Prepare for your electronics to get up close and personal.
At this year's International Consumer Electronics Show, companies showed off technologies that come closer to the promise of leveraging real-time data to learn about people, anticipating what they might want and serving up customized experiences tailored to individual preferences.
While this year's crop of gadgets haven't yet replicated Jeeves, the fictional British butler who knows his employers' needs before they do themselves, they're inching closer -- thanks to a combination of ubiquitous sensors, savvy software that can make sense of a dizzying array of data, and flexible manufacturing.
"We're entering into a third industrial revolution, one that I think of as mass customization," said Shawn DuBravac, Chief Economist at the Consumer Electronics Association, the trade group that puts on CES. "We're taking full advantage of our industrial infrastructure while giving people the ability to personalize products to create custom experiences. Fitness devices that can monitor your heartbeat and set the right goals for you. Entertainment systems that know what you were listening to in the car and pick up where you dropped off when you enter your house."
Four hot areas of technology at CES this year demonstrate this trend best: the connected car, premium headphones, high-resolution audio and wearable technology.
CONNECTED CAR
The goal of a car that can stream all manner of content and services is gaining momentum. Google Inc. launched its Open Automotive Alliance at CES, with Honda Motor Co., General Motors Co., Audi AG and Hyundai to bring car-oriented Android apps into their vehicles.
Audi, in particular, showed off a vehicle with built-in 4G connectivity that can act as a wireless mobile hot spot for up to 5 devices. The company also demonstrated an Android tablet that lets passengers direct and control the in-car entertainment system, cueing up music and, in the near future, connecting the car with a host of Android apps.
Audi won't be the only automaker with connected car solutions. By 2018, 70% to 80% of all new vehicles are estimated to have the option for high-speed wireless service, according to a forecast by Gartner Inc. Combined with the fact that the average American spends 47 minutes a day just commuting to and from work, the car represents an untapped opportunity for content companies beyond broadcast and satellite radio to further engage people.
"The car is the ultimate mobile platform," said Thilo Koslowski, mobile analyst with Gartner. "It has more real estate than phones, and it isn't constrained by power."
It is, however, constrained by safety requirements.
"That means you're not going to be playing Tetris in the car," said Ty Roberts, CTO of Gracenote, a data company that's working with car companies to develop an intelligent layer of software to make content recommendations to drivers who can't safely flip through dense catalogs of entertainment options. "The car is, however, perfect for music, and the opportunity will be in personalization -- a system that marries vehicle and environmental data with individual preferences to make a system that is smarter, easier and more contextual than what we have today."
Another constraint is the lack of a universal standard for in-vehicle software and services, said Geoff Snyder, Pandora Inc.'s director of automotive business development.
"There's definitely fragmentation that causes some challenges," said Snyder. "Pretty much everyone is using different technology."
Microsoft has worked closely with Ford Motor Co. to develop the Ford SYNC AppLink platform. Apple announced in June that it will introduce iOS for cars this year, with Honda expected to roll out the first implementation this year. Daimler AG, BMW AG and General Motors have also lined up with Apple. In addition, other software platforms include QNX, owned by BlackBerry, and Linux.
Gartner's Koslowski believes that fragmentation will ultimately be good for the industry. "Everyone is still searching for the Holy Grail," he said. "Everyone is innovating to find the right apps, the right integration and the right prices that will work for consumers."
PREMIUM AUDIO
High-end headphones continued to be a big theme at CES, with Beats by Dre, 50 Cent's SMS Audio and, of course, Monster.
A consistent bright spot in audio has been premium headphones, which accounts for 40% of the $2 billion U.S. headphones market. U.S. unit sales of headphones priced above $100 exploded 96% between Nov. 24 and Dec. 21, thanks to aggressive promotions by Beats Electronics and Bose, the two companies that dominate this segment, according to NPD Group. For the first 11 months of 2013, unit sales grew 37% versus the same period a year earlier.
But as impressive as that was, the growth rate was lower than in 2012, when unit sales grew 61% compared to 2011.
"Part of it is that this market can't grow 64% forever," said NPD Analyst Ben Arnold, who projected that the market will grow between 13% and 15% in units this year.
As a result, headphone companies are looking to personalization and quality for growth. Many are adding wireless features, both via Bluetooth and wifi, and tuning their gear for specific verticals such as fitness and video gaming to find growth in a maturing market.
Jaybird, for example, is following the GoPro model of offering wireless audio gear for extreme athletes. Its ability to gain market share in a niche market has earned it a spot as Inc. magazine's No. 51 fastest-growing private companies in 2013.
Monster, which severed ties with Beats in 2012 and has been selling headphones under its own brand, has pursued a similar strategy of market segmentation, designing headphones and audio equipment for various verticals. At CES, Monster announced it is pairing up with Adidas and UFC to make products for sports fans, as well as a deal to design car audio for Lamborghini in a bid to boost the company's brand appeal among the ultra-wealthy. The company captured a 4% unit share of the U.S. market in 2013, according to NPD.
"There are still huge, untapped markets," said Noel Lee, Monster's Chief Executive. "If we do it right, I believe the market has the potential to be three times the size it is today."
HIGH-RESOLUTION AUDIO
The premium headphones market is about to get a boost from another audio trend that's gaining volume -- high-resolution audio.
High-quality digital audio, which has long played the red-headed stepchild against the vastly more popular MP3 audio formats, garnered much more attention at CES this year, with a dedicated High-Res Audio Tech Zone and conference. Backing the initiative are music labels, consumer electronics companies and digital music services that believe high-res audio's promise of "better than CD sound" will provide everyone with a much needed revenue boost.
"Ten years ago, we had a revolution for audio towards convenience, but that came at the expense of audio quality," said Gary Brotman, Director of Product Marketing for Qualcomm Inc., which supports HRA. "Today, we're seeing a Renaissance in audio, where quality and context are coming back."
Technically, high-resolution audio is defined as 192 kilohertz, 24-bit lossless audio. By comparison, CDs generally have a sampling rate of 44.1 kHz and a 16-bit depth. The HRA standard applies to both downloadable files as well as streaming audio.
Digital music retailers backing HRA include HD Tracks, Acoustic Sounds, Blue Coast Records and iTrax. Sony Corp., Mytek Digital and Onkyo are supporting HRA with playback devices. Sony, Universal Music Group and Warner Music Group have also expressed support for the format, promising to release music in HRA, especially catalog titles.
Will consumers follow? A CEA survey found that 60% of consumers who expressed at least a moderate interest in audio said they were willing to pay more for higher quality digital music.
"As our industry continues to help bring about ways of making that quality conveniently available for fans, there will be an explosion in new creative and commercial possibilities for artists, labels, device manufacturers and digital services alike," said Mike Jbara, president of Warner's Alternative Distribution Alliance.
WEARABLES
The "Internet of everything" was very much in vogue at CES, with sensors and connectivity embedded into all manner of everyday objects -- from eyewear to clothing, jewelry to shoes.
Juniper Research forecast that the global market for wearable technology to grow from $1.4 billion in 2013 to $19 billion in 2018. While much of the early action revolves around fitness, with activity trackers and heart monitors being the most prevalent, entertainment options aren't far behind.
For music, wearable technologies hold particular promise because of audio's portability relative to other media.
"When we did our Kickstarter campaign for our Omate smart watch, 10% of the participants asked for streaming music as part of the device's functionality," said Nick N.M. Yap, Chief Executive of iRocke and Co-founder of Omate, which sold 5,000 watches through its 2013 Kickstarter campaign and is expecting to ship half a million watches to distributors this quarter. "That's very high, considering that we weren't even asking for feedback and music wasn't even on the list of features we marketed. But it makes perfect sense once we thought about it. Now we're working to integrate every music service we can into our device."
"Wearables give us a way to tune our entertainment in far more personal ways," said Redg Snodgrass, Chief Executive of Wearable World, a San Francisco-based start-up accelerator dedicated to wearable technologies. "We can now understand the physiology of our audience and be able to adjust how we engage with people based on how they feel. That's one of the biggest promises for wearables – being able to personalize entertainment so we can better interact with people."
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