A Handful of CES Musings....

By Jason Bergsman, NBC Universal Digital Media Strategy and Business Development

I could write for days about what I saw at CES 2009 and the implications of it all, but with the benefit of a healthy separation from Vegas, here are a few reasonably quick musings.....

Special thanks to Glenn Reitmeier and Peter Rosenberg of NBC Universal, whose illuminating tours of the CES exhibition floors were most helpful in separating the wheat from the chaff...

1. Internet connections pervade new TVs, with embedded chipsets to enable an application environment...

Though simplistic news/information widgets have for years been touted at CES, they've offered limited functionality and appeal. Now, however, OEMs are establishing relationships with key providers of high quality IP-delivered content, such as Amazon and Netflix, enabling far more expansive and desirable use cases to exploit the burgeoning TV-internet connectivity.

Look for OEMs to aggressively forge partnerships with IP-delivered content providers (especially in film video on demand), which the OEMs will promote heavily to encourage consumer adoption--and stimulate more upgrades to internet-enabled TVs. Arguably imperceptible picture quality improvements, or ever-bigger and ever-thinner screens won't be sufficient to spur upgrades for mainstream existing LCD/plasma owners for some time to come. The manufacturers must perfect the user interface, however, and ultimately must allow for a more open platform to allow consumer choice among applications.

The direct connection model, especially if Tru2Way enabled, may ultimately place pressure on set-top box manufacturers and renters (i.e., MSOs), which may increase the likelihood that MSOs and telco television providers will charge consumers for internet access based on variable data use volume. As for Roku/Vudu and other box-based providers of similar services, as innovative as their products may now be, it seems unlikely that they will prove to be an enduring presence on the consumer products landscape, unless their platforms are integrated into set-top boxes or televisions--as TiVO has come to do.

2. Internet connectivity and streaming content everywhere on every device...

Whether in televisions, picture frames, netbooks, etc., native wireless broadband/WiFi enabled devices could be seen at every turn. Though connectivity issues may constrain or frustrate any device conducive to use on the go or in varied locations, the default net connectivity will allow devices to transcend rather more limited use cases.

A digital picture frame is not just a picture frame; it's soon to be yet another screen onto which content of all types--including video--can be beamed and streamed. A digital camera is not just a receptacle for static images; it's soon to be a dynamic, continual broadcaster of geo-tagged user-generated content. A Blu-ray DVD is not just a mode for the physical storage of content; rather, in Sony's vision, it will be a key to access supplemental, dynamic, and interactive materials on the internet, when played on a BD Live device. It will take time, but consumer definitions of devices based on their primary historical functionality will become more expansive and flexible.

Effortless internet access on netbooks will create even more demand for high-quality streaming content, consumed to consumers' delight on high-quality (perhaps super-thin HD-quality organic LED), reasonably sized, portable screens.

In a parallel but distinctive development, the introduction of the broadcast industry's mobile television broadcast standard ATSC should figure to markedly hasten the adoption of mobile television, both on phones and smartphones and for the first time, on notebooks/netbooks. ATSC allows for the broadcast of television signals to mobile phones using existing broadcast spectrum delivered to devices equipped with an ATSC compatible chip with conditional access capabilities that could enable premium subscription services. Working with wireless carriers, the broadcasters that constitute the ATSC consortium could create robust unicast on-demand services to supplement over the air ATSC broadcast video.

The entertainment industry motto of content "anywhere, anytime" will become no less hackneyed, but all the more accurate.

3. Albeit perhaps reluctantly, manufacturers have embraced low-end disruptive devices following evolving consumer behavior/preferences--and consumers win...

Economic circumstances will compel consumers to perhaps 'trade down' for their next purchase, which over time will no doubt cannibalize higher-end, higher margin products. In the amateur video production realm, consumers' demonstrated behavior of tolerating--and enjoying--low quality (relative to professional content, at least, created/delivered at professional standards) video (on YouTube, etc.) has in part laid the foundation for mounting demand for 'low end' camcorders that was kicked of by Pure Digital's innovative and highly successful Flip video series--which now comes in HD. Sony and other 'high-end' OEMs unveiled ~$200 competitors, which we can expect will continue to move upmarket in image quality and storage as relevant input costs continue to decline.

In the computing realm, consumers' now-established behavior of comfortably using their cellphones/smartphones for far more than just telephony and for basic data services, though with device-imposed tradeoffs, sets the stage for adoption of small, low-cost, and lightweight (both literally and in terms of the product attributes) netbook computers. Though the form factor will not allow for integrated peripherals like DVD players/burners, the processor won't allow for sophisticated graphics processing, and the screen size may not be conducive for all purposes, for most mainstream uses, the netbooks will prove to be more than sufficient for many consumers.

We've already seen screen sizes increase to the level of smaller notebooks, so it's certainly conceivable that consumers who need no more than word processing and presentation software (Microsoft-based or otherwise), web browsing, and email will look to netbooks as laptop replacements. The magnitude of this cannibalistic behavior perhaps has not been fully anticipated by computer manufacturers. For other individuals, netbooks will serve as supplemental mobile devices so long as connectivity is assured, battery life is reasonable, and startup is quick.

With ready internet access, the netbooks will continue to propel the propagation of cloud-based computing, through which the aforementioned applications--and the files they create--will need not reside locally, but rather will be stored centrally.

With good screens, streaming video, ATSC chips, and shrinking SD cards and USB storage devices that hold up to 64GB of data today and terabytes in the future, these low-cost portable devices will serve as powerful consoles for the consumption of stored and streaming video content on demand, and via terrestrial broadcast.

4. Though OEMs are pushing consumer 3D, adoption will remain limited regardless of the volume of 3D enabled programming delivered...

Early adopters and gamers may embrace the 3D TVs, but the need for glasses in most cases and the somewhat unsettling and uncomfortable nature of the viewing experience will most likely not spur the purchase of a dedicated 3D device. However, the ability to turn on/off the 3D functionality may increase adoption by cinephiles or by big sports fans in the home, or at the least by establishments that cater to such crowds (e.g., sports bars.)

In the chicken and egg conundrum, however, the need to have a dedicated production effort for such events will further confine 3D to the periphery for some time to come. Most consumers will dismiss it as a frivolous gimmick, especially in these market circumstances, which may turn the industry off of the notion altogether based on broadband volume. 3D will have more of an allure for occasion-based viewing in theaters however, primarily for blockbuster films. Home adoption may follow, but don't hold your breath.

5. Simplicity arrives. . .

The consumer electronics industry seems to have finally acknowledged that complexity in setting up, connecting, and navigating the controls of advanced devices has constrained their adoption and resonance.

Many manufacturers unveiled wireless-enabled products that can readily network with each other, making the prospect of the digital home ever more achievable--Samsung unveiled full wireless HD video transfer technology between living room devices that will be governed by a common user interface across all the networked devices. The user interface of the Palm Pre elegantly embodies the notion of intuitive simplicity, which was a focus of Steve Ballmer's keynote remarks about Windows 7. Toshiba demoed a television programming guide that groups content visually and spatially on an axis according to relevance of title, genre, person, and keyword. It's a ways away from a rollout, but represented advanced, experimental thinking around the organization of metadata relevant to consumer choice and preferences.

Simplicity was manifest in form factors as well, with Panasonic displaying a touch-based remote control that seeks to resist the button-based oppression of the complicated home entertainment center remote control. Apple has no doubt served as an inspiration to device designers and it shouldn't be long until a remote control emerges that's directly akin to the touch and motion-dependent controls of the iPhone/iPod touch itself.