Trends at CES 2016

I spent several days last week at the CES trade show, as I have now for the last several years. As you may have read, the organization behind the show recently changed its name from the Consumer Electronics Association to the Consumer Technology Association and this fits very nicely with the focus of the analyst firm I run, which is consumer technology. Today, I thought I’d quickly run through some of the trends I saw at this year’s CES. Tim, Ben, and I discussed some of these trends on the most recent edition of the Tech.pinions podcast as well.

Virtual and augmented reality

One of several product categories that was all over the show floor at CES this year was virtual reality (and, to a lesser extent, augmented reality). Oculus is obviously the eight hundred pound gorilla in this market and made its major pricing and preorder announcement during CES, but there are a variety of others playing in this space too, though not all of them were on display publicly at the show. The Oculus demos are very impressive (and there was a line over an hour long at the Oculus booth to experience the Rift demo), but I also saw a demo of the HTC Vive headset in its developer version at the show and came away impressed by that, too. To my mind, the biggest question about VR and AR isn’t whether they’re finally becoming reality (they clearly are), but whether they can ever break through into the mainstream and beyond hobbyists and early adopters. There are clearly commercial applications in training and education, and gaming is the obvious consumer opportunity, but it’s not yet clear whether there’s an opportunity beyond gaming. There were use cases at CES around movies, too but, for now, these remain one-off experiments rather than pervasive additions to the standard release cycle for feature films and I’m skeptical that’ll change. I do believe the phone-based versions are more likely to achieve something like mainstream adoption than the versions tied to expensive gaming rigs.

Drones everywhere

Drones were another product category which was hard to get away from on the show floor this year. Besides the big names you might be familiar with, there were dozens of smaller companies showing off drones of various shapes and sizes. The trend I’ve observed around drones over the last several months is a bifurcation of sorts between the high-end stuff and what you might describe as the toys. I’m guessing lots of kids (and some adults) got drones for Christmas this year, but these drones are much smaller, lighter, and less capable than the ones being developed for commercial use, even if they leverage some of the same technology. Here, as with VR and AR, the commercial uses seem obvious, with applications in professional photography and videography, real estate, emergency situations, maintenance and repair, and many others. I’ve no doubt this market will continue to grow. What I’m more skeptical about is whether the consumer side can grow meaningfully and sustainably beyond its current market size. Though I saw kids on my street playing with their new toys in the days after Christmas, I’m doubtful whether they will have the staying power (and durability) to last through the year as compelling playthings. Though some hobbyists will doubtless find ongoing value in their aerial cameras, I suspect much of the general population will move on to other things in the years to come.

4K and HDR in televisions

4K TVs have been on display now at CES for several years, and it’s already clear the adoption of these televisions will be more like HD TVs than 3D ones. While 3D TVs felt like a desperate attempt by manufacturers to goose the adoption cycle that had little consumer pull to match, 4K is a far more obvious and meaningful advancement in the viewing experience. We’re already seeing significant mainstream adoption of sets. The two main trends in evidence at CES were a focus on HDR (high dynamic range) and other enhancements to the 4K technology, coupled with efforts around making more content available to owners of these sets. As in the early days of HD, 4K is currently stuck in a chicken-and-egg adoption cycle where many content providers are waiting on set adoption and many consumers are waiting on content availability to buy their first sets. This year looks like it may be the one where we finally achieve something of a breakthrough. The two major US satellite providers were both talking up their 4K-capable set top boxes at CES, while 4K Blu-Ray players and other means of getting 4K content to consumers were also more in evidence. From talking to Pay TV providers at the show, it seemed 4K content from major sports networks could well arrive in 4K, which is likely to provide the stimulus the technology needs to get into its mass adopter phase.

Fitness and health

There were announcements from a couple of the bigger names in the fitness device space at CES, but they were received fairly differently. Fitbit announced a smartwatch – the Blaze – and its stock promptly tanked as investors took this as a sign Fitbit was leaving its areas of strength and going into direct competition with smartwatch makers like Apple, Samsung, and others. Withings, meanwhile, announced a connected thermometer, much more in its wheelhouse as a connected health and fitness device manufacturer, that seemed to be much better received. It’s debatable whether the product itself is a winner – it’s a very expensive entrant in a category which already has plenty of cheaper alternatives – but it is at least consistent with Withings’ strengths and focus as a company. The other major trend in evidence in the health and fitness space was a move towards starting to not just track fitness and health conditions but to begin to treat them. I got pitches from quite a few companies selling devices intended to help alleviate various acute and chronic ailments and this feels like a big area of expansion over the next couple of years. This side of the market comes with significant additional barriers to entry in the form of FDA regulation and has therefore been slower to get started, but promises to have more stickiness with consumers than pure fitness trackers which have notoriously high abandonment rates.

Cars and autonomous driving

Cars have been at CES for a few years now, but their presence has often been disappointing. Though they’ve seen themselves increasingly as technology companies, the actual features they’ve shown off at CES have often been the same as those they’ve focused on at the major car shows. Getting demos of actual in-car technology (and especially features like CarPlay and Android Auto) has been frustratingly difficult in the past. But that’s starting to change, as the car manufacturers become more realistic about their role in in-car infotainment, but also as autonomous driving technology starts to really hit the show floor (and the streets outside the Convention Center). Major automakers and various players from the supply chain and location services providers such as Here and Magellan were all talking up and demonstrating their autonomous driving capabilities and, although consumer availability of the more advanced forms of these technologies is still years away, it’s clear these players are asking many of the right questions and beginning to provide the answers. As well as the long-term focus on truly autonomous driving, there was an admirable recognition that much work needs to be done on the interim steps as well, when autonomous and semi-autonomous vehicles will be driving alongside tradition cars driven by people.

A year of many smaller advancements

Overall, this year’s CES felt like it was characterized by incremental advancements across a number of different technology and product categories, rather than being dominated by a single major piece of news. Yes, Netflix’s international expansion was perhaps one of the single biggest announcements at the show, but it didn’t feel like it overshadowed the rest of the event in the way big news has in the past at CES. In some ways, this diversity of news and improvements across a range of markets befits the organizer’s name change and a shift in focus beyond consumer electronics alone and that’s a good thing.

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

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