Sharma Presents 2014 CES Observations

International CES is not an event where game-changers are launched but it is a celebration of technology and gadgets. It is a good place to understand what is on its way to hope (many if not most of the products never make it to the market), hype (“innovation” was the most used word for defining pretty much anything, second year in a row), and commoditization (how many body tracker does the world need?). It is a place for like-minded people to congregate and pontificate, to do deals, to validate their roadmaps, spy on competitors, meet new partners and suppliers, and just get warmed-up for the year ahead. CES is a good place to get a sense of where the investments might flow this year.

Here is the summary of our observations from 2014 CES:

The big numbers – CEA expects the overall consumer electronics market to grow 2-3% in 2014 to $208 billion. The new growth areas are connected devices, tablets, wellness devices, connected auto, 3D printers, etc. Smart watch sales are expected to double in revenues in 2014. The wearables are expected to grow 25%. At CES, clearly, the connected universe was in full display in all its current glory. It was a mix of some new ideas, incremental improvements from last year, and innovators from all walks of life getting into the value chain.

Wearables – It was no surprise that wearables were one of the highlights of the show. The good news is that the barrier to entry is fairly low. The bad news is that the barrier to entry is fairly low. The space is going to get commoditized very quickly and it is likely going to get stratified into two major buckets – really cheap $10-20 wearables (if one can have < $50 smartphone, there is no real reason for a common wearable to be > $100 given that the components are fairly standard and algorithms are well understood. The other bucket will be high-end fashion driven wearables. Companies that can afford to get some classy designers involved and get good retail distribution are going to cater to the “jewelry” conscious market. The big winners are obviously the component folks who don’t really care who wins as long as there are many players in the pond. Wearables might congregate around natural islands of geography, distribution, and ecosystems. Intel’s keynote was focused almost entirely on wearables.

Connected Auto – There were announcements in the connected auto space. This year things matured a bit with more investments flowing in. AT&T and Google announced their respective platforms for connected auto. While there are significant opportunities in the space, it is still quite fragmented and as such less appeal for the wider developer population.

Robotics – While we are still ways away from the household robotic butler, tiny robots are becoming very sophisticated. Robotics has been around for ages but the connected environment gives them their soul. Toys, games, entertainment, emergency verticals, etc. are natural categories.  Unlike the wearables segment, robotics is less commoditized but has lesser overall mass appeal.

Sponsored data – Maybe sponsored data rubs some folks the wrong way but alternate data monetization models are needed in the market. AT&T announced their sponsored data platform. There are already numerous examples of sponsored data all around us across the world. In fact, in some regions, sponsored data will become a key ingredient of the overall mobile data strategy. There are several other alternate sponsored data models that will benefit users and markets should be encouraged to explore them. If it is indeed a bad idea, the market will take care of itself.

US mobile industry – While I work around the globe and there are some fascinating markets with new developments, US is by far the most interesting mobile market right now.  Not only does it have the most innovation going on, the competitive dynamics make it a great study for the students of the industry. T-Mobile, having decided on the value strategy is disrupting the market dramatically from the pricing structure point of view. Just like Free in France changed the market within 12 months, T-Mobile is doing the same in the US. They pre-announced their Q4 numbers at CES and they are stunning. 1.6M net-adds, 900K postpaid adds. For the year, they added 4.4M subs. To understand how dramatic of a reversal this is one has to only look at 2012 numbers – 2M postpaid losses compared to 2M postpaid gains in 2013. US industry has never seen such reversal in a short amount of time. Fasten your seat belts, 2014 is going to be a fascinating ride.

Healthcare connected devices – This super category of the wearables is something that is actually quite interesting and can be quite lucrative if you get it right. Sensors that can alert of impending heart attack or food poisoning or help manage diabetes and cancer by understanding the markets inside the body are revolutionary. If we get the price points to manageable levels, the impact on global health is going to be astounding and unprecedented. Of course, regulations and a moribund industry stands in the way.

Curved TV – The 3D TVs were a big flop. Consumers really didn’t warm up to the idea. The curved TV introduced by Samsung won lot of accolades and it was indeed a good experience if you find the right spot to view the screen in front of you. The 4Ks were out in full force as well with Vizio even touting one for under $1K. it is another matter that the UHD content doesn’t really exist in any meaningful way to while there was buzz, there might be little biz on the cards in the short term.

3D Printing – We all appreciate the potential for 3D printing – it is enormous. However, the impact could surprise us. With printers coming down in price to below $500, it is becoming more affordable and could really unleash the creativity of individuals of all shapes and sizes.

Smart Home – There is lot of activity and some real dollars flowing into the segment. AT&T has had some good success with their Digital Life rollout and it is generating new ARPU and increasing LTV of the customers. Additionally, startups are coming out with specific improvements around security, energy, entertainment, appliances, communication, and other related areas.

Disconnect between data and security – There is so much data emanating out of the wearables and the personal IoT devices that NSA or the hackers don’t really have to worry about the lack of data. Given the massive breach at Target, it is time for regulators to step in and work with the industry to formulate some basic guidelines on data protection. It should be unacceptable that these incidents are increasing in audacity and frequency.

Virtual Reality – Oculus VR was one the biggest hits at CES. The marriage of gaming and VR is a natural one and whoever tried the space-age headset at CES seemed immersed into an experience previously unexplored.

Best Booth – Samsung again took the honors

Best Booth Engagement – GoPro has some loyal fans

Source: http://www.chetansharma.com/blog/2014/01/12/2014-ces-observations/

Your feedback is always welcome.Chetan SharmaWe will be keeping a close eye on the trends in the wireless data sector in our blogtwitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in March 2014. The next Global Wireless Data Market update will be issued in February 2014.
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