A Concise History of the Smartwatch
Originally published by Joe Thompson on Hodinkee.
In November 1997, I wrote a column called “Calling Dick Tracy: Your Watch is Nearly Ready.” (It appeared in American Time, a watch trade magazine.) With the quartz-watch revolution nearly 30 years old, I noted that “a new generation of sophisticated quartz timepieces is beginning to make quartz technology interesting again.”
The watches that had caught my attention were a Seiko wrist computer called MessageWatch and a prototype of a phone watch developed by Nippon Telegraph and Telephone Corp. in Japan that would ultimately be called Wristomo. “The ‘new quartz’ trend hasn’t gotten a lot of attention,” I wrote. “But the hunch here is that the new technology is an important, if under-reported story. My guess is that it marks the beginning of the fourth major market shift of the quartz era. Each of the first three was a major revolution which dramatically altered the watch market. Whether the new-technology trend develops into the fourth revolution is impossible to know, but it could.”
It took 18 years, but it appears that the fourth revolution that I speculated about, lo, those many years ago, has finally arrived. Not with smartwatches (i.e., watches with internet connections); they’ve been around for at least 14 years. No, the revolution began two years ago with the Apple Watch. If, in fact, smartwatches move from a high-tech niche category to become a fixture of the watch industry’s middle market, then the 2015 Apple Watch will be the Seiko Astron of the smartwatch revolution -- the watch that changed the game.
Not everyone thinks that will happen. The latest smartwatch wave, which began with the Pebble watch in 2013, has suffered setbacks. In fact, just a year ago, some smartwatch watchers were calling it curtains for the whole category. “Let’s Face It: Smartwatches Are Dead” declared a headline in Variety on December 5, 2016. A week later, Business Insider blared “Wearables Are Dead.”
These, and other negative stories, came in the wake of a rough patch for smartwatches (the collapse of Pebble’s smartwatch business and its purchase by Fitbit; poor third-quarter sales of the Apple Watch; Motorola putting its smartwatch plans on hold, etc.). Apple’s launch of the Series 3 watch with cellular connectivity in September seems to have sent sentiment swinging in the other direction, at least as regards Apple. (See our own Ben Clymer’s two-thumbs-up review of the watch here.)
It’s true that the smartwatch market has its challenges: design limitations, short battery life, no killer app, low to no interest in apps other than fitness and medical, competition from fitness trackers and more. In the previous articles in this Four Revolutions series, we have seen how the quartz-watch revolution of the 1970s, the fashion-watch revolution of the 1980s, and the mechanical watch renaissance of the 1990s dramatically reshaped the watch world. That hasn’t happened yet with smartwatches.
Smartwatches and their predecessors, wrist computers, have been the reluctant revolution. Over the years, they have come in waves, arriving with a big splash, then sinking out of sight. Even the 2003 entrance into the market by the then almighty Microsoft with its Smart Personal Object Technology (SPOT) for watches couldn’t make smartwatches mainstream.
Until 2015, what smartwatch had been a hit the way Seiko was in the 1970s, Swatch in the 1980s, or the Rolex Daytona in the 1990s? After a while, one wondered what the deal was with smartwatches: Were they a major development in watch history? A niche toy for tech-geeks? Or simply a long-running, highly entertaining freak-watch sideshow?
Apple has changed all that. The Apple effect on the watch market has been profound. The revolution now has its monster hit watch. Global sales of smartwatches totaled 4.2 million pieces in 2014, according to International Data Corp., the research firm. It rose to 19.4 million in 2015, the year Apple Series 0 (as some call it) went on sale. Apple accounted for 11.6 million of those, according to IDC estimates.
In launching the Apple Series 3 this September, CEO Tim Cook famously boasted that, in just two years, Apple had surpassed Rolex as the world’s top watch producer in revenue, reaching annual sales of $6 billion. In the process, it has wreaked havoc on the mid-range of the U.S. watch market. For details, see our story on Fossil’s fate since Apple arrived.
It seems pretty clear that the fourth revolution of the quartz-watch era is now underway. What follows is a brief, spotty, overview of the long road that led to it from one who covered a pioneer of the category in 1982. Like so many wrist devices that followed, it was wildly revolutionary, but not a revolution.
The Tiniest TV
That was the Seiko TV Watch. Launched in Japan in 1982 and the United States the next year, it was the wonder of the watch world: the first watch to incorporate a television. It received 82 VHF and UHF channels. It was also a stereo FM radio. And, lastly, it was a quartz chronograph watch. It cost $495; the TV operated for approximately five hours on two AA batteries.
The hoopla over the TV watch was huge; it made headlines around the world. Roger Moore’s James Bond wore the Seiko TV watch in “Octopussy” in 1983. Later, Tom Hanks wore one in the movie “Dragnet”.
So technical was the TV watch that Seiko issued to the press a special briefing paper with 48 questions and answers. Not among the 48 questions was this one, which was mine from the minute I saw it: Does anybody really want this contraption?
The answer, it turned out, was no. To wear it, you had to be wired like a lab rat. The watch on your wrist was connected by a plug on top and a wire that ran to a TV/radio receiver the size of a Walkman that you carried in a pocket. Also wired to the receiver were headphones that you wore to hear the broadcasts.
User friendliness was not the watch’s strong point. But the worst thing about it was the size of the screen: 1.2 inches! The idea that anybody would want to watch anything on a screen that small seemed to me preposterous. Yet for Seiko, the small screen was the watch’s most important feature. It demonstrated Seiko’s breakthrough LVD (liquid crystal video display) technology for digital information devices.
Which explains the astonishing answer to question #41 in the briefing paper: “Can you make it with a larger screen?”
Answer: “It would be technically possible. However, we believe that 1.2 inches is the most appropriate size for a TV watch.” For Seiko engineers, smaller was better because it showcased that dazzling new active matrix LVD display, which went on to appear in numerous other Seiko non-watch electronic products.
The TV watch taught me the first lesson of the connected watch genre: the hoopla over these wristwatches was not about the watch, but the wrist. Time and timing had nothing to do with it. It was about having the engineering chops to miniaturize advanced technology to the size of postage stamp so that it fits the wrist. The second lesson was that, in almost every case, due to the size of the human wrist, the screen was too small to be useful.
Computers and More
Seiko in those days was the hero of the quartz watch revolution and the world’s top watch company. The company had also begun to diversify into non-watch electronic products under the Epson brand. It developed the world’s first hand-held computer in the same year as it launched the TV-watch. The company began exploring a new frontier of high-tech, hyphenated watches. In 1984, it developed a computer watch, the RC-1000 Wrist Terminal. In 1994, it was a pager watch called MessageWatch, Seiko’s entry into the booming telecommunications field. The watch was cheaper and more convenient to use than a pager. It had voice mail and information services (news, sports, stocks, weather, winning lottery numbers, etc.). Plus time updates from the atomic clock in Colorado 36 times a day. All that for $80 and an $8.95 monthly paging fee.
That same year, Timex introduced its own computer watch, Data Link ($130), the first watch capable of downloading information from a computer. Developed with Microsoft, the watch used a wireless optical scanning system to receive information (appointments, birthdays, phone numbers and the like) from Microsoft software. At the launch, Microsoft Chairman Bill Gates demonstrated how it worked. He held the watch up to a PC screen on which bar-code lines were flashing. After the watch had “read” the information, Gates called it up on the watch at the push of a button. The watch could store about 70 messages.
The previous year, Swatch got into the “smart” watch game with the Swatch Access watch. It gave the wearer easy access to events simply by pointing the watch at a device at the entrance of the venue. A microchip in the watch was programmed to store the value of the ticket in the watch.
In 1998, SII (Seiko Instruments Inc.), Seiko’s other (with Seiko Epson) manufacturing arm, launched the group’s latest and greatest computer watch. The Ruputer Pro wearable computer looked like a watch and was worn like a watch but Seiko did not call it a watch. Ruputer was a “wearable wrist-type computer peripheral,” Seiko said. It was “the world’s first wearable personal computer.” (Seiko considered Timex’s Data Link more watch than computer, apparently.) Ruputer had an LCD screen, a 3.6MHz processor and came with a cradle that connected it to a computer. The watch-like peripheral downloaded data from personal computers and could play computer games. There were two models priced at the yen equivalent of $290 and $365.
The next frontier was the watch phone. The development of wrist wonders began to shift from watch firms to electronics/ computer/ telecommunications firms. First to market a watch phone was South Korea’s Samsung Electronics in 2000. Its SPH-WP10 watch phone combined the functions of a digital watch with a wireless communication handset. It offered 90 minutes of continuous call time. Japan’s NTT DoCoMo Wristomo phone watch, whose prototype piqued my interest in 1997, was finally introduced in 2003 at a price of Y37,000 (equivalent to $300 then). With these watches, the Dick Tracy comic strip fantasy of a phone watch became a reality. But neither phone watch was a hit. In fact, none of these early wrist gadgets was a hit. As the new century dawned, the only device people seemed to want on their wrists was a watch.
On the SPOT
In January, 2003 at the Consumer Electronics Show in Las Vegas, Bill Gates was back. This time he had prototypes of a new generation of smart wristwatches (Microsoft called them smart watches) that delivered news, weather, sports scores, stock quotes, text messages, horoscopes, and more over a wireless, FM radio frequency network that Microsoft created.
Microsoft partnered with four watch companies – Citizen, Fossil, Suunto and Swatch – which produced watches containing Microsoft’s new SPOT software. Microsoft picked watches as the first products in what it expected would be a new wave of so-called “smart objects.” Its new software transformed the watch into an internet device on the wrist, receiving and displaying internet content.
As I reported at the time, in an article headlined “Microsoft Ushers In ‘Smart Watch’ Era,” “Microsoft has reportedly invested billions of dollars developing the new technology as part of its strategy to extend into the home the technology that revolutionized the workplace. Computer industry analysts note that, with the PC industry maturing and sales slowing, Microsoft is looking to expand its technology into new products and markets. Like watches.”
Why watches? “We always thought that wristwatches would be the first category of devices built on SPOT technology,” Microsoft’s Roger Gulrajani explained in a statement. “We looked at product categories and devices to discover where the technology would be most relevant. In early meetings with watchmakers, we discovered that the watch industry has the need to reinvent itself cyclically, and that the major revolutions and market opportunities in watchmaking had to do with technology. We believed that by working with watchmakers to create new application scenarios, together we had the opportunity to ignite a change in the way people use watches.”
It was a change, alright. Wearers decided what information and services they wanted by going to Microsoft’s SPOT device website on their PCs. Information was transmitted to the watch via DirectBand, a new Microsoft technology for sending Web-based content to smart objects. The hype was enormous. In a keynote address at CES, Gates said “SPOT is the next evolution in what the watch should be.” Fossil’s vice-president of technology called it “the most significant development since the invention of the quartz movement some 30 years ago.”
Really? In a column I wrote at the time (titled “Honk If You Want a Computer on Your Wrist!”) I expressed skepticism about the smartwatches. “Why is Microsoft making such a fuss over computer watches? Is it because people are clamoring for a computer on the wrist? Of course not. Seiko proved that in the 1990s. Remember the Seiko Ruputer and the Seiko Message Watch? How many of them do you see today?”
“No,” I continued. “Microsoft is trumpeting computer watches because they showcase its new SPOT technology. Microsoft plans to put SPOT technology into all manner of consumer products, including refrigerator magnets, to create the totally interconnected world we all long for.” It wasn’t about the watch.
In fact, people did not want Bill Gates’s newfangled watches. The watches bombed. In 2005, Microsoft disbanded its MSN DirectBand service. “It was a total failure,” Swatch Group CEO Nick Hayek told me later. He had developed the Swatch Paparazzi watch specifically for the Microsoft SPOT technology launch. Paparazzi cost $150, plus a fee for the MSN Direct service. “We depended on Microsoft’s software,” Hayek said. “And when it decided that it was not interested in developing the watch further, we were sitting on 100,000 watches.” Hayek was not amused. The Swatch Group sued Microsoft, which paid Swatch $14 million in damages. The experience taught Hayek a lesson about smartwatches, as we will see shortly.
It was Pebble, a start-up smartwatch company, that kickstarted the current wave of smartphone-connected watches. In 2012, founder Eric Migicovsky launched a Kickstarter campaign to fund production of Pebble smartwatches. He hoped to raise $100,000, but ended up with more than $10 million and orders for 85,000 watches. A second round of crowdfunding raised another $20 million and orders for another 100,000 watches. The first watches hit the market in 2013. By then, a dozen electronics firms were developing smartwatches. Samsung, Sony and Qualcomm launched smartwatches in 2013. Many more came in 2014. That September, Apple announced that it would launch a smartwatch in 2015.
When it did, one of the first casualties was Pebble. Migicovsky was forced to sell the company to Fitbit last December for $40 million. Pebble could not compete with Apple. It reportedly sold 3 million smartwatches in three years. Apple sold 11.6 million smartwatches in its first nine months, according to IDC estimates.
Another casualty, as noted earlier, was Fossil. Apple has hurt sales in the mid-range of the U.S. watch market, particularly the fashion-watch segment, where Fossil is the leader. (Also hurting that category is its department store distribution.) One measure of Apple’s impact on Fossil’s business is the stock price. On the day Apple Watch debuted in April 2015, Fossil’s stock traded at $83.75. Yesterday, it closed at $7.75.
Today, Apple and Fitbit are the dominant players in the smartwatch market, smartwatch experts say. They have plenty of competition, of course, primarily from other electronics firms (Samsung, Suunto, LG, Garmin, etc.). But also from traditional watchmakers.
The Mid-Market Battle
Watch companies in the mid-priced segment of the market (around $100 to $800), who are most threatened by Apple, are fighting back. Many have adopted the more design friendly Android Wear operating system for their smartwatches. Leading the way are the fashion brands, Fossil and Movado, along with Guess. The Fossil and Movado groups have launched so called “fashion-first” smartwatches under various brands in their portfolios. (The Fossil Group plans to have smartwatches in 19 brands; Movado has added them to seven of its brands.)
Also using Android Wear in smartwatches are some Swiss brands (in addition to Movado) who compete in the affordable luxury market, like TAG Heuer, Montblanc and Louis Vuitton. Joining them in a bid for a piece of the up-market smartwatch action is Frederique Constant.
The Swatch Group is expected to join the Swiss smartwatch contingent eventually. But it wants no part of anyone else’s operating system. Hayek learned that lesson from the Microsoft fiasco with the Paparazzi watch. Since then, the Swatch Group has avoided the smartwatch category, instead offering a few watches with limited connectivity, like the Swatch Bellamy (2015) and Swatch Pay (2017), which contain Swatch’s own contact-less payment technology. It enables wearers to pay for merchandise by swiping the watch at the store counter. Hayek’s solution to the operating system problem is to have the Swatch Group make its own. It has teamed up with the Swiss Center for Electronics and Microtechnology (CSEM) to make an operating system for connecting smartwatches to the internet. It says it will introduce new smartwatches containing the operating system by the end of 2018.
Meanwhile, in Japan, Casio has entered the smartwatch market with a line of ProTek Smart Outdoor watches, also using Android Wear. Casio is focusing on smartwatches with specific sports functions (cycling, skiing, kayaking, fishing, trekking, etc.), a niche where it believes it has an edge.
Elsewhere in Japan, in a notable non-development, Citizen and Seiko are essentially taking a pass on smartwatches. Even though Apple competes with lower-priced Citizen, Bulova (part of the Citizen Watch group) and Seiko watches, both watch giants see smartwatches as a separate business and have no desire to get into the ring with Apple. The move is reminiscent of their decision in the 1970s to ignore LED digital technology and concentrate instead on the LCD. That proved to be a very wise decision. Will this?
“We’re not an electronics company,” Citizen Watch Co. CEO Toshio Tokura told me in Tokyo in 2015. “We’re not Apple. The smartwatch industry is not really the market that we’ve been addressing over the years.” Since 2012 Citizen has had a watch with Bluetooth compatibility to Apple iOS and Android, the Eco-Drive Proximity. It is Citizen’s only entry in the connected genre. Citizen does not call Proximity a smartwatch (although some of its retail agents do). Tokura described Bluetooth as “a cherry on top” of the Eco-Drive watch. “That will never be the main part of our business,” he said. At this point, Citizen has no plans to introduce any smartwatches.
The issue is less cut and dried at Seiko. Akio Naito, chairman of Seiko Corp. of America, and a member of the board of directors of Seiko Holding Corp. in Japan, says there has been “heated discussion” in the company as to what to do about the smartwatch category. So far, it has taken a cautious approach. The Seiko group does make smartwatches. It has introduced a few models in Japan under the Epson and Seiko brands, but none in international markets. Naito is in the cautious camp. “I don’t think we should try to compete against Apple or Samsung. We should not enter a category of products which can become commoditized so quickly. I see the risk of having to keep up with developments of the operating systems or ensuring compatibilities with numerous smartphones all over the world.” Nevertheless, Seiko continues to monitor smartwatch developments, he says, and could get into the game in the future.
Where does the smartwatch market go from here? It’s anybody’s guess. But something I wrote in that column 20 years ago about the fourth revolution of the quartz watch era is still apt: “Will [it] fire the imaginations of new-century consumers? Will it unleash forces that create new watch products, producers, markets and customers, like the other three waves did?”
We’re finally going to find out.
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