Technology, Media & Telecommunications Predictions 2014 Middle East Contents Foreword 2 Technology 5 The $750 billion converged living room: a plateau approaches 6 Wearables: the eyes have it 10 One became many: the tablet market stratifies 17 Massive Open Online Courses (MOOCs): not distruptive yet, but the future looks bright 20 eVisits: the 21st century housecall 29 SME adoption of ICT services: catching up but still a long road ahead… 36 Media 41 Doubling up on pay-TV 42 Television measurement: for better and worse 48 Broadcast sports rights: premium plus 50 Performance rights lift recorded music revenues 56 Telecommunications 59 Short messaging services versus instant messaging: value versus volume 60 Phablets are not a phad 64 The smartphone generation gap: over-55? There’s no app for that 67 ‘Ruggedized’ data devices at $250: reinventing the business case for mobile field force 70 Recent Deloitte thought leadership 72 Contacts at Deloitte Touche Tohmatsu Limited (DTTL) and its member firms 73 Deloitte in the Middle East 74 Endnotes 75 Technology, Media & Telecommunications Predictions 2014 | Middle East 1 Foreword Welcome to the 2014 edition of Deloitte’s predictions Smartphone and tablet vendors are emphasizing for the technology, media and telecommunications ruggedness as a key differentiator, which will make (TMT) sectors. the cracked screen even less common in 2014. This focus also has the benefit of making consumer TMT Predictions’ objective is to identify critical inflection devices increasingly appropriate for use in non-office points we believe should inform industry strategic environments, and in 2014 we expect a rugged field- thinking, and to explain how we think these will force device will cost as little as $250. manifest over the next 12-18 months. Our perspectives are built around hundreds of discussions with industry New device form factors are expected to be launched executives, analysts and commentators, along with tens in 2014, with wearable computers being one of the of thousands of consumer interviews. Our predictions most talked-about categories. We predict sales of smart are also tested with clients, industry analysts and glasses, watches and wristbands will reach 10 million conference attendees in the months that lead to the units in total this year, and will generate about $3 billion predictions. in revenue; significant, but modest when compared to revenues from devices in the converged living room. While the Global Predictions are currently in their 13th edition, this year for the second time, Deloitte has By contrast, revenue in the low billions is very significant launched a version of the predictions with specific for the recorded music industry, which has seen relevance to the Middle East region. falling revenues over most of the last two decades. In 2014, we foresee one component of recorded music, We would also like to express, once again, our gratitude performance rights fees, which are paid for use of to the Dubai Media City (DMC) for its support in the music in public, to reach $1 billion for the first time launch of the TMT Predictions in the Middle East for the ever. This contrasts with the $25 billion broadcast rights second year. The Predictions are a part of the DMC’s for premium sports (a 14 percent increase on 2013 untiring commitment to support research and study globally and an even greater 15-20 percent increase in into the future of the sector. As in each year that we the Middle East), or the $100 billion forecast for text have published a set of predictions, the core drivers messaging services. of disruption in the sector remain the same: processor speed, connectivity and storage. As is common in the TMT market, volume does not always equal value. While text messages will only For the past decade, these three drivers have enabled represent about a third of all messages sent from mobile massive advances in the utility, ubiquity and spend on phones, they will account for close to 100 percent of connected devices. In 2014, we expect five connected revenues, with mobile instant messaging (MIM) services devices which constitute the converged living room – generating about $2 billion. TVs, PCs, video game consoles, smartphones (including phablets) and tablets – to generate $750 billion in A decade ago, broadband started at 128 Kbit/s. In revenue. 2014 multiple markets will feature speeds of over 100 Mbit/s and higher. The steady growth in bandwidth has Despite launching a mere four years ago, tablets are enabled, and will continue to enable a steady widening already mainstream and approaching maturity, in that of the scope of services than can migrate online. For the category now describes a wide, and widening, example, we expect faster broadband will help move range of capabilities, sizes, user bases and uses. The aspects of healthcare online, with 100 million eVisits largest component in the converged living room group, – online medical interactions – projected to take place smartphones ($375 billion revenue in 2014), are nearing globally in 2014. In the Middle East we foresee the saturation among most age groups, although there is eminent rise in eHealth and the disruptive effects of still a prime opportunity among people older than 55 – mHealth on the region’s health sector. a demographic likely to experience one of the steepest rises in penetration rate this year. 2 The super-fast broadband speeds that are now The focus of our Predictions varies from year-to-year, increasingly available also enable more video to be but one theme appears constant: the impact of TMT on delivered online, which is a key factor behind the our behaviors steadily deepens. In the time it took to tens of millions of homes expected to double up on read this foreword, over 100 million messages will have pay-TV by subscribing to an additional broadband- been sent via smartphones around the world. delivered service. As a portion of viewing of TV migrates online, measurement has to follow to ensure viewing, We welcome your feedback. We remind readers that particularly among younger viewers is captured. This our aim with the Predictions is to catalyze discussions year, viewing data for countries representing over around significant developments in the dynamic TMT 100 million viewers should start to incorporate TV sector. We provide a view on what we think will consumption on laptops, tablets and smartphones. happen, what are the most likely scenarios as a result and what the implications are for various companies. Video-on-demand services are predominantly offered We do not however presume that ours is the last word in fast broadband markets, however service is also on any given topic: our intent is to spark the debate. possible in regions currently lacking extensive broadband infrastructure. The Middle East is at a key point as fibre- We wish you all the best for 2014 and trust you and to-the-home (FTTH) broadband becomes implemented your colleagues find this year’s Predictions a useful across the GCC. Satellites can relay movies and TV stimulant for your strategic thinking and market actions programs onto the ever larger hard drives of digital for the year ahead and beyond. video recorders (DVRs), enabling providers to offer over a thousand hours of on-demand programming. Most of our predictions focus on the next 18 months. However one topic, the emergence of Massive Open Online Courses (MOOCs) merits both a near-term assessment (modest adoption) as well as a longer-term view (significant take-up). Santino Saguto Consulting Partner and TMT Leader for Middle East Most fundamentally to the development of the Middle Deloitte & Touche (M.E.) East, we see small-to-medium enterprises (SMEs) in the region expanding their investment in information and communication technologies (ICT). As the region’s SMEs acquire and build up their web presence, e-commerce and cloud computing capabilities, they will stimulate the region’s economic growth going forward. As in each year that we have published a set of predictions, the core drivers of disruption in the sector remain the same: processor speed, connectivity and storage. Technology, Media & Telecommunications Predictions 2014 | Middle East 3 4 Technology The $750 billion converged living room: a plateau approaches 6 Wearables: the eyes have it 10 One became many: the tablet market stratifies 17 Massive Open Online Courses (MOOCs): not disruptive yet, but the future looks bright 20 eVisits: the 21st century housecall 29 SME adoption of ICT services: catching up but still a long road ahead… 36 Technology, Media & Telecommunications Predictions 2014 | Middle East 5 The $750 billion converged living room: a plateau approaches Deloitte predicts that global sales of smartphones, These five categories of consumer electronics devices are tablets, PCs, TV sets and video game consoles will closely related in that they are currently the five largest exceed $750 billion in 2014, up $50 billion from 2013 by dollar value, are all multi-functional, and each plays and almost double the 2007 total (see Figure 1)1. a key role in entertainment and media consumption. Combined global sales of these five products have Also, all five of these devices have benefited from grown remarkably since 2003, with trailing five-year common technology such as processors and screens compound annual growth (CAGR) of 6-12 percent (except for video game consoles, all of the devices make per year over a decade (see Figure 2) (although use of high resolution LCD technology)3. In contrast, year-over-year growth has fluctuated from a high other large segments such as portable video games of 27 percent in 2010 to a low of -3 percent in the devices, eReaders and feature phones tend to focus on recession year of 2009). In contrast, the growth rate for a single function and thus have a narrower impact on the global semiconductor industry was only 3.1 percent general media consumption and entertainment.