As mobile phones take on more capabilities, the consumer electronics (CE) industry is left seeking alternative ways of keeping its devices relevant. Especially in tough financial times, CE manufacturers have been hit particularly hard as consumers evaluate whether a device that does a number of functions well enough supersedes the need for a dedicated – often expensive – device that performs one function exceptionally well. Vital to CE vendors’ future success may be the ability to offer seamless connectivity but without adding another service plan to consumers’ stack of bills.

According to a recent ABI Research study, mobile Internet devices (MIDs) combining a function like a camera, media player or navigation with wireless Internet access are most likely to succeed as consumers increasingly expect a constant Internet connection. This success will only come if CE manufacturers can couple a device with a business model that users will adopt – and quickly.

“All of a sudden, [CE vendors] are struggling to find ways to stay relevant and keep their product shipments up,” said ABI research director Kevin Burden. “Going along with that same theme, we’re seeing an expectation on the part of consumers – the Internet is very prevalent right now, and there are so many devices out there that connect to the Internet that you never think about connecting to those services and sharing content and so forth. How do you stay relevant by delivering a level of services to these consumer electronics devices?”

The cell phone is the one device most consumers don’t have to be convinced to carry, but it’s also one of the few devices they are accustomed to paying for by the month. The reason a company like Research in Motion has been so successful with its Blackberry line is not a factor of the device itself but because it is tightly tied to its service model and the backend infrastructure supporting push email. Likewise, the iPod’s close integration with Apple iTunes made it more successful than its MP3 player predecessors, Burden pointed out. Considering this, a digital camera maker, for example, needs to figure out not only how to deliver broadband connectivity but also how to get wireless service to the device, integrate an application with it, make photo-sharing easy and transfer the photo to other CE devices, just as a starting point.

“It’s not always about the devices,” Burden said. “It’s the services and infrastructure around the device that give it the capabilities you want to model in the market.”