Day two of the Consumer Electronics Show, weather has remained fine and amenable to the conference grind. Traffic has worsened though the transportation backlog resulting from the NE storm has abated somewhat and, while some are delayed, most attendees are making it to Sin City for the start of the show proper. 

1. PlayStation Now: cloud gaming promise for buoyant PlayStation platform

PlayStation announced plans for launch of PlayStation Now: fully streamed remote server (or cloud) provisioned gaming to all PlayStation platforms, Bravia TVs, tablets and smartphones. US beta in January followed by full rollout by the end of summer with global rollout plans to be confirmed in the near future. Rental and subscription have been confirmed as the two charging models. PlayStation recommend a minimum 5MBPS downstream connection for an optimum experience.  

The promise of video streamed games on demand may finally start to be fulfilled. VSGoD services stream games to any connected device with a screen and controller inputs. Because the game is processed remotely it doesn't matter how powerful the hardware is: hence a graphically intense PS4 title is playable on a handset as long as the network connection is good enough. 

PlayStation also confirmed that the service will eventually be extended beyond Sony devices marking the emergence of a digital platform with increasing levels of device agnosticism. Android, iOS and whatever OS compatible PS NOW apps could deliver a PlayStation gaming experience to non-Sony devices. The potential addressable market, particularly when we include handsets, is at a completely different scale to what PlayStation has had to work with in the past. 

This was announced at the same time as confirmation that PlayStation 4 had sold through 4.2m units as at 28 December 2013, beating Xbox One by around 1m units confirming our view that the cheaper price and graphical superiority would resonate with consumers, despite a worse launch line up of games. PS4 has now outsold Nintendo's Wii U on an LTD basis, confirming an existential crisis for Nintendo in home consoles. Together Xbox One and PS4 have sold through over 7.2m units since November in a limited number of launch territories (neither has launched in JP yet), an excellent start to a new generation many believe may be the last for dedicated home console hardware. 

It's all a Stream

- At a stroke all Sony connectable screen based devices have access to a games catalogue spanning three home console generations, two handhelds and an Android based PS Mobile library. 

- Bravia smart TVs become games consoles. Handsets and tablets can suddenly play games with graphics significantly better than those they can process on the device. Once console only exclusives are playable on PC based laptops. 

- the technology works: graphically intense showcase God of War 3 looked and played well in a demo on a 60 inch Bravia. Only during particularly fast pans could one detect some minor judder and this would probably not be noticeable to a layman who wasn't looking for some indication of flaws in the stream. 

- PlayStation's huge back catalogue of games is one of the broadest, largest and finest games catalogues available. PlayStation now has a new way of monetising this catalogue. We expect there to be some negative impact on pre-owned games sales as gamers move to streaming catalogue titles instead of buying a second hand disc. 

- streaming games demos means there is no need to wait for large downloads for demos which take time and cost significantly more than streaming the same demo. 

- backwards compatibility can now be enabled by VSGoD rather than in silicon. 

Like the Cat that got the Stream

- we expect this will be additive to retail sales (both packaged and digital) for some time yet. Spending on streaming will cannibalise retail pre-owned sales to a mild to moderate level however retail pre-owned will continue to thrive as it is a distinct consumer experience. Whether it will increase overall spending on catalogue games is an interesting question: initially we suspect not but that spending will shift from retail pre-owned and catalogue sales to streaming leaving overall market size at around the same levels. Obviously as non-Sony devices are enabled the long term potential for spending growth is significant. 

- we wonder whether fixed and mobile networks can handle the demands of fully streamed gaming. Headline speed of 5MBPS isn't too demanding in many territories (it will be an issue in some) but bandwidth caps will be an issue. Certainly using a mobile network to access PS NOW could be problematic on many levels for a few years yet. PlayStation may want to explore connectivity bundled with PS NOW subs in order to drive subscriber growth. 

We will revisit our VSGoD forecasts in the light of this announcement: backing by a major platform owner is a significant fillip for the distribution method. 

2. Cloudy with a touch of TV

Sony also announced plans to launch a subscription based OTT TV service (aka virtual MSO) in the US market, combining linear TV and on-demand services such as Netflix. Details were scant though they did confirm they would begin testing the service this year in the US. 

Veni, Vidi, OTT

- Sony has a large installed base of addressable devices to target across PlayStation, Bravia TVs, Vaio laptops, handsets and tablets so might not face similar initial market volume challenges which spooked Intel's Oncue initiative (reportedly close to being sold to Verizon who might well compete with Sony in this nascent space). 

OTT-eetering

- good content is expensive and outside a deal with Viacom precious little is known about Sony's content relationships. What we do now is that content owners will not lower the price for a new entrant: Sony will have to sign some big cheques and guarantee some enormous minimum payments to secure the quality of TV content which is necessary to drive subscription growth. 

- the competition for premium TV and video subscriptions in the US is already intense. Getting a new service to scale and grow fast enough to not sustain huge losses resulting from payment guarantees to content owners will be challenging if not impossible. Sony has spent some years sustaining significant group wide losses which were relatively traumatic: does it really want to dive headlong into a business which could repeat this process?

We expect premium OTT TV subscription services to become a significant segment of OTT spending over the next five years and our latest OTT forecast, available at

http://www.strategyanalytics.com/default.aspx?mod=saservice&a0=20&m=5#1

reflects this view. Our forecasts will remain unchanged providing two to three providers launch in the US alongside Sony in 2014.

3. Viva Conviva

Conviva is cloud based technology which enables online video providers to optimise stream delivery and quality. Conviva code is embedded in apps provided by services such as ESPN and HBO. This enables realtime reporting of a dizzying array of video performance metrics such as bitrate, resolution, video protocol, device, view time, player version etc etc. This data is aggregated and used by Conviva to optimise video delivery at a huge scale meaning Conviva algorithms will reroute stream delivery across the public Internet depending on whether a given CDN's performance is dipping or will recommend delivery at a different bitrate in order to optimise quality across millions of streams, amongst a host of potential actions to improve the quality of what the audience sees on the screen. 

Convivial

- Conviva's scale, with much runway for growth remaining, is impressive. Conviva optimises 4b streams per month across 1.6b devices. This yields a huge amount of data to inform Conviva's algorithms to further optimise video delivery. 

- Conviva is agnostic: it doesn't care about devices, OSs or competitive considerations meaning it works with everyone and hence has a uniquely broad view of online video delivery. 

- Conviva has highlighted numerous additional applications for the huge and valuable volume of data it collects (which I won't share to spare their blushes): this is a firm with significant runway for growth territorially, potential new clients and for new product development. 

I still need Convi-vincing (sorry)

- I'm struggling to think of a negative point. Maybe someone will acquire them and screw things up. Maybe there will be a zombie apocalypse. Let's cross our fingers. 

Onto day three, we will keep you updated with what we think are the interesting media related developments from the show.