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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Reflex - Wednesday, October 3, 2007 - link
"My concerns are purely on the surface and no self serving MS articles or videos will illuminate me to the real facts."This is not a Microsoft standard, it is an industry one. Work on it began back in 1995 and was originally pushed by Intel and several laptop manufacturers looking for a way to make machines cheaper. The AC'97 and (rarely implemented) AC'99 specs were the initial results of it. HD Audio/Azalia(UAA in Vista) is simply the latest implementation. It has been ignored from the beginning by Creative, while endorsed by the vast majority of the industry, from motherboard makers to OS venders to sound card manufacturers. The videos that were linked merely explain the MS implementation of what is an open and free standard.
"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."
This is not true. The existing class drivers, as well as UAA, have the ability to be extensible. That means that while basic functionality is identical between them, special drivers can be created that expose additional features and abilities of the device to the OS. There is no real limitation here, and just as video cards can expose new functionality to game developers that are beyond the generalized DirectX or OGL API's, a device with a class driver can extend the interface for applications that wish to take advantage of it.
"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."
This is not really the point. The point is that when you have crashes you analyze what caused them and sort them into buckets to determine what causes the most problems. Microsoft has stated publicly that 97% of all OS crashes are due to third party drivers on their OS's. This mostly has to do with the fact that most drivers in the past have been kernel mode, ie: the operate at Ring 0 and as a result can take down the entire OS if they do anything wrong. The point of a class driver is that the kernel mode portions of the driver are developed by and the responsibility of Microsoft themselves, and that those class drivers provide a 'hook' that the third party can use to write a driver more specific to thier device, but where their driver operates entirely in user mode. This improves the OS in two distinct ways when a crash occurs:
1) If a crash happens that takes down the OS, it will obviously be a bug in Microsoft's portion of the driver, and they will own all of that code and be able to issue a fix on thier end without waiting for the third party. Furthermore, such a fix will improve stability for ALL devices of the class, rather than just that specific item of hardware.
2) If the crash happens with part of the driver that the third party developed, the OS will not go down with it, and in fact can simply restart the driver safely with no effect to the end user, no data loss, or anything else. The OS stability is not in any way impacted.
This also makes driver development cheaper since Microsoft is taking on the development of the most complicated portion of the development and taking responsibility for the results, plus users benefit from a true 'plug and play' experience, everything just works, even if its not utilizing all features(need the third party driver to enable everything).
Now in the previous two paragraphs, feel free to substitute 'Microsoft' for 'Linux' or 'Apple' since they also can and are implementing this system as well.
Hope that makes some things clearer!
Ryan Smith - Wednesday, October 3, 2007 - link
MadBoris, you're pretty much spot on. From everything I've researched in to UAA there's no real option for interfacing hardware with the audio stack; you have to use another API like OpenAL to do so. This does bring about that level of stability Reflex was talking about, but it effectively fixes everyone's hardware at a least-common-denominator (though it should be noted that you can bolt on software to the stack to do effects, Creative already does this in some places with Vista; it eats up even more CPU time though). This is great for RealTek and the like who are making low end gear, because now Microsoft is doing all the hard work for them and they can ship what amounts to a DAC with a few lines of code once they no longer support XP.Microsoft's vision going forward is that all audio effects will be done in software. For example, a game like BioShock will build or license an audio engine (FMOD) that can do all of these effects we've come to expect via software, then Vista lets the game see each speaker to write out the appropriate hardware. Good processing is expensive (the X-Fi and its 51mil transistors isn't just sitting on its butt), so what we get today isn't very good processing.
Things may improve with more processor power. They may also just stay the same while companies focus on graphics over audio.
BitJunkie - Wednesday, October 3, 2007 - link
So how did we end up in this position? What prompted MS to be so heavy handed (or radical?) in their approach to changing Windows audio? There is no major advantage to MS in dictating things in this way that I can see - other than stability.There has to be some reason for the Microsoft Azalia / intel HD Audio standard becoming dominant, what exactly was Creative doing or not doing - with their defacto monopoly on gaming audio? All interesting questions in my view. Would be good if anyone could shed some light on them.
I can't help but feel that as consumers we've lost out because of Creative's business practices and attitude - maybe I'm being unfair in that. Ultimately though Creative have to carry the can for where they are at present.
Reflex - Wednesday, October 3, 2007 - link
"From everything I've researched in to UAA there's no real option for interfacing hardware with the audio stack; you have to use another API like OpenAL to do so."This is explicitly not true. UAA does allow flexible DSP's to be developed for hardware accelleration. Re-read the spec if this is the indication you got.
"Good processing is expensive (the X-Fi and its 51mil transistors isn't just sitting on its butt), so what we get today isn't very good processing."
First off, no, its not expensive. The reason the X-Fi is 51 million transisters is because it is a software designed chip. That is a notoriously transister intensive method of designing a chip, and they have done little manual tweaking to reduce its transister counts. This is one reason that on the surface video chips appear to be more complicated than CPU's, but ask designers of both what they think and you'll find that GPU's aren't even in the same league. Creative went cheap on the design process and the result is that their chip is transister heavy.
Secondly, reviewers of Bioshock who tested it on Vista noticed that the sound was exceptional. I would suggest looking into that. It really had no serious issues although it did have a bit of a perf hit(but this was mostly due to audio drivers not being mature).
BikeDude - Wednesday, October 3, 2007 - link
At first I thought "great, let us see what is going on with Creative then", but the article left more questions than answers.I would love to learn why Creative's drivers "suck" under Vista. I can't remember seeing an article explaining how Vista's audio stack works, nor why hw acceleration is less important.
I also see many commenters here who say MS killed EAX. How so? There are plenty of existing games supporting it? E.g. in BattleField 2, to get an echo effect inside a warehouse, you are pretty much limited to the X-Fi as other EAX implementors don't go far enough. (at least that used to be the case)
Instead of answering such questions, Anand presents us with a "why buy/sell Creative stocks". Honestly, I could not care less about the stock market at this moment... :P (not exactly stable at the moment, now is it?)
Zak - Wednesday, October 3, 2007 - link
"a company being forced out of business" - CL is getting the taste of their own medicine...Z.
MadBoris - Wednesday, October 3, 2007 - link
I was a real fan of Aureal back in the day.I am good with that, what goes around comes around.
I just don't like the way it came around with MS drawing the line, MS is a great chess player thinking many moves ahead, where it's difficult to see where they are going.
BitJunkie - Wednesday, October 3, 2007 - link
MS did a lot of work behind the scenes on Vista that changed the way audio is handled. For those that are technically orientated and can understand pretty techy chat there's a good video here: http://channel9.msdn.com/ShowPost.aspx?PostID=1468...">http://channel9.msdn.com/ShowPost.aspx?PostID=1468... on the vista audio stack.For a higher level overview, there's a good video here: http://channel9.msdn.com/ShowPost.aspx?PostID=2155...">http://channel9.msdn.com/ShowPost.aspx?PostID=2155... in which the move from AC'97 to HD Audio (Azaelia) and the requirements for hardware design and driver programming are discussed. You can see that a lot of effort was focused on routing circuits on PCBs to avoid noise and to design hardware to minimise interference. Sounds like an OEM gave Scoble a call and bitched about the Vista logo program back in 2005 - regarding the audio stack perhaps.
It's all MS "propaganda" but gives a good insight in to their design philosophy. It also gives a better understanding of why Vista is a big step forward.
Christobevii3 - Wednesday, October 3, 2007 - link
How can you only blame the market?First up creatives pricing sucks. Even an entry level card is nearly $100 on the x-fi or was when i looked. So what did this $100 offer me?
1. A sound card that can't do dts encoding for games to my 5.1 receiver.
2. Drivers that are worse than a steam update
I haven't used a creative card since their sblive in 1999 because of the drivers. It worked ok on an fic az11 but when i upgraded it crackled like hell. But not only that, when i tried to update the driver to fix it, it hard locked the os but even safe mode couldn't uninstall the drivers. The next setup of trying to get it to work failed and the drivers had grown to roughly 60MB. So I gave up and just dealt with onboard sound.
Now, I have an HT omega sound card and love it. The drivers only problem is the mic boost button has to be rechecked on startup!!! Not only that but the drivers are like 15MB 8 years later after creatives and i can do dts output to my receiver in realtime. Interesting that the $60 sound card i purchase has now gotten so popular that it is $80, but also that it uses higher quality solid state capacitors where an equal creative has old style ones suseptable to rotting out.
Last but least, screwing over aureal and then not supporting a3d. Fuck that.
cosmotic - Wednesday, October 3, 2007 - link
I can't believe no one has mentioned Sensaura yet. Its another company, like Aureal, that had a superior product which Creative bought for their IP.Sensaura produced software that let other sound card manufacturers take advantage of A3D, DirectSound, OpenAL, and EAX 1 and 2. For years third party sound card manufactures have had this same list of supported APIs without adding new versions of EAX, most likely because Creative now owns them.