The Business of Technology: Creative Labs
by Ryan Smith on October 2, 2007 5:00 PM EST- Posted in
- Bulldozer
Creative's Technology
So what has brought upon these changes in revenue and Creative's overall business problems? The answer to that lies in what's been going on with their technology and individual product market share.
Earlier we called Creative the king of sound cards until recently, much of their business woes stems from that loss. Creative's history is one founded on the back of the Sound Blaster hardware and the Sound Blaster name, creating a problem for Creative in having all of their eggs in one basket that they have been trying to solve for years. All told, Creative hasn't had a lot of luck spreading out their business and doing well; various efforts like graphics cards and DVD-ROM drives never panned out. Of the few things that have panned out, Creative's major consumer product lines have settled in as the following: portable media players, sound cards, webcams, and speakers.
Since sound cards were Creative's biggest business at one point, it has been Creative's biggest loss. Onboard audio has gone from a joke 10 years ago to how the vast majority of computers today handle audio, and it has been Creative who has suffered the greatest losses from that. The Live and Audigy series have both been bonafide successes in terms of sales, but never the less sales are slowing and the X-Fi likely won't be nearly as successful. The fact of the matter is that the consumer sound card market is on its last leg and the possible user base for such hardware has shrunk to professionals and gamers, and that's it.
The X-Fi will likely be the last significant feature-heavy sound DSP to be released by anyone, and it will never match the kinds of sales Creative has seen with earlier products. The final nail in the coffin will be Windows Vista, which as we have discussed in our review of that operating system, under normal circumstances runs the entire audio subsystem in software, reducing the need for a sound card down to a DAC to handle the digital/analog conversion. Creative's own troubles in writing solid Vista drivers for their sound cards hasn't helped matters either, but this has only hastened the inevitable. The sound card is dead, and it isn't coming back.
So what is Creative's leading product with the demise of the sound card? As we saw in their financials, it's now portable media players, a growing market but unfortunately for Creative it's one that they're getting slaughtered in. Prior to the arrival of the iPod, Creative was vying for the top of the portable media player market next to the now-defunct Rio brand, leading to the infamous Slashdot quote about the iPod's release: "No wireless. Less space than a nomad. Lame." Now Creative is struggling in a market where it was one of the first players.
Apple has the vast majority of the North American market for obvious reasons, but #2 tends to be shocking to most people: SanDisk. With Apple's main focus on the mid-to-high end MP3 player market, it has left an opening for cheap media players that SanDisk has been able to fill. Meanwhile both SanDisk and Apple have kept Creative and the other competitors locked out of the market, with Creative taking the #3 spot with less than 4% of the market. Creative's problems are further compounded by Microsoft at #4, who is more than happy to lose money on the media player market for now, and previously backed the PlaysForSure technology that Creative uses for DRM. It should be noted however that Apple doesn't have this kind of penetration in Asia, but as there are no reliable statistics on sales in most Asian markets, we can't ascertain what Creative's exact share there is, but it's believed to still be well below #1.
As a result of all of this, what little share of the market Creative has is almost entirely composed of the near-commodity market, save the small number of "anything but Apple" sales. Their Nomad and Zen lines do not have any significant brand recognition, meanwhile SanDisk can build & sell flash based media players for less than Creative. What little bit of the near-commodity market Creative does have a strong foot in is hard drive based media players that focus on video, and even this is at risk of being undermined by Apple now that they have a full-screen iPod to compete. In spite of all of this the majority of Creative's revenue comes from portable media player sales, but fighting on the near-commodity market means they will never be able to attain much of a profit with it.
Creative's third market segment, webcams, is more or less the same story. Webcams are a commodity - there's a lot of competition and not a lot of money. They may stay in it, but they'll never be able to repeat their most profitable days relying on webcams.
There is one bright spot for Creative however, and that's speakers. In their efforts to branch out Creative picked up Cambridge Soundworks in 1997, and their speaker division has continued to perform well. Creative is only dealing in computer speakers which limits their overall market and they face stiff competition from the likes of Logitech, but this market isn't quite a commodity market like Creative's other major markets. In fact as a percentage of revenue the speaker division is nearly 20%, which is itself nearly twice as much as it was 2 years ago. We'd expect Creative to be pushing their speaker products harder as the sound card market finishes crashing, since even with the integration of audio consumers still need speakers.
Finally there are all of Creative's other markets, which we'll touch on briefly. Creative continues to sell various peripherals, such as mice and routers, but most of these are low-volume products that are simply rebranded products form other suppliers. In fact most readers have probably never seen these products in a local store; Creative's minor product lines are almost exclusively limited to the Asian markets. The profitability from these operations is reportedly decent, but it's not something that Creative can win at in the international markets.
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shortylickens - Wednesday, October 3, 2007 - link
Creative would have done better to work with onboard audio instead of fighting it so hard.Instead of trying to convince a small portion of the market (gamers and enthusiasts) to buy a $100 add-in product, they should have been putting $20 audio chips into motherboards, and reaching 100% of the market.
Thats the standard to surviving in business. You either sell a handful of very expensive products to a few customers, or you sell a buttload of cheap products to many customers.
When the overpriced, low-sale items (Live, Audigy, X-FI) werent keeping them afloat, they should have switched tactics.
MadBoris - Wednesday, October 3, 2007 - link
They are being put out of audio card business by Microsoft, simple.I cannot understand how people can so easily swallow what they are fed.
Somehow the great variation of OEM onboard sound cards with minimalistic drivers (written in some third world closet) is going to be a benefit to all of us.
Now you will have 10-30 variations of onboard sound cards in crrent platforms all competing to be the lowest priced $1.25 chips on future mobo's. They will have their own idiosynchrocies just due to the extreme variety and poor minimalistic drivers. Instead of a HW MFR's bearing the major burdens, it will be the API's now, but mainly Microsoft that will directly control the future advances in sound processing. Furthermore, MS pushing their software based sound API's for gaming like XACT is really just a shift to move PC devs to their console market (part of their device in every home goal).
Sorry, I'm not buying the whole Vista is improving on the auditory benefits of humanity. Creative may not have been the greatest thing since sliced bread in people's minds, but their was possible competition. MS's directsound API blew really. But MS 'really' handling it all now is not an improvement to me. Just another move MS has made in putting their foot in as a door stop and making sure they dominate/control an area, unfortunately they are very slow in even stealing and implementing other peoples ideas, let alone doing anything really well on their own.
I used to slam people who were MS conspiracy theorists but eventually you have to see what is really going on with their motivations a seeing a few moves ahead. The new wddm driver models and DX API's was another step in MS placing in a door stop with future GPU design decisions being directly controlled by them, just more goals of isolating.
I would like to see Anandtech take a hard nosed look at MS business strategies, not just at a company being forced out of business, now that could be an article. :)
BitJunkie - Wednesday, October 3, 2007 - link
They aren't being put out of business by MS. They are being put out of business by an inability to change and innovate because they are still in the mindset that "creative labs IS PC audio". All they had to do is start to develop HD Audio compliant solutions with all their funky hardware DSP effects and they would have been in a very competative position.They didn't innovate, so they aren't competative. Worse than that, they knobbled the competition, sat on the technology and stagnated the PC audio market so we as consumers are in a worse position. Thank god for HD Audio - I just hope someone starts making decent HD Audio add-in boards to extend the capabilities under Vista.
All MS did was fix a fundamentally crap driver architecture and audio stack - what I don't understand is why a company making it's business off of the back of one computing platform was arrogant enough to think that they could survive for long by ignoring that change.
Zak - Wednesday, October 3, 2007 - link
"inability to change and innovate because they are still in the mindset..." - does this remind anyone of RIAA? LOL...Z.
Reflex - Wednesday, October 3, 2007 - link
I'm guessing you are not a developer. Your post seems to ignore some very basic realities. UAA is not new, it is the OS level implementation of the Azalia/HD-Audio spec, and its a standard that is open to any developer on any platform(including Linux). It is not MS owned. Every single audio chip maker of any consequence signed on willingly with the single exception of Creative Labs. They all agreed that it would reduce development costs, increase platform stability(regardless of platform) and increase audio quality. Once again, the only dissenter was Creative. I understand your concerns, but honestly they are not reflected by anyone credible in the industry."Now you will have 10-30 variations of onboard sound cards in crrent platforms all competing to be the lowest priced $1.25 chips on future mobo's. They will have their own idiosynchrocies just due to the extreme variety and poor minimalistic drivers."
Just to address this issue specifically, have you plugged a flash drive into a computer recently? How about a digital camera? Mouse? Keyboard? All of these devices use the same concept as UAA, namely a minimal class driver that allows OEM's to add extensions to take advantage of individual features. The end result is that these devices 'just work' for all basic functionality out of the box without a specialized driver required. None of them have the capability to bluescreen the OS, nor do they compromise security via poor coding practices. This is the future of drivers on the Windows platform, and it is a major part of why each successive OS is more stable than the previous version. I would not be suprised to see network drivers head this route soon. And yes, the specs for all of these things are open and generally not controlled by MS(Intel is typically the prime mover actually) and are also implemented on other OS's, including OS X and Linux.
These advances benefit everyone. Unfortunatly Creative could not see that. All they had to do was focus R&D into making a truly beneficial programmable DSP for audio and they'd have had a real winner, but their unwillingness to do so has made them irrelevant.
MadBoris - Wednesday, October 3, 2007 - link
Not a sound developer. No developer is expert in all technologies.While I admit I lack the expertise to see all the underlying facts of the case.
My concerns are purely on the surface and no self serving MS articles or videos will illuminate me to the real facts. Just on the surface alone I see issues, but we will see how it will all play out. It will likely affect different segments of the PC differently with some good and bad.
As to minimal class drivers, the only problem is that they provide minimal functionality out of a given device as i understand it. There is no room for a hardware MFR to expose new functionality unless it is adopted by everyone and as a standard. It removes the beauty of what R&D can do in moving technology forward, a minimal class driver is an unfortunate direction. Overall stability can never be attained, MS themselves consistently prove that, but their are other ways to move in that desired direction rather than a minimalistic approach. Feel free to correct me if I am mistaken, since you appear more versed on the subject of the direction of drivers.
saratoga - Wednesday, October 3, 2007 - link
I think you're seriously confused about how the industry is moving forward. DOS is long dead. You're not supposed to be doing things like sound effects in a driver on a modern system. Sound was one of the few areas that got a free pass from MS/Apple to stay in the stone age when OSes were dragged into the modern era. This led the the ridiculous number of problems with sound drivers over the last 10 years.
Moving this stuff into user mode is absolutely the way forward.
Which is not a justification for using unstable or shoddy methods. You're trying to say that since something cannot be perfect, theres no sense in improving it. Thats wrong. If something is imperfect, improving it is often a sensible course of action. Its also why we don't run Windows 98 anymore.
Well, theres the Windows 2003 approach where the entire audio stack is just turned off rather then risk it taking down the machine. I don't think thats a better solution. Other then that, theres not a whole lot you can do. If you're letting people run enormously complicated code in drivers, you're going to have a lot of problems. Its really that simple.
And anyway, you keep implying that something important is being lost here. I really don't agree. This is the way forward if we want to have multicore and GPU-coprocessor accelerated sound. These are worth the cost of making the couple percent of the market who have an XFI install the OpenAL comparability layer since it will open the way forward for far more stable and far more advanced positional sound engines in the future.
BikeDude - Thursday, October 4, 2007 - link
First things first: I wholeheartedly agree on the stability issues. Creative has proven, time and time again that they cannot be trusted to write a driver that doesn't seriously compromise your system's stability. (mind you, nVidia are fast approaching that stage too IMO)
But I am curious how you so categorically can state that moving the audio driver into user mode aids multicore accelerated sounds?
I do not know the exact details, but if you look at Mark Russinovich's book "Inside Windows 2000", he explains that the GDI was moved in to the kernel (from user mode) because that was the only way they could see their way of improving multi-core performance. Prior to NT4, graphics performance was actually hurt by using several cores (or CPUs rather). Photoshop used to run slower on a dual-CPU rig.
But of course, the Windows team are more aware of this situation than I am, so hopefully they have given this subject a lot of thought. Although I suspect/fear that the stability argument has been fairly heavy, because... Creative's drivers plain suck. They are a menace to any computer. From what I have seen, only a handful people are skilled enough to write kernel device drivers and none of them have ever been employed by Creative.
(FWIW: I distinctly remember the time when NT4 introduced the changes I refer to, as well as all the cries of "OMG! they moved the graphics driver into the kernel! Total mayhem will ensue!" -- completely missing the obvious: The third-party graphics driver from ATI et al, was already running in the kernel, starting with NT 3.1! But GDI wasn't, and without GDI Windows pretty much doesn't function, so it has to be rock solid and has a pretty good track record)
As for Windows 2003 -- the audio stack is turned off by default. You can easily set Win2003 up as a gaming OS, just like XP. (I've used it that way since before its release) But certainly, by default it runs without any fancy features enabled. With good reason, e.g. nVidia quietly dropped PAE support after 79.11. After version 79.11, stuff stops working when you have 4GB main memory+. (32-bit Windows 2003) I can easily imagine similar issues arising with drivers such as the ones Creative puts out.
saratoga - Thursday, October 4, 2007 - link
It lets developers write sound code without writing drivers. Pretty simple really. It also allows for easy development of middleware for doing accelerated sound.
GDI was moved into kernel mode so that the system didn't have to switch processor modes over and over again just to draw simple GUI elements. This has nothing to do with GDI.
Photoshop is not a driver. I don't know why you're bringing it up.
Yes, but then you would incur the same stability issues as other versions of Windows.
BikeDude - Friday, October 5, 2007 - link
[quote]Photoshop is not a driver. I don't know why you're bringing it up.
[/quote]
Because back then (NT 3.51) this was the side-effect of having GDI in user mode. Moving GDI into the kernel was mainly done to increase performance on SMP rigs. (according to Mark's book)
[quote]Yes, but then you would incur the same stability issues as other versions of Windows.[/quote]
...provided you use an audio driver from a not-too-bright OEM. Not all of us still use Creative you know... :P (granted, my CMedia chip triggers a BSOD if I enable EAX2 in "Medieaval Total War 2", the situation is nowhere as bad as it was with the Creative drivers I have used in the past)