Almost 10 years ago to the month since Cisco announced it would acquire Linksys, the company has told investors it has agreed to sell the unit to Belkin, the privately held home networking specialist based in Los Angeles, CA. Financial terms have not been disclosed. The transaction is expected to close in March 2013.

What is often misunderstood about Cisco’s recent strategic moves, including the closure of its Flip video camera business, is that it still has a strong interest in consumer markets: what has changed, and is now complete through the Linksys divestment, is that Cisco no longer plays directly in the consumer retail space – instead it supports its service provider customers in delivering solutions to end consumers. In that role Cisco still maintains a strong interest in understanding and driving emerging connected consumer technology trends.

The most interesting aspect of the Belkin deal is that Cisco will enter a strategic relationship with Belkin “focused on a variety of initiatives including retail distribution, strategic marketing and products for the service provider market”. My interpretation of this is that Belkin and Cisco will work together to support Cisco’s service provider customers in home networking product development and distribution. Apart from any transaction fees (and its rising share price) this would appear to be the one benefit to Cisco from the Belkin deal.

Cisco’s ten-year odyssey through the world of low margin consumer electronics has been exciting and expensive. In the early days we questioned whether Cisco would become a major consumer technology brand alongside Samsung and Apple. And when the company introduced wireless home audio systems and media hubs in 2009 it looked like things might begin to accelerate. As I wrote at the time, Cisco’s consumer strategy at that time represented a “compelling, yet high risk vision”.

The wireless audio strategy proved to be disastrous, and once the economic downturn hit Cisco’s corporate results the financial markets zoomed in on the weak spots. Linksys’s low margins (relative to Cisco’s traditional enterprise businesses) meant trouble and the writing was on the wall. It was only a matter of time before retail consumer electronics would become an interesting footnote in Cisco’s history.

David Mercer

As hoped for in my comments last week, television has created much of the excitement so far at CES 2013. Things started off well when the first major press conference from LG spent very little time on smartphones, instead leading with OLED and Ultra-HD, and indeed also smart home in the form of smart appliances. LG announced three Ultra-HD screen sizes for 2013 launch: 55”, 65” and 84”, and confirmed that the 55” model would retail for less than $10,000.

Sharp joined the UHD party by announcing 60”, 70” and 85” models, and demonstrations at the company’s booth are very impressive. Perhaps most dramatic in terms of market impact could be Hisense, which has taken over the prominent location previously occupied by Microsoft. Hisense is demonstrating UHD in 50”, 58”, 65” and 84” screen sizes. The company told me that the 84” is effectively a custom-built model, but the sub 65” models are all scheduled for mass production in March and availability in the US in May. Most significantly prices are expected to be approximately only twice the 1080p equivalent. We will try to get further confirmation on the implications of this assertion, which could clearly have a dramatic impact on early UHD demand becauses prices would be far below any previous estimates.

Another indication of UHD pricing came from Toshiba, who told me that their 65” and 58” models would be priced at less than $100 per inch, although again the 84” was seen as very much a different story. Toshiba’s UHD native 4k video demonstrations were very impressive. I have to say I was less impressed by the Hisense demos, although these were also claimed to be native 4k.

The biggest supporter of 4k is Sony, whose impressive stand has this as a strong theme across video creativity and TVs. Most stunning of all is Sony’s prototype 4k OLED, demonstrating that OLED technology will eventually embrace UHD, although at what cost? Nevertheless the 56” display confirmed what we always suspected: 4k really does have an impact at “smaller” screen sizes, in spite of claims from many who may have never seen it.

I did also take a demonstration of Samsung’s innovative dual view 3D OLED TV with quad-core processor, which allows two viewers to watch different programmes on the same TV. Not being a great 3D fan, this was nevertheless a very effective demonstration. The challenge is that the glasses are effectively selecting between different TV inputs, so the viewer would need to be using either multiple set-top boxes or boxes with multiple video outputs.

David Mercer

Smartphones, tablets and ultrabooks will grab many of the headlines over the next few days of CES mayhem, and in some cases may even deserve their accolades. The world of consumer technology has been transformed by smart personal devices and there is plenty more innovation coming down those pipelines in the years ahead.

In the meantime, the world of TV, which used to define CES, has taken a back seat. In spite of various developments in recent years, including high definition, connected and smart TV and 3D, some of which have had strategic significance for ecosystem players, television as a whole has tended to decline in relative importance. Apart from the notable exception of Samsung, the business performance of major TV vendors has certainly suffered in recent years and has added to the general perception that television is a legacy industry in decline.

Smart TV was supposed to change all that, and, as we have reported, there are now more than a hundred million smart TVs in use worldwide. But there is little evidence yet of these newest smart devices transforming the business outlook for their manufacturers. As I noted a few months ago smart TV usage rates are higher in the US, where high value services like Netflix are prominent, than in Europe, where equivalents are harder to find. Smart TV’s success will hinge on driving new services, content and usage: selling the devices is only the first step.

The next opportunity for TV’s fightback will be highly visible at next week’s International CES: Ultra High Definition TV presents a major opportunity to raise the value bar for TV manufacturers and ultimately for content and service providers as well. Naturally enough people will look at these crazily-prized jumbo TVs and wonder who on earth will buy them, and for a couple of years their scepticism will appear to be justified. UHD is the start of a another stage in television’s evolution and there are many barriers ahead, not least bandwidth restrictions and new codec requirements. But display prices will fall rapidly and we fully expect UHD TV ultimately to do to HDTV what HDTV has done to standard definition over the past twenty years.

Our UHD forecast has been released and we are projecting ten million homes worldwide owning a UHD TV by 2016. We’re looking forward to seeing the first wave of these products and some great 4k content next week in Vegas.

David Mercer

Strategy Analytics has been designing and analysing large scale consumer surveys for many years. Some of this work has been used by our industry analysts to support their regular market and competition tracking. We have also conducted frequent consumer surveys to support proprietary project and consulting activities.

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I think I must amaze some of my younger colleagues when I show them one of our ancient hard copy multi-client studies, a few dusty samples of which I keep stacked away in a cupboard in my office. The fact that a research report can exist on paper alone takes some getting used to in this online era.

 I have little cause to refer to them nowadays, of course, but that changed recently when Strategy Analytics decided to renew its focus on smart home. Back in 1986, shortly before I joined the company, it published a study called “The Interactive Home”, so I was curious to see how some of those predictions stacked up with the benefits of 25 years of hindsight.

Sure enough, we talked about the concept of “smart home” in that report, largely in the context of home automation, management and security. We noted in particular that in Germany “there seems little or no coherent drive twoards realisation of ‘Smart Home’ concepts at present”. A key obstacle was the high levels of rented and apartment accommodation, which reduced the need for automation and security systems.

The conclusions in the UK also make interesting reading: we identified a “growing body of serious PC owners” who would “help open up the information-related interactive sectors”, as well as opportunities in interactive television and electronic publishing. The study also concluded that “energy telemetry” was “likely to emerge as a prime investment area in the early 1990s”.

The study had a 10-year forecast horizon, which is fairly ambitious compared to regular analyst reports. We may laugh now at a forecast of what would happen in the late 1990s, but that seemed as far off in 1986 as the 2020s seem today. And in fact, as so often happens with emerging technologies, while the long-term scenarios were broadly correct, the future timing of events was misunderstood. And in general the report was over-optimistic in terms of predicting the speed with which new “smart home” services would emerge as mass market opportunities.

Given those past uncertainties and false dawns, the question posed by my colleague, Bill Ablondi, is right on the mark: “Smart Homes: Why Now?”  He identifies a number of reasons to think that we may not have to wait another 25 years before true interactive home technologies become widespread, including:

·         Consumers becoming increasingly connected via mobile devices  

·         Broadband service providers need to develop additional revenue generating units (RGUs) to offset declining growth in traditional businesses  

·         Expansion of offerings from traditional home security systems providers into self-monitoring and control products and services

·         Introduction of affordable, retrofit solutions that can enhance lifestyles, safeguard homes and reduce home operating expenses

·         Manufacturers of appliances and home systems desire to differentiate their offerings and expand their opportunities

·         Government incentives and mandates to reduce energy consumption by connecting residential customers to advanced electricity distribution and management systems

In other words, some high value industry sectors are getting serious and see that many pieces of the smart home jigsaw are lying around waiting to be put into place. Key barriers remain, of course, not least persuading consumers that there is value in these systems and services. That’s a key set of questions which our new advisory service, Smart Home Strategies, will be exploring over the coming weeks and months.

David Mercer

Client Reading: Smart Homes: Why Now?

“The TV” has been about more than “TV” for many years. Ever since the first video recorders arrived back in the late 1970s, bringing home video to millions of millions of TV sets around the world, TV viewers have been faced with ever-increasing choice in what they watch and when they watch it.

The latest stage in this evolution has been the arrival of internet connectivity to the TV itself and to many of its attached devices. While such products have been around for a few years, it’s only relatively recently that improved bandwidth and usability have allowed people to explore the world of internet video on their big screens.

Our recent survey of nearly 5000 respondents across the US and Europe suggests people are taking to this “connected TV thing” in a big way. Based on the survey’s findings we estimate that 42 million homes across the two regions are now connecting a TV screen to the internet, in some way or other, in order to watch TV shows or movies. This is not a daily activity for most people just yet – this is the number of homes doing this monthly, weekly or daily. But it’s a clear sign that the concept of connected TV is becoming more widely accepted.

Significantly we found much higher usage in the US than in Europe – 20% of US homes are using connected TV compared to 10% of European homes. The Germans are falling some way behind the rest of Europe: only 6% of German homes are using connected TV currently, compared to 12% in both France and Italy – the UK proportion stands at 9%.

New digital service providers such as Netflix and Hulu have seen tremendous progress in the States in the last couple of years as they become available on multiple connected TV devices. Europe has yet to find its own equivalent, although each market can name examples of localised services.

People are still working out the best way to get connected TV content onto their TV set. In the US the games console is leading the way: in Europe the most popular method is to connect a PC to the TV using an HDMI cable. But the majority of connected TV viewers are actually making use of more than one solution. There may be a number of reasons for this: certain content is only available from different devices; or they are using different TV screens at different times.

We are in the early days of the connected TV revolution, but the momentum shows no sign of decline. As Ultraviolet launches and Apple considers its own streaming movie service, this market is set to get a lot more interesting over the next few months.

David Mercer

Client Reading: Multiscreen Connected TV: Assessing Device Usage and Ownership

I listened in recently to an analyst webinar given by Dave Durnil, director of advanced content at Qualcomm CDMA Technologies. Dave's role is to convince games publishers that Qualcomm's Snapdragon system-on-chip platform is suitable for "console-quality" games. So far things seem to be going well, with more than a 100 games optimized to the Snapdragon platform.

Qualcomm’s strategy, according to Durnil, is based on the premise that smartphones will replace TV games consoles. Durnil provided various statistics which demonstrate the “decline” of the console market, which do not match Strategy Analytics’ own analysis, so that’s an unfortunate place to start the discussion.

There’s no question that the quality of games on handset devices is improving rapidly, and will continue to do so through more advanced mobile platforms like Snapdragon. But why is Qualcomm asking the question, will phones replace consoles? If it truly expects Snapdragon to match or exceed the capabilities of TV consoles in the future, surely it could enter the dedicated TV console market and sell even more devices?

The flawed assumption seems to be that consumers are willing to use their handsets as TV peripherals, using either an HDMI lead or short-range wireless connection. Our research so far has suggested this type of behaviour is something which only a small number of people are interested in: for example, in our July 2011 consumer survey, only 6% of 4800 respondents said they were very interested in using a mobile phone to send high definition TV and video to a TV set.

Many people also doubt whether a mobile-dedicated platform really will be able to compete head-to-head with a TV-based one, but let’s also put those doubts to one side for the sake of argument. If Qualcomm is right, and Snapdragon really will be able to compete with PS4 and Xbox720, what is to stop the company offering its technology platform to console manufacturers, as well as handset makers? Games publishers would presumably be delighted at the prospect of authoring to a common mobile/TV platform.

The concern, as we have seen with Nokia in the past, is that a strategy focused on traditional strengths can blind a firm to growth potential outside of its comfort zone. Qualcomm should be careful not to fall into that trap: its gaming strategy suggests that it could have a future beyond just the handheld device. 200 million TV games consoles will be sold worldwide over the next five years – is Qualcomm missing out?

David Mercer

Client Reading: Global Connected Consumer Electronics (CE) Devices Market Forecast

Rarely has an emerging consumer technology divided opinion so forcefully as 3DTV. Commentators seem to feel obliged to take an extreme position: either this is the first step in a major home entertainment revolution; or it’s a unnecessary, if not outright dangerous, innovation imposed on unwilling television viewers. Some industry players, particularly TV manufacturers, have certainly been guilty of excessive hype in talking up 3D; and some observers seem to latch on to every slight sign of weakness as evidence of impending market collapse.

The truth, inevitably, lies somewhere in the middle, and is therefore less likely to grab headlines. The complexity of the picture probably explains why we don’t hear much about this side of the story. The fact is that people are buying 3DTVs, although not in great numbers, yet. And according to more than 200 3DTV owners across the US and Europe in our recent survey many of these people are watching shows in 3D and enjoying the experience, although a minority are less happy with what they have seen. There is certainly a general desire to improve on various aspects of 3DTV as it stands today, such as availability of content and glasses issues.

Indeed, the biggest concern with 3DTV owners is, not surprisingly, the need to wear glasses. An overwhelming majority of respondents agreed that they would watch a lot more shows in 3D if they did not have to wear special 3D glasses. However, this is not stopping them watching 3DTV altogether: more than two thirds of 3DTV owners are watching 3D programming at least once a week, and 41% are watching on a daily basis. Given the relative paucity of available programming in 3D, this is a relatively positive finding, although it may also reflect the fact that nearly half of 3DTV owners are making use of the TV’s in-built 2D-3D conversion feature.

There is a mixed picture when it comes to the overall 3DTV experience as well: most 3DTV owners agree that the quality of the 3DTV experience overall has been very good. But most people also agree that watching too many shows in 3D makes them feel sick. So it seems that 3DTV is likely to remain an occasional activity for most viewers until the technology matures.

As we have reported previously, a third of homes will own a 3D-ready TV by 2014. The evidence from our latest research suggests that actually watching shows in 3D is likely to become a regular activity for at least a half of those homes, and that’s assuming content availability and quality at today’s levels. Sceptics should remember that the 3DTV market is still at the beginning of a long development curve: and the industry needs to keep working to address the many challenges which lie ahead.

David Mercer

Client Reading: 3DTVs: Buying Intentions and Early Adopter Feedback

A colleague and I witnessed a fascinating example at lunchtime today of why LG’s strategic conversion to passive 3D is likely to gather momentum with retailers and across the industry. Demonstrating 3DTV in-store is never easy at the best of times. TVs need to be set up with appropriate demonstration material, glasses need to be available, and customers have to be persuaded to pick up those glasses and try out the demonstration.

LG appears to have done a deal with our local John Lewis department store, because the company’s two new passive 3D sets have been moved to a prominent position at the front of the AV department – a few weeks ago they were positioned in amongst the rows of regular TVs. Judging by our short time in the area, it seems to have worked because a couple of other customers also came along to try out the demo while we were there.

The first good news was that the store feels comfortable enough, given their low value, to leave several pairs of 3D glasses lying around, unsecured, next to the TVs. Customers do not therefore feel as inhibited in picking them up and trying them on as they do when they see glasses tied by a security wire to a specially designed point-of-sale unit.

However, the main problem then became apparent:– the two LG TVs (one 42”, one 47”) were positioned below standing eye level. LG’s Film-type Patterned Retarder (FPR) technology limits the 3D effect to same-height viewing. If you are standing with your eyes above or below the top or bottom of the display you will see not a 3D effect, but what will appear like ghosting with very little image depth. So to see the 3D image effectively in the store we had to crouch down. The transformation was dramatic: suddenly the quality of the 3D material became apparent across a variety of clips, including sports, movies and nature. I have seen enough 3D demonstrations to have become sceptical about many so-called improvements, but this was genuinely impressive. Inevitably the quality of content production had an impact on the 3D effect, but overall I was very pleasantly surprised. One or two other customers were watching the same demonstration and were also making encouraging comments.

We then tried a Sony 3D demonstration, which was parked in the regular line of TVs. Here we saw immediately the weakness of the active shutter approach: four pairs of glasses were available for the two TVs on display, but neither TV was set up to demonstrate 3D. I had to fiddle with the menu to get the set to convert 2D to 3D, and then it became clear that the glasses were simply not functioning. After an assistant finally came over to help us we established that only one of the four pairs of glasses had a working battery. By this time, even though the (2D converted) 3D demonstration was reasonably good, we both felt we would have long ago walked away as potential customers.

Finally an assistant helped us with a Samsung active shutter demonstration. Again, there was a considerable delay while the set was configured correctly and the glasses were found and prepared for use. The 3D experience again was of good quality, in my experience, although people perceive the impact of 3D differently according to the content itself. Nevertheless we again felt that the usability of the active shutter TV and glasses would be seen as a strong negative by many customers who had already experienced the LG approach.

So once John Lewis positions their LG TVs at correct viewing height, I think they will find they have hit on the ideal in-store 3DTV demonstration. I notice today that Cello Electronics, a UK TV manufacturer, has joined the FPR club and will launch budget-price passive 3DTVs this summer (42” retailing at £499). Sony, Samsung and Panasonic had better beware: active shutter’s days look like they are numbered and manufacturers which remain wedded to that technology could lose share rapidly if they don’t find an answer before long.

David Mercer

Client Reading: Cost Concern & Lack of Interest Main Barriers to 3D TV Adoption

I took an hour or so away from the excellent Connected TV Summit last week to stop by at the Screen Media Expo at London's Earls Court. While it’s not a consumer event I was interested to see what was claimed to be the latest in autostereo 3D from a Hungarian technology developer, iPont. iPont has recently established its UK office in Oxford, and is going to be in the news this weekend as it is supplying the technology behind the first public broadcast of an autostereo 3D football match.

Sky will be transmitting the European Champions League final in 3D, and most home- and pub-based viewers will need to wear 3D glasses. Sky’s 3D productions and broadcasts are tailored specifically to the needs of glasses-based technologies, but iPont’s technology converts the standard live Sky 3D broadcast for viewing on autostereo displays, and this will be demonstrated to an invited audience at the Walkabout pub in Covent Garden, London on Saturday evening.

iPont gave several demonstrations at Screen Media Expo, including 3D Blu-ray and football matches, though none of the latter were broadcast live. They were using autostereo displays from Tridelity and Alioscopy. As with all 3D content, the production quality of the material varied, but in general the 3D effect was impressive, at least relative to most other autostereo demonstrations I have seen. iPont claims that its current technology supports nine viewing angles, but I did not notice as strong a deterioration in viewing experience between viewing points as with some other technologies, such as Toshiba’s autostereo TVs.

iPont’s “secret sauce” is a box of software tricks which converts stereo 3D, on the fly, to multi-angle autostereo 3D. Autostereo displays rely on the availability of multiple angles in the video content which generate multiple viewing angles from the display. The (extremely) expensive way to do this is to set up multiple camera positions during content production, but this is always likely to prove cost-prohibitive. iPont’s current technology works at the consumer or viewer end, and could be included in 3DTVs themselves (iPont is in discussion with leading TV manufacturers).

Perhaps more significantly for the longer term is the prospect of including this type of conversion software into the production and transmission chain. Rather than having the set-top box or TV doing the work, the conversion would be encoded into the broadcast stream. Major US and European broadcasters are known to be interested in this approach. As the technology moves towards commercialisation it is certain that standards bodies and regulators may start to pay close attention as well.

David Mercer

Client Reading: 3D in Europe: Challenges and Opportunities