Consumer Electronics are old news. Today it’s all about the software. Obviously, that’s a bit of an oversimplification but the underlying concept - that software, not devices are the future of CE continues to be proven daily. Just yesterday at E3, Microsoft announced an overhaul of it’s Xbox 360 dashboard. The iPod Touch (I dare not mention the device that shall not be named) can be upgraded and offer enhanced functionality. HP has updated its installed base of MediaSmart TV capabilities to the new version.

The industry is recognizing the need for an upgrade path to keep older devices relevant. There was a time that you needed a new iPod every year. Now the devices are small enough, store enough, offer ample features, and have their capabilities upgraded often enough that keeping a device longer is not unreasonable. The emergence of upgradeable software presents a number of possibilities that CE manufacturers must consider; selling less hardware, becoming part of a new revenue stream, and requiring CE companies to become software experts.

Ultimately, the lesson to be garnered from the change is that the experience matters most and the device is becoming secondary. If you can create a more than adequate device coupled with an ever improving UI you will succeed where others that only offer half of the equation fail. This topic strikes me an an interesting blog post, but desiring of more analysis. So, look out for a Yankee Group DecisionNote in the coming weeks that tackles the ever changing CE environment. What devices are most at risk, what partnerships will be necessary, and how business model changes will be impacted as a result.