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Digital Dominance

CES 2016 Keys on OTT Expansion, Virtual Reality and Connected Everything 1/11/2016 8:00 AM Eastern
TakeAway

The Internet of Things, virtual reality and Ultra HD were show-stoppers at CES in Las Vegas.

LAS VEGAS — Weather-induced travel snafus didn’t stop tens of thousands of techno-geeks from pouring into Sin City last week for CES, where the biggest corporate bets were placed on the Internet of Things, over-the-top video services, and 4K/Ultra HD.

 

If the the Consumer Technology Association’s annual gadget-fest had one big, central theme, it was the IoT, a market that spans home security and automation, OTT devices, and connected wearables, and even “smart” clothing.

 

CES Unveiled, an event that gives show-goers a glimpse of what was to be on display during the week, was dominated by dozens of IoT startups, all looking to cut their slice of a market that will create a record-setting $287 billion in retail revenue in 2016, according to the CTA’s latest forecast.

 

That’s the kind of market traction that would justify former Cisco Systems CEO John Chambers’s 2014 prediction that the IoT is poised to become a $19 trillion market over the next decade, with pickup by the private and public sectors, entire cities and, perhaps, entire countries.

 

Aside from the ongoing debate about data and device security, the big challenge in the years ahead will be securing IoT systems and building software that enables these multitudes of connected devices and sensors to work together. Panasonic is one of many companies taking a stab at that by introducing ÔRA, an “adaptive” smart home platform designed to work with connected products from a wide range of suppliers and underlying operating systems.

 

VR GETS MORE REAL

The market for virtual reality — including the technology that runs it and the content that will fuel it — is a small-yet-rapidly-growing segment, and its presence was felt strongly at CES.

 

Consumers appear to have an appetite for VR. Interest in new VR products will cause sales to surge 500% in 2016 and reach 1.2 million units sold, the CTA predicted. The trade group also said it expects VR to generate $540 million in revenues this year, up 440% from 2015.

 

Some 70% of U.S. consumers have played video games, an area expected to drive VR adoption, according to a new study from Frank N. Magid Associates, and nearly one-quarter of consumers said they are “very interested” in having a virtual reality experience at home. Another 23% said they were interested.

 

Those numbers are part of the reason why Comcast has been splashing cash on VR startups such as Baobab, Next- VR, and AltspaceVR, and why Discovery Communications has launched a division dedicated to VR content development.

 

The biggest VR news last week came by way of Oculus, the VR startup acquired by Facebook in 2014 for a cool $2 billion. Timed with the event, Oculus began to take preorders on its flagship VR platform, the Oculus Rift, on Wednesday (Jan. 6).

 

The company also set the starting price — $599 — for a package that includes the Oculus headset, sensor, remote, required cables, an Xbox One controller and two games.

 

Oculus Rift-PC bundles retail starting at $1,499. Oculus will offer its wares in 20 countries out of the chute.

 

By comparison, the Samsung Gear VR mobile headset (also powered by Oculus’s technology) costs $99, but must be paired with a compatible Samsung smartphone, which puts the all-in price in the same neighborhood as the single-purpose Oculus Rift.

 

There’s much more to come, as high-end VR platforms from Sony (for the PlayStation 4) and HTC (Vive) hit the market later this year.

 

“There’s nothing gimmicky about VR,” said Nick Woodman, CEO of GoPro, the maker of wearable cameras that’s working with Google on a consumer-focused, 360-degree camera array called Odyssey.

 

OTT SPREADS EVERYWHERE

Over-the-top video is no longer an emerging niche, but a mainstream phenomenon with an increasingly global reach.

 

For evidence of that look no further than Netflix, which last week said it had flipped the switch on its subscription OTT video service in 130 more countries, expanding to almost 200. Vietnam, India, Poland, Brazil, Russia and Saudi Arabia are among the countries that have joined the list, while China remains notably absent.

 

“Today, you are witnessing the birth of a new global Internet TV network,” Netflix CEO Reed Hastings declared in his CES keynote last Wednesday (Jan. 6).

 

The expansion will surely give a massive boost to Netflix’s subscriber base and the reach of its originals. Netflix, which was available in 60 countries heading into CES, has about 69.17 million subscribers worldwide, including 43.18 million in the U.S. Netflix will produce more than 600 hours of original programming this year, chief content officer Ted Sarandos said.

 

The adoption and reach of digital video continues to have a profound effect on the overall TV market, changing the way consumers watch.

 

“Digital will win the decade,” Robert Kyncl, YouTube’s chief business officer, said during his keynote last Thursday (Jan. 7). He predicted that digital video will “replace” TV, in part because it’s immersive in ways that traditional TV can’t be, is “endlessly diverse” and is inherently mobile.

 

“I don’t think digital video will grow linearly; I think it will grow exponentially,” Kyncl added, holding fast to a prediction that digital formats will present 75% of the total viewing pie by 2020.

 

Kyncl likened YouTube’s trajectory to the rise of cable TV, where networks such as ESPN, CNN, AMC and MTV first emerged as niche players but eventually expanded into original content.

 

YouTube is at a “similar inflection point,” he said, as it ups investment in originals for its new YouTube Red subscription service, which is also rumored to be seeking TV licensing deals.

 

But there are also some differences. YouTube “is a democratic platform … anyone can create something everyone can watch,” he said.

 

YouTube has yet to announce a multichannel TV offering that replicates pay TV, but others are pursuing services and strategies aimed at the small but growing cord-cutting trend.

 

Add to that list Vidgo, an Atlanta-based startup that hopes to crack the pay TV code by offering low-cost bundles of broadcast TV channels and VOD via an over-the-top distribution platform.

 

Taking aim at a market now targeted by services such as Sling TV and PlayStation Vue, Vidgo said it will offer a set of packages with live, linear TV and video-on-demand, including premium services, local broadcast TV and sports, to a range of smart TVs, tablets and smartphones.

 

Looking a bit like a virtual multichannel video programming distributor, Vidgo said its service will be free of credit checks or contracts. It plans to launch in 15 U.S. markets in the first half of 2016 (including New York, Los Angeles and Atlanta), and achieve national coverage by Q4 2016.

 

For now, Vidgo is keeping a lid on its channel lineups and pricing, noting it will release those details within the next 45 days. But the startup has some pay TV expertise behind it. Robert Kostensky, formerly of DirecTV, is Vidgo’s president and co-founder, and Shane Cannon, president of Cannon Satellite TV (a Dish Network authorized dealer), is its chief marketing officer. Vidgo’s parent company is Gotham Media, a company that runs a content delivery network and develops streaming apps for platforms such as iOS, Android and Roku.

 

TUNER TONNAGE

OTT services topped the video agenda last week, but traditional pay TV continues to fight for growth and relevance.

 

Dish Network used this year’s CES to unleash a super- sized whole-home DVR, the Hopper 3, a device that supports 4K video and packs 16 tuners and 2 Terabytes of storage.

 

Dish unveiled its latest flagship as the satellite-TV provider looks to amp up its pay TV subscriber numbers. It lost 23,000 video subscribers in the third quarter of 2015, ending the period with 13.91 million.

 

The Hopper 3 will carry forward elements from earlier-generation Hoppers, including integrated Sling Media place-shifting technology and AutoHop ad-skipping capability, but will sport a faster processor (the Broadcom BCM7445 Ultra HD TV Home Gateway chip) that will result in quicker response times for Dish’s coming “touch” remote, which is still in beta.

 

The 16-tuner device will enable customers to attach up to 6 “Joey” client devices, meaning that seven different shows can be watched in the home at the same time. Dish customers will also be able to watch and record up to 16 shows at once.

 

That capability also allows Dish to one-up Cablevision Systems’s multiroom DVR, as well as a multidevice X1 setup Comcast is testing that enables customers to record up to 15 shows at once. Verizon FiOS TV’s Quantum TV platform lets users record up to 10 shows at once when they combine the functions of two Arris-made Verizon Media Servers.

 

On the Ultra HD front, the Hopper 3 supports 4K content up to 60 frames per second. Early on, Dish will offer 4K fare from Sony Pictures, The Orchard and Mance Media, as well as Netflix’s 4K library.

 

Dish also has other apps in mind for 4K, as the Hopper 3 will let subs with 4K TVs stitch four live HD (1080p) streams onto the TV screen at the same time. That capability — something Dish refers to as “Sports Bar Mode” — decodes four HD programs and stitches them into one stream that can be displayed on the 4K screen.

 

Splitting and combining those screens is another way to “show off the power of 4K,” Vivek Khemka, Dish’s recently promoted executive vice president and chief technology officer, said.

Dish also introduced the Hopper Go, a $99 USB-connected device with 64 Gigabytes of flash memory that lets subs transfer up to 100 hours of DVR-recorded content for offline viewing on a mobile device. Dish subs with the Hopper 2 or Hopper 3 will be able to link up to five mobile devices to the Hopper Go via WiFi, and Android tablet and smartphone users will have the added option of connecting via a USB cable.

 

4K MATURING

There were also signs everywhere that 4K video is rapidly maturing as consumer adoption of the platform grows and the underlying technology ecosystem starts to wrap itself around standards.

 

About 34% of U.S. homes will have a 4K TV by 2019, according to research firm IHS. On the technical end, the UHD Alliance, an industry organization that includes DirecTV and Rogers Communications among its backers, launched a consumer-facing logo and brand that identifies services, content and devices that adhere to technical specifications that deliver a “premium” Ultra HD experience.

 

The group will use and license an “Ultra HD Premium” logo to identify those products and services that deliver agreed-upon metrics such as High Dynamic Range, peak luminance, audio, black levels and wide color gamut, among others.

 

The initial specs cover TVs (other devices are currently “under consideration”), distribution and content.

 

Panasonic’s DX90 series TV sets are the first to be certified with the UHD Premium label, Julie Bauer, president of Panasonic consumer electronics and chief marketing officer, said at a CES press event here.

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