our Fujifilm USB flash drives is so strong, we’re working very hard to supply enough of them to the retail market. With capacities from 32 MB to 1.0 GB, these are the hottest storage devices on the market. They work with any PC or MAC that has a USB port and recent operating software. No power supply is required. Simply plug in to the USB port, download your files and you’re ready to go.

Q. What is your big push for Q4?

A. We’ll be pushing our entire line but emphasizing the hot products for us, DVD media and USB drives. We think they’ll be really hot for the Holidays.

Q. Digital Cameras and media have been a hot category but looking forward how can Retailers be more successful with digital cameras?

A. Fujifilm is hearing from Retailers and consumers that what they want is information and education. With mainstream consumers now looking to purchase digital cameras and so many models to choose from, consumers want help and information in order to make their purchase decision and the Retailer and supplier that can provide this help stands to gain success. To that end, we’ve recently completely redesigned our digital camera Web site at www.fujifilm.com/digitalcameras. The site is information rich, but presented in an easy-to-use interactive style guiding consumers through camera selection. Within the site are overview videos that can be syndicated and launched from our Retailers’ own Web sites. And, there’s a training utility that highlights pre-and post-purchase quick start topics. This can give the consumer and store employee a near hands-on experience, with quick answers to common questions and problems. So, this is our effort to provide that needed information and education and we invite Retailers to take advantage of it. Of course, we offer a range of models, from beginner to advanced and professional models, to meet any consumer need and we’re always among the top brands in the category.

- Thanks Steve – and best of luck this Q4.

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RESEARCH

ARS Analyst Outlook
Wal-Mart Expected to Sell Own-Branded Notebooks in 2004
by Sam Bhavnani
Mobile Computing Analyst
November 20, 2003

The Taiwan Economic News is reporting that Wal-Mart will sell house-branded notebooks in the US next year. According to the article, several tier one contract manufacturers are scrambling to win large orders from Wal-Mart.

Wal-Mart will place an initial order for 100,000 notebooks from Taiwan-based Arima Computer Corp. with Wal-Mart targeting 1Q 2004 as the introduction date. Arima has not confirmed the report, which was leaked by the ever-familiar "industry sources." The Retailer only recently began selling notebooks this past summer, with a quiet release in select markets. Up until this summer, Wal-Mart had only offered notebooks on its e-commerce Web site.

As a point of comparison, Wal-Mart generates approximately $250 million in annualized revenue; Dell generates approximately $50 billion and HP generates approximately $90 billion. Wal-Mart has approximately 2,500 stores and 456 warehouse clubs (Sam's Club) in the US alone. It employs just over one billion people worldwide (800K in US and 200K overseas).

The retail giant is clearly aiming at Dell and is also attempting to elevate its profit margins in one of the fastest growing categories within the consumer computing space. The Retailer has become an economic force through its low-pricing policy and it will continue that policy in the mobile computing space. This move will further drive down notebook PC prices, particularly at the low-end.

Wal-Mart's RFQ set off a flurry of bidding activity from contract manufacturers such as Arima Computer, Quanta Computer, Compal Electronics, and Wistron Corp. Arima, who has reportedly won Wal-Mart's initial "test" order, lost HP, one of its largest customers, earlier this year.

Wal-Mart will enter the market by offering one or two SKUs initially, testing market and consumer reaction. One important question is how Wal-Mart will brand this system. Best Buy's effort at branding computers resulted in the brand name of VPR Matrix. A move that duplicated a well-known strategy by Retailer Costco which brands its house brand products with the "Kirkland" label, thus making customers think that Kirkland is a separate entity from Costco. ARS would be surprised if Wal-Mart branded the system with the "Wal-Mart" and thus ARS expects that Wal-Mart will create a third party brand name for the new products. The Taipei Times is reporting that Wal-Mart will use the brand-name "Avail" for its notebooks. Detailed specifications of the Wal-Mart branded notebooks are not known, however, Arima manufactures systems using both Intel and AMD processors. ARS believes Wal-Mart will enter the market with a 15" system at a sub-$800 price point.

Possible configurations for the new Wal-Mart notebook will likely utilize either an Athlon XP or Intel Celeron processor with the following configurations listed below. In addition to the Celeron and the Athlon, ARS believes that a P4 configuration may also be possible.

Who does this impact?

Retailers such as Best Buy, Circuit City, CompUSA, Staples, Office Depot, Office Max, and Costco will be impacted by Wal-Mart's increasing efforts in the mobility space. The high-end of the notebook market will remain secure and will continue to grow for the major Retailers. However, sales of value SKUs (sub-$1000) will slip as customer's flock to Wal-Mart.

Bottom line - Major Retailers will lose sales of volume low-price SKUs when Wal-Mart offers branded notebooks. Major notebook Vendors, such as HP, Dell, Sony, and Toshiba, all need to pay careful attention to Wal- Mart's actions in the value segment of the notebook space.

HP and Toshiba are likely to be most impacted due to the fact that both manufacturers have a considerable focus within the low-end notebook market. Additionally, HP will likely be affected due to the fact that Wal-Mart is currently test marketing HP notebooks. HP was likely hoping that the Wal-Mart test of HP notebooks would result in Wal-Mart rolling out HP notebooks to all stores. However, Wal-Mart's new plan of providing a branded notebook puts those expectations into question. .

Dell's low-end notebook space (Inspiron 5100 and 1100) may be adversely impacted by Wal-Mart's offering of its own-branded notebooks. Dell exerts considerable resources to target the "average American" through television advertisements, newspaper inserts, and magazine advertisements; Wal-Mart's core strength is selling to the "average American." Wal-Mart's entry will force Dell to increase the visibility and reach of its already vast promotional campaign.

Bottom line - The good news for Dell, HP, Sony, and Toshiba is that Wal-Mart will initially (next 12+ months) only compete in the consumer value-segment. It will not compete in the fast growing high-end of the consumer notebook segment and will never be a corporate play. Critics will point out that Wal-Mart does not have any experience in the computer industry and that CE giant Best Buy offered its own-branded computer products (VPR Matrix) in the past and has largely given up on this project. Critics are correct on both fronts; however, Wal-Mart's financial muscle will enable it to secure very competitive pricing from the contract manufacturers. There is a reason all of the contract manufacturers are scrambling to win Wal-Mart's business, and that is each of the manufacturers understand the volumes that Wal-Mart will move. Wal-Mart's potential entry to the notebook space in early 2004 will be yet another driver that will increase sales and penetration rates of notebook PCs.

Aladdin Systems recently shipped Game On! Family Pack, Volume 1, a collection of six popular titles like Tony Hawk's Pro Skater 3 and realMYST. for hours of fun for the whole family. Game On! Family Pack's six fully-registered, top-rated titles are valued at over $120 for only $49.99. "The Game On! Family Pack is an outstanding assortment of games for the whole family," said David Polzine, Product Manager. "This collection brings Mac users top-rated games at a great price and will bring their families hours of enjoyment."

Sony has launched a portable, personal digital video player under its Vaio brand in Japan. The GigaPocket PCVA-HVP20 features a 20GB hard drive, enough to hold up to 31 hours of programming - if you're pretty frugal with image quality. The GigaPocket is a compact 12 x 8.4 x 2.8cm (4.8 x 3.4 x 1.1in) and sports a 3.5in backlit TFT LCD screen. The unit supports the MPEG 1 and MPEG 2 video compression standards, and it's the former, running at a 1.41Mbps compression rate) that yields those 31 hours of program storage. The 300g (10.6oz) device also supports (sort of) AVI (DV) and WMV format video, but these have to be sourced separately and transferred to the GigaPocket via its USB 2.0 connector. These two formats are converted to 4Mbps MPEG 2 - a little short of DVD quality - on the fly as they're sent over from a PC. Alas, the GigaPocket can only handle four hours of programming per file. And you need to add a separate TV tuner module to the device to allow it to operate without a PC as a content source. Built inside the HVP20 is a rechargeable Lithium Ion battery offering around four hours playback time. The device also offers a TV out connector.

THQ and Sega announced a co-publishing agreement through which the companies will release two new Nintendo Game Boy Advance adventures based on one of the biggest videogame icons of all time, Sonic the Hedgehog. The games are scheduled to ship in North, Central and South America in the first half of 2004. The companies previously released two other Sonic-branded games for the Game Boy Advance that boast combined sales of approximately a million units. Sonic Battle, the first title planned for release under the agreement, is scheduled to release in North America in January 2004. Coinciding with Sega's new Sonic Heroes console release, Sonic Battle will benefit from Sega's multi-million dollar Sonic Heroes marketing campaign. The companies are also scheduled to release Sonic Advance 3 in 2004. "Sega's uncompromising approach to design innovation and game quality have captivated audiences of all ages across every viable gaming platform," said Brian Farrell, President and CEO, THQ.

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List is based on units sold by twenty-three channel partners. For more information, please contact The NPD Group at (703) 376-6226.

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COMMUNITY Changing Channels Are we becoming Japan? – Part 3 By ChannelMedia Columnist Steve Cross

For a while I’ve been looking at changes in the distribution model to get insights for clients, and help them position for the future. Some of that insight I’ve shared (remember, I save the best stuff for paying clients). A couple columns addressed how the consolidation of outlets, diminishing numbers of channel jobs, and growth of mega- and hybrid- distribution/firms are affecting the way products go to market in North America. That was contrasted with how products go to market (through channels) in Japan.

In Japan there are “front-end” distributors who localize package, republish, and prepare software and hardware products for launch. They sell the stuff off to bigger “box-mover” distributors. Then the box movers sell to an ever-decreasing series of resellers. Sounds familiar, huh?

Allow me to briefly continue to refresh your memory. It seems like republishers and hybrid reps with distribution agreements and pre-assigned/reserved SKUs have made a huge dent in the previous models. Much of that is fueled by the inability to the big distributors to add and manage new small; products. You may ask why this would be a bad scenario. Well, it keeps little guys away from the market, and raises the bar too high for new players. Is that bad? Yes, indeed. As most of the innovation in our industry comes from the bottom, rather than the top, if these new products don’t see the light of day, all of futures in the business will be diminished.

There is an old story about AT&T before the break-up 20+ years ago. AT&T was planning to introduce broadband sometime in the 2020’s, another 15 or so years from now. Only by breaking the monopoly up and allowing the little companies to fight it out were we able to build this great Internet infrastructure that allows 37% (as of last month) broadband access.

We’ve seen the growth of these hybrid people to fill the niche of bringing new products top the distributors while still managing the products on the hybrid side of the fence, sort of unburdening the transaction for the distributors. One more level of intermediation that really makes sense and allows the system to function at perhaps a higher level. Look for more. And at each step of the intermediation, a small amount of margin gets drained off.

These are not bad things. If products are managed better before they hit the disty, if products and companies are prepared better for the market, if new technologies continue to flow, is that bad? Heck no. That’s good stuff and it will keep us all working. I like that.

Contact Steve Cross at steve@crosschannel.com, 702-492-7472.