CES 2018: Interactive Entertainment 

[Editor’s note: this post was written by SuperData’s CEO, Joost van Dreunen.]

CES 2018: Interactive Entertainment 

I’m in Las Vegas this week for CES 2018. Here’s a few of my key observations.

Virtual reality is slowly coming into reality 

Immediately clear from the overall tone coming from VR firms this year is that everyone has rolled up their sleeves and got to work. Following the usual period of fantastic forecasts and promises, now is when the work gets done. This means a host of incremental but important innovations, such as a integrated audio, untethering, and lower price points. (All of which is a far cry from what was initially pitched at CES two years ago.)

The more demure atmosphere is fitting. Overall investments have slowed down across the industry as VR startups are finding it more difficult to raise funding. What gives hope is the accelerating momentum behind augmented reality and the growing emphasis on enterprise solutions.

Razer wows but can it deliver post-IPO?

As every year Razer has done a good job at being heard in the cacophony. And, yes, I now need one of those laptop/smartphone combos in my life. What truly stands out is the firm’s continued commitment to innovation. Perhaps having borrowed a page from the Silicone Valley bro-speak (“fail fast and often,” “break things”, whatever) in the lead-up to its IPO, Razer distinguishes itself with a relentless push behind innovating high-end gaming hardware. So, too, this year. Project Linda was overall well received. But herein also lies a problem: to Razer, it seems, CES is an enormous public focus group of sorts, where it collects feedback rather than showcases what’s next in store. This creates uncertainty for third-party partners who will want to see an equal commitment rather than a parade of prototype show ponies from a gaming hardware marketing firm. Nevertheless, Razer continues to push the envelop and garner consumer interest, indicating that competitors should perhaps emulate at least some of Razer’s operational agility.

Nvidia upgrades PC gaming 

Different from Apple and Samsung, who are both in hot pursuit of just the high-end smartphone market (seeing no problem charging $1,000 for a phone), NVIDIA is seemingly looking at both ends. On the bottom end there’s its streaming service, GeForce Now , that allows you to play games at high performance even if all you have is a crappy $200 laptop or that brick monster that was handed to you by the IT folks at corporate. (BTW, the PC and Shield versions are different.) It’s a work-in-progress, to be sure, but what bugs me is the counter-intuitive price point: at CES last year Nvidia talked about charging $25 for 20 hours of its service. That seems expensive for the lower-end of the consumer market and suggests we might be hearing about a subscription service at some point.

The updated Shield is a beautiful little box that offers a range of content and functionality and makes smart TVs immediately dumber. Better to keep the box outside of the screen. Tricky part will be the price point between $160 and $200 depending on functionality compared to offerings like Roku which cost only $40 and offers roughly the same video library.

Finally the Big Format Game Displays are gorgeous. In porting Destiny 2 to PC, NVIDIA told me they worked closely with Activision Blizzard in optimizing the graphics and overall experience. And it shows. However, the price tag of around $4k puts this at the highest of high-end.

Combined these different components are clearly aimed at the top of the market which makes it a lot riskier given the generally lower end specs (and purchasing power) of the global PC gamer market. What made expensive Apple phones sell was content (complimentary assets) such as music, video, and games. To pull off a similar feat, Nvidia will also have to work hard on its content relationships and in the truest sense become a platform that content providers simply cannot ignore. For me that part is still lacking.

What this year’s CES tells me about the future

Walking through the madness of CES, I’m constantly reminded of the increasingly lower barriers to entry when it comes to designing and manufacturing consumer electronics-based experiences and functionalities. Sure, it’s cool to have a Chinese company make Optimus Prime bluetooth speakers. But why not optimize your supply chain and take a larger piece of that process in-house?

Against a backdrop of industry consolidation and harder to reach audiences, I anticipate especially media firms that own valuable IP or have a strong market position to start vertically integrating the pursuit of innovative experiences. Earlier this year we already saw the Lenovo/Disney AR Star Wars Lightsaber which uses an augmented reality headset. Although arguably a single-purpose application, its $200 price point made it a hot ticket for the fans. But its true value lies deeper. Most of what we usually see is electronics with a license attached to it. That is going to change as IP holders take control of their own supply chain in an effort to become more agile and allow for amore aggressive exploration of experiences beyond the standard TV screen in lieu of licensing.

Particularly with emergent technologies like AR it is now increasingly possible to blur the lines between the worlds of the silver screen, story-telling, and interactivity. But to do that well means disintermediation rather than expanding an existing licensing effort. Disney has already committed itself to this strategy in streaming video, and I expect to see a similar development in its pursuits around interactive (think BAMTech). Similarly, traditional sports clubs and leagues have started to explore esports and other avenues that build on their strengths to reinvigorate viewership and audience loyalty. In the years to come the meaning of digitalization in entertainment will exceed the notion of merely wider distribution and start to facilitate key business model innovations that were previously unsustainable.