The Business of Technology: Creative Labs
by Ryan Smith on October 2, 2007 5:00 PM EST- Posted in
- Bulldozer
Closing Thoughts
So between their business and technology, where does all of this leave Creative? Simply put, it would be difficult to argue they're not in a very bad situation.
On the technology side, almost all of their markets are either commodities or dying, and they're not the market leader in anything any more. Some businesses exist and thrive solely as a supplier of commodity components, but Creative isn't that kind of company. They need to be able to take a major part in a new high-profit industry to replace what they've lost from the sound card market, and they've yet to find something that can sustain them for long. Or to put things in another perspective: we don't see them as having the technology needed to carry the company.
On the business side, they're already in trouble from their technology issues. Their stock price is near record lows and they haven't been able to generate enough revenue to cover costs in a couple of years. Their saving grace at the moment is their Apple settlement, which has helped them turn a profit for this year at least. In the next year or so they may be able to take a piece of flesh from all the other major portable media player competitors, but there's a finite number of targets and as one-time payments the money won't last forever. For the time being Creative's business side can hold up the company, but it can't do this for very long, they need improvements on the technology side to bring the company back in to balance.
Looking at their research & development expenditures however, it paints a conflicting picture. A company in need of technological rejuvenation generally needs to be spending a lot on R&D, and this isn't the immediate case. FY2007 R&D spending was $64mil, compared to $77mil the year before and $82mil the year prior to that. We would have to go back to FY2003 to find a time they spent less on R&D, and that was one of their boom years. $64mil is not a small chunk of change to be spending on R&D (it's some 7% of all revenue) but it still leaves us wondering if they're going to be able to develop something to get the company out of its current rut. R&D spending only gets harder as revenue continues to drop.
In closing, it's too early to even be hinting at doom & gloom for Creative yet, but by now the first warning light has lit up. Things are not good for Creative right now, but there's a lot of time left. But can the company survive the dramatic shift required to make it? Only time will tell.
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EarthsDM - Tuesday, October 2, 2007 - link
Sorry, I meant to say 'sooner' not 'soon.'tacoburrito - Tuesday, October 2, 2007 - link
I bought the Creative Rio when it first came out and loved it. Lent it to my grilfriend but she lost it. Bought another Creative mp3 player and it worked even better. I also bought a couple of cheapo Creative soundcards to install on Pentium 2 and 3 systems and they worked great. I'm in the process of getting the Creative Zen player.I have great experience with Creative products and I don't understand the hatred towards the company. Is all the hatred because of what they did to Aureal?
trelin - Tuesday, October 2, 2007 - link
No, it's a combination of various things they've done (and continue to do). True, for some people like me Aureal alone was enough to begin boycotting the company, but a large portion of frustrated users (in the soundcard market at least) stem from product support (eg, driver quality issues) and exorbitant pricing due to their monopoly of the EAX standard. I'm not qualified to comment further on recent quality because a RivaTNT videocard was the last Creative product I've owned.A recent (some would say rather small) example was charging for Alchemy for the Audigy. I agree that it is within their rights to charge for additional software to work with Vista (they made no compatibility claims on the Audigy regarding EAX support in Vista), but charging people an extra $10 just to continue using a feature does no breed happy customers.
As to your own experiences, I don't disagree on their other markets. I had an old Cambridge 5.1 system that worked just fine, and my friend had a Rio that I rather liked. My RivaTNT based Creative card was fantastic; I had terrific success using their Unified driver (a 3dfx wrapper).
yyrkoon - Tuesday, October 2, 2007 - link
I think the biggest part of their problem is that with the advent of multiple core CPUs, and onboard audio, people are starting to realize that discrete is not realy a must, not even for an enthusiast. Audiophiles would probably buy another brand already.It may behoove them to sink their future into chipset/onboard audio, with perhaps a discrete line as well, to placiate the people who just cant get it into their heads that discrete does not nessisarily mean better. Whatever money cow they find to keep themselves afloat, they better do it fast. Also, it sounds as though this company is led by 90 year old men, who think that change is *bad*, it would not hurt them to have a few people who thought 'outside of the box'.
Anyone remember who 3DFx was ? . . . *besides* the people at HP . . .
Zoomer - Saturday, October 6, 2007 - link
I hate to say this, but Realtek is hardly excellent.Trashy, perhaps. Try running games on it. It's totally broken.
Axbattler - Wednesday, October 3, 2007 - link
What has the advent of multiple core CPU have to do with audio? If you are talking about system resource, then frankly speaking, the difference between discrete and onboard has been pretty insignificant long before the first dual core CPU.Personally, I do not like Creative much as a company (mainly due to the Aureal stunt - and I also think they've not put enough innovation over the years).
But as an audio and computer enthusiast, I find that the Elite Pro is still a viable choice. First of all, onboard sound cards, as much improvement as they've made over the year, still sound bad on demanding headphones. The Beyerdynamic DT880 honestly sound like a cheap pair of headphones when plugged on an onboard sound card, and even an Audigy 2ZS (which is hardly audiophile grade) would make the listening more enjoyable. The X-Fi line fixes a number of issue with the Audigy 2, including the infamous re-sampling issue.
The Audigy 4 Pro, Elite Pro (not sure about previous sound card in their Pro line) provide the DAC you'd find in entry level pro card (Elite Pro is pretty much an EMU-1212 with the DSP). The issue with Pro cards is that they often geared toward recording, so you end up paying for lots of inputs you might not use. Of course, audio enthusiast could always go for an external DAC if they want even better. But it cost more, takes more space and you lose the DSP unless you had a low end X-Fi as transport.
That's twice I've mentioned the DSP. People may think that if you are serious about audio, then you should not care about any form of 'sound processing'. And yes, I am not keen on any form of 'processing' when listening to music. I could not care less about the 'Crystalizer'. But I simply can't say the same about CMSS when watching movies through a good pair of headphones. I've yet to find any software or hardware processing that has given me more satisfying surround sound on my AKG K701.
On a side note, I am slightly surprised that neither Aureal nor E-MU was mentioned at all in this article.
Calin - Wednesday, October 3, 2007 - link
I remember them. My first real touch with 3DFx and Voodoo was in some game, a comparison between running on 3DFx Voodoo 2 and a Riva TNT PCI (on a top of the line Pentium II 300MHz). There was little difference in quality and speed.Guess I've lost the golden 3DFx years
Reflex - Tuesday, October 2, 2007 - link
Having worked with Creative in a professional capacity at multiple times in my career I have a few observations of my own:- Over the years Creative has refused to embrace new technolgies and trends. This includes PCI(had to buy Ensoniq to have a PCI product at all), PCI-E(offered poor excuses about latency to avoid having to release a new product), ACPI(poor driver and firmware support) and now UAA(Vista standard).
- Along those lines they have also refused to move into areas that are seemingly obvious for fear of cannibalizing their add-in board market. There is little reason that Realtek is ruling the on-board sound market, that could just have easily been Creative considering their background. Instead they chose to put on blinders and pretend that on-board audio could never compete with an add-in card. They may be correct in the absolute sense, but the average user does not give a damn. Back when it would have mattered, a Creative branded AC'97 solution with some enhanced drivers would have gone a long way, now no one would care.
- Absurd 'fanboy' attitude towards certain companies. The CEO of Creative has a passionate hatred for Microsoft. This is why MS had to develop its own drivers for Windows 2000/XP for the SBLive, and why there are no drivers for their products in Vista. Likewise, they have repeatedly had poor dealings with other manufacturers, and have treated competitors in ways that were they not a Singapore based business they would have been prosecuted in the US or EU for(Aureal is the obvious example, but they did the same to numerous smaller companies in other markets). Business is dispassionate, you do not refuse to be part of a standard(UAA) simply because you dislike the standard bearer when they hold 95% of your target market. You do not foster bad feelings among the larger market, making it unlikely that others will work with you, at some point you may need some allies.
As far as I and many in the industry are concerned, Creative is reaping what they have sown. They were lucky enough to set a standard and they rode that single success for years based on their brand name alone. Even now there are plenty of oppurtunities in their original market for them to revitalize thier success(UAA, for instance, can be paired with a powerful DSP and it will use it for accelleration), but it is doubtful that Creative will capitalize on those oppurtunities, they would rather go out of business than do things in any way other than their own.
So long Creative, I'll always remember you as the guys who gave me great sound in Doom, but I won't shed a tear for your passing. In the long run, Creative will perform its greatest service by serving as an object lesson for other companies on how not to do business.
maverick85wd - Wednesday, October 3, 2007 - link
Excellently put.I will also not be displeased to see them go, I have a Zen media player that had a screen die after four months of use. After trying to make me pay $20 for tech support (which I avoided by telling them I had already troubleshot the problem) they tried to make me pay another $20 for fixing my barely used defective player AFTER they had returned it to me. The whole situation was laughable. Either way, I will never purchase anything from them again.
Scorpion - Wednesday, October 3, 2007 - link
Yeah you summed up a lot of it.Creative's Motto for over the past decade: (which I coined for them)
"We don't innovate, we regurgitate"
I boycotted Creative back in 1998 with the last soundcard of theirs I purchased. A nightmare situation for drivers. Their drivers were terrible! And it was such a headache to even figure out the right drivers that you needed back then. With Aureal, and everything else... Just look at the PC sound market. Now look at the PC graphics market. Creative's undeserved monopoly on the market stiffled innovation for so long. We could have a rich PC sound industry right now I honestly believe if it weren't for Creative. Aureal was trying to make that happen. Creative didn't feel like competing, so they litigated them out of the market.
I hope you burn in hell Creative. Now I can stop looking at your ugly call center here in Stillwater, OK.