New Patterns of Consumption, New Patterns of Use?

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performance. > Strategic for Google: will make all its services smarter, not just its phones. • Opening of AI to de
New Patterns of Consumption, New Patterns of Use? Paul Gray, Principal Analyst April 2017

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Contents • Quick roundup of television • UHD: beyond the television screen • Intelligence: at the edge of the network?

• Trust

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TV shipments mature; area growing rapidly Display area in TV (million m2) by region 300

180 160

250 200

120 100

150 80 100

60 40

50

Middle East and Africa Shipment (millions)

Area (millions m²)

140

Latin America Asia Pacific China Eastern Europe Western Europe North America Japan Shipments

20

0

0 Source: IHS

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

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© 2017 IHS

Premium large screen display trends: TV Bigger, more pixels, better pixels…cheaper 30%

• Higher resolution: 4K and now 8K appearing

25%

• Brighter (for high dynamic range): from 300cd/m2 (standard) to 1000cd/m2 peak

15%

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10% 5%

$9,500

$50,000

0%

$7,500

• Prices: still falling.

20%

$8,500

• Deeper colours: DCI-P3 gamut, towards Rec.2020

55"+ TV prices, by size and technology

$750 $1,250 $1,750 $2,250 $2,750 $3,250 $3,750 $4,250 $4,750 $5,500 $6,500

• Bigger: size growth by 1” per year

LCD TV UHD 55 LCD TV UHD 58 LCD TV UHD 60 LCD TV UHD 65 LCD TV UHD 70 LCD TV UHD 75 OLED TV UHD 55 OLED TV UHD 65

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OLED: attractive alternative to sheer size? Significant number of European consumers choose OLED over a larger LCD • Most brands now using OLED as a premium offering

TV share: 55" OLED, 65" LCD, 65" OLED, 75"LCD

• Pricing positioned at comparable 10” larger LCD

80%

90%

• Many premium consumers choosing OLED over LCD – especially in Europe

70%

• 65” OLED out-shipping 75” LCD

50%

55" OLED

60%

65" LCD 65" OLED

40%

75" LCD

30%

• Endgame on screen sizes?

20% 10% 0% Japan Source: IHS

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North America

Western Europe © 2017 IHS

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Flat panel TVs don’t scale well beyond 65” Cannot rely on size alone to support the market… LCD TV packed weight and box volume v size 120

• Very much larger box for protection: corner drop.

100

• Increasingly difficult to transport • Shipping costs grow exponentially

Weight (kg)

• Extra metalwork for rigidity

1600 Weight / kg

1400

Volume / l

1200

80

1000

60

800 600

40

400 20

200 0

0 30 Reference data: Samsung Q8C series, excluding 88”

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Volume (litres / 000cc)

Flat panel TVs do not scale well beyond 65”:

Source: IHS

50

70

Screen size (inches)

90 © 2017 IHS

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UHD: beyond the television screen

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UHD Content reinforces new consumption patterns Why was Reed Hastings at MWC? • Streaming services first to launch UHD content > Marketing strategy to support premium content positioning. • Equally encouraging mobile usage.

• UHD featuring like Dolby Vision now on phones: LG G6 (pictured)

• Blurring boundaries between TV and mobile viewing: it’s all long-form video! Source: LGE

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UHD movie title availability best from OTT streamers UHD title availability by service and delivery method 250 Physical Both EST & VoD EST Only SVOD VoD

200 150 100 50 0

0

50

100

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150

200

250

Amazon DirecTV M-Go

Netflix Ultraflix Vudu

Film most suitable for UHD, but SVoD giants’ UHD TV content critical to their businesses UHD Title availability

Amazon v. Netflix, by Genre 160

Documentary Events Film Sports TV series

140 120

100 80 Film

60

TV series

40

Events

20

Documentary Sports

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0 Amazon

Netflix

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Intelligence: at the edge of the network?

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5G Low latency and low power most interesting • You cannot buffer perception! • Fast, ultra-reliable networks allow mobile technologies to address critical systems. • Ability to use far-flung computing and hardware resources > Amazon Web Services an early example

• Productivity growth moves away from simple access to investable capital?

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A new era of interactivity Buttons and sliders Pointing devices

Touch and Gesture

Network-based intelligence © 2017 IHS Markit. All Rights Reserved.

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Alexa, what is the forecast? Smartness transitioning from the device to the network. • Alexa, Bixby, Cortana, Google Assistant, Siri starting new era of interactivity. > Power of the network reinforces the device.

• New gatekeepers emerging, network effect heavily rewarded • Rewards to scale: better learning gives better performance. > Strategic for Google: will make all its services smarter, not just its phones. • Opening of AI to developers triggers wave of new integrations: > Cars, white goods, other CE devices. Source: Samsung

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Smart Speakers lead the charge Smart speaker forecast by platform • Prices will drop rapidly – plenty of scope for subsidy model.

30

• Alexa has lead from perfect timing, competition will intensify from other platforms and devices.

25

• Device makers largely agnostic, support for multiple platforms likely.

• Smart speaker installed base over 59 million units in 2020, from 6 million in 2016

Apple Siri Google Assistant

Shipment (millions)

• Google will accelerate as developers gain momentum

Other / Proprietary

20

Amazon Alexa Sonos

15

10

5

0 2014 Source: IHS © 2017 IHS Markit. All Rights Reserved.

2015

2016

2017

2018

2019

2020 © 2017 IHS

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Where does privacy fit in a hierarchy of company needs? Privacy Brand Sustainable business model

Profitable

Product doesn’t harm customers © 2017 IHS Markit. All Rights Reserved.

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Where does privacy fit in a hierarchy of company needs?

Or is it here?

Privacy Brand Sustainable business model

Profitable

Product doesn’t harm customers © 2017 IHS Markit. All Rights Reserved.

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Thank you! Questions? Paul Gray, [email protected] +44 7810 854646

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