It seems slightly odd to be referencing ‘the consumer electronics’ (CES) trade show when being asked to consider the big trends in Pro AV for 2017, but here I am kicking off with a nod to CES. As my colleagues from our CE division returned from Vegas and we discussed the hot trends from the show floor, I am reminded again that convergence, certainly in terms of innovation and transferable learnings, is such an important part of our lives. Indeed, never have the CE and B2B analysts at Futuresource worked so closely together. It is also slightly depressing to note that, in some instances, the CE sector has leapt ahead where the Pro AV industry was once so proud to be the cocoon for product innovation and development before it transferred in scale to the consumer sector. Let’s consider some examples.
At CES, voice recognition and AI stole the show front and centre for tech giants like Microsoft, Google, Amazon and Apple. This isn’t new, it hasn’t caught the industry off guard, yet in the Pro AV space it’s rarely referenced, despite having the potential to dramatically impact control, automation and to a point display technology. Simplicity is key and will underpin much of the electronics industry in the future. Though not a learning from CES, I still find it amazing that we have only recently begun to see the videoconferencing sector move beyond dedicated spaces/rooms when away from the office, most of us have been using FaceTime or Skype for many years.
However, most developments are running in parallel or are combining to provide a more powerful experience for an increasingly mobile workforce.
At CES, smart home automation was again a key theme and of course, closely linked to smart buildings and cities in our world. Underpinning these trends we have connected devices, AV over IP, IoT and further into big data, all hot topics in Pro AV for 2017. Building further on these trends, and perhaps too nascent for this discussion, smart cars were another hot theme at the show. Whilst much of the buzz and hype focused on the benefits for consumer brands, behind closed doors the benefits for enterprise were often cited.
Finally, Virtual Reality (VR) and Augment Reality (AR) Head-Mounted Display’s continue to fascinate consumers and demand attention at CES. There is little doubt that the consumer sector has huge potential to drive scale but some of the most interesting use cases are found in B2B environments for training, design, sales & marketing etc. 2017 will see both VR and AR solutions, not just HMD’s, grow in importance for the Pro AV sector.
But I digress from the original intention of this blog, which was to look at the main display highlights for 2017, it’s hard to be focused when we are in such a fluid phase of industry development.
At Futuresource, we talk more and more about ‘Digital Surfaces’, appreciating that each of the major display platforms (projection, LCD, LED) has a place and are increasingly blended together. In retail for example, store designers are surprisingly alert and informed to the benefits each platform can bring and we will begin to see installations that use multiple display technologies to create innovative and engaging experiences. Creativity is less of a driver in corporate and education markets but utilising multiple display technologies is no less in demand, typically projection and LCD but moving forward we will see LED become a viable choice.
We aren’t, as many would propose, at a point when a one of these technologies loses relevance though of course in some instances they certainly compete for the same budgets.
The projection category has finally fallen into long term volume decline but is still the single largest display platform by quite some margin with lots of reasons for optimism looking forward.
2017 will see more small and large scale mapping technology come to market. Indeed, showcasing projection’s inherent flexibility has been the emphasis of recent tradeshows in the wake of falling sales in presentation applications. We expect to see a broader range of brands partnering with leading mapping specialists/integrators in ever-more striking installations.
Advances in solid-state technology – namely laser phosphor – has enabled digital signage to finally became a viable opportunity for the projection industry and thus, coupled with mounting adoption in this application, solid state is expected to be the key projection trend in 2017. Further launches of laser-phosphor solutions, at both ends of the brightness spectrum, are anticipated from all major brands, whilst cheaper RGB laser is expected to be a key theme in the high-end segment.
4K will be the other key theme of 2017, with the first solutions using TI’s latest, and smallest, 4K chip-set launched ahead of the ISE 2017 show, as are those with Compound Photonics’ licensed 0.55” 4K chip-set. With rumours that the price of these solutions will rapidly rival 1080p/WXGA equivalents, it will be interesting to analyse how well they are received considering that the market’s core brightness segment is rapidly evolving to >4k lumens.
For the LCD displays sector, we can expect to see vendors broadening ranges in large 70”+ sizes and accelerate the transition to 4K, critically in smaller sub 50” sizes. Though far more niche, more buzz, not necessarily commercial opportunity, will also build around ultra-thin, in some cases flexible, display technology.
Display opportunities in presentation environments, particularly in the enterprise space, will be a keen focus for the industry in 2017 with vendors building on interactive ranges and integrating collaborative tools directly into the display.
We can expect to see wireless presentation features for sharing content, audio/camera for videoconferencing and even wider UC access, akin to the Microsoft Surface hub come to market. Meeting room collaboration is hot!
The high brightness/outdoor and semi outdoor market will develop strongly in the coming year building on already buoyant in window market and, dare we say it, opportunities in QSR finally being realised. A number of important changes in supply chain dynamics, mixed with a growing demand across franchise holders will help drive this trend.
For the videowall space, virtually ‘bezeless’ LCD walls, with more extreme/extra narrow displays will continue to gain traction but come under increasing pressure from narrow pixel pitch (NPP) LED which has been very much in the ascendancy in recent years. After Sony stole the show at InfoComm with its CLEDIS NPP LED, and at CES, we will hear more about new micro LED and chip of board (COB) technology for NPP LED in 2017, another key development phase for the category.
To sum up, it’s an incredibly exciting time to be in the pro display space and Pro AV industry, but there are challenges ahead. Navigating the choice of display technology, associated specification and features will be headache enough for manufacturers, channel and end-users but adding in the other more macro trends mentioned above further clouds future roadmaps and strategies.
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BLOG COMMENTARY BY FUTURESOURCE ANALYSTS
It seems slightly odd to be referencing ‘the consumer electronics’ (CES) trade show when being asked to consider the big trends in Pro AV for 2017, but here I am kicking off with a nod to CES. As my colleagues from our CE division returned from Vegas and we discussed the hot trends from the show floor, I am reminded again that convergence, certainly in terms of innovation and transferable learnings, is such an important part of our lives. Indeed, never have the CE and B2B analysts at Futuresource worked so closely together. It is also slightly depressing to note that, in some instances, the CE sector has leapt ahead where the Pro AV industry was once so proud to be the cocoon for product innovation and development before it transferred in scale to the consumer sector. Let’s consider some examples.
Futuresource expects voice control to largely disrupt how we interact with our electronics – from controlling our in-car-entertainment, white goods or smartphones, voice is making an impact. With four main contenders in the English language VPA race, Siri, Alexa, Cortana and Google Assistant, there is a lot of ground to fight for, with no clear winner in sight.
While Amazon, Apple, Google and Microsoft are taking vastly different strategies in terms of getting users on their platforms, and with Samsung’s rumoured assistant Bixby, speculated to be released in the coming fortnight, we have a very interesting platform battle developing in 2017.
Often when discussing the VPA market, we also forget the many alternatives available either as smartphone apps or regional products outside of the west. SK Telecom has ‘skinned’ IBM Watson technology with the Korean Language, to offer voice commands and AI assistance in their Nugu smart speaker.
Baidu, the Chinese answer to Google, also has its sights on bringing smart assistant device to the most widely spoken languages in the world, Mandarin and Cantonese. Although Baidu’s VPA speaker form factor differs from other leading VPA’s on the market, including a screen and a camera, the essential uses of the device remain the same – ordering food or other goods, asking questions and interacting with the smart home.
While language coverage is one key aspect of how VPA’s will battle globally for a space in our homes, the business model behind the devices and smart assistant is equally important.
So far, I have mentioned six companies with assistants on the market or expected forthcoming offerings, but background of these companies is important to understand the limitations of the devices and the expected adoption of their use globally.
Apple and Samsung both predominantly create revenue from sales of hardware. Siri has only appeared on hardware that is produced by Apple and is marketed as a unique selling point to Apple products. Presumably, if Samsung do later announce their own brand of personal assistant, we will see a similar model.
Baidu and Google create the vast majority of their revenue from servicing online advertising. While Google has made claims to focus more on hardware in the future, their hardware has usually served to forward their software or advertising products. Baidu’s business model is less varied than Google’s, with a greater focus on online marketing, meaning Baidu’s smart assistant technology will be offered to generate data and therefore better targeted advertising.
Microsoft’s major source of business is its software, however, does gain a substantial amount of sales from other hardware ventures. The company so far has largely invested into their Cortana platform as software, opposed to pushing the assistant as a hardware device. Its PC and gaming platform could prove key strategic assets, in both business and consumer channels.
SK Telecom had announced plans to diversify their revenue streams after citing loses in 2015-2016. The network has a range of products that the Nugu smart assistant can interact with, such as video streaming and cable platforms.
Finally, Amazon is predominantly an online retailer. However, to further generate business on their platforms, Amazon has created several hardware devices linked to their retail products. Although Alexa has been celebrated as being a hugely capable smart assistant, it is sold essentially to drive traffic to the Amazon store and Amazon Prime membership.
As smart assistants continue to become more popular, 2017 will witness many more vendors and products emerge in this space, and we will see how different business model manifest as consumer propositions, and ultimately, which will generate greater traction.
Consider home video in China and the first things that spring to mind for many are pirate DVDs and illegal online video sites. However, things are changing rapidly. The Chinese home video market is in the midst of a cultural revolution and this is largely occurring in the minds of the young, with the growing acceptance and uptake of legal paid-for SVoD services.
Legal video websites are nothing new in China, but the notion of paying for online video content is, with the legal market having long been dominated by ad-funded on-demand services.
Gradually, however, the concept of SVoD has taken hold and is being driven by some heavyweight Chinese companies; notably the world’s largest retailer Alibaba which acquired the Youku Tudou SVoD service in 2015, Chinese search engine giant Baidu, which owns the largest SvoD service iQiyi, on-line gaming and social media platform Tencent and leading technology company Le TV. Each is estimated to have in excess of 10 million paying subscribers and is continuing to grow fast.
SVoD is another battleground in the fight for consumers between Baidu, Alibaba and Tencent which has seen them compete on an increasing number of services, including music streaming, web browsers, cloud storage solutions, map/navigation services, on-line payments and social media.
Notable in their absence are the major global SVoD players Netflix and Amazon Prime Video. The expansion of both services into China is hamstrung by local legislation dictating that 70% of the content carried must be local content and that overseas organisations operating online in China must use local data storage facilities and domestic equipment.
In addition to ownership regulations stipulating that foreign companies establishing an operation in China must be part of a joint venture with a Chinese company, foreign companies can only hold a maximum 51% stake in the venture.
As a consequence, the major domestic SVoD services have marched ahead establishing in-house content production divisions and augmenting their local content offering through licencing deals with the major Hollywood studios; Tencent with Paramount and Sony, Youku with Universal and iQiyi with Fox.
Traditionally, the video on demand sector has been relatively free of the strict censorship controls that have impacted the TV and feature film segments, but indications over the past 12 months are that the Chinese government is beginning to tighten regulations in line with the rest of the media industry.
Nevertheless, US and international feature film content is a key driver for consumer SVoD adoption with 56% of Chinese SVoD users in Futuresource’s ‘Living With Digital’ survey (published in Q3-2016) citing this as the main reason for subscribing to an SVoD service.
SVoD uptake is being driven by the younger consumer group. Futuresource’s ‘Living with Digital’ consumer research highlighted that 66% of SVoD users are in the 16 to 35 age group. This is a demographic that is increasingly interested in high quality, premium content. In addition, they are not deterred by the concept of paying for access.
With monthly subscription costs typically ranging between RMB 10 and RMB 20 (US$ 1.50 to US$3.00) the threshold to subscribe is relatively low compared to other territories, making a subscription an increasingly attractive proposition.
Looking ahead, the Chinese SVoD market has huge potential for growth driven by the desire for premium content and as the generational shift in consumer behaviour adopts SVoD as the norm.
Online piracy both in terms of illegal streaming and downloads remains an issue in China and add to that unauthorised account sharing. Nonetheless, the concept of legal, paid-for services is gaining a stronger foothold amongst consumers.
Broadband penetration continues to increase reaching 54% of Chinese households by the end of 2016. In addition, use of connected devices is increasing. The installed base of Digital Media Adaptors reached almost 44 million units at the end of 2016, representing approximately 10% of households, but this is dwarfed by the growth in Smart TV’s which were in close to 32% of households.
The growth in the market will occur with or without Netflix and Amazon. Both have currently stepped back from China, although looking forward they may yet aim to enter the market. But there are issues to resolve and the major domestic players may well be too entrenched with consumers and in terms of content deals.
Amazon may have the edge over Netflix in launching in China, having been active under the Amazon brand since 2011 and having launched the Prime Delivery service in autumn 2016. Consequently it will have a strong consumer database in addition to an established brand awareness.
Further details on the development of the Chinese Home Video market will be available in the forthcoming China Video Insights Report and additional consumer insight can be obtained from Futuresource’s Living With Digital Service.
This week, Futuresource’s education technology team published its latest report on the adoption of mobile PC’s in K-12 schools globally.
One of the key takeaways is the storming success Google is having with its Chromebook platform in the US market. A 58% market share in 2016 is no mean feat when competing with Microsoft and Apple, but look beyond the US and the market picture is markedly different. While Chrome is starting to gain traction in some territories, Microsoft retains the international advantage.
It’s not just the operating system space where educational technology adoption between countries is markedly different. In an upcoming report, Futuresource explores the landscape for K-12 administrative and instructional management software in both the US & the UK. The two countries share a common language, a similar curriculum and a recent penchant for political upset, but illustrate substantial contrast in the adoption of education technology.
Different structures for school management and procurement are a notable factor here. In the US, public schools are grouped into districts. There are over 13,000 districts but the largest 250 account for roughly 40% of students; creating enticing opportunities for suppliers looking to scale adoption and significant price competition for big volume deals. In the UK, purchasing of technologies is predominantly done on a school-by-school basis, creating a stronger reliance on channel partners and larger direct sales forces. This is starting to change with schools converting to academies (Schools directly funded by the Department for Education with greater operational freedom than convention local authority schools) and grouping together into Multi Academy Trusts (MAT’s) which operate in a similar fashion to US districts.
The US’s district system has created demand for product categories like data analytics platforms to interpret and forecast district wide performance and Enterprise Resource Planning (ERP) solutions to help manage large workforces. These types of tools have a much lower rate of penetration in UK schools but are growing in relevance, as the number and scale of MAT’s increases.
Consolidated purchasing has also supported the rapid adoption of student devices in US schools with student penetration reaching over 45% in 2016. This growth is creating significant markets for device management and web filtering tools, allowing administrators and teachers to control and restrict the digital adventures of inquisitive students. In the UK, device penetration hit a road block shortly after passing the 15% mark, with budgetary pressures amongst other factors inhibiting growth.
Even in mature product segments, market dynamics vary. Both the US and UK show a strong reliance on Student Information Systems (SIS’s) (as most mature markets do). SIS’s are the heart of a school’s data collection system, capturing information on key indicators like student attendance, behaviour and learning outcomes. These systems integrate into a range of other platforms supporting functions like school communications, finance and cafeteria management as well as learning management and content solutions. In the UK, there is one dominant provider, Capita, the companies SIMS products service roughly 22,000 schools.
In the US, the market is considerably more fragmented. There are over 120 providers in the market, with each state dictating its own data collection and reporting requirements. In the last decade, the UK market has seen the entrance of a number of new SIS competitors, typically offering an affordable cloud-based solution and seeking to take share from Capita. In the US, the market is now heading in the other direction; consolidation through acquisition is the order of the day with market leader PowerSchool buying up a number of competitors in the last 18 months.
Evolving market characteristics such as these are important to note for everybody selling technology to schools. As EdTech adoption scales, the ecosystem is becoming increasingly intertwined and the functionality of product segments is overlapping. Standards for integration and interoperability are creating user-friendly environments and driving both partnerships and acquisitions on the supply side. Understanding the broader ecosystem, both at home and abroad is key for vendors looking to expand local presence and enter international markets.
Smart appliances have been available for many years without making much impact on the $74 billion worldwide laundry and refrigeration market, but research from Futuresource Consulting indicates that this may be about to change.
Currently, <2% of the worldwide market for laundry and refrigeration is accounted for by smart devices, even though the world’s first connected fridge was launched back in 2000 by LG. The topic of when (or even if) these products will take off has been hotly debated in the industry ever since. Brands have struggled to propose killer applications which appeal to the consumer and such devices have been relatively expensive compared to the benefits they might bring.
Futuresource, which first started tracking the smart home market in 2001, believes that the inflection point is fast approaching in the next 2-3 years; one which will see smart features rapidly become widely available in mainstream appliances. So why the optimism? What will drive this?
As with so many consumer products, success or failure revolves around industry push and consumer pull factors. It is evident that the initial impetus is coming from the vendors, whilst the appeal for consumers is rather less clear.
The vendors are convinced they are on to a good thing by pushing smart devices. LG and Hoover have committed to implement connectivity within all their appliances this year. Bosch (world #4) and Samsung (#6) have announced plans to follow suit by 2020. Key to this is the declining bill of materials cost of the electronics involved in making an appliance connected. This is crucial, as 2/3rds of consumers say they would not spend more than an extra 10% for the inclusion of smart features in an appliance.
As a result, once a brand has decided to offer smart features and made investments in the underlying electronics, app design, support and infrastructure it now makes sense for that brand to roll the technology down through its product ranges rather than restrict it to the high-end. Manufacturers also have to plan well ahead to future-proof their devices as – unlike mobile phones – appliances have long life cycles. These factors, plus the knowledge that the first movers can achieve competitive advantage, leads Futuresource to anticipate that smart features will become standard fit for all the major players even though applications are yet to evolve. Vendors such as Samsung and LG will also seek to leverage their wider portfolio of products, which have the ability to offer a more integrated smart home experience.
Vendors know that smart appliances will feed back a rich stream of highly accurate data on how their products are being used. This will pave the way for remote diagnostics, making repairs much cheaper and quicker and enable them to improve their products accordingly. Brands will be able to offer strong service propositions, creating the prospect of longer-term revenue streams, moving past the traditional one-off sale. For example, a brand which offers a smart refrigerator with internal cameras may be able to deduce how consumers store their food and for how long. They may even choose to sell this information on to the food industry.
So there is little doubt that it is in the interest of the industry to roll out smart features, but will consumers accept them? Futuresource’s smart appliance research reveals that less than 30% of consumers agree that current smart offerings would provide long-term benefit. Whilst security, monitoring, energy efficiency and convenience are drivers of smart home products generally, these opportunities are not so clear-cut in laundry and refrigeration. Despite the most advanced smart features, one still has to be in front of the washer to load/unload the clothes and similar issues remain with packing/unpacking the fridge. Appliance monitoring and security is potentially more intriguing. Futuresource consumer research found that the most interesting smart features for consumers were refrigeration devices that can send an alert when temperatures rise and appliances that can inform users when there’s a danger of overheating. However, these benefits have not been well articulated to consumers, with vendors preferring to focus on more eye-catching innovations such as built-in displays on which to show menus, or even TV shows.
Despite the lack of compelling use cases from the consumer point of view, we at Futuresource expect smart appliances to comprise over 50% of the total home appliances market by 2021, primarily driven by the industry. With a widening adoption of other smart and IoT devices driving up awareness and appreciation of connectivity benefits, those vendors whose products offer greater interoperability and can work within a larger smart home ecosystem are poised to gain market share. However, the industry will face an uphill task in persuading consumers that the benefits are so great that they should upgrade their current appliances any sooner than they would have done otherwise.
Research Analyst Guy Hammett is working on Futuresource Consulting's forthcoming worldwide home appliances market report, due in March 2017.
The UK pharmacy chain, Boots announced yesterday (March 1st 2017) that it is to close two thirds of its in-store photo centres, which fulfil silver halide photo prints, photobooks, cards and some wall décor with a combination of wet minilabs, duplex and simplex digital printers and LFPs.
Is this a sign of the times for the Western European retail minilab sector, which, has not invested as wholeheartedly in dry minilabs as other world regions, such as the USA, Canada and Australia?
It is clear that some Western European retail chains have turned their focus away from in-store minilabs in recent years, or, as is the case with the UK mass merchandisers, Asda, Tesco and Morrisons, have outsourced in-store photo centres to a third-party operator.
Unlike their peers in the USA, for example, European retailers have also eschewed driving online (and more recently, mobile device) orders to in-store minilabs and instant print kiosks, with a majority of online orders fulfilled by an off-site printing partner.
In-store photo printing is still facing the ongoing challenge from the now established web to home photo channel, plus mounting pressure from the more recent mobile device ordering sub-channel within web to home, facilitated by developments in AI.
However, let’s not write off the minilab sector in Europe. To put things in perspective, in-store minilab photo prints accounted for just over 40% of the 7.5 billon units sold in Western Europe in 2016.
If one considers the success of the Germany pharmacy giant, DM in retail minilab fulfilment, as well as that of the Timpson/Max Spielmann group in the UK (and Walgreens in the USA), not to mention the entrepreneurial spirit of many independent photo retailers, there is still plenty of lemonade to be made from the lemons!
The dust has settled on another successful show for the organisers, assuming growth metrics are indeed the right barometer of success! The official statistics underline what our team of analysts all felt; this was busier and larger than ever before. Attendance grew by 12% year-on-year to surpass 73,000 visitors across the four days with an extra 3,000m² of floor space added.
We picked up a few negative comments that the show was getting too big and too diverse but it’s not an opinion I personally share. I have been around long enough to have attended CeBIT in its heyday and understand the perils of losing focus. ISE just doesn’t have this feel yet. Yes it has broadened its focus to include new areas, Smart buildings being a great example, but all the zones are absolutely relevant to the Pro AV community. Perhaps the important point here is a more general reflection of the world around us, we have moved into a converged and connected era where Pro AV is often now part of a wider eco-system. This trend will only accelerate moving forward and we can expect the show to continuing innovating to keep pace with these changes.
Whilst our team of 10 analysts visited all the major zones and held meetings with a wide range of interesting companies, the key focus, certainly in terms of reporting, was on display technology. And what a visual feast we were treated to this year as LED continues its ascendancy, LCD displays become ever more feature rich and projection fights back on a range of fronts.
Below is a brief list of the highlights across each of the three technologies. For a more detailed overview of the show, please click here to download our show report.
Solid State Illumination – Only a minority of brands were without an SSI projector on their stands. Philips’ HLD LED is showcased by BenQ and Hitachi.
4K UHD Resolution – Many brands now use TI’s 4K UHD chip in Consumer/B2B-oriented projectors. Canon, JVC and Sony demonstrated their own 4K LCoS.
High Brightness 1DLP – Even more manufacturers launched 5-15k lumen single-chip DLP products – reflecting the appetite for mid to high-brightness but otherwise lowly spec’d product in mainstream installation areas.
Greater Usage in Mapping/Signage – Numerous vendors were showcasing their projector hardware in a signage or mapping environment, further showing the flexibility of projector technology.
4K UHD – New 4K UHD products on offer, but less emphasis on booths with numerous 4K UHD displays. Likely to be a big year for 4K UHD with adoption expected to take off.
Interactive Displays – Interactivity combined with collaboration was the hot topic of the show, with many new collaboration products shown from both IT heavyweights like Microsoft and Cisco, but also from display vendors.
OLED – Central to LG’s booth, with visually stunning conformed flexible displays and wallpaper screens. Samsung launched the QLED product, their take on OLED. Both OLED and QLED looked very impressive with strong colours, contrast ratios and crisp images.
SoC – New generations of products launched, with Tizen from Samsung and Android from Panasonic, Philips and Viewsonic. Raspberry Pi slot-in device shown by NEC allowing option of smart display.
Video wall (LCD & LED)
Extra Narrow Bezel – More product shown for E/EXNB across most vendors, both those who exhibited last year and vendors new to the market this year. Expected to take a greater share in coming year, beginning to challenge RPC control room spaces.
Stunning LED Displays and New Technologies – Sony CLEDIS was the talk of the show, beautiful product but extremely costly. P0.7mm demonstrated by Planar/Leyard. Massive amount of LED seen around the show with virtually all main vendors having some offerings.
Rear Projection Cubes – Laser solutions brought to market by Delta (Laser Phosphor, 4K) and Barco (Laser RGB).
The BETT educational technology (EdTech) show remains to be one of the global meeting places for those passionate about harnessing the power of technology in education. The Futuresource team relish the opportunity to explore the halls at this show and wish to share the zeitgeist of BETT 2017 in our free downloadable show report.
The emphasis and focus of BETT has changed subtly over the last few years with fewer of the major textbook publishers in attendance. A large part of the show floor was dedicated to management systems and tools for schools/administrators but digital content solutions demonstrations were relatively limited in comparison. Google and Microsoft are arguably now the key exhibitors at the show, with big crowds always visible on their stands.
Numerous new computing devices were announced by Microsoft and Google and OEM partners targeting the education sector. The supply chain has moved towards developing custom made education SKUs that are built for students e.g. toughened gorilla glass being utilised by some for protection against students dropping devices.
Some of the key headlines and trends at the show were as expected. Virtual reality (VR), robotics and coding were extremely prominent but BETT 2017 also saw some interesting new developments in the areas of data analytics, artificial intelligence (AI) and smart security.
There was a large number of VR demonstrations taking place, highlighting a variety of applications that directly support the curriculum together with enhanced interactivity, typically via standalone handsets.
In terms of the management platforms and tool vendors, the focus seemed to be on a modular expansion of their solution ecosystems, leveraging their existing customer bases in order to cross sell capabilities and solutions. As vendors look to develop their portfolios further, a blurring of the lines between product categories and providers can be seen from an end-user perspective. An example of this is the merger between leading communications provider SchoolComms and leading cashless payments provider ParentPay.
Analytics and various applications for artificial intelligence (AI) were the new kids on the block at BETT 2017, with emerging product categories for standalone tools and evolving functionality for solutions like the MIS and VLE already present in schools. In the back office, tools designed to support decision making across Multi Academy Trusts and those that draw insight from multiple platforms and data sources are both emerging categories.
In the classroom, the increased use of formative assessment tools to guide student progression and the adoption of adaptive learning solutions that drives content discovery were both increasingly evident on the show floor.
Finally, vendors selling smart technologies for access control, attendance monitoring and cashless payment solutions had an extremely strong presence on the show floor. The technologies employed for user identification continue to evolve with solutions integrating RFID, NFC, facial recognition and fingerprinting each seeing increased adoption alongside more traditional card scanning solutions, typically found in school canteens. As schools increasingly invest in EdTech solutions they are more vulnerable to targeted theft, with thieves targeting IT equipment, hence the emergence of security applications for smart security. Click here to download our BETT 2017 Show Report>>
Do-It-Yourself (DIY) is a trend we see growing in Consumer Electronics as consumers seek to refresh, enhance, and even create their own CE devices, supported by online tutorials, online component marketplaces and a rapidly growing base of coding-savvy consumers.
We have seen connectivity penetrate home and personal CE devices; however the scope of what we can do with this connectivity is often limited to the OEM’s ideas of a product’s intended use. The demand for more flexibility in the functionality offered by devices is not new; we have seen groups develop the means to update and change locked devices, for example, jailbreaking iOS devices. It is the products that allow and encourage innovation that result in such interesting consumer creations.
The availability of make-your-own kits for DIY electronic goods is growing quickly; we are seeing products being made by new entrants, but also those established in their field. Bose, notoriously absent from CE trade shows, had a booth for their BOSEbuild educational DIY speaker at this January’s CES. We’ve seen a modular DIY electronics vendor collaborate with the giant Disney and other toy companies are being built from the ground up on offering educational toys on technology and electronics.
Home audio products also highlight the commitment and opportunity to upcycle and create products at home. Speakers and headphones can be made with relatively little prior knowledge of electrical engineering. For those willing to take on a greater challenge, high-end items such as electrostatic headphones, can be made at home for a lower cost than can be found on the high street.
The Lego Boost kit, announced at CES 2017, is perhaps a subtle sign of where some areas of consumer electronics are heading. The toy combines the traditional build and play opportunities, but an accompanying app brings creations to life through simple programming commands, bringing creations to life. While innovations in the toy market may not usually have many implications to wider CE products, the availability of such toys mark the increasing demand for the DIY creation of electronics goods.
In fact, the toy market is where a large degree of ‘makerspace’ products can be seen to be beginning their consumer life. XYZprinting, one of the leading consumer 3D printer vendors has a lot of products focused in the toy makerspace market. While ‘adult’ use cases for 3D printers in the home develop, there is clearly a healthy market for devices aimed to give children creative opportunities with advancing technology.
Raspberry Pi, currently by far the best-selling British computer with over 11 million units, is an important innovator in both the educational and non-educational DIY computing space. The tiny chipset has allowed the homebrew creation of a vast amount of products in the home. Home media controllers, photo booths, smart mirrors, car dashboards, retro arcade machines, smart plugs and home security systems have all been powered by Raspberry Pi’s. Communities of creatives have grown around the product, sharing design blueprints, pushing new concepts forward and allowing designers to customise consumer goods further than what is available from established brands.
An important catalyst to this makerspace and DIY CE trend, especially as we move forward, is coding being increasingly taught at schools - coding and the principles of programming are moving beyond after-school clubs and now feature in curriculums for children as young as five.
In parallel with this trend, the global home improvement market finds itself increasing year-on-year - those in developed nations spend between $150 and $200 a year on DIY home improvements and with technology taking a greater importance in the home, the overlap between these previously separated markets is growing.
Confidence in creation and design is a major barrier to entry for DIY expenditure and project initiation. Combatting this is a wide range of support groups that have been created both online and with real-world access points. Sites such as YouTube host a wealth of how-to videos and discussion for project guides or tips for getting the most from a DIY investment. Hackerspaces offer an opportunity for those interested in pushing their creative ability to do so, around like minded people and without the need for investment into expensive professional equipment, such as high-end 3D printers. However, given the rise of electrical educational goods, it is likely as a whole we will come to be more competent in designing and building our own electronics.
Although it is all but a small segment of the overall CE market, there are observable and growing trends towards consumers demanding more access to building or customising their consumer goods. We should expect to see an increase in both educational toys, but also an increase in CE products being replicated, recycled and repaired at home, even created based on original designs.
One of the uniting aspects of most of the pro video and AV industries is that almost all end-users are looking to cut costs whilst at the same time aspiring to do more with the video format. This idea of doing more for less has driven down price points significantly in the pro camcorder market (a global figure of -28% over the past five years) and has encouraged people to consider alternative ways in which to capture video.
Alternatives to pro camcorders include DSLRs and CSCs, a trend which has been well documented, but in the world of live video production, the burgeoning professional PTZ camera market is fulfilling this function.
For instance, take broadcast, the origin of professional video use. Traditional studio set-ups require at least two or three cameras and their camera operators as well as a camera controller in the studio’s gallery. Use of comparatively inexpensive PTZ cameras does away with the need for camera operators, reducing the required headcount for a three camera set up from four to one. In a world where budgets are being squeezed, this is a significant reduction in both CAPEX and OPEX that is very appealing to some.
There are caveats to this of course: PTZ cameras can’t yet match the image quality of 2/3" sensor studio cameras and they can only be used in non-dynamic environments where the action is pedestrian. PTZ cameras are therefore better suited to static studio set-ups (interviews, news or cooking shows for example) than fast moving sports. Because of this, reality TV is another key application, for example the UK production of reality staple ‘Big Brother’ uses 55 high-end PTZ cameras controlled by just one operator.
Away from broadcast, the video conferencing market is going from strength-to-strength, partly due to the cost savings derived from people being able to communicate face-to-face without the expense of traveling.
Another way broadcast is starting to save money by using PTZ cameras is through remote production. Where small, satellite studios are required, PTZ cameras (along with other production equipment) can be operated remotely, requiring no on-site staff. This is perfect for locations that often require people to be interviewed, but don’t warrant investment in a full stand-alone studio - financial districts for example.
Aside from cost savings, another point key to the growth of the PTZ camera market has simply been the emergence of video as a central part of modern life. The dominance of the internet in our lives and increasing broadband speeds has meant that video is now everywhere. Smart phones and tablets mean that video content is always at arm’s reach, websites are now almost expected to feature video in some way and video-based display signage is ubiquitous, we can rarely escape video.
It follows therefore that the use of video is growing fast outside of the world of broadcast. Video hasn’t been the exclusive preserve of broadcast for at least 10 years now, but its use in a whole variety of applications is now being accelerated by this wider cultural phenomenon.
In addition to video conferencing, other markets for PTZ cameras include internal corporate communications, education, houses of worship, government and military as well as medical, event venues and stadiums. Some of these applications use PTZ cameras due to their low cost and comparative simplicity (they are often seen as “fire and forget” in terms of installation) while others such as education, stadiums and houses of worship use them because of they can be mounted out of the way on ceilings or high on walls and controlled remotely.
The education market in particular is extremely interesting in its use of PTZ cameras and is a good example of the cultural encroachment of video. While PTZ cameras are used to record lectures or lessons for students to catch up on later or for teacher assessment, the cameras come into their own in this environment when distance learning is considered. Massive Open Online Courses (MOOCS), typically fielded by technology companies rather than educational establishments, are forcing some of the world’s leading universities to change their business models. The ability to distribute videos of lectures, whether recorded or live, gives universities valuable assets that can be monetised without geographical boundaries. PTZ cameras are at the heart of this trend and are allowing traditional higher-education establishments to compete in this new market.
Considering all of these factors, the PTZ camera market is growing in volume terms, with 49% growth expected between 2016 and 2021. Although much of the 103,000 units shipped in 2016* were accounted for by comparatively inexpensive products used extensively in video conferencing, most volume growth over the next five years will be found in the $2,000-$3,500 segment as more quality conscious markets grow in importance. This means that despite significant price erosion, the shift in product mix will allow for a 27% growth in value over the same time period, up from $220 million in 2016*.
The well-publicised and highly acrimonious pricing row between Sky and Discovery Communications was settled at the 11th hour on the 31st January 2017 and Sky subscribers will continue to enjoy Discovery’s bouquet of 12 thematic genre channels like Discovery, Animal Planet, TLC as well as Eurosport. The disagreement was simple – Sky said Discovery’s viewing on its platforms has fallen and it did not want to pay what was being asked to renew their long term carriage agreement. Discovery said it is being paid less than it was 10 years ago, despite Sky subscription price rises and a claimed 20% increase in viewing of its channels on Sky platforms (the acquisition of Sky Germany and Italy in this period may well be a factor behind this assertion). Here’s the Futuresource take on the issues which underlay this unusually public spat between these two media giants.
Impact of On-Demand on Linear Viewing
Comparing BARB data for the last 7 months of 2016 with the same period for 2014 does suggest that the share of Discovery’s channel bouquet (excluding Eurosport) has indeed declined. The data also indicates that Sky’s own average channel share over the same periods has been relatively constant.
In our view, this will almost certainly be due in a large part to the impact of on-demand viewing on traditional linear multichannel TV. According to the latest survey in the Futuresource international consumer research program ‘Living With Digital’, 12% of UK respondents now say that SVoD services are their most frequently viewed video platform, up from 6% a year earlier, compared to 15% for Pay-TV channels. There are now approaching 6 million Netflix and 4 million Amazon Prime Video users in the UK (many taking both). As total TV viewing hours are relatively flat, it is inevitable that viewing of these services (as well as other alternative platforms like YouTube) will be taking share from traditional linear TV channels.
To combat the SVoD challenge, Sky itself has been migrating its proposition from linear to On-Demand with Sky Q, Sky+, Boxed Sets, Sky Store, Sky Go and Sky Now. Viewing of Sky Atlantic (which carries HBO content) is 75% on-demand. From 2018 Sky will offer its full content portfolio on its online TV platform Sky Now, which offers both Subscription and PPV/Pass options.
Rising Cost of Sports Rights
Live sports have become a critical weapon in the battle to sustain Pay-TV as Broadband has taken centre-stage in the battle for multi-service subscribers. Sky had to bear a 70% rise in the price of Premier League rights in the last round as a result of competition from BT Sports and is paying a stellar £4.2 billion for 5 of the 7 packages which run for 3 years from 2016. Sky’s profitability dipped 9% in the last half-year and will be looking to keep its results up, especially as it has accepted a takeover bid by 21st Century Fox which values the company at £18.5 billion. Hence an understandable reluctance to pay more for channels which it claims are being viewed less.
Discovery, whose largest shareholder is John Malone (Liberty), acquired the 49% of Eurosport it did not already own from TF1 in July 2015 for €491 million. It too has ramped up sports spending with exclusive rights to the Australian Open tennis and €1.3 billion for Olympics rights for 2016-2024. Over 40% of Discovery’s overall revenue comes from advertising but it will also look to maximize subscription-based income and has been pushing its standalone online Eurosport Player. Although distribution deals with BT and Virgin Media (owned by Liberty Global) remained in place, a blank screen on 10 million+ Sky boxes from 1st February would have left a big hole and it was clearly in the interests of both companies to reach agreement.
Q4 punctuated a disappointing year for wearable device sales, as connected watch sales failed to fill the void left by slowing fitness devices – despite functionality and brands shifting to the newer category.
A total of 90 million units of wearable devices were shipped to the market, reaching a retail market value of $14.2 billion. It was the first year since 2011 when there was a decline in the retail value of the market. The slowdown in shipments and a fall in value are partly explained by waning appeal of the novelty associated with tracking activity and wearable devices in general, as well as a price decrease in most product categories, which in turn, indicates that some developed markets are maturing and saturating.
The brand landscape of the wearables market has rapidly evolved over the past few years and is now consolidated around a few key players. In terms of units shipped there were 4 clear market leaders in 2016: Fitbit, Xiaomi, Garmin and Apple. Fitbit and Xiaomi were leading in the activity tracker category accounting for 41% and 28% of units shipped respectively. Garmin was dominating the sports watch category with 26% and Apple was standing out in the connected watch segment with a total of 44% of units shipped last year.
Fitness devices are reaching a degree of saturation in developed markets, for this reason vendors in this space have started to introduce smartwatches (with operating systems), anticipating a broader population opportunity longer term. Garmin developed its own app store called Connect IQ which allows their devices to run 3rd party applications. Fitbit acquired Pebble and Vector, two smartwatch companies.
Due to the problems of short battery life, bulky design and a lack of solid use cases, full smartwatches did not take off as quickly as expected in 2016. Wireless watches, also referred to as hybrid watches (classic analogue design with connectivity features e.g. activity tracking, remote time keeping), in the short run will appeal more to consumers, as they allow design variety, are affordable and have a longer lasting battery life. They are expected to grow by more than 20 times by 2020, as some of the leading watch vendors such as Casio and Fossil are pushing for connectivity within their watches, with Fossil launching over 130 model SKUs across 2015 and 2016. Fossil make many well-known brands such as Skagen, Armani, Michael Kors among others.
However, there is ongoing research in the smartwatch category, addressing the problem of short battery life. Some of the traditional watch vendors have already introduced watches with a solar panel instead of display, which allows the creation of smartwatches that do not require charging. The question is now whether this technology will allow adding additional features to the device. In the long run, the smartwatch category is expected to cannibalise both activity trackers and sports watches, as it will be able to incorporate the same features.
Although the market performed below expectations, there are still opportunities for growth in the wearables category in emerging and developing markets. In 2016, they only represented 43% of the volume and 36% of the value of the total expected global shipments for 2016. Moreover, in those markets the total wearables penetration has only reached between 1 and 3%.
The smart displays market has evolved and changed in the last year, with further developments expected this year. Of course, smart displays incorporating System on Chip (SoC) is not a new development in the large format display market, with Samsung having ‘Smart Signage’ screens for almost five years. However, now is the time where there is the most availability and choice to the user, with ever more vendors offering this solution.
Why is SoC becoming a key feature for many vendors? End users are in some cases demanding a simplified solution for basic signage, and do not require dedicated external media players and networks, when a basic system fulfils the signage needs they have. This is especially true when the content being shown is often not much more than a rotation of images, basic graphics, video and free broadcast channels.
Highlighting the importance of this category, roughly a third of all displays (excluding videowall and interactive) have SoC integrated into the displays. It has been interesting to see the different approaches by vendors to this segment with various choices around SoC, OS, range inclusion, integration level, etc. all driving complicated development decisions.
Samsung is by far the largest proponent of SoC, with well over two-thirds of its display range (excluding videowall and interactive product) coming with on-board intelligence. Unlike some other vendors, Samsung has been less discerning about which model ranges should carry SoC, integrating it into virtually all of its mid-range, and some high-end SKU’s. 2016 saw the introduction of the Tizen based solution, utilising the successful platform cultivated in the smart TV sector. The processors used have also developed significantly, providing more power with which to run increasingly complex signage platforms.
LG has the next largest offering of SoC, with the WebOS platform. However, unlike Samsung, LG has been far more selective around range inclusion, opting to focus more keenly on entry level ranges where the benefits to the end-user are perhaps more obvious.
As well as the Tizen developments, 2016 saw new SoC offerings coming to market from other vendors. Some of the more interesting developments have been the Android operating system based solutions brought to market by Panasonic and Philips, with Viewsonic expected to follow in the near future. This is an interesting direction from these vendors, utilising the strong user-base of Android through familiarity in mobiles and tablets. Android has a wide network of application developers able to produce compelling signage applications that are easy to use. The Google Play store is indeed a strong selling point for these displays, with a large content bank being readily available.
The final announcement of 2016 came from NEC with its Raspberry Pi solution, expected to be launched at ISE 2017. Unlike other vendors, this solution is not integrated into the display itself but instead, Raspberry Pi signage computers are offered via an optional slot in to the new Open Modular Interface (OMI). This provides flexibility in pre-sales along with the ability for fast swap out should the player fail.
But what of the actual usage of SoC solutions beyond the hard sales numbers outlined above? From discussions across the industry, utilisation rates are thought to be incredibly low, as low as 10%. One of the reasons for this is that the technology is perceived as being very lightweight and only suitable for small networks showing basic content, for example in a small retail environment. Integrators and distributors have told Futuresource that if an SoC display is selected (as is often the only option for some brands), they will always encourage the purchase and use of a dedicated media player. Of course, an integrator will make more margin on an additional media player, but also there are concerns that if the SoC fails it is a very costly and time consuming process to have the display replaced, whereas a new dedicated media player could be couriered to the client very quickly and instantly swapped out.
With the evolution of the smart displays from new and existing vendors, Futuresource expects to see the segment continue to grow and utilisation rates increase, helping to drive the signage market forward.
With worldwide shipments increasing by a factor of twenty over the last ten years, the smartphone has become one of the most successful products in consumer electronics today. 2017 will see the point at which over half of the world’s population owns a smartphone, far surpassing the peak of feature phone penetration, which did not reach more than 40% of the global population. Futuresource Consulting recently published their latest research and figures on the smartphone market, drawing on insight on the market gained over the last ten years.
The exceptional growth witnessed at the beginning of the decade, breaking the 1 billion yearly shipments milestone, has slowed as developed markets have matured. However, 2016 did see an increase in shipments to 1.6 billion units, a 9.2% change from 2015.
While healthy shipment growth is expected over the next four years, at CAGR 5.4% 2016-2020, economic issues in key developing markets have lowered expectations of worldwide sales. Furthermore, the tail-end of the smartphone rush is in sight. Shipments have begun to plateau, and while total market trade value has reached a high of $317 billion in 2016, total revenues are expected to dwindle over the next three years.
Samsung and Apple have retained large segments of the market, and their position of first and second place. With fierce competition in 2016, Samsung lost some share of the global market, with 22.1% of total market shipments, alongside Apple, who fell to 13.4% of global shipments. Huawei continued to grow, increasing their overall shipments by 40%, to gain 9.8% of global market share. Regionally, Chinese brands have had a turbulent year. Tecno, itel and Infinix, brands of the Transsion Group, saw particular gains in Africa and the Middle East, increasing from 11.6% to 18.6% of market shipments. Xiaomi and Coolpad, on the other hand, have seen declining market share in APAC, with combined shipments falling by a total of 20 million units, and brand shares declining to 5.4% and 1.6% respectively.
Looking to the future, vendors are seeking ways in which to grow market share. APAC has provided substantial growth in recent years, as developed markets have reached a peak in handset sales, but as growth in the region has slowed, META has been viewed as the next high potential market. Up until 2016, growth continued, but negative economic conditions in key markets such as Nigeria have caused lacklustre results. Furthermore, as the average spend per handset is lower in developing nations, compared to established markets such as the UK or USA, premium brands such as Apple have had difficulty in capturing handset sales.
The difficulties faced by both smartphone OEMs and the telecoms industry has led to adaptation in product offering, and attempts to stimulate replacement handset sales. For example, UK operator O2 has begun offering smart home packages, while other products such as headphones have seen widespread sale through the telecoms channel in the US and Japan, a trend now being seen in Europe. Handset recycling, refurbishment and resale schemes have been brought into use by major OEMs to quicken handset replacement. It is hoped that these measures will further drive sales, in a period of expected change in the smartphone industry.
According to reports, Apple is intensifying talks with producers to acquire original scripted material for TV shows and movies. This is not new, reports of Apple dialog with Hollywood have been circulating for years, but does it indicate a stronger interest in exclusive content as a services differentiator, or signal a major strategic push into filmed entertainment as a precursor to a much bigger Apple TV play?
For some time, Apple has been releasing music-related original programming such as Taylor Swift’s 1989 world tour and exclusive interviews with top artists like Adele. The firm’s first venture into original production outside the music arena will be a TV series, announced in March 2016, starring entertainer Will.i.am in association with veteran producers Ben Silverman and Howard T. Owens. This will focus on apps development and the app economy and, although it will undoubtedly be entertaining, the piece will clearly also play a role as marketing collateral for the Apps Store and Apple’s developer programs. Eddie Cue, Apple SVP of Internet Software and Services is previously reported to have said that it did not signal broader ambitions in TV and movies and content will be carefully selected to fit with Apple’s business like Apps Store and Apple Music.
Apple’s Internet Services business has continued to grow strongly in the last few years, rising 22% to $24.35 billion in FY 2016 (although this was boosted by a $548 million windfall payment from Samsung relating to a patent infringement lawsuit). However, growth has come primarily from the Apps Store, Apple Care, Apple Pay and licensing services - iTunes growth has flattened as competing streaming services have hit transactional entertainment market growth, notably Spotify (music), Netflix and Amazon (video).
Apple Music, launched in 2016, is Apple’s answer to Spotify (and other streaming services, including newly launched Amazon Music) and now counts over 20 million paying subscribers. A priority for the company will be to secure and grow Apple Music to defend its overall share of the digital music market and strategic moves will almost certainly include a widening slate of exclusive artists and original filmed entertainment (this path was followed by MTV 20 years ago to reduce its reliance on canned music videos).
Apple has hinted at major plays in television for several years but in practice has just continued to build the portfolio of content distributed on Apple TV, including major streaming services like Netflix, Amazon, HBO Now and Hulu. Apple has elected thus far not to directly compete with these major SVoD brands, who distribute across the widest possible range of personal and TV-centric devices, including Amazon’s own Fire TV DMA. Futuresource estimates that over 20 million Apple TV boxes are currently in active use worldwide, a big number perhaps, but only a small fraction of Apple’s 600m+ base of iPhone users.
In the absence of an Apple-branded SVoD service per se, third party brands like Netflix on Apple TV will almost certainly generate a small commission for the company and iTunes remains the default destination for EST or VoD amongst Apple users.
During the last 3 years Netflix and Amazon (and to a lesser extent, Hulu) have taken a leaf from HBO’s book and have become locked into a spending ‘arms race’ on original series to attract and retain subscribers. If Apple wanted to make a major play in production and SVoD, it could have made a play for Time Warner, acquiring both a leading studio and HBO in the process. However, despite reports of Apple interest, the company chose to pass, leaving AT&T trying to buy the company (this deal is currently under regulatory review, it is conceivable that Apple could step in if it is blocked). The decision to pass on TimeWarner strongly suggests that the latest reported Apple tactical moves into original production look to be aimed more at strengthening businesses like Apple Music, rather than a major new assault on the filmed entertainment market.
The Futuresource research portfolio and expertise spans multiple technology sectors including consumer electronics (CE) and the education technology (EdTech) sectors, therefore the first essential trip in the technology calendar each year is CES in Las Vegas. The CE team at Futuresource recently shared all of the key category trends in the CES webinar here>>. The next port of call on the tradeshow circuit will be the educational technology show BETT, from 25th-28th January. This show is the global meeting place for those passionate about harnessing the power of technology in education. Following CES, Futuresource has decided to share a few of the top-line trends that it expects to see reflected from the CE showgrounds of Las Vegas in the EdTech halls of London’s Excel.
Increased EdTech Presence at CES
K-12 educational technology had a dedicated and much bigger presence at CES this year with its own space at the Sands expo area, part of the overall CES event. The presence of educational applicable tech was also found interspersed around the other halls too.
If we were to look at the CES show through EdTech lensed glasses, coding and robotics would certainly stand out as core themes, essentially this is due to the increased focus on science, technology, engineering, and maths (STEM) learning in many countries, also coding is now becoming part of the curriculum in many schools globally. This thematic trend was reflected by the number of products being demonstrated by both established brands and start-ups, addressing this growing need.
Crowd Stoppers and Coverage
If stand crowds and press coverage were anything to go by then the LEGO stand certainly grabbed the most attention with its LEGO BOOST product line, aimed at teaching younger kids to code, complementing its successful Mindstorms product line aimed at older students.
In terms of robotics, everything from virtual assistants, toys, cleaning robots and educational robots were being demonstrated - many of course can be linked again to teaching kids how to code, such as the KUBO robot which gained a lot of attention. This product utilises tactile programming and not only accelerates the learning processes for kids whilst coding but also can be applied to developing maths, languages and music skills too.
Another interesting but rather scary product was Professor Einstein by Hanson Robotics. This artificial intelligence (AI), Wi-Fi enabled teaching or learning assistant, stood at 14.5” whilst rather eerily looking like its genius name sake, including facial ex
Last but not least, the diverse applications for robotics in education were re-enforced by the Telepresence robot which is being used in higher education to help remote or sick students remain connected to classmates and tutors.
For more information about Futuresource EdTech reports including: the Smart Campus - an Opportunity Assessment, PC Sales in the K-12 Market, Education Platforms Opportunity Analysis and the BETT Show Report (31/01), please visit our Education team page here>>
Dual-lens Cameras from Huawei, LG and Apple Showcase Latest Tech Development
Smartphone manufacturers are placing more emphasis on improving the camera and photography features as a way to differentiate from the competition and encourage consumer replacement every 1-2 years. For example, the iPhone 7 Plus dual-lens camera supports core photography applications for both capture (shallow depth of field/bokeh effect and zoom improvements - switching between 28mm and 56mm with one click) and editing flexibility (RAW capture).
In terms of consumer demand, dual-lens represented 2% of overall smartphone volumes in 2016 and is set to treble to 6% this year. In the short term, dual-lens is likely to remain limited to the most premium model(s) for most vendors (similar to Apple’s approach of exclusively offering it with the iPhone 7 Plus). Beyond this period, Futuresource expects the cost of dual-lens components/production to fall and many vendors to be incorporating this feature into a much wider range of their models. We have already seen entry-level (£250) dual-lens camera models showcased at CES 2017 and it is likely that these cameras will be incorporated into a significant proportion of smartphones in the long term.
Processing Power Driving Developments Beyond Traditional Photography Applications
Beyond dual-lens cameras, there appears to be a slowdown in physical camera/sensor developments (reduced focus on megapixels, protruding lens challenges associated with optical zoom, etc.) and more emphasis on the imaging capability, such as computational photography and enhanced data processing.
The use of dual-lens is likely to support the adoption of Augmented Reality (AR) because two cameras provide the differing levels of depth required to create a 3D image/video. Google’s Tango software platform is one the first ground-breaking examples of consumer AR, which makes devices more aware of the world around them.
3D capture for mapping surroundings around users could be used for a host of applications, including mixed reality gaming. For non-gaming, iStaging allows users to position furniture in their home and see what the new items would look like. With online shopping, a 3D camera can be used to store a full body image on a smartphone and then users can visit the retailer website to try clothes on virtually.
There were some physical hardware challenges for the first AR device with Tango software, seen with the Lenovo Phab 2 Pro, which is relatively large (6.4”) due to the amount of AR sensors required on the rear. At CES 2017, Asus showcased a smaller and lighter device - the first VR and AR smartphone with support for Google’s Tango and Daydream software.
The first examples of 360/VR smartphone cameras were seen in late 2016, including the ProTruly Darling which utilises two wide-angle cameras, one on the front and one on the rear, along with sophisticated algorithms, in order to record 360-degree video and panoramic pictures. With this example, the level of lens protrusion is fairly discreet.
It is becoming increasingly clear that non-traditional photography applications will continue to play a growing role in camera integration and technology development, versus core/traditional photography applications.
Netflix might be a global phenomenon but it's only just playing catch up with a function Amazon Prime Video has had since August 2014; the ability to download movies and TV shows to watch offline - even though Amazon is only active in a handful of countries (although this is about to change significantly). Amazon's download functionality has been well received by consumers, despite little promotion around it; Futuresource's Living with Digital survey from June-16 shows that 59% of Amazon Prime Video Users in the US, UK and Germany have downloaded Movies or TV on the service, equating to over 20 million users of the service. Half of these cite doing so regularly, with the functionality also popular in Japan.
Netflix, as recently as last year had been vocal about not adding a download function, so why now?
The feature provides additional value to "Netflix Originals" allowing its own titles to become more prominent initially and further supporting its intense program of releases. It could be that a train/plane/car journey watching downloaded TV shows is all that is needed to get viewers hooked to a series.
Netflix is placing increasing importance on emerging nations to drive growth. In Western countries the main benefits for a download function are to view whilst out of the home, to save mobile data or to use when access to the internet is either impossible, or expensive. Over fixed networks most Western subscribers can stream content without too much problem. However, in emerging nations even over fixed networks buffering can ruin the experience. So the benefit for downloading is greater, circumventing low speeds of fixed networks as well as low speeds and data caps of mobile internet, and allowing for a better quality viewing experience. Downloading on SVoD services is also a common feature on a number of local services in emerging markets.
Futuresource's Living With Digital study already shows that Netflix users would use the option as 75% of Netflix Subscribers who also use Amazon Prime Video are already downloading content for later. The demographics of Amazon download users is interesting too, households with young children skew much higher, as do young adults (18-25) who are often on the go.
There are some limitations to the services, with a significant proportion of Netflix's library not available to download. Along with Netflix Originals, Sony Pictures, NBC Universal, Lionsgate and some other independent studios are prominent. But others including Warner, Fox, BBC and Disney have no or limited content, and with perfectly good reason. Download functionality could well impact transactional digital sales, which for the home video divisions of the studios remains a major focus. Packaged video spend is declining by double digits in most countries and for the studios moving consumers to digital sell-through in particularly is a key focus in many developed markets.
In addition, the complexity of such rights is highlighted by key titles including Daredevil, Luke Cage, Jessica Jones and others which are "Netflix Originals", which can't be downloaded as Marvel rights are held by Disney, who apparently aren't on board. This will add consumer confusion as they can't even be assured that they can download all Netflix Originals, instead having to rely on the dedicated "Available to Download" section to find shows to watch later.
Overall, this will be a good move for Netflix, the demand has been there since day one and this is good timing for them too. Christmas is coming up, a time when a lot of people travel and we typically see a spike in SVoD subscriptions for evening entertainment. Amazon is due to go global, adding competition so this is another feather in Netflix's cap. However, this download capability will surely add cost to its enormous content spend and adding more major studios could be challenging, despite assurances that more content to download is on the way. The industry will have a renewed interest in the Netflix Q4 investor relations report.
The recent announcement that Samsung will acquire Harman for $8 billion has sent the newswires buzzing across the technology industry. Google this news and one comes across reams of press commentary, along with countless blogs from industry experts, Futuresource included.
The story invariably focuses around the access Samsung will gain in the automotive sector or, more specifically, connected car solutions which accounted for approximately 65% of Harman's sales during the 12 months ending 30th September. For the record, there is absolutely nothing wrong with this, it's a mantra often preached at Futuresource 'opportunity and innovation is all around us in the tech industry, but where is the money being spent?'.
But we on the Pro AV side of this business sat up and took notice for a very different reason. Samsung is a serious heavy-weight in the Pro AV space or certainly in display technology, where it is clear market leader in LCD technology. However, and like many Pro AV display vendors (not just in LCD but also projection and LED), Samsung has a constant challenge to remain relevant in the planning and decision-making process. In a bitterly ironic twist, given the display is often the only part of a solution that an end user actually sees, the lion's share of project budgets tends to be spent on other solution elements. Display selection is regularly an area where corners are cut to fit project budgets. Couple this with the rock bottom pricing of TVs as an alternative to professional displays and the picture looks even more challenging.
For many of us in the industry, Harman means audio, and rightly so considering the slew of brands in its wheelhouse. Professional audio appears to be following the CE space, enjoying something of a renaissance in recent times, or perhaps just finally receiving the attention it should really always have enjoyed. This is actually closely reflected in the amount of work Futuresource has been undertaking in this space over the last two years. There are certainly some interesting synergies here for Samsung; brands like AKG, Crown, JBL Professional, Martin, Studer and Soundcraft potentially offer Samsung access to new accounts and channels. But much like automotive, whilst this is the more obvious story, for me it is opportunities in video distribution that piqued my interest.
As a bit of background, Harman acquired AMX in 2014. AMX is the third placed player in pro AV signal distribution and automation technologies behind competitors Crestron and Extron.
Video distribution solutions are a major portion of the business for AV automation companies, with these products accounting for around 50% of revenues across the major players. Matrix switching products, typically used to tie together multi-room systems, account for roughly half of this video distribution value and have been a major focus of growth and competition between providers in recent years.
These matrix switching solutions act as the heart of distributed AV systems, with various control systems and room-based technologies layered on top of the central video distribution network. As such, in large project opportunities, these systems are typically specified early on in the decision-making process as the complexity of solutions means that manufacturers will typically work closely with end users and integration partners. Samsung's acquisition means it will be able to push display products as part of the deal, early on in the project lifecycle.
This provides Samsung with greater access to customers across a range of verticals. The base of Samsung's displays business is heavily focused on retail, not a major market for matrix switching, and is arguably less strong in verticals like corporate, government, education and healthcare, where the majority of matrix switching sales are seen.
Breakdown of Matrix Switching Ports by Vertical - Global 2015
The other key story to this is the transition towards AV over IP, a very hot topic right now in the industry. The falling cost of Ethernet switches, improvements in compression and delivery technologies and a transition towards AV management through IT departments at an end-user level are all expected to increase the adoption of IP solutions in coming years.
Of the top three players in signal distribution, AMX seems to have been the most aggressive in its adoption of AV over IP. An indication of this was the acquisition of SVSI in 2015, estimated to be the leading player in low latency AV over IP solutions. Other major players have been less aggressive in their adoption of IP technologies as these solutions use off-the-shelf Ethernet switches and threaten revenues from proprietary card cages that conventional matrix switchers are based on.
This has the potential to offer AMX a competitive edge over other major suppliers who do not have a robust IP offering to complement conventional matrix switching solutions.
All these factors coupled together present Samsung with a multitude of opportunities, of course only if recognised, embraced and managed effectively. The strength in connected technologies that Harman brings has implications for its enterprise business, beyond Samsung's VD operations, but that feels like a topic for another blog!
Samsung has made an offer worth around $8 billion to acquire US audio/automotive specialist group Harman International. The deal will jump-start Samsung in the global automotive infotainment market, which Futuresource values at around $30 billion (including telematics and navigation), as well bringing Harman's stable of consumer and professional audio brands to Samsung's portfolio.
In the world of consumer electronics, Harman has been quite an unusual success story – a traditional high-end home and car audio specialist which has flourished through revolutions in wireless, mobile and streaming music, while riding a wave of change in the automotive sector as in-car entertainment has been increasingly integrated with information, navigation and telematics. Harman has grown both organically and through acquisitions, now owning more than 15 brands including JBL, AKG, Infinity, B&O (automotive only) and B&W. Harman/Kardon is also still also a tier-one global audio name in its own right. In professional AV, Harman has also acquired specialist professional firms like Studer and Revel to strengthen its portfolio and integrates AV and lighting solutions for events, venues and other sectors.
Automotive is seen a major strategic technology opportunity, attracting interest from major players like Google and Apple. In 2015, 92 million vehicles we made worldwide, of which 73 million were cars, and the average electronics value per automobile continues to rise year-on-year. However, the key to success in this market lies in relationships between technology providers and vehicle manufacturers: Harman has presence in 36 vehicle marques and is #1 in branded car audio.
To sum up, the Harman deal will provide Samsung with a leading position in the connected car, bolster its position in home audio and open up an entry into the pro AV market. It is expected that the company will operate as an independent subsidiary of Samsung.
In December our 'Connected Car Opportunities' will seek to address the wider opportunities associated with this sector.
The video server market is one of the stalwart product areas of the broadcast equipment industry, but in recent years it has started to face the same challenges that are affecting much of the rest of this business.
The transition to IT-centric solutions has been core to these changes, as has a shift in end-user purchase behaviour and the desire to do more with less.
Even before considering the implications the transition to IP will bring in the future, COTS (Commercial Off-The-Shelf) IT systems are already impacting the studio and news segments of the video server market due to their comparatively low cost. In the past, there has been a resistance to use pure IT equipment, but pressure on budgets has meant that this is an increasingly popular option, which will only increase as end-users gain confidence with such 'non-traditional' products.
Playout is the other area of the market being hit hard by alternative solutions. Compared to other types of video sever, playout is the most price sensitive, which has allowed cost effective 'Channel-in-a-Box' products to gain real traction, especially where only limited functionality is required. Interestingly, this trend is most advanced in mature markets such as North America and Western Europe, while the typically more price sensitive emerging markets favour more traditional playout solutions. Feedback suggests that the mature markets are simply further up the learning curve and are more open to alternative products.
Until recently, the term 'cloud' was somewhat of a dirty word in the industry, perhaps due to its vagueness and overuse, but over the past 18 months this seems to have changed and attitudes are thawing. The realisation has dawned on many that IP and cloud-based virtualised infrastructure is the future. Cloud-based, virtualised playout is becoming more common, which will have a significant impact on the traditional, hardware based playout server market over the next five years.
Replay servers are one of the few growth areas of the market, but even here prices are under enormous pressure with most of the growth found in the low to mid-range. Vendors of high end, highly specialised servers are having to add functionality to their products just to maintain prices.
In short, the video server industry is currently facing, and will continue to face, some stern tests. As with all product areas in the world of broadcast, video server vendors are having to evolve in order to address the rapidly changing situation. Not all manufacturers will survive the next five years and the ones that do survive will be the companies that move with and ahead of the changing tide.
The competitive landscape of meeting room collaboration solutions over the past two years has changed rapidly where tools to facilitate this collaboration were extremely fragmented with vendors of displays, software/content, videoconferencing (VC) hardware and wireless presentation devices working in isolation of each other. However, the common standards used by many of these vendors allowed for their independently developed products to be integrated creating a complete solution. One key development in this solution is the growth of the interactive flat panel display (IFPD) market, which Futuresource expects to grow by 34% year-on-year by the end of 2016, reaching 916,000 units. By 2020, this figure is expected to reach 1.2 million units, indicating a 2016-2020 CAGR of 22.2% for IFPD.
IFPD has partly evolved into a multi-featured, all-in-one display solution that allows VC, interactivity and content sharing, effectively bridging many of the gaps between VC players, display vendors and wireless presentation solution providers. While Microsoft's Surface Hub solution (launched in early 2016) may not have driven the evolution of IFPD into an all-in-one collaborative display solution, its marketing and launch were critical in increasing awareness of such solutions.
On 25th October 2016, Google announced the Jamboard: a 55-inch 4K interactive flat panel display aimed at the corporate market. Jamboard claims the distinction of being Google's first hardware product announcement since the company's rebranding of its G Suite of cloud-based applications (e.g. Gmail, Google Drive and Google Docs). Jamboard is currently only available to business customers of G Suite on a private beta testing basis but is expected to become available to the public by mid-2017 with a price tag below US$6,000.
Unlike its Chromebook product that went to market via third-party OEMs such as Acer, Asus, Dell, HP and Lenovo, Google is in partnership with BenQ, which provides the panel. Through this partnership, Jamboard will be sold through BenQ's channel network in the Americas.
Jamboard itself is designed to facilitate collaboration in the corporate space using Google Hangouts, permitting up to 50 participants in a "Jam" session. Video calling is possible with Jamboard featuring an integrated HD camera, speakers and microphone. Its interactive functionality supports both pen and finger touch and content sharing is permissible in a Jam via iOS and Android devices.
While Jamboard has many similarities to Microsoft's Surface Hub, it does have notable limitations such as users being unable to contribute to a Jam through a desktop/notebook computer but rather only through the G Suite mobile apps on iOS/Android devices as well as Chromebooks. Desktop/notebooks may only view a Jam via a web browser. Jamboard does not allow the installation of third-party applications nor are Jam participants able to review sessions or embed video, though the latter is a possible future development.
Despite having some limitations against Surface Hub, Google's G Suite of cloud apps, 4K resolution and finger touch interactivity present Jamboard as a clear competitor to Surface Hub with both devices being IFPDs with an integrated camera and audio inputs/outputs, particularly with Jamboard undercutting the 55" Surface Hub. Will potential customers be enticed by Jamboard over Surface Hub with the former's lower price point despite the difference in functionality?
Will the likes of Cisco and Polycom be inclined to create their own IFPD solutions in the near future or will they partner with existing IFPD manufacturers?
2016 has seen the launch of lower cost virtual reality (VR) headsets and the availability of 360 video experiences without headsets on sites like YouTube and Facebook. This is creating a heightened interest in 360 video capture. Initially VR capture was made possible only with high end professional cameras like the Nokia Ozo, at a cost of 60,000 USD, this was certainly a figure that the average consumer purse strings could not stretch to. However there are more affordable 360 camera devices coming to market. It is therefore not surprising that interest within the consumer 360-degree camera segment has grown considerably.
Consumers are seeing new launches of premium devices such as the Kodak SP360 4K, 360fly 4K, Nikon KeyMission, Samsung Gear 360, Vuze 3D 360, and more affordable entry-level consumer models from Ricoh (Theta), LG (360) and C-list brands (<$100). There are also many more, less established companies looking to secure investment to develop new 360 cameras via crowd funding sites like Kickstarter. The range of 360-degree camera form factors has also widened from the initial mountable and handheld models to throwable and aerial drones.
Futuresource expects the vast majority of demand for single-unit 360-degree cameras, e.g. Kodak SP360 to be driven by consumers, initially early adopters and sports enthusiasts. Increased competition throughout the forecast period should see prices fall and lead to rising demand from casual users, similar to the trend with traditional action cameras e.g. GoPro Hero4.
150k 360-degree camera units were sold worldwide in 2015 (1% of total action cameras). In 2016, growth has accelerated following the launch of new models and developments within VR. Futuresource expects 0.6m units to ship globally this year (out of total 9.8m action cameras), of which North America will account for almost half.
It's still relatively early days for the 360 segment and there are some limitations, such as the quality/resolution of the video and issues with video/content stitching, particularly with the low-end models, although these issues are likely to be addressed moving forward. While volumes will remain comparatively niche in the short term, the longer term outlook for 360 degree cameras is positive, accounting for 34% of the overall action camera market by 2020, 4 million 360-degree cameras. User-generated content for VR is set to fuel growth in 360-degree cameras. YouTube and Facebook are the key platforms for 360 video activity, allowing users to view content without a dedicated headset, although a more immersive experience (audio and visual) is capable with a headset (e.g. Samsung Gear VR).
Despite smartphones being the most convenient device for casual photography, demand for certain dedicated image capture devices, such as action cameras, remains steady as consumers see the benefit of wearable/mountable, hands-free capture.
In terms of the Futuresource analysis of the 360-degree action camera market it only includes single-unit devices in its definition of consumer 360-degree cameras (e.g. Samsung Gear 360), typically retailing for <$1,000 as opposed to a 360 rig setup using traditional action cameras or high-end professional devices (e.g. Nokia Ozo).
Following its $49 billion grab for DirecTV in 2015, AT&T has now offered $84 billion to acquire Time Warner Inc. The deal is subject to regulatory scrutiny and the FCC will be under pressure by a number of parties to block the deal, including Donald Trump, who has already said he will veto it if elected on the basis of too much concentration of power.
The value of entertainment M&A deals has skyrocketed as major network providers have moved to acquire content properties and the cable industry has continued to consolidate. Vertical integration is back in fashion - in 2009, Time Warner spun out its cable unit Time Warner Cable (TWC), seeing little strategic value in owning a physical network and netting its shareholders a windfall of about $9 billion in the process. In 2016, Charter Communications bought TWC for about $60 billion (as well as Brighthouse Networks for $11.1 billion in a separate transaction), catapulting the company into the #3 slot in US Pay-TV after Comcast and DirectTV, with 25 million subscribers. (Charter, mired in debt, was in Chapter 11 bankruptcy protection in 2009).
|Comcast/NBC Universal||2011||$30 Billion|
|Charter/Time Warner Cable & Bright House||2016||$71 Billion|
|AT&T/Time Warner Inc||(Proposed||$84 Billion|
Although there may be opportunities for vertically owned companies to bundle content and services, the likely competitive advantage gained may actually not be that significant. The marriage of Comcast and NBC Universal is now 5 years old, but the two entities seem to still largely operate as separate businesses, i.e. provision of network services and entertainment content respectively. AT&T is planning a $35 per month DirecTV streaming service which is likely to be offered at a similar price to anyone with Broadband, not just AT&T network subscribers. OTT SVoD services, including Time Warner's HBO Now, invariably offer multi-device access to subscribers, regardless of network provider.
So it may be that a simple corporate thirst for bigger operating scale underlies the current spate of deal making, especially as dominant network providers are limited in terms of maximum horizontal ownership. For example Comcast abandoned its $45 billion attempt to buy Time Warner Cable in 2015 in the face of institutional concerns over market concentration. Similarly AT&T was blocked in its $39 billion attempt to buy T-Mobile in 2011.
What Will AT&T and Time Warner Bring to the Table if the Deal Goes Ahead?
|AT&T||Time Warner Inc|
|Revenue $147 Billion||Revenue $28 Billion|
|Wireless Subscribers 137 Million||Warner Bros: #1 in TV & Movie Production|
|Broadband Subscribers 14.3 Million||Global Distribution, Theme Parks etc.|
|Video Subscribers 25.4 Million||Turner, CNN, Cartoon Network, Other Cable|
|(DirecTV 19.8 Million, U-Verse 5.6 Million||HBO, 46 Million Subs, International Distribution|
|Video Revenue $20.3 Billion||50% of the CW Network (with CBS)|
|Business/International Communications||DC Superheroes: Games, Toy Franchises|
Google has ditched its Nexus line of products after a few years. Initially introduced in 2012 to showcase Android’s capabilities and stimulate interest amongst OEM partners and consumers alike Nexus has now given way to Pixel as Google switches from working with selected partners on devices such as smartphones and tablets to new ‘designed by Google’ for a range of new hardware. This blog examines why this is and looks at the bigger picture behind Google’s new strategy as it extends into VR, smarthome and beyond.
Whilst Pixel was introduced as a brand with the Pixel Chromebook in 2013 and followed by the new tablet announced last year it was the recent announcement of the all-new Pixel smartphones that has garnered the most attention. Smartphones are a much bigger product category than tablets and Chromebooks. And now Pixel is a halo-product, a showcase for Android, with Google looking to closely integrate its new software platforms to launch new services and enhance existing ones.
In a way, this is similar to Microsoft’s Surface brand and its brand strategy for that; in both Microsoft and Google’s case, Apple should be credited with influencing their product management strategy. Much attention will be paid to whether Google can use Pixel to grow its brand and mindshare as Microsoft has done for Surface, which remains one of the bright spots in a stagnant tablet market and has done much to provide growth opportunities with many OEMs following suit in the convertible and 2-in-1 categories. The smartphone sector is similarly slowing and it is more important than ever that companies look to differentiate. Pixel gives Google the opportunity to do this without relying on partners to deliver its devices – and without diluting its software capabilities and reach with their own applications.
The other point of note is that, like Surface, Pixel has continued on the move last year (with the Nexus 6P) from cost-effective to premium flagship. This reduces conflict and competition with the majority of Android manufacturers – alleged to be a big factor in Google quickly moving to off-load its Motorola Mobility division not long after it was acquired – and hopefully maintains the balancing act of maintaining cooperation whilst minimising competition.
Why take this risk? By producing its own hardware, Google will better understand the complications of integrating its own software and tailoring the whole package to consumers’ preferences to enhance the user experience – especially with regard to combining hardware and software as effectively as possible. This is a point which has seen discontent expressed with regard to its Android Wear and Cardboard platforms for wearables and VR. By its very nature, Google’s openness leaves it trying to standardise implementations in order to please multiple partners with different interests.
This openness in effect restricts customisation and tailoring to different requirements. With Android Wear, a common complaint has been that the one-size-fits-all approach has left it acting as a Swiss Army knife trying to be all things to all people whilst limiting OEMs’ abilities to maximise battery life (a key point for consumers). With Cardboard, the more basic implementation prevented OEMs from improving the user experience with head-straps (for hands-free use) and additional sensors (for greater/smoother accuracy and involvement).
This approach has caused some issues, with Samsung being the most prominent absentee from both of these platforms, choosing instead to develop its own software and platforms for both wearables and VR. Huawei is currently rumoured to be considering also adopting Samsung’s Tizen OS for its new smartwatch. Perhaps it is these two companies’ size and scale that means that they do not have to be so reliant on Google but it’s a strong indication that the two leading Android smartphone manufacturers are looking elsewhere. Now, as a developer and provider of complete products Google will understand more about what is required to combine its software and hardware and learn of the nuances that have to be taken into account, which is something that could benefit their OEM partners as well as itself.
In order to effectively implement all of this, Google has also brought in a new retail strategy. Now its products are available in physical stores, no longer just through its online Play outlet. This gives it a much bigger presence and reach, which will boost sales. Minimising competition – whether deliberately or not – Google has announced exclusive distribution deals with MNOs in key countries as well as leading retail chains. This gives it a chance to have consumers more involved, even if only window shopping people will be able to see and try out the products in person rather than looking at images and reports online.
Also announced alongside the Pixel smartphones were several other devices that are new to Google and to demonstrate its intent to put its new philosophy into practice. Coming soon after it recruited Amazon’s lead hardware developer, Google has announced Google Home, Daydream, Chromecast Ultra, Google WiFi and Google Assistant. Okay, Google Assistant is not hardware or a device but it is important and goes beyond what other virtual assistants are able to do; it is smarter, more contextually aware and more interactive than other platforms currently out there. Amazon has taken the lead with its Prime multimedia services, Echo and Alexa. In fact, Alexa being integrated into 3rd party devices perhaps is the biggest indicator of the threat to which Google has responded. Google now has a much better opportunity to maximise its broad range of platforms and applications and better understand how to implement them to be more successful with both partners and consumers.
Our opinion at Futuresource is that this is perhaps the key point. Google has been able to test the waters with various software developments over the years but it has struggled to really go beyond search and advertising (possibly with the exception of Maps and location). It has done well to adapt to mobile, with Android serving it well there. Beyond that though? The new devices, integrating with Assistant and other software will give Google direct access to the new holy grail, data! Google will be much more able to utilise the vast amounts of data expected as we increasingly migrate online and move away from traditional UI and devices to voice control and sensors supported by machine learning.
By placing the emphasis on OEM partners to date, Google has been at risk of missing out on data. By producing integrated solutions it can go straight to the source and provide a more-rounded experience to customers whether they are out and about with their smartphones, living their daily lives at home, gaming and consuming multimedia content, listening to music, exercising, at work, travelling in their cars or interacting with potential new future connected IoT devices. Think of Google Assistant operating with your car as you work through your calendar, stream your music, plan your shopping list, schedule your meetings, check your recent exercise regime, pay for a new purchase and skip traffic jams – all on your commute before you step foot outside your car.
Last week, IBM, in partnership with Apple positioned its Watson analytics platform for the K-12 education market with the launch of the Watson Element for Educators app. The app, designed exclusively for iPad's, collates information covering students likes & dislikes, learning activities, interests and academic achievements to provide a holistic view of a student's school career. Based on this rounded perspective, Watson Element offers guidance for differentiated instruction in the form of content recommendations. Combining potential revenue streams from software licensing and content sales - the platform straddles two hot topics within the EdTech space, the role of analytics and the way content is packaged and delivered in education.
The rise of digital education has led to the adoption of multiple disparate software platforms within schools. The increase in digital tools has been accompanied by a growth in data generated by these platforms. The growing availability of student and institutional data has been met with efforts to aggregate information from multiple platforms to generate insights. IBM, with its Cognos BI platform is just one of the providers of such a solution. In this model a variety of data points are combined to measure institutional wide performance, highlighting the macro impact of individual solutions and initiatives and providing indicators for groups of outliers where intervention may be required. These solutions help administrators analyse trends within the general student population, providing measurement against compliance frameworks and efficacy targets.
The introduction of the Watson platform marks a significant move for IBM from the back office into the classroom, with a solution designed to analyse the individual not the institution. The platform is designed for use by teachers, not administrators and aims to support a differentiated learning experience in a similar manner to adaptive learning courseware. Adaptive learning courseware leads students down personalised learning paths where content delivered to the individual is based on their level of ability and knowledge. A student's ability level is defined by usage and with use, platforms build up a picture of knowledge acquisition over time. Watson Element works in a similar way, the big difference here is that Watson is not locked into a predefined proprietary content library as is the case with adaptive learning courseware.
This fundamental change in content discovery and course formation has implications for the go to market strategy of content publishers. In today's market, the vast majority of education content is sold direct to schools and districts. In this model, courseware is typically acquired in an aggregated format – an entire textbook or content library or access to a comprehensive online learning platform. The Watson platform, through its content recommendation features has the capacity to recommend content beyond tools already owned by a school. In this model, additional recommended courseware would be acquired via a content portal. Content would be tailored for the individual and as such the purchase of content would be administered by the teacher (in league with the student) and not by the school or district, as is typically the case currently. This has two clear implications for content publishers, firstly, teachers will have a greater influence on content purchases than previously and secondly the content is more likely to be purchased in a disaggregated format (a single lesson or even learning asset) to meet the immediate needs of an individual student. This could have significant long term implications for how content is purchased in K-12 education, with the potential transition from aggregated school and district wide purchasing towards disaggregated purchasing for the individual. In order for this vision to be realised however, the industry movement towards open standards (and by implication the increasing pressure on publishers to allow their content to be disaggregated) needs to continue.
Of course Watson Element is not the only platform offering analytics based content recommendations and is just one of a number of platforms and ecosystem developments leading end-users towards disaggregated content but IBM's offering has the potential to be a significant contributor. In the wake of the IBM & Apple announcement, leading educational publisher Pearson announced its intention to utilise the Watson platform as a virtual tutor for higher education. It is currently unclear whether or for how long Apple will remain the exclusive partner for Watson in K-12 education.
The benefits for Apple in the partnership are twofold. Firstly, there is the potential for content recommendations to link to materials in its iTunes U platform. Secondly, the tie up offers a clear point of differentiation for the IOS ecosystem. Apple took an early lead in the market appealing to innovative educators by positioning its ecosystem around the transformative power of technology. Its market share in US K-12 mobile device shipments* sat around 50% in 2012 & 2013 when 1:1 roll outs started on mass in the US. More recently, Apple has lost share due to the rapid rise of Chromebooks (which reached 50% share in 2015*). At a time when a large number of Apple's early adopter customers (who purchased 2012 and 2013) are likely looking to replace their devices, this new competitive development will provide a new 'USP' for Apple in the face of stiffer competition from Google and Microsoft. One significant challenge to adoption of this however maybe the move towards a multiple OS scenario (where different OS's are utilised by different age grades and usage models) which has taken place in many US school districts. In this scenario, either the district has to choose to return to a single OS environment or not to utilise the Watson Element platform across all of its students.
*Shipments refer to mobile device products only (Notebook, Netbook, Tablet, Chromebook) not including desktop.
*K-12 institutional sales only, not including bring your own device.
As flat panel technologies become increasingly prevalent in corporate and education environments, projection's unique ability to produce more than a mere 2D image is beginning to be exploited. Projection mapping demonstrates how the technology can evolve to extort new opportunities and negate the threat that FPD presents.
Large-scale projection mapping is not new but only in the last two years has it become a hot trend following innovations by leading integrators such as ProjectionArtworks; Dataton and The Projection Studio. Widespread marketing of the latest mapped spectacle, whether it is in stadiums, arenas or on the world's most iconic architecture, has helped to catapult projection-mapping into an attraction the public can recognise, and now demands.
Small-scale mapping has also recently gained traction, again thanks largely to software developments such as the scalable, cloud-based solution, DisplayMapper. Such solutions, as well as developments in solid-state technology have finally enabled digital signage to become a viable opportunity for projection. We are now seeing it finally enter retail verticals in the form of striking on-shelf product promotions in leading chained stores. Research conducted by Futuresource Consulting has found that the global Total Addressable Market (TAM) for projection in retail alone is 3.7 million units.
Whilst the industry has seen innovations in large-scale and commercial small-scale mapping, there has so far been a glaring void – mapping for the mainstream.
Optoma has recently released Projection Mapper – a $4.99 app that can be used with any brand/type of projector. The app represents the first launch of dedicated software for digital signage by a projector brand, which is significant in itself.
Affordable and easy to use, Projection Mapper has the potential to bring mapping to the masses across a range of verticals: prosumer DJs, small businesses and in the home for parties/holiday decorations. The current global installed base for home projectors is 3.8 million – which represents a substantial untapped opportunity before the corporate market is even considered.
Projection Mapper has the potential to expand the general public's understanding as to what is possible with a projector and that achieving those possibilities is easy – and crucially, affordable. Not only does this have the potential to enhance how projection technology is perceived, which will in itself help overall projector sales, but it also unlocks an entirely new application for the industry at a time when traditional applications are becoming increasingly threatened.
Futuresource expects that Optoma will be the first of several projector brands to launch such a solution; in conjunction with dedicated hardware solutions such as Panasonic's Space Player, in order for the market to fully realize the opportunity that signage represents.
The retail photo printing sector has been undergoing a marked change in Western Europe (and, in fact, globally) in the past two years or so, driven by the availability of a wider range of photo printing equipment. Specifically, the inkjet photo printers marketed by Epson & Fujifilm, plus the recently launched Noritsu inkjet photo printers.
These inkjet photo printers can be integrated into an instant print kiosk, or into a modular dry minilab, as well as being employed standalone: front of counter - linked to one or more order screens, or back of counter - supporting an existing wet or dry minilab. They offer retailers more flexibility, a wider range of photo (and non-photo) products and a lower purchase price barrier in some configurations. These printers also appeal to the events, pro-photography and public sector end-user groups.
In the twelve months to the end of June 2016, over 2,300 of these inkjet photo printers shipped in Western Europe (13 markets), as compared to around 470 fully integrated and modular dry minilabs.
To complement existing silver halide minilab and dye-sub/inkjet minilab, instant print kiosk and standalone printer installations at retail, this newer wave of inkjet photo printers is and will be a practical tool for photo retailers in a challenging marketplace.
The retail photo printing business has, and will have a tough task in attracting and retaining customers, especially in the face of the rise in photo printing apps in some Western European markets, but there are clear examples of pharmacy chains, mass-merchandisers, photo specialists and independent photo retailers across Western Europe which are thriving, and attracting new customers. For example, some of the Millennials, who have not grown up with the concept of photo printing are currently willing to pay high prices for square, retro, black & white and Polaroid style photo prints and successful and innovative photo retailers are tapping into this market.
A number of trade exhibitions and fairs punctuate the calendar of Futuresource analysts and – one of these, CEATEC - has just finished. The Tokyo show (whose full name is Combined Exhibition of Advanced Technologies) feels quite different to other events such as CES, IBC and IFA as it is primarily a showcase for Japanese firms. Over the years, Futuresource has observed how CEATEC reflects the changing face of the Japanese CE industry. In the past, this was the show to preview world leading innovations in TV sets, personal and home A/V. But the once globally dominant Japanese vendors such as Sony, Panasonic, Sharp, JVC and Toshiba are no longer the powerhouses that they once were in these fields and are refocusing their businesses. Sony has not exhibited at CEATEC in recent years, whilst the others prefer to show alternative products on their booths.
As a result, the dominant themes of the show this time were IoT, smart home and robotics and Japanese firms are clearly at the forefront in many respects.
Sharp's booth typified these themes, dominated by a live show where scenarios were acted out to demonstrate how smart home will make life easier. The mother, cooking dinner in a Sharp oven, asks a voice personal assistant to turn down the temperature of the oven to prevent the meal being burnt before she completed her yoga workout. The prototype VPA, which would also adjust the air conditioning unit is designed to cater for the Japanese taste for cute curved robotic shapes. Unlike some of the VPAs coming to the market, it does not double as a wireless speaker. A robotic vacuum cleaner – the Cocorobo x Vocaloid - was in action meanwhile; the centre of attention as it also played music whilst it worked its way around the floor.
Japanese online retail giant Rakuten told Futuresource that it is also working on a VPA (though not on show) capable of both audio and image recognition. MUFG bank meanwhile was showing a VPA in the guise of a 12cm high robot which it is trialling in a branch. Unlike most human branch assistants, it can speak English and Chinese (in addition to Japanese) and so can help travellers with banking queries. The bank figures it is cheaper to supply these devices than employ staff with foreign language capabilities. As in previous years though, many of the robot devices on show were little more than toys.
Panasonic is a world leader in power supply for next generation devices and its flexible battery for use in wearable devices was a major headline of the show. Just 0.55mm thick, the lithium ion battery can withstand regularly being bent to an angle of 25 degrees.
There were a multitude of IoT products on show, many of them relatively low value devices such as smart doorbells, sensors, and cameras. Whilst Sony was not exhibiting, it's worth noting that its sensors underpin many of the cameras used in remote monitoring systems.
Flexible displays were apparent on several booths. Nippon Electric Glass showed various products which can be used in portable and wearable devices or on car dashboards. Glass ribbon that is thin enough to roll up, but durable in conditions when being twisted or bent.
Various applications of virtual and augmented reality were apparent, including a VR headset from toymaker Tomy whilst Rakuten was showing its virtual shopping experience, enabling the clothes shopper to view him/herself trying on clothes without the inconvenience of entering a cubicle and physically getting changed. Styles, colours and sizes could be changed at a gesture.
TV sets enjoyed a significant presence last year but this time they were scarcely to be seen; largely restricted to a booth hosted by JEITA and NHK which was once again flying the flag for 4K UHD and forthcoming 8K. Trial 4K broadcasts by the national public broadcaster are underway, with regular services scheduled for 2018, at which point trial 8K broadcasts will begin ahead of the 2020 Olympics. Whilst doubts remain elsewhere in the world about the consumer need for 8K services, the Japanese thirst for the best possible technology remains.
Nearby, the Blu-ray Disc Association of Japan was hosting a booth highlighting the 40-50 disc titles that are now available in Japan, including a sprinkling of local content, anime and documentaries.
And that was about it for A/V. Panasonic, which had made a big splash of its 4K last year, was not showing TV sets, nor was its Technics high end audio brand exhibiting this year.
However, a visit to CE retailers in Tokyo such as BIC Camera and Yamada Denki - whose stores typically sprawl over several floors - is a welcome reminder of the passion that the Japanese consumer still possesses for consumer electronics.
Although the CEATEC show itself does not really merit a dedicated visit from Europe or North America, it is well-attended by Japanese. 120,000 visitors were expected during the week. Unlike CES, this show is not exclusive to trade visitors and not a place where a great volume of business is conducted with retailers and distributors. That said, the conference track which acts as companion to the show is well attended by industry executives. Futuresource made presentations on the state of the global CE industry, audio and smart home and these were sold out.
The Futuresource Imaging and Pro Video team attended Photokina 2016, meeting clients and scanning the floor for the latest products. We have talked before about how the enthusiast and professional equipment market remains robust despite the collapse of entry level in our previous blog (click here to view), and this was clear to see at the show. The key announcements were centred around higher value products with greater features and functionality, while as anticipated, very few entry-level devices were on display.
The number of exhibitors (983) was down 8% in 2016 compared with the previous event in 2014. However, the overall number of visitors increased by 4% to 191,000. There was certainly a buzz around the show, assisted by attempts from the organisers to promote a multi-media event, focusing on image communications and featuring more interactive zones.
The organisers reported that approximately 40% of private visitors (excluding exhibitors) said that they were attending the show for the first time, while the share of visitors aged under 30 increased by around 20% compared with the previous show.
Interchangeable Lens Cameras
One of the most discussed launches was Fujifilm's entrance into the medium format segment with the GFX Compact System Camera (CSC), which goes into direct competition with Hasselblad's X1D and professional DSLR models.
Other notable announcements at the show included high-end CSC's from Olympus (E-M1 mk II) and Panasonic (GH5), while Sony unexpectedly announced a new flagship A-mount model (A99 II), which was especially surprising given their investment and success with the smaller/lighter E-mount (CSC) line-up in recent years. Along with launches in recent months from Fujifilm (X-T2) and Canon (5D Mk IV) these new releases provide enthusiasts and professionals with ideal specs for a range of applications, including fast moving action/sports video capture (all 4K).
Some of the new camera announcements at the show were prototypes and are not expected to hit the retail shelves until early-mid 2017. It is probable that some of these launches were delayed as a result of the Japanese earthquake which caused major disruption to production earlier this year. Click here to view Futuresource's blog on the subject.
The camera vendors were not just tempting enthusiasts and professionals with camera bodies – a significant amount of professional lenses were also on display. All Compact System Camera vendors have been steadily expanding their professional lens range in recent years and Olympus was notable with the launch of three new lenses, including impressive zoom and prime models (both retailing at €1,299).
With rapidly increasing consumer and professional interest in Drones it was little surprise to see these vendors occupying a more significant section on the floor compared with the previous event, and attendees were keen to pilot the latest models.
GoPro entered the segment by unveiling an easy-to-use, portable drone (Karma, $799 excluding camera) with innovative folding propeller arms and removable gimbal. The action camera pioneer will be hoping that its ecosystem of hardware (cameras/accessories) and software (including new cloud storage service 'GoPro Plus'), brand association and loyal customer base of hobbyists will act as a catalyst for strong drone sales.
One week after the show finished, video drone market leader DJI also announced a similar portable, foldable drone (Mavic Pro, $799), but with the addition of the latest features that sports enthusiasts will particularly appreciate, such as 'obstacle avoidance' and 'follow me'. The Mavic is likely to provide stiff competition to the Karma as we head into Q4 and the key gifting period.
Action Cameras and 360-Degree Capture
There was a plethora of action cameras with new features, including GoPro's Hero5 line-up with voice control, whilst Sony launched the FDR-X3000 with optical image stabilisation, providing what is reportedly the most advanced level of stabilisation on the market. Nikon's 360-degree action camera (KeyMission 360) was on display for the first time and footage from the camera was available to view through VR headsets on the booth.
Retro Resurgence - Instant Photography is on the Rise
The booths showcasing the latest instant print cameras and mobile printers were particularly popular amongst the younger demographic at the show, who experimented with printing from the instant cameras or from their smartphone.
The worldwide market for instant print cameras is currently largely dominated by Fujifilm, ahead of Polaroid. The brands have been joined by new entrant Leica, which looks to capitalise on this buoyant segment, which grew 20% to approximately 6 million units (worldwide) in 2015. This growth trend has continued in 2016, fuelled by a growing consumer desire for tangible output and a retro appeal which combines modern camera technology with nostalgia.
Photo Printing and Equipment
Wall décor remains a popular consumer product and was a prominent feature at the show, with wide ranging displays by photo labs, equipment/paper vendors and also some of the camera vendors. An extension of this was personalised photo (and non-photo) fabric and wallpaper printing using LFPs, promoted by Felix Schoeller and Photo-Me, amongst others.
A range of new photo papers were on display, notably some with various textures, including papers providing a canvas or leather look and feel. In the retail photo printing sector there was a heavy focus on compact inkjet photo printers, notably the Epson's Surelab D700 and Fujifilm's new Frontier DE-100 (offering a longer print head life than the Frontier DX-100. Meanwhile, Noritsu was heavily promoting its new QSS Smart DR-08 and DR-12 inkjet photo printers, offering panoramic prints up to 200cm in width. These printers also open up more opportunities in the events and professional photo sectors.
Consumers' have never had so much choice of movies and ways of getting their hands on it, so why is the disc still king and what's behind the reluctance to adopt just digital as the way to buy movies and video to own and keep?
Futuresource's latest consumer research unearthed an interesting trend from the results of 20,000 online interviews across 11 countries including the USA, Canada, Australia, UK, Germany, France, Italy, Spain, China, Japan and South Korea. Although the total number of consumers who are buying video to own and keep remains robust when combing DVD, Blu-ray and Electronic Sell-through (EST) there are very few who only buy EST.
Using the UK as an example, just over half the adult population buy video to keep, of these 67% only buy DVD's and Blu-rays, 29% buy both digital and DVD's and Blu-rays and that leaves just 4% who buy digital exclusively. The same is true in the US even though more people buy digital than physical, just 5% only buy digital copies. This is despite the number of EST buyers increasing over the past year, but the proportion buying just digital sell-through only has not.
If people are becoming more familiar with buying digital video overall, why aren't they choosing to buy only digital? It's comes down to collectability and longevity of ownership.
Looking at the reasons people haven't bought digital ("Cost" and "I have enough other options to watch movies e.g. SVoD") and using the UK respondents again as a benchmark, of respondents who haven't bought any digital video outright, 21% said they hadn't because "I don't feel like I will truly own it forever" with a further 19% ticking "They aren't as collectable as DVD's or Blu-ray's". Interestingly, both reasons were equally important to young and old including the "millennials" who are often stereotyped as preferring to access content rather than owning it. This data is taken from Futuresource's wave 12 edition of its Living with Digital consumer research.
The above represents a significant challenge, as persuading video buyers to buy a digital copy is difficult, if they don't feel that they will truly own it and perceive it has lower value to the physical counterpart. Part of the problem lies with the relative invisibility of the actual digital product, with the vinyl revolution highlighting consumers' appetite for tangibility is still significant.
Some insights and perhaps a hint at addressing this issue can be drawn from looking at the other side of this question, of those who have bought digital video, why did you? Overwhelmingly popular was "It was a good price or on promotion" which was cited by 45% of UK respondents (50% in the US), followed by "It was more convenient than buying a DVD or Blu-ray" which was selected by 42% of those in the UK and 43% of US respondents.
New services such as Sky and Amazon have provided a kicker to the EST markets they are active in, helping propel awareness of EST and communicate the convenience of this format, in particular bringing it to the TV screen rather than a mobile device or PC/laptop. Amazon and Sky have the scale to continue to drive EST, which will be vital in propelling EST to the next level and making more consumers comfortable in making the jump to digital ownership.
Apple's iPhone 7 launched to the usual blaze of speculation and publicity. As I watched the event and the presentation of each feature and improvement the point that occurred to me was that it is now near enough impossible for a smartphone to stand out from the crowd. Apple did a great job in explaining the advances in camera functionality, battery performance and the new waterproof capability but it struck me that someone had done each of these things already. Apple has cherry-picked the best features and advances in technology but someone, somewhere has pretty much done them all and they can be found in other manufacturers' devices.
Dual lens cameras can be found in the LG G5 and Huawei's P9, the latter developed with Leica's input. Sony too has made much of its advances with camera technology, not surprising given it is the major supplier of the components to most other companies. Similarly, it has been very progressive about its battery performance (stating two days for its Xperia models for some time now) and it has recently introduced smarter charging to prolong the life of its newer Z-series models). The same for waterproofing, Sony has it (in most models), Samsung also reintroduced it for the Galaxy S7 (having previously dropped it for the S6).
Much was made of the loss of the 3.5mm headphone jack but consumers have been moving towards Bluetooth headphones for some years and given an adapter is provided it really is a moot point. It is an Apple-specific development and doesn't signify any notable advance or change in design or capability. Saying that, the greater data throughput and quality available via Apple's lightning connector may prepare the way for higher quality audio services from Apple.
The rest of the features and changes are largely design orientated. Apple is great at integrating proven technology and establishing features that others have struggled with, the addition of Touch ID and biometric fingerprint readers in phones being a great case in point.
What this really indicates is that hardware is not enough to stand out from the crowd. This is a result of the smartphone market having matured significantly in the past few years. The market is effectively at a point of saturation and vendors are no longer able to rely on a killer feature or design change (given current technology) to drive sales. The iPhone 6 two years ago was the last real device to do this and that was perhaps its simplest change; Apple responded to the phablet trend and delivered a bigger iPhone that immediately stood out from previous iterations. That produced a jump in sales, timed well with its own expansion and uptake in Asiawhich was at the forefront of phablet demand.
Global Smartphone Penetration
Where Apple has gone with these latest advances and design features is to focus more on the user experience. Apple users rank the highest in terms of their use of apps, especially paid for apps and Apple is doing its best to maintain this. Whilst the camera improvements on their own may not stand out too much, they will be well received by their strong base of Instagram users. The screen is brighter and better quality, lending itself to capturing (via the camera) and viewing high quality content. Battery performance has to improve to support these features without degrading the overall user experience by having to charge it more often (thereby interrupting usage). Battery, screen and audio are the other three areas cited by consumers as being of most importance and Apple has addressed these to maintain and increase appeal to their user base, which is critical when operating at such a premium and having to justify to maintain their higher prices – something most other manufacturers have been unable to do.
Whilst some have made much of Apple's "struggles" in 2016, the other manufacturers would happily swap places with Apple to have such "difficulties" to contend with. Meanwhile, Apple continues to expand its portfolio and add its brand to new products. The Watch 2 has seen waterproofing also added and advances within Watch OS3, better lending itself to outdoor and sports usage which remains the "killer app" for wearables.
Futuresource expects to see more from them on the headphone side and the AirPods are Apple's first venture into "hearables". Whilst others are already available (notably Bragi's Dash and Samsung's Gear Icon X), Apple has again looked to offer a smarter user experience, combining sensors within the earbuds to optimise usage, with good reliability rather than trying to do everything they could think of being the primary concern. The AirPods automatically switch on when removed from the charger case, they pair very simply, they automatically stop music playback when removed and start again when put back in, they allow Siri to always be on hand (and as that improves this will move things forward again).
More product categories will be introduced over time, with Futuresource expecting more news in the smart home arena. It is likely that we will see Siri feature more prominently there too as virtual assistants are already being used by Amazon, Google and Sony to integrate themselves every closer into consumers' lives. For now though we are already thinking about what may be done to mark the iPhone's 10th anniversary next year. Does Apple have one more surprise in terms of hardware and design to go with its other advances relating to the user experience and how its customers interact with its devices and their wider ecosystems across homes, offices and automobiles?
The printing and photocopying market is huge, over $50 billion including consumables and services, but is steadily contracting as document management moves to digital distribution and the cloud. The market is segmented by volume and technology, with different brands competing in respective segments.
In an unusual move for a Korean company, Samsung has decided to sell its printer business to HP, who will pay $1.1 billion, equivalent to about one year's revenue. Samsung's business is centred on laser multi-function printers for consumer and SME markets but is sub-scale compared to its major competitors. Although it is a leader in PC monitors, the company has generally found the going tough in office equipment and also exited the PC market in 2014 to focus on tablets and smartphones. Samsung currently has a major recall of its flagship Galaxy Note7 smartphone and just sold minority shareholdings in Seagate, Sharp, Rambus and ASML, raising almost $900 million.
HP was split up in 2015, the PC and Printer businesses spun off into a separate company, HP Inc, which had sales of about $50 billion in 2015, of which printers, consumables and media accounted for $20 billion. HP sells printer hardware cheap and makes 80% of its profits on cartridges and paper, a classic 'razors and blades' business model. The remaining $30 billion of HP Inc's sales come from PCs, where the company is competing against Lenovo for the #1 slot under HP and Compaq brands. (The other company resulting from the separation, HP Enterprise, is also currently in the news as it is selling its software business to Micro Focus for $8.8 billion, creating the UK's largest tech company by revenue).
HP is the leader in inkjet printing in consumer and SME markets, competing primarily with Epson. In laser printers, HP is also a leading player but is heavily dependent on Canon, who has supplied OEM laser technology for many years and also sells printers under its own brand. This reliance may be reduced by the Samsung deal, which brings to HP a portfolio of 6,500 patents and 1,400 engineers and researchers, although the company has said collaboration with Canon will continue. The firm says its objective with the Samsung deal is to drive innovation and help replace photocopiers with multi-function printers, but, as Futuresource sees it, the inescapable fact is that the world is trending away from paper to digital communication and information management. It is significant that Xerox, who dominates high volume printing, is also in the process of splitting out its document management business as a separate company. Lexmark, IBM's old low end printer group, was sold to Chinese interests earlier in 2016.
|Leading Players*||Market Strongholds|
|HP||Inkjet and laser printers for consumers and SME (Small Medium Enterprise)|
|Xerox||High volume printing, copiers, graphic communications, document management outsourcing, enterprise|
|Canon||Laser printers and copiers for consumers and enterprise|
|Epson||Inkjet printers for consumers and SME|
Think vinyl in the digital age of music streaming and downloading and it’s easy to think snap, crackle pop and clutter.
But one of the most unusual phenomenon of the past few years has been the renaissance of vinyl records – an odd curio in an era of consumption over collection and where the convenience of ‘All you can eat’, access all areas subscription streaming services has been winning out. But nonetheless the vinyl revival is well underway, sales volumes are increasing for both discs and hardware. New vinyl disc sales have doubled in retail value between 2013 and 2015 with consumer spend to reach almost U$1 billion during 2016. Consequently pressure is building on the supply chain to meet demand.
But why midway through the second decade of the 21st century are we witnessing a revival in demand for a format that the mass market abandoned years ago as being too clunky to use in addition to being less sonically perfect than CDs?
It shouldn’t happen here but it is.
So what is driving the vinyl revival? It has been a niche format for the best part of two and a half decades with sales underpinned by the long term vinyl aficionados and the DJ community. More recently we have witnessed the emergence of the younger consumer (16 to 35 year olds) buying into the vinyl concept.
Futuresource Consulting’s Living with Digital consumer research survey from July 2016, indicates that 22% of 16 to 35 years olds have bought a new or second-hand vinyl record in the last 6 months across the USA, UK, Germany and France combined. 85% of these buyers are buying new vinyl.
For some this is a fashion trend, their friends are buying vinyl and may have purchased a budget price turntable, it is considered to be cool. So, they follow the crowd and consequently may be short term vinyl buyers with little long term longevity in the market.
For some in this age group it is the collection process, the attraction of amassing elaborate artwork or collecting different coloured discs, while maybe never playing the discs – using streaming or download services to meet their listening needs. Futuresource’s previous wave of research from December 2015 suggested that 17% of all vinyl buyers do not even own a turntable.
While others who maybe dissatisfied with the sound quality of digitally delivered music and even CD, the attraction is the warmer fuller sound of vinyl records in comparison to other media.
For many younger consumers the ritual of listening to vinyl records, the interaction with the sleeve, the sleeve notes and the process of placing the disc on a turntable is their first tactile interaction with music, something older music consumers had taken for granted but had been lost to the download/streaming generation.
Moving forward this latter group with their enthusiasm for the sound quality, the ritual of playing the disc and their appreciation of the vinyl record, the music and artwork combined, as a complete artistic package are key for the music companies. It is essential that the record labels cultivate the younger consumers of today as the vinyl aficionados of tomorrow.
However, it is also evident that streaming services and vinyl buying are more than happily co-existing; half of Spotify subscribers have bought a vinyl record in the last 6 months – 4 times more likely than the overall population.
The vinyl revival presents an opportunity for the major labels to repackage their catalogue one last time, with major reissue programs of classic artists such as David Bowie, Pink Floyd, The Beatles, The Rolling Stones and Led Zeppelin – the latter out of print on vinyl since the earlier 1990’s – all generating significant volumes, although not all major classic rock artists or catalogue reissues have generated huge sales levels. Nonetheless, sales have been so good that in the UK and Germany there has been the launch of the first dedicated vinyl charts. In addition, the success of catalogue sales on vinyl has not gone on unnoticed by current front line artists, some of which have insisted on a vinyl SKU for new releases, although it has to be said with mixed sales results e.g. Ed Sheeran has achieved high sales volumes on vinyl for his 2014 release X.
The vinyl market has long been dominated by online retailers such as Amazon and specialist online music retailers satisfying demand. However, the upswing in disc sales has awoken interest amongst brick and mortar retailers – in the UK major supermarkets Tesco and Sainsbury’s have begun to stock a limited selection of LP’s in addition to a range of budget turntables, Media Markt is thought to have taken the process of vinyl purchasing and range management back in-house. In the USA the vinyl revival has resulted in the emergence of the non-traditional retailers most notably with clothes and lifestyle retailer Urban Outfitters achieving a significant share of the market.
However, the surge in vinyl demand has placed pressure on the supply chain, with around forty plants active across the US and Europe collectively. Limitations on capacity and the ability to expand, in addition to a shortage of skilled manpower, combine to create capacity bottlenecks and lengthy turnaround times.
The challenge for the music industry is maintaining momentum in the vinyl segment by successfully mining their catalogues and attracting and retaining consumer interest, converting today’s recent vinyl adopters to be the mainstays of the market tomorrow while all the while maintaining retail support.
Consumer electronic trade shows are normally dominated by the latest cutting-edge gadgets and IFA 2016 was no different with the latest innovations in drones, wearables and 3D printing technologies being widely showcased.
However, projection – dubbed by some as an outmoded technology – was also placed centre-stage and attracted widespread draw. In fact, leading TV manufacturers Hisense and TCL placed their new 4K 'laser TV' projectors at the fore of their booths.
Since LG released the Hecto series at CES 2013, 'laser TVs' have been gaining attraction but, due to the technology's price-tag, adoption has been limited. However, significant developments in solid state technology are rapidly reducing this price premium and are paving the way for a string of brands to enter with more affordable solutions.
The result of this innovation is a projector that can directly compete with a TV for use as the home's main display. Solid state illumination offers home users a bright solution that can last up to 20,000 hours with little maintenance – including no lamp replacements. The majority of 'laser TV' solutions currently on the market offer a display of at least 100" which means projection also offers a far greater dollar-per-inch ratio.
Epson, LG, Sony and JVC also dedicated significant floor-space to demonstrating their projectors – further highlighting how projection technology is evolving to remain relevant in the rapidly evolving world of CE.
Social media is shaping up to change the video viewing habits of many, with millennials already at the forefront of this switchover. User generated content and short form videos are proving to be incredibly popular by the mobile-driven masses, creating billions in views.
As a result, it comes as no surprise that content owners are taking full advantage of this addictive nature. NBC Universal is providing original short form content on Snapchat from The Voice and more recently it utilised its rights to the Rio 2016 Olympics, by offering exclusive content on the platform. Others, including Viacom, have been pushing snippets of shows from Comedy Central and MTV, using its stock of content; but this move by NBC will be the first for originally curated content.
Major networks have traditionally targeted their audience through broadcast channels, typically associated with large audiences and high production value. However, social media now offers potential by tapping into larger (and global) audiences, accompanied with lower production costs. Though, the question remains whether short form content compliments the traditional long form to promote it, or will it displace/overshadow it.
Snapchat is the fastest growing social media outlet to date, launched in September 2011, and has seen faster growth in its first five years than competitors Facebook, Twitter and Instagram. However, Snapchat isn't the only one extending its video presence.
YouTube still reigns supreme as the go-to video service, but it's well-known that Mark Zuckerberg is keen to take an ever bigger piece of video viewing hours, adding features such 360 video and more recently 'Facebook Live', which has shown a rafter of content including UFC fights, the presidential campaign and original content, such as news segments from ABC News. Instagram recently introduced 'Stories', which replicates a key Snapchat feature. Twitter has long been a key player in the sharing of video and commentary and recently added 360 video support. A culmination of all these initiatives is allowing video to be accessed easily on each platform, ready for the awaiting audiences seeking fresh content.
Social media has been progressively making the upgrade from user generated brand advocacy such as the highly successful Zoella, to a launch platform for new video content creators such as Vox, Vice and Mashable. Content publisher UniLad has seen tremendous growth from Facebook, YouTube and Instagram amassing 2.7 billion views for its videos in July 2016 alone, becoming the largest social video publisher to date. Now however, the platforms are making further progression to showcase high-production value dedicated content from the major networks. With social media garnering mass global audiences such as this, it is undoubtedly a natural step for content creators to showcase their creations quickly and effectively.
Smartphones have opened up the gates to allow social media to flourish as a video content platform, as apparent in the chart above, as most social media is consumed through smartphones with some dedicated to this platform alone. There is the drawback however of video eating into mobile data allowances, but if anyone is like me, this is easily forgotten with videos automatically playing on Snapchat and Instagram.
Short form video dominates in the world of social media with UK newspaper The Daily Telegraph citing 'consumers having shorter attention spans than goldfish, thanks to smartphones'. Futuresource's latest consumer research dedicated to kids media consumption habits highlights that in the US and UK, 76% of kids (ages 3-16) indicate free online videos they viewed were typically 15 mins or under.
Short form video is similar to the issues facing nutritionists, whereby peoples' nonchalant snacking leads to them eating way more than they would in one main meal. There's a high chance a similar feeding frenzy on video will work for media companies alike moving to short form. But will content owners similarly face the same issue in being exposed to too much snacking and not enough of the main meal?
Ultimately, this quick and frequent engagement is helping to reach larger audiences, gaining new advertising revenue streams and hopefully wetting the appetite for many of the large scale shows content owners rely on.
The above data is taken from our latest consumer study called 'Kids Tech', which was published in March 2016. The consumer study reviews technology usage and entertainment/content consumption of children between the ages of 3 and 16 years old. The study covers four countries - UK, Germany, the USA and China.
In mid-April 2016, a series of devastating earthquakes hit Kumamoto City in South West Japan. The entirety of Kumamoto City was left without water, rail and road links, air services were disrupted and several key factories for the camera and pro camcorder industry were damaged.
Chief among these was Sony's Kumamoto factory, responsible for manufacturing CMOS image sensors for many brands – both consumer and professional. The factory supplies around 40% of image sensors used in all digital cameras. Production in Sony's factory was reported to have resumed by mid-May but feedback from the channel is that back-orders are still waiting to be fulfilled well into August.
The Futuresource EMEA pro camcorder monthly data shows that while volumes dipped in April and reached their lowest point in May, by June they were starting to recover, returning to run-rate levels by July. This is consistent with the time taken for the market to recover from 2011's Tohoku earthquake, where volumes returned to expected levels within a few months.
In comparison, the consumer imaging market, which includes digital cameras, traditional camcorders and action cameras, has witnessed a longer period of supply shortages compared with the pro camcorder market.
Consumer imaging shipment volumes were down approximately 50% in Q2 16 (versus Q2 15). With digital camera demand significantly outweighing supply, and vendors keen to minimise the financial disruption of the lower sales numbers, data from Futuresource's weekly digital cameras service highlighted that some vendors raised prices by 10-15% in recent months, causing the price of some high-end interchangeable lens camera models to rise by €150-€200.
How long will this disruption last?
The overall impact on the pro camcorder industry is thought to be short-term only, with back-orders being fulfilled by late Q3 2016. The result of this will be that volumes that would have been shipped in Q2 will instead be recorded in Q3, resulting in a larger than usual third quarter. In other words, the net impact to overall 2016 volumes should be minimal.
Meanwhile, the supply of higher value DSLR cameras are likely to be in good shape by late Q3 and all consumer imaging products should return to run-rate levels by early Q4, in time for the crucial gifting period. This return to normal business is timely with new consumer and professional cameras set to be announced at the Photokina trade show in September, which is likely to contribute towards a strong end to a challenging year for the industry.
The LCD video wall product is going through another evolution; one that is hoped will stimulate further growth and keep the sector strong. This transition is the move to ever smaller bezel widths, the introduction of Extra/Extreme Narrow Bezel (E/EXNB) products. This type of product is classified by Futuresource as 2.0mm and below Bezel to Bezel
(B-to-B) tiled displays.
At the end of 2015, the first E/EXNB product was launched by LG, the 55VH7B, with a B-to-B of 1.8mm. This was soon followed by most of the major vendors showing products of this type at ISE 2016, both from 'CE volume vendors' such as NEC, Panasonic and Samsung, but also traditional video wall specialists like Planar. Of these launches, the smallest Bezel-to-Bezel demonstrated was a Samsung and Planar product with 1.4mm B-to-B 55". This product is the only screen size thus far to have E/EXNB bezel widths, with no 46/47" being launched.
Whilst the E/EXNB product type hasn't sold in huge volumes yet, Futuresource expects this to become a crucial segment for the LCD video wall market. E/EXNB will become the premium product, previously a spot held by Ultra Narrow Bezel (UNB, defined as 2.1mm-4mm B-to-B by Futuresource). It's also interesting to note that, the migration between segments with UNB jumping from 32% share in 2015 to 52% in 2016 YTD.
Futuresource expects that SNB products will begin to be phased out by vendors in 2016/17, as UNB becomes the 'entry level' product, and E/EXNB takes the 'high end' position. Mirroring the trend witnessed in SNB pricing, UNB price points will drop to fulfil this lower end in the market.
So why is the introduction of the E/EXNB product important to the videowall market? There are two main reasons for this. Since its inception, the noticeable bezel join has always been a negative point for LCD video walls with many end-users disliking the crosshair effect. This is one of the key benefits of Rear Projection Cubes (RPC), where the bezel join is minimal. With RPC being favoured in some 24/7 mission critical control room applications, where data or alerts cannot afford to be lost in the bezel joins, E/EXNB is closing this gap, and creating another option for these applications. In Control Rooms, where space is of a premium, the thinner LCD solution is a big advantage over the traditionally bulkier RPC options. Added to this, the price for an LCD solution is significantly lower than an RPC solution.
As well as attempting to counter the perceived benefit of RPC, LCD is fighting on another front against the huge demand and surge of Narrow Pixel Pitch LED (NPP LED) products (as outlined in one of our recent blog piece). Of course, NPP LED is, by its nature, bezel less and can be assembled in any size or shape, without any perceivable join. However, whilst this bezel-less display is of course an advantage, this comes at a very high price premium. The E/EXNB product fits nicely in-between cheaper SNB/UNB and high cost NPP LED.
The coming months and years will be of great interest to see how E/EXNB is adopted and utilised. Futuresource expects the video wall market to be reinvigorated and grow with the introduction of this new technology.
- Small footprint and low cost – e.g. key for smartwatches
- Hands-free – key attribute for driving, cooking, etc.
- Throughput, versus typing - we generally speak 3x the number of words versus typing
- Voice is personalised and can capture context (e.g. mood, background), more than keyboards
- Random access versus tree-structure menus.
In July 2015, Amazon launched its first audio device, called Echo, which has since become the bestselling wireless speaker in the US and is expected to sell around 3.9 million units by the end of this year (cumulative since launch), earning Amazon almost $700 million. Echo represents the first wireless speaker to introduce a 'Voice Personal Assistant' (VPA); the feature has generated significant intrigue within the audio industry, many wondering whether it could provide a much-needed boost to market revenues, which will be flat this year after a decade of stellar performance.
Echo comes bundled with popular music streaming brands like Spotify as well as Amazon's own Prime Music service, and moving forward is rumoured to include a dedicated low-cost music streaming service for Echo, presumably so that non-Prime subscribers aren't put off buying Echo. However, the feature causing most intrigue is voice and its voice personal assistant, which Amazon has named Alexa. Echo uses Alexa and an 8 microphone array to bring access to cloud services using voice. Users can control their media (e.g. "Play Beyoncé I'm a single lady", "Skip", etc.), as well as control compatible devices residing on the WiFi network (e.g. lights, appliances, etc.), and even access cloud content and services, such as ordering products from Amazon's own store, Pizzas from Dominos or a minicab from Uber.
User feedback indicates that usage is dominated by entertainment in practice, but nevertheless the product has created another catalyst to help increase awareness and interest in smart home. Brands like Nest, Insteon, Wink and Wemo have seen the opportunity to 'piggy back' on the popularity of wireless speakers and have system interfaces to enable Echo to control home automation functions, leveraging the power of Alexa.
Meanwhile, Google has announced 'Google Home' using its own VPA, which will reach the market in Q4 this year; and JD.com, Amazon's equivalent in China, launched two 'DingDong' models using iFlyTek's VPA in June 2016, the cheapest of which sells for only $30. Apple will offer Siri control of smart home devices via a new 'Home' App in iOS 10, but otherwise has not announced a dedicated audio device.
Futuresource believe voice will become more prevalent as a user interface over the next 2-3 years, where visual and touch interfaces have dominated to date. While touch and visual interfaces represent familiarity for consumers and are necessary for certain applications such as video and surfing the web, voice and speakers have key attributes and could become more relevant for certain environments (driving the car, cooking in the kitchen) and applications. Key attributes include:
With growing use of VPA's among smartphone users (Siri, Google, etc.), and the growth in smartwatches using VPA, along with improvements in voice pick-up accuracy and response latency, Futuresource expects voice to reduce friction within certain applications. If users want to check the weather or the traffic or set up an alarm, voice is relatively quick and reduces levels of abstraction i.e. users don't need to find and unlock your phone, open the app and press necessary buttons on a soft keyboard, voice is potentially much more convenient. Though, this assumes the assistant understands you (i.e. accuracy), and responds fairly quickly (low latency).
The short term scenario is relatively straightforward, and most probably positive, based on the momentum the category has, and the low level of penetration even among 'early adopters'. The longer term scenario is dependent on geographic rollout (based on language support, Wi-Fi home penetration), the rate at which existing audio vendors (Bose, UE, Sonos, etc.) integrate the technology either themselves or outsourced, the strength of the ecosystem supporting the platform (devices, services), and whether consumers take to voice interaction. Futuresource forecast the speaker-VPA category to achieve 4.7 million units in 2017.
Interactive flat panels (IFPDs) are now dominating the interactive display market in classrooms. Taking over from interactive whiteboards (IWBs), they accounted for a staggering 96% of sales into UK classrooms in Q2 2016. USA has recently surged ahead at 70% of sales; this is up from 14% just two years ago. Across the world there are now more IFPDs than IWBs sold.
Schools are choosing this type of device because the brighter image is more visible and they can see immediate user benefits over projector based IWBs and they want to have the latest technology. Children and parents can immediately relate to this technology and now IWBs are seen as old-fashioned. Height adjustable displays are also easier to use, so are a more accessible display for the children who collaborate, which encourages social skills, sharing and discussing.
Prices are also reducing, with 65" IFPDs below $4,000. Initial costs are higher than IWBs but with negligible maintenance and low running costs, the total cost of ownership is arguably on par with an IWB and projector system. This is detrimental to the projector market where education is a key market.
The rapid rise of IFPDs has considerable impact for the traditional IWB vendors who, instead of being in control of end-to-end supply chain, have to source from a small number of OEM providers. Developing a real unique differentiator on hardware is therefore becoming much harder. This product transition has opened the entry point for a far wider range of competitors as anyone can OEM IFPD products. The competitive situation is changing and there has been success for local players entering the market, initially just in their home country and expanding outwards (for example Sahara in the UK and Prowise in Netherlands). In the USA, there are now over 20 vendors with a product range. Foxconn purchasing SMART therefore makes sense as SMART can leverage massive economies of scale to gain competitive advantage from a hardware point of view.
The channel is also impacted, as a wider range of brands means more choice and more flexibility for channel providers. Higher sale value leads to higher turnover, but logistics are more complex as large displays are considerably heavier and they are a far more delicate product to handle rather than the 'indestructible IWB'. As IFPDs are relatively new to schools, it is too early to judge a typical lifetime but it will certainly be far shorter than the 10 to 12 years from the average IWB, good news for vendors and the channel. It is also good news that IFPDs give resellers a reason why schools should change from their IWBs.
School have to choose smaller displays due to the increased cost and whereas the average IWB is 85" the corresponding IFPD is only 65", this can be countered slightly by the brighter image but may still mean that there are situations where the display may be too small for larger classrooms.
Artificial Intelligence is moving from the realm of science fiction to the real world in systems and products which can learn, assess, even anticipate and make fully autonomous decisions and responses. In other words, machines that can effectively think. AI is already being deployed across a rapidly widening range of applications, for example, data mining in healthcare, finance and e-Commerce, traffic and location analysis, call centres, language translation, image filtering, personalisation, social media 'chatbots', video games and driverless vehicles. AI software does not necessarily have to reside in an interface device (or robot), but can be performed by central processing over networks, enabling immensely powerful system capability.
In step with the introduction of AI, the technology is growing the use of natural language dialogue, visual and biometric recognition to complement text input, output and touch screens, creating a Man Machine Interface (MMI) more akin to a person-to-person dialogue. Already, concepts like virtual sales or service agents are being tested ('press 3 if you would like to talk to an Avatar'!).
But what about AI in education? This an area where traditional teaching methods, sensitivity to excessive technology intrusion, data privacy, performance monitoring and security are all major concerns. Futuresource believes that the focus of AI in the near to medium term will be primarily on supplementing the role of conventional teachers, including pre-school, infants and special needs applications, as well as providing stronger support for students at the personal study level, especially in structured online study programs and coursework for mature students.
Intelligent Tutoring Systems (ITS) have been in development for more than two decades and a wide range of adaptive learning tutoring software is already available. However, lack of investment in content has held back the market historically and current publisher focus is on subjects like mathematics which have defined scope, global scale and curriculum synergies.
Trials of robotic teachers and teaching assistants are underway in several countries, combining telepresence (remote teaching) and AI-based autonomous techniques. About 9,000 Nao robots made by Softbank Robotics (formerly Alderban Robotics) in France are in use around the world. A large number of these are in educational research institutes as researchers experiment to find out how robots can be most effectively exploited, including programs for children with special needs due to conditions such as Autism. Applications are inspired by approved behavioural models and approaches (ABA, PECS, TEACCH, DENVER, SCERTS).
'Edutainment' is again not new. Educational PC games are well established and help young children with computer interface skills as well as making learning fun. AI can be selectively employed in this environment and robotic teaching assistants are already being trialled in several countries. Physical manifestation (rather than an avatar on PC or tablet screen) may be helpful with younger children to increase engagement, although there is a danger robots are seen as playthings – researchers in San Diego reported that they found the arms broken off Rubi, a teaching robot, after the first day of school! A note of caution, however, younger children are managed and supervised with the utmost sensitivity and again the scenario is one of AI and robotics supporting teachers, rather than displacing them.
A general trend towards the 'flipped classroom' means more personal study time for many students and greater focus on collaborative groupwork activity in classes, especially at undergraduate and post-graduate levels. This means more student dependence on course material and web information resources. AI can enable personal assistant software to adapt to and support a particular individual's pace of learning and needs, possibly becoming an indispensable virtual companion or 'Digital Mentor'. Robots like Softbank Robotics' Pepper, which was introduced in 2014, can already perceive human emotion and respond accordingly to provide motivational support and encouragement.
Studying a language by a structured course (tape, CD etc.) has been around for decades, but AI will offer a new level of interactive tutorial capability as voice recognition and machine learning deals with the subtleties of conversational syntax, accuracy of pronunciation, colloquialisms and vocabulary. Telepresence by remote teachers can supplement autonomous system capability. Digital translation is advancing at tremendous speed – for example, Google Translate already understands 15 languages and can speak in 23! (It can also provide text-based translation of words and phrases in another 50 languages).
Asia is of particular interest as a market, where a huge and rapidly expanding middle class wants to learn foreign languages, especially English, and are prepared to pay for it (as opposed to school budgets). Robotic teachers and teaching assistants using AI and telepresence have been on trial in Japan since as long ago as 2009. In South Korea, Robosem, developed by Yujin Robot, has been trialled for English classes and some even predict that robots could actually start to replace teachers in language classes after 2020.
Online Courses & Mature Students
Futuresource believes that early AI impact will be seen in online course enhancement, both on and off-campus, especially MOOCs (Massive Open Online Courses), where scale offers a more attractive commercial proposition to platforms and software developers. As a leading edge example, Udemy (bought by LinkedIn and now Microsoft), is an online learning and teaching marketplace hosting 40,000 courses for 12 million students. Many 'bricks and mortar' universities offer off-campus courses, using MOOC providers like Coursera or edX. At many business schools, a high share of MBA students are on distance learning courses, attending only residential weekend tutorials and groups. Low completion rates have been a problem with online courses, but AI will be able to sense progress and commitment, help keep students engaged and flag up need for additional support if they are falling behind or losing motivation.
Marking and Grading
AI-based systems can take the drudge out of examining and grading coursework and examination papers, freeing up teachers to spend more time on student development. Software is already available to mark structured work like multiple choice and 'fill-in' questionnaires, although there has been some controversy over the reliability of results obtained with online testing. In the future, AI may even be able to rival teachers in grading freeform qualitative work like essays, at least at primary and secondary levels. Given time, AI will even be able to grade abstract notions like 'elegance' in mathematical proofs or originality and prosaic quality in composition. A sidebar benefit is that AI can also spot student-to-student copying and instantaneously scan for work using plagiarised content 'cut and pasted' from the web.
Like voice, handwriting recognition continues to improve in accuracy, meaning that AI-based systems will be able to assess written, rather than typed work. Similarly, visual recognition and AI will allow systems to interpret and assess hand-drawn images (and conversely help children to write, as is already the case with robot-assisted calligraphy trials in Japan).
AI-assisted marking and grading can help in identifying areas where courses need strengthening or where individual students or teachers need more support (although again we stress that the education sector can be sensitive to invasive technology - student bodies, teaching unions or administrators could resist change in some areas, not least performance monitoring and supervision).
At this stage, it is difficult to judge just how far AI might go in education long term. One of the teaching assistant at Georgia Institute of Technology, Jill Watson, has been answering e-mail questions sent by post-grad students and posted on forums since January 2016. Answers were received within minutes, were accurate, using nuances and colloquialisms and some students even suggested that Jill should be 'Teaching Assistant of the Year'. Nobody realized that Jill was in fact a robot powered by IBM's Watson system. 'It seemed very much like a normal conversation with a human being' one of the students told The Wall Street Journal. The course? You guessed it – Artificial Intelligence.
2016 is a major year for VR, as it pushes beyond the early adopters and reaches mainstream audiences, and crucially across a range of entertainment genres. Music has a great fit with VR and the pioneers in the music industries, artists, musicians and manufacturers, together with AV distribution networks and formats are already forging ahead, bringing VR, once a theoretical concept, to reality.
A number of key bands and artists have already welcomed VR technology with open arms. Taylor Swift created a 360 video app, that makes fans part of an interactive musical mansion tour. The Icelandic, musical pioneer, Bjork, produced the video for the track Stonemilker, in interactive 360 video together with surround sound audio and is currently developing a full VR album. And let's not forget Paul McCartney, who now has a range of VR experiences available through VR pioneer Jaunt's platform, including 360 video shot at a recent concert through to a documentary focused on the early days of the Beatles. This is all good news for driving consumer awareness of the technology.
VR uptake is set to benefit from a range of headsets from basic £10 headsets that just need a smartphone to operate through to £700 units requiring the power of a high-end PC. With the price point broadly correlating to the level of quality and overall immersion of the experience. The price point range and wide variety of applications opens up the technology to a broad demographic – important in gaining mass acceptance. Futuresource Consulting predicts that in Europe, 11.5 million headsets will be shipped in 2020, building to an installed base of close to 30 million.
Major technology companies including Facebook, Google, Intel, HTC and Samsung are investing in the VR eco-system, connecting and contributing to this musical evolution. Companies are distributing developer kits to drive education in the design and creative communities and mainstream acceptance is starting to grow. Popular internet platforms such as You Tube 360 and Facebook 360 have growing subscriber numbers. By 2020 Futuresource Consulting predict that consumer VR content – including gaming and video - will reach a market value of $8.3 billion.
However, there is still more work to do in terms of consumer education. Consumer research results from Futuresource's global market tracker for VR, indicate that in the UK only 7% of the nationally representative sample had tried VR. This rose to 12% for the under 35s. In terms of content that consumers would like to view in VR, movies, music/TV, sports and adult content came out on top – all of which are key genres of experimentation for the industry.
There is a great deal of hype and excitement around VR, and so there should be, but it is not a world without barriers and challenges that must be overcome. The creative communities need to create post production products, production processes and pipeline, that efficiently create VR and deliver VR content, especially considering the file sizes involved in a VR production. In terms of monetisation consumers need to see the additional value in investing in VR devices and content. The tech is now out there but if the right content is not readily available then it might stall the adoption of HMD.
Smartphones have revolutionised how, when and where consumers capture images and engage with social media, image sharing platforms and e-tailers. According to Futuresource's latest research, in 2016 there will be over 3.6 billion smartphones in use globally and consumers will upload over 5 billion images per day via just four platforms alone (Facebook, Instagram, Snapchat & WhatsApp), many of these captured by and uploaded from smartphones.
In the last three to four years, many established photo printing retailers and e-tailers (i.e. CeWe, Photobox, Shutterfly, Snapfish, etc.), plus new players that have come to the market (i.e. Cheerz, FreePrints, LaLaLab, Mosaic, Printic, etc.) have started to exploit the potential of converting some of these billions of images sitting on consumers' smartphones, on social media platforms, on image sharing platforms and on the cloud to printed photo products, via their photo
They have targeted, in particular, the millennials, who did not grow up with printed photos and, for whom, photo printing is a novelty. These consumers are currently prepared, for example, to pay high prices for square and Polaroid style photo prints. However, there is no guarantee that this will not just be a passing phase.
It is now not only the millennials who use a smartphone as their primary image capture device, but the older demographics too. Consequently, the photo printing industry has a wider potential target market than it has had for many years and a chance to win new customers that have never before ordered printed photo products.
If just an additional 3% of the 236 billion images set to be captured in 2016 on smartphones in, for example, Western Europe were ordered by consumers as photo prints, then this would double the photo prints market size from 7 billion to 14 billion prints and have a very positive effect on revenue.
Of course, a shift of this magnitude is not likely to happen, but there are already some positive signs in France, the UK and the USA that some of the active apps are driving volume in the web/mobile to home photo prints ordering channel and helping to slow the rate of photo prints volume downturn in these three markets.
There is also great potential to promote a further uplift in demand for (higher margin) photobooks and photo-merchandise by securing incremental orders from smartphones. Both of these sectors are still exhibiting volume and value growth, but their overall population penetration remains low and there are many consumers who have never ordered any of these products.
The photo printing industry has an opportunity to deliver a strong message to all consumers that printed photo products are still one of the most effective ways of securing and safeguarding treasured images for the future. It needs to facilitate this by providing consumers with quick, easy ways of ordering appealing printed photo products from smartphones, as well as continuing to engage with consumers who order in-store and order online via PCs, laptops and tablets.
Narrow Pixel Pitch (NPP) LED had a very strong year in 2015, with total value reaching $678 million in 2015, representing an increase of 201% year-on-year. The market now enters a steady but strong growth phase in 2016. Futuresource expects that the NPP LED market will account for 34% of total value in the videowall market, highly impressive for a technology that was only launched in 2012.
In 2016, as Futuresource expected, P1.9mm starts its transition as the mainstream pixel pitch, and P0.9mm becomes the premium option. Average end user prices have been falling, due to the increase of Surface Mounted Devices (SMD) LED package production and tier 2 Chinese LED manufactures significantly expanding the local market with relatively low price SKU's.
Chip-on-board (COB) LED continues to receive more attention, often considered to be the next technology for NPP LED. COB LED offers low energy consumption and water/dust/break proof features. Compared with SMD LED, COB LED has higher production yields and lower production costs. However, COB LED is currently unable to match the picture quality of SMD LED and the repairing process is challenging.
Instead of racing for an ever tighter pixel pitch, vendors focused on improving products and developing better solutions. Futuresource has seen the approach from vendors change with the creation of solutions or specific products designed for specific applications. Furthermore, many vendors have moved toward a more standardised cabinet design with 27.5', with 16:9 aspect ratios seemingly the preferred size.
The competitive landscape of the market changed in the last 18 months, with international brands like Samsung, NEC, Panasonic, Planar, Christie Digital, Delta and Eyevis all entering the market. These brands are expected to stimulate the market, especially with Sony unveiling Crystal LED Integrated Structure (CLEDIS) at InfoComm US 2016, which redefines high-end display solutions.
- HDR10/PQ – This is the format which will primarily be adopted for pre-recorded films and TV series and is already part of the UHD Blu-ray specification. It is license and royalty free and currently supporting this solution is Samsung, LG, Philips, Sony, Panasonic and others.
- Hybrid Log Gamma (HLG) will primarily be adopted for live broadcasts. Its main advantage is that its fully backwards compatible with standard dynamic range TV's as well as being license and royalty free.
- Dolby Vision works by adding another layer of detail onto the HDR10 format, providing greater quality. However, it needs a license and therefore demands a royalty, as well as requiring higher processor power.
This current generational upgrade for TV is happening in two waves, the first we've already seen (increased resolution – 4K UHD); the second is the inclusion of High Dynamic Range (HDR) and Wider Colour Gamut (WCG), posing a different challenge for the industry.
It's clear that there is now little doubt that Ultra High Definition (UHD) will replace HD, this type of generational upgrade is of the kind we are very used to. So far, 45 million UHD TVs have been shipped globally and by 2020 UHD TVs are to account for over 50% of total TV shipments, but it could be higher.
The initial move to UHD came at the time when TV panel makers were seeing tight profit margins for HD. So, when the first 4K UHD TV's began to be sold in the market in 2013, almost three full years before Ultra HD Blu-ray launched, it meant that the next generation of TV technology was already experiencing a two stage implementation. Meanwhile, industry standards bodies were working on ratifying specifications for improving both colour and dynamic range of content (WCG and HDR respectively). Put simply, this allows screens to show brighter brights, darker darks, and a broader array of colours than currently can be displayed.
Until recently, implementation of HDR was confusing due to the number of different (and half complementary, half competing) methods, with 3 key solutions emerging:
There is also a notable HDR specification from Technicolor/Philips and while it does have merit, it has not yet gained the equivalent support from the industry.
So the challenge for the industry is how to explain this all to consumers, because while resolution does improve viewing experience, well executed HDR and WGC make a much more notable impact. Together, these three can provide an optimum UHD experience.
At a retail level this is a challenge, as although 72% of US consumers (some of the most tech savvy in the world) are aware of 4K UHD, just 44% are aware of HDR, according to Futuresource's recent Living with Digital consumer survey. Therefore, retail needs to inform consumers that if they want to see a significant upgrade with their new TV, they need to purchase one which includes at least HDR specifications 1 and or 2.
It also poses a challenge for digital video, for a number of years paid-for services have only offered the option of SD or HD, but that choice could expand significantly to include, UHD with or without HDR (in up to 3 different specifications), and potentially could have a HD with HDR option too in order to improve the picture but not be as data heavy as UHD. Either way, it's not a clean solution and likely to cause further confusion amongst consumers.
UHD Blu-ray has an opportunity to take advantage of this confusion as the entire eco-system works well. Consumers will still need a HDR10 compatible TV to get the full effect, but all other parts of the chain (including production, discs and players) are controlled by the single UHD Blu-ray specification. 56% of Living with Digital's EU5 and US respondents who've tried UHD Blu-ray have reported themselves 'Extremely Satisfied'.
This week, the news wires were buzzing with news of Samsung deciding to end of life (EOL) its range of transparent OLED (TOLED) displays. The Futuresource team reported seeing TOLED products front and centre during visits to both ISE and InfoComm China this year, so this news was a touch surprising. Or with hindsight, was it really?
Futuresource has undertaken numerous studies to understand the potential of transparent display devices which spiked again in 2015 with the introduction of TOLED. These studies typically involve an upstream review of component production and downstream analysis of demand and usage drivers. The findings varied very little with a common set of barriers, more barrier than drivers unfortunately, dominating the discussions.
At a production level, and regardless of if the display was transparent or not, OLED struggles with production efficiencies in large screen sizes, maintaining extremely high price points against LCD displays. Increasing competition from Chinese LCD panel producers, coupled with the introduction of quantum dot (QD) and high dynamic range (HDR), only accentuates this position. However, it is clear that OLED is receiving an ever increasing amount of attention with mass adoption across mobile devices, securing huge R&D budgets and an investment/attention from major panel vendors ramping up in 2016. From a Pro AV perspective, LG have been showcasing OLED technology at both the ISE and InfoComm shows this year. Whilst they looked quite stunning, it was notable that LG largely stood alone in this area and one can't help but feel that this was more a glimpse of what is possible than a serious push for one of the leading commercial display vendors.
Of course transparent displays are nothing new to the Pro AV industry, with LCD options launched as early as 2012. The reception was mixed at best with endless interesting opportunities including fridges, vending machines and display cases, but few genuine use cases that justified the heavy cost of hardware. Beyond the high price premium, the achievable level of transparency has also been relatively low for LCD solutions, between 10-20%, with a number of component vendors and manufacturers feeling the ability to increase this ratio would overcome a significant barrier to more mainstream adoption. OLED technology gives a significant boost to transparency, but takes the hardware cost out into the stratosphere again.
The launch of TOLED rejuvenated interest in this segment but ultimately it has suffered a similar fate as TLCD: where is the use case? How do I justify the high CAPEX? What will be the ROI against alternative display options?
So does the exit of Samsung from TOLED spell the end for this technology? Futuresource certainly doesn't think so. Samsung is a volume player, sometimes display technologies are just ahead of their time and this is true for both OLED and transparency in general. All the markers seem to indicate OLED will ultimately be the 'next' mass display technology but this will take time. Though I cringe to mention it, a little like the faux pas of mentioning the Minority Report in a digital signage presentation, one can't help but be drawn to the Corning video 'A Day Made of Glass' (now viewed a staggering 25 million times) and recognise that transparent displays will become increasingly common in our lives. There are many exciting use cases for transparent displays, like everything in this business, it's just a matter of timing.
Japan's Softbank is planning to buy UK semiconductor architecture designer ARM for £24.3 billion (US $31 billion), representing a 43% premium on ARM's pre-announcement share price. If the deal goes ahead, it seems like a lot for a company, which although highly profitable, had just $1.5 billion sales and single-digit growth in 2015. What does Softbank see in strategic value to justify the price ticket?
ARM's Business Model
ARM does not make chips, but licenses its core processor architecture to other companies. The average fee is a little under $0.10 per chip, an affordable fee in the context of powerful, relatively expensive devices like smartphones, tablets and servers.
To date, over 90 billion products have been shipped with ARM-powered processors. The bulk of these have been mobile devices, where low energy consumption is most critical; 95% of the world's cellphones use at least one chip using an ARM core or IP, and most use several (signal processing, graphics, controllers etc).
In 2015, 15 billion chips were shipped with ARM cores, 32% of total processor shipments estimated at 47 billion units. However, as ARM does not actually sell chips, in revenue terms its licensing income represents well under 10% of a mobile applications processor market valued at $18 billion.
45% of ARM's 2015 usage was in mobile devices, but use of its low power architectures is spreading into non-portable areas as energy consumption becomes increasingly important e.g. network servers and data storage. As its market share increases in new areas, ARM's sales will outgrow the semiconductor market, indeed this week it is expected to report quarterly revenue up 20%.
Who Is Softbank?
Softbank is an investment holding group run by entrepreneurial Chief Executive Masayoshi Son, Japan's richest man, who has a history of placing bets on tech start-ups. His biggest success story is Alibaba, in which Softbank invested $20 million for a 32% stake in 2000. Alibaba has risen to become China's leading e-Commerce provider, valued at about $200 billion, netting Softbank over $60 billion. Currently, Softbank is selling its majority stake in Finnish gaming company Supercell (Clash of Clans) to China's Tencent, tripling its investment in three years.
From a business perspective, Softbank is focused on communications and internet services. Its domestic operating company has over 30 million wireless subscribers in Japan (Softbank bought out Vodafone Japan to add to its own J-Phone subscribers) and it owns 35.5% of Yahoo Japan, which provides Internet and advertising services. Softbank also owns 80% of Sprint, the #4 US mobile communications supplier, which it bought for $22 billion in 2013.
Does ARM Fit With Softbank?
Despite talk about a 'paradigm shift' at Softbank towards investment in the 'Internet of Things', it is difficult to see the strategic business fit between ARM and provision of mobile internet services. This synergy is also clearly lost on some Softbank shareholders who have criticised the deal and have seen a 10% fall in their stock value since the announcement. Softbank has over $100 billion debt load and there are also concerns that the ARM deal will over-extend the company.
From a financial point of view, ARM will not shift the needle in Softbank's $90 billion revenue, although it will make a useful profit contribution. So, it looks as though this investment is mainly based on an expectation of future growth in strategic value in ARM as it continues to expand its business, which means Softbank may have to stay in for the long haul.
The 'Maker Market' is one of the hottest trends in the EdTech sector. Maker days are springing up everywhere and schools are increasingly creating maker spaces. The White House announced a 'National Week of Making', inviting people to hold events around the US which celebrates problem-solving and supporting new opportunities for creativity and ingenuity. The use of robotics, especially tied to coding, is developing and a key part of the 'maker' trend. Walking the halls at the recent ISTE trade show in Denver our team perception was that many of the stands from the traditional industry leaders seemed to be quieter than usual whilst the big crowds were flocking to 'maker' demonstrations.
We've seen this many times before in EdTech, trends come and go and many prove to be just short term fads. Whilst new technologies are picked up by the most innovative, they often founder when it comes to penetrating 'mainstream' classrooms and therefore gaining significant and sustainable scale. Digital tools have helped to reinvigorate the teaching of traditional STEM subjects in schools (science, technology, engineering, maths). Statistically, boys are much more likely to study traditional STEM subjects (and more likely to work in STEM related sectors) but the use of robotics has the potential to help address longer term gender gap issues within education. At present though, robotics solutions are often utilised in after school /extra curricula classes. To gain long term acceptance, robotics need to be integrated into the curriculum for use in the classroom.
Talking to vendors offering robotics solutions at ISTE, it was clear that many were emphasising the lesson plans they had created, to help teachers get to grips with the concepts of how robotics can be utilised for learning. Whilst the most innovative tend to be happy to experiment and learn for themselves, the mainstream typically need more support. So, example lesson plans with step-by-step instructions are needed. Some providers reported that they were working with (or had employed) teachers to help design lesson plans and case studies and the implementation of this is likely to be key to long term adoption. Walking the ISTE show floor however, it felt like there were almost too many new providers entering the 'maker market' and the complexity of integrating with curriculum could help to separate serious players from the rest.
The use of robotics has the potential to become a long term trend in education, helping to improve interest in STEM subjects and closing gender gaps. The challenge for providers will be to achieve the scale necessary, so that investment is made in teacher training and lesson plans which are linked to the curriculum. With the extremely fragmented nature of the curriculum, this is likely to be a demanding challenge and may be a long term roadblock to widespread adoption.
Focus on META for New Growth, Accessories, Dedicated Online Stores and Open-Channel Brands.
This blog entry expands on and discusses some of the new findings from Futuresource’s most recent analysis of the mobile market.
2016 marks a significant point in terms of handsets sales, with smartphone growth expected to fall below 10% for the first time this year. This introduces new dynamics and challenges for brands, vendors and service providers. In the past, there has always been the guarantee of new markets migrating from feature phones to smartphones, or those who jumped straight in by taking advantage of increasingly low priced devices being released in the past two years. Now the market is slowing; between 2011 and 2016 mobile penetration increased from 43% to 70%, by 2020 it is only expected to increase to 75%.
The picture is not wholly pessimistic, there remain opportunities for growth; we forecast that annual sales of smartphones will grow by half a billion from the end of 2015 to 2020 as they account for an ever greater proportion of total handset sales (from 70% in 2015 to 84% in 2020). The advent of 5G will provide a bit of a boost in the most mature markets and there remains some growth in those still developing. Yet the safety net of overall market growth of 40-60% per annum has now gone. Differentiation between devices and brands is more difficult. Brands entering the market are able to take advantage of Android platforms from major chip vendors, offering low-priced smartphones with specifications and features that are attractive to large proportions of consumers. One impact of this, perhaps more significantly than for volumes, is that average trade value is expected to grow less than 3% in 2016 (it was over 10% two years ago), and then flat to declining from 2017 onwards. The margin for error in terms of brand positioning, distribution and retail strategy and device attractiveness is smaller than ever with brands finding it ever more difficult to bounce back from a bad year as competition gets ever more intense.
In the past year Asia Pacific (APAC), the previous growth engine, has started to slow with China in particular flattening off and countries like Indonesia and Pakistan becoming more settled. India has relatively low penetration and is growing, although more steadily than those other countries as it is fairly conservative. Plus, competition is intense as local vendors and tier one global brands already present have seen at least 15 Chinese vendors enter the market in the past year as they look to find new growth channels beyond their domestic market (which whilst steady for volumes is fickle in terms of brands and devices). Latin America is suffering from a mix of political uncertainty and economic downturn, whilst North America and Western Europe are already saturated. Eastern Europe has some untapped potential but the economic meltdown in the biggest market, Russia, is causing a slowdown. This leaves the Middle East and Africa (MEA).
MEA is an interesting and rapidly changing region, in a way representing the global market as some African countries are relatively untapped, with mobile and smartphone penetration as low as 20-30% and less than 10% respectively. Contrastingly, some Middle Eastern countries are amongst the most highly penetrated smartphone markets in the world (close to 90%). This has resulted in rapid growth in countries such as Egypt, Nigeria and South Africa; now the three largest smartphone markets in Africa, with both recognised and new vendors are moving quickly, building local presence and new channels to distribute their products. Companies like Tecno were among the first to recognise this, establishing a position alongside the likes of Samsung and Apple. Others are catching up quickly with Huawei and Lenovo being fast-growing brands in the region. Now we are seeing companies like Wileyfox from Europe, Micromax and Karbonn from India and Chinese vendors, such as Infinix and OPPO, looking to introduce their entry-level products to very price sensitive consumers.
This competition has already had an effect. Futuresource increased its estimates for 2015 smartphone sales in MEA due to the demand for sub-$100 smartphones, with the annual growth rate raised from 29% to 51% as adoption happens faster. There is a slight trade-off with later growth being reduced slightly (from 10% to 5% in 2020), as penetration cannot continue but this combines to highlight why companies are so keen to tap into what is effectively the only region delivering significant growth over the next five years. Such has been the growth, Futuresource’s latest analysis now shows MEA is expected to become a larger smartphone market than Western Europe next year.
Projector resellers are facing increasing pressure from the expected long-term decline of the mainstream market. However, traditional 'bricks and mortar' resellers face further challenges from online retail, particularly from mass merchandisers such as Amazon and Media Markt which are able to undercut traditional resellers partly due to their lower overheads.
A survey conducted by Futuresource of projector resellers across EU5 (France, Germany, Italy, Spain and the UK) found that close to half of those who responded had seen a negative impact on their business due to online competition. Much of the negative impact had been seen in low-margin mainstream product sales (standard throw <5000 lumens) where the resellers believed that they had lost out mostly to etail where Corporate customers required one-off replacements – this was also witnessed in Education with entry-level product, albeit to a lesser extent.
Though losses of small-quantity sales to etail competitors were frequent, it had been revealed that resellers were largely immune to the impact of etail competition when either the corporate or education sectors required large quantities for replacement or new room builds. The lack of expertise in pre-sales consultation, integration and post-sales support put mass merchandisers at a distinct disadvantage against traditional resellers.
More than half of the resellers that had seen a negative impact on their business by online retailers were actively reviewing their strategy to increase their portfolio of value-added services and after-sales support to fight against further losses from the etail channel. Though a typical trait of IT dealers, some AV dealers admitted to diversifying their product range with peripherals to boost their margins. Interestingly, despite the potential boost to their revenue from online sales, only a third of these resellers had a website of their own which allowed customers to make a transaction. This insight is a summary of Futuresource's Projector Quarterly Reseller Index.
A longstanding and contentious issue for the optical disc replication industry has been the requirement to pay a royalty to a number of patent pools on each good disc manufactured. CD royalties expired in the early part of the last decade, except in the USA where they were enforced until 2008. Since 2013 the essential patents required for DVD production have begun to gradually expire. By early 2017 the royalty obligation on DVD production is expected to have ended thus easing the cost burden on the replication industry. BD patents, however, will largely begin to expire between 2020 and 2025 although some will remain active until 2030.
A Bit of History…
At its peak no fewer than five patent pools were actively seeking DVD royalties from disc replicators, 6C (representing Hitachi, JVC, Kenwood, Mitsubishi, Panasonic, Samsung, Sanyo, Sharp, Toshiba and Warner Bros), 3C (representing Sony, Philips, Pioneer and LG), MPEG LA (which represented around 20 organisations including Sony, JVC, Thomson, as well as Scientific Atlanta and France Telecom) in addition to DVA (Discovision Associates) which was only active in the USA. Thomson also had patents on DVD.
At the launch of the format in 1997 the collective royalty level stood at US$0.198 per disc in the USA (US$0.168 in Europe), which at the time represented a manageable 4% to 5% of the overall DVD9 manufacturing price. By the turn of the century, as disc volumes and industry competition increased and pushed disc manufacturing prices downwards, the proportion of the average DVD9 replication price represented by the royalty began to increase significantly. Although the patent pools implemented reductions in the royalty rates, a combination of the competitive nature of the replication industry, customer pressure and increasing disc production volumes, meant that the reduction was invariably outpaced by the speed of replication price erosion. As a result, the royalty accounted for an estimated 15% of the DVD9 replication price in the USA (12% in Europe) in 2000, rising to close to a fifth by 2005, at which time the collective royalty had fallen to US$ 0.134 in the US and US$0.116 per disc in Europe.
At this point in time DVD production volumes were achieving healthy double digit growth rates year on year and industry wide capacity utilisation rates were healthy (65% of global capacity was utilised in 2005). However this was counterbalanced by rising oil prices and polycarbonate production issues which meant that raw materials prices were increasing and consequently production margins and disc replication prices were placed under immense pressure. This brought greater focus on the royalties issue and increased lobbying by the industry association iODRA.
The Uneven Playing Field
As with CD before it, a controversial element of the royalty was the subject of cross licencing, whereby technology companies holding patents would cross licence with each other to effectively discount their royalty obligations. As a result their disc replicator subsidiaries were able to gain a perceived price advantage over replicators without cross licensee status.
This situation was further exasperated by the inconsistent approach as to where patents were registered, for example not all patents were registered in Eastern Europe thus granting a price advantage to Eastern European plants over their Western European counterparts. Although attempts were made to counteract this, specifically by implementing the full royalty on discs exported to countries where the full royalty was in place, however this was difficult to police.
The uneven playing field was further compounded by the issue of non-compliant replicators who sought to avoid paying some or all of the royalties, in order to either ease margins or make themselves more price competitive.
Invariably this resulted in cries of foul play by compliant manufacturers and those replicators without cross licensee status, lamenting the lack of a level playing field, and resulted in a failed bid to petition the EU to intervene and harmonise the situation.
Fallen on Hard Times.
DVD production peaked in 2008 with global production volumes of 8.7 billion discs and the industry fell in to decline shortly after. Diminishing replication demand pushed industrywide capacity utilisation beneath 50% from 2010 and it has steadily worsened, placing greater pressure on replicators, replication prices and production margins. Although there is little scope for downward movement in manufacturing prices for many replicators. The worsening market conditions resulted in a slew of factory closures and industry downsizing and consolidation in the years that followed.
2016 finds the industry in ill health, the outlook is for global DVD output to fall to around 3 billion discs by the year end, with around one third of available global capacity being utilised and further rationalisation is expected.
A positive for those manufacturers still active is the gradual removal of the disc royalty as the essential patents begin to expire. The AC-3 patent was the first to go having expired at the end of 2013. Since late 2015, there has been a gradual fall away of essential patents amongst the different patent pools. By Q2 2017 it is anticipated that all major patents will have expired; with the exception of a small number of territories which don’t currently have a replication industry.
Consequently the cost burden on replicators will lighten, although moving forward it is uncertain as to whether they will be able to use the lack of royalties to shore up margins or whether this will be passed on to their customers in a new round of price reductions, in reality it may well be both.
While the current disc patents become increasingly redundant, this may not be the end of the royalty situation. Throughout the history of optical disc production there have been incidences of companies emerging outside of the regular royalty groups with individual patent claims, some of which have traction and some of which have faded away. The latest “submarine patent” claim is by Laser Dynamics which is known to have made royalty claims against US DVD replicators. The possibility of yet to emerge patent claims may result in some DVD royalty payment requirement for the industry moving forward.
Innovation in the supply side of the EdTech industry continues to develop at pace. Virtual reality, predictive analytics and adaptive learning are just a few of the developing trends, but is the gap between what technology suppliers are offering and what end users are able to effectively leverage in the classroom beginning to grow? As the market matures, EdTech is increasingly penetrating a more mainstream user base, not just innovators. So, usage messages need to focus on being simpler.
The EdTech ecosystem is constantly evolving, with increasing numbers of platforms and applications being made available to schools. This increasing number of options is creating fragmentation in the ecosystem, which is confusing end users when it comes to selecting and using the right tools to achieving their desired learning outcomes. As an analyst tracking the category full time, it is incredibly hard to keep up to date with all of the various providers entering the market as well as the different product categories emerging. If we find it hard to stay up to date, how must
The chart below shows our interpretation of how we believe the platform landscape within the EdTech landscape currently sits, but there are many blurring lines and arguments could be made that many other categories exist. The chart highlights the bewildering number of different types of platforms that exist in the market and that’s before you start to explore the digital content landscape.
There is no doubt, that whilst in many ways it is positive that the industry continues to innovate and new providers with fresh ideas continue to flood the market. What the industry needs now is scale and for clear leaders to emerge. Walking the recent ISTE tradeshow floor, it was clear that many providers are locking in to the Google (Classroom and Apps for Education) and Microsoft (Office, Classroom and OneNote) ecosystems. Adoption of interoperability standards such as LTI and OneRoster is increasing (in the US market at least, much less on a global scale where custom APIs are still most common) allowing for simpler integration of platforms. Seamless integration is needed in order for platforms to efficiently and securely share the data required for users to be able to make informed decisions via data analytic tools.
A key question moving forward will be how much of the ecosystem the major OS providers will want to bring in house, for example will we see data analytics tools wrapped into the wider OS offering? This will be a key consideration moving forward, by integrating solutions into their offering, they are potentially helping to simplify and provide scale to the industry. Too much integration however, could result in them stepping on incumbent provider’s toes. In addition, we anticipate a movement towards consolidation in the industry (as seen by PowerSchools acquisition of Haiku Learning), especially in the SIS & LMS space.
What’s clear to see, is that end users are crying out for simplicity. The growth of Clever in the US is a clear example. Despite a business model that is generally seen as unpopular with the publishers, (as they take a % of publisher revenue) Clever has developed a strong position with many districts informing suppliers that they have to integrate with Clever in order to operate within the district.
The education ecosystem is currently too complex and confusing for users and it is holding the industry back. Industry providers and associations need to continue to seek, work on, develop and deploy interoperability standards on a large scale, thereby ensuring a more cohesive learning environment for end users.
A concise summary of our view of the show would be 'evolution' rather than 'revolution' in terms of developments in the EdTech market. Many of the key themes seen on the show floor were around integrating and implementing technology solutions in a more efficient, joined up and effective way. We have talked before about how the fragmented education ecosystem was causing confusion for end users in our latest blog article, which focuses on the issue of simplicity. Click here to view>>. Walking round the show floor, providers were advertising partnerships and integrations with third party platforms (integration into the Google and Microsoft ecosystems most prevalent). It was noticeable that there were limited product announcements or developments with significant 'wow' factor.
From an individual exhibitor point of view, Amazon's announcement of the Inspire Open Educational Resource (OER) platform was a major talking point. The entrance (entrance in the sense of this announcement, Amazon does already operate in education) of a heavyweight provider such as Amazon caused much discussion. The industry is desperately in need of scale, especially in terms of content curation and central locations for content discovery so the announcement was broadly welcomed. Whilst currently a non-profit play, as part of the US Department of Education 'GoOpen' initiative, it is clear to see that longer term the platform has the potential to become a powerful one stop shop for curated paid for content.
The 'Maker Market' has seen significant discussion in the US through 2015/16 and this momentum continued at ISTE with a noticeably large number of demonstrations of robotics and 3D printing solutions especially. In addition, there were multiple conference sessions discussing how best to utilise and implement 'Maker' spaces. It was also noteworthy that many of the 'Maker' stands seemed to be the best attended. As with many new usage trends, the challenge now for producers is to get past the 'innovator' stage of market uptake (i.e. teachers who are happy to create, trial and develop usage themselves) and penetrate mainstream users in order to start to scale volumes. A key challenge to widespread adoption will be ensuring solutions are integrated into state curriculums and specific lesson plans. Providers are starting with this process and many stated that they have developed large numbers of lesson plans. Integration into the various state curriculums is less developed and this will prove a real challenge to market providers.
Virtual Reality was a key theme on the show floor with numerous demonstrations taking place. Google announced its 'Expeditions' program is now live following an extensive beta testing program that reached more than 1 million students. The platform launches with more than 200 separate 'Expeditions'. Many of the leading publishers were demonstrating content they had created for the program, in addition openly admitting they had further developments in the pipeline.
The market for classroom collaboration tools has become one of the most overcrowded sections of the EdTech market. I have lost count of the number of solutions I have seen that offer some combination of screen mirroring, screen casting, Q&A functionality and content distribution. There are many specialist providers offering paid for solutions in this space, but with so many free solutions (that admittedly don't typically have the same level of functionality) carving out a clear market position has been hard.
Google has brought some scale and much needed simplicity to this sector of the market by launching Google Cast for Education. A free Chrome app that allows students and teachers to share screens wirelessly. With Google's wide adoption (more than 10 million users of Google Classroom) and the full integration into the Google ecosystem, Google Cast for Education is likely to be adopted quickly, making it harder for providers seeking to commercialise dedicated collaboration/screen sharing solutions.
Utilising data to help drive learning outcomes was clearly a big topic at the show. Whilst the utilisation of data is not new, many cite the fact that end users are struggling to understand how to glean insight from data. Part of this issue, is that different parts of the supply chain are collecting disparate data (SIS, LMS, Publishers) and integration between platforms is often not simple. Custom APIs and even CSV data transfers between disparate systems remains common. Interoperability standards are key to ensuring efficient & secure data transfer takes place whilst managing privacy issues. Moving forward, the question of who in the supply chain holds the data is likely to be a key question in supply chain developments.
On the display side of things, interactive displays are transitioning towards flat panel technology with fewer projection vendors demonstrating. PCAP touch technology is emerging, whilst more expensive it offers significant benefits (accuracy and speed).
Finally, it is worth noting what wasn't at the show. There was almost no presence for wearable devices. A couple of vendors had them on their stands, but with no education usage case (essentially just a consumer demonstration unit). Whilst wearable usage in education has been discussed for some time, the 'killer app' is yet to become clear (certainly in k-12 at least).
Perhaps understandably due to the nature of the show there was very limited evidence of the Internet of Things, a hot topic amongst the EdTech technological supply chain. Futuresource understands that most of the supply chain focus is on the area of 'Smart Campus' (i.e. smart lighting, security etc) as opposed to the 'Smart Classroom' (utilising sensors, wearables etc) so ISTE is likely the wrong trade show for such demonstrations (more likely initial uptake in Higher Education).
To summarise, KISS (Keep it simple stupid!) seems like an apt phrase to describe the industry status currently. Whilst providers are catching on to this and increasingly preaching the message, the fact remains the supply ecosystem is too fragmented. The industry needs scale providers to develop and increasing adoption of interoperability standards in order to simplify usage for end users.
The marriage of Lionsgate and Starz has finally reached the altar following the announcement that Lionsgate will acquire Starz for $4.4 billion in cash and stock. The move will bring Lionsgate a new conduit to the valuable US cable market as well additional international and SVoD distribution. Starz will be able to lift its game in terms of original content in the fight against its bigger rivals HBO (owned by Time Warner), Showtime (CBS) and the growing power
Canadian-American Lionsgate built its early business on low budget horror movie franchises like Saw but really hit the ramp with the global blockbuster Hunger Games and sequels. It has also been pushing strongly into TV production to diversify. In 2015, TV production grew to 24% of Lionsgate's $2.4 billion revenue and in recent years it has produced a string of hit series which have been distributed on broadcast, cable and SVoD e.g. Anger Management, Orange is the New Black, Nashville, Mad Men, Manhattan and Nurse Jackie.
Starz is one of the top three premium Pay-TV channels in the USA, with about 24 million subscribers (55m including Encore). In the last few years it has started beefing up original content, and aired 76 episodes of original series in 2015 including Outlander, Fresh Bone and Blunt Talk. However, it is well behind HBO, which has kept original productions up to half of output, and, more recently Netflix, which has bet heavily on original series following the global success of House of Cards. Starz has been pushing into OTT delivery and has a partnership with Amazon and T-Mobile, which offers Starz Play free and unlimited to its subscribers. Starz Play also launched internationally in 2015, with a focus on the Middle East.
Starz Inc was spun out from media investment conglomerate Liberty Media in 2013, but Liberty remains the majority shareholder and the Starz deal will bring Chairman John Malone onto the management board of Lionsgate. Lionsgate owns 31% of much smaller Pay-TV channel Epix and will now probably seek to sell this. The deal is part of ongoing consolidation in Entertainment which has been occurring as most recently illustrated by the Universal Dreamworks acquisition. Next moves could include the sale of Paramount.
Strictly speaking, 360 video isn't virtual reality (which tends to be computer rendered), but virtual reality and 360 video have become one and the same thing in popular parlance as they often (but not always) use the same headsets to
The ability to watch 360 video on YouTube and Facebook without the need for headsets is a key differentiator between the two technologies as it immediately gives video creators popular platforms on which to publish their videos that doesn't need additional investment from consumers. Essentially, 360 video is currently far more accessible than
Many of the production challenges that exist for VR are the same for 360 video, but the unique and rather obvious difference is that 360 video requires a camera, or more specifically, cameras.
The principles of 360 video are well understood – multiple cameras are required to provide 360 degree coverage, the images of which are stitched together to produce a coherent video – but there is a wide degree of variation in the way this is achieved.
Many productions are using multiple cameras mounted on a rig, which at the low end (the GoPro Odyssey and Facebook Surround 360 rigs for example) is an affordable solution, but at the high end cinema quality images are traded off against extremely high cost and unfavourable physical characteristics – imagine the size, weight and cost of a 16 camera Arri Alexa rig for example!
Another issue is that however accurately engineered the rig is, inaccuracies produced when mounting the cameras will result in greater issues when stitching the content and so many productions favour integrated cameras to minimise this.
At NAB this year there was an array of cameras claiming to be professional, but most could optimistically be described as "prosumer" at best. Still, these cameras can and are being used by professionals to experiment in the art of 360 productions and in many and varied professional applications where the 360 element adds a new dimension. One example that has been given is consumer 360 cameras being used by forensic teams to give greater context to the high quality photographs taken at crime scenes.
At the high end of the integrated 360 camera spectrum there are only a small number of models on the market. The Nokia Ozo and Jaunt One the two main contenders, although high prices and limited availability means that sales are currently limited. Futuresource expects sales will remain low, especially as once the initial early adopters have purchased, the industry is likely to rely on a rental model due to the experimental stage at which 360 video is currently at. Unless 360 video is the bread and butter of a production company, renting makes a lot more sense than investing in a $60K camera - a trend seen across the camera markets.
Professional 360 cameras will remain niche in the short to mid-term. In Europe, the market will be around 10% the size of the European digital cinema market in 2016, but longer term they will play an increasingly important role in the acquisition market overall.
Last week's decision by the UK to exit the European Union raises many questions for the consumer electronics industry. The most fundamental being – what impact will this have on sales?
To answer this accurately implies knowledge of the impact it will have on the economy, on prices, on household disposable income and on consumer confidence. All of these are of course a matter of opinion, with the phrases 'Uncharted Territory' and 'Uncertainty' being a regular response from the experts.
So what can we be sure about? Is there anything we can learn from history?
Firstly, most independent economic forecast agencies warned before the vote that a UK withdrawal from the EU would have a negative impact on the economy. In other words, the economy would be smaller than otherwise predicted, at least in the short to mid-term. This would particularly impact the UK, which is one of the EU's largest economies. They generally advised that UK Sterling would lose value versus the Euro and the US Dollar, whilst the Euro would do likewise versus the US Dollar.
This could lead to higher interest rates in the UK, which would then reduce consumers' disposable income. Futuresource concluded that – based on these predictions – consumer spending on discretionary items would also be negatively impacted in the short to mid-term and that the market in the UK would be most affected, but that it would also negatively affect other EU markets and economies to a lesser extent.
The exchange rates have indeed taken a hit in the three working days since the result was announced, with Sterling down 7% Vs the Euro and 10% Vs US$. The longer term is of course still a matter of conjecture, but the likelihood is that there will be some recovery after the initial shock. Regarding interest rates in the UK, these may not rise in the way that was anticipated before the Brexit decision as the Bank of England looks set to intervene to keep rates down.
The last time there was such economic uncertainty in Europe was of course in 2008 with the worldwide collapse in banking and resulting recession. However, the CE market survived and parts even thrived. Whilst consumers delayed replacing their cars [the global car market fell by around 40% in 2009] and slashed discretionary expenditure on dining out, going to the theatre and expensive foreign holidays, they targeted their remaining cash on items that they perceived to give them better long term value. In such times, consumers often hunker down in the home and invest in products that make their lifestyle at home more enjoyable and fulfilling. They also shopped around more in search of the best price. We saw deals advertised as 'Credit Crunch busters' to persuade shoppers to take the plunge. Value tends to suffer more than volume in times of economic stress, with margins being squeezed even further.
Which types of CE product are likely to fare better than others if there is a marked economic downturn?
Generally speaking, economic downturns have the biggest impact on product categories which are mature, and are seen as somewhat discretionary. Current examples would include Tablets, Compact Digital Cameras, DVD players and secondary TVs. Adoption and replacement of these devices might be deferred until economic stability returns, or put off completely.
Anything which is perceived as a necessity and is coming to the end of its effective working life will be replaced by the consumer if at all possible. This would include Washing Machines, Refrigerators and Smartphones.
Products, meanwhile, which are already on a high growth curve – the current 'must-haves'- will continue to grow, but likely at a slower pace or at least with lower prices attached. Devices in this category in the opinion of Futuresource include Smartwatches, Wireless Speakers and Wireless Headphones. In the early years of the 21stC, DVD Players were the must-have product and sales growth continued despite the economic recession and stock market collapse that occurred in the wake of the terrorist attacks on the Twin Towers in Sept 2001. Not only was it a growth product at the time, but it also played into the social trend of staying at home.
From a content perspective, the Pay-TV industry came through the last recession relatively unscathed as consumers opted to retain their TV packages in the light of spending more time at home. It's worth noting though that Brexit will prompt some vexed discussions on issues which go to the heart of the content industry – movement of skills and talent from other countries, copyright, broadcast standards and taxes. It remains to be seen how these might impact the future pricing of entertainment content.
In short, if there is a marked economic aftershock - which seems likely at least in the short term - consumers will prioritise what products they choose to buy and will seek the best price, possibly trading downwards in terms of features or brand.
The UK economy will obviously survive. Its entrepreneurial flair, increasing focus on non-EU trade, and likely policy accommodation by the Bank of England and UK Treasury will all help to stabilise and recover the economy in the medium to long term. However, getting to the next stage could be a long process, leaving considerable uncertainty for UK citizens and markets. The extent of the damage now rests largely on the way the exit is managed. Of particular importance to the UK economy will be ensuring London's continued pre-eminence in financial services. This sector is highly important in the country's wealth creation and hence consumer spending.
Meanwhile, CE vendors and retailers need to manage their businesses in order to mitigate the consequences of any downturn.
Following the release of the latest Futuresource WW Wearables Report we would like to share some of the topline trends, data points and market shares in the wearables market. In Q1 2016, worldwide revenue for wearable devices surged 133% to nearly $6 billion (at retail) year-on-year, fuelled by connected watches, notably as Apple Watch passes its 1st birthday. Units grew significantly less than value, representing 50% uplift in the average price paid for a wearable device, to $218.
Within the health & fitness category, activity trackers continue to be the standout performer, with volumes growing 18% in the quarter, to reach 10.7 million units, while sports watches with GPS and heart-rate monitoring (using chest-straps) grew 11%. Fitbit and Xiaomi commanded more than 70% share of activity tracker volumes while Garmin, Polar and Suunto remained the most popular brands in sports watches, used by fitness enthusiasts and endurance athletes.
Unit growth for activity trackers has come at the expense of tumbling prices and ultimately rapid feature commoditisation - average prices for the category fell 40% in 2015, versus 2014.
With falling prices and value migrating to connected watches, overall spend on health & fitness wearables grew only 2% in 2015 and are expected to witness similar underwhelming growth this year, despite unit and penetration growth. As a result, vendors are focusing efforts on additional revenue streams such as accessories (bands, etc.), in-app engagement, emerging markets (where penetration is almost zero), and repositioning in to watches and jewellery.
A number of brands from the world of tech and fashion are manoeuvring for position with partnerships and acquisitions - Nokia buying French wearable-health Withings, Fossil acquired Misfit, and Fitbit recently acquired Coin which will allow them to add payment technology to their devices.
While Apple Watch uptake continues to fall short of early forecasts, Apple already ranks among the largest watchmakers in the world in revenue terms, behind giants Swatch and Rolex, and ahead of Fossil, Citizen, Casio, Richemont, LVMH and other well-known heavyweights in watch making. This serves as a stark reminder of Apple's global reach and pull and how smartphones have redefined market success, in terms of scale and rate of adoption.
These global insights are in the latest quarterly results from Futuresource global wearables report, which focuses on the total market size, sales, forecasts, product type and technologies. Its detailed tracking of the wearables landscape provides a snapshot of the current market status, analysis of the latest trends as well as providing longer term forecasts.
Video gaming has come a long way, appealing now to a wider demographic than ever, from casual app gaming through to truly immersive experiences offered by VR.
However, popularity is not just limited to the playing of games, but also the watching of others playing; carving out a new genre of video content, a new sport, and a new form of sportsperson, with professional gamers seeking recognition akin to the likes of Brady and Ronaldo. And now the industry is breaking away from their niche online ecosystem to the mainstream world of TV.
Currently Twitch, (Amazon owned gaming social video site), is the number one destination for both individuals to broadcast their game play and the first choice for professional competitive gaming ‘eSport’ tournament organisers to broadcast their matches. And when you consider the site sees the average viewer watching 421.6 minutes per month, compared to a mere 291 on YouTube, it comes as no surprise that companies are increasingly looking to partner with Twitch.
For a game that involves players ‘twiddling their thumbs’ for hours, the above numbers are extremely impressive. So it comes as no surprise traditional broadcasters are now looking to take a share of Twitch’s action. Also factoring in the proposals currently sat with the IOC for esports to become a recognised Olympic event in 2020 games, the esport content pool is likely to get a whole lot bigger.
However, is it possible for the same viewership to transfer to linear viewing? Will the millennial population pull away from their laptops/mobiles and move to the TV?
Two of the main challenges to esport working on scheduled TV are firstly:
a) The loss of interactivity
Part of what makes Twitch extremely popular is the interactivity and the ability to share commentary directly with other viewers whilst watching the events, allowing everyone’s inner Simon Cowell to come out. This has been one of the key drivers to increasing viewership for game events and something that may not transfer well to TV where commentary would be need to run on a secondary device or service such as Twitter. Facebook is attempting to enter the broadcast field in esport, and whilst this would allow direct commentary, the loss of anonymity in providing it may prove to be unpopular with the more ‘vicious’ spectators.
b) Returning to the familial screen.
Whilst wide scale TV broadcasting seems to be the end game for the evolution of eSport, it will be a challenge to the industry to transfer a generation defined by the internet to the traditional TV set. But there is no shortage of companies willing to take a punt on making it work.
Turner recently announced a multi-year deal with Twitch to broadcast its ELeague three times per week through the site to over 80 countries; this will be complemented by a weekly roundup show on Turner’s US linear channel TBS. The Eleague appears to be showing early signs of success gaining 500k viewers for the first broadcast at a 10pm slot and as broadcasts continue, this initiative could seek to grow its audience share outside of primetime.
Traditional broadcasters are likely to see difficulties in getting similar viewership seen on Twitch. However, eSport could help to break a new primetime for the video gaming masses, by utilising a generally less profitable late night time slot.
Esport is and will continue to be largely prosperous whether it be online or on TV. Recent rumours of ESPN offering $500m to Riot Games for League of Legends may have come up false; however it does set a standard in the industry of how potentially valuable esport could be.
Personally, I’m not a fan, but I’m a rare breed. Esport is in it for the long run, so expect broadcasters, brands, advertisers, gamers all swarming towards this new money maker. Say goodbye to your sponsorships NBA stars; the nerds are coming to claim it!
The Futuresource professional AV team attended Infocomm 2016, meeting clients and scanning the floor for the latest innovations in this space. For those that did not attend this show, we wanted to share what we found to be the big display themes, which did reflect the trends from European market, captured in our ISE 2016 report.
The final numbers for the US show InfoComm 2016 did echo the feedback from exhibitors and visitors alike, it felt quiet, which is strange for a Vegas based show!
However, given the increasing influence of ISE in Amsterdam, arguably the premier global professional AV show, it was excellent to see a few exciting product launches timed for this US show. Whilst the numbers were down, there was certainly a buzz around the show floor and positive steps to introduce new areas including drones and the internet of things (IoT), which will maintain its future relevance.
Following the trends seen at ISE and reflected in sales performance, solid state projection (SSL), mostly high bright laser phosphor, was heavily promoted by almost every vendor at the show, and rightly so given its importance to the category.
InfoComm 2016 was not necessarily about what was being shown but rather how it was being shown. Several brands, in fact most, demonstrated projectors being used in micro or large-scale mapped installations. This was most notable on the Epson stand, following the same theme it adopted at ISE, the brand partnered with DATATON to highlight its intention to be recognised as a leader in high-end, as well as mainstream projection.
Closely linked to both the above points, digital signage played a pivotal role on most brands’ stands, finally making this application viable to all product segments. Brands were keen to illustrate how projection’s inherent flexibility creates a wealth of opportunity for players in this space. The Panasonic Space Player, though not a new product, is a great example of this trend.
As the impact of flat panel displays in presentation applications becomes more wildly felt, we expect projector brands to devote more time in demonstrating how the technology can do far more than mirror a computer screen.
Beyond solid state illumination (SSI), brands continue to accelerate the introduction of high resolution projectors with 4K, liquid crystal on silicon (LCOS) and digital light processing (DLP) chipsets, very clearly a trend highlighting the level of investment in the installation space.
NPP LED stood out clearly in the latest Futuresource Global Video Wall Report, NPP LED, <3mm was front and centre for most of the leading display vendors. Indeed, it is quite amazing to see how this new display technology has moved from the darkest depths, at the back of ‘hall nowhere’, to be such a prominent category, in such a short space of time.
The Sony 1.2 CLEDIS (Crystal LED Integrated Structure) wall was the show stopping technology for Futuresource, rarely without a huge crowd. Deliberately avoiding the techie side of the product, it has very high contrast potential in well-lit environments and produces a smooth continuous image.
Numerous LED product developments were on show across the floor, cable-less solutions, curved mounting, etc., another key indicator of the rapid maturity in this category. Silicon core is the other vendor worthy of individual note, launching both P0.95mm indoor and P3.9mm outdoor solutions.
Commercial Flat Panel
The commercial LCD category felt a little flat, no pun intended, at this year’s show. We have already been through the 4K, and to a point the super large screen size buzz, so the addition of new headline grabbing products was limited. In fairness this is also a consequence of so many launches timed for ISE this year.
Nevertheless, there were some trends and announcements that caught our eye. The first of these was the clear push into high brightness categories with all the key vendors emphasising this segment. In the case of Samsung, this manifested itself into an impressive full outdoor demonstration, an area that Futuresource believes is primed for growth in the next few years.
The sheer scale and visibility of NPP LED makes it easy to forget that the LCD narrow bezel (NB) category is still the dominant video wall technology with 64% value share in 2015 and one that has enjoyed another round of development, with vendors launching extreme narrow bezel (eXNB) product to market. This creates a third segment, <3mm bezel to bezel and brings the category ever closer to seamless display.
We would be remiss if we didn’t also mention the array of stunning, organic light-emitting diode (OLED) technology from LG, in particular the double sided display. Whilst the current price points are extremely prohibitive, and likely to stay that way for some time given production issues, the displays are quite stunning and have the wow factor that exhibitors and attendees crave.
This is a very quick and high level overview of display technology at the show, please feel free to reach out directly for a more detailed discussion.
Now the doors to the American AV tradeshow Infocomm2016 have opened, the industry will be taking in the recent news of the acquisition of the interactive whiteboard manufacturer SMART by the world's largest electronics manufacturer Foxconn, which now owns a 66.67% stake in its business. This follows its recent purchase of Sharp Electronics a couple of months ago.
Traditional Western based interactive whiteboard makers have come under severe pressure in recent years as market growth has slowed and users have increasingly invested in personal learning solutions such as computers, tablets and connectivity as opposed to ‘front of class’ tools. Early adopter markets being the US and UK have now slowed down with wider global uptake being slow in comparison. Whilst uptake in China is currently booming. China currently accounts for more than 50% of global market sales. The market is serviced by local providers so Western providers have been unable to effectively penetrate the leading global market.
One of the commercial problems of traditional whiteboard technology is its longevity, with devices typically lasting upwards of 10 years, meaning a limited replacement market opportunity in comparison to many other hardware devices. In the rapid growth years of the early 2000s, SMART sold its whiteboards and software as one solution, with one upfront total fee. This model worked well, until the major early adopter markets of the UK and US started to slow and SMART was unable to drive ongoing revenues from its loyal existing customer base. For a while complementary solutions to the whiteboard such as voting systems, visualisers and audio systems, offered substantial margin opportunities but these solutions then came under pressure from the multi-functional computing devices, especially tablets. SMART eventually sought to differentiate its software from the hardware offering with annual licenses for SMART Notebook but this move was arguably made too late, as users were not used to paying for display software.
SMART, despite its troubled history of late, undeniably has a strong brand in the education sector. This transaction with Foxconn provides access to significant resources, a plethora of partners, markets, technologies and finance that will enable SMART to put its troubles behind and prepare for significant growth. The implications of such an acquisition are huge when considering the various partners and technologies the firm already has access to beyond the world of professional AV. Specifically, in the AV space, Foxconn already owns Sharp and InFocus. The interactive display market is transitioning away from whiteboard technology to flat panel technology, 55% of educations sales in 2015 were flat panels. Sharp owns a 10th generation panel production factory and a combination of Sharp’s flat panel production expertise and pricing competiveness with SMART software, brand, huge classroom installed base and route to market promises to be a strong combination.
The Corporate Market – Forecasted to be a 2.6 billion $ opportunity in 2020
Whilst interactive display sales to the education sector are slowing, the corporate meeting room market remains a huge opportunity. In North America alone there are 5.5 million meeting rooms and existing penetration is negligible. To date, no provider has really been able to fully ‘crack’ this market, with the challenge of providing an interactive meeting tool to help drive collaboration that is simple enough for users to utilise infrequently without training. Teachers tend to use displays daily so are more likely to learn about usage then users in a typical corporate environment and this is proving a challenge. Microsoft has announced and is now shipping the Surface Hub solution targeting this exact challenge and expectation is that this product will drive awareness and opportunities for interactive display usage in meeting rooms.
The Futuresource team will continue to get feedback on this and other developments all of the major AV and ed tech shows around the world, feeding the information back into the ongoing industry research that goes into the 'Futuresource report portfolio'.
The steep declines in camera sales over recent years (30% y-o-y), due to the ill-effects of smartphone cannibalisation, are showing some signs of softening, which could suggest the market is set to ‘bottom out’ over the next few years to serve the needs of a segment of the population who appreciate the unique benefits of dedicated cameras including bigger sensors, better optics, accessories, etc. Our research also seems to suggest the population has benefitted from previously smartphone-only users ‘stepping-up’ to real photography. Ultimately, however, the population is much smaller than it once was, but more enthusiastic, spending more, on premium equipment.
At the very top of the photography equipment market sales have remained robust while the wider market collapsed – now representing a much more important segment of the market. Segments which include the likes of premium (large sensor) Fixed Lens cameras, mid-pro Interchangeable Lens (IL) cameras, and standalone/aftermarket lenses represent a stable market size of around £270million retail sales, year-after-year.
With camera replacement cycles lengthening, Pro Enthusiasts are more likely to invest in their ecosystem (lenses, accessories, etc.), which should result in a relatively buoyant lens trend compared to IL camera bodies moving forwards. In particular, developments within the Compact System Camera (CSC/Mirrorless) segment, such as full frame sensor and special zooms, should result in CSC lenses rising 12% in absolute value over the next four years.
The long term outlook for high-end equipment is relatively stable in absolute terms, with value remaining broadly constant, and likely to represent a growing share of overall revenues, reaching almost two thirds by 2019/2020.
While it is clear that digital cameras maintain key technical advantages over multifunctional camera-devices, in terms of bigger and superior sensors and optics, and manual control, smartphones are setting the bar in terms of smart UI’s, connectivity and mobile apps, which represents a growing usability delta between smartphones and digital cameras.
Futuresource Consulting has recently published its latest round of corporate market research providing insight and commentary into the evolving purchasing and use-models of AV solutions in corporate environments. The study is based on feedback from 500 organisations across Western Europe and the US and accesses trends in both the adoption of digital signage solutions in corporate office spaces and the changing requirements for AV solutions in the meeting room.
The corporate vertical continues to show a strong propensity for growth in the adoption of digital signage at a time where the wider market is beginning to show signs of maturity (in some segments) and emerging territories are posting declines in the face of worsening economic conditions. The corporate market offers a large addressable audience, existing communications infrastructure (which signage solutions can leverage) and the growing desire of companies to communicate with employees and partners in increasingly diverse ways.
Annual volume growth for commercial Large Format Display (LFD) product (excluding videowall and interactive whiteboard product) reached just 6% globally in 2015, down from 10% the year before and 20% in 2013. Large chained installs in sectors like automotive, QSR and retail banking continue to prop-up rising volumes in larger Western markets but a growth ceiling is becoming an increasing concern for suppliers as penetration in these early adopter verticals rises.
Over 30% of organisations surveyed in our latest round of research are using screens outside of meeting spaces for the purpose of digital signage. Large organisations with headcounts of 500+ show the highest rates of adoption but it’s the SME market, below the top tier of enterprise, which provides the largest addressable opportunity in terms of scale. Requirements in this sector are typically heavily cost driven, often based on small networks running template driven signage, with the potential to overlay signage content on existing screens used to deliver broadcast content. From a supply side perspective, the last few years have seen increasing diversification of solutions as vendors seek to align products to individual verticals, opening up new customer bases. A key facet of this strategy has been the rising availability and declining cost of lower end solutions designed to service small network environments like those seen in SME office spaces. The rising penetration of SoC solutions in screen hardware, the decreasing cost of low end media players and the increasing availability of template based content management solutions have all made digital signage more accessible to corporate customers. Penetration in the segment is rising and this positive trend is highlighted by our survey with 14% of companies that do not currently operate digital signage in office spaces expecting to do so during the next two years.
A primary driver for the adoption and expansion of digital signage networks in the corporate space is the increasing influence of IT managers and IT integrators on AV purchase decisions. This trend is happening at a time when the AV signal distribution market is making its first significant inroads into replacing conventional matrix switching products with IP based solutions. Residing on a company’s central network, these video distribution platforms sit alongside other network based communications tools, providing IT and communications managers with opportunities to create increasingly centralised and integrated solutions.
IP solutions account for a small proportion of the AV matrix switching market at present (<5%) but the cost of these solutions is falling as the cost of Ethernet switches comes down and video compression standards improve. These solutions can offer numerous benefits and significant cost saving potential for larger networks spread across corporate campuses. Perhaps most importantly for the signage market is the flexibility these solutions offer. Any screen in any location can receive any video stream on the network and adding additional screens is as simple as adding an additional Ethernet switch to existing infrastructure. Over 50% of companies we surveyed which currently use digital signage in their offices expect to expand that network within the next two years. The future adoption of IP based video switching solutions will aid network expansion and help maximise the utility of signage installs in office spaces.
The mainstream projector market faces long-term declines. That's not news to most. However, one story that often gets overlooked is that despite this drop in volume, market value is expected to grow.
Accelerated adoption of solid state illumination (SSI) projectors in 2017 will drive a rise in ASPs. SSI solutions are expected to maintain an upfront premium over lamp-based solutions moving forward due to reduced maintenance costs (no replacement lamp or filter cleaning fees) enabling a lower cost of ownership.
Whilst high-bright projectors (above 5k lumens) will contribute to the majority of this value boost, SSI is expected to gain traction across all market segments – mainstream, home cinema and short throw. By 2020, Futuresource expects around 29% of sales to be solid state – whether that is laser phosphor, RGB LED, HLD LED or RGB laser, up from just 7% in 2015. This rapid uptake is expected to cause the market's value (which has been on a consecutive 'YoY' dive since 2014) to surge 10% over the next 5 years.
The prospect of greater margins on the horizon is being hailed by the projector vendor community as they have been blighted with multiple challenges over the last few years. It seems that the period of FPDs boasting the advantage of offering resellers far greater premiums than projectors is now coming to an end. Whilst this will fail to stop FPDs from taking greater share in both corporate and education applications (for numerous reasons, including the perception that FPDs are 'future-proofing'), it will help to curb the rate of the decline in the overall projector market.
At Google I/O last week, the company unveiled its response to Amazon Echo, Google Home, a compact wireless speaker with access to a range of music services including Google's own Play Music and GoogleCast, enabling multi-room audio. Android's Google Assistant and Google Now will provide far-field voice control for services interaction as well as smart home devices, including Nest, which Google bought for $3.2 billion in 2014. Home is another piece in the Google IoT ecosystem jigsaw, leveraging the huge share of Android in mobile devices, convergence with Chrome and the bridgehead of Nest and Open Thread. Google Home will be available later in 2016.
How things have changed since the advent of MP3, streaming music services, mobile devices and the wireless speaker revolution! In the good old HiFi days, customers would sit in studios listening to speakers from a range of vendors before making their choice, while more discerning audiophiles were happy to shell out up to $5,000 USD or more to get an extra quality edge. Today, connectivity and interactive features are competing for buyers with audio quality, bringing new end-to-end players like Amazon and Google into an already crowded field, even Apple is thought to be planning a SIRI-enabled wireless speaker product to expand its Home Kit ecosystem. Meanwhile, traditional audio brands are trying to drive HRA (High Resolution Audio) to boost consumer interest in quality and defend their space. Will new features or gimmicks make a serious dent in the market? Only time will tell.
Amazon broke the $100 billion sales barrier in 2015 and is continuing to show unrelenting growth into 2016, with Q1 revenue up 28% to $29.1 billion. In addition to organic expansion of its e-Commerce business through wider product range and geographical reach, services are growing at 60% and now account for over 25% of revenue. 40% of 2015 operating profits came from Amazon Web Services (AWS) which is growing at 64% and is likely to hit $12 billion revenue in 2016.
Amazon's Media segment grew at just 3.5% CAGR until 2015, but still represents a mighty business, with sales of $23 billion, bigger than Apple. Book publishing remains core, driven by Amazon's 60% share of the e-book market, served by tablets and its own Kindle e-readers. To offset decline in packaged music and video, the company offers free streaming entertainment in 5 of Amazon's key markets to subscribers of Prime, its highly successful customer loyalty program, which now has over 40 million members.
In consumer electronics, Amazon continues to spin out a succession of innovative products developed by Lab126, its R&D group based in Cupertino. These include Echo, a wireless speaker with Amazon's Alexa voice control which was the surprise hit of 2015, selling at least 2 million units, according to Futuresource estimates. Amazon also continues to roll out dedicated Kindle e-readers despite the huge growth of tablets, including new models which will be solar powered.
In a recent Perspective report 'Amazon: a Global e-Commerce Powerhouse', Futuresource gets inside the success factors which have driven the company from an online bookseller in 1994 to the world's most valuable retailer today.
At Google I/O, Google outlined plans to bring its Android Apps to Chromebooks. Whilst this news has been expected for some time, the formal announcement adds another intriguing layer of context to the ongoing OS 'Battle Royale' for the global education market.
Chromebooks are the number one selling device in the US K-12 market, reaching over 50% share in 2015 (a dramatic increase from 2% in 2012). However, Windows continues to dominate globally with 43% share as 90% of all Chromebook sales to K-12 are in the US. Microsoft and Apple have sought to fight back against the Chromebook onslaught with a slew of new additions to their education offerings (Microsoft Classroom, School Data Sync, Apple iOS 9.3 new management features and the Classroom App) but this new announcement will add another important capability to Chromebooks, the touch based app ecosystem.
The Android operating system currently has a negligible position, 2% of shipments in 2015. Most of its existing installed base is in emerging markets globally where Chromebooks do not sell in scale. This announcement is unlikely to change the competitive OS environment significantly in the short term. However, in the mid-long term it provides Chromebooks with an important competitive angle.
Google's announcement follows the slow build-up of the '2 in 1' form factor from 'The Wintel' alliance who have been promoting it as the ideal long term solution for education. Combining the processing capabilities of a notebook with the tactile touch capabilities of a tablet it is ideal for education. Pricing of '2 in 1's' has been coming down rapidly with devices now regularly in the sub $400 USD range. This trend is expected to continue and the next 12 months will see a large number of device launches (for both Windows and Chromebooks), with price points sub $300 USD expected. '2 in 1s' accounted for 4% of global K-12 device demand in 2015, and are expected to rise to 15% by 2017. Whilst Microsoft and Google will compete hard in the '2 in 1' category, Apple currently has a less compelling offering. The iPad Pro is currently priced out of range for 'mainstream' K-12 usage with 73% of market demand in 2015 coming from devices sub $400 USD. Of course this could change over time as new versions are launched, and the older iPad prices are reduced. In addition, feedback suggests that convertible devices (those with 360° hinges) are more likely to gain traction than detachable devices, as schools don't like the management complexity of separate parts and the likelihood of loss/theft and damage.