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Connected Homes December 2019/January 2020 Viewpoints

Technology Analyst: Christian Feest

2019: The Year in Review

The year 2019 saw a continuation of the strong growth the connected-home market has enjoyed in recent years. In the 12 months to end 2019, revenues for the connected-home market in the United States grew by about 20%, in comparison with revenue growth in 2018, as more consumers adopted connected devices in their homes and manufacturers increased the range of available connected devices on offer.

Yet despite this growth, the typical connected home of 2019 is still a long way from the ubiquitous, futuristic, and fully integrated ecosystem that many people in the industry envisage—at least for the vast majority of consumers. Smart speakers, connected security systems, and video streaming have already achieved a high degree of market penetration, but most other connected-home devices are far slower to see widespread adoption. Nevertheless, several developments in 2019—many of which happened behind the scenes—will pave the way for further advances in connected homes. For example, the next-generation Wi-Fi standard, which started appearing in 2019 devices, will enable more connected devices in the home without suffering performance degradation. Additional data sources, such as the health information available to several Alexa skills as of April 2019, will increase the variety of functions virtual assistants can perform. Paragraphs below detail some of these and other top connected-homes stories of 2019.

Smart Speakers and Smart Displays

Smart speakers have exploded in popularity in recent years to become one of the most popular connected-home devices, and the market for smart speakers continued its impressive growth rate in 2019. Analysts at Canalys reported expectations that the global installed base of smart speakers would increase to 207.9 million by the end of 2019—up 82.4% from 114 million in 2018. Much of this growth comes from Eastern markets, with China, South Korea, and Japan all likely to more than double the total number of installed smart speakers in 2019. In Western markets, Amazon retained its position as the dominant force in smart speakers, with Alexa-powered devices accounting for 70% of the 76 million installed smart speakers in the United States, for example. Google-powered devices, the next closest rival, account for 25% of the total installed smart speakers in the United States.

The year 2019 also saw a form of device closely related to smart speakers gain in popularity: smart displays. Several large companies—including Amazon, Google, and new entrant Facebook—released new devices toward the end of 2018, and smart display sales in 2019 were strong. Although smart displays are still less common than ordinary smart speakers, the emerging smart display market grew at a significantly faster rate in 2019 than the smart speaker market did.

Back-End Developments

In April 2019, Amazon added the first Alexa skills that enable the virtual assistant to access protected health information (subject to the US Health Insurance Portability and Accountability Act 1996). Access to such health information expands the health-care applications of virtual assistants—for example, users can ask, "Alexa, what was my last blood sugar reading?" But beyond seeing such incremental advances, 2019 saw no breakthrough advances in virtual-assistant capabilities. One candidate breakthrough technology is Google's Duplex: an AI system that generates and responds to natural language in order to accomplish tasks over the phone. Google expanded both Duplex's geographic availability in 2019—in 48 US states and New Zealand as of writing—and the range of smartphones that support Duplex, but Google did not make Duplex available on its range of smart speakers in 2019.

Elsewhere at Google, the company took further steps to integrate Nest (formerly an independent subsidiary of Google's parent company, Alphabet) with Google Home, with the ultimate view to marketing all Google connected-home products under the Google Nest brand. As part of the merging of these two brands, Google discontinued Works With Nest—a program that enabled third-party manufacturers to integrate their devices and services with the Nest ecosystem—in August 2019. In place of Works With Nest, Google will use the Works With Google Assistant program. However, Google does not guarantee support for every device that was on the old Works With Nest program, which potentially leaves some consumers and possibly even some manufacturers stuck with what are now useless devices.

Infrastructure and Connectivity

Although several operators have launched 5G networks since late 2018, 5G mobile coverage is still very limited, and 5G home broadband services are even more so. As of November 2019, Verizon offers its 5G Ultra Wideband in parts of 18 US cities, AT&T offers mobile 5G in parts of 21 US cities, and T-Mobile offers mobile 5G in parts of 6 US cities. This limited coverage has had little if any impact on the connected-home market so far, as the areas served by 5G are typically also served by high-speed wired broadband anyway. Further, early adopters of 5G broadband are almost exclusively businesses.

In September 2019, the Wi-Fi alliance began certifying the first Wi-Fi 6–compliant devices, which now include access points such as the Ruckus R750 and the Samsung Galaxy Note10 smartphone. In addition to enabling higher data rates and lower latencies, Wi-Fi 6 will enable users to connect many more devices to a router and, further, potentially reduce power demands of connected devices—features likely to provide significant utility for connected homes in forthcoming years. However, 2019 is still too early for Wi-Fi 6 to have disrupted the connected-home market to anywhere near its full potential, and most existing devices are unable to benefit from Wi-Fi 6.

Entertainment

The year 2019 could prove to be the year in which Netflix began to lose its dominance of the TV-streaming market, with several large companies launching competing services. In November 2019, both Apple and Disney launched their own streaming services: Apple TV Plus and Disney+, respectively. Also in 2019, NBCUniversal announced that its Peacock TV streaming service is going live in April 2020, and WarnerMedia announced that its HBO Max TV streaming service is going live in May 2020.

Elsewhere in home entertainment, 2019 saw Google and Microsoft make progress with their respective cloud-gaming platforms. After a successful trial of a single game on its cloud-gaming service (then it was Project Stream) that began in late 2018, Google went live with Stadia in November 2019. At launch, players could play 22 games on Stadia, with more games added to the platform since then. In October 2019, Microsoft began testing its own cloud-gaming platform—Project xCloud—which enables players to play more than 50 games at present.

Look for These Developments in 2020

  • The year 2020 could see Google formally announce an all-in-one connected-home subscription package to rival Amazon Prime. Google has already expanded the benefits of its cloud-storage platform, Google One, and speculation exists that Google will expand it further perhaps to include music streaming, premium video streaming, and online shopping discounts.
  • Wi-Fi Certified 6 will become a selling point for many new devices, including computers, smartphones, and routers. Wi-Fi Certified 6 devices will slowly proliferate throughout 2020, and connected-home device manufacturers will likely develop sensors and other low-power devices that take advantage of Wi-Fi 6 power-saving features such as target wake time.
  • Both the hardware and software already exist to enable greater personalization within the connected home, and 2020 could see applications that utilize these abilities. Some smart home security cameras already utilize facial recognition and artificial intelligence to, for example, keep track of who has entered a home, but other devices with cameras—such as smart displays—could serve similar functions within certain rooms to automatically personalize connected device settings to people who are present.
  • Although the major manufacturers avoided any major privacy scandals in 2019, consumers are increasingly conscious of how companies gather and use their personal data. Negative headlines (especially on the scale of the Facebook–Cambridge Analytica scandal) could slow the connected-home market's growth and possibly enable privacy-focused start-ups to gain market share from market leaders. Even without any major scandals, though, expect to see the main players invest in and market the privacy features of their devices and services—such as local processing—in 2020.
  • The year 2020 will likely see several battles play out in gaming. In addition to Google Stadia's and Microsoft's Project xCloud's joining the likes of PlayStation Now and Nvidia's GeForce Now in cloud gaming, several companies are likely to release new gaming consoles. Microsoft has announced it will release its new console—currently, Project Scarlett—in Q4 2020, and rumors suggest Sony will also release a new console—Playstation 5—at about the same time. A further battle will also play out between cloud gaming and such traditional, local-based, alternatives (whether these alternatives be games consoles or PCs) as cloud-gaming-platform operators look to gain market share from them.