Presentation

Eric Hanselman

Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for Technology, Media & Telecom at S&P Global Market Intelligence. And today, we're going to be digging into everything that was going on at the Consumer Electronics Show with analyst, Neil Barbour, who has just returned from Las Vegas and all of the excitement that is CES. Neil, welcome to the podcast.

Neil Barbour

Yes, thanks for having me, Eric.

Eric Hanselman

So this is the year that, that CES, in theory, was back. It's after the pandemic, that things have really thinned out. CES has always been that venue where the latest and greatest in consumer tech and gadgetry gets previewed -- is back to its former glory. And what was the event like?

Neil Barbour

Right. Well, last year, they had a significantly diminished presence in Las Vegas at the Convention Center in The Venetian and a couple of other expos around Las Vegas due to the pandemic. They were trying to keep numbers low. They couldn't commit to a lot of people to come to the show.

But they moved forward and they had what they estimated to be around 40,000 to 50,000 people involved. This year, they are expecting 100,000 people. I was at both shows last year and this year. And it seemed about double. It was more like 2019 or 2020, where you sort of stood shoulder to shoulder with -- it seemed like the entire universe, who is interested in -- and looking at a TV or...

Eric Hanselman

Everybody who's descended...

Neil Barbour

Absolutely. Yes, and you were just [ jocking ] for space to get a glimpse at the latest and greatest tech moving on to the floor. So yes, I think to that extent, there is definitely -- the demand is there to come and look at the tech. What might have been missing at this year's show was the sense that there were a lot of new advancements being made or a lot of new products being announced or new product categories coming to the floor. My colleague, Michael Paxton, likes to talk that a lot of tech advancements happen sort of in a 3- to 5-year cadence, is that something new comes out.

And then it sort of gets iterated on, in the next couple of years. It could be we're in the middle of one of those cycles, and also could be that the pandemic and ensuing macroeconomic headwinds cut down on the amount of R&D and new product that a lot of these vendors were allowed to bring to the floor -- or allow, could bring to the floor conceivably, considering the work they were able to put in over the last couple of years.

Eric Hanselman

One of the things I heard upfront was that macroeconomic concerns were really holding some outfits back, that there was maybe a little more caution. But to your point, maybe that, coupled with the fact that this is an incremental improvement year, just kept the super hype a little more at bay.

Neil Barbour

Right. Yes. I mean there's 2 concerns there. The first is rising cost per components sort of limits what you can put into a new gadget and still be able to sell it at an affordable or reasonable price. And the second is the amount of focus that the consumer market can put into a device, when they're already dealing with rising cost, across an array of other goods.

Eric Hanselman

There's less opportunity for the consumer market to be leaping towards new things when there's a little more caution.

Neil Barbour

I think so. Yes.

Eric Hanselman

So were there -- I mean, with that slightly less buzzy environment, were there technology themes that really ran through any of the announcements or the product reveals that were taking place?

Neil Barbour

Yes, absolutely. CES has become more and more of a car show over the years, but this still felt like something of a breakthrough year for this segment as far as sometimes, it's sort of cordoned off to its own space. And you saw more and more car stuff sort of sneaking into the gen pop of CES.

I think most notably, you can look at what Sony has been doing with car tech over the last couple of years. This is the third year in a row that Sony has had a car in the middle of their booth. But it was a little different this year because they had a manufacturing partner.

Honda has agreed to put their -- Sony's sensor and display tech into an automobile that they want to start producing at around 2026. So some of these sort of abstract ideas around the ways that traditional tech companies can get into the automobile space became a little more tangible this year.

Eric Hanselman

So these are moving beyond concept cars to actually something that is really integrating a lot of different aspects of the tech and starting to really look at tech automotive partnerships, in ways we hadn't seen it before?

Neil Barbour

Yes, maybe if ever, so slowly. And then you sort of see it more tangibly over at where they're showing the industrial and agricultural automobiles or vehicles. For instance, John Deere had a vehicle that could water a large row of crops, but use it in a very targeted way.

So instead of just spraying water or whatever sort of feed needs to be spread out across those crops, it can very targetedly find where the seeds are and put the water right on it. So in the name of automation and conservation, these vehicles are embedding some of the tech that you see around more speculative automotive trends, into more tangible use cases for now and the next few years.

Eric Hanselman

Well, we've been talking about some of the Agritech pieces and especially when you start looking at much more efficient and effective farming mechanisms. There's so much that seems like we're right on the cusp of. A lot of GPS integration and positioning and precision ag go seems to have been well covered and pretty well-integrated. But now it's that next stage of being able to integrate sensor technology to be able to do some of the things that we've started to look at. All the IoT sensor integration pieces that are now starting to come to bear actually in real products.

Neil Barbour

Exactly. Yes. And when you see these massive pieces of equipment sitting in the middle of a convention set, a floor, it really cuts an image.

Eric Hanselman

I could imagine, well, it's taking that step from the smaller automotive presence to something that really is real industrial technology. It seems like that's something that's kind of transformational. Were there other transformational aspects that you saw around CES?

Neil Barbour

Yes. A lot of the other product segments that we saw seem more iterative. There were a lot of smart home goods on the floor. One of the big trends flowing through Smart Home is the Matter 1.0 interoperability specification, which is supposed to solve for a lot of the problems with different vendors, smart home goods.

Be it smart lights or doorbells, not being able to talk to one another. So if you buy one from Ring and one from Google's array of products, they can't exactly tell each other what they're doing. And that interoperability can be key for a smart home to work smoothly.

Eric Hanselman

So it seems like one of those things that this is, again, one of those iterative pieces that we got all the whiz-bang features of home automation. And now it's that day 2 operational piece of getting them all to talk to each other, ensuring that you control and manage them from a common hub.

What do you think about matter uptake? Does it seem like there's real traction? I mean, I think just about anybody who's making smart home is in that position of saying they're supporting it. Does that really seem to be gaining momentum in terms of real delivered product?

Neil Barbour

It does seem over the next year or 2, at least, the high-end products will be adopting matter. There was also some talk that they could add. I think -- I believe Samsung said that some of their recent Smart TVs even could receive Matter 1.0 through a software update. So it doesn't seem there is a huge hardware component.

So maybe it isn't adding a lot of cost per unit outside of maybe a licensing cost. And some of the conversations that we had with the vendors, enthusiasm was a little blunted. It seems that maybe 1.0 isn't the standard that is going to really make matter, matter inside of the smart home software stack and that it needs a couple of turns before it's doing all the things they can really say it can do.

Eric Hanselman

Not uncommon in terms of that kind of progression, good ideas in the 1.0 and real practical usability when you get to 2.0.

Neil Barbour

Yes, exactly. Another thing we saw on the show floor was the display technologies. It looks like mini LED is taking over a larger role, particularly at high-end sets. Mini LED is a technology that is supposed to -- so plant OLED technology or at least offer a viable alternative to OLED technology.

And that it can reproduce color accuracy in the same way that OLED does, but I can do it at a much brighter rate and underlying -- or peak brightness. So the colors can really pop, which has always been a weakness of OLED. One of the underlying problems it's also solving is that most of the display manufacturers and vendors are reliant on LG for those OLED displays.

They're infamously the only vendor actually making the display. So if you buy a Sony TV that says OLED on it, you're actually buying an LG panel with Sony technology on top of it. And this is a way for some of these other TV manufacturers and vendors, particularly at the high end, to break out of that ecosystem.

Eric Hanselman

So some competitive aspects that start to drive that. And again, technology supply chains, when you've got one exclusive supplier that's going to start to foster some innovation to sort of break up that monopoly.

Neil Barbour

Right. So those are kind of the iterative things. If you go to CES in a year, you're going to see cars, you can see smart home stuff, you're going to see TVs. What was new this year was the metaverse. And that -- those kind of...

Eric Hanselman

You said the M word.

Neil Barbour

Yes, really cracked that egg.

Eric Hanselman

Well and hey, realistically, if there's going to be metaverse, CES is the place for it.

Neil Barbour

Right. And in previous years, you would see sort of curious exhibitors saying, "We build the metaverse for blank." And you can put any noun there, baristas, industrial companies, farms. That was always striking because it had the buzzword in it and you wanted to know more.

And usually, what that meant is that they could build a 3D world to engage a brand or a live experience or just hobbyists looking for somewhere to meet in a virtual space. But they sort of lived by themselves.

To get there, sometimes you can point your web browser at one of those virtual spaces. And then it would load in a sort of an HTML5 client or you have to download some software, usually tied to Unity or Unreal Engine and then it would sort of pop up. What was different this year is that companies like HTC and Meta, a smaller company called Lotte Data Communication and an even smaller company called Somnium Space, are showing metaverse hubs.

And that's where these 3D experiences can live in a single space that is interconnected by either corridors or a unified search, and you can take one consistent Avatar, online identity, digital assets, across all of those different spaces. So we're calling those metaverse hubs right now.

And those were kind of a big deal to give shape to the femoral idea of a metaverse. They really had a lot of striking images on the floor, Lotte Data Communication's Metaverse Hub will be called Caliverse and it's supposed to launch in 2023. They were giving demos around it where one person would sit facing a dozen or 2 dozen people sitting on stands, and they were also to be engaged in a similar experience. So he was your tour guide through that Metaverse Hub.

Eric Hanselman

Well, really, it sounds like a gateway for metaverses that have sprung up in the world at large.

Neil Barbour

That's right. It does, as I said, give shape to what the metaverse is and could be, which we sort of define as a series of interconnected virtual worlds or 3D experiences that facilitate communication, collaboration and commerce. But the challenge is that if there are these different ways to enter the metaverse, that all have their own platforms and languages, and maybe don't communicate with one another or maybe they have their own currencies. The challenge is that the average consumer or enterprise that wants to get involved now might have a hard time deciding which one is the good one.

Which one they should spend time developing for and being invested in. So the metaverse, at its end goal, would be that all of these hubs could connect to one another. Right now, that's not happening and no one's really putting a lot of muscle into making that happen. They're more creating walled gardens. Meta is making a Metaverse Hub, Horizon World, that has a lot in common with Facebook, which is infamously a walled garden. So it's creating some confusion and fracturing the addressable market.

Eric Hanselman

Is that something where there's an expectation that interconnection could potentially benefit any of the various hubs? Because right now, it seems like the walled garden approach is one that is really the principal motivating approach because for each of these providers, they're looking to be able to really hang on to their own sphere.

And granted they want to be able to create like Horizon World, they want to be able to create an environment where multiple metaverses can be created by others, but to keep them part of that whole ecosystem as opposed to opening those doors to be able to roam meta versus that will.

Neil Barbour

Yes, I think so. I think the problem is maybe getting it right and showing people the true value proposition of why your Metaverse Hub is the one that people should spend the most time in. And I think that if you can execute, if a company can execute on all aspects that an enterprise or consumer are looking for in a metaverse, then they'll have a good chance of running the table.

The problem is that no one's really sure what the metaverse should look like or how they're going to get there. What sort of interactions they should include? What sort of creator economies they should accommodate? What sort of Avatar technology people will be interested in? So if one company gets that right and everyone starts going there, then they have a strong chance to own the metaverse at this early stage.

But if they don't, and from trying a lot of these metaverses on the show floor, I can kind of tell you that the one made by the richest company is not really all that much better looking than the one made by the humblest company at this juncture. Then they're probably going to -- if they are able to collect citizens or users, they're probably going to do it at a fairly symmetrical rate.

And then they might find that to reach an economy of scale, where the benefits of a big retail operations or large ad inventory sales are better, if they can facilitate communication inside and outside of their metaverse and to other experiences.

Eric Hanselman

Yes. They've got to get to a point at which there really are motivations to bring them together. Well, I mean, it seems like we face the same sort of challenges that exist with gaming platforms, which is that the point that you made earlier, is that each of them are trying to attract content creators for the individual platforms.

They're trying to ensure that their environments have got the absolute best content. And yet, there's not a ton of motivation to be able to bring them together, but I think you raised an additional interesting point there about the fact that maybe we get to a point that if you're able to, from an ad perspective, span some of these worlds. If you'd be able to link those together in ways that have got some mutually beneficial capabilities, maybe we get to that point.

Neil Barbour

Yes. And one thing to keep in mind, particularly with Meta and HTC, but we also saw this with Somnium Space, and I'll explain a little bit later that if you can have a really compelling ecosystem and that means the hardware stack as well as the software stack. So Meta sells to Quest Pro and also the Quest 2, which is it's a more competitively priced headset.

If you can tie that hardware to the capabilities of the software, in a way that really makes sense to the end user, then you may have an edge on the competing metaverses. Somnium Space is partnering with a company called Vrgineers. And their kind of hook is that they're releasing schematics where you could 3D print your own VR headset parts at home and then combine the features that you want.

You can also buy some of them modularly and build your own headset at home. So that's sort of a niche hobby is play, but those are some of the angles that you're likely to see over the next couple of years as these metaverses try to cater to the way you would interface with that metaverse.

Eric Hanselman

Well, it sounds like that's also something that is potentially an angle to attract creators because if you can get better headsets, if you can build it around the environment that you're trying to create, hey, very DIY-sh is today. But maybe that opens the door for content creators to do new and innovative things in terms of what headsets look like, how they actually put those together. I mean we've seen other similar kinds of things happening in the DIY world. I look at the drone market.

I look at a number of the things we've seen in gaming. And certainly, traditionally, in the gaming environment, there's a lot of DIY in terms of how rigs get set up, all those pieces. Maybe that's something that opens the door on that front as well.

Neil Barbour

Yes, that's an interesting point. It's also worth mentioning that a lot of these metaverse hubs were shown running on hardware that isn't necessarily a VR headset. Desktop computers can sort of run a flat version of it, similar with a phone. Sometimes, those versions to access the metaverse are not necessarily as engaging as the full tactile 3D experience inside the headset.

But it does offer a competing view of getting there for the average consumer who maybe isn't ready to invest in a bulky headset. And it's worth mentioning, too, that a lot of the new headsets that were shown on the floor this year were not necessarily strikingly better from a visual perspective. They did have bumps in resolution and refresh rates and fields of view as someone who's been putting these headsets on at different shows.

And have owned a couple, myself in the past, there's a sense that diminishing returns are setting in as far as those incremental improvements to the lenses and the systems on the chip. But what is notable this year is that the hardware is a lot lighter. It's finally resting on the nose and the head in a way that isn't as uncomfortable and maybe even, dare I say, comfortable or getting there.

So a lot of the tech is getting to the point where it resembles more eyeglasses or maybe swimming goggles instead of helmets. Yes, and as those form factors can cycle down to more affordable headsets that could entice more people into the VR market.

Eric Hanselman

Well, as you're pointing out at the outset, that incrementalism in the particular case of headsets is useful because now we're into that stage of grinding down the weight, making sure that they're lighter, making sure that they are a bit more performant.

Getting to that next level. And that's a point at which you've got to get really good at the manufacturing technology. It's not something where you can simply throw a lot of hardware and strap it on someone's head. You've now got to actually understand the nuances of how do you eliminate weight.

How do you get enough processing power, without setting people's foreheads heads on fire. Those kinds of things that you've got to be able to get to. And those are fundamentally that longer-term manufacturing and design skill that has to be rolled together to make that happen.

Neil Barbour

Right? Efficiency footprint, those are going to be the key advancements in VR and AR over the next 3 to 5 years, I think.

Eric Hanselman

So you mentioned non-headset nonglasses connectivity into the metaverse. It's something where -- I mean I think about some of the challenges that 3D TV has faced. And I wonder whether or not do we get to a point at which we've got high enough resolution in home environments to be able to have that be that gateway. To have, albeit, still a flat delivery capability.

But the one that now has the ability to not only serve the regular video needs but also be that gateway. It means to get into places where there's a bit more horsepower in the actual TV itself. But maybe one other angle in terms of what that metaverse gateway looks like.

Neil Barbour

Yes, I think that's exactly is the power of embedded into the TV, will be really key to providing those kinds of experiences. Look, you could connect a game console to a TV right now, and it could play some metaverse or metaverse-like experiences.

And even some game consoles have VR headsets. Sony, for instance, was showing up the PSVR 2 at the show. As another interesting wrinkles for display tech, you mentioned 3D. Sony had an SRD display that was a little bit more than a 3D TV but acting in the same way.

It had eye-tracking camera and could sort of show a volumetric holograph-like picture. It seemed to flow out of the screen nearly a foot and give you access to things like digital twins and really detailed topographical maps. So those are the kind of directions that display tech is moving in. I kind of think that cloud rendering, cloud gaming is key to bringing those kinds of experiences to the average consumer. If you buy a high-end display, I mean, conceivably, they could put the kind of hardware on there that could render a complex 3D scene.

But likely, most people are going to continue buying TVs and the $200 to $600 range. And those TVs probably are never going to find the margin that they need to make a sustainable business, if they're also putting half a computer into the back of the TV.

Eric Hanselman

And that's where the cloud rendering comes into play that you wind up ensuring that there is enough computational capacity to be able to drive it directly to the television, without the need for the display to have all this sector processing power.

Neil Barbour

100%. And you saw some of that, particularly from Microsoft on the show floor. They were running their Xbox Game Cloud right on the show floor and probably one of the most demanding network situation as possible.

There's 100,000 journalists...

Eric Hanselman

Trying to get something -- take what the network load happens to be at CES and actually run a real devil on it.

Neil Barbour

Absolutely, yes. And they were playing contemporary Xbox games on a big screen, and it looked relatively nice. There was some blockiness, you could tell, but that provides the path forward to bringing the really complex e-commerce and virtual world exploration experiences to average displays.

Eric Hanselman

Well, well, this has been great, Neil. I appreciate all the feedback. It sounds like there were no shortage of interesting things. A lot of different aspects to CES this year and a whole set of interest that we'll have to see how it plays out in the year ahead.

Neil Barbour

Yes, definitely. Thanks for having me, Eric.

Eric Hanselman

And that is it for this episode of Next in Tech. Thanks to our audience for staying with us. And thanks to our production team, including: Caroline Wright, Ethan Zimman and Syed Wajih Abbas on the Marketing & Events teams; and our Studio lead, [ Kyle Canullosi ].

I hope you join us for our next episode, which is our 100th episode where I'm going to be digging into some of the future of artificial intelligence, where it fits and what it might reveal. I hope you'll join us then because there is always something Next in Tech.