2. Copyright © 2007 Consumer Electronics Association Tim Herbert Sr. Director, Market Research Consumer Electronics Association therbert@ce.org Making Sense of Our Brave New World 5 Trends in Consumer Technologies Devices Software Packaged Content DRM Distribution DIY Content Networks Platforms Services

3. Copyright © 2007 Consumer Electronics Association Point A Points B, C, D…

4. Copyright © 2007 Consumer Electronics Association It Goes to Eleven Phenomenon Drives Everything Faster, smaller, clearer, greater capacity, cheaper, etc. 1 Enriched Connections Networks (home, cloud, sneaker, or social) offer greater utility 3 Distribution Redefined New methods, ideas and models better connect consumers & content 4 More Displays, More Options Number of screens in the home/out of the home continues to expand 2 Empowerment | Personalization Accelerates Devices, tools, and information further empower consumers to work and be entertained when, where and how they want, while allowing companies to better target their audiences 5 5 Trends to Watch

5. Copyright © 2007 Consumer Electronics Association For a number of reasons, it is tough to predict exactly what products and services will emerge, but it is safe to assume there will be plenty of product improvements and innovations at the margin. It Goes to Eleven Phenomenon As usual, consumer electronics products will get smaller, faster, clearer, lighter, more efficient, increased capacity, longer runtime, higher resolution, more reliable and larger screens, while getting less expensive. 1

6. Copyright © 2007 Consumer Electronics Association A Brief History of Time 2001 19682007 20061991199519901930 9.7 CE products per household 25 CE products per household Year when product reached ~25% household penetration

7. Copyright © 2007 Consumer Electronics Association More Displays, More Options 45%32% 28%5%5%12%1% all | 21% DM10%-3%5%5% 2 Google Gas Pump Display?

8. Copyright © 2007 Consumer Electronics Association A Closer Look at Television e – estimated, p - projected LCD = 18.5 million units shipped in 07 Digital Displays | Millions of units 46% decline in prices HDTV penetration rate ~32%

9. Copyright © 2007 Consumer Electronics Association Enriched Connections 3 Broadband = 51%, but many newbies 30% have a wired or wireless home network Home Theater = 26% Wide area connections (WiMax, WiFi/Hotspots, Cell, Broadband, SlingMedia) Local area connections (Ethernet, WiFi, HDMI) Personal networks (RF, Bluetooth, OE integration) Connecting services (VOIP, vlogs, blogs, social networks)

10. Copyright © 2007 Consumer Electronics Association Desired Activities Using Home TV Share Interact Personalize Explore Connect Control

11. Copyright © 2007 Consumer Electronics Association Video Content Watched on a PC

12. Copyright © 2007 Consumer Electronics Association Distribution Redefined 4

13. Copyright © 2007 Consumer Electronics Association Sources of PC Video 10% have ripped DVD content –Including home videos 16% have burned digital videos to DVD YouTube: 206 million unique visitors 2.9 billion downloads through iTunes

14. Copyright © 2007 Consumer Electronics Association Seeking a Change? Content Distribution MethodCurrentPreferredDifference Physically move content50%25%-25% Centrally stored content5%23%18% Place shifting device5%13%8% Movie copies of content10%5%-5% Use network9%5%-4% Physically move device21%4%-17% Remotely stored contentNA1%NA Other2%1%-1% None31%24%-7%

15. Copyright © 2007 Consumer Electronics Association Fewer restrictions with physical media Afraid something may happen to the digital file Physical copy easier to share with friends/family Minimal hassle factor Like in-person shopping experience Like to display collection of DVDs or CDs Or, Does Physical Media Still Appeal? Reasons for Preferring Physical CDs or DVDs

16. Copyright © 2007 Consumer Electronics Association Today, Video Entertainment = Home Location Percent of Users Percent of Time Home97%75% Friends/Families Home31%8% Movie Theater30%6% Work12%4% In Car9%2% Public Transportation8%2% School4%1% At the Gym4%1% Walking Around3%1% Other1%0% Total199%100%

17. Copyright © 2007 Consumer Electronics Association Tomorrow, Entertainment = Home + X? 34% say portability of content important/very important 27% interested/very interested in media server for in-home distribution 86% say picture quality important/very important; 79% say price; 73% say ease of accessing

18. Copyright © 2007 Consumer Electronics Association Empowerment | Personalization 5 10% 25% DVR Penetration Mid-year 2005 Mid-year 2007

19. Copyright © 2007 Consumer Electronics Association Neutral Negative Positive 30% of HDTV owner sports fans agree or strongly agree with the statement companies that advertise in high- definition are more tech savvy. Perception of Companies That Advertise in High Definition

20. Copyright © 2007 Consumer Electronics Association It Goes to Eleven Phenomenon Drives Everything Faster, smaller, clearer, greater capacity, cheaper, etc. 1 Enriched Connections Networks (home, cloud, sneaker, or social) offer greater utility 3 Distribution Redefined New methods, ideas and models better connect consumers & content 4 More Displays, More Options Number of screens in the home/out of the home continues to expand 2 5 Trends to Watch Empowerment | Personalization Accelerates Devices, tools, and information further empower consumers to work and be entertained when, where and how they want, while allowing companies to better target their audiences 5

21. Copyright © 2007 Consumer Electronics Association Tim Herbert Sr. Director, Market Research Consumer Electronics Association therbert@ce.org Thank You