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Deloitte 2014 TMT predictions
Converged living room sales to plateau; doubling up on pay TV; 2x as many IMs as SMSs to be sent.
30 January 2014: The top global technology, media, and telecommunication trends for 2014 include the US$750 billion converged living room heading towards a sales plateau; 50 million homes to double up on pay TV; and consumers to send 50 billion instant messages a day, doubling the current 21 billion SMSs.
According to Deloitte Australia’s TMT leader Stuart Johnston, smartphones, the largest component in the converged living room group, projected to generate US$375 billion in revenue in 2014, are nearing saturation among most age groups except the 55+ demographic, which will grow usage by 25% this year.
Johnston said: “While we expect to see a plateauing of the device sales (smartphones and the connected living room), we do not expect to see a corresponding decline in the overall spend on personal entertainment. Rather, we will see a shift in the share of wallet, with the money that is not being spent on new physical devices, being spent on software, apps and games etc, as well as media and data plans.”
Australia’s national media partner Clare Harding pointed out that by the end of this year, up to 50 million homes around the world will have two or more separate pay television subscriptions, countering the historical expectations of ‘cord-cutting’. These additional subscriptions will generate about US$5 billion in revenues. In addition a further 10 million homes will receive premium programming as part of their subscription to other services, such as broadband.
“Our report details many watched and often contended trends in the industry,” said Johnston. “While there has been much uncertainty around wearables for instance, this year we predict that consumer interest will lead to a lucrative market with US$3 billion in sales in smart glasses, watches, and fitness bands. In Australia alone we anticipate 20% of 17-75 year olds will own a wearable by August this year.
“It is an interesting trend, but wearables will not replace smartphones. In fact the majority of wearable devices require smartphone tethering for connectivity, GPS etc. In reality, data viewing capabilities are limited on wearables, and a second screen is required for rich data viewing and manipulation, so they are an extension to the digital ecosystem, not a substitution.
"However the enterprise application of wearables is likely to be one of the untold stories of 2014. There are many opportunities for applying wearables to improve safety and efficiency, by providing quicker and safer access to data.”
Johnston said a recent trial of Google Glass by police in a US town saw an 80% drop in false accusations of police brutality, and a drop in cases of excessive use of force by police.
The 13th edition of the Deloitte Global TMT Predictions also predicts that phablets - an oversized smartphone that’s part cell phone, part tablet - will outsell tablets by US$25 billion.
Johnston expects phablets to be another ‘niche" story this year. “Phablets have already absorbed 25% of the smart phone market,” he said. “In our region we expect phablets to out-ship tablets and TVs into Asia this year given the Asian appetite for gaming and video viewing on smartphones. The larger phablet screen is much more attractive than the small screen for video games. Further, texting in native languages such as Mandarin, Arabic and Hindi, is easier on the larger phablet.”
IMs vs SMSs
Another expected development in 2014, is that mobile instant messaging services (IMS), like ‘What’s App’, will generate about 70% of all messages sent from mobile phones, but deliver only about three percent of the value to the telecoms industry. Although 70 billion messages will be sent via mobile every day, only 21 billion will be via SMS, generating revenues of about US$100 billion this year, compared to just US$2 billion for mobile IM services.
Johnston said that while 2014 will be the year of the Baby Boomer, this group also comes with its own set of challenges and opportunities. “Getting Baby Boomers to engage all the functions of their smartphones, and not just use them as a simple phone, represents a great opportunity for carriers.
“It will be a challenge though,” said Johnston. “As we expect that a quarter of over-55 smartphone owners won’t download a single app!”
Clare Harding pointed out that the Baby Boomer sector is also helping to drive the shift in focus from ‘health’ to ‘wellness’, helping to boost ‘fitness’ wearable sales and influencing the take-up of eVisits to the extent that they may well go mainstream.
Harding said: “The global Deloitte TMT team anticipates an inflection point in 2014 in the adoption of eVisits. This will be partially due to pressure, particularly in the US, to reduce medical costs and improve care, but mostly due to changes in technology and telecommunications infrastructure.”
She said: “The delivery of high speed broadband to all Australians, with the renewed focus on providing high speed connectivity to regional and rural Australians, will also likely facilitate any take-up of eVisits in Australia.”
Another prediction - more accurate measurement of domestic television program viewing for tens of millions of viewers - will have a knock-on effect on advertising and subscription revenues.
Harding explained that: “Hybrid measurement enables viewing on PCs, tablets and smartphones to be counted, and so picks up TV consumption, particularly among younger age groups, who are more likely to watch TV on these devices. These viewers have almost certainly been under-counted to date, which has not been good for the US$200 billion TV advertising market.”
Harding added that the report also looks well beyond 2014 and predicts a ‘perfect storm’ of conditions that could make Massive Open Online Courses (MOOCs) a major factor by 2020. Currently they represent more than 10% of all courses taken in tertiary and continuing education.
New technology, alternative modes of teaching and a need to continuously update quickly obsolete skills are driving the trend, suggesting MOOCs will grow exponentially over the longer term, even if disruption is expected to be minimal in 2014.
The details of this year’s TMT predictions to impact the marketplace in 2014 include:
- The US$750 billion converged living room: a plateau approaches. Global sales of smartphones, tablets, PCs, TV sets and videogame consoles will exceed US$750 billion in 2014, up US$50 billion from 2013 and almost double the 2007 total. However a sales plateau appears likely. Sales are expected to continue growing, but at a slower rate than over the past 10 years, with an estimated ceiling of about US$800 billion per year.
- One became many: the tablet market stratifies. The stratifying tablet market is being driven by low-end devices with a cheap price point, but a narrow function set. In some markets they are becoming more toys than tools, with price points from just under £30 up. The iPad’s share of the tablet market has steadily slipped making it premium rather than predominant. Last year compact tablets sold strongly and are expected to overtake the installed base of classic tablets (9 inches and up) in 2014.
- Wearables: the eyes have it - Smart glasses, fitness bands and watches, should sell about 10 million units in 2014, generating US$3 billion. Of these wearable computer form factors, smart glasses should generate the most revenue, from sales of about four million units at an average selling price of US$500. Smart fitness bands should sell four million units, at around US$140, and smart watches are predicted to sell about two million units at around US$200.
- eVisits: the 21st century house call. Globally there are expected to be 100 million eVisits this year, potentially saving more than US$5 billion when compared to the cost of in-person doctor visits and representing a growth of 400% from 2012 levels.
- Massive Open Online Courses (MOOCs): not a disruption zone yet, but the future is bright. Student registrations in MOOCs will be up 100% compared to 2012 to more than 10 million courses, but the low completion rates mean that less than 0.2% of all courses completed in 2014 will be MOOCs. The growing awareness of online education will force educational institutions to increase investment in this area, drive more acceptance of online education as it becomes accredited, and increase adoption by corporate training groups in particular.
- Doubling up on pay TV: By the end of 2014 up to 50 million homes around the world will have two or more separate pay-television subscriptions, with the additional subscriptions generating about US$5 billion in revenues. A further 10 million homes will receive premium programming as part of their subscription to another service, such as broadband.
- Broadcast sports rights: premium plus. The value of premium sports broadcast rights will increase to US$24.2 billion, a 14% rise on 2013, equivalent to an additional US$2.9 billion. This increase in rights fees will be driven by new agreements with certain top tier European domestic football (soccer) leagues and major North American sports leagues.
- Television measurement: for better and worse. Measurement of viewing of domestic television programs should become more accurate for tens of millions of viewers, thanks to the introduction of hybrid measurement. This enables the inclusion of viewing taking place on PCs, tablets and smartphones into overall viewing numbers, and also includes other data sets, such as set-top box channel selections and video-on-demand server logs.
- SMS vs. IM: value versus volume. Instant messaging services on mobile phones (MIM) will carry more than twice the volume (50 billion versus 21 billion per day) of messages sent via a short messaging service (SMS)
- Phablets are not a phad: Shipments of phablets, smartphones with 5 to 6.9 inch screens, will represent a quarter of smartphones sold, some 300 million units. That is double the 2013 volume, and 10 times 2012 sales. But after initial rapid consumer success, 2014 may mark a ‘peak phablet’ year, as only a sizeable minority of smartphones users will want such a large device.
- The smartphone generation gap: Over 55? There’s no app for that. Over-55s will be the age group to experience the fastest year-on-year rises in smartphone penetration across developed markets. Ownership should rise to between 45% to 50% by year-end, lower than the approximately 70% penetration rate for 18-54 year olds, but a 25% increase from 2013.
- ‘Ruggedised’ data devices at US$250: reinventing the business case for mobile field force. The entry price for a ruggedised, connected data device that can be used by some field workers, and used to undertake tasks such as car rental check-in inspections, inspecting highways or delivering packages, will fall to US$250.
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