January 7, 2013
Ten years ago, the most common way to connect to the Internet at home was via a PC or a laptop. Now, connectivity at home is increasingly being supplemented by tablets, smartphones, and other media devices, although PCs/laptops still dominate. Consumer electronics device manufacturers cashing in on this shift are offering Internet-ready capabilities in many of their devices. Although the notion of “connected devices” can be quite broad, we focused specifically on game consoles, Blu-ray players, and high-definition (HD) TVs in our recently published Forrester Research Connected Devices Forecast, 2012 To 2017 (US). Here is a brief commentary on each of these device segments:
- Game consoles: In 2012, the game console manufacturers experienced declining sales. Unlike in the past, when the introduction of a new console generally saw significant uptake in sales, Nintendo’s Wii U (launched in Q4 2012) is not expected to hit the peak sales of the original Wii. We believe that this trend will be seen more broadly in the game console industry. This is largely (though not exclusively) driven by the availability of low-cost/"freemium" titles on smartphones and tablets, which fulfill the gaming needs of the casual gamer — and have a negative impact on the console market. However, we still expect the console market to see moderate growth. By 2017, the majority of consoles will be “connected” to an IP connection because consoles are multi-purpose and allow users to do many activities online such as rent/buy movies and TV shows, purchase games, watch streaming videos, and listen to streaming music.
- Blu-ray players: The sales of Blu-ray players have continued to increase over the past five years but at a slower pace than the DVD players in their early years. Growth drivers for Blu-ray player sales include declining prices, bundled offers with HDTVs, DVD player replacements, the availability of more titles in the Blu-ray format, and Blu-ray disc availability via kiosk rental channels. However, consumers’ preference for owning fewer optical discs and the availability of streaming services via set-top boxes, game consoles, and connected TVs will moderate the standalone Blu-ray player sales growth. Availability of Blu-ray disc playing capability in the game consoles such as Sony PS3 will also decelerate the sales of standalone Blu-ray players.
- Connected HDTVs: By 2017, as the number of “connectable TVs” increases, more US households will have a connected TV than will have a connected game console or a connected Blu-ray player. We expect the number of connected HDTVs to grow faster due to the availability of an increasing number of movies and TV shows via online streaming services, a shift in consumers’ preference for watching more online video content via their TVs, the increasing maturity of TV operating systems, and the anticipated large-scale production of OLED TVs starting in 2014.
We expect 66 million US households — 54% of the total — to access the Internet via one or more of these types of devices in 2017; they will usually supplement, rather than replace, incumbent devices like PCs, laptops, tablets, and smartphones. People will also connect to the Internet via devices such as set-top boxes, portable media players, eReaders, digital photo frames, and even connected digital cameras. With the proliferation of many consumer technology devices that are connected and the rapid rise of Social/Mobile apps, consumer behavior is taking on a profound shift in how it consumes media, interacts with brands and people, and where it interacts from. This shift will challenge the existing business models of Media and Telecom industries and will result in newer opportunities for Internet-based businesses.