Steve Jobs was a master of "one more thing" at WWDC. For his fourth gig as emcee at the Golden Globes, Ricky Gervais continued pulling no (verbal) punches as we all anticipated. And every year, we – as consumers or industry participants – hold CES to an incredibly loftier standard to deliver that wow factor time and time again.
CES 2016 drew to a close last week with a record-breaking 170,000 attendees. The thousands of exhibitors gave it their best shot. More pixels? LG showcased 8K. "Smart" fridge with integrated 1080p display, payment, and remote viewing of how much bread you have left? Samsung's Family Hub will set you back $5,000. And Sony went retro with their hi-res audio turntable.
For media companies that don't need a robot to clean your grill or a passenger drone, the other "official" announcements may have had less sizzle but still underscored continued innovation and investment in digital. After days of meetings and conversations with customers, prospects, and partners from morning until night, here are the key themes that I think will dominate for the remainder of 2016.
OTT: "Show me the money!"
During CES, the most common theme amongst media companies was OTT. The line between broadcast and digital continues to disappear as traditional broadcasters continue to unify audiences across both digital and broadcast. Digital platforms have become an extension of broadcast for both linear and on-demand content, with "digital" companies creating premium content that sits eye-to-eye with broadcast, e.g., Amazon's Mozart in the Jungle nabbing the Golden Globe for Best Television Series, Musical or Comedy. And broadcast has become more like digital in expanding the breadth of content available and redefining the consumption experience beyond a single screen, e.g., ESPN's CFP Megacast Presentation across ESPN, ESPN2 2, ESPN 3, ESPN News, ESPN Deportes, ESPNU, and WatchESPN. From advertising to subscription business models, media companies continue to engage audiences across devices – from desktop to mobile to living room – and across content types – from primetime broadcast to anime.
4K: "You know what big boy? You’re grown up."
Two years ago, 4K was the talk of CES. Regardless of whether most consumers would derive significant benefit (based on screen size, distance from device to viewer, and content quality), consumers could easily grasp the "bigger [more bits] is better" marketing type. Worldwide shipments of 4K televisions are expected to surpass 30MM units when the final numbers are crunched for 2015.
However, media companies were faced with how to deliver four times the bits as "full" HD in a cost effective manner and ensuring a premium viewing experience for users, whether they were in the home or on the road. Focus turned on high-efficiency video coding (HEVC) as an enabler for delivering 4K content while significantly reducing storage size and delivery requirements, but HEVC was marred not only by slow adoption by device manufacturers but also the formation of multiple patent pools and the Alliance for Open Media, with a priority to create an alternative to HEVC.
Despite these uncertainties, many media companies pushed forward over the past few years to upgrade their workflows for the creation, acquisition, encoding, delivery, and playback of 4K content, with and without HEVC. Media companies aren't waiting for the legal issues to be resolved; they've crossed the 4K Rubicon and we'll see an increase in the digital adoption and distribution of 4K content this year. A risk for companies that want to fully adopt 4K is margin compression. On the subscription side it's unknown whether services streaming in 4K will command a price premium to cover the additional cost, especially if accessibility of content – consumption on mobile, where 4K is less relevant – remains a key driver of user engagement. For ad supported models, it seems even less likely that CPMs could quadruple to keep up with the greater number of bits being delivered.
HDR: "It's like, how much more black could this be? And the answer is none. None more black."
Over the years, "4K" has been often used interchangeably with "UHD/Ultra HD". However, UHD has now expanded in definition to include both 4K and the often overlooked HDR ("High Dynamic Range"). While 4K increases the resolution of content, there's a limitation to whether a viewer can perceive the difference based on the size of the screen and the distance from the screen.
With the current RGB 8-bit color model, each color is represented by 256 shades, with a combined 16MM+ colors. Moving to the new HDR 10-bit color model increases each color to 1024 shades, with a combined 1B+ colors. As a result, HDR dramatically increases the available color palette for greater detail. Consequently, the added color detail and richness can benefit the viewer whether they're watching on a 4-inch or 40-inch screen.
Various manufacturers announced support for Ultra HD Premium at CES, a new certification (combining support of 4K and HDR) introduced by the Ultra HD Alliance. And in the digital realm, heavyweights Netflix and Amazon Prime Instant Video, previously announced support for HDR with the latter having already launched 4K Ultra HD content in 2015, though only on a limited range of Samsung SUHD television. While HEVC adoption has been slowed by both licensing concerns and device adoption, HDR adoption has been similarly slowed by multiple formats from the likes of Dolby, Philips, and Technicolor. With the Philips and Technicolor announcement last week to "merge their ongoing delivery roadmaps for HDR solutions," HDR is primed for a growth year as it is integrated into both digital workflows and consumer devices.
VR / Immersive Video: "There is no spoon."
When it comes to VR, the Matrix “spoon” reference is particularly apt. For one hot second, 3DTV was the king of hill, but its decline was swift and expected. Immersive video may have started down a similar path until both digital giants Facebook (Oculus), Google (Cardboard), Samsung (Gear VR), and Sony (Project Morpheus/PS VR) and content creators (Disney, Legendary, NY Times) put their weight behind it to make the fad not only fashionable but feasible.
At F8 2015, I experienced live streaming immersive video on the Rift and at SXSW 2015, I had the opportunity to enjoy Samsung's Gear VR, from being in the audience of SNL's 40th Anniversary to a 4D "haptic" Divergent experience. At CES 2016, VR hardware and immersive video demonstrations were hot fodder for discussion. Though in my experience at CES, content – especially for immersive video – is king, as I had another opportunity to experience Gear VR but with fairly mundane content: courtside basketball, a home run being hit, and waves crashing on a beach.
Discovery's VR experience was a common "did you see it?" question. While VR and immersive video take center stage, their neglected cousin spherical video has garnered interest from the likes of Facebook, Discovery, and USA Today. While more "simplistic", the spherical video experience offers a key advantage immersive video does not: the ability for multiple people to engage with the content without needing to spend on expensive devices. However, the message from several media companies at CES underscored what I've heard in 2015. These types of new experiences remain effectively experimental, more valuable as showcase branding exercises for a sponsor or as proof of innovation, rather than a driver of mass engagement and monetization. We've yet to see the first immersive or spherical Snow Fall moment, but I expect a content creator to be the catalyst for immersive and spherical video this year, similar to how Discovery elevated Planet Earth into the premier "must see" content during the transition to HD.
In summary, OTT, 4K, HDR, and VR were the trends that jumped out for us but it’s understandable that, as highly visual innovations, they over-index on commanding attention. We’re certainly on top of OTT as it has been a significant driver in the Media industry for some time and we have been aligning with our customers, and monitoring consumer demand, and adoption of capable devices when it comes to other emerging technologies. While the conference itself didn't provide the wow factor I had hoped for, the message from media companies was loud and clear: 2016 will be a year of additional investment and innovation in digital video as they continue to prove out monetization models for the long term.
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