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

 

With a couple of hours to go before this year’s technofest in Las Vegas gets under way, I thought I’d issue a friendly warning to the growing number of firms (Intel, Samsung, LG are culprits so far) who seem to be planning to major on “Smart TV” as a key theme of this year’s show. Even before the doors open we already have a quotation from LG Electronics' Baeguen Kang: "Smart TV is an inevitable trend: As people experienced smartphones and tablet PCs, the larger screen on a TV is very attractive for apps and Web content.” So whatever people do on phones and PCs, they will inevitably do on their TVs? If this is an indication of the strategic thinking behind many of the innovations we are about to see unveiled this week, I can scarcely imagine the horrors which await us. When will manufacturers learn? As Google’s disastrous first attempt at connected TV has neatly demonstrated, people do not want the web on TV. How many times do we have to go through this learning process? What people want on TV is video content, and if that’s going to be “smart” it had better deliver some level of intelligence about what video content viewers are likely to enjoy. As I said in our (free to download) 2011 Predictions report, television viewers don’t want a million things to choose from: they want their TV to tell them what they are likely to enjoy. Surprise me, enlighten me! That has value, and if it unexpectedly appears at this year’s show I’ll be the first to label it “smart”. David Mercer

We don’t do this very often folks, but as a seasonal gift we have made our 2011 Digital Home Predictions report available to everyone, whether a Strategy Analytics client or not. You can download the full report here. A lot of the talk at the moment is about Google’s troubles with its TV offer: there will be little to see at CES after all, much to the annoyance of Google’s many partners no doubt. But this setback should not be seen as a a sign of general malaise in the connected TV industry: Apple has just reported that its TV solution is finally gaining some traction, and we expect continued progress from other key players in the rollout of internet TV to the big screen during 2011. We may even see Facebook moving into this space. Headline number of the year will be tablet revenues, which we predict will exceed netbooks. We also think Apple needs to revamp iTunes to take account of the connected device era, and Nintendo may have to take the plunge and launch the successor to the Wii. We’ll see further innovations in the TV control arena, with touchscreens, phone apps and motion control all featuring more widely. But 3DTV is likely to see only slow progress: sure, people will be buying 3D-enabled sets, but less than 20% will be watching 3D content on them. And one more stat to whet your appetite: more than one billion people worldwide will be using social networks for the first time during 2011. And since you are one of them, please go ahead and read the full report, and any comments and feedback are always appreciated. Best wishes for a peaceful holiday season. David Mercer Client Reading: Profiling the Connected Media Consumer - UK

Having tested Microsoft’s Xbox Kinect for the last few days I can confirm that it has the elusive wow factor. Controlling on-screen icons and menus with a wave of the hand is the first sign that this stuff is definitely not of the old generation. Seeing your own avatar mirror your movements introduces the real sense of spookiness which only comes with genuinely ground-breaking technology. And when you are first signed into the service simply by entering the room, the realisation dawns that the age of intelligent technology may finally be upon us. My other conclusion is that if you are not physically fit before you buy Kinect, you certainly will be after a few sessions of gameplay. Microsoft is very clear that the initial raft of Kinect games titles are aimed at its “non-traditional” audience (implying, not entirely accurately, spotty teenagers shooting each other from the comfort of oversized armchairs) and involve varying levels of energy expenditure from a standing position. You may or may not be relieved to know that there is at least one application which does not require you to abandon the sofa: VideoKinect is the built-in video communications service, allowing Kinect games players to take a break to share their exhausting exploits with friends and relatives around the world. As for the games themselves, we found the bowling and track and field in Kinect Sports a lot of fun. Bowling illustrates the strengths of gesture-based gaming because the system appears to recognise genuine bowling actions which are impossible for any controller system to replicate. Track and field includes a variety of athletics events, and, yes, the 100m dash involves running on the spot as fast as you can. Microsoft told me that an elderly 80-year old lady in Australia had enjoyed some of these sports. I would like to see this. Children will love Kinectimals, the classic cutsey furry animal petting game. Choose your favourite cub, cuddle it with your virtual hands, and watch it mimic your actions and learn tricks. Parents of young children should avoid installing this game on their main TV as they will never get to watch TV again. Kinect Joy Ride didn’t work as well for me. This is the main racing game available at launch, and, yes, you have to pretend to hold a steering wheel. I would love this to have worked more effectively, but this is the point at which virtualisation just doesn’t seem to make any sense. Try it at home: See how long you can keep your hands spaced the same distance apart while moving them around in a circle, changing direction frequently, and leaning your body one way or the other to perform tricks. Sorry, but holding a real steering wheel has just got to be a better experience. Microsoft hope that Kinect will help it to “more than double” the number of Xbox 360s sold worldwide so far, which is more than 42 million. Our own core scenario forecast is that Microsoft will fall slightly short of this objective, selling a cumulative 79 million 360s by 2015. Our analysis did allow for further upside to 360 sales as a result of a successful Kinect launch, so we will be tracking its near term progress and impact on core console sales before updating our scenario models. We should also be clear that Microsoft, along with other platform vendors, tends to talk in terms of cumulative sales. Our analysis also takes account of console retirement and replacement, and this could be a critical issue as we begin to understand Kinect’s impact on wider 360 ownership. It is, after all, being offered for sale as a peripheral to existing 360 owners, as well as packaged with a complete 360 console system. Again, the mix between these two packaging options will be important in determining the real impact on the 360’s overall performance. Sales to existing 360 owners may extend the life of the system in those households but will not help to widen the audience. Microsoft’s primary interest will be to increase sales of the 360 itself to new owners. Will Kinect succeed? As always, it will depend on how we define success. Kinect is certainly innovative, and as such it will appeal to existing 360 owners who want to explore the new technology for its own sake or find the new games appealing. Kinect should also bring the 360 more forcefully to the minds of existing owners of other consoles who may be tiring of their current platform. The obvious target is Nintendo’s Wii, global sales of which, as we predicted, are declining by more than 20% this year. While Nintendo works out its post-Wii strategy, Kinect has a window of opportunity of maybe a year to tap into demand from lapsed Wii users. In spite of the enthusiasm indicated above, Kinect is not without its challenges. The biggest concern for many potential buyers will be the space required in front of the TV. Our system is installed in a traditionally small English cottage, and there is just about enough space to use Kinect for the few games we have tried. Demonstrations of some games I have seen suggest that Kinect owners will need clutter-free floor space of three feet by six feet (1m x 2m) at a minimum distance of six feet (2m) from the sensor in order to get the maximum benefit. Xbox actually recommends a distance of 8-10 feet (c. 3m) from the sensor. It goes without saying that this space must be free of all obstacles, alive or dead, if minor injuries are to be avoided. Other commentators have noted the potential for lag in motion sensing. The movements in the self-image window or the avatar certainly appear some fractions of a second behind actual motion. The critical question is whether this has an impact on usability, and so far, in an admittedly short series of tests, I have not noticed any significant negative impact on gameplay. There have been occasions when voice recognition and motion sensing do not appear to function perfectly, but I would not draw any conclusions regarding weaknesses in the technology versus the need for familiarisation. Only time will tell whether these are persistent issues which need to be resolved by further technology enhancements. Kinect’s success will hinge on whether “really clever stuff” is good enough to drive sales, and whether its integration into games is perceived as ground-breaking. Xbox is also taking a risk in focusing Kinect purely on the “active gaming” sector. Nintendo did break new ground with motion control, but Wii games did not always require players to stand up or indeed move around. Microsoft says that developers can deploy Kinect in more “subtle” ways, supporting sit-back gaming. Until such games appear the first titles risk being positioned as a niche market. But overall Kinect is an impressive attempt to take the TV games console industry in a new direction and we believe it will have the initial positive impact on the 360 business which we predicted earlier this year. Judgment on its longer term success will have to wait a few more months once the novelty has begun to wear off, but it would be very surprising if Kinect’s arrival does not push development of games and other TV-based applications in directions we can today only barely imagine. Client Reading: Taming the Waves: Games Console Life Cycles and Platform Competition

I never thought I would hear it, but the buzz on the streets of Essex, that trend-setting county just east of London, is that Research in Motion (RIM)’s BlackBerry handsets have now replaced Apple’s iPhone as the gadget of choice. I should immediately qualify this “finding” as purely anecdotal research, based on a conversation with my 13-year-old niece this past weekend regarding her latest phone, acquired because, as all parents will recognise, “all her friends have got one”. It doesn’t seem five minutes since she was demanding the latest iPhone, hence my surprise that the BlackBerry has risen so rapidly in the teenage desirability league table, at the expense of the apparently unstoppable iPhone. My colleague, Andy Brown, our resident RIM expert, assures me that the Canadian company has been promoting the BlackBerry as a consumer device for some years, largely by advertising it in the hands of celebrities. In spite of those efforts I would argue that it is still commonly perceived as a business-centric device. Nevertheless, consumer sales of BlackBerrys have been rising rapidly, contributing to RIM’s impressive overall performance in the mobile phone market. I was obviously keen to learn why today’s younger teenagers are apparently bucking the accepted trend towards using touchscreen, button-free devices. The QWERTY keyboard, according to my niece, is in fact one of the appealing features of the BlackBerry, since typing messages is so much easier. And it turns out that messaging appears to lie at the heart of RIM’s success in this segment: the ability for young friends to send each other messages using RIM’s BlackBerry Messenger (BBM) service, completely free of charge, has huge appeal to the device’s owners as well as their parents, concerned at rising monthly bills. So the obvious question is, what happened to the apparently eternal appeal of an unlimited choice of apps, as well as 4” touchscreen displays? At least for this small sample, it seems they are now considered of secondary importance. For my niece and her group of friends, the ability to stay in touch via near-constant, rapid messaging, and at zero additional cost, is what matters most. Whether that will be the case as they get older remains to be seen, but it’s a reminder that one device format is unlikely to suit the needs of all segments, however successful a particular product may appear. “With iPhone, every handset works the same,” said Apple’s Steve Jobs during yesterday’s results call. Yes, Steve, they do: and it seems, amazingly enough, that some people really don’t need it that way. Client Reading: RIM Announces PlayBook Tablet and Multiplatform Strategy

I was speaking on the panel at the OTT 'mashup' eventat Ogilvy's London Docklands headquarters last night, alongside Turner Broadcasting's Casey Harwood and Anthony Rose, CTO at the BBC's Canvas (now YouView) project, amongst others. As a first-time masher-up and intrigued at the possibilities for the format, the event turned out to be organised along relatively familiar panel debate lines. Casey and I began with introductory comments, and were followed by critiques from the other contributors. The session was then opened up to debate, including audience questions. All the time, running on a display behind us, was a Twitter feed of comments from participants in the twittersphere, as well, presumably, as a few of the 100 or so people who joined us in the traditional, physical fashion. The only problem was that the panelists had to turn away from the audience to see if any particularly fascinating Tweets had appeared, and if they ever did, it was noticeable that the physical audience's attention would be diverted to the ominous gap between the panelists and away from the speakers. The one recommendation I would make is that questions and comments from the virtual audience could have been added to the debate; it did rather feel at times as though we were being Tweeted at without right of reply. Nevertheless it was an interesting evening and I hope the audience found the debate valuable. my own contribution centered on a few relevant datapoints from our recent survey of UK TV and online TV viewers. In particular I referenced the fact that 13% of UK people are currently watching TV on the internet at least on a weekly basis. So we needed to bear in mind that the OTT phenomenon is still restricted to a relatively small proportion of the population, and most of that activity is taking place on the PC. The number of people accessing web TV on their TV set is of course even smaller: 6% of people are connecting a PC to a TV, and 4% now claim to use a dedicated internet TV device. Having said that, our work with early connected TV adopters within our Digital Home Observatory suggests that television behaviour can change rapidly once viewers have access to some of these emerging technologies. This segment is motivated by a desire for greater viewing flexibility and access to preferred content. They also still see weaknesses in current connected TV solutions, especially in the field of control devices and interfaces. The panel also touched on the issue of business models, and in response to the question of how things might look in three years I replied that the basic alternatives would not change greatly: television in the UK will still be funded by a combination of public service licence fees, advertising and customer payment of one sort or another. The mix may change slightly, and we may see greater variety in pay business models. But it’s important to remember that customers are very sensitive to their monthly bills. The impression is often given, especially by new entrants, that new payment models can somehow overcome consumer resistance to the size of the overall television bill. The reality is that 80% of UK customers check their bank statements every month, and a similar proportion prefer predictability in their monthly payments. 69% would agree to pay only for the shows they watch, but only if it reduced the overall monthly bill. All in all I agreed with Anthony Rose’s comment that too little emphasis in connected TV discussions has been put on live, scheduled television. The assumption seems to be that this traditional model will break down rapidly as various on-demand options become available, but this trend is likely to happen only slowly over a long period of time. Even for early adopters, scheduled broadcasting remains an important part of the overall mix. The overall message is one of increased fragmentation of delivery models and audiences. Client Reading: Profiling the Connected Media Consumer - UK

A quick heads-up that we are offering a complimentary analyst breakfast at this year’s NAB Show in Las Vegas on April 13th. With our partners from D. I. S. Consulting we’ll be examining the outlook for the professional and broadcast industry, which has been badly hit by the recession over the past 18 months. We’ll also be presenting new research from our Digital Home Observatory to illustrate how the viewing habits of the next generation of digital consumers are evolving as a result of the proliferation of connected TV devices. Pre-registration is advised by visiting here: Event details are as follows: Breakfast Presentation from Strategy Analytics and D.I.S. Consulting: “Broadcasting in Turmoil: Recession, Recovery and Online Disruption” Date: Tuesday, April 13, 2010 Time: 7:30 am - Breakfast and Registration 8:00 am - Presentation Location: Las Vegas Convention Center, Las Vegas; Room S225 South Hall Upper Level David Mercer

We’ve covered Hillcrest Labs many times, such as here. Today the company introduced its latest offer, a web browser. At first sight it may seem like a new browser is the last thing the market needs, but this one has a key difference: it’s not designed to be used on the PC screen. It’s aimed at that growing band of consumers who connect their PCs to a TV so they can surf and watch web video from the comfort of their couch or armchair. Some browsers can be set for TV display but these options are often unsatisfactory. Hillcrest’s Kylo browser is offered free of charge. From the early demonstration we saw the company seems to have done a good job of presenting web pages more appropriately for the big screen and video consumption. As our Digital Home Observatory research has shown that connected TV viewers see the control device as a key impediment to a satisfactory experience. Using a standard PC keyboard and mouse on the couch is inconvenient at best. Onscreen keyboards can be offered for entering URLs but these are often slow and cumbersome compared to the real thing. As we’ve noted before Hillcrest’s Loop pointer deploys an impressive combination of technologies to make pointing at a screen more accurate than other motion controllers. Hillcrest’s business model is not changing as a result of the Kylo launch. While it is packaging certain web video services, it is not currently seeking to turn this into a revenue stream, although the company will watch for opportunities. Hillcrest’s primary aim and business model focus is to increase sales of its control devices. David Mercer Client Reading: Touchscreen Controllers Set to Drive the Connected TV Experience