Jan 13, 2012

A Week at CES

January 13, 2012

I spent the bulk of the week in Las Vegas at the Consumer Electronics Show, and thought I would write some of my thoughts and observations from the show. Remember, I’m not an engineer, so take everything I say with a grain of salt. Also remember that I wrote most of this while waiting for my plane, after walking about 40 miles over three days in shoes that weren’t super comfortable, eating lousy food, and staying in a room that was subpar at best. In other words, this might not be my best work.

In addition to discussing specific products and companies, I will also generalize about the major product categories and themes at the show.

First, while the show didn’t seem as crowded as last year, there were some anecdotal comments suggesting attendance was slightly up this year. One concession woman told me Tuesday was a record day for them. I read in the local paper that the attendance was “on par” with last year.

I’d say the biggest winner was Microsoft (MSFT). Yes, Mr. Softy. I’ve never been a fan of the Seattle goliath, however, their new operating system, Windows 8, could be a game changer for them. It reminds me of the release of Windows 3.1, which was the first Win OS to adopt menus and be somewhat user friendly, the release of which drove PC penetration to record levels. Microsoft has never proven to be terribly creative, however, once they identify a technology as a winner, they are adept at copying and enhancing it, and Windows 8 falls into that category. The software looks and feels very similar to the iPad IOS, yet runs on any device, whether touch screen enabled or not. The OS integrates programs and content across multiple devices and environments (PC, web, etc) seamlessly.

I hate to give MSFT too many kudos, but while I’m mentioning them I might as well also discuss the X-Box. I’m not a gamer, so I won’t get into the analyzing the gaming features, but instead the additional functionality and future functionality of this device. Today the X-Box functions as a mini set top box, supporting Netflix (NFLX) and a number of cable system subscriptions in limited form. As an example, a Verizon (VZ) FIOS customer can view a mini version of their FIOS service over an X-Box, eliminating the need for an additional set top box and the monthly rental charge (and also saves VZ the capital cost of the box and installation costs). According to the Verizon people I spoke with, they anticipate rolling out a full version of their FIOS service to the X-Box in the 2nd quarter. Add in Kinnect (motion control) and eventually voice control software, and suddenly the X-Box becomes a set top box that can be controlled by a controller, hand movement, or voice. That is huge and a first step in pushing the set top box capital costs from the cable company to the consumer.

One cool app I saw in the “future” section was using the Kinnect to try on clothes, called Wardrobe. A woman was standing in front of the Kinnect, and her image was shown on the screen. She would touch virtual clothes and accessories, and they would appear on her screen shot, and would move when she moved, as if her image was wearing them. While MSFT was showing this as a way to try on clothes and accessories from your closet, I believe this could revolutionize online shopping, and would be embraced by retailers looking to both drive sales and lower shipping costs for returns due to mis-sizing, etc.

I’d say overall that MSFT has taken great strides to level the playing field from an operating system standpoint with Apple (AAPL), and with the huge penetration of the X-Box, the company may have an advantage when it comes to integrated entrainment in the home. AAPL needs to really deliver some innovative products (iPad 3, Apple TV, new set top box functionality) at the upcoming Mac World convention or risk a repeat of the 1990’s, when MSFT pushed them aside.

Speaking of Verizon, they have a lot going on in both their wireless and wireline (FIOS) divisions. The main reason they were able to get a 95% national footprint for 4G much faster than their competitors is due to their existing national fiber network. Much of the 4G traffic is being carried across the fiber plant, with the proverbial last mile being delivered wirelessly. It would seem we are within 3-5 years of a high-speed service delivery which is agnostic as to the last mile, and Verizon (VZ) is the only player who can deliver that today.

In addition to the X-Box rollout for VZ, they also had a Google (GOOG) TV demo that was impressive. The most important feature of the Google TV was the integration of all media sources into a single menu. As an example, if you search for a show, it looks across Netflix, iTunes, video on demand, YouTube, and any other service you are subscribed to, and shows you all the services with that show available. You can then choose the most cost effective delivery method to view the program from. Today, most systems, including Apple TV, require you to search through each service for the program of choice. This Google TV upgrade should be available mid-year.

A final comment on eliminating the traditional set top box. Several new TV’s were equipped and approved for use with VZ’s FIOS service. The built in networking (wifi and Ethernet) as well as software allows these smart TV’s to view VZ content directly from the VZ router, bypassing the STB altogether. Consumers can use IOS or Android apps on their phone or tablet to control the TV and view the guide. Once again, this will lower VZ’s capital expenditures and speed their ability to upgrade consumer interfaces and functionality. Instead of upgrading and then undergoing a 3-4 year STB replacement cycle, the company could merely upgrade the remote control app and push the upgrade to whatever device consumers are using to control their system.

Exercise monitoring was a big theme at the show. There were thousands of devices, both wearable and integrated into exercise equipment and clothing, that allowed the user to monitor various vitals such as mileage, time, heart rate ranges, etc. All of the systems provided quick or in many cases wireless, automatic uploading of the data to a tablet, PC, or other form factor for analysis and tracking.

In addition to monitoring your exercise there were numerous small form factor video cameras designed to be mounted to your bike, body, or helmet, to record your sessions on the snow, water, motorcycle, skydiving, etc. Additionally, one company had a camera built into skiing/motorsport goggles. A few years ago I hypothesized that today’s kids would have their entire lives recorded digitally and stored somewhere, for good or bad. With small form video cameras under $100, it seems that no one will be safe from the roving camera.

An entire industry has evolved to support the iPhone and iPad. Cases, mounts, exercise equipment, wall mounts, chargers, and sound systems. I thought the sound systems were the most interesting. Most are Blue Tooth based, which means they will easily synch with your iPhone or iPad within a 30 foot range. One product, from In2uit and pictured below, is a very flat (think <1/4”) form factor speaker, which can sit on a table or hang on a wall, and in no way resembles a speaker, yet puts out great sound.

People were tired there, and apparently some companies were there to prey on the tired. There were numerous massage chair companies offering their wares at $10K per chair and up, and those things were selling like beer at an Irish happy hour. One booth had a 30 minute wait to enjoy a 20 minute session on one of their chairs (see picture below). I was able to hit it when there wasn’t a line, and while waiting 30 minutes wouldn’t have been worth it, my three minute wait was definitely worthwhile and helped me slog through the rest of the day. I’m pushing for one in the office.

Smart homes solutions were everywhere. There are a number of consortiums, such as Z-Wave, which provide standards for product interaction. Products include control pads (or sometimes tablets) that control heating, lighting, drapery, appliances, and security. Lights can be custom designed to work with the standard, or in many instances either a new plug or outlet is all that is required to allow older products to be work with the control pad. Refrigerators which let you know what has been removed and what needs to be replaced, and can even create a shopping list sent to your phone were also shown. The smart home is a great concept which is probably close to being integrated into new homes, but still needs to drop in price and complexity before older homes are retrofitted.

Speaking of the office, I’m also going to push for the workstation below. They had it set up as a gaming station, but I thought it would make a great trading station.

There were easily 100 vendors of over the ear headphones, which is reportedly a $1 billion industry. I recently became acquainted with the resurgence of this phenomena as the only thing my oldest son wanted for Christmas was a pair of red Dr. Dre Solo Beats. I tried to explain to him that his iPod wouldn’t sound any better with ridiculously expensive headphones or his earbuds, but we all know that teenagers need to learn by doing. It took him about three days to figure out his iPod doesn’t generate a high enough quality sound for those earphones. In the meantime. I looked at over the ear headphones that ranged from $100 per pair to $1800 per pair at the show, and personally couldn’t tell the difference between any of them outside of comfort. That didn’t stop vendors from showing thousands of different styles, and every one of them demonstrated with loud, heavy bass infused rap music with the exception of one, who was playing doo wop music.

Garmin (GRMN), the GPS maker, was at the show. While they were presenting their usual array of OEM and aftermarket Personal Navigation Devices (PND), I thought the most interesting product they had was the Android app available for Android based phones and tablets, of which there were hundreds. The app eliminates the need for a separate device and continues a trend towards device consolidation. I am wondering if this app ends up cannibalizing sales of their PNDs, which are already in decline.

Gesture and touch control were huge at the show. Gesture control (think Kinnect as an example) will be the next wave in controlling your TV. Touch control is becoming pervasive across any device requiring human input, including TVs and displays. Sharp showed an 85” touch panel display that had unbelievable clarity. Voice control is a bit further behind gesture and touch control, but is obviously part of the long term solution.

Connection devices were pervasive, and suffice to say that you can now connect anything to anything. I was partial to the wireless HD devices that would connect your iPad or other IP device to your HD TV.

Even though the big auto show was going on in Detroit this week, the auto manufacturers had a huge presence at the show. Outside of the trend towards flat black paint (think a University of Oregon football helmet with wheels), there is a heavy movement towards integrating apps and entertainment into the vehicle. A Mercedes engineer told me they have been working with Apple to allow the car radio to download music from an owner’s iCloud account. Until then, there are numerous devices designed to integrate your PND app, music, social media, and other IP content into the car. Head’s up displays for GPS and social apps are just around the corner. Most new cars will have 7-24” displays in the dash (see pic below) along with voice control to operate the system.

Portable chargers were also pervasive, including both solar and other green charging units.

Nokia showed their new line of Lumia phones and all I can say is “yawn”. I felt the styling was a big miss, and the features and functions were copy cats of other phones already on the market. The one-time leader in market share, design and functionality has definitely missed it again.

Samsung had an enormous booth which showed a broad array of products, including phones, pens, tablets, smart TVs, smart phones, etc. Their smart TV is one of the TV’s I mentioned earlier that will work with VZ FIOS. The TV will allow consumers to share photos between devices and even to other homes, chat, and is controlled by both voice and motion control. The company was also pushing their Galaxy tablet and S-Pen, which allows you to draw lifelike drawings on the device.

Speaking of disappointing, the Research in Motion (RIMM) booth, i.e. Blackberry, was pitiful. The company had nothing new to offer, and as most people are aware, they pushed out the release of their new OS until later this year. The booth was nearly empty, and the offering of products both sparse and stale.

OLED TV’s made an appearance, and will eventually be big sellers once the price points drop below $8000. I did see a number of 3D TVs that don’t require glasses. While they won’t be mass market for a couple of years, this is the first version of 3D that I feel has an opportunity to go mainstream. No one wants to wear goggles while watching TV. The technology still needs some improvements as it still tends to give you a headache when you watch it, even without the glasses.

Overall I thought the show was lacking any major new innovations. This year’s show is more about incremental improvements in existing technologies as opposed to revolutionary new products.

Have a great weekend


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