Two updated forecasts from the Consumer Technology Association paint a mixed outlook for digital media consumption in the coming year. Collectively, the reports offer perspectives for both the hardware and the content that Americans will embrace as the entertainment and work-at-home worlds recalibrate their positions following the current financial and health upheaval of the coronavirus era.

Based on two separate consumer field studies , CTA has updated its semiannual Industry Forecast, which shows declining sales in most home technology categories except for video streaming, and also has published its 22 Annual Consumer Technology Ownership and Market Potential Study, which acknowledges tenuous short-term technology spending but nonetheless concludes that "tech is indispensable in our lives," pointing to "smart home" and wireless products that will thrive.

"Thirty-one percent of households indicated they were more likely to purchase technology within the next 12 months due to COVID-19," CTA said in its Ownership study.

In its 2020 Industry Forecast Update, the Association revised - mostly downward - predictions issued at its Consumer Electronics Show in January. Now, in "Assessing COVID-19 Impact," CTA acknowledges that "the financial health of consumers and their willingness to spend presents the biggest swing factor to the outlook."

Nonetheless, the updated forecast finds that consumer spending on streaming services such as Netflix and Amazon Prime will rise amid lockdown conditions, performing better than expected. Its updated study during the first weeks of the COVID-19 "shelter-in-place" orders found that 26% of those surveyed said that they had tried a new video streaming service.

CTA had already expected that consumers would spend $24.1 billion on video streaming services in 2020, nearly 30% above 2019 levels. Its revised April worst-case scenario still sees $24.1 billion spent for video streaming, but it envisions that the COVID-19 impact could push that revenue up to $25.3 billion, about 35% greater than in 2019. Music streaming will see no major change, growing at a 15 to 17% rate above 2019 -- in to a range just over $9 billion this year, according to the CTA updated analysis.

Related: COVID-19 Could Squeeze Networks More in Q2

CTA's survey found that nearly half of respondents say they are watching live TV and online streaming video more often now than they typically do.

"Budget-minded viewers may accelerate the cord-cutting trend in recent years, cancelling cable or satellite service in exchange for a stack of video streaming services," the report contends.

The study acknowledges that the economic downturn "will dampen" the expected demand for 8K Ultra HD and OLED TV display technologies. It foresees a decline of between 8% to 14% in 2020 compared to its earlier forecasts. Spinning a positive conclusion, CTA suggests that "near-term opportunities for TV sales include households looking to add screens to accommodate more in-home video demand and upgrades in the commercial market, as businesses enhance video conferencing capabilities."

The revised forecast also envisions that Artificial and Virtual Reality sales may decline and that drone sales may suffer because of closed public spaces, fewer events and stay-at-home rules that will lower drone sales this year. Overall, CTA acknowledge that primary technology devices, including smartphones, TV sets and laptops "will decline in 2020 as consumers struggle with economic uncertainty."

CTA will publish its next semi-annual "Industry Forecast" in July.

Ownership Intent Expected to Persist: The Cloud's Role

CTA's latest annual Consumer Technology Ownership & Market Potential Study, unveiled shortly after the COVID impact special report, shows a more upbeat outlook . Based on a survey of more than 2,600 adults, findings indicate that 67% of respondents say they were unaffected or more likely to purchase by the economic downturn and continue to plan tech purchases within the next 12 months.

"The data on purchase intent exposed year-over-year consistencies across product categories, strengthening the hypothesis that the desire for technology in the face of strong economic headwinds remains strong or, at a minimum, steady," CTA said.

Video products - including new LCD/LED and HDR TV sets as well as streaming video receivers - ranked high on CTA's "purchase intent" survey. About 12 million homes plan to buy at lest one TV set of 70-inches or larger in the coming year, CTA found. Three-quarters of customers who already own a digital streaming device plan to replace or supplement products in that category. CTA attributes the grow to the expanding content libraries beyond entertainment, including productivity, health and educational content.

“As the pandemic carries on, the impact on technology spending will remain in question, however, it’s clear that tech is indispensable in our lives,” said Steve Koenig, CTA's VP of research.

CTA also sees continuing growth in "smart home" products, although "with consumers forced to watch their budget, many will opt for ‘non-smart’ home tech," the report concludes. It found that this year for the first time there will be more repeat purchases than first-time purchases "as people who already own the devices ... add smart peripherals to their home networks."

On the other hand, "Luxury custom installs are also expected to decrease as the economy enters a recession," the study says, although it points out, "Exceptions may include smart speakers and displays, which add ‘smarts’ to the home for relatively low cost."

"Cloud-based services and technologies are seeing an influx of demand," CTA says, citing the health crisis which, it says, is "accelerating an existing uptrend." It expects "many new behaviors and attitudes will likely stick once contagion is contained. For example, the uptick in online ordering is unlikely to retreat," with implications for physical stores.

CTA acknowledges that "Disruption to supply chains and logistical networks add to the disruptive threats facing the outlook, not only for product inventory on the retail-side, but for device manufacturing due to shortages of components and raw materials."

Sales of 4K Ultra High Definition TV sets will climb 21% during the coming year, and revenue for subscription video streaming services will jump by 24% during the same period, according to the Consumer Technology Association's mid-year update of its "U.S. Consumer Technology Sales and Forecast," published Tuesday (July 31).

The semi-annual industry-wide update puts overall consumer technology sales up 6% by the end of this year compared with 2017, significantly higher than the annual growth rate of 3.9% predicted in CTA's January forecast.

CTA's January 2018 Report: Consumer Spending on Streaming Services to Reach $19.5B

The expected home technology growth is being spurred by a strong economy, low unemployment and the tax cut, according to CTA's analysis.

CTA foresees expansion in smart home and whole-home WiFi systems, which, along with streaming video, potentially affect cable operators and programmers' activities in those sectors. The rapid acquisition of 4K TV sets will offset the continuing flat sales for traditional HDTV receivers, possibly spurring networks to accelerate UHD delivery. CTA predicted that nearly 22.5 million 4K UHD sets will be sold in 2019, compared with 18.5 million this year and 16.7 million in 2017. 

The sales pace of smart TVs will slow down: 33.8 million units last year, 35.2 million this year, 36.6 million in 2019, according to the CTA analysis. But that widespread penetration of Internet-accessible TV sets will be accompanied by continuing growth in sales of streaming media players (including sticks and set-top boxes): 17 million units last year, 18.6 million units this year and 19.7 million units next year, according to the CTA forecast.

Related Study: 74% of U.S. TV Homes Have at Least One Connected TV Device

CTA foresees consumer expenditures on streaming video services to reach $13.4 billion this year, and $16.6 billion in 2019, compared with about $4 billion in 2014.

"These services are expected to sustain healthy, double-digit growth rates for the foreseeable future as consumers explore the various content delivery platforms available to them," the report concluded. "Live TV streaming options are becoming more widely available this year, potentially attracting traditional pay-TV subscribers that have until now avoided cutting the cord for fear of losing their sports programming. With plentiful streaming options available, it is expected that viewers will continue to cut the cord to explore their ideal blend of streamed content."

Related: 'Consumer Reports' Guides Subscribers on Cord-Shaving

At the same time, home networking devices -- especially smart speakers as forerunners of the Internet of Things juggernaut -- will fly off retail (and online) shelves. And their presence will raise new competitive issues, especially as fifth-generation (5G) wireless technology is deployed.

“The new Internet of Things is the ‘Intelligence of Things’,” said Steve Koenig, CTA vice president of market research.“Connected products tap artificial intelligence to enhance services, especially in categories including smartphones, connected cars and smart home devices. And with 5G on our doorstep – the first 5G products will hit the market this year – we’re crossing into a new phase of faster and smarter connected devices.”

Rick Kowalski, CTA senior manager of market research and business intelligence, focused on the "huge shift in how people consume content." He emphasized the value of live streaming, which has "more consumers exploring their over-the-top video options." "This remarkable growth in streaming services shows us that the phrase ‘content is king’ is more relevant than ever,” Kowalski said.

CTA said it expects U.S. consumer technology revenue overall will reach $377 billion in 2018. CTA said that this year will mark the first time that whole-home WiFi products and artificial/virtual reality headsets hit the $1 billion wholesale revenue milestone.

Among the other hot categories, with expected wholesale revenue levels, are voice-controlled smart speakers ($3.2 billion) and smarthome devices such as thermostats, detectors, locks and doorbells ($4.6 billion). CTA acknowledges that "multi-year projections cannot account for unpredictable factors such as changes in tariffs, trade laws, interest rates and federal policy."

The CTA report is available for $2,000 to non-members of association.

Follows CTA/NCTA Agreement Extension

CTA's forecast came just days after the organization and NCTA – The Internet & Television Association announced a four-year extension of the "Voluntary Agreement for Ongoing Improvement to the Energy Efficiency of Small Network Equipment." They said the cross-industry initiative has improved the efficiency of home internet devices such as modems and routers by 20%.

Although the agreement is unrelated to CTA's sales forecasts, it exemplifies the co-dependency of the industries.

The Small Network Equipment (SNE) Voluntary Agreement was initially adopted in 2015 to build upon the success of a similar award-winning voluntary agreement for set-top boxes endorsed by the U.S. Department of Energy (DOE) in 2013. The extension of the voluntary agreement raises the bar for signatories by committing to meet new, more rigorous energy efficiency levels by 2020 that are on average 11% lower than the agreement’s current levels.

"The four-year extension of the voluntary agreement demonstrates our industry's commitment to approaches that assure our customers benefit from energy efficiency measures while maintaining our ability to develop new services and equipment which they demand,” said Neal Goldberg, NCTA’s general counsel.

Agreement signatories include the major broadband internet services providers serving 95 million U.S. households (89%of the market) -- AT&T, Cablevision, CenturyLink, Charter, Comcast, Cox Communications, Frontier and Verizon -- as well as leading device manufacturers Actiontec, ARRIS, D-Link, NETGEAR, Technicolor and Ubee Interactive.

"For communications companies that already have a firm stake in the home through traditional offerings such as video, broadband and voice, an unprecedented opportunity is up for grabs. As the connected home market quickly expands, blazing the trail in the emerging landscape will become increasingly non-negotiable to incumbents’ future growth and survival." —Shuvankar Roy, Comcast; and Sumit Banerjee and Abhinav Saksena, Accenture Strategy

Over the past decade, connected technologies have evolved from an abstract idea into something woven into the fabric of our everyday lives. Whether it’s switching off a forgotten light with your smartphone or jumpstarting your home’s smart entertainment systems via a simple request to Alexa, connected devices enabled via technologies such as artificial intelligence are reshaping consumer experiences as we know them. 

They’re also redefining the word ‘convenience.’ A recent Accenture Strategy study found that 56% of executives predict AI deployment will drive new growth and revenue opportunities. And nearly 6% say this revenue growth will come from increased consumer satisfaction and engagement.

Nowhere are these opportunities more apparent than in the connected home where, according to the U.S. Department of Labor, Americans spend more than half of their daily time. Today, products that once seemed futuristic are now common household items. There has been a 60% growth in smart speakers, while smart home products have increased by 41%. The future will see a collection of deeply integrated micro-ecosystems that will make the home intelligent, personalized and seamless.

For communications companies that already have a firm stake in the home through traditional offerings such as video, broadband and voice, an unprecedented opportunity is up for grabs. As the connected home market quickly expands, blazing the trail in the emerging landscape will become increasingly non-negotiable to incumbents’ future growth and survival.

Preparing for the Fight

In the fight to own the home, communications companies face an increasingly crowded and complex path ahead. Competition is fast expanding past traditional players to include Silicon Valley giants and other players looking for the next platform to reach consumers. 

A wave of recent M&A activity — such as Amazon’s acquisition of Ring — underscores that both traditional and new entrants are recognizing the major value of the connected home market, and acting accordingly. In fact, Accenture Strategy research finds that 43% of companies cited the need for next-gen technology as a trigger for their M&A as they race to win over consumers with top-of-market digital offerings.

As communications companies face multiple headwinds, including shifting customer presences and cost pressures, they must rise to the challenge and best position themselves in the fight to win. By facing barriers head-on, embracing new business models, and looking outside the four walls of their organization, communications players have a major opportunity to become the dominant and holistic service providers in consumer homes.

Confronting Challenges

To start, communications companies should recognize where they have advantages to seize — for instance, familiarity among consumers in the home space, and an existing suite of home services — and where vulnerabilities remain. For one, the connected home market differs significantly from communication providers’ core products. 

Many successful connected home products, such as Alexa and Nest Thermostat, are purchased through one-time sale — contrasting with the recurring subscription model typical of communications companies. This means communications companies will need to rethink their pricing models to reap the most benefit, while also finding ways to reduce cost-of-entry for consumers.

Another challenge facing incumbents is navigating a market built around product design and experience — features that haven’t been historically paramount to traditional communications providers’ offerings. To compete with companies such as Google and Amazon, who put product design at the core of their DNA, traditional companies need to accelerate investment in best-class product design and manufacturing, as well as transition culture and ways of working. Some companies are already making this shift in their business models — among them, Comcast, which is helping transform the video product experience with the release of X1.

In today’s day and age, companies also need to remember that they don’t always need to go it alone. In fact, doing so may prove to be a disadvantage. Instead, communications providers need to decipher how and where they want to participate in the connected home ecosystem, so they are best able to bolster traditional portfolios, bring differentiated offerings to market and reach new segments of consumers. 

Accenture Strategy research has found that nearly half (44%) of executives across industries agree the value of ecosystems lays in access to new customers. As lines blur between industries, there are also new opportunities to partner with “frenemy” companies to create new integrated experiences and put down a lasting stake in the connected home experience.

The Path to the Finish Line

In an increasingly complex and crowded industry, there are several steps communications companies can take to stay ahead of the curve and own a connected home market share:

• Form an Integrated Strategy: Evaluate new opportunities in the context of traditional products and services, with an eye toward creating integrated service offerings that allow you to both dominate the old and win in the new. Create a refreshed home services aggregation strategy that defines a path forward for both defending core services and expanding to new revenue streams through digital offerings. Create new, holistic business and pricing models that give consumers a more seamless exchange on everything from user experience, service, billing and beyond.
• Shift Focus to Design and Experience: Refocus priorities to place design and experience at the forefront of service offerings, which is necessary for keeping up with Silicon Valley rivals and emerging players.
• Redefine your Role in the Broader Home Ecosystem: Ask yourself: what role should your company play in the broader — and rapidly expanding — connected home ecosystem? What gaps remain in your company’s capabilities, and where can a digitally savvy partner create a distinct advantage? Think outside your four walls to embrace non-traditional partners, including longtime rivals, to create differentiated product offerings, expand market share and provide best-in-class experiences to consumers.
• Embrace Data: Create an analytics strategy to power the home business. Ecosystems will soon evolve from value chain partnerships, in which each entity has a specific function, to information exchanges that drive new opportunities to leverage and monetize data. Through investments in analytics combined with strategic partnerships, companies can access rich data insights that enable them to better service customers and ultimately drive growth.

As connected devices become more ingrained into consumers’ everyday lives, the connected home space has grown to be a major market opportunity, creating a fierce battleground between traditional and emerging companies alike. If incumbent communications players develop bold visions, rethink long-held business models and make strategic bets today, they can find themselves victors in the connected home race of the future.

Shuvankar Roy is vice president of business operations at Comcast; Sumit Banerjee is managing director at Accenture Strategy; and Abhinav Saksena is a former managing director at Accenture Strategy.

YouTube TV, the over-the-top TV service launched more than a year ago, doesn’t have the most subscribers among the streaming crowd, but it appears to be leading the pack in terms of consumer sentiment.

That’s according to findings in Crimson Hexagon’s Consumer Electronics Report, which analyzed a massive pool of public social data. Crimson Hexagon estimates that its A.I.-powered insights engine carved out findings from more than 1 trillion posts of “consumer conversations and opinions” from a mix global sources, including social networks and enterprise-held data.

Crimson Hexagon, which uses that repository of data to help partners such as General Mills, Twitter, Adidas and Paramount Pictures get a fix on tracking brand perception and marketing campaign performance, found that YouTube TV generated the most positive consumer sentiment among the OTT services it tracked (74%), edging out Netflix, Hulu and HBO Now. PlayStation Vue and Sling TV — two rival OTT TV services — were shown to have more negative consumer sentiment.

Crimson Hexagon noted that YouTube TV was praised in part for having a relatively low ad load, while Netflix was given props for its broad catalog as well as its original series and shows.

Among the subscription video-on-demand crowd, Netflix’s “share of voice” dominated both Hulu and Amazon Video, according to Crimson Hexagon’s data pool.

The firm noted that the online discussion around streaming services has seen a meteoric rise. While that online conversation accounted for about 3 million posts in 2010, that number surged to 67 million in 2017.

The study also shed some light on consumer sentiment in the smart home arena, finding that the discussion has become increasingly positive since 2010, mirroring the growth of consumer adoptions. Smart lighting received the most positive attention in this category, followed by entertainment, home assistants, home heating and air conditioning control, and home security.

Amazon and Google were the top two smart home brands, trailed by Apple and Nest (which is part of Google).

The Internet of Things (IoT) was one of the big things at the 2016 Consumer Electronics Show, but connecting lights, locks, thermostats and other “smart” devices will represent a significant challenge for cable operators as they look to flesh out their home security and automation services in the months and years ahead.

For one thing, there’s no uniformity on how these devices work together, as they tend to use a range of connection protocols, including WiFi, ZigBee, Bluetooth and Z-Wave.

Adding to the confusion is the emergence of smarthome frameworks, such as Apple Home Kit, The AllSeen Alliance, Google’s Weave, and a new “adaptive” smarthome plat form from Panasonic called ÔRA that is designed to work with the company’s own products, as well as third-party devices.

This challenge is not lost on cable operators, which view home automation and security as an important growth driver. In fact, several have already teamed up with Icontrol, including Comcast, Cox Communications, Rogers Communications, Time Warner Cable and Bright House. Suddenlink Communications (now part of Altice Group) has partnered with Alarm.com.

But that might not be enough. In fact, Comcast is already moving beyond Icontrol with a home-grown platform that supports the MSO’s own connected devices, as well as those from third parties that pass Comcast’s “Works with Xfinity Home” selection and certification program. Comcast is expected to explore licensing its new smart-home platform to other operators, as it’s now doing with its IP-capable X1 video platform. AT&T is also trying to license its platform, Digital Life, to telcos outside the United States. It’s clear that some big providers see IoT as a big opportunity.

Another company that is setting its sights on the IoT market, and with cable providers in particular, is Zonoff, a startup that has developed a white-label, protocol-agnostic platform called Z1.

Kevin Garton, Zonoff’s chief marketing officer, said one aim of the Malvern, Pa.-based company is to help partners get a grip on the interoperability challenge that has arisen as the market is flooded with an array of smart devices.

At its heart, Zonoff is a software company, and Z1 is designed to provide partners with a platform that supports data and analytics, as well as a set of hardware services, including a certification program, for hubs and routers. Zonoff has also created a series of subscription services that can enable service providers to generate more revenue from their smarthome offerings, such as cloud video storage and a “home adviser” service that can dispatch workers to the customer if the system is alerted about an issue.

As a white-label offering, that means the provider gets to call the shots on how the service is branded and marketed.

Working with service providers is relatively new for Zonoff, which cut its teeth on do-it-yourself products and counts Icontrol, MiOS and Greenwave Systems among competitors in the turnkey group. On the retail front, for example, Zonoff’s technology underpins the Staples Connect home and home-office product line.

Garton said Zonoff has already secured several service provider deals, though it’s not at liberty to name them as most of its partners don’t want to confuse Z1 with their own branded service. That group includes a large French company in the “structured wiring industry,” as well as providers in the United States and Canada, he said.

Zonoff has also integrated with several smart home product makers, including Aeotec, Centralite, Danalock, Ecolink, D-Link, Kwikset, Jawbone, LG, Netgear, Lutron and Nest, among others.

Z1 centers on “true interoperability,” Garton said, noting that the system works with all radio-based technologies, including proprietary ones from partners such as Lutron, which specializes in connected home lighting.

Z1 is also keeping close tabs on developments surrounding WiFi HaLow, an emerging low-power, long-range version of WiFi tailored for IoT, as well as Bluetooth Smart, another new energy-efficient system.