Tuesday, 25 June 2013

Digital Keys Format Wars?

Do you remember the video format wars between Beta and VHS?  

In the late nineteen seventies and early nineteen eighties there was intense competition between the Betamax and VHS video cassette and recorders for what would become the accepted norm in the home video market.

Of course anyone who was around in the nineteen eighties knows that VHS emerged as the winner.

Over the last one hundred and fifty years, the Beta vs VHS ‘video format war’ is only just one example of many ‘format wars’. It is also probably the most famous one. You can read more about it at the wiki page here

Sony's Betamax

So what has the video format wars got to do with Digital Keys? Is there a format war going on with Digital Keys at the moment? Who cares if there is? What does this have to do with anything, anyway?

The video format war is a highly scrutinized event in business and marketing history, which lead to a plethora of marketing investigations into why Betamax failed.  If you are interested in business, marketing and investing, then you might be interested to learn more about the ‘video format wars’, and to see if there are any analogies here with digital keys.

On the other hand, if you are a consumer, according to this blog,  you probably don’t care about the tech behind the new smartlocks/digital key products coming out onto the market.

August (in the left corner) vs Lockitron (in the right corner)

Actor Ashton Kutcher and the CEO of Yahoo, Marissa Mayer, are two Digital Keys investors who might care about what’s going on in the digital keys space. That’s because they just invested in a car sharing company called Getaround. According to reports ‘they were impressed with Getarounds car kit which allows car doors to be unlocked by a smartphone’ see more here 

Plenty of other investors have been getting into the digital keys space lately – they range from the founder of Wordpress  who invested in August, to Mark Cuban, who invested in Unikey, right through to the car companies General Motors, Ford and Hyundai. Recently these car companies announced they will be replacing carkey fobs with Digital Keys – e.g see here

CEO of Yahoo Marissa Mayer, and is that Ashton Kutcher in the red onsie with the green hat?

So returning to the video format war analogy, we know that the Japanese company JVC was the biggest winner, and Sony’s Betamax was the biggest loser.  JVC quickly licenced their VHS technology to 40 companies , whilst only 12 companies used Sony’s Betamax.  According to a BBC News report, by the end of the eighties, around 50% of homes in the UK had VHS recorders. According to a Documentary on the Discovery Channel, by 1986 the home ownership of VCR’s had swelled to around 33 per cent in the USA. That’s over 120 million units sold in the UK and the USA alone.

There were a few reasons offered as to why JVC and VHS won the format wars. These centre on VHS having a longer recording time, it had a better electronic timer, it was cheaper, and the Video Shop rental market adopted VHS. Although it was argued that the Betamax had a better quality picture.  So perhaps it’s fair to say;
“that a cheaper, more user friendly format, with a complimentary product  supported by another industry, won at the end of the day”.

The first thing we need to know if perhaps there is a format war looming in the digital keys space is the most obvious. Of course that is “what are the formats here?”

Let’s start by looking at the two successful Digital Keys offerings going around right now. The first one is called ‘August’. August took 10,000 pre-orders in 24 hours. A similar product offering called ‘Lockitron’ took over 14,000 credit card orders in 4 weeks totaling over $2.2 million.  According to August’s website, the only clue they give away about their format/tech is this; ‘August relies on the same secure communications technology used by financial institutions for online banking’, and ‘it does not rely on a wi-fi connection’. Lockitron on the other hand, does use wi-fi. According to their website, Lockitron also uses the same security protocols as used in online banking.  All the car sharing companies digital keys kits use wi-fi too. The world’s number one lock manufactuer Assa Abloy, have a digital keys product which doesn't use wi-fi. (see here) 

August, Lockitron, and SEOS, have promised shipping later in 2013. The car-sharing companies car kits are not yet available to the public to buy(if you get one installed, and then take your car off the car sharing market, they take the kit back). The car companies digital keys locks, Hyundai, GM, Ford etc, will be coming out in 2014, and 2015. Perhaps as they all get closer to becoming readily available, we will learn more about their tech/formats, and then begin to see if there is indeed a format war looming.

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