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Connected Homes February 2019 Viewpoints

Technology Analyst: Michael Gold

Virtual Exercise Classes

By Christian Feest
Feest is a technology analyst with Strategic Business Insights.

Why is this topic significant?

Connected home fitness equipment has given rise to the new and lucrative industry of virtual exercise classes and fitness coaching.

Description

Various rowing and bicycling machines have supported virtual races during recent years, but new applications are creating new business models. Other equipment supports downloading new programs and uploading performance data for comparison against performance data of other users online. However, several companies are using the equipment to facilitate real-time virtual exercise classes and coaching.

Peloton is perhaps the biggest success story in the nascent field of virtual exercise classes. In August 2018, the company's series F funding round raised $550 million, taking the company to a valuation of $4.15 billion. Peloton's product range includes a stationary bicycle ($1,995) and a treadmill ($3,995), both of which enable the user to take part in group exercise classes from home. As well as charging for the equipment, Peloton charges a $39 monthly subscription fee. This subscription fee allows users to take part in instructor-led exercise classes that stream in real time to a screen on the device. The screen can also display the user's performance data as well as a leaderboard showing performance of the other participants in the class. Interaction goes both ways: The instructor can also acknowledge users who are working particularly hard and provide encouragement to users who are struggling.

Other start-ups are looking to replicate this subscription-based live-coaching business model. Mirror, for example, is a wall-mounted display with a camera and speakers that costs $1,495 plus a $39 monthly subscription. Similarly, Tonal is a wall-mounted display that includes magnetic weights and costs $2,995 plus a $49 monthly subscription.

Implications

The main selling point of virtual exercise classes bundled with fitness equipment is that the services provide the social and motivational aspects of instructor-led group exercise classes from the comfort and convenience of home. However, whether these benefits will be enough to persuade gym goers to exercise at home rather than at a gym or convince people who lack the time or motivation to visit a gym to subscribe to these services—especially given their high-end price points—remains a question.

If prices drop and virtual exercise classes catch on to become a mainstream market, network effects could play an important role. The social aspect is a major selling point of virtual exercise classes, and thus the more customers who use a particular service, the more value it is likely to provide users. Fitness enthusiasts are likely to want to exercise with and compare their performance against that of their friends. Conversely, customers will be less likely to join a network if classes have few participants. These network effects could result in a small handful of companies dominating the sector.

Impacts/Disruptions

The impact of virtual exercise classes will be felt strongly by established exercise-equipment manufacturers. For example, Icon Health and Fitness, one of the world's largest manufacturers of exercise equipment, offers a degree of connectivity with its iFit subsidiary, but iFit is far behind Peloton in live-streamed exercise classes.

Virtual exercise classes could also create opportunities in areas such as user interfaces and virtual reality. Future virtual exercise classes could make use of developments in these areas to become more immersive and provide a greater level of feedback and interaction for users.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Low

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 5 Years

Opportunities in the following industry areas:

Virtual reality, social media, health, fitness

Relevant to the following Explorer Technology Areas:

New Players in Cloud Gaming

By Christian Feest
Feest is a technology analyst with Strategic Business Insights.

Why is this topic significant?

Cloud gaming is gaining commercial traction, with large technology companies such as Google and Microsoft launching their own cloud-gaming platforms.

Description

Cloud-gaming platforms operate by transmitting controller inputs to remote servers for processing and then transmitting compressed video outputs of these computations back to the player's screen. Technological advances have mitigated many of the challenges associated with this architecture, and cloud gaming is attracting investment from major technology companies. In October 2018, Google announced its cloud-gaming platform: Project Stream, and Microsoft announced its own cloud-gaming platform: Project xCloud. These new competitors join more established cloud-gaming platforms such as Sony's PlayStation Now and NVIDIA's GeForce Now.

An initial demonstration of Project Stream ran from 5 October 2018 to 15 January 2019. A limited number of participants were able to play Assassin's Creed Odyssey over Google's new cloud-gaming platform. System requirements are modest: download rates of 25 megabits per second (Mbit/s) or greater and a computer with Google's Chrome browser. Early reviews indicate that Project Stream works as it should, with the latency between controller inputs and their effects on screen not hampering gameplay noticeably.

Microsoft's offering—Project xCloud—is due to begin public trials in 2019 before expanding to a larger audience. A post from Microsoft in October 2018 reported that the test version of Project xCloud was running at 10 Mbit/s. This low bit rate could enable users to stream computationally intensive games over 4G cell-phone networks.

As well as these confirmed projects, job advertisements posted by Amazon have fueled speculation that Amazon is also developing a cloud-gaming platform. With extensive experience in cloud computing from Amazon Web Services, Amazon would be well placed to join Google and Microsoft by entering the cloud-gaming market in the near future.

Implications

One of the big advantages of cloud-based gaming platforms is that users can, in theory, play games on any device. The player's own hardware capabilities become less important than those of the cloud-gaming service provider, so that a user can play a computationally intensive game on a fairly basic device, such as a cell phone. This capability could lead to consumers' upgrading their own hardware less frequently, instead opting to spend money on subscriptions.

The range of devices and operating systems that support each cloud-gaming platform could prove an important factor in attracting subscribers, because consumers are likely to opt for a gaming service that works with their existing devices rather than spend extra for new hardware. Google and Microsoft are in a strong position in this regard: Chrome can install on a wide range of devices and operating systems, and Microsoft is developing Project xCloud to work across PCs, consoles, and mobile devices.

Impacts/Disruptions

The disruptive potential of the cloud differs between genres of gaming. In comparison with localized alternatives, games that require fast reactions, such as multiplayer first-person shooters, will suffer negative effects from the increased latency of cloud-gaming platforms. If cloud gaming becomes sufficiently popular, commercial pressures to reduce latency could affect the architecture of communications networks. For example, cloud service providers could be pressured to locate servers closer to end-users, resulting in a more decentralized architecture.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 5 Years

Opportunities in the following industry areas:

Cloud computing, gaming, artificial intelligence, communications

Relevant to the following Explorer Technology Areas: