Technology, Media & Telecommunications Predictions

Technology, Media & Telecommunications Predictions 2016

Contents Foreword 1 Technology 3 Women in IT jobs: it is about education, but it is also about more than just education 4 Trailing millennials are the pro-PC, not the post-PC, generation 8 Touch commerce: the mobile online checkout gets an express lane 12 Graphene: research now, reap next decade 14 Cognitive technologies enhance enterprise software 17 Media 21 Virtual reality: a billion dollar niche 22 Mobile games: leading, but less lucrative 26 Mobile ad-blockers: saved by the app? 28 The award for stable box office revenues in the face of digital media goes to… 30 US TV: erosion, not implosion 35 European football scores $30 billion 39 eSports: bigger and smaller than you think 42 Telecommunications 45 The dawn of the Gigabit Internet age: every bit counts 46 Used smartphones: the $17 billion market you may never have heard of 50 The rise of the data exclusive 53 VoLTE/VoWiFi: capacity, reach and capability 57 Photo sharing: trillions and rising 59 Endnotes 62 Recent Deloitte thought leadership 78 Contacts at Deloitte Touche Tohmatsu Limited (DTTL) and its member firms 79

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Foreword Welcome to the fifteenth edition of Predictions for the Technology, Media and Telecommunications (TMT) sectors. The last 15 years have been a golden era for innovation: multiple TMT products and services that we now take for granted were niche or non-existent back then. In 2002, homes typically had dial-up Internet access, boxy television sets, wired speakers, standalone digital cameras, shopping catalogues and fixed line telephones. Photos were stored in albums and shelves bulged with CDs and DVDs; LPs had been banished to the attic or sold off. ‘Candy bar’ shaped mobile phones had monochrome screens and were predominantly used to make calls and exchange text messages. Instant messaging, e-mail, e-commerce, maps, search engines, photos, videos and other online services that are now routinely accessed via smartphones were predominantly PC-based at the start of 2002. 3G networks had only just launched commercially, offering speeds of a few hundred kilobits per second. As most homes still had dial-up Internet, it was faster for most people to visit a video rental store, return home, watch the film, and then return it rather than to wait for a file to download. Over the last 15 years, connectivity has become steadily faster, enabling many new categories of service to become mainstream, including a number of current staple applications: search engines, social networks, video-on-demand, e- and m-commerce, app stores and online video games. These new services have driven the growing appeal of digital devices; smartphones and tablets being the two standout devices to have emerged over the period. These new device types have tended to complement rather than usurp existing products. While the past 15 years has witnessed startling change, it has also seen remarkable continuity. Broadcast television, radio, cinema, live entertainment, printed books and in-person meetings remain popular despite multiple digitally- enabled alternatives. 2016 promises to be yet another exciting year for the TMT sector. In this year’s edition we look at a fascinating array of trends, each developing at its own momentum. We look forward to the progress of cognitive technologies in enterprise software, to new approaches in accelerating mobile commerce check-out, and to the progression of graphene. We highlight the continuing strength of demand for the PC – especially among millennials. We welcome the commercial launch of virtual reality, and note the continued growth of both premium sports (with a focus on football in Europe), as well as the emerging eSports sector. We expect mobile should become the biggest games platform in 2016, overtaking console and PC. We observe that the key traditional media of television and cinema should continue to hold their own, even if not growing. We explore the current and near-term impact of ad-blockers on mobile advertising revenues. We discuss key drivers of bandwidth demand including the emergence of Gigabit to the home, trends in photo sharing and a continued rise in data exclusive communicators, as well as the potential impact of the take-up of network-managed voice over data services. Technology, Media & Telecommunications Predictions 2016 1

Finally, we expect the used smartphone market to surpass $17 billion in trade-in value, making it a significant consumer device market in its own right. We hope that you find this year’s set of predictions an interesting read and that they bring a useful dynamic to your discussions. Paul Sallomi Paul Lee Global Technology, Media & Telecommunications Partner, Head of Global TMT Research (TMT) Industry Leader Deloitte Touche Tohmatsu Limited Deloitte Touche Tohmatsu Limited 2

Technology Women in IT jobs: it is about education, but it is also about more than just education 4 Trailing millennials are the pro-PC, not the post-PC, generation 8 Touch commerce: the mobile online checkout gets an express lane 12 Graphene: research now, reap next decade 14 Cognitive technologies enhance enterprise software 17 Technology, Media & Telecommunications Predictions 2016 3

Women in IT jobs: it is about education, but it is also about more than just education Deloitte Global predicts that by end-2016 fewer than The education pipeline 1 25 percent of information technology (IT) jobs in Not every current IT worker has an educational developed countries will be held by women, i.e. women background in computer science or other similar field. 2 working in IT roles (see Figure 1) . That figure is about But in those fields of study, and especially in computer the same as 2015, and may even be down. Lack of science, there are clear problems with gender diversity in gender diversity in IT is both a social and economic the educational pipeline. issue. Global costs may be in the tens of billions of dollars; according to one study, the gender gap in IT Only 18 percent of US university computer science 3 8 costs the UK alone about $4 billion annually . Given that (CS) graduates in 2013 were women . And that was cost, gender parity (roughly 50 percent women in IT down from 1985, when 37 percent of graduates were jobs) seems a reasonable goal over the long term. Why women. UK figures are very similar: in the 2013/14 are the 2016 numbers less than half that goal, and why educational year, only 17.1 percent of computer 9 aren’t they improving faster? science students were women . That is much lower than overall female participation in higher education in Gender imbalance in IT has been recognized as an the UK of 56 percent, and actually down very slightly 4 10 issue since at least 2005 . One might have expected from 17.4 percent in the 2012/13 educational year . some improvement since then, and perhaps even faster The percentage of women enrolled in mathematics, change since 2010, when there was a surge in articles computer and information sciences at universities 5 about women in technology jobs . That has not been and colleges in Canada is higher, at 25 percent in 11 the case. 2014 , but that is down two percent since 2009, 12 when it was over 27 percent . But at the best known For example, in the eight years between 2005 and 2013 computer science school in the country, the University the percentage of women in IT jobs in Sweden fell from of Waterloo, women made up only 13 percent of 2010 23 percent to 22 percent (although the percentage of enrollment in computer science, down from 33 percent women in senior IT roles did rise from 16 to 21 percent). in the late 1980salthough they now have a number of In the US, which has five million IT jobs, the ratio of programs to get more women to enroll, and to retain female IT workers also fell from 25 to 24 percent from 13 them once they are in the program . In Sweden as of 6 2010 to 2014 , with the proportion of women in more 2010, women were 24 percent of computer science senior roles declining three percentage points to 27 14 15 graduates , down from 30 percent in 2000 . percent in 2014. In the UK, with 1.2 million IT posts, the percentage of women in IT jobs increased from 17 7 percent to 18 percent 2010-2015 . In each market, the total number of IT jobs increased by over 20 percent in the last five years. Figure 1: Women as percentage of total IT workforce by country for US, Sweden, Canada and UK 30% 25% 24% 22% 22% 20% 18% 15% 10% 5% 0% US Sweden Canada UK Source: The statistics for the chart above were obtained from government websites or documents. The US data is for 2014, Sweden data is for 2013, Canada data is 2011 and UK data is for April-June 2015. See endnotes for information on sources. 4

But the gender gap in the educational pipeline precedes Retaining. Women in IT roles are 45 percent more university (tertiary) education. Only 18 percent of US likely than men to leave in their first year, according to 25 students taking the Advanced Placement Exam for a 2014 US study . The study found that retention was 16 Computer Science in 2013 were women . Once again, a problem after the first year as well: one in five women UK data is roughly similar: a 2012 survey showed that with a STEM degree is out of the labor force, compared 26 only 17 percent of girls had learned any computer to only one in 10 men with a STEM education . Issues coding in school, about half the level of the 33 percent that may be contributing to this lack of retention include 17 of boys who had coded . And some argue that girls are pay and promotion (see below). A hostile or sexist ‘bro- often steered away from science and math courses in grammer’ culture can also be an issue: in one study, 18 primary school . Other experts go earlier still, stressing 27 percent of women cited discomfort with their work the role parents need to take in encouraging girls environment, either overt or implicit discrimination, as a 27 younger than school age to be interested in science and factor in why they left their IT job . Further, workplace 19 technology . policies not suited to women, whether marathon coding sessions, expectations around not having children Challenges beyond the education pipeline (62 percent of female IT workers don’t have children, Recruiting. According to a 2014 study among UK firms, 28 compared to 57 percent of men ) or lack of childcare half of all companies hiring IT workers stated that only may all play a role. 20 one-in-twenty job applicants were women . Gender- neutral job descriptions are an important first step, Paying and promoting. A US female web developer but may not be sufficient, since the various algorithms makes 79 cents to the dollar men make for the same 29 driving online recruiting advertisements may mean job ; and while female computer and information 21 women do not see the job placement ads . In several systems managers have a narrower gap of 87 cents to 30 studies, researchers found that the software showing the dollar, a pay difference is still prevalent . The single ads for certain senior jobs targeted users tagged as men largest category of IT workers in the US is ‘software nearly six times as often as users labeled as women. developers, applications and systems software’ at over one in four of all IT workers – the pay gap for that Hiring. Hiring more female recruiters may help, but 31 group is 84 cents to the dollar . In the US a quarter will likely be an insufficient step. Various studies from of women with IT roles feel stalled in their careers. In multiple countries show that both men and women 32 India the proportion is much higher, at 45 percent . The are twice as likely to hire a man for an IT job as an number of female CIOs in the UK is 14 percent, and this 22 33 equally qualified woman . That may not necessarily has not changed in the last 10 years ; and a UK survey be conscious sexist behavior: there appears to be a states that 37 percent of women in IT say that they number of unconscious biases at work that prompt have been passed over for promotion because of their even female recruiters to choose male candidates over 34 gender . equally qualified women. There are initiatives to help 23 make people aware of their biases (the process is On the other hand, the issue of senior women in IT roles called ‘unbiasing’) but training and education may only varies significantly by country. In the UK, where partially offset them. Further, men and women in IT 18 percent of the IT workforce is female, the percentage write their CVs in styles that vary by gender, and those of senior roles filled by women is half of that, at nine stylistic differences may be making recruiters less likely percent. In Sweden, 21 percent of IT chiefs are female, 24 to hire women . in line with the 22 percent of the IT workforce that are women. And in the US and Canada, the percentage of IT managers that are women is 2-3 percentage points higher than the percentage of all IT workers who are female. It is unclear why the gender gap for senior roles varies between countries, but it does suggest that cultural factors are playing a role. Technology, Media & Telecommunications Predictions 2016 5

The percentage of women in IT varies significantly Although some of the numbers on gender diversity in by specialization and that variation also varies by IT may appear disappointing, there are also hopeful country. As an example, in the US over 35 percent of signs. At one leading US technology school, computer 39 web developers are female, while only 12 percent of science is now the most popular degree for women . computer network architects are women. Canada has a similar pattern, with web developers at the very high Furthermore, education may not be the gating factor end of the diversity range and computer and network that some think it is. While less than a fifth of US operators and web technicians at the lower end. On computer science graduates were women in 2013, as the other hand, the UK data shows that the percentage of 2014 the proportion of women in tech roles in US of web design and development professionals who companies was 24 percent in 2014, and 27 percent of 40 are female is only slightly higher than the UK average IT managerial roles were held by women . for all IT jobs, likely one of the factors (along with the low number of women in senior IT positions) that And speaking of leadership, there have never been more 41 contributes to the UK’s poor performance on gender senior women in tech , particularly high-profile female 42 diversity in IT roles compared to all the other countries C-suite executives : this is providing leadership, role 35 models and mentors for women and girls considering a mentioned . career in IT. It is important to note that diversity and inclusion are about much more than gender. As an example, ethnicity Another positive is that the IT job categories with the appears to be a significant factor in reaching senior lowest female representation are shrinking over time, levels in leading Silicon Valley tech companies: all of and the more balanced categories are growing43, Hispanics, Asians and blacks are at a disadvantage suggesting that we may be nearing a tipping point to white men or white women at executive levels, in diversity. Further, tech companies are leading the 36 broader IT industry: the US tech companies that released according to a 2015 US study . And of course, industries other than IT suffer from gender gaps for both their gender diversity numbers in 2013 had an average participation and pay. of 30.3 percent female employees, and that number 44 rose in 2014 by 0.15 percent . Women in IT companies Although the focus of this prediction has been on women in IT professions, there is a distinct but related topic of gender diversity within IT companies, specifically at the large American (usually Silicon Valley-based) companies. There are tech companies that 37 currently publish their diversity numbers on an annual basis and they average about 32 percent female employees in 2014. These companies are a key part of the technology sector, likely represent the broader tech company employment picture, and are likely to be an important source of IT jobs for women going forward. But these companies have many workers in many different occupations, not all of which are IT jobs. One sample of six US tech companies showed that although their total workforce was 38 30-39 percent women, the number of women in ‘tech jobs’ was only 10-20 percent . Increasing the gender diversity at these companies is likely an important goal, but only tangentially connected to the larger picture of women in IT jobs. Because of the considerable public spotlight on these companies as bellwethers for women in technology, it seems a reasonable prediction that the gender diversity numbers at high-profile publicly traded companies are likely to rise at a faster rate than for women in IT functions or jobs. Therefore it will be important to recognize that even if some Silicon Valley companies have 50 percent female employees that may not mean that the diversity of women in IT jobs across the US or developed countries in general has improved to the same extent. 6

Bottom line Getting more girls and young women into streams that will lead to careers in IT will likely be difficult. 45 Initiatives are under way to depict more positive female IT role models in the media . But even if real progress is made immediately in improving gender parity in STEM at levels of the educational pipeline, it may take time (possibly decades, in the case of improvements to primary education) for those improvements to translate into IT job parity. Recruiting: firms could use software to screen for job descriptions that use words that are likely to turn 46 away women: major technology companies are already doing this . Another barrier can be tenure- related requirements: given the IT gender gap, requiring 20 years of IT experience shrinks the pool of qualified female candidates enormously. If lengthy tenure is a genuinely necessary requirement for the position, then it is appropriate, otherwise it would be an artificial barrier to hiring women. Hiring: having both men and women as part of the hiring process is likely to help. At one tech 47 company, women who were interviewed only by men were more likely to turn down a job offer . Now that at this company every female candidate meets with at least one woman from the company during the hiring process, more women are being hired. Women are sometimes less likely to promote themselves in interviews, and the same company now gets hiring managers to ask more detailed questions to paint a fuller picture. Retention: the attrition rate for mothers at one tech company was double that for employees as a whole: extending maternity leave from three months to five, and from partial pay to full pay, led to the 48 attrition rate following childbirth falling by half . A number of technology companies are looking at the role of mentoring: having more senior women support more junior IT workers is likely to lead to 49 better retention . Paying and promoting: IT prides itself on being a merit-based field. But gender differences need to be overcome: one company had its employees nominate themselves for promotions, and women were less likely to do so. In response, there are now workshops where women encourage other women to 50 nominate themselves, and they are now being promoted proportionately . The role of government: one possible solution may be for governments to take the lead, and attempt to increase the percentage of women in IT jobs in the public sector. Across all job types, the public sector tends to be more diverse than the private sector. According to the OECD (Organization for Economic Co-operation and Development), women make up 45 percent of the total employment across all industries in 2013, but 58 percent of public sector employment, and the figure is 70 percent 51 in Sweden . Government leadership in IT employment of women does seem to work partially. Public sector IT jobs 52 are 15 percent of all IT jobs in Sweden . While 22 percent of Swedish IT jobs are held by women, for public sector IT workers it is a third, which suggests that government initiatives can at least help narrow the tech gender gap. On the other hand, that also means that private sector IT employment for women in Sweden is only a fifth. It seems likely that this dynamic also holds true in other developed countries: the public sector IT gender disparity is less pronounced than the national averages, and the 53 private sector is therefore worse (by some amount) than the national average . Technology, Media & Telecommunications Predictions 2016 7

Trailing millennials are the pro-PC, not the post-PC generation Deloitte Global predicts that trailing millennials (18-24 The large screens, keyboards and trackpads or mice years old) are likely to be the most pro-PC of all age of the laptop provide an ease of input and display groups in 2016. They are very unlikely to be post-PC and that is superior to even the largest phablet. It appears abandon personal computers (any operating system). millennials (and other age groups) are more than willing This age group is the smartphone generation, but its to have a laptop open in front of them and hold a ownership, intent to purchase and use of PCs will likely smartphone in their other hand. be higher than any other age group in 2016. When it comes to substitution, it appears to be the large According to research by Deloitte member firms on tablet (nine inches or larger) that is being partly passed average over 85 percent of trailing millennials in over by 18-24 year-olds. In every country surveyed, 13 developed countries had access to a laptop in access to laptops for trailing millennials was between 54 2015 . This is a little lower than the 89 percent who 38 and 60 percentage points more than access to large have access to a smartphone in these markets (see tablets, and averaged 52 percentage points higher 55 Figure 2) . In most countries access to smartphones across all 13 countries. is slightly higher, but in the US, France, and Canada more 18-24 year-olds have access to a laptop than Trailing millennials are actively interested in acquiring a smartphone. Further, laptop access for the trailing new laptop models. Purchase intent may be at a lower millennial demographic was either highest or second level than for smartphones, along with every other highest of the six age groups in the survey in all but two device, but laptops are still the second-most desired markets, Norway and Finland. Access to a laptop among device in every country surveyed. About a third of 18-24 trailing millennials was seven percent higher than for the year-olds in developed countries surveyed planned to population as a whole, and in some countries was much buy a new smartphone in the next 12 months, and higher than the average: 17 percent in the US, a quarter intended to buy a new laptop (see Figure 3). 15 percent in Canada, 12 percent in Australia and 10 percent in France. That number is roughly double the percentage of other devices one might expect a post-PC generation to be It appears that 18-24 year-olds consider smartphones thinking about buying, such as tablets, wearables or and PCs as complements, not substitutes. This may be portable games players. Once again, the intent-to- partly because laptops are more affordable than they purchase data for laptops for millennials was higher once were, with many sub-$500 devices available. than for any other age group in 12 of the 13 countries Trailing millennials in developed countries may not have surveyed, with Norway as the only exception. to choose between a PC and a smartphone. Figure 2: Laptop and smartphone adoption among 18-24 year-olds Q: Which of the following devices do you own or have ready access to? 100% 80% 60% 40% 20% 0% Average Australia Canada Finland France Germany Italy Japan Netherlands Norway Singapore Spain UK US Laptop Smartphone Weighted base: Respondents aged 18-24: Australia (265), Canada (253), Finland (120), France (242), Germany (212), Italy (193), Japan (185), Netherlands (253), Norway (130), Singapore (327), Spain (193), UK (510), US (279) Source: Deloitte member firms’ Global Mobile Consumer Survey, developed countries, May-July 2015 8

Figure 3: Intent to purchase a smartphone or laptop within the next 12 months among 18-24 year-olds Q: Which of the following devices are you likely to buy in the next 12 months? 60% 50% 40% 30% 20% 10% 0% Average Australia Canada Finland France Germany Italy Japan Netherlands Norway Singapore Spain UK US Laptop Smartphone Weighted base: Respondents aged 18-24: Australia (265), Canada (253), Finland (120), France (242), Germany (212), Italy (193), Japan (185), Netherlands (253), Norway (130), Singapore (327), Spain (193), UK (510), US (279) Source: Deloitte member firms’ Global Mobile Consumer Survey, developed countries, May-July 2015 Other Deloitte US research into the US market suggests Desktop and laptop computers are close behind at that 14-25 year-olds rank laptops among their most 27 percent of total media time: which is more than for 56 valued devices . About three-quarters of 14-25 year-olds the adult population as a whole (only 21 percent); and placed laptops and smartphones in their top three valued higher than the percentage of time millennials spend on devices. That percentage was higher than laptop ranking traditional TV (23 percent). In fact, based on time spent, for any other demographic studied. It was also much millennials are closer to being the post-TV generation higher than any other device for trailing millennials, than the post-PC generation. whose next top-ranked devices were gaming consoles, 60 flat-panel TV and desktop computers at 45, 40 and 35 In a comScore study , millennials in all of the US, UK percent respectively. and Canada are definitely mobile-first: in each country 18-34 year-olds spend at least 20 hours more per month Further, the younger millennials appear to be getting on mobiles than on their laptops or desktop PCs. In fact, good use out of their computers. Studies suggest American millennials spend 90 hours per month on their that 18-24 year-olds in the US spend 49 minutes per mobiles, nearly 50 hours more than on their computers. day using the Internet or watching video on a PC, in However, that has not meant they have abandoned addition to email, games, and work/study applications their PCs: millennial PC usage is 39-46 hours per month 57 such as word processing . That 49 minutes per day is across the countries, which is a little less than usage for less than older Americans (35-49 year-olds are using the population as a whole (about two hours per month), the Internet or watching video on their computers 69 but not materially so. 58 minutes per day ) but it does not suggest that the younger group is about to abandon their laptops or Looking at media platform usage by all adult Americans desktops in the near future. But the same data shows (and not only trailing millennials,) there has been that millennials make use of their smartphones even enormous growth in time spent on digital mobile more, spending 99 minutes per day using the web, devices, from 19 minutes daily in 2008 to 171 minutes 61 an app or watching video on their smartphone. So in 2015, an 800 percent growth over only seven years . 18-24 year-olds spend 148 minutes per day in front of In the same period, TV usage has been flat; up only a smartphones or PCs, with 67 percent of this time on the minute per day to 255 minutes; and other connected smartphone. digital devices (such as gaming consoles connected to the Internet) have grown to 25 minutes per day Daily time spent on all media reflects the same trend. from nine. But time spent on print newspapers, print Another study found that millennials (18-34 years magazines, and broadcast radio all fell sharply: their old, not just trailing millennials) use mobile devices combined daily time fell from 165 minutes to 109 minutes, (smartphones and tablets) quite frequently, spending a 33 percent decline. 59 a third of total media time on them . Technology, Media & Telecommunications Predictions 2016 9

Meanwhile desktop/laptop media consumption (not What are millennials doing on PCs? The answer is including time spent on email, work applications, or computer games, longer-form video, downloading or playing offline PC games) rose from 131 minutes to streaming content, and creating or editing content (text, 142 minutes. videos). In fact, when we look at how PCs compete with tablets or smartphones, and how they are used by Mobile usage for adult Americans appears to be a demographic groups, it might be those aged 55 and over mix of additive and substitutional. It has increased the who are more likely to become the post-PC generation. total cumulative time per day people spend consuming media across all platforms, from 578 minutes in 2008 There are also age and cohort effects at work. As to 701 minutes in 2015, or over 20 percent, although today’s 18-24 year-olds grow older, it seems likely that there is also some growth in simultaneous usage with their PC use may rise when they are 25-34, and then the rise of the second screen. Smartphones and tablets possibly increase again when they are 35-49, which have become the digital devices of choice for media is the age group that currently uses computers the consumption, and appears to have been accomplished most per day in the US. After that, and as they begin by a combination of substitution for traditional media to spend less time playing complex PC-based games, (but not taking media time from the PC) and adding to moving increasingly to legal sources of content, and the total amount of media time. shift from being content creators to spending more time exclusively consuming or reviewing content, their PC It seems likely the trend for mobile media usage taking usage is likely to fall and shift towards tablets. over newspaper, magazine and radio is true for 18-24 But it seems equally probable that the cohort of 18-24 year-olds too. And when we look at data for that age year-olds of 2020 or 2025 will still use devices that are group between Q1 2011 and Q1 2015, total computer more or less PC-like: they will have full-size keyboards, time (on the Internet and watching video) is virtually much larger screens, and pointing devices that are unchanged, falling from 54.1 minutes per day to 53.9 more precise than a finger on a screen. Based on recent 62 minutes . There was a shift in how the computer is trends, they are likely to use those devices for fewer being used, with video usage increasing by nine minutes minutes per day than today’s 18-24 year-olds use their per day in four years, but total time spent was flat. computers, but it will still be a significant device: widely- owned, widely-valued, often required by schools or employers, and used for hours per week. Bottom line It appears that having a mobile strategy will be necessary in 2016, especially if your market is millennials. In fact, a mobile-first strategy is almost certainly a good idea. But a mobile-only strategy that assumes millennials have already abandoned (or are about to abandon) their computers is almost certainly an equally bad idea. Depending on the content or use case, millennials still use their PCs, and sometimes even prefer the PC to mobile. One excellent example of this distinction is video content. In a Deloitte US survey published in 2015, trailing millennials (14-25 years old) reported the percentage of time spent watching four different 63 forms of video content: for smartphones, tablets, desktop/laptop computers and TV sets . As Figure 4 shows, leaving TV sets aside, the computer screen was the dominant device, even for user- generated content. In fact, for movies and TV shows (30-60 minutes), millennial use of computers was 64 more than double the screen time for smartphones and tablets combined . Although games and social media are indeed heavily mobile-first for trailing millennials, the larger screens of desktops and laptops seems to be preferred to mobile. 10

Figure 4: Time spent watching video content by device, US, among 14-25 year-olds Q: Of the time you spend watching movies/TV shows/sports/user-generated content, what percentage do you watch on the following devices? 60% 53% 50% 40% 41% 40% 32% 30% 24% 20% 9% 8% 8% 10% 10% 8% 8% 5% 0% Movies TV shows Sports User-generated content Movies TV shows Sports User-generated content Laptop/Desktop Smartphone Tablets Base: Respondents aged 14-25 (424 respondents) Source: Deloitte US’s Digital Democracy Survey, Ninth edition, November 2014. See endnotes for further information on the research. 65 Another example is online banking. According to a 2014 US study , 20-34 year-olds were much more likely than any other demographic to conduct banking-related activities via digital channels, with 65-80 percent using digital to make internal transfers, check for fraudulent charges or check account balances. They were also the most likely to use the bank’s mobile app: more than twice as likely as 66 Generation X (35-49 year olds) and nearly eight times as likely as Baby Boomers (50-70 year olds) . However, although they did use the mobile app for checking balances, and external and internal transfers, when asked to express a preference for the mobile app or the bank website, millennials preferred the website more than two-to-one over mobile for each type of transaction. Shopping is another use where the PC still has its place. US 18-34 year olds spend $2,000 per year on digital purchases, 79 percent said in a survey that they discovered a new brand or product through 67 mobile, and more than half said they prefer the mobile shopping app to the online site . But a 2014 survey of US 19-33 year-olds showed that they still prefer using their computer over either the smartphone or tablet for checking product details or availability, and especially for making the actual purchase, with nearly two-thirds using their computer, and only about 40 percent using their 68 smartphone or tablet . In a more recent 2015 Deloitte US survey, 18-24 year olds were most likely to use their mobile devices to find the location of stores, shop/browse online and compare prices. However, only 39 percent used their smartphone for actual purchases, and only 27 percent used their 69 tablets . Technology, Media & Telecommunications Predictions 2016 11

Touch commerce: the mobile online checkout gets an express line Deloitte Global predicts that in 2016, the number Deloitte member firm research has found that as of mid- of individuals who use a third party touch-based 2015 about a third of respondents in developed markets payment service to make a purchase on their mobile browse shopping websites/apps on a weekly basis, but devices (smartphones and tablets) should increase by only nine percent purchase (see Figure 5). A first-time 70 150 percent, to reach 50 million regular users . visitor to a mobile website or app may need to type in name, address, email, phone number, and sometimes Touch commerce enables a customer to make a secure purchase preferences, security details (passwords, security first-time or subsequent payment on any merchant’s questions) and finally payment details to complete a website or app without having to provide registration or transaction. The wide scope of information required, log-in details either to the merchant or to the payment coupled with the difficulty of entering it on a touch service. Authorizing the transaction on a mobile device screen, likely contributes to the abandonment of baskets. simply requires the application of a fingerprint or a few (typically two) touches of a screen. Submitting all these data on a computer with a full- size keyboard is a chore. On a five-inch touch screen, Critically, touch commerce reduces significantly the time with predictive text in a mischievous mood and on taken from browsing to transaction on a mobile phone, a juddering bus, it can be tortuous. and on an app or website which the customer has not used before, to mere seconds from tens of seconds or Touch commerce enabled by third-party services even minutes. removes much of the ‘grit’ from mobile transactions, reducing the entire process to the application of Touch commerce enables retailers to exploit shoppers’ a fingerprint or one or two touches of the screen. increasing use of mobile devices to browse retail sites and apps. Transactions on sites and apps remain scarce, There are likely to be two principal types of third-party with laborious payment processes often to blame. touch-based mobile payment services in 2016. Indeed cart abandonment in mobile commerce can 71 One is linked to the device’s operating system (OS). be as high as 80 percent . Easier checkout has been identified as a key factor/key requirement for increased Shopping applications can use existing information 72 associated with the OS, including payment card details mobile buying . and home address. Payments for this service are typically authenticated by a fingerprint and can be used within apps73. Goods can be shipped to the default address stored in the OS. Figure 5: Respondents who use their phone to browse or purchase from shopping websites/apps at least weekly Q: How frequently do you use your phone to do any of these (browse shopping websites/apps, make an online purchase of a product)? 60% 50% 40% 30% 20% 10% 0% Average Australia Canada Finland France Germany Italy Japan Netherlands Norway Singapore Spain UK US Browse shopping websites/apps (weekly) Make an online purchase of a product (weekly) Weighted base: Respondents who own or have access to a standard phone/smartphone: Australia (1,837), Canada (1,676), Finland (963), France (1,829), Germany (1,821), Italy (1,873), Japan (1,420), Netherlands (1,886), Norway (925), Singapore (1,903), Spain (1,891), UK (3,682), US (1,828) Source: Deloitte member firms’ Global Mobile Consumer Survey, developed countries, May-July 2015 12

Deloitte Global expects this category should represent The combination of these data and technology enables the majority of touch-based payments made in 2016: retailers to outsource mobile transactions to third there are billions of smartphones that have payment card parties, and by so doing, convert payment from a and home address information associated with them. frustrating to a friction-free experience. One merchant Additionally, the base of fingerprint reader-equipped reported that the checkout process via their legacy app devices is steadily rising, with more than 450 million required 103 seconds for customers to type in their full forecast to ship this year, adding to the existing base of credit card and shipping information; third-party touch 74 77 hundreds of millions’ . payment reduced this to just 17 seconds . The second type of third-party touch-based mobile Other payment services may emerge soon. For example, payment service is linked to existing payment service some large retailers could enable their customers to use providers. Prior to being able to make purchases by one pre-stored payment data to validate purchases made on 78 or two touches of the screen, the user would need to other retailers’ apps . have opened an account with the payment provider and elected to stay logged in for future purchases. Once this Third-party touch-based mobile payment services are feature is enabled, the user simply has to press buy and just a first step towards an overall improved shopping 75 experience on mobile. confirm buttons . Confirmation can be via a fingerprint 76 with some devices . Consumers are increasingly likely to expect simplified authentication services, and may want this approach for online as well as in-store payments. Bottom line Consumers are constantly connected to their smartphones, from the early hours in the morning to late at night, when at work, while spending time with family and friends or while commuting. These provide opportunities for converting browsing into purchases with a simplified payment process. Retailers should educate the market on the existence of touch commerce and encourage first-time usage, perhaps by offering small discounts for doing so. Marketing campaigns should show how fast touch payments are, but also explain how they are also as secure, and possibly more so, than conventional check out processes. Retailers may need to offer a variety of payment options via a range of third parties. Touch commerce is likely to tap into consumers’ appetite for impulse purchasing. But more mobile commerce and impulse purchases may mean that they will need to be even more responsive and able to cope with unpredicted spikes in demand that may happen at various times of the day and night. 79 The potential impact on sales created by social media influencers should also be considered . A simplified checkout process is not the only prerequisite for mobile commerce. A user-friendly and appealing mobile website or app is also essential. Some approaches to touch commerce could cause retailers to lose some visibility of customer behavior. Retailers should carefully weigh the benefits of rapid transaction fulfilment with loss of control of customer data. Retailers should also consider integrating touch payment services with loyalty schemes. Technology, Media & Telecommunications Predictions 2016 13

Graphene: research now, reap next decade Deloitte Global predicts the total value of the graphene Graphene has been called a ‘wonder material’81, as it materials market in 2016 is likely to be in the low offers an unrivalled combination of tensile, electrical, tens of millions of dollars, equivalent to less than an thermal and optical properties. Significant investments hour’s projected revenues from smartphone sales have been made in recent years which could hasten this year. Research and development spending on the pace at which we start to see more practical graphene is likely to be in the hundreds of millions of applications of graphene and new technologies. For dollars in 2016; in the medium term, graphene may example, the European Union has invested $1.3 billion be incorporated into products worth many billions in ‘The Graphene Flagship’, a consortium of academic of dollars per year, but it may be decades before this and commercial researchers82. The UK Government has material’s potential is fully realized. provided £235 million ($353 million) to fund a graphene 83 research center . Tech companies are investing in In 2016, while there are expected to be a few dozen developing their understanding of the material. commercially available products that include graphene, Samsung for example has already applied for hundreds the material is likely to be a composite. For example, 84 of graphene-related patents . graphene could be incorporated to improve the strength and weight of the carbon fibers used to manufacture Graphene is a single atom thick two-dimensional 80 sports equipment . structure, which is a million times thinner than a human hair or a sheet of paper. It is based on graphite, which in turn is a crystallized form of carbon, one of the most abundant elements in the world. A team of scientists from Manchester won the 2010 Nobel Prize for Physics for isolating small amounts of graphene, by applying sticky tape to chunks of graphite and then peeling the 85 layers off one by one , leaving a layer of graphene on 86 the tape . Figure 6: Graphene predictions timeline Large First graphene scale use of Graphene Graphene- scientific paper graphene- batteries in Infrared vision enhanced published enhanced smartphones contact lenses construction carbon fiber materials composites 2004: Discovery 2010 Further into the future… Graphene Graphene Nobel Prize touchscreens water filtration Smart plasters awarded in smartphones systems introduced Source: Deloitte Global, 2015 14

Graphene is flexible and very strong, and (in one The main challenge lies in manufacturing large aspect) is tougher than a diamond and stronger than quantities of graphene, in various formats, and at steel. It is currently used as an element within a resin an affordable price, with effective yields and a purity to manufacture solid structures, as is the case with sufficient so as not to impair graphene’s desired 87 carbon fiber sports equipment . For example, carbon chemical properties. Production volumes also need to be fiber tennis rackets are made using a small amount of scaled up to factory level. graphene88. At the 2015 Geneva Motor Show, Spania unveiled the world’s first supercar to incorporate Despite many academic and commercial research 89 groups investigating methods of production, making graphene into the structure of a car . Going forward, graphene could be increasingly incorporated in large quantities of graphene remains a profound manufactured products. For example, it could reduce the challenge. Graphene is currently produced by a variety weight of vehicles, cutting down both fuel consumption of methods, which can be summarized as either ‘bottom and resulting emissions. up’ or ‘top down’. ‘Bottom up’ methods use chemistry to synthesize layers of graphene, while ‘top down’ It is transparent: 97 percent of light passes through approaches utilize graphite. The Nobel prize-winning it. It also an excellent conductor, and can carry heat ‘sticky tape approach’ and the ‘how to make graphene and electricity more efficiently than gold or copper. in your kitchen’ approach (described below) are This could make it very useful for developing the next examples of ‘top down’ production methods that yield generation of electronics such as solar panels and high-quality tiny graphene fragments. However, they are batteries. micrometers in size, and these methods are not suitable 97 for large scale manufacture . Incorporating graphene into batteries could increase their performance enormously. Energy density could be increased up to tenfold, enabling smartphones to last days without recharging, and an electric car’s range to How to make graphene in your kitchen 90 (if you have lab equipment) equal or surpass that of gasoline vehicles . Memory chips based on graphene have the potential As with many emerging technologies, theories abound but practice is a little to increase smartphone storage capacities tenfold, and harder. It is possible to create graphene using a kitchen blender to combine 98 also reduce power consumption and increase memory graphite powder with water and dishwashing liquid . A precise quantity 91 of dishwashing liquid is required to make this work, with the volume access speed · Graphene could lead the way in flexible smartphones by providing an alternative to silicon, dependent on the properties of the graphite powder used. Determining 99 which is brittle and could break when bent. this requires advanced and expensive lab equipment . But as of end-2015 this approach, like many others, remained theoretically viable, but not yet It could also be applied to any surface to convert it into proven in a large production run. a screen; it would be equivalent to applying a layer of 92 high-tech plastic wrap . The principal example of a ‘bottom up’ production Graphene is impermeable to gases and liquids, while method is chemical vapor deposition (CVD) which graphene oxide is permeable to water only. This means involves creating a graphene layer on another layer (for 93 that graphene oxide could be used for desalination , or 100 example copper foil) , ‘unzipping’ carbon nanotubes 94 the removal of harmful radioactive isotopes . 101 and the reduction of graphene oxide . While some of 102 Graphene also has the capability to change the way in these these methods can produce square meters of which we interact with the world: it could be used to graphene, they may produce highly defective graphene, 95 or require the use of hazardous materials. As such, there create contact lenses that enable infrared vision , and is still some way to go in optimizing the production to develop ‘smart plasters’ that reduce the risk of anti- processes. 96 bacterial infection . However, the toxicity of graphene to humans has yet to be confirmed through scientific As of end-2015, the market price of graphene studies. 103 was about $100 per gram . Once the method of The potential of graphene is phenomenal, but patience production is optimized and scaled up, the cost of is vital: there are several challenges to be addressed graphene is expected to come down to the cost of before a graphene era can be realized. the raw materials, which will likely be centered on the 104 existing suppliers for graphite: China and India . Technology, Media & Telecommunications Predictions 2016 15

While graphene is a ‘wonder material’, there is another Other barriers to the development of graphene are the major hurdle to overcome before its use can become established processes and supply chains for existing widespread in electronics. Semi-conductors, like silicon, materials used in electronics; for example silicon, are characterized by their ability to turn on and off as which is the industry standard in microelectronics, and their electrons can only move freely within the material indium tin oxide which is widely used as transparent 106 in the presence of energy due to the existence of a small electrodes used in touch screens . Until graphene band gap. A band gap is the energy range between can be produced and supplied at a competitive price the valence band (where an electron cannot conduct to these existing technologies, it is unlikely to become electricity) and the conduction band (where it can). ubiquitous in the market. This means that it will most If material is an insulator, this band is large, and the likely be about a decade before graphene can be electrons cannot move from one band into the other and used commercially as an alternative to silicon, but this the material has no electrical conductivity. One of the should provide ample time to understand the material 107 reasons why graphene has such high conductivity is due and to evaluate its potential performance . to the fact that it has no band gap and electrons are free to move between these two bands with no resistence. While products marketed as ‘graphene’ may be on At the present time, scientists are still developing the market in 2016, many, if not all, will likely be methods by which to insert a band gap while still constructed principally from more traditional materials 105 and incorporate a limited quantity of graphene. maintaining graphene’s highly attractive properties. We would expect graphene to continue to be used as a supplementary material in the short term (and through to 2020 at least), until the manufacturing process for graphene is mature enough for it to be used as a key material in products. Bottom line It is important to be cognizant both of graphene’s potential, as well as the many challenges that need to be overcome before its fantastic properties can be exploited. In 2016, and most likely in the decade to come, graphene will be in a research and prototyping phase. The potential benefits are significant; the challenges are commensurately high. We predict that sales of materials will likely remain the principal source of revenues in 2016. We expect to see some of the first real graphene-based products entering the market. The number of ‘graphene’ products on sale in 2016 will likely number in the tens. We anticipate that the graphene market, including material sales, will likely not surpass $30 million in 2016. By the end of the decade material sales may still be a little more than $100 million – which represents growth, but also a 108 continuation of the research phase . We should put graphene’s life cycle trajectory in perspective: many of the most impactful materials have taken decades before attaining mainstream adoption. Aluminium was used as a luxury metal in 19th century France. Even when manufacturing costs fell it remained a niche material until the invention of the airplane, which uniquely required aluminium’s specific combination of strength and weight to make commercial flight viable. Indeed, it is only now that aluminium is becoming incorporated increasingly into premium passenger cars. Carbon fiber has similarly had a long gestation: it was first used commercially in the late 1800s as 109 a component in light bulbs . Today it is used only selectively in vehicles, even though its benefits are very well understood. In 2016, graphene-enhanced products are only going to offer a glimpse of the material’s full potential, but a key point to consider is that new materials disrupt existing products and lead to new technologies. So some of the future technologies and benefits of graphene, which could embody the ‘graphene era’ and change our world, only currently exist within the realms of our imagination. 16

Cognitive technologies enhance enterprise software Deloitte Global predicts that by end-2016 more than Deloitte Global expects cognitive technologies will be 80 of the world’s 100 largest enterprise software deployed to differing extents by enterprise software companies by revenues will have integrated cognitive companies, but we want to take the time to define 110 technologies into their products , a 25 percent increase what are likely to be the three most widely used in the 112 on the prior year when 64 of the top 100 had launched near-term : products and services which featured one or more 111 Machine learning – the ability of computer systems cognitive technologies in 2015 . By 2020, we expect about 95 percent of the top 100 will have incorporated to improve their performance by exposure to data one or more cognitive technologies. but without the need to follow explicitly-programmed instructions – is likely to be the most prevalent. It We expect that the cognitive technologies that will be enhances a large array of applications, from classification the most important in the enterprise software market to prediction, from anomaly detection to personalization. in 2016 will be: machine learning, natural language processing and speech recognition. Natural language processing (NLP) – whereby computers can process text in the same way as humans, What do we mean by cognitive technologies and for example extracting meaning from text or even artificial intelligence (AI)? We distinguish between the generating text that is readable, stylistically natural, field of AI and the technologies that emanate from the and grammatically correct – has multiple valuable field. The popular press portrays AI as the advent of applications when incorporated in software that computers as smart as – or smarter than – humans. The analyses unstructured text. individual technologies, by contrast, are getting steadily better at performing specific tasks that were formerly Speech recognition – the ability to automatically only deliverable by humans. Figure 7 identifies the and accurately transcribe human speech, is useful for leading cognitive technologies that business and public applications that may benefit from hands-free modes of sector leaders are likely to benefit from in 2016. operation. Figure 7: Widely used cognitive technologies Computer Machine Natural vision learning language processing Speech Optimization recognition Rules- Robotics Planning based systems & scheduling Graphic eloitte niversity Press Source eloitte evelopment C  ­€ Technology, Media & Telecommunications Predictions 2016 17

Deloitte Global expects the three main benefits for Venture capital (VC) firms are active in this space too. software companies that have integrated cognitive Since 2011, most VC funding of start-ups developing technologies into their products will be: or applying cognitive technologies has benefited companies building applications for traditional enterprise Improving core functionality – Cognitive technologies functions such as marketing and sales. US-based start- will be used to improve the performance of existing ups like these have raised nearly $2.5 billion since 2011, software by doing the same things, only better. For suggesting that the biggest near-term opportunity for example, one US-based company providing retail cognitive technologies is in using them to enhance solutions uses machine learning to reduce false positives 119 current business practices . For instance, 113 when identifying fraudulent transactions . Previous a company called Convirza raised $25 million to develop software solutions already identified fraud, but machine and commercialize a call marketing optimization learning allows the retailer to do so with greater accuracy, platform that uses speech recognition technology and potentially resulting in fewer legitimate transactions being sophisticated algorithms to gauge lead quality, measure incorrectly flagged. A Silicon Valley networking company customer conversions, analyze phone performance, uses a cloud-based Cognitive Threat Analytics program and take action with workflow-based marketing that relies on advanced statistical modeling and machine 120 automation . learning to independently identify new web security 114 threats, learn from what it sees, and adapt over time . Another target for venture investors is vertical specific software vendors. Such companies have received over Generating new insights – Machine learning and 121 $2 billion from venture investors since 2011 . One other advanced analytical technologies will likely make example is Wellframe, which received $1.5 million in it possible to uncover previously inaccessible insights seed funding for its mobile app that connects healthcare that were hidden in large data sets or obscured by the providers and patients once they return home from the unstructured format of the data. One US database hospital, creating a daily to-do list for the patients with company’s cloud service leverages NLP technology to items such as medication reminders and questionnaires determine and assign an ‘emotional’ rating to customer about symptoms. Wellframe’s machine learning survey responses that fit a customer sentiment category, engine tailors the app’s content based on answers and 115 which helps companies take immediate action . care regimens prescribed by the patient’s healthcare 122 provider . Automation – Cognitive technologies make it possible to automate tasks formerly done by people. One medical The growth in enterprise software use of cognitive software company uses an NLP engine to interpret technologies has been partly driven by the shift toward doctors’ free-text notes and extracts key data such as cloud computing. Only a subset of users of enterprise 116 allergies, medications and diagnoses . A business software would historically have had the scale to deploy services company streamlined a standardized business the on-premise technologies capable of doing advanced process: their cross-border e-commerce platform machine learning, for example. But the growth in cloud employs a natural language processing engine and computing could allow enterprise software vendors machine learning algorithms to accurately deliver and to provide the benefits of machine learning to all their continuously improve product classifications as more 123 clients . Further growth in cognitive technologies is 117 transactions are processed . likely to be accelerated by the trend toward open source AI: one of the largest players in the space open-sourced Some business software companies have developed 124 the software engine behind their deep learning tools , AI capabilities in-house, but many others are acquiring and another open-sourced the designs for the servers capability through M&A, and we expect this to 125 that run their AI algorithms . continue in 2016. Indeed more than 100 mergers and acquisitions involving cognitive technology companies 118 have taken place since 2012 . 18

Bottom line Many top software companies have already discovered the potential for cognitive technologies to enhance their products, create value for customers and improve business operations. Strong support from venture capital investors is helping to further commercialize enterprise applications of cognitive technologies. The potential benefits in terms of ease of use, enhanced performance and improved insights are simply too compelling for software providers to ignore. This is why we expect the trend of embedding cognitive technologies in enterprise software to continue through 2016 and beyond, approaching ubiquity by 2020. Vendors of enterprise software applications should consider how cognitive technologies can enhance their products. Start-ups may offer models of how to employ these technologies to make products easier to use, automate functions intelligently, and generate greater insight from data. Corporate IT groups may want to build awareness of and skills in cognitive technologies such as machine learning and natural language processing. They could also begin to assess how to employ cognitive technologies to enhance existing corporate applications to provide greater usability and more valuable insights to users. Buyers of enterprise software may find it worthwhile to ask their vendors to explain how they plan to take advantage of cognitive technologies to enhance their products’ performance and utility. Software companies should also consider applying cognitive technologies to their internal business operations, such as recruitment. One company integrated predictive analytics to forecast which job applicants were likely to have a good cultural fit and be high 126 performing . The same technology could also predict when a target candidate might start seeking out a new job, and make 127 recruiters aware of this . Another company deployed a virtual support agent, based on NLP, to understand and resolve customer issues. The impact was marked: the average customer support resolution rate rose to 85 percent and the number of call center inquiries and emails fell by 128 22 percent . Companies could also use cognitive technologies in managing warehouse operations and employees. If an employee uses a new way to accomplish a job more efficiently, that technique can be analyzed and used later on. For one company this delivered an 129 eight percent increase in warehouse productivity . Cognitive technologies should be used across the three types of enterprise software markets: The Enterprise Application Software market focuses on leveraging the power of computers to achieve business, professional or personal goals. One company’s cloud solution features a client-targeting tool that aims to solve the difficulty of marketing to 130 large volumes of anonymous online traffic . It uses machine learning to discover associations between the behavior of a new site visitor and the actions taken by previous visitors who behaved similarly. The goal is to make the site experience more engaging and increase conversions to sales. The Enterprise Infrastructure Software market provides tools that help companies build, run and manage the performance of IT resources. One company has enhanced its logging tool with machine learning capability that groups related server events together to make it easier for an IT manager to identify developing problems or unusual computing trends that should be 131 addressed on a real-time basis . Vertical Specific Software is focused on a narrow scope/industry and is typically a stand-alone software application. In partnership with a major cancer institution, a technology company has developed a standalone oncology offering. Accessible by mobile or desktop, the deep machine learning AI is able to analyze the large volume of patient records and identify potential evidence-based 132 treatment options . The use of cognitive technologies in enterprise software is only part of the overall trend toward increases use of AI in the larger enterprise market. One 2015 study forecasts the sales of enterprise AI will be a cumulative $43.5 billion between 2015 and 133 2024 . Technology, Media & Telecommunications Predictions 2016 19

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Media Virtual reality: a billion dollar niche 22 Mobile games: leading, but less lucrative 26 Mobile ad-blockers: saved by the app? 28 The award for stable box office revenues in the face of digital media goes to… 30 US TV: erosion, not implosion 35 European football scores $30 billion 39 eSports: bigger and smaller than you think 42 Technology, Media & Telecommunications Predictions 2016 21

Virtual reality: a billion dollar niche Deloitte Global predicts that virtual reality (VR) will have As with many technologies, the notion of virtual We would its first billion dollar year in 2016, with about $700 million reality is decades old, but its commercial realization expect the in hardware sales, and the remainder from content. has been subject to the sometimes slow pace of majority of We estimate sales of about 2.5 million VR headsets and technological progress. Optimal VR experiences require 10 million game copies sold. very high resolution screens (ideally over 500 dots per spending on VR inch, which have only recently become commercially to be by core VR is likely to have multiple applications, both consumer available), a wide field of view and high refresh rates and enterprise, in the longer term, but in 2016 we 136 (ideally at least 75 frames a second , requiring rather than expect the vast majority of commercial activity to focus powerful processors). More processing power is also casual gamers. on video games. We would expect the majority of necessary so that synchronization between the user spending on VR to be by core rather than casual gamers. moving their head and the picture being adjusted is This implies that while anyone with a smartphone could as near-simultaneous as possible. It is only recently try out a variant of VR, the majority of VR’s revenues in that screen and processor technology have improved 2016 will likely be driven by a base of tens of millions in terms of price and performance such that VR is of core gamers rather than the hundreds of millions of commercially viable, albeit still at high price points for occasional console or PC gamers, or the billions who the full featured solution. play casual games. There are likely to be two main types of VR device in Virtual reality hardware offers visual (and sometimes 2016: ‘full feature’ and ‘mobile’. audio) immersion via a head-mounted display that shows a stereo image in 3D. Sensors in the headset The former incorporates high resolution screens and track the user’s movements and change the user’s view will cost about $350-$500 (with prices at the start of accordingly. A VR version of scuba diving allows you to the year likely being higher), and we estimate between feel as if real fish are swimming toward you. If you look 1–1.75 million sales in 2016, with volumes depending 137 up, you see a realistically rendered sky. When you glance heavily on the initial price . down, you are shown the ocean floor. The sound track adjusts accordingly, enhancing the perception of being Full feature devices will likely be designed for use with elsewhere. All other things being equal, the higher the either latest generation games consoles or PCs with screen resolution, and the faster the screen refresh, the advanced graphics cards (each costing about $300) 134 capable of driving high refresh rates: the ‘average’ PC is more convincing the simulation . not powerful enough to support a viable VR experience. However the illusion remains incomplete, in that not all senses would be catered for. VR could take you into the We expect the addressable market for games consoles depths of the rain forest. You could see the forest floor as of the end of 2016 to be at least 30 million units, and or look up to the canopy. But you would not feel the high-end PCs at about seven million units worldwide. humidity, experience the smells or touch the vegetation. We also expect that most users of full feature VR would already own the latest generation console or a high-end VR content can be created using CGI (computer generated PC. Otherwise, a full feature VR experience would images) or filmed using special clusters of cameras that require at least $300 additional spending on a console collectively capture a 360-degree field of view. In playback, or $1,000 for a suitably equipped PC. the user is shown different aspects of the images 135 Some VR owners may purchase additional accessories, captured, depending on where he or she is looking . ranging from controllers to treadmills whose base plate moves in alignment with the view being seen. The floor 138 would tilt, for example, if you were walking uphill . 22

There are hundreds of millions of gamers on consoles VR cardboard kits are also available. These have the and PCs, and many of them buy hardware accessories virtue of being low cost, often less than $10 and 139 141 to improve their game play . However, the vast frequently given away . But they can be fragile as 140 majority of the top selling peripherals are $30-50 . they are self-assembled and because of the material. Only a minority of these gamers may want to spend Low cost variants lack features such as nose supports, over $300 on additional equipment such as graphics causing discomfort with prolonged use. Most of them cards, liquid cooling for processors or other special lack the strap to attach it to your head and require devices. a person to hold it in their hands; this in turn eliminates the motion sickness caused by slow phone refresh rates, ‘Mobile VR’ incorporates a high-end smartphone’s but reduces the immersion that the user is experiencing. screen into a special case, enabling the headset to fit more-or-less snugly on the user’s head. This is likely to As for VR content, we would expect most revenue cost from about $100, and we forecast that at least half generated to come from games sales, with titles sold a million units will be sold in 2016. Mobile VR requires at between $5 and $40, generating over $300 million. smartphones with large, high resolution screens, ideally Many of the apps created for smartphones are likely to with greater than 400 pixels per inch (PPI) resolution, be available for under $10 or free, with the latter serving 142 which is higher than that for the average premium primarily as marketing tools . smartphone. We expect that VR-ready smartphones will cost from $750 and up but that most purchasers of We do not expect VR to be used to any great extent mobile VR will already be owners of a suitable device. in television or movies in 2016. A key reason for VR’s minimal impact on TV and movies this year is that little Both types of VR would provide a high quality VR VR content exists, with a fundamental constraint being experience, with the caliber of full feature VR being the lack of broadcast grade or even hobbyist cameras noticeably superior, at least in 2016 and out to 2020. capable of capturing VR content. VR apps will be The processor and pixel density requirements require available, but we expect these typically to offer a view a lot of power, with plug in power being ideal. of a virtualized living room which includes a virtual 143 A smartphone being used for VR may exhaust its battery television set, displaying regular TV programs in 2D . after half an hour. Mobile VR will rely on accelerometers for tracking and lacks positional tracking, which may By the start of 2016, we anticipate a small range cause a little lag. Furthermore, the field of vision in of suitable cameras may have been launched onto full feature VR should be slightly superior, at about the market, but the cost of purchasing or renting 100 degrees or wider, while a smartphone tends to offer professional grade devices may initially be prohibitive for 144 a field of 96 degrees at most. many projects . VR can be experienced with lower specification PCs, Furthermore, as was the case with 3D filming for consoles or smartphone, but the quality degrades television, there is likely to be a learning curve in 145 accordingly. A normal PC would deliver lower screen determining best practices for shooting for VR . refresh rates, lessening the efficacy of the simulation. Regular filming places the set in front of the camera, The images shown may lag the pace of a turning and the production crew to the rear and out of shot. head, in turn causing a feeling of nausea, as the image VR filming may require the crew to disappear entirely, presented would not be what the brain expects. which may complicate the directing of the shots. One can also use standard resolution smartphones, but For VR sports, it is not yet certain where best to place you would likely see pixelated, less convincing images. the camera: placing it in the center of a field and in the A smartphone screen that is pixel free at normal viewing mid-point of the action would likely constrain players’ distances (10 cm) is likely to appear pixelated when movements. a mere 1-2 cm away from the eye. Smartphone vendors are unlikely to over-specify pixel density unless they can monetize it. Also, mobile graphics chips have to get powerful enough to cope with such high resolutions. Technology, Media & Telecommunications Predictions 2016 23

There are also likely to be challenges in post-production, one of which will be simply how to store the image Simulators and the military files. One production level camera features 42 cameras capable of 4K resolution. This captures a gigapixel image Simulators have been used for flight training (about 500 times the size of a standard smartphone as it is much safer and cheaper to learn how 146 to fly in difficult conditions on the ground image), and shoots at 30 frames a second . One subsequent challenge of capturing images at this than in the air. Early simulators were wooden level of resolution will be determining how to store, boxes mounted on a Universal Joint and transmit and edit the files. driven by organ bellows in 1930, but were 153. By the 1990s, full critical to training VR offers viewers a choice of point of view (POV); flight simulators were more mechanically some viewers may prefer the director to choose the sophisticated and incorporated large, high best viewing angle for them. The first DVDs offered the resolution screens that projected virtual option of multiple angles, with the viewer choosing the scenes for the pilots-in-training. These cost perspective, as a differentiator to video cassettes, but millions of dollars, and in some cases less this option was rapidly dropped due to low consumer expensive solutions were sufficient. By 2007 interest. helmets incorporating projected dual screen images a few inches from the user’s eyes As for enterprise adoption of VR, we expect 2016 were being used for training, both for flight will be a year of experimentation, with a range of 154 simulation and land combat training . companies dabbling with using VR for sales and marketing purposes. These activities are likely to be commercially insignificant this year. For example: We congratulate VR on what we expect will be its • Some architects are using VR to create interactive first billion dollar year, and we forecast rising revenues visualizations of construction projects in place of in coming years: it is possible that the industry will 147 generate tens of billions of revenues in the medium 3D models, or fly-through video . This approach can 148 155 enable clients to make changes before work starts . term . What appears certain however is that VR’s potential is unlikely to be reached imminently; as with all • Emergency response workers have used VR to practice emerging technologies patience is required. 149 how to respond to faults with nuclear reactors . • There are multiple applications for healthcare, with training and education of staff and members of the 150 public being among the most prevalent . 151 • Hotels can provide VR guides to properties . For guests at a property, a VR headset could act as a virtual concierge, showing guests places they could visit. • As well as teaching via a virtual classroom, VR can additionally be used to provide digitized tours to 152 prospective students . • VR will likely continue to be used in the military where simulators have long been commonplace (see side bar: Simulators and the military). 24

Bottom Line Virtual reality is a fantastic innovation which can demonstrate the cutting edge of what technology is capable of today. VR’s capability is likely to improve further still over the years as processors improve, screen resolution increases yet further, and content creators learn how to create for the format. That said, as can happen with emerging technologies, there is considerable hype about the impact of VR in the near-term. Any company that is considering VR in any regard should have a careful look at the likely addressable market. Enthusiastic reactions to VR at trade fairs or at industry conferences, based on a few minutes of usage, may not convert into mass market demand. Those who attend trade shows may not be representative of the overall population, and those who are willing to line up for hours to try a new VR headset are likely to be even less representative. Furthermore, not all of those who are willing to line up for a free trial may be willing to spend $300-500 of their own money when the devices become commercially available. Any company considering marketing via VR imagery should consider the cost of making this content available to consumers. For example travel companies wanting to create VR brochures should 156. assess how much filming and playback in VR may cost relative to current marketing approaches They should also assess the cost associated with acquiring the hardware needed to display these materials. Recent breakthrough technologies that required consumers to wear something on their face have not proven to be mass market successes. While VR headsets may sell better than smart glasses or 3D TV glasses, also consider that using the technology may require a set of behavioral changes (the most apparent of which is wearing a large headset) that the majority of people do not want to make. For some people the immersion that VR causes may overwhelm rather than liberate. And wearing a padded headset for a prolonged period of time may cause the user’s face to get hot and/or sweaty. But the dream of being able to teleport anywhere just by donning a pair of goggles might prove 157. The ambition to deliver on this dream is enough for some to continue using VR on a daily basis likely to keep many companies investing in the goal of making VR a commercial and virtual reality. As for enterprise adoption of VR, we expect 2016 will be a year of experimentation, with a range of companies dabbling with using VR for sales and marketing purposes. Technology, Media & Telecommunications Predictions 2016 25

Mobile games: leading, but less lucrative Deloitte Global predicts that in 2016 mobile devices If mobile games publishers cannot afford a TV campaign, The immense (smartphone and tablet) will become the leading games they could use outcome-based advertising, such as number of platform by software revenue, generating $35 billion app-install ads. They would only need to pay for actual mobile game in revenue, up 20 percent from 2015. This compares downloads of a game or could even choose to pay for to $32 billion for PC games and $28 billion for console apps that are both downloaded and opened several titles renders games, up only five and six percent respectively from the times. However this can be expensive. In the US market, many new previous year. cost per install is $1-2, and can spike far higher on a seasonal basis, such as just after December when However we expect average revenue per game by 165 titles invisible there is a surge of new device activations . An install without platform to vary significantly. We forecast $4.8 million accompanied by usage (known as ‘Cost per Loyal User’) per console game available, $2.9 million per PC game, 166 can incur a charge of over $4 in the US . 158 substantial but only $40,000 per mobile game . We estimate marketing average annual spending on content per mobile games A mobile games publisher might pay several dollars per player to be about $20. This compares to $50 per PC download with no resulting revenue, even if the user spending. games player, and $145 per console player. While many benefits from hundreds of hours of free usage. tens of thousands of companies create mobile games, we would expect only about 200 mobile games This potential outcome highlights a third fundamental companies will gross over $1 million in 2016. difference: the business model. The predominant sales There are three main reasons explaining the acute model for mobile games is freemium, whereby games differences in revenue per game. are downloaded for free and additional content, be this in the form of extra lives, additional characters or special The first is the size of the installed base. We estimate powers, is charged for. Players can (and do) spend about 1.75 billion smartphones and tablets will be tens of hours playing without having to pay a cent. used to play games frequently as of end-2016, out of Market data suggests that this is typically less than three 167 a total base of 2.7 billion smartphones and 750 million percent of all players . 159 tablets . This compares to the just over 600 million who play games regularly on PCs, and approximately Indeed in 2016, it is highly probable that the vast 160 majority of freemium games downloaded to mobile 200 million for games consoles . devices will generate no revenue. According to A second fundamental difference is barriers to entry. Deloitte member firm research, only about a tenth of A typical latest-generation (also known as AAA) console smartphone owners make in-app purchases (including 168 or PC-based game costs tens of millions of dollars to games) in a given month . Those that spend on mobile 161 162 produce , a similar sum to market , and can take games are lucrative, but they are elusive. About one in several years to develop. Mobile games have relatively 650 mobile games players (known in the industry as low barriers to entry, and can be created in mere “whales”) generate about half of all in-app spend in 169 hours. This has contributed to a profusion of mobile free-to-play games . By contrast, almost all players of games titles. As of the start of 2016, we estimate app console or PC-based games have paid for the game. stores will offer more than 800,000 mobile games; this compares to 17,000 titles available for all games One reason why console and PC game players may be consoles and PCs. Every day a further 500 mobile games more willing to pay is because of the utility derived, with 163 many hours of play frequently taking place. By contrast titles are launched on a single platform . mobile games are often played to occupy pauses during The immense number of mobile game titles renders the day when the user might otherwise be doing little or many new titles invisible without substantial marketing nothing, such as while commuting on public transport, spending. The largest mobile games publishers are or waiting for a friend to arrive, or during an advertising spending hundreds of millions of dollars on marketing break. A mobile game can fill a few minutes and is annually, with a large amount of this spent on broadcast often a fall-back, whereas someone playing a console or 164 TV . PC-based game may block out hours to do so. 26

The marketing investment required for mobile games We would expect games play to remain a principal publishers is likely to keep the market stratified in 2016. usage of mobile devices. However, while consumers Deloitte Global expects about 80 percent of mobile are likely to continue to enjoy playing mobile games, games revenue in the top 1,000 titles to be earned life may become increasingly arduous for mobile games by the top 20 publishers in each region: that leaves publishers, potentially leading to some major players a fifth of the remaining revenue to be shared among exiting the market in 2016 or 2017. 170 many tens of thousands of developers . We would also expect sizeable rewards to be maintained for Given these data, we further predict that the rise of the number one game; the best grossing game could mobile games, in terms of revenues, will not ‘eat’ generate five times that of the number five game, and console and PC games revenues in the medium term: 171 the three platforms will co-exist, with each serving 10 times that of the number 10 game . largely distinct needs, underpinned by different business We would expect only a few hundred mobile games dynamics. 172 companies to gross over $1 million in 2016 ; this would be sufficient to run a studio with 5-10 developers. One survey of 8,000 developers found that 17 percent Bottom Line generated no revenue; 18 percent made less than $100 The mobile games industry as a whole should 173 a month, and half made less than $1,000 per month . thrive in 2016, but the outlook for individual A further difference between mobile games and mobile games developers is likely to be far both console and PC games has been longevity. more varied. When touchscreen based games Movie franchises can be criticized for offering up a mere first became available for smartphones and three sequels to a blockbuster; nine console and PC tablets, it was relatively easy for an individual franchises have launched over 10 editions, of which or small company to create a game that three (Madden NFL, FIFA and Mario Brothers) have had would then become a major hit. over 20 editions. One 17-year old title, Counter‑Strike, However success has its consequences, one has on average hundreds of thousands of concurrent of which has been to encourage a deluge users of its latest iteration: Counter‑Strike: Global of developers, and the result has been an 174 Offensive . A major benefit of successful sequels increasingly challenging outlook for fledgling is a lowered marketing cost; the historical inability mobile games publishers. to launch mobile game sequels further adds to the marketing cost. The mobile games sector now has the same Some media properties can diversify across multiple core challenges as most mainstream media: platforms, such as books or plays being turned into creating compelling content and making movies or TV shows. Console and PC game hits should, people aware of it. arguably, transfer easily to mobile. Yet very few mobile This may leave three options for small mobile games hits (under 10 percent) were originally console or games developers (aside from keeping their PC hits. day job). A first option would be to hope for We predict that in subsequent years mobile games a serendipitous hit, such has blessed recent revenues will continue to grow, propelled by both hits such as Crossy Road, Flappy Bird or 175. A second is to align with a rising base of mobile devices, and a marked increase Monument Valley in device specification, particularly for smartphones. a major publisher which has the resources Better processors and sharper screens will likely enable to market a new game heavily – but those more sophisticated game play and more complex downloading the game on a freemium basis graphics over time, although game play on a five – or may not pay for add-ons with sufficient ten-inch screen will be different than on a 15 – or regularity. A third option may simply be to 50-inch screen. Faster connectivity will enable quicker focus on the console or PC market: while the downloads as well as online play. addressable base may be far smaller, gamers in this category have long been accustomed to paying for content. Technology, Media & Telecommunications Predictions 2016 27

Mobile ad-blockers: saved by the app? Deloitte Global predicts a mere 0.3 percent of all mobile A key reason for this is that only a minority (about An ad-blocker device owners (comprising smartphones and tablets) will 20 percent) of the 3.4 billion mobile devices is a software use an ad-blocker by end-2016. This is likely to put less (smartphones and tablets) in use by end-2016 are than $100 million (0.1 percent) of the $70 billion mobile likely to have native ad-blocking capability built into file that blocks 176 advertising market at risk . their operating system. This reduces significantly access to sites the addressable market for device-level ad-blocking. that deliver An ad-blocker is a software file that blocks access to These devices are forecast to generate about $6 billion sites that deliver advertising files. These include the in browser-based ad revenues in 2016. advertising files. visible, such as banner and pop-up ads, and those operating in the background, such as trackers, which Additionally, most time spent on mobile devices is log a user’s online activity. Data gathered by trackers app-based, but ad-blockers only filter out browser-based 178 can be used to determine which ads to serve, and can content . In the US for example, about 90 percent of also be resold to third parties. Without an ad-blocker, time spent on mobile devices is within an app, and only 179 a request for a 500-word online article may download a tenth in a browser . This means that ad-blocking these 500 words and additionally a large quantity (up at the device level is applicable only for a minority of to 20 megabytes, equivalent to 1,000 pages of text) of devices, and for a minority of the time. 177 advertising files (advertising copy and trackers) . Mobile ad-blockers do not block all ads: they prevent For users, the most immediate impact of ad-blockers is access to about 50,000 scripts (commands that are page load times: a page that would have taken 10-15 executed on a device automatically). The more sites that seconds to load over a fast 4G connection can now take are added, the more processing power is required to 2-3 seconds. Further, pages are presented mostly ad-free check each site requested against the list. So ad-blockers and white space replaces the areas reserved for ads; no cannot be fully comprehensive. Some of the companies ads pop up to obscure what you are reading. providing ad-blockers offer to delist (also known as ‘white list’), sometimes for ads that are not deemed A less visible consequence of ad-blockers is that trackers intrusive, and occasionally for a fee. get barred too, inhibiting the reuse and resale of the user’s browsing patterns. Some sites install dozens An additional barrier to adoption is consumer inertia: of trackers onto a user’s device. Further, each ad, for an ad-blocker to be operational, the user needs while small in size, can readily feel obtrusive within to select, download, and adjust the settings on their the minimalist confines of a smartphone screen. device. We expect most ad-blockers will be paid-for, as All additional ad content can bulk up each web free ad-blockers’ efficacy may be compromised by their page considerably, potentially increasing load times, use of ‘white lists’. consuming data allowances, and depleting the battery. Given all these factors we expect only a minority – at Despite these benefits, we would expect very few most two percent (10 million) – of the addressable mobile devices to have ad-blockers installed by market to have an ad-blocker installed and active by end-2016. end-2016. Only a small minority of the 3.4 billion smartphones We would also expect advertisers to redeploy ads to and tablets in use by end-2016 are likely to have native apps or to websites not affected by ad-blocking and ad-blocking capability built into their operating system; as a result may not reduce their spending on mobile. of these most usage will be app-based and unaffected So websites with minimal advertising, and those with by device-level ad-blocking. fast-loading advertising, may be net beneficiaries of ad-blockers. 28

We expect the adoption of ad-blockers will follow a different pattern to that for PCs, for which ad-blocking Bottom Line has been available for years. As of mid-2015, there were an estimated 200 million monthly active users of When ad-blockers first went on sale they ad-blockers on PCs globally, with 77 million active users stormed to the top of the app store charts 180 in the first weekend181. Subsequently sales in Europe and 45 million in the US alone . The focus 182 on app-based usage on a mobile device is likely to be have fallen steadily . However this should a key reason why the relatively large-scale adoption of not be a cause for complacency. There is ad-blocking technology that has been experienced on the possibility of a further wave of interest PCs will not be replicated on mobile. in ad-blocking, which could lead to a more significant wave of adoption. While we do not expect the impact of mobile ad-blocking in 2016 to be significant relative to the Online publishers that rely on advertising for overall size of the market, its impact is likely to be felt revenues should use the threat of ad-blocking disproportionately. to consider how best to enable easy payment for their content and not provide a vast array Smaller online-only publishers that rely entirely on of consumer data as a condition of being advertising revenues and lack other forms of income, able to contribute a dollar, or to insist on such as subscription, may be particularly affected. subscription. They may not have the resource to be able to optimize their sites to load fast, while still delivering advertising. The mobile advertising industry should also 183. They may also lack the funding to create an app within keep an eye on network-level ad-blocking which ads could be delivered outside of the reach of While in some markets this may be considered ad-blockers. a contravention of net neutrality principles, regulation may change to enable this184. It may also be the case that the most impacted news outlets are those focused on tech and gaming news, The industry should also anticipate whose audience is most aware of ad-blockers and most how prevalent consumer inertia can be. likely to have deployed them for their PC-based usage. For example, hundreds of millions of mobile users have been able to access an ad-free, text-only mode for reading content for years, but few have chosen to do so185. However we also anticipate that many mobile users would deploy their own form of organic ad-blocking by simply ignoring mobile websites with what they consider to be excessive advertising content. So even if ad-blockers are not popular, avoidance of ad-heavy sites may still be common. Technology, Media & Telecommunications Predictions 2016 29

The award for stable box office revenues in the face of digital media goes to… Deloitte Global predicts that the value of movie theater The annual movie box office is driven heavily by the admissions in the US and Canada will fall by about three fortunes of the top five blockbusters. The popularity percent in 2016, to about $10.6 billion, with about of these films accounts for most of the year-on-year 1.3 billion tickets sold. It is impossible to forecast beyond volatility. Since 2007, the trend has been for the five that with any precision: box office is so dependent on highest-grossing films to generate over 40 percent of 189 the slate of movies released. Between 1996 and 2015, the box office (see Figure 8). In 2014 the top five 190 the annual box office revenue change is nearly random, fared poorly and the box office fell five percent . although it has never gone up by more than 10 percent Last year was better, up a forecast eight percent. 186 or fallen by more than six percent and the number of 2016 may surprise, but at time of writing one industry tickets sold has never gone up by more than 12 percent forecast is for a slightly weaker slate of blockbusters, 187 191 or fallen by more than six percent . Given that, we and therefore a decline, although not as bad as 2014 . expect average annual revenue growth in the near-term to be about one percent, but within a range of plus or minus 10 percent, and the number of tickets sold to decline about one percent per year. Box office dollars are likely to grow, but at a minimal pace, and are actually likely to decline (also at a minimal pace) if 188 inflation is taken into account . Figure 8: Contribution (%) from top five films to total box office revenues Contribution (%) % % 0%  % % % %  % %  % 2% 2% % 1% 0% 0% 3% 3% 3% 0% 1% 0% 3% 3 % 33% 3 % 3% 30% 32% 2% 2% 20% 10% 0%  1 2 3  1 2 3  1 2 3  1 2 3  1 2 3  1 2 3  1 2 3 0 0 0 0 0 0 0 0 0 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 1 1 1 Source: Canaccord Genuity. For further information on the source, see endnotes. The annual movie box office is driven heavily by the fortunes of the top five blockbusters. 30

As stated previously, between 1995 and 2015 annual A chart of box office revenues in constant dollars and revenues for the US and Canadian box office (called also the number of tickets sold shows a clear picture: the North American box office by the movie industry, both admissions and constant dollar revenues grew from although it does not include Mexico) fluctuated in 1995 to 2002, and since then both inflation-adjusted a relatively narrow range of up 10 percent and down revenues and admissions have fluctuated, but are in slow 6 percent. Although the effects of inflation have been decline. From 2002 to 2015, admissions have fallen from small in any given year, the cumulative effect over 1.55 billion to 1.33 billion, or an annual compounded rate 192 20 years is that a box office dollar in 1995 is worth of 1.17 percent , while revenues declined at a 0.79 percent $1.57 in 2015. compound rate in constant 2014 dollars, from $12.03 billion 193 to $10.85 billion , see Figure 9. Figure 9: US and Canada cinema revenues and admissions 1995‑2015 in billions of 2014 dollars Tickets (billion) Revenue ($ billion) 1.8 $14 1.6 $12 1.4 $10 1.2 1.0 $8 0.8 $6 0.6 $4 0.4 0.2 $2 0.0 $0 19951996199719981999200020012002200320042005200620072008200920102011201220132014 2015 Tickets (billion) Revenue ($ billion) Sources: MPAA, Deloitte Canada analysis. For further information on the sources, see endnotes. A sub-one percent average annual decline in admission The revenue impact has been mitigated, even in revenues is not indicative of a growth industry, especially constant dollar terms, as US movie ticket prices have considering population growth of 1-2 percent. In fact, risen slightly faster than inflation, in part due to a mix Figure 10 shows that per capita admissions in the US with more expensive 3D and large format movies (such and Canada have been declining at a fairly consistent as IMAX). The average ticket in 1995 was $4.59 in 194 rate since 2005, from 4.4 visits per year to 3.9 : an 1995, and $8.17 in 2014, but in constant 1995 dollars 11 percent decline in total, or a 1.2 percent annual the 2014 number is $5.27, which is annual price growth 195 compounded decline. of almost exactly one percent above inflation . Figure 10: US and Canada tickets per capita for population aged 2+, 2005‑2015 Tickets per capita 6 5 4.4 4.4 4.4 4.2 4.3 4.1 4.1 3.9 4.0 3.9 4 3.7 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: MPAA, Deloitte Canada analysis. For further information on the sources, see endnotes. Technology, Media & Telecommunications Predictions 2016 31

But compared to what has happened to the DVD It is also worth noting that the number of tickets sold business, the DVD rental business, and other traditional annually in US and Canada since 2002 is down from media, cinema is doing better than most. 1.58 billion to about 1.3 billion in 2015. That 18 percent fall is not bad compared to other traditional media in Charging for feature films has been an industry the same time period, but is also not as serious as the for over 100 years. Globally the industry is about previous decline in the movie business caused by a new 196 $40 billion per year , and although it is declining in technology. In 1947 US box office reached a peak of some markets, it is doing so at a very moderate pace 4.7 billion tickets sold, but the rise of TV saw ticket sales compared to other industries that face threats from fall to a billion by 1964 – a 78 percent collapse over only digital and the Internet. 200 17 years . It seems likely that the greater ease and accessibility Importantly, the stability of movie admissions is not of legal and illegal movie streaming or downloading being driven by older audiences, in the way that TV has had an effect on movie box offices. One estimate viewing is, where younger viewers watch about half of the cost of piracy to the US studios was $6.1 billion as many hours per day as people aged 65 or over. 197 a year . What was a growth industry to 2002 is now The average North American aged 2 or over attended marked by annual fluctuations around a slow decline. just under four movies per year in 2015, while the And although the dollar value of admissions has been 201 average 12-24 year old went to 6.3 movies . Yes, they relatively stable, the decline in terms of tickets is steeper: are consuming movies on YouTube, iTunes application compared to a 0.8 percent decline in constant dollars 202 program , Netflix and illegal streaming/download sites, for 2002-2015, the number of tickets sold has declined but they continue to over-index on cinema-going as about twice as quickly at 1.5 percent annually. well, citing the ability to socialize with friends and the 203 big screen experience . That is still not the kind of erosion seen in many other traditional media, but given that movie theater owners make money from both admissions and concessions, the number of tickets matters a lot. Concession revenues are about 45 percent as the amount of the money from 198 admissions , but they are an even larger source of 199 profits, with margins of about 85 percent . … compared to what has happened to the DVD business, the DVD rental business, and other traditional media, cinema is doing better than most. 32

Bottom Line Spending on making movies should assume flat-to-down theatrical revenues, but with an ever-increasing focus on franchises and sequels. Seven of the top 10 movies in 2015 were in this 204. Sequels and franchises category, and the expected outlook for 2016 is for continued dominance tend to be lower risk, and also enjoy better international success than standalone films. As of late 205. 2015, Hollywood had 157 movie sequels in the works This prediction focuses on domestic box office: the data shows that the number of tickets and dollars from theatrical admissions is more resilient than many think. But the focus on domestic box office is not even close to the full picture for the movie industry. At one time, international box office was almost an afterthought, but these days US studios assume that international will be 60 percent of total box office for any given film, with some films seeing 75 percent of cumulative box office coming from outside North America206. Further, even global box office ticket sales are only about half the story. In 2012, nearly half (48 percent) of total revenues for the average film came from ancillary 207 revenues: home video sales, pay-per-view and TV/OTT licensing, syndication fees and merchandising . The US and Canada market is the world’s biggest box office at about $11 billion annually, but global 208 box office revenues were about $40 billion in 2015 . As of 2013, the five biggest international box office markets after North America were China ($3.6 billion), Japan ($2.4 billion), UK ($1.7 billion) 209 France ($1.6 billion) and India ($1.5 billion) . Between 2009 and 2013, the North American box office was up about three percent in nominal dollars, but the international markets grew by $6.5 billion or 22 percent in the same time frame, representing 70 percent of all ticket sales by 2013. Certain markets are growing even more strongly than the overall international market: as of December 2015, box office in China was up 49 percent year over year, to $6.7 billion. China is expected to 210. The growth in China’s box office is being surpass the North American market by 2017 or 2018 driven in part by expansion in the number of screens: 25,000 additional screens are expected to be added in the next five years211, which is more than the total number of screens in the country at the end of 2014212. This will take China well past the North American market, with its 40,000 screens 213 214 as of 2014 . The number of admissions in 2014 was 830 million , and assuming that growth in attendance is in line with the revenue increase at the box office, admissions should be around 1.26 billion for the full year 2015, virtually tied with the 1.3 billion in the North American market. Although the Chinese and North American market are jockeying for leadership in terms of annual box office revenues, in the number of tickets sold, both are well behind India, which had 2.7 billion 215. The rest of the global market is relatively stable: in 2014 Latin America rose two admissions in 2013 216. percent, while EMEA fell three percent The North American market is likely to be typical, at least for English-speaking markets. Admissions and revenues for the UK and Australian markets are roughly in line with US trends across multiple periods, as can be seen in Figure 11, although the revenue measurements are in nominal dollars rather than constant dollars. Technology, Media & Telecommunications Predictions 2016 33

Figure 11: Box office and attendance CAGR: North America, UK, and Australia 1993‑2013 North America UK Australia 5‑yr CAGR till 2013 Attendance 0.0% 0.2% -0.6% Box office revenue 2.6% 4.8% 3.1% 10‑yr CAGR till 2013 Attendance -1.3% -0.1% -0.9% Box office revenue 1.7% 3.9% 2.4% 15‑yr CAGR till 2013 Attendance -0.7% 1.3% 0.2% Box office revenue 3.1% 4.4% 3.8% 20‑yr CAGR till 2013 Attendance 0.4% 1.9% 2.0% Box office revenue 3.8% 5.6% 5.3% Source: Canaccord Genuity. For further information on the source, see endnotes. Since movie theaters share ticket revenues with the movie distributors, but keep all of the concession profits for themselves, we expect to see the price of popcorn and other treats continue rising faster 217 than the rate of inflation or ticket prices . Exhibitors can continue to promote premium movie experiences such as 3D and IMAX, although at the risk of pushing some people away due to high prices. The annual growth in ticket prices is only about one percent in real terms, and the industry may want to highlight this fact, since the perception is that ticket prices have grown much faster. Also exhibitors can drive better use of under-utilized exhibition space, such as by showing live 218 219 operas , renting out meeting rooms to businesses, or as eSports venues . 34

US TV: erosion, not implosion Deloitte Global predicts that the US traditional television However intent was rarely matched by action and the market, the world’s largest at about $170 billion in decline has been much more muted. The number of 2016, will see erosion on at least six fronts: the number pay-TV subscribers has been declining slowly since 226 of pay-TV subscribers; pay-TV penetration as a percent 2012 , falling by 8,000 in 2012, 170,000 in 2013, and 227 of total population; average pay-TV monthly bill; 164,000 in 2014 . The annual incremental change consumers switching to antennas for watching TV; and in total subscribers was steady at around 150,000 live and time-shifted viewing by the overall population, fewer for most years between 2010 and 2014, but it and especially by trailing millennials (18-24 years old). is accelerating sharply in 2015 with pay-TV subscribers 228 estimated to fall by just under one million , on a base Although media coverage of these trends is very 229 of roughly 100 million homes subscribing to a pay-TV high in 2015, they have been ongoing since about package. There is also likely to be some cord shaving, 2010/2011, which in some ways was ‘peak TV’ in the where consumers pay less money for fewer traditional US. Despite many forecasts of the imminent collapse channels, which is discussed further below: in a Deloitte of the traditional advertising and subscription-funded US 2014 survey, just over half of existing US pay-TV TV model, it is likely to erode at a slow, steady and customers said they would prefer to pay only for the predictable rate. Television is not growing the way it 230 channels they watch regularly . However, as noted used to: for example, pay-TV penetration in the US rose above, there has tended to be a disconnect between from over 76 percent in 2000 to nearly 90 percent in stated intention and follow-through. 220 2010, and has fallen slowly since . Traditional TV is not dying, disappearing, or irrelevant. As of May 2015 TV Pay-TV penetration. Deloitte Global predicts that reached 208.5 million Americans over the age of 18, or pay-TV penetration (or reach) will fall more than two 87 percent of the adult population; and they watched percentage points to 81 percent in 2016, to under 468 billion minutes of TV in the average week, which is 79 percent in 2017, and around 70 percent by 2020. about four times as many minutes as adult Americans That is a 20 percentage point decline in reach from the spent on their smartphones, in apps or on the web (but 89.4 percent in 2010, but the installed base would likely 221 not including talking or SMS texting) . still be markedly higher than for most other countries, and about the same level as US pay-TV penetration Pay-TV cord cutting. Deloitte Global predicts that the 231 of 72 percent in 1997 .The expected decline in number of US subscribers who cut the cord (completely penetration rate is largely due to a steady 1.1-1.3 million cancel pay-TV service from a cable, satellite or phone forecast increase in the number of US households company) is likely to be just over 1 percent in 2016, 232 between 2015 and 2025 . perhaps 1.5 percent in 2017, and around 2 percent in 2018. By 2020, we predict that there are likely to be But another factor is the growing number of millennials around 90 million US homes which are still paying for who have never had a pay-TV subscription. These are some version of the traditional bundle which, while not cord cutters, but cord nevers, and in one US survey 233 down from the peak of 100.9 million subscribers in represent 11 percent of 18-34 year-olds . There have 222 2011 , will be 18 million higher than the 72 million always been Americans who have never paid for TV, but 223 US cable and satellite subscribers in 1997 . The rise of the older demographics tended to watch over-the-air cord cutting has been the most discussed trend around broadcast TV with an antenna. They weren’t paying for traditional TV viewing for years, and is likely to remain a monthly subscription, but they still watched traditional so in 2016. In 2010, nearly 90 percent of US consumers TV, and usually with all the advertisements. Some of the watched almost all their TV via a signal provided new generation of cord nevers may be using antennas by a ‘distributor’, that is a cable, satellite or phone (one cable company includes an OTA antenna for company. Pay-TV is typically sold as part of a bundle, customers who subscribe to broadband but don’t want 234 and costs the average subscriber $100 per month pay-TV ), but many may be using broadband only for for TV only in 2015, with broadband or voice service their video needs. The exact number of millennials who 224 costing additional amounts . For many years around don’t pay for TV and don’t have antennas is not known, seven percent of pay-TV consumers have said that they but as of 2015 the number of households in the US were thinking about cancelling or would cancel their who had broadband only and no antenna or pay-TV 225 subscriptions within the next 12 months . subscription was only 3.3 million, although that was up 235 over a million from 2014, or more than 50 percent . Technology, Media & Telecommunications Predictions 2016 35

Average monthly pay-TV bill. Deloitte Global predicts Many North Americans are unaware that many of the Deloitte Global that the monthly TV bill in 2016 will be about five channels they would like to watch are available for predicts the percent higher than the average $100 per month bill no monthly charge with the installation of a digital number of in 2015, or lower than the historical growth rate of antenna that allows for over-the-air (OTA) TV viewing, over six percent, reflecting the combined effects of either live or time-shifted if they have a recorder. antenna-only small numbers of cord shavers and fewer consumers For some Americans, this may require a more expensive homes (or adding channels. The average US bill for pay-TV grew roof-mounted antenna, but for the more than 80 percent 236 241 by 6.1 percent per year between 1995 and 2015. who live in urban areas , the antenna can be indoors 242 antenna plus Deloitte Global further predicts that the bill growth is near a window or exterior wall and costs less than $20 . Internet TV) likely to decline by about one percentage point per year OTA digital TV is commonplace in Europe, but only about so that by 2020 ARPU is likely to be under one percent, 12.7 million US homes were receiving broadcast as of to increase and may even have begun to decline, although still at Q2 2015, or 651,000 higher than the same period in 243 by less than a relatively slow rate. 2014 . There are many articles that specifically address 244 cord cutters using antennas , and some distributors fear one million in The number of channels available to the average US that they will see a surge in OTA homes, as cord-cutters 2016, to about pay-TV subscriber has increased by almost 50 percent cancel traditional distribution bundles; get some channels 237 13.5 million since 2008, from under 130 channels to nearly 190 . from their antenna and buy a small bespoke selection of Over that period the number of channels watched by OTT services. homes, and the average viewer has declined from 15 channels in 238 to about 2012 to 11 in 2014 . As some 90 percent of channels There is some evidence of this trend, but it is much that are being paid for are unwatched, some subscribers smaller than most people expect. OTA-only homes in 18 million may be thinking about cord shaving: choosing packages the US were more or less flat at just over 11 million homes with fewer channels, or fewer packages, with the result from 2010-2013, but the number has recently begun by 2020. being lower monthly spend. growing, and at a faster rate: 500,000 additional homes went OTA-only in 2014 and nearly a million in A few cord shavers may be substituting a traditional 2015 (although the year-over-year growth was highest pay-TV package with a lower-cost subscription video on 245 in Q1 – in Q2 and Q3 it was less than 700,000) . demand (SVOD) service. Were this behavior widespread, The modest rise in OTA viewing affects each of the parts we would have likely seen a decline in monthly pay-TV of the traditional TV industry differently. Cable, telco and bills, but this has not happened. In fact average bills satellite providers of TV packages are likely to see a small are still rising, rising from $89 in 2014 to over $99 in effect on subscriber numbers and revenues (although 239 2015, according to one survey . Another 2015 survey only 53 percent of broadcast-only homes are broadband shows that over 80 percent of pay-TV subscribers are 246 subscribers, so that partially offsets the decline ). spending the same or more as in 2014, and that they However, TV broadcasters and their advertisers are not are remarkably stable in the services they are buying: affected by a move from traditional pay-TV bundle to 64 percent kept the same services as last year, 17.8 percent OTA: as long as viewers are watching their programs added services, and 18.6 percent cut services – for a net (and the ads) then they are largely indifferent to the 240 annual change of only 0.8 percent . distribution method. Antenna instead of pay-TV. Deloitte Global predicts Average daily TV viewing, live and time-shifted. the number of antenna-only homes (or antenna plus Deloitte Global predicts that daily TV minutes for the Internet TV) to increase by less than one million in 2016, adult population will continue to fall at a slow but to about 13.5 million homes, and to about 18 million 247 steady rate in 2016, to 320 minutes per day in Q1 . homes by 2020. On average, adults in the US watched over 330 minutes of traditional live and time-shifted TV per day in Q1 2015 on a TV set. This is 14 minutes down from 2014, and 248 10 minutes lower than in 2013 . 36

Deloitte Global further predicts that this moderate Specific subsets of the US audience are shifting viewing decline will continue, but average daily viewing in the habits faster than the average. Trailing millennials aged US will likely still be over 240 minutes in 2020, that 18-24 watched 29 percent fewer minutes of TV daily is greater than in most other countries, despite the in 2015 than they did in 2011 (see Figure 12). This is an fall. Four hours would be exactly the same amount of 8.3 percent compounded annual decline, which is traditional TV as watched in the 1998-99 broadcast six times faster than the 1.3 percent decline seen for the 249 253 season . population aged 2+ in the same period . Average daily TV viewing, live and time-shifted Younger Americans have always watched considerably 254 trailing millennials. Deloitte Global predicts that less TV than older demographics , but the gap is 18-24 year-olds will watch about 12 percent less widening: in 2008 18-24 year-olds watched 58 percent traditional TV in Q1 of the 2016 broadcast year than in as much live and time-shifted TV as those over 65, while the same quarter of the previous year, or about 20 fewer by 2015 that age group was watching only 36 percent minutes daily, down to an average of 150 minutes, still as many minutes of live and time-shifted TV on TV sets, well over two hours. Deloitte Global further predicts and about 42 percent as many minutes of all video on 255 that erosion in viewing time will continue, and that all devices as Americans 65+ . As TV time for 18-24 18-24 year-olds will be watching less than two hours year-olds drops to under two hours per day, we may of TV daily by 2020, but more than 90 minutes. end up nearing a tipping point where TV viewing for Some portion of their video consumption over that that demographic may begin to decline more sharply time period will likely be shifting from traditional TV on than for the population as a whole: there may be TV sets to other devices, such as multimedia devices a threshold or minimum daily viewing time below which (Apple TV digital media extender, Chromecast, etc.) media consumption changes more abruptly. 250 smartphones, computers and tablets . But video consumption on those devices, while it has been growing, has not been offsetting the decline in traditional TV-watching by trailing millennials. In 2015, all video watched on devices other than TV sets was 251 32 minutes daily, up from 28 minutes in 2014 . Those additional four minutes are much less than the 33 minute decline in traditional TV on TV sets that 252 18-24 year-olds watched over the same two periods . Figure 12: Daily TV minutes (live and time shifted) for US 18-24 year olds in Q1 Minutes 300 250 200 150 100 50 0 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016E Source: Nielsen Three Screen Report Q1 2010, Nielsen Cross Platform Reports Q1 2011, 2012, 2013, 2014, Nielsen Total Audience Report Q1 2015, and Deloitte Global estimate for Q1 2016. For further information on the source, see endnotes. Technology, Media & Telecommunications Predictions 2016 37

Bottom Line With the rise of over-the-top (OTT) services offered from non-traditional providers like Netflix, download services like iTunes 256 application program , clips from services like YouTube, and the continued usage of pirate sites (streamed or downloaded), talk of the imminent collapse of traditional TV is understandable. But while the US TV market is not growing, it is not collapsing either. The best way of describing the outlook is gradual erosion: an apocalypse is not around the corner. An obvious question is: “What do all these various erosions do to the size of the US television industry?” If it is about $170 billion in 2016, (of which $75 billion is advertising and $95 billion is pay-TV) how does that number change thereafter, and by how much? The outcome is hard to predict with certainty. Putting it all together, the total picture is murky. If one percent of current pay-TV subscribers discontinues service in 2016 this does not necessarily mean a one percent decline in revenues. Cord cutters are likely to be those on the lowest-priced pay-TV packages. Their departure may cause ARPU to rise and 257 become more resilient: customers that remain may be those least sensitive to further price increases . Cord cutters are likely to include those watching the fewest minutes of TV, and may represent a smaller share of ad dollars to the industry than subscription dollars. Some cord cutters are moving to OTA antennas, and may therefore end up watching more ads due to the lack of a DVR, and subscription losses may be offset by more effective advertising. Equally, cord shavers who get rid of channels they are not watching will likely have minimal impact on ad revenues. Millennials aged 18-24 are a desirable demographic, and they are reducing TV minutes at a faster rate than the population as a whole, 258 but are only a tenth of the US population . Further, advertisers often pay to target specific groups: if traditional TV watching becomes concentrated in certain age groups or other demographic slices, advertisers could be willing to pay more for that targeted audience. As an example, there were concerns over weakness in the TV ad market in the summer of 2015, as the mid-point of the August 259 260 US upfront estimates fell over two percent from 2014 . However by October, total TV ad spend was up 10 percent annually . The US is only one market, albeit the largest in the world, representing about 38 percent of the global TV market of around $450 billion worth of subscriptions, advertising and license fees. What happens in the US may or may not happen in the rest of the world. Trends in Canada for cord cutting, cord shaving, pay-TV penetration and changes in viewing for the population as a whole, and for millennials, are roughly in line with the US data cited. If we look at the UK TV market there are some similarities: viewing minutes are expected to fall between 2015 and 2020, but 261 moderately, from 204 daily minutes to 191 . The UK data also shows a 27 percent decline in viewing by 16-24 year-olds for the period 2010-H1 2015: from 169 daily live and time-shifted minutes to 123, very much in line with the US decline of 29 percent over 262 (roughly) the same period . However, the forecast is for the peak decline in that youngest demographic to have occurred in 2014/15, 263 and to “flatten out from 2016 onwards” . It is also worth noting that although TV minutes may be declining in the UK, the pay-TV 264 market is growing strongly, both in terms of subscribers and revenues , and the UK TV advertising market grew eight percent in 265 2015, recording its best growth in 20 years . Although pay-TV subscribers are expected to fall slowly in the US, the global picture remains in growth mode. From 950 million subscribers and 58 percent penetration in 2015, estimates for 2020 are for 20 percent growth to 1.14 billion subscribers and 266 63 percent penetration . Our thesis of gradual erosion is based on recent history and incomplete data. As already mentioned, if there is a tipping point of viewing hours needed to sustain pay-TV subscription rates, we could see the number of millennials who have their own homes and 267 who do not get pay-TV go from current levels of 20-25 percent to a much higher number in a short period of time. That hasn’t happened yet, but it could. Another wild card is likely to be the effect of popular channels that had formerly been available only as part of a pay-TV bundle being offered on a stand-alone basis over the top (OTT) through the Internet. One such service has already launched 268 in the US, and has only seen about one percent of its pay-TV subscribers cancel pay-TV and switch to the OTT version . Should that service, or any others, see that substitution accelerate, the fragmenting of the traditional pay-TV bundle model will almost certainly see our predictions on cord cutting, cord shaving, and cord nevers prove too conservative. Finally, although the 18-24 year-old category is currently moving the fastest away from the traditional TV model, it is worth adding that older generations are also exhibiting some of the same shifts, albeit at lower levels. If those older age groups began to resemble millennials more rapidly in their pay-TV habits, our forecasts would again be too cautious. 38

European football scores $30 billion Deloitte Global predicts that the European football Both the UK and Spain are now relatively mature pay-TV market may generate $30 billion (€27 billion) in markets for football, with 17.4 million pay-TV homes in There is global 272 revenues in 2016/2017, an $8 billion (€7 billion) increase the UK (65 percent of all households) and 5.4 million interest in 273 relative to 2011/2012, and a compound annual growth (29 percent) in Spain as of Q2 2015 . Live rights to football’s top rate of seven percent. premium content such as top-tier domestic league football provides regular content through most months leagues and Most of this growth will likely be driven by the five largest of the year, and hence is highly attractive to pay-TV clubs at many leagues (England’s Premier League, France’s Ligue 1, the operators in driving subscriptions. German Bundesliga, Italy’s Serie A and La Liga in Spain) levels, from whose share of revenues continues to rise. These leagues It is not just from domestic markets that Europe’s top broadcast are expected to generate approximately $17 billion leagues are achieving substantial growth in broadcast (58 percent) of total revenues in 2016/17. rights fees. The EPL and La Liga’s international rights interest to shirt fees have been climbing fast too. In the 2016/2017 sponsorship Football and pay television have had an increasingly season the EPL is expected to generate over $1.5 billion symbiotic relationship over the past two decades, and from overseas broadcast rights, a gain of at least and ownership. forecast 2016/2017 revenues attest to this. Football’s 40 percent compared to the previous rights cycle. revenues are predominantly made up of matchday La Liga generates less than half this amount, but has (admissions and hospitality), commercial income and achieved substantial recent growth, and generates the broadcast revenues, and it is this latter source which is second-highest broadcast revenues from non-domestic forecast to generate both the majority of total revenues markets of any sports league. and the increase in revenues in 2016/17. There is global interest in football’s top leagues and The 2016/2017 season will see new broadcast deals clubs at many levels, from broadcast interest to shirt for both the English Premier League (EPL) and Spain’s sponsorship and ownership. In the EPL, over half of the La Liga come into effect. Domestic live broadcast rights 20 clubs have non-UK owners and the principal sponsor is expected to generate an average of $2.6 billion of three-quarters’ of the teams is headquartered abroad, 269 for the EPL for the three seasons from 2016/2017 , with many based in Asia Pacific and the Middle East. a 71 percent increase on the prior agreement. Spain’s La Liga, which has recently moved to a collective broadcast rights selling model, is expected to earn approximately $1.1 billion per season from domestic live 270 rights . These are the two biggest drivers of revenue growth in the European football market. Figure 13: Predicted European football league revenues in $ billions for 2016/2017 $20 $18 $17 $16 $14 $12 $10 $8 $6 $5 $4 $3 $4 $2 $1 $0 'Big five' Non 'big five' FIFA, UEFA and Big five countries' Non 'big five' European leagues European leagues National Associations other leagues other leagues 271 Source: Deloitte Sports Business Group, 2015 Technology, Media & Telecommunications Predictions 2016 39

Combined revenues of the 20 EPL clubs are predicted The early signs are that this is the case, with Premier The game’s to surpass $6.5 billion in 2016/17, more than double League clubs returning collective pre-tax profits in rising revenues, that of the next-highest European league. The EPL has 2013/14 for the first time since 1998/99. This has and its universal for many years delivered strong matchday, commercial made the sport and its clubs an increasingly attractive and broadcast revenues and the core reasons for the investment, both for individuals seeking prestige and for appeal, make it EPL’s continued revenue leadership are: its substantial financial buyers looking for a return on their investment. highly attractive broadcast revenue advantage, aided by highly successful centralized sales and marketing; global talent; Further purchases of leading European football teams, to investors. competitive matches throughout the league; full stadia; in part or whole, are likely in 2016 and beyond. In late and strong history and heritage. 2015, Chinese investors paid $400m for a 13 percent 276 shareholding in City Football Group , which owns EPL EPL clubs are reaping the returns from heavy investment club Manchester City and football clubs in Melbourne in venues and facilities over the last 20 years. and New York, as well as a shareholding in a club in League attendance averages over 95 percent of stadium Yokohama. As of end-2015, only one Premier League capacity. Commercial revenues are now the highest of club, Leicester City, was majority-owned by Asia any European league, driven particularly by lucrative Pacific-based investors: we expect this to increase. deals secured by the league’s largest clubs, which have global appeal and resonance. For example, Manchester Chinese investors have been building their football United’s ten-year kit deal with Adidas is worth investments within their home country and abroad. 274 One investor in Manchester City, China Media a minimum of $114 million (£75 million) per season . Capital (CMC) also spent $1.3 billion to secure global While the EPL’s financial prowess may not have been broadcasting rights for the Chinese Super League matched by its on-pitch success in European club for five years from 2016277. Earlier in 2015 Dalian competitions, in recent seasons their widening revenue Wanda, a Chinese conglomerate, bought a $50million advantage has given clubs the clout to bid for the top (€45million) stake in Atlético de Madrid, as well as global playing talent, possibly squeezing out other acquiring global sports marketing company Infront European clubs. Sports & Media, which holds commercial rights to the 278, 279 Chinese Super League . Full ownership of a Premier Football has long been about supporters at every level, League club by a Chinese investor may only be a matter and owning a football club has to some extent been the of time. ultimate collectable. The game’s rising revenues, and its universal appeal, make it highly attractive to investors. A quarter of EPL club owners are from North America and the EPL has secured a six-year $1 billion broadcast The game changer is the recent trend for top clubs, in deal with NBC from 2016/17, highlighting its growing the EPL in particular, to be able to generate a profit. prominence in the US. Further evidence of football’s Historically, revenue growth has been outstripped by growing value in the US market are the sell-out crowds cost increases, with football’s greatest challenge being for pre-season matches involving European clubs, and its ability to balance the books. Recent years have seen also the carefully-managed development of the MLS. the development, implementation and subsequent The US generates the highest individual broadcast rights benefits of cost control regulations within the game, fee for the World Cup of any territory, and US fans were indicating that this could be the most significant football the largest contingent of travelling fans for the last business development since the Bosman ruling on player 280 World Cup . 275 transfers . 40

Bottom Line Football’s revenues have been increasing consistently and impressively over the past few decades; but it is only recently that revenue growth has stayed ahead of costs, with improved cost discipline being implemented across the game. This improved cost management, combined with continuing broadcast and commercial growth, looks likely to make football clubs increasingly profitable. They are therefore attractive to investors looking for a consistent financial return, as well as those interested in building profile or business opportunities through acquiring a trophy asset football club. In the long run, there is a virtuous circle within football. The more revenues a club can generate, the more it has to invest in talent, increasing the chances of on-pitch success, with the associated financial rewards allowing it to reinvest. This creates an imperative for clubs, and the leagues of which they are a part, to maximize their revenues. More revenue should enable clubs to recruit not just the best talent and coaches on the field, but also the best commercial staff, access to the best technology, and the ability to invest for the long term, for example by investing in youth academies. The more popular football becomes, the more brands will likely want to be associated with it. Europe is currently football’s financial powerbase, with leagues and clubs continuing to explore how to capitalize on their global appeal through a variety of strategies – broadcasting and distribution of content, sponsorship, other commercial partnerships, shareholdings, talent development and matches abroad. It is established practice for top European clubs to play pre-season matches in non-European markets. This trend is likely to increase, and it seems only a matter of time before a European League stages regular season matches outside of the continent, in a similar manner to how the NFL has staged matches in London and the NBA in Europe. As long as imported European content retains popularity, leagues and clubs outside of Europe face the challenge of developing their own competition structures. This challenge should be embraced, with these leagues and clubs building strong governance and administration structures, facilities, youth development and community engagement in their local markets, while leveraging best practice from Europe. Commentators may question whether football’s revenues can continue to grow. We would not expect the 2016/2017 revenue growth rate to continue in 2017/2018: there are no major new broadcast or sponsorship deals likely to start in that period which would generate the same uplift as the new EPL and La Liga deals will do in 2016/2017. But in the long term, prospects look favorable as long as football maintains its ability to remain a spectacle that can attract a large proportion of the population, almost every week of the year, and which plays out not just on our television screens, but also through online news sites on the web, on social networks, on video games, in the back pages of newspapers, over breakfast, in school break times, and indeed in almost every other medium. Technology, Media & Telecommunications Predictions 2016 41

eSports: bigger and smaller than you think 281 Deloitte Global predicts that eSports will generate Revenues for eSports are predicted to grow 25 percent The very idea global revenues of $500 million in 2016, up 25 percent in 2016, which is better than most mature sports, 282 that people from about $400 million in 2015 , and will likely have many of which have been around for a century or even may be willing an audience of regular and occasional viewers of close centuries. Arguably, given its small size, some might ask to 150 million people. why eSports’ growth rate is not higher. to watch other The very idea that people may be willing to watch Some believe that eSports is approaching a tipping people play other people play competitive video games for big point or upward inflection in the market: one American competitive money prizes may surprise some. These people analyst predicts that eSports in the US alone will leap 284 video games often underestimate the global annual market size at from $85 million in 2014 to $1.2 billion in 2018 : millions of dollars only. Conversely, eSports advocates a 94 percent compounded growth rate, which is triple for big money overestimate the current market size, believing annual the projected 2016 growth over 2015. prizes may revenues are already in the billions, and comparable to major league sports. Some are linking the popularity of online video 285 surprise some. game-related content to eSports . The top In some ways, eSports is comparable. A single event gaming-related video star is PewDiePie, with 40 million 286 (but not that many per year) may attract 40,000 people subscribers , and number two is VanossGaming, with 287 watching live, and tens of millions watching over 15 million subscribers . They may be the biggest stars, the Web. This could be interpreted as meaning that but collectively gaming videos make up more than 283 288 “eSports is bigger than basketball ”. That may be true, 10 percent of YouTube’s top performing channels . when measured by audience size for an individual event, but in dollar terms, eSports is not yet playing in the big However, Deloitte Global does not believe that there leagues. is a direct correlation between online video gaming success and eSports and, therefore, that the annual In 2016, eSports revenues will represent a fraction growth rate of eSports revenues is not about to triple. of league revenues in major sports such as European The most popular online content is not about watching football (soccer), US football, basketball, baseball, or elite gamers competing. Instead, the content is about ice hockey which range from $4 billion up to $30 billion entertainment (both PewDiePie and Vanoss are better (see Figure 14). known for their humor than being top-ranked players) or is largely instructional in nature: teaching gamers how to find hidden treasures (such as Easter eggs) or surmount difficult in-game challenges. Figure 14: Major league sports revenues in $ billions Revenue ($billion) 35 30 $30 25 20 15 $11 10 $8 5 $5 $4 $0.5 0 European football NFL football MLB baseball NBA basketball NHL hockey eSports 2016 2015 2014 2014 2015 2016 Note: Revenue figures include ticket sales, TV rights, sponsorships and other commercial sources Source: Forbes and Deloitte Global analysis based on publicly available sources. For further information on the sources, see endnotes. 42

There is nothing wrong with educating or entertaining tens of millions of gamers (usually for free, except Bottom Line for the ads), but this may not directly lead to tens of millions wanting to either subscribe or pay to attend an Even if eSports’ revenues were to triple eSports tournament. So far, much of the online gaming between 2016 and 2020 (to $1.5 billion), they audience is more comparable to fans of the Harlem would only be one percent of global sports 295. But eSports Globetrotters (people who are entertainers, who happen revenues of over $150 billion to play basketball) rather than to fans of a successful pro does reach tens of millions of people on basketball team who plays to win a championship. a regular basis, and over a hundred million occasionally. As such, it is comparable to many Tech and media companies are paying attention to traditional sports that have large audiences, eSports, both for growth opportunities and because big sponsors and interesting demographics. it appeals to a narrow and desirable demographic: One study predicts that eSports will have 296. 75 percent are millennials aged 18-34, and 82 percent more viewers than NFL football by 2020 289 One report describes them as “an advertising are men . Amazon acquired Twitch for just under 290 297 $1 billion in 2014 , while 2015 saw Swedish media goldmine ”, which is supported by their company Modern Times acquire a majority stake in spending habits: eSports fans are more likely 291 to make in-game purchases, buy more apparel ESL, the oldest eSports company for $87 million . 292 and buy more branded peripherals than other Russian investors have committed $100 million . 298 Canadian motion picture exhibitor Cineplex is spending gamers . $15 million to acquire an eSports company and create a new gaming league that will take place in its The assumption tends to be that eSports fans 293 are dominated by those who prefer gaming theatres , and the first dedicated eSports venue has been opened in the UK in partnership with a cinema on their computers. In fact, only 35 percent of 294 US eSports fans were PC gamers, with nearly chain . 299. 80 percent of fans being console gamers Mobile games have not been a part of 300 eSports, although that may change . Immersive technology like VR goggles may make eSports even more interesting301. However, this is unlikely to be an important growth area for eSports in the near-term: our 2016 Prediction on the VR market expects combined hardware and software sales of less than $1 billion (see Prediction: Virtual reality: a billion dollar niche). There is nothing wrong with educating or entertaining tens of millions of gamers (usually for free, except for the ads), but this may not directly lead to tens of millions wanting to either subscribe or pay to attend an eSports tournament. Technology, Media & Telecommunications Predictions 2016 43

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Telecommunications The dawn of the Gigabit Internet age: every bit counts 46 Used smartphones: the $17 billion market you may never have heard of 50 The rise of the data exclusive 53 VoLTE/VoWiFi: capacity, reach and capability 57 Photo sharing: trillions and rising 59 Technology, Media & Telecommunications Predictions 2016 45

The dawn of the Gigabit Internet age: every bit counts Deloitte Global predicts that the number of Gigabit While Gbit/s subscriptions should surge this year (albeit per second (Gbit/s) Internet connections will surge to from close to nothing to niche) the sharpest inflection 10 million by year-end, a tenfold increase, of which point for the service may be in terms of perception. about 70 percent will be residential connections. This would follow a flurry of announcements about the 305 Rising demand is likely to be fueled by falling prices and launch of Gbit/s around the world . increasing availability: in 2015, the number of Gbit/s tariffs almost doubled in just three quarters, from just The perceived reasoning for Gbit/s service will likely 302 evolve from identifying a single application running on over 80 to over 150 (see Figure 15) . The 10 million subscribers will likely, however, represent a small a single device that requires a gigantic pipe to meet the proportion of the 250 million customers on networks aggregate demand from dozens of connected devices capable of Gbit/s (or 1,000 Mbit/s) connections as of in a home. end-2016. Over the past 20 years, data connectivity has progressed Looking further ahead, we forecast about 600 million from serving a single device and a low-speed subscribers may be on networks that offer a Gigabit application, to serving multiple, ever more powerful tariff as of 2020, representing the majority of connected devices. Demand for connectivity has evolved homes in the world. At this stage between 50 and symbiotically: as faster speeds have become available, 100 million broadband connections may be Gbit/s, or the range of applications supported has increased, 303 and the viable number of devices per person has marketed as such . This would be between 5 and 10 percent of all broadband connections. Of these steadily risen. about 90 percent would be residential, and the remainder for business. Small businesses have also experienced a significant increase in bandwidth demand, with the move to cloud-based services for a growing range of applications being a key driver of this. Figure 15: Global Gigabit tariff count 180 160 140 120 100 80 60 40 20 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 304 Source: Point Topic , 2015 The number of Gigabit per second (Gbit/s) Internet connections will surge to 10 million by year-end, a tenfold increase, of which about 70 percent will be residential connections. 46

Advances in data connectivity speeds to the home, 1995‑2015 In the mid-1990s, most people used dial-up connections, running typically at 30 Kbit/s. In the following decade, broadband went mass market in developed countries. In 2005, a typical speed offered to the mass market was 1 Mbit/s. In the last five years basic broadband has been complemented by fiber-enhanced connections, which currently offer speeds of 30 Mbit/s and faster. As of summer 2015, FTTx (all types of fiber-based broadband connection) overtook Digital Subscriber Line (DSL) as the most common form of fixed Internet access technology. FTTx offers speeds of 30 Mbit/s and higher. At each point in time much faster speeds have been available, but were only chosen by a minority. At the start of 2016, upper quartile homes in developed The other fiber technology, known as Fiber to the countries may have accumulated a dozen connected Cabinet (FTTC) is unlikely to deliver Gbit/s speeds in devices, each of which may individually ‘sip’ data, 2016, but an evolution of the technology known as but collectively, at peak time, might ‘gulp’ data. G.FAST (also known as Fiber to the Street, or FTTS), Through 2020 that dozen may well become dozens. in trial phase in 2016, should offer speeds in the 309 hundreds of megabits per second (Mbit/s) , and Gbit/s Furthermore, some subscribers may select a Gbit/s (with the headline speed an aggregate of uplink and tariff to improve their chances of addressing downlink speeds) by 2019, if not earlier. For carriers with aggregate demand for 500 Mbit/s at a given time. copper-based networks, FTTS could offer much higher Advertised broadband speeds are often maxima; speeds over existing copper connections running into they may not be medians or averages. The reality homes, significantly reducing the upgrade costs. of broadband is that it is a best efforts service. Multiple factors can diminish the actual speed obtained Indeed a relatively modest network upgrade cost is on a device. likely to be a key enabler of Gbit/s services. One major cable operator has quantified the cost to upgrade its Faster connection speeds can also enable more ‘bursty’ network to be able to deliver a Gbit/s would be about 310 connections, with files downloading or uploading far $22 per home passed . DOCSIS 3.1, the cable network faster, meaning that each device is connected for less upgrade, is 25 percent more efficient than earlier time to the Internet, freeing up capacity for the next versions of DOCSIS. Operators can offers speeds that are 306 request for data . hundreds of megabits faster without having to change 311 the network . A further driver of Gbit/s demand is likely to be price. At the end of 2012, the average entry level price for The faster and more ubiquitous that FTTS and other fiber 307 service was over $400 . By Q3 2015, the average had technologies become, the greater the incentive for cable 312 fallen to under $200, and the cheapest package was networks to upgrade their networks, and vice-versa . 308 priced at under $50 . As average data connections get faster, we expect As of 2016, only a limited number of connectivity existing services to become steadily more bandwidth technologies are likely to be capable of Gbit/s service, consumptive, new formerly unviable data-intensive namely Fiber to the Home (FTTH), Premise (FTTP), services to launch, and new ‘data-gulping’ devices to Basement (FTTB) and DOCSIS 3.1. FTTH is relatively rare come to market. Over time many data services have due to the cost, but FTTP and FTTB are well suited to consumed an increasing quantity of bandwidth, rising in delivering high speeds to apartment blocks. DOCSIS 3.1 line with availability. Video streaming offers the clearest is the upgrade to DOCSIS 3.0 which enables Gbit/s example of this. Its quality has increased steadily along speeds on cable broadband networks. with data connectivity speeds (see side bar: A history of video streaming). Over the past decade, video streaming services have progressed from offering 0.5 Mbit/s streams, which is inferior to standard definition (SD) television, to ultra-high 4K resolution, using 25-50 Mbit/s, or up to 100 times more bandwidth (also 313 see side bar: A history of video streaming) . Technology, Media & Telecommunications Predictions 2016 47

A history of video streaming: 1995 to 2015 The first Internet-streamed broadcast took place 20 years ago. It barely counted as a video stream: it blended high quality audio with a series of real-time images. Most of the 36,000 online viewers accessed the content from Internet Cafes as home connections were 314 too slow . A decade later, in 2006, a year-old YouTube was receiving 65,000 uploads a day which could then be streamed in low quality 315 (320x240 pixels and mono audio) . In 2008, quality was upgraded to 720p (entry level high definition). A year later full HD, or 1080p became available. In 2010, 4K files (2160p) became available, many years ahead of traditional TV broadcasters. A 4K upload 316 can be at up to 68 Mbit/s . In 2014, 8K was offered, albeit possibly many years ahead of the commercial availability of screens able to display that level of detail. Video calls have also experienced a significant upgrade It is likely that faster bandwidth may also create in quality. In 2006, video calls were typically made additional uses of the TV set: it is possible, for example, using aftermarket webcams attached to PCs. This year, that the set, when not being used to watch programs video calling is supported by billions of smartphones, or movies, may be used to display images and video, tablets and PCs, for one-on-one or one-to-many calls. in the same way that screensavers have filled computer The faster the data connection, the greater the number screens when idle. We expect it will become increasingly of possible participants: an eight-way video call would common to download or stream high resolution require a dedicated 8 Mbit/s stream. screensavers for display on TV sets, with imagery ranging from cityscapes to fireplaces, from HD views As available bandwidth increases, we would 318 from the International Space Station to live webcams expect it to change all aspects of communication. 319 from tourist hotspots . Instant messages have already evolved from being predominantly text-based to incorporating photos (in Gbit/s connections may change the approach to home ever higher resolution) and video (at ever higher frame security solutions. Historically, connected home security rates). Social networks, which are a variant of instant relied on a call center making a telephone call to the messaging, are hosting growing volumes of video views. home. Many home video camera solutions currently As of November 2015, there were eight billion daily record on to hard drives. As uplink speeds increase, 317 video views on Facebook, double the quantity in April . cameras are likely to stream video, back-up online, offer 320 better resolution and higher frame rates . A single It is possible that the telephone call may be replaced by HD webcam may stream at 1 Mbit/s, and as the cost a video wall, offering always-on portals to friends, or of security cameras declines, they may well proliferate distant family or remote teams. In 2016 the video wall in homes. As their resolution increases, their network may be a small screen, such as a tablet, but over time, demand will likely grow too. dedicated video-wall devices might become available, with a commensurate increase in data speed required. In addition to the bandwidth usage that is triggered by human activity, from video-on-demand to browsing, Faster data connections have enabled high definition there is likely to be a growing volume of background (HD) video-on-demand to a television set, and are likely data usage. Every additional device, from smartphones to be a factor in encouraging purchases of 4K TV sets. to smart lighting hubs, is likely to require online updates, As at end-2015, the majority of 4K services were via be this for apps or for operating systems. Over time, streaming. these may well grow in size – for example the maximum size of a downloadable app has risen steadily over the years to reach 4GB now; the current limit on 321 downloadable PC files is now 250 GB . Every photo taken may trigger a chain reaction of back-ups to other devices and to remote hosting sites. 48

The more bandwidth available, the more likely This prediction has focused on Gbit/s services via fixed people are to squander it, at least in relative terms. lines to homes and premises, but by end-2020 it is This is similar to the evolution of programming. possible that such speeds will also be attainable over When processing power was limited, coding was very cellular mobile connections. LTE advanced currently efficient. As processing power steadily increased, it offers up to about 500 Mbit/s in trials, and up to 323 made less and less sense to spend time refining code 250 Mbit/s in commercial offerings . Carriers that 322 such that it ‘sipped’ power . A similar transition has deploy 5G branded services are likely to offer Gbit/s happened with bandwidth: the more availability of it at services, and there is likely to be a mixture of trials the same price, the more consumption. and limited commercial launches of service in the run 324 up to 2020 . Bottom line A Gbit/s Internet connection might appear frivolous, but a decade ago some commentators may have questioned the need for a touchscreen-based device capable of transmitting data at 150 Mbit/s, with storage for tens of thousands of HD photos, video quality sufficient for broadcast, a pixel density superior to most TV sets, a secure fingerprint reader, and billions of transistors within a 64-bit eight core processor. Yet modern smartphones with this specification are likely to sell in the hundreds of millions of units this year. While a Gbit/s connection for a single device and a single application may be overkill, consumers are 325 likely to continue accumulating connected devices in the long term . ISPs should proceed cautiously and be able to respond rapidly. ISPs that launch Gigabit/s too early, and increase speeds on all other service tiers at the same time, may encourage some subscribers to downgrade to a lesser tier. However the offer of Gbit/s service by some ISPs may oblige a rapid 326 response by other players in the same market . Device vendors and application developers should constantly review how the increasing pace of broadband speeds, or response rates, is likely to make previously unviable gadgets or services possible. As broadband speeds rise, TV broadcasters should consider the extent to which they need to continue using traditional broadcast technologies to deliver content to homes. It may be the case that for some neighborhoods they no longer need to use satellite, cable or terrestrial broadcast to deliver programs into customers’ homes. While this prediction focuses on 2016, and the Gigabit/s era, it is most likely that the speed race will not conclude upon reaching this speed. We would expect Internet speeds to continue rising in the long term; 10 Gbit/s has already been announced, and 50 Gbit/s connections are being contemplated for 327 the future . Technology, Media & Telecommunications Predictions 2016 49

Used smartphones: the $17 billion market you may never have heard of Deloitte Global predicts that in 2016 consumers will For consumers the primary incentives to sell a device – sell outright or trade in approximately 120 million used rather than keeping it as a spare, giving it to a family smartphones generating more than $17 billion for their member or throwing it away – will likely be driven by owners, at an average value of $140 per device. This is the ease of doing so, the luster of owning a latest model a marked increase from the 80 million smartphones device and the trade-in value on offer. traded in 2015 with a value of $11 billion, or an average 328 We expect the market for acquiring second- (or value of $135 . third- or fourth-) hand devices to become steadily The value of sold or traded-in smartphones will likely be more organized. A decade back, those wishing to sell about twice that of wearables and 25 times the value of their old phones would often use online auctions or 329 the virtual reality (VR) hardware market . marketplaces, which could be far slower and uncertain relative to being quoted a trade-in value at the point of Worth $17 billion in 2016, and with 50 percent sale, or simply swapping one phone for another with year-on-year growth in units, the used smartphone a leasing plan. market is forecast to grow four-five times faster than the overall smartphone market. A total of Specialist companies may emerge which forecast 1.6 billion smartphones are expected be sold in trade-in values after one, two or more years of 330 2016, an 11 percent increase on the prior year . ownership, similar to the equivalent service providers in Used smartphones represent an increasing share of the the automobile industry. market: about seven percent of the total smartphone sales by units in 2016, up from five percent in 2015 and In many developed markets the range of options four percent in 2014. for selling a device is steadily growing, ranging from companies specializing in acquiring second-hand devices 331 We predict at least 10 percent of premium smartphones to manufacturers offering leasing options . ($500 or higher) purchased new in 2016 will end up having three or more owners before being retired, and We expect there to be significant variation in the will still be used actively in 2020 or beyond. practice of trading in smartphones by market. Deloitte member firms’ research in 20 markets found We would expect trade-in value per device to vary by that as of mid-2015 approximately 12 percent of all model and market, but across the 120 million used consumers sold their smartphones (see Figure 16). smartphones that are likely to be sold in 2016, we Of these two-thirds sold their smartphones outright, estimate that the average value per device will be and a third traded them in with an operator or device about $140. manufacturer. In Singapore, about a quarter of smartphones were traded in; in Norway, Italy, Russia About half of these devices are expected to be traded and Finland, only five percent were sold or exchanged. in to manufacturers or carriers in exchange for credit Deloitte Global would expect that over time, most toward a new smartphone. The remainder will likely be markets should see a steady increase in trade-ins. sold online privately, to retail shops or to second-hand device specialists. We expect the practice of selling smartphones could well accelerate through 2020 as both consumers and suppliers increasingly embrace the practice of selling or acquiring second-hand smartphones. 50

Figure 16: Respondents who sell or trade in their previous smartphone Question: What did you do with your previous smartphone when you last upgraded? 30% 25% 20% 15% 10% 5% 0% y a d a y a US UK India Ital Japan France Spain Canad Polan Turkey Mexico Brazil Chin Norway Russi Finland AverageSingapore German Australia Netherlands Sold to phone recycling companies and online for cash Sold/traded to manufacturer/mobile operator Weighted base: Respondents who own or have access to a smartphone: Australia (1,582), Brazil (1,547), Canada (1,414), China (1,729), Finland (726), France (1,407), Germany (1,491), India (1,729), Italy (1,589), Japan (952), Mexico (1,623), Netherlands (1,639), Norway (846), Poland (1,602), Russia (1,462), Singapore (1,850), Spain (1,755), Turkey (860), UK (3,039), US (1,458) Source: Deloitte member firms’ Global Mobile Consumer Survey, May-July 2015 The US and Canadian markets in particular are seeing For smartphone vendors the direct benefits of a thriving a shift from subsidized smartphones on two-year second-hand market are three fold. First, encouraging contracts to a one-year lease/upgrade program: an annual replacement cycle among a growing one survey found that a fifth of new iPhone device number of users may increase annual sales. Second, 332 purchasers in the US intended to lease it . The four the availability of a formal second-hand market could largest US wireless carriers offer smartphone leasing make their devices more affordable to customers with options that allow for annual trade-ins, which are smaller budgets, without having to create less profitable, expected to capture a large part of the post-paid budget variants of their devices. Used, refurbished 333 market . In Germany consumers are increasingly being premium smartphones may be more appealing than 334 required to purchase devices outright . A trade-in for brand new unbranded devices. Third, there would likely the old smartphone would reduce the net sum handed be a margin in processing used phones, similar to that over at the point of acquisition of the new device. earned by car dealers. We would expect emerging markets to be net acquirers of second-hand smartphones. Some consumers may prefer to buy refurbished, used premium models in lieu A trade-in for the old smartphone would of new budget brands, possibly cannibalizing sales of 335 reduce the net sum handed over at the new devices from those budget manufacturers . Rising trade-in values may be a further incentive. point of acquisition of the new device. In the UK market, the average price of a used handset 336 increased from $30 in 2007 to $165 in 2013 . Some models may retain 70 percent of their value nine 337 months post launch . Technology, Media & Telecommunications Predictions 2016 51

Bottom line The smartphone is the primary consumer electronics device by revenues and units: over $400 billion in sales and 1.6 billion units expected to sell in 2016. Its second-hand market is a significant market in its own right and likely to grow over the coming years. The biggest potential implications are for handset vendors, who are likely to become more and more aware of the residual value of their devices. The forecast future value of their products is also likely to become an increasingly important factor in the purchase decision. This may affect not just consumer sales, but also those made by enterprises, for which total cost of ownership should factor in the expected resale value once smartphones are returned. A possible consequence of a more organized second-hand market is the potential for cannibalization: some consumers may elect to buy second-hand, rather than new, as is the case with the car market. However, some of those that purchase a second-hand device may then decide to purchase new next time round, and they may also purchase new accessories and apps for their used smartphones. Furthermore, familiarity with a used device may act as a brand ‘gateway’ and encourage the purchase of other devices from the same vendor. Carriers in developed markets could increase their offer of refurbished premium smartphones. Customers on tight budgets with a refurbished premium device may generate more network traffic, or opt for a large monthly data bundle, than those with a brand new mid-range or budget device. Carriers could offer superior trade-in rates and simple trade-in procedures to lure users from other networks, or to encourage contract extensions. They should consider how best to flex contract length, or offer shorter terms. Any entity (for example a carrier or an enterprise providing handsets to employees) providing leased handsets should evaluate the tax implications. In some markets, the depreciation in the value of the asset may be tax deductible while in some markets the provision a handset may be treated as a form of income and taxed accordingly. Carriers in developing markets should also analyze closely the merits of offering a wider range of refurbished, second-hand premium handsets. Consumers across the world aspire to premium brands, and many may well prefer a used aspirational brand, ahead of a new device from a second-tier brand. The ideal $100 handset does not necessarily need to be a new one. Insurance companies should consider what opportunities this trend may present for them. One of the risks of leasing devices is uncertainty over the condition of the handsets when returned. Vendors or carriers offering leased devices may oblige consumers to take out insurance so as to mitigate risk. Insurance companies should evaluate the robustness of each smartphone model, and also how well each device may be treated. The growth of a second market could lead to consumer confusion. Some smartphones are locked to specific networks. Customers unaware of this may end up purchasing a device that they cannot use on their current network. Furthermore, there are multiple variants of each device, which may not be obvious to consumers. Each 4G model, for example, supports different frequencies of 4G, with the earliest 4G phones supporting relatively few frequencies. So someone purchasing a 4G phone may find 338 that this phone is not compatible with the 4G frequencies owned by their current operator , especially for phones that are being 339 resold in different countries or regions . Consumers selling smartphones should ensure that data stored on their devices is erased before selling on. While professional buyers of phones delete data as part of the service, private buyers would not do so. In one small US study, five of 13 used phones 340 still had customer information on them . The trend to resell old hand-me-down phones may be better for the environment: 140 million mobile devices were thrown away, 341 ending up in landfills in the US in 2012 alone . By 2016, and globally, the number would likely be over 250 million, with some portion of those previously discarded phones now being resold. One category that may lose from this market is children, seniors and charities, who have become accustomed to receiving hand-me-down phones for free. If trading in becomes lucrative, the flow of gifted devices may become interrupted. CIOs can now dispose of old smartphones more effectively, or offer refurbished devices to more junior employees. Companies purchasing smartphones for their staff should evaluate how long they should own their phones to optimize the total cost of ownership. It could be that replacing (and trading in phones) after two years is more financially attractive than keeping them for three, for example. 52

The rise of the data exclusive Deloitte Global predicts that in 2016, 26 percent of Second, most smartphone owners’ usage patterns have smartphone users in developed markets will not make become more data-intensive, with the proportion of any traditional phone calls in a given week. We call time spent on non-voice activity increasing considerably; these individuals ‘data exclusives’. They have not in some markets, such as the UK and the US it has 344 stopped communicating, but are rather substituting reportedly trebled . traditional voice calls for a combination of messaging (including SMS), voice and video services delivered ‘over What may be happening is a polarization in the usage the top’. The data exclusive contingent was 22 percent of voice on mobile: some users are increasing their voice of all smartphone users in 2015, and 11 percent in 2012 call volumes; at the other end of the scale a growing 342 proportion are not using voice at all. (see Figure 17) . In recent years there have been two contrasting trends with voice. First, mobile voice volumes as measured in In 2016, 26 percent of smartphone users in minutes have increased by 20 percent between 2012 343 and 2015 , likely because of the increased affordability developed markets will not make any of voice minutes, the rising take-up of unlimited voice packages, an increase in voice minute allowances and traditional phone calls in a given week. an ongoing substitution of fixed to mobile calling. Figure 17: Weekly use of standard voice calling, 2012‑2015 Question: In the last seven days, in which of the following ways have you used your smartphone to communicate with others (standard voice calls)? 100% 90% 89% 87% 83% 80% 77% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 Note: Respondents who used their smartphone less than once a week have been excluded from this analysis Weighted base: Respondents who own or have access to a smartphone: 2012 (5,000), 2013 (10,427), 2014 (16,995), 2015 (18,334) Source: Deloitte member firms’ Global Mobile Consumer Survey, selected developed countries, May-July 2012/2013/2014/2015 Technology, Media & Telecommunications Predictions 2016 53

A key catalyst for the fall in the proportion of people Over the same period of decline in voice calls, most making voice calls on their smartphones has likely been forms of data communication, such as IM, social the proliferation of options to communicate without networks and even the now ‘old school’ email, have speaking. Phone conversations with friends and family, become more popular. for example, have been supplanted to an extent by social networks, which offer multiple enhancements IM has seen the most rapid uptake among consumers to a standard conversation, such as the ability to since 2012, with the proportion of adults using IM more broadcast to friends and family, incorporate emoji and than doubling from 27 percent in 2012 to 59 percent in 345 append photos, videos and hyperlinks. Social networks, 2015 (Figure 18) , and volumes escalating from 346 IM (instant messaging), email and other forms of 7 trillion in 2012 to 43 trillion in 2015 . messaging also offer control over when to respond: they are asynchronous, while voice conversation obliges Interestingly the text message, a relatively cheap and a real-time response. simple form of data communication, remains widely used among those not making voice calls. As of It is not just private conversations that are being mid-2015, the most popular data service used was text usurped. An app can replace the calls we would have messaging, with 60 percent usage, closely followed formerly made to order a take-away, request a taxi, by instant messaging, email and social networks book an appointment or make a bank transfer. (see Figure 19). Figure 18: Weekly use of instant messaging, 2012‑2015 Question: In the last seven days, in which of the following ways have you used your smartphone to communicate with others (instant messaging)? 70% 59% 60% 50% 47% 44% 40% 30% 27% 20% 10% 0% 2012 2013 2014 2015 Note: Respondents who used their smartphone less than once a week have been excluded from this analysis Weighted base: Smartphone owners 2012 (5,000), 2013 (10,427), 2014 (16,995), 2015 (18,334) Source: Deloitte member firms’ Global Mobile Consumer Survey, selected developed countries, May-July 2012/2013/2014/2015 Social networks, IM (instant messaging), email and other forms of messaging also offer control over when to respond: they are asynchronous, while voice conversation obliges a real-time response. 54

Figure 19: Communication services used in the last week by ‘data exclusives’, 2015 Question: In the last seven days, in which of the following ways have you used your smartphone to communicate with others (all forms of communication excluding standard voice calls)? 70% 60% 60% 52% 51% 50% 48% 40% 30% 19% 18% 20% 10% 10% 5% 0% SMS IM app Emails Social networks VoIP MMS Video calls Other Weighted base: Smartphone owners who did not use their device to make voice calls in the last seven days (4,634) Source: Deloitte member firms’ Global Mobile Consumer Survey. Respondents in the following developed countries: Australia, Canada, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Singapore, Spain, UK, US, May-July 2015 The age group with the largest proportion of data Figure 20 shows the proportion of data exclusive users exclusives as of mid-2015 was 18-24 year-olds, by age group. 31 percent of whom (in developed countries) reported not making phone calls on a weekly basis, compared to the average for adults of 22 percent. Figure 20: ‘Data exclusive’ mobile users, by age group, 2015 Question: In the last seven days, in which of the following ways have you used your smartphone to communicate with others (all forms of communication excluding standard voice calls)? 35% 31% 30% 26% 25% 23% 21% 20% 19% 18% 15% 10% 5% 0% 18-24 25-34 35-44 45-54 55-64 65-75 Weighted base: Smartphone owners who did not use their device for voice calls in the last seven days (4,634) Source: Deloitte member firms’ Global Mobile Consumer Survey. Respondents in the following developed countries: Australia, Canada, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Singapore, Spain, UK, US, May-July 2015 Technology, Media & Telecommunications Predictions 2016 55

In 2016 and beyond the proportion of data exclusive As children progress to their first smartphone, they may 18-24 year-old users may rise further still, given that not be provided with a voice and data package in order upcoming members of this cohort are likely very to control costs, and they may use this device exclusively accustomed to messaging. Their first communications over WiFi, with only occasional use of OTT voice device as young children may have been a touch-screen technology. By the time a teen has the funds to pay MP3 player or a WiFi tablet, which can readily be for a regular mobile phone package that includes voice used for messaging, apps and other types of data calls, he or she may regard messaging as the default functionality, but lacks a cellular modem, and therefore mode of communication and they may instinctively has no capability to make traditional voice calls. avoid making voice calls. Bottom line The original premise of the smartphone was that it would enable voice and data communications via the one device. In the last decade the data capabilities of smartphones have steadily ratcheted up, in the form of bigger screens, faster connectivity, more powerful processors, superior cameras and improved graphics capabilities. The most obvious implication for carriers is that offering monthly plans with very large or unlimited voice minutes may not be equally attractive for all customers. If 20 percent are talking fewer than 100 minutes per month, they will likely respond only to other inducements, perhaps ‘all you can app’ messaging plans or simply better data networks. Depending on the alternative to cellular voice, increased use of messaging, especially with pictures or video, may help drive consumers to bigger data plans, enhancing average revenue per user (ARPU). A decline in voice call traffic could also enable carriers to reduce the quantity of spectrum assigned to voice, and make this available for data. Smartphone vendors should consider whether a decline in voice usage may encourage a rise in sales of large smartphones (also known as phablets). One of the barriers to large smartphone adoption had been the obtrusiveness of the device when making calls, but if fewer calls are being made, larger screens are arguably preferable for messaging applications. Any entity communicating with the public should consider how best to adapt to these trends. Government should determine whether to focus on app-based communications rather than call centers; fast food purveyors might want to focus on improving app-based or web-based ordering, on the assumption that customers would rather type than talk when placing orders. 56

VoLTE/VoWiFi: capacity, reach and capability Deloitte Global predicts about 100 carriers worldwide VoLTE also offers a range of enhancements over will be offering at least one packet-based voice service standard voice. For example it offers the ability to use by the end of 2016, double the amount year-on-year, a data connection while being on a call, superior voice 347 and six times higher than at the beginning of 2015 . call quality, faster call connection, fewer dropped calls We estimate that approximately 300 million customers and the ability to switch from a voice call to a video call. will be using Voice over LTE (VoLTE) and/or Voice However while early adopters in 2016 are likely to be over WiFi (VoWiFi); double the number at the start of most fervent users of this additional functionality, many the year and five times higher than at the beginning users may not notice the variation in voice quality. 348 of 2015 . Carriers are likely to use VoWiFi to extend coverage, For most carriers launching VoLTE or VoWiFi in 2016, particularly indoors, and as a result help improve the primary motivation is likely to be to increase network customer satisfaction with the operator and lessen the capacity and extend the reach of their voice services. likelihood of churn. The majority of mobile calls are While VoLTE or VoWiFi technologies enable a range made indoors (at least twice as many smartphone users 349 of value-added services, such as video calling, we make voice calls indoors than outdoors) , but providing expect the majority of carriers to exploit this additional good internal coverage can be technically complex functionality in later years, with the initial focus being on and expensive, particularly for lower floors and internal coverage and capacity. rooms. One study found that about 40 percent of UK consumers have a mobile blackspot at home and almost VoLTE increases capacity as it allows operators to move a third reported regular issues making or receiving voice calls off 2G and 3G networks and onto the LTE 350 mobile calls from home . (4G) network. The often lower frequency spectrum that is freed up can be reused for data services. One response to blackspots is to deploy additional Additionally the LTE interface is more efficient at cellular towers or small cells to increase network reach, carrying calls relative to traditional calls: it can support but this is complex technically, time-consuming (due for 351 up to twice as many voice users in a given bandwidth example to required planning consents) and costly . (per megahertz). Additional cost savings can be Another approach would be to place femtocells (tiny obtained from retiring legacy infrastructure, and not base stations) in consumers’ homes: each of these having to run two infrastructures in parallel, one for data would cost tens of dollars. and one for voice. Figure 21: VoLTE and VoWiFi operator deployments and users, 2014‑2016 Users (million) Number of deployments 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 2014 2015 2016 Operator deployments Users (million) Source: Deloitte Global, 2015 Technology, Media & Telecommunications Predictions 2016 57

VoWiFi may at first glance appear very similar to Further, VoWiFi can reduce cost for an operator as it VoIP, but there are two critical differences. Firstly it is enables traffic to be off-loaded to another network. a network operator managed and controlled service, The cost savings could be significant: a US carrier with which, for users, should mean that the call is less likely 15 percent VoWiFi penetration and a national footprint to be dropped. So other activity on the same network is could enjoy spectrum and capacity savings per year of 352 less likely to disrupt a voice call than would be the case approaching half a billion dollars . on a VoIP call, which is carried on a best efforts basis. For carriers, being in charge of the service also means Long term, most operators will likely launch both that they have more control over the revenue stream. services as a natural evolution towards IP-based-only Secondly, VoWiFi offers native calling: there is no need communication. However, short term some carriers to open an app to make or receive calls. A VoIP call can may decide to launch one of the two services first. only be received when that specific app is open. The decision will likely be influenced by three main factors: the potential cost savings, the need to improve VoWiFi extends reach at a relatively low marginal cost. indoor coverage, and the customers’ interest in Operators need to deploy an IP multimedia subsystem enhanced communication services. (IMS). If they already have VoLTE, this will already have been paid for. In some regards VoWiFi may even reduce operator costs, as calls placed on a smartphone would be carried over the consumer’s broadband network, freeing up some cellular capacity. Bottom line 353 Operators need to weigh up benefits against the cost of deploying an IMS . One analyst firm has calculated that the cost of deploying and operating an IMS solution could be up to $10 million with a VoLTE subscriber base of around 2.5 million. If the base rose to 75 million, there would be significant 354 economies of scale, with the annual operating cost estimated at about $45 million . In the short term, device and network interoperability may be a barrier for uptake. VoWiFi and VoLTE support varies by handset, and each carrier has enabled a different set of these devices. In some cases, VoWiFi may be supported on a consumer all-you-can-eat tariff, but not on the enterprise tariff. Furthermore, packet-based calls may require calling and called devices to have the same software version enabled. For VoLTE, both parties need to have compatible handsets, be in 4G range, be subscribed to 4G (rather than just having 4G capability), and, for a period of time, be on the same 355 network . Carriers should also bear in mind the potential cost implications for incorporating emergency service support (providing a user’s location) into VoLTE and VoWiFi. The IMS signaling system needs to support the Emergency IMS subsystem to ensure that the call goes through. Consumers have high expectations for voice quality: operators should only launch VoLTE and VoWiFi services when the service is stable. The network should be configured so as to prioritize voice packets. Real-time monitoring and auctioning of network performance KPIs such as bit-rate, latency, jitter and packet loss are also recommended. Operators should include a fallback for non-native VoLTE calls, or 356 calls in areas where 4G coverage is lacking or limited . Operators should also advise on some of the quirks of the service at this stage: for example a VoWiFi call cannot roam onto a circuit-based 2G or 3G call when out of WiFi range: it can only move onto a VoLTE network. Carriers should determine how best to advertise the two services so that consumers value the quality of voice call and perceive the enhancements provided as value added services. This could counteract the declining trend of smartphone users not making phone calls and moving to OTT alternatives. 58

Photo sharing: trillions and rising Deloitte Global predicts that in 2016, 2.5 trillion photos Smartphones can reduce the processes of taking, will be shared or stored online, a 15 percent increase adjusting and sending a high definition photo to less on the prior year. About three-quarters of this total will than a second. 357 likely be shares, and the remainder online back ups . The dominance of the smartphone to photo We estimate that over 90 percent of these photos sharing is due to its ubiquity and the rate at which will have been taken over a smartphone; digital SLRs, owners upgrade their devices. We expect 1.6 billion compact cameras, tablets and laptops will collectively smartphones to be sold in total this year, equivalent to contribute the remainder. This estimate does not include about 23 times peak sales of film cameras (70 million the trillions of photos that remain on devices’ memory. units, 1999), 13 times the peak for digital cameras (120 million SLR and compact digital cameras, 2010) The expected network impact of all this sharing will and 40 times 2014 digital camera sales (40 million 358 359 be about 3.5 exabytes , a 20 percent increase over units) . We forecast about three-quarters of the previous year. We expect the network impact of smartphones sold to be upgrades, with most having photographs to continue rising for the foreseeable better cameras, processors, connectivity and storage future, driven by steady increases in the volume of than their predecessors. photos taken, shared and backed up, as well as rising average file size. We estimate the number of photos shared online to be about 31 times the volume taken (let alone shared) in the Photo sharing has been and will likely be enabled 360 1990s, when about 80 billion were taken every year . and encouraged by improvements in smartphone capabilities, as well as faster fixed and mobile In 2016, we expect the average size of photos taken to connectivity. increase, thanks to the rising resolution of smartphone cameras. Average resolution, as measured in megapixels Photography’s appeal is partly about capturing and (MP), of smartphones on sale increased from 2.4 MP sharing a moment: smartphones enable both to occur 361 in 2007 to 9 MP last year . We forecast average almost simultaneously. They remove the lengthy time resolution for smartphones on sale to surpass 10 MP this lag with standard photographic film between taking and year (see Figure 22). sharing a photo. Figure 22: Smartphone cameras average resolution (megapixels), 2007‑2015 10 9 8 7 6 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: GSM Arena. For more information on the source, see endnote Technology, Media & Telecommunications Predictions 2016 59

A core reason for the rise in photos shared online ‘Hot dog legs’ are one type of photographic 364 is the widening array of tools that enable and self-portrait, collectively known as selfies . These may encourage sharing. As of end-2015, there were over appear a contemporary activity, but demand has existed 2,000 photo-sharing apps available. for almost a century, with the automated photo-booth 365 originally addressing people’s needs . The first booth, Some tools encourage keeping images for posterity; installed in New York in 1925, had 280,000 customers others emphasize transience, for those who prefer it. 366 in its first six months . Photos can be shared with the whole world, or with selected individuals. Rising network speeds make it Increasing volumes of photos are being backed up easier to send bursts of images, quickly. because of the growing range of tools which enable this, at low or zero cost to the user. A user with multiple Posts with photos get 53 percent more ‘likes’, back-up services may end up creating a cloud-based 104 percent more comments, and 84 percent more copy of the same file multiple times. 362 click-throughs than text-only posts . The more fervent reaction to social network posts with photos is likely to The profusion of both sharing and back-up services encourage yet more posts with images. could lead to one photo being shared and backed-up hundreds of times. The growing ease of creating and sharing images is arguably shaping the way people communicate. For example parents may share the same photo of their The speed and quality with which we can take photos newborn with their individual social networks, as well encourages the photos and videos to be substituted as send to different groups via a set of instant message for spoken or written words. The message “having services. Some recipients of the image may forward it on a wonderful time on holiday” via a postcard or a phone to their own networks. If the receiving phone’s settings call is being usurped by photos captured and sent are configured to save each photo viewed, this device from a phone. The 2013 fashion of posting a photo would create an online back-up. of a tanned pair of legs – colloquially known as ‘hot dog legs’ – was a popular way of conveying that you were on vacation and that the sunshine had been 363 abundant . The ability to communicate in this way The more fervent reaction is driving usage of mobile data while abroad, and to social network posts with accentuating a differentiator for operators that offer low – or zero-cost roaming. photos may encourage yet more posts with images. 60

Bottom line The desire for photos drives innovation, encourages smartphone upgrades and increases network usage. Smartphone vendors have long differentiated their models on photographic capability. They should make sure to focus on innovations that are perceptible and appreciated by users, and not be lured into a specification race that only pleases the device’s creators. A few years back, some vendors competed on megapixel count. With most photos viewed on small screens by both creators and recipients, incremental resolution soon became imperceptible to all but the best-trained eye. Engineers’ ingenuity was thus arguably squandered. Customers are likely to respond to technology that flatters their ability. Smartphones benefit from exponentially-improving processor and connectivity speed, a progression known as Moore’s Law. There is no equivalent law for talent, but technology can (and should) be deployed to lessen user error when taking photos. Software that automatically compensates for photographic mistakes (such as shooting into direct sunlight) can make the owner feel more talented. Vendors should also consider how to tap into make over technology to enhance the subject. A phone’s software can deliver an instant, digital make over by automatically smoothing wrinkles, lessening bags under the eyes, deleting spots and adding a sun-kissed glow. The smartphone is an upgrade to the Evil Queen’s magic mirror, as it need not speak the truth. Software can also differentiate by automation of cataloguing. When one has amassed tens of thousands of photos on a phone, finding a specific portrait becomes tedious. Facial recognition can be 367 deployed to identify individuals automatically, without having to create metadata for each image . Network operators can harness our desire for portraiture and other images to drive network traffic, and to encourage upgrades to larger data packages. Photos (and increasingly video) will likely increase the demand for uplink capacity, and ISPs and mobile operators could differentiate their offerings as optimized for photo/video sharing. Photo apps and back-up sites should evolve their offerings in line with changing habits. One recent innovation is moving photos, which are a composite of a standard photo accompanied by a few frames of low resolution images that capture the second before and after the main photo was taken368. Retailers should consider how best to tap into the growth in communication via images. Catalogues, which have traditionally been shot months before distribution, can be deconstructed into smartphone screen-sized photos accompanied by a ‘buy’ button. A photo of a celebrity wearing a brand’s outfit can be relayed immediately to fans – there is no need to wait for this to appear in a newspaper, magazine or on a website. Technology, Media & Telecommunications Predictions 2016 61

Endnotes 1. This category refers to the professions identified by governments in the US, U.K., Canada, and Sweden. The US list of professions is: Computer programmers; Software developers, applications and systems software; Web developers; Computer support specialists; Database administrators; Network and computer systems administrators; Computer network architects; Computer occupations, all other; Computer hardware engineers; and Computer and information systems managers. Other countries have similar but different classification methods. 2. Deloitte Global estimate based on publicly-disclosed data from governments, and then population weighted. 3. See Lack of women in IT costing UK £2.6 billion a year, HR Magazine, 28 April, 2014: http://www.hrmagazine.co.uk/article-details/lack-of-women-in-it-costing-uk-2-6-billion-a-year; 2.6 billion GBP is roughly $4 billion. 4. Women are ‘put off’ hi-tech jobs, BBC, 8 September 2005: http://news.bbc.co.uk/2/hi/technology/4225470.stm 5. 2010: The Year of Whining About Women In Tech, ZDNet, 22 December 2010: http://www.zdnet.com/article/2010-the-year- of-whining-about-women-in-tech/ 6. The job classifications in the US changed between 2010 and 2014 reports, but not enough to make comparisons meaningless. Data comes from the Bureau of Labor Statistics 7. The job classifications in the UK changed between 2010 and 2011, and have been steady to 2015. But the changes are not enough to make historical comparisons meaningless. Data comes from the Office for National Statistics 8. See Solving the Equation: The Variables for Women’s Success in Engineering and Computing, The American Association of University Women (AAUW): http://www.aauw.org/research/solving-the-equation/ 9. For more information, see Student Introduction 2013/14, Higher Education Statistics Agency: https://www.hesa.ac.uk/intros/ stuintro1314 10. For more information, see Student Introduction 2012/13, Higher Education Statistics Agency: https://www.hesa.ac.uk/intros/ stuintro1213 11. Postsecondary enrolments by institution type, sex and field of study (Both sexes), Statistics Canada, 30 November 2015: http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/educ72a-eng.htm 12. Table 2 University enrolment by field of study and gender, Statistics Canada, 7 May 2011: http://www.statcan.gc.ca/daily- quotidien/100714/t100714a2-eng.htm 13. See Where the boys are and aren’t, University of WATERLOO, as accessed on 14 December 2015: https://uwaterloo.ca/alumni/ alumni-publications/waterloo-magazine/where-boys-are-and-arent 14. Closing the Gender Gap ACT NOW, OECD, as accessed on 14 December 2015: http://www.oecd.org/sweden/Closing%20 the%20Gender%20Gap%20-%20Sweden%20FINAL.pdf 15. IT gender gap: Where are the female programmers?, TechRepublic, 6 April 2010: http://www.techrepublic.com/blog/software- engineer/it-gender-gap-where-are-the-female-programmers/ 16. Detailed AP CS 2013 Results: Unfortunately, much the same, Computing Education Blog, 1 January 2014: https://computinged. wordpress.com/2014/01/01/detailed-ap-cs-2013-results-unfortunately-much-the-same/ 17. ICT teaching upgrade expected … in 2014, The Guardian, 20 August 2012: http://www.theguardian.com/education/2012/ aug/20/ict-teaching-programming-no-guidance 18. STEM Fields And The Gender Gap: Where Are The Women?, Forbes, 20 June 2012: http://www.forbes.com/sites/work-in- progress/2012/06/20/stem-fields-and-the-gender-gap-where-are-the-women/ 19. Parents Key in Attracting Girls to STEM, US News, 29 June 2015: http://www.usnews.com/news/stem-solutions/ articles/2015/06/29/parents-key-in-attracting-girls-to-stem 20. One In Twenty IT Job Applicants Are Women, Say Majority Of Tech Employers, TechWeekEurope UK, 22 December 2014: http://www.techweekeurope.co.uk/workspace/it-job-women-157937 21. Google’s algorithm shows prestigious job ads to men, but not to women. Here’s why that should worry you, The Washington Post, 6 July 2015: http://www.washingtonpost.com/news/the-intersect/wp/2015/07/06/googles-algorithm-shows-prestigious- job-ads-to-men-but-not-to-women-heres-why-that-should-worry-you/?tid=sm_tw 22. How stereotypes impair women’s careers in science: http://www.pnas.org/content/111/12/4403.abstract 23. Guide: Raise awareness about unconscious bias, re:Work: https://rework.withgoogle.com/guides/unbiasing-raise-awareness/ steps/introduction/ 24. The resume gap: Are different gender styles contributing to tech’s dismal diversity?, Fortune, 26 March 2015: http://fortune. com/2015/03/26/the-resume-gap-women-tell-stories-men-stick-to-facts-and-get-the-advantage/ 25. Keeping women in high-tech fields is big challenge, report finds, The Washington Post, 12 February 2014: http://www.washingtonpost.com/business/economy/keeping-women-in-high-tech-fields-is-big-challenge-report- finds/2014/02/12/8a53c6ac-93fe-11e3-b46a-5a3d0d2130da_story.html 26. Women Are Leaving Science And Engineering Jobs In Droves, ThinkProgress, 13 February 2014: http://thinkprogress.org/ economy/2014/02/13/3287861/women-leaving-stem-jobs/ and Women’s Progress In Science And Engineering Jobs Has Stalled For Two Decades, ThinkProgress, 10 September 2013: http://thinkprogress.org/economy/2013/09/10/2599491/women-stem/ 62

27. It’s the Culture, Bro: Why Women Leave Tech, Inc.com, 8 October 2014: http://www.inc.com/kimberly-weisul/its-the-culture- bro-why-women-leave-tech.html 28. Women’s Progress In Science And Engineering Jobs Has Stalled For Two Decades, ThinkProgress, 10 September 2013: http://thinkprogress.org/economy/2013/09/10/2599491/women-stem/ 29. Women web developers make 79 cents to the dollar men earn doing the same job, Narrow the Gap, as accessed on 11 December 2015: http://narrowthegapp.com/gap/web-developers 30. Women computer and information systems managers make 87 cents to the dollar men earn doing the same job, Narrow the Gap, as accessed on 11 December 2015: http://narrowthegapp.com/gap/computer-and-information-systems-managers 31. Women software developers, applications and systems software make 84 cents to the dollar men earn doing the same job, Narrow the Gap, as accessed on 11 December 2015: http://narrowthegapp.com/gap/software-developers-applications-and- systems-software 32. Keeping women in high-tech fields is big challenge, report finds, The Washington Post, 12 February 2014: http://www.washingtonpost.com/business/economy/keeping-women-in-high-tech-fields-is-big-challenge-report- finds/2014/02/12/8a53c6ac-93fe-11e3-b46a-5a3d0d2130da_story.html 33. Women in technology: no progress on inequality for 10 years, The Guardian, 14 May 2014: http://www.theguardian.com/ technology/2014/may/14/women-technology-inequality-10-years-female 34. Gender imbalance in IT sector growing, HR Magazine, 30 March 2015: http://www.hrmagazine.co.uk/article-details/gender- imbalance-in-it-sector-growing 35. Data for Canada, US, UK and Sweden have been sourced from the offices for national statistics in the respective countries 36. Hidden in Plain Sight: Asian American Leaders in Silicon Valley, Ascend Foundation, May 2015: http://c.ymcdn.com/sites/www. ascendleadership.org/resource/resmgr/Research/HiddenInPlainSight_OnePager_.pdf 37. For more information, see See how the big tech companies compare on employee diversity, Fortune, 30 July 2015: http:// fortune.com/2015/07/30/tech-companies-diveristy/ 38. We Aren’t Imagining It: The Tech Industry Needs More Women, Lifehacker, 20 November 2015: http://lifehacker.com/we- arent-imagining-it-the-tech-industry-needs-more-wom-1743737246?utm_expid=66866090-67.e9PWeE2DSnKObFD7vNEoqg.0 39. Computer science now top major for women at Stanford University, Reuters, 9 October 2015: http://www.reuters.com/article/ us-women-technology-stanford-idUSKCN0S32F020151009 40. Labor Force Statistics from the Current Population Survey, Bureau of Labor Statistics of the U.S. Department of Labor, 12 February 2015: http://www.bls.gov/cps/cpsaat11.htm 41. List of women executives at tech companies, Wikia, as accessed on 24 December 2015: http://geekfeminism.wikia.com/wiki/ List_of_women_executives_at_tech_companies 42. The Most Powerful Women In Tech 2015, Forbes, 26 May 2015: http://www.forbes.com/sites/katevinton/2015/05/26/the- most-powerful-women-in-tech-2015/ 43. Only 19 percent of system administrators were women in 2014, but there were 205,000 sysadmins in the US that year, down from 229,000 in 2010, an absolute decline of 24,000, and in a period when the IT sector grew by 757,000 jobs. Meanwhile 35 percent of web developers are women, a category that was added to the classification due to growth in jobs. http://www.bls.gov/cps/cpsaat11.htm and http://www.bls.gov/cps/aa2010/cpsaat11.pdf 44. See how the big tech companies compare on employee diversity, Fortune, 30 July 2015: http://fortune.com/2015/07/30/tech- companies-diveristy/ 45. Google helps Hollywood boost girls-who-code image, USA Today, 18 March 2015: http://www.usatoday.com/story/ tech/2015/03/18/google-abc-disney-pair-up-to-promote-images-of-girls-and-computer-science/24903551/ 46. Here Are The Words That May Keep Women From Applying For Jobs, The Huffington Post, 6 February 2015: http://www.huffingtonpost.com/2015/06/02/textio-unitive-bias-software_n_7493624.html 47. In Google’s Inner Circle, a Falling Number of Women, The New York Times, 22 August 2012: http://www.nytimes.com/ 2012/08/23/technology/in-googles-inner-circle-a-falling-number-of-women.html?pagewanted=2&_r=4&smid=tw-nytimesbusin ess&partner=socialflow 48. Ibid. 49. How Mentoring May Be the Key to Solving Tech’s Women Problem, The Huffington Post, updated on 4 October 2014: http:// www.huffingtonpost.com/cassie-slane/how-mentoring-may-be-the-_b_4717821.html 50. In Google’s Inner Circle, a Falling Number of Women, The New York Times, 22 August 2012: http://www.nytimes.com/ 2012/08/23/technology/in-googles-inner-circle-a-falling-number-of-women.html?pagewanted=2&_r=4&smid=tw-nytimesbusin ess&partner=socialflow 51. For more information, see Government at a Glance 2015, 6 July 2015: http://www.oecd-ilibrary.org/docserver/download/4215081ec023. pdf?expires=1447602260&id=id&accname=guest&checksum=798872FE4BE4CA599C54771E8C4A1BA8 Technology, Media & Telecommunications Predictions 2016 63

52. Public sector employers are (translated from Swedish): Government administration, State Enterprise, Municipal administration, County administration, Other public institutions, State-owned enterprises and organizations, and Municipally-owned businesses and organizations 53. Statistics are from publicly-disclosed data from Swedish central statistics database: http://www.statistikdatabasen.scb.se/ pxweb/sv/ssd/START__AM__AM0208__AM0208B/YREG18/?rxid=9084f4d2-6ff6-45c0-b2c7-8eafc2328495 54. The question was focused on laptops rather than computers or desktops. This question is part of the Deloitte member firms’ Global Mobile Consumer Survey, conducted in 13 developed countries. Fieldwork took place between May and July 2015. For more details, see Deloitte member firms’ Global Mobile Consumer Survey: www.deloitte.com/gmcs 55. Ibid. 56. Deloitte US’s Digital Democracy Survey, Ninth Edition, Deloitte Development LLC, 2015: http://www2.deloitte.com/us/en/ pages/technology-media-and-telecommunications/articles/digital-democracy-survey-generational-media-consumption-trends. html 57. The weekly number for Internet on a PC for 18-24 is 3h58 minutes, and video on a PC for the same age group is 1h47, for a total of 5h45 minutes per week, or 49 minutes daily. Nielsen Total Audience Report: Q2 2015 (page 10, table 1A), Nielsen, 21 September 2015: http://www.nielsen.com/us/en/insights/reports/2015/the-total-audience-report-q2-2015.html 58. The weekly number for Internet on a PC for 35-49 is 6h13 minutes, and video on a PC for the same age group is 1h50 for a total of 8h03 minutes per week, or 69 minutes daily. Nielsen Total Audience Report: Q2 2015 (Page 10 Table 1A), Nielsen, 21 September 2015: http://www.nielsen.com/us/en/insights/reports/2015/the-total-audience-report-q2-2015.html 59. See May I Have Your Attention, Please?, David Pakman’s blog Disruption, 10 August 2015: http://www.pakman.com/ 2015/08/10/may-i-have-your-attention-please/ 60. comScore MMX Multi-Platform, US, Canada, UK, March 2015 61. See May I Have Your Attention, Please?, David Pakman’s blog Disruption, 10 August 2015: http://www.pakman. com/2015/08/10/may-i-have-your-attention-please/ 62. Although there were changes in methodology between the Cross Platform and Total Audience Reports, they do not appear to affect the ‘Using the Internet on a Computer’ and ‘Watching Video on Internet’ measurement categories. See Nielsen Cross Platform Report Q1 2011 (page 6, table 1), Nielsen, June 2011: http://www.nielsen.com/content/dam/corporate/us/en/ newswire/uploads/2011/06/Nielsen-cross-platform-report-q1-2011_web.pdf; Nielsen Total Audience Report: Q1 2015 (Page 11 Table 1), Nielsen, 23 June 2015: http://www.nielsen.com/us/en/insights/reports/2015/the-total-audience-report-q1-2015.html 63. Deloitte US’s Digital Democracy Survey, Ninth Edition, Deloitte Development LLC, 2015: http://www2.deloitte.com/us/en/ pages/technology-media-and-telecommunications/articles/digital-democracy-survey-generational-media-consumption-trends. html 64. Ibid. 65. Millennial Banking Insights and Opportunities (pages 9 and 10), Fair Isaac Corporation, 2014: http://www.fico.com/millennial- quiz/pdf/fico-millennial-insight-report.pdf 66. The span of years during which generation X was born varies by author on the topic, but it is generally regarded as the age group between millennials and baby boomers. 67. Current Trends Among Millennials and Online Shopping, PFS Web, 14 August 2015: http://www.pfsweb.com/blog/current- trends-among-millennials-and-online-shopping/ 68. Do Millennials Actually Use Smartphones for Shopping? eMarketer, 16 April 2015: http://www.emarketer.com/Article/Do- Millennials-Actually-Use-Smartphones-Shopping/1012363 69. Deloitte US’s 2015 Holiday Survey, unpublished demographic data, Deloitte Development LLC, October 2015: http://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-2015-holiday-survey-results.pdf 70. Deloitte Global analysis based on conversations with industry experts and a variety of publicly-available sources such as PayPal reports 15% growth in revenue in Q3, 28 October 2015: https://www.internetretailer.com/2015/10/28/paypal-reports- 15-growth-revenue-q3; Of 101 M iPhones now in U.S. installed base, 62% are iPhone 6 models with Apple Pay support, AppleInsider, 19 November 2015: http://appleinsider.com/articles/15/11/19/of-101m-iphones-now-in-us-installed-base-62-are- iphone-6-models-with-apple-pay-support. Deloitte Global has not considered solutions that have a limit on the purchasing amount. 71. The average cart abandonment rate across four countries on phones as of December 2014 was 79 percent: Cart Abandonment Rates on Black Friday – Cyber Monday Weekend, Barilliance, 3 December 2014: http://www.barilliance.com/cart- abandonment-rates-black-friday-cyber-monday-weekend/ 72. Six Trends in the Shifting World of Mcommerce, eMarketer, 9 July 2015: http://www.emarketer.com/Webinar/Six-Trends- Shifting-World-of-Mcommerce/4000114 73. As of November 2015, more than 200 apps had Apple Pay mobile payments enabled. iPhone, iTunes, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 74. As of October 2015, there were more than 60 models of fingerprint-enabled phones. Apple Spurs Massive Growth in Smartphone Fingerprint Sensor Market, IHS, 4 November 2013: http://press.ihs.com/press-release/design-supply-chain-media/ apple-spurs-massive-growth-smartphone-fingerprint-sensor-mar 64

TM 75. One Touch FAQs, PayPal, as accessed on 14 December 2015: https://www.paypal.com/uk/webapps/mpp/one-touch- checkout/faq 76. Samsung Galaxy S5 User Guide, Tom’s Guide, 24 February 2014: http://www.tomsguide.com/us/samsung-galaxy-s5- guide,review-2821-16.html 77. Apple Pay Data – Faster Purchases, Higher Conversions & Surprises, Blog of Edward Aten, founder of Merchbar, 14 January 2015: https://merchbar.wordpress.com/2015/01/14/apple-pay-data-faster-purchases-higher-conversions-and-surprises/ 78. Pay with Amazon within apps is expected to go live soon. The ability to pay by using Amazon credentials is already available via the browser, but a login with the Amazon credentials is always required, hence it was not included in this prediction. See Amazon Launches ‘Pay With Amazon’ Buttons for Mobile Apps, Re/code, 29 October 2015: http://recode.net/2015/10/29/ amazon-launches-pay-with-amazon-buttons-for-mobile-apps/; 79. For a view as to the impact of social media influencers on spikes in demand, see Kylie Jenner launches new collection of lipsticks, breaks the Internet, Mashable, 1 December 2015: http://mashable.com/2015/11/30/kylie-jenners-lips-break-the- internet/#sYEkE8T6Jqq1 80. Faster...stronger...but does graphene make for a better tennis racquet?, The Sydney Morning Herald, 22 June 2015: http:// www.smh.com.au/sport/tennis/fasterstrongerbut-does-graphene-make-for-a-better-tennis-racquet-20150619-ghsod1.html 81. Graphene: The Carbon-Based ‘Wonder Material’, Compound Interest, 23 June 2015: http://www.compoundchem.com/2015/06/23/graphene/ 82. To know more about the Graphene Flagship Project, see About Graphene Flagship, Graphene Flagship, as accessed on 17 December 2015: http://graphene-flagship.eu/project/Pages/About-Graphene-Flagship.aspx 83. Autumn Statement 2014: Manchester to get £235m science research centre, BBC, 3 December 2014: http://www.bbc.co.uk/ news/uk-england-30309451 84. Graphene prompts global spending on research, Financial Times, 17 June 2014: http://www.ft.com/cms/s/0/b2aee898-eccd- 11e3-a57e-00144feabdc0.html#axzz3u28BX8jH 85. Physicists win Nobel using sticky tape and pencil, New Scientist, 6 October 2010: https://www.newscientist.com/article/ mg20827812-700-physicists-win-nobel-using-sticky-tape-and-pencil/ 86. How to Make Graphene, MIT Techology Review, 14 April 2008: http://www.technologyreview.com/news/409900/how-to- make-graphene/ 87. For more information, watch How It’s Made Carbon Fiber Car Parts, YouTube, as accessed on 17 December 2015: https://youtu.be/MFNaoklYELY?t=113 88. Multi-layer graphene flakes which have been mixed into the composite. 89. The new GTA Spano shines at Geneva, The Spania GTA, 3 March 2015: http://www.spaniagta.com/en/news/the-new-gta- spano-shines-at-geneva 90. Ultra-efficient graphene battery has energy density of oil, E&T magazine, 30 October 2015: http://eandt.theiet.org/news/2015/ oct/graphene-battery.cfm 91. Graphene key to dense, energy-efficient memory chips, engineers say, 26 October 2015: http://phys.org/news/2015- 10-graphene-key-dense-energy-efficient-memory.html; Graphene key to high-density, energy-efficient memory chips, Stanford engineers say, Stanford News, 23 October 2015: http://news.stanford.edu/news/2015/october/graphene-memory- chips-102315.html 92. The Race to Develop Graphene, Bloomberg, 29 May 2014: http://www.bloomberg.com/bw/articles/2014-05-29/samsung- leads-in-graphene-patent-applications 93. Graphene oxide-assisted membranes: Fabrication and potential applications in desalination and water purification, Journal of Membrane Science, volume 484, Elsevier, 15 June 2015: http://www.sciencedirect.com/science/article/pii/S0376738815001878 94. RADIOACTIVE ELEMENT REMOVAL FROM WATER USING GRAPHENE OXIDE (GO), Texas A&M University, May 2014: http://oaktrust.library.tamu.edu/bitstream/handle/1969.1/152067/CONCKLIN-DOCUMENT-2014.pdf 95. Graphene Gives You Infrared Vision in a Contact Lens, IEEE Spectrum, 17 March 2014: http://spectrum.ieee.org/nanoclast/ semiconductors/optoelectronics/graphene-gives-you-infrared-vision-in-a-contact-lens 96. Green graphene band-aid, Chemistry World, 7 July 2013: http://www.rsc.org/chemistryworld/2013/07/antimicrobial-graphene- band-aid 97. How to Make Graphene, MIT Technology Review, 14 April 2008: http://www.technologyreview.com/news/409900/how-to- make-graphene/ 98. Make graphene in your kitchen with soap and a blender, New Scientist, 20 April 2014: https://www.newscientist.com/article/ dn25442-make-graphene-in-your-kitchen-with-soap-and-a-blender/ 99. Furthermore, the resulting emulsion is a blend of graphite and graphene, which would still need to be separated. A ten thousand litre vat would yield an estimated, lucrative, 100 grams an hour. See Make graphene in your kitchen with soap and a blender, New Scientist, 20 April 2014: https://www.newscientist.com/article/dn25442-make-graphene-in-your-kitchen-with- soap-and-a-blender/ Technology, Media & Telecommunications Predictions 2016 65

100. Chemical vapor deposition (CVD) is means by which thermally dissociated carbon atoms are deposited to create a film onto a substrate. See further details at: CVD Graphene – Creating Graphene Via Chemical Vapour Deposition, Graphenea, as accessed on 17 December 2015: http://www.graphenea.com/pages/cvd-graphene#.VnGGBJjMVMs 101. Mass production of high quality graphene: An analysis of worldwide patents, Nanowerk Nanotechnology, 28 June 2012: http://www.nanowerk.com/spotlight/spotid=25744.php 102. As graphene is made in single-layer sheets, the yields are often calculated in square meters rather than grams, as this determines their potential uses. 103. Graphene Supermarket, as accessed on 17 December 2015: https://graphene-supermarket.com/ 104. Major countries in worldwide graphite mine production from 2010 to 2014 (in 1,000 metric tons), Statista, as accessed on 17 December 2015: http://www.statista.com/statistics/267366/world-graphite-production/ 105. Graphene band gap heralds new electronics, Chemistry World, 29 September 2015: http://www.rsc.org/ chemistryworld/2015/09/graphene-band-gap-electronics-transistors-semiconductor 106. Challenges and opportunities in graphene commercialization, Nature Nanotechnology, 6 October 2014: http://www.nature.com/nnano/journal/v9/n10/full/nnano.2014.225.html 107. For more information, see IBM builds graphene chip that’s 10,000 times faster, using standard CMOS processes, ExtremeTech, 30 January 2014: http://www.extremetech.com/extreme/175727-ibm-builds-graphene-chip-thats-10000-times-faster-using- standard-cmos-processes 108. Graphene Industry Size at US$120M by 2020: China and Regional Markets Analysis, PR Newswire, 4 December 2014: http://www.prnewswire.com/news-releases/graphene-industry-size-at-us120m-by-2020-china-and-regional-markets- analysis-284742931.html 109. High Performance Carbon Fibers, American Chemical Society, 17 September 2003: http://www.acs.org/content/acs/en/ education/whatischemistry/landmarks/carbonfibers.html 110. For an overview of cognitive technologies, see Demystifying artificial intelligence What business leaders need to know about cognitive technologies, Deloitte University Press, Deloitte Development LLC, 4 November 2015: http://dupress.com/articles/ what-is-cognitive-technology/?coll=12201. 111. The top 100 is being referenced from the Gartner report. See Market Share: All Software Markets, Worldwide, 2014, Gartner, 31 March 2015: https://www.gartner.com/doc/3019720/market-share-software-markets-worldwide [Subscription required] 112. The thinker and the shopper: Four ways cognitive technologies can add value to consumer products, Deloitte University Press, Deloitte Development LLC, 3 June 2015: http://dupress.com/articles/cognitive-technologies-consumer-products/?coll=12201 113. For more information on detecting and prevention of enterprise fraud, see Fractals, NCR, as accessed on 20 November 2015: http://www.ncr.com/financial-services/enterprise-fraud-prevention/fractals 114. Cisco Cognitive Threat Analytics, Cisco, as accessed on 20 November 2015, http://www.cisco.com/c/en/us/solutions/enterprise- networks/cognitive-threat-analytics/index.html 115. Oracle RightNow Feeedback Cloud Service, Oracle, as accessed on 20 November 2015: http://www.oracle.com/us/media1/ rightnow-feedback-cloud-service-1583572.pdf 116. Pushing Technology Forward, Epic, as accessed on 20 November 2015: https://careers.epic.com/Home/SoftwareDevelopment 117. Global Ecommerce, Promise Delivered, Pitney Bowes, as accessed on 20 November 2015: https://www.pitneybowes.com/ content/dam/pitneybowes/us/en/legacy/docs/us/pdf/microsite/ecommerce/resources/ecomm-cut-sheet.pdf 118. Cognitive technologies in the technology sector: From science fiction vision to real-world value, Deloitte University Press, Deloitte Development LLC, 15 December 2015: http://dupress.com/articles/cognitive-technologies-in-technology-sector-tmt/ 119. Cognitive technologies: Applying machine intelligence to traditional business problems, Deloitte University Press, Deloitte Development LLC, 6 October 2015: http://dupress.com/articles/trends-cognitive-technology-business-issues/?per=4005. 120. Convirza lands $20M to sift what you say on the phone to brands, VentureBeat, 10 June 2015: http://venturebeat. com/2015/06/10/convirza-lands-20m-to-sift-what-you-say-on-the-phone-to-brands/ 121. Cognitive technologies: Applying machine intelligence to traditional business problems, Deloitte University Press, Deloitte Development LLC, 6 October 2015: http://dupress.com/articles/trends-cognitive-technology-business-issues/?per=4005. 122. Wellframe raises $1.5M to send patients home with a nurse in their pocket, VentureBeat, 7 April 2014, http://venturebeat. com/2014/04/07/wellframe-raises-1-5m-to-send-patients-home-with-a-nurse-in-their-pocket/ 123. Cloud machine learning wars heat up, ZDNet, 13 April 2015: http://www.zdnet.com/article/cloud-machine-learning-wars-heat- up/ 124. Google Just Open Sourced TensorFlow, Its Artificial Intelligence Engine, WIRED, 9 November 2015: http://www.wired. com/2015/11/google-open-sources-its-artificial-intelligence-engine/ 125. Facebook Open Sources Its AI Hardware as It Races Google, WIRED, 10 December 2015: http://www.wired.com/2015/12/ facebook-open-source-ai-big-sur/ 126. Red Hat + Gild: Consolidating Intelligence & Insight to Hire Better Candidates Faster, Gild, as accessed on 20 November 2015: https://www.gild.com/customers/red-hat-case-study 66

127. Predictive Hiring: An Interview with Gild’s SVP of Marketing, Robert Carroll [Part2], Gild, as accessed on 20 November 2015: https://www.gild.com/blog/predictive-hiring-an-interview-with-robert-carroll-part-2 128. Kaspersky Lab Extends Its Intelligent Virtual Agent Lena From Customer Support to the Sales Function, Marketwired, 19 January 2012: http://www.marketwired.com/press-release/kaspersky-lab-extends-its-intelligent-virtual-agent-lena-from- customer-support-sales-1608692.htm 129. Hitachi Hires Artificially Intelligent Bosses For Their Warehouses, Popular Science, 8 September 2015: http://www.popsci.com/ hitachi-hires-artificial-intelligence-bosses-for-their-warehouses 130. Automated personalization Capability Spotlight, Adobe, as accessed on 17 December 2015: http://wwwimages.adobe.com/ content/dam/acom/en/solutions/target/pdf/54658.en.target.spotlight.automated-personalization.pdf 131. VMware ‘Machine Learning’ Helps Spot Trouble, InformationWeek, 28 May 2014: http://www.informationweek.com/cloud/ infrastructure-as-a-service/vmware-machine-learning-helps-spot-trouble/d/d-id/1269234 132. Watson for Oncology, IBM, as accessed on 17 December 2015: http://www.ibm.com/smarterplanet/us/en/ibmwatson/watson- oncology.html 133. Artificial Intelligence Technologies Are Quietly Penetrating a Wide Range of Enterprise Applications, According to Tractica, Business Wire, 19 August 2015: http://www.businesswire.com/news/home/20150819005015/en/Artificial-Intelligence- Technologies-Quietly-Penetrating-Wide-Range 134. This article provides a good example of the strength of immersion that is possible with VR, see Getting sweaty with the future of Sony’s virtual reality, Engadget, 11 June 2014: http://www.engadget.com/2014/06/11/the-future-of-sony-virtual-reality-e3- morpheus/ 135. CGI provides the most realistic depth immersion while 360 videos offer more detail but less immersive pictures. 136. According to Deloitte Global research, we believe 90 frames per second (FPS) is required for a high quality VR experience; 75 (FPS) will provide a good experience on a powerful PC and 60 FPS may cause some feelings of nausea. Any fewer could cause users to feel ill-at-ease. 137. We are assuming that products will launch Q2 or later in the year, including HTC’s Vive. See HTC Vive Update, HTC, 8 December 2015: http://blog.htc.com/2015/12/htc-vive-update/ 138. For more information on treadmill for VR, see Virtuix Omni, Virtuix, as accessed on 21 December 2015: http://www.virtuix. com/ 139. As an indicator of the number of serious games players, there are about 125 million who use Steam. See Steam has over 125 million active users, 8.9M concurrent peak, VG247, 24 February 2015: http://www.vg247.com/2015/02/24/steam-has- over-125-million-active-users-8-9m-concurrent-peak/ 140. For more information on gaming accessories and price, see PC gaming hardware, Amazon, as accessed on 21 December 2015: http://www.amazon.ca/s/ref=s9_acss_bw_ct_Computer_ct_4_h?rh=i:videogames,n:356952011&ie=UTF81&pf_ rd_m=A3DWYIK6Y9EEQB&pf_rd_s=merchandised-search-5&pf_rd_r=189PH7Y5KJCSMS533RY0&pf_rd_t=101&pf_rd_ p=2253574542&pf_rd_i=1235983011 141. One of the biggest giveaways was of a million units by the New York Times in late 2015. See New York Times Gives Away One Million Virtual Reality Viewers for New App, Variety, 20 October 2015: http://variety.com/2015/digital/news/nyt-vr-virtual- reality-cardboard-new-york-times-1201622150/ 142. For example, see Best Google Cardboard apps: Top games and demos for your mobile VR headset, Wareable, 26 November 2015: http://www.wareable.com/google/the-best-google-cardboard-apps; The best virtual reality apps for iPhone, compatible with Google Cardboard, AppleInsider, 1 August 2015: http://appleinsider.com/articles/15/08/02/the-best-virtual-reality-apps- for-iphone-compatible-with-google-cardboard 143. For more information, see HULU DIVES INTO VIRTUAL REALITY, Hulu, 24 September 2015: http://blog.hulu.com/2015/09/24/ huluvirtualreality/ 144. As of end-2015, a few professional VR cameras had launched. For example, see Nokia announces OZO virtual reality camera for professional content creators, Nokia, 29 July 2015: http://company.nokia.com/en/news/press-releases/2015/07/29/nokia- announces-ozo-virtual-reality-camera-for-professional-content-creators 145. For more information, see Interview: VR movie pioneer on the challenges and future of virtual reality filmmaking, PCWorld, 9 April 2014: http://www.pcworld.com/article/2141202/interview-vr-movie-pioneer-on-the-challenges-and-future-of-virtual- reality-filmmaking.html 146. For more information, see Eye, 360 Designs, as accessed on 21 December 2015: http://360designs.io/eye/ 147. DigitalVR develops virtual reality platform for architects, Prolific North, 29 October 2015: http://www.prolificnorth. co.uk/2015/10/digitalvr-develops-virtual-reality-platform-for-architects/ 148. How this 150-year-old company uses virtual reality, Fortune, 25 August 2015: http://fortune.com/2015/08/25/mccarthy- construction-vr/ 149. See 8 Amazing Uses for VR Beyond Gaming, PCMagazine, as accessed on 21 December 2015: http://uk.pcmag.com/wearable- tech/39151/gallery/8-amazing-uses-for-vr-beyond-gaming?p=4 150. Virtual Reality In Healthcare: Where’s The Innovation?, TechCrunch, 16 September 2015: http://techcrunch.com/2015/09/16/ virtual-reality-in-healthcare-wheres-the-innovation/ Technology, Media & Telecommunications Predictions 2016 67

151. See How Virtual Reality Can Help Hotels Compete With Airbnb, Hospitality Net, 28 October 2015: http://www.hospitalitynet. org/news/4072363.html 152. See 8 Amazing Uses for VR Beyond Gaming, PCMagazine, as accessed on 21 December 2015: http://uk.pcmag.com/wearable- tech/39151/gallery/8-amazing-uses-for-vr-beyond-gaming?p=5 153. Link Trainer, Wikipedia, as accessed on 21 December 2015: https://en.wikipedia.org/wiki/Link_Trainer 154. New head mounted display for use in military training, Gizmag, 17 July 2007: http://www.gizmag.com/go/7645/ 155. Facebook’s Zuckerberg: Virtual reality will have slow ramp, ZDNet, 5 November 2015: http://www.zdnet.com/article/ facebooks-zuckerberg-virtual-reality-will-have-slow-ramp/ 156. How Oculus and Cardboard Are Going to Rock the Travel Industry, Bloomberg, 19 June 2015: http://www.bloomberg.com/ news/articles/2015-06-19/how-oculus-and-cardboard-are-going-to-rock-the-travel-industry 157. See Mark Zuckerberg: Virtual Reality is the Future of Travel, Yahoo, 17 April 2015: https://www.yahoo.com/travel/mark- zuckerberg-virtual-reality-is-the-future-of-116646911427.html 158. For the number of games available, we have used a number of publicly available sources including http://store.steampowered. com/, http://www.vgchartz.com/and the most recent information available for mobile games from the two main app stores. If a title is available across a number of platforms, the total number of games will include all the platforms that title is available on. For PC games, we have considered only games that are downloadable onto the PC it is being played on, not games which are accessible via browsers. 159. Deloitte Global expects that approximately 50 percent of the total base of smartphones and tablets in use will be used to play games on a frequent basis. According to Deloitte member firms’ Global Mobile Consumer Survey conducted in 20 countries, 46 percent of respondents use their phones to play games at least once a week. Fieldwork took place between May and July 2015. For more details, see Deloitte member firms’ Global Mobile Consumer Survey: http://www.deloitte.com/gmcs 160. Special E3 Gaming Report: The Growth of Mobile & Online Multiplayer, App Annie, 11 June 2015: http://blog.appannie.com/ app-annie-idc-gaming-report-2015-h1-e3-edition/[requires download] 161. For details on video game development cycles and costs, see Video game development, Wikipedia, as accessed on 10 December 2015: https://en.wikipedia.org/wiki/Video_game_development 162. For examples of marketing costs, see How Much Does It Cost To Make A Big Video Game?, Kotaku, 15 January 2014: http://kotaku.com/how-much-does-it-cost-to-make-a-big-video-game-1501413649 163. 500 iOS games per day: Flooded mobile market is tricky for indie devs, VentureBeat, 3 March 2015: http://venturebeat. com/2015/03/03/500-ios-games-per-day-flooded-mobile-market-is-tricky-for-indie-devs/ 164. Why King and Supercell spent nearly $500M marketing their games — and how you can spend way less, VentureBeat, 27 April 2015: http://venturebeat.com/2015/04/27/why-king-and-supercell-spent-nearly-500m-marketing-their-games-and-how-you- can-spend-way-less/ 165. CPI, Fiksu Indexes for August 2015, Fiksu: https://www.fiksu.com/resources/fiksu-indexes/2015/august 166. Cost per Loyal User Index, Fiksu Indexes for August 2015, Fiksu: https://www.fiksu.com/resources/fiksu-indexes/2015/august 167. For example, conversion for Zynga in 2014 was under two percent; in 2011 it was reported at 2.5 percent. See Credit Suisse Raises Zynga Inc (ZNGA) Target Price; Maintains Underperform Rating, Bidness Etc, 10 November 2014: http://www. bidnessetc.com/28870-credit-suisse-raises-zynga-inc-znga-target-price-maintains-underperform-rat/; Veteran Wall Street analyst rates Zynga an “outperform”, VentureBeat, 19 December 2015: http://venturebeat.com/2011/12/19/veteran-wall- streeet-analyst-rates-zynga-an-outperform/; For King, conversion in 2014 was 2.3 percent, see Candy Crush Saga players spent £865m on the game in 2014 alone, The Guardian, 13 February 2015: http://www.theguardian.com/technology/2015/feb/13/ candy-crush-saga-players-855m-2014 168. According to Deloitte member firms’ Global Mobile Consumer Survey conducted in 20 countries, 10 percent of respondents have made an app/game related purchase in the last month. Fieldwork took place between May and July 2015. For more details, see Global Mobile Consumer Survey: http://www.deloitte.com/gmcs 169. Only 0.15 percent of mobile gamers account for 50 percent of all in-game revenue (exclusive), VentureBeat, 26 February 2015: http://venturebeat.com/2014/02/26/only-0-15-of-mobile-gamers-account-for-50-percent-of-all-in-game-revenue-exclusive/ 170. If you’re not in the top 100, you’ll barely be able to make a living in the iOS ecosystem, gamesindustry.biz, 10 July 2015: http://www.gamesindustry.biz/articles/2015-07-10-ios-game-revenues-show-top-20-dominate-newzoo 171. As of 10 December 2015, the number one game for the Apple iPhone device in the US generated $1,470,543 in in-app revenue, while the games ranked number five and number ten generated $293,973 and $143,406 respectively. For more information, see Top Grossing iPhone Games, Think Gaming, as accessed on 10 December 2015: https://thinkgaming.com/ app-sales-data/; iPhone, iTunes, App Store, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 172. If you’re not in the top 100, you’ll barely be able to make a living in the iOS ecosystem, gameindustry.biz, 10 July 2015: http://www.gamesindustry.biz/articles/2015-07-10-ios-game-revenues-show-top-20-dominate-newzoo 173. Developer Economics Q1 2015: State of the Developer Nation, VisionMobile, as accessed on 10 December: http://www.visionmobile.com/product/developer-economics-q1-2015-state-developer-nation/ 68

174. For more information, see How Counter-Strike: Global Offensive is still dominating Steam, gamesindustry.biz, 16 October 2015: http://www.gamesindustry.biz/articles/2015-10-15-how-counter-strike-global-offensive-is-still-dominating-steam 175. For some background on the financial performance of Monument Valley, see Monument Valley Team Reveals The Cost And Reward Of Making A Hit iOS Game, TechCrunch, 15 January 2015: http://techcrunch.com/2015/01/15/monument-valley-team- reveals-the-cost-and-reward-of-making-a-hit-ios-game/ 176. 2016 to be the year global mobile advertising overtakes newspapers, The Drum, 14 September 2015: http://www.thedrum. com/news/2015/09/14/2016-be-year-global-mobile-advertising-overtakes-newspapers; Cost of mobile ad-blocking will only be $1 billion, research firm says, Fortune, 23 September 2015: http://fortune. com/2015/09/23/cost-of-ad-blocking/ 177. In one test, the largest homepage downloaded was 19.4 MB in size and took 39 seconds to download over a 4G network. For more information see Putting Mobile Ad Blockers to the Test, The New York Times, 1 October 2015: http://www.nytimes. com/2015/10/01/technology/personaltech/ad-blockers-mobile-iphone-browsers.html?_r=0 178. Report: Apps Nearly 90 Percent Of Smartphone Internet Time, Marketing Land, 7 March 2014: http://marketingland.com/ report-apps-now-90-percent-smartphone-internet-time-76257 179. Report: Apps Nearly 90 Percent Of Smartphone Internet Time, Flurry Insights, 26 August 2015: http://flurrymobile.tumblr.com/ post/127638842745/seven-years-into-the-mobile-revolution-content-is 180. For more information on the size of the PC-based ad-blocking market, see The cost of ad blocking, 2015 Ad Blocking Report, PageFair and Adobe, 2015: http://downloads.pagefair.com/reports/2015_report-the_cost_of_ad_blocking.pdf 181. As an example of the reporting on this, see iOS 9 ad-blocker apps shoot to top of charts on day one, The Guardian, 17 September 2015: http://www.theguardian.com/technology/2015/sep/17/adblockers-ios-9-app-charts-peace 182. On September 17 2015, three of the top five apps were ad-blockers: Peace, Crystal and Purify occupied #1, #2 and #4 position. As of October 2015, Purify is ranked #44 in paid apps, Crystal is ranked #180 (top ad blocker ranked after Purify) and Peace has been withdrawn from the app store. See iOS Top App Charts, AppAnnie: https://www.appannie.com/apps/ios/ top/?_ref=header&device=iphone 183. Digicel has started blocking advertisements on its networks in the Caribbean. See Digicel first mobile group to block ads in battle against Google, Financial Times, 30 September 2015: https://next.ft.com/content/73262f80-676d-11e5-97d0- 1456a776a4f5 184. France tells internet service provider to end ads block, 8 January 2013: http://www.bbc.co.uk/news/technology-20943779 185. Safari application program on iOS devices has offered a ‘reader mode’ for years. iPhone, iTunes, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 186. North American gross box office revenue from 1980 to 2014 (in billion US dollars), Statista, as accessed on 14 December 2015: http://www.statista.com/statistics/187069/north-american-box-office-gross-revenue-since-1980. 187. Domestic Movie Theatrical Market Summary 1995 to 2015, as accessed on 15 December, 2015: http://www.the-numbers.com/ market/ 188. This assumes US and Canadian inflation rates of about two percent per year over the next few years. 189. Assessing the longer term outlook of the box office (page 10, figure 11), Canaccord Genuity, 23 March 2015 190. Box Office Ticket Sales 2014: Revenues Plunge To Lowest In Three Years, International Business Times, 5 January 2015: http:// www.ibtimes.com/box-office-ticket-sales-2014-revenues-plunge-lowest-three-years-1773368 191. Box Office Will Fall in 2016 Following Record Year, Study Says, Variety, 15 October 2015: http://variety.com/2015/film/box- office/2016-box-office-down-2015-record-1201619066/ 192. Domestic Movie Theatrical Market Summary 1995 to 2015, as accessed on 15 December, 2015: http://www.the-numbers.com/ market/ 193. Deloitte Global estimates for 2015 for admissions, box office and per capita visits. 194. Theatrical Market Statistics 2014 (page 9), MPAA, as accessed on 15 December 2015: http://www.mpaa.org/wp-content/ uploads/2015/03/MPAA-Theatrical-Market-Statistics-2014.pdf 195. Annual Average US Ticket Price, The National Association of Theatre Owners, as accessed on 14 December 2015: http://natoonline.org/data/ticket-price/ 196. Global box office revenue from 2015 to 2019 (in billion US dollars), Statista, as accessed on 14 December 2015: http://www.statista.com/statistics/259987/global-box-office-revenue/ 197. Putting a Price Tag on Film Piracy, The Wall Street Journal, 5 April 2013: http://blogs.wsj.com/numbers/putting-a-price-tag-on- film-piracy-1228/ 198. The sneaky way movie theaters are making up for falling ticket sales, Fortune, 18 February 2015: http://fortune.com/2015/02/18/movie-theaters-concessions/ 199. Movie Theaters Make 85% Profit at Concession Stands, Time, 7 December 2009: http://business.time.com/2009/12/07/movie- theaters-make-85-profit-at-concession-stands/ 200. Assessing the longer term outlook of the box office (page 9, figure 10), Canaccord Genuity, 23 March 2015. Technology, Media & Telecommunications Predictions 2016 69

201. 12-17 year olds went to 6.4 movies in 2014, while 18-24 went to 6.2 movies, for an average of 6.3. Assuming they went to five percent more movies in 2015 (in line with our estimate) that would be 6.6 movies for 2015. See Theatrical Market Statistics 2014 (page 9), MPAA, as accessed on 15 December 2015: http://www.mpaa.org/wp-content/uploads/2015/03/ MPAA-Theatrical-Market-Statistics-2014.pdf 202. iPhone, iTunes, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 203. What Do Millennials Really Want?, NCM, 9 October 2014: http://blog.ncm.com/2014/10/09/millenials/ 204. Sequels and franchises make 2015 the year of the mega-movie, The Guardian, 15 November 2015: http://www.theguardian. com/business/2015/nov/15/sequels-franchises-us-box-office-record 205. 155 movie sequels currently in the works, Den of Geek, 2 December 2015: http://www.denofgeek.com/movies/movie- sequels/35837/157-movie-sequels-currently-in-the-works 206. American Studios To American Audiences: Please Take A Seat … In The Way, Way Back, Deadline, 28 September, 2014: http://deadline.com/2014/09/american-box-office-importance-studios-oversas-841427/ 207. Future of Film II: Box Office Losses as the Price of Admission, Ivey Business Review, 1 March 2014: http://iveybusinessreview. ca/blogs/lbolukhba2010/2014/03/01/future-of-film-ii-la-fin-du-cinema/ 208. Sequels and franchises make 2015 the year of the mega-movie, The Guardian, 15 November 2015: http://www.theguardian. com/business/2015/nov/15/sequels-franchises-us-box-office-record 209. 2013 Global Box Office, MPAA, as accessed on 11 December 2015: http://www.mpaa.org/wp-content/uploads/2014/03/MPAA- boxoffice-72ppi.png 210. China Box Office Hits $6.3 Billion for 2015, Marking 48 Percent Yearly Growth, The Hollywood Reporter, 3 December 2015: http://www.hollywoodreporter.com/news/china-box-office-hits-63-845728 211. Global box office flatlines, but China shows strong growth, The Guardian, 12 March 2015: http://www.theguardian.com/ film/2015/mar/12/global-box-office-china-strong-growth 212. Number of cinema screens in China from 2007 to 2014, Statista, as accessed on 14 December 2015: http://www.statista.com/ statistics/279111/number-of-cinema-screens-in-china/ 213. Number of US Movie Screens, The National Association of Theatre Owners, as accessed on 14 December 2015: http://natoonline.org/data/us-movie-screens/ 214. China Surges 36% in Total Box Office Revenue, Variety, 4 January 2015: http://variety.com/2015/film/news/china-confirmed-as- global-number-two-after-36-box-office-surge-in-2014-1201392453/ 215. Number of cinema admissions in India from 2009 to 2014 (in millions), Statista, as accessed on 14 December 2015: http://www.statista.com/statistics/316824/cinema-admissions-india/ 216. Theatrical Market Statistics 2014, MPAA, March, 2015: http://www.mpaa.org/wp-content/uploads/2015/03/MPAA-Theatrical- Market-Statistics-2014.pdf 217. Why Does Movie Popcorn Cost So Much?, Stanford Graduate School of Business, 1 December 2009: https://www.gsb.stanford. edu/insights/why-does-movie-popcorn-cost-so-much 218. Fox Germany Inks Deal With Italy’s Rai Com To Release Live Italian Operas Theatrically, Variety, 19 November 2015: http://variety.com/2015/film/global/1201644399-1201644399/ 219. eSports, Cineplex, as accessed on 14 December 2015: http://www.cineplex.com/Events/eSports 220. Penetration was over 76 percent in 2000, and 89.4 percent in 2010. The Truth and Distraction of US Cord Cutting, REDEF, 20 October 2015: https://redef.com/original/the-truth-and-distraction-of-us-cord-cutting 221. Nielsen Comparable Metrics: Q2 2015 (page 9), Nielsen, 3 December 2015: http://www.nielsen.com/us/en/insights/ reports/2015/the-comparable-metrics-report-q2-2015.html 222. Number of pay-TV households in the United States from 2014 to 2019 (in millions), Statista, as accessed on 17 December 2015: http://www.statista.com/statistics/251268/number-of-pay-tv-households-in-the-us/ 223. Telephone companies did not offer pay-TV in 1997, but cable TV was in 65.9 million households and there were 6.5 million satellite TV subscribers. See US Households With Cable Television, 1977-1999, TV History, as accessed on 17 December 2015: http://www.tvhistory.tv/Cable_Households_77-99.JPG; Net January 1997 satellite subscriber additions, satbiznews.com, as accessed on 17 December 2015: http://www.satbiznews.com/jan97sat.html 224. 83% of US Households Subscribe to a Pay-TV Service, Leichtman Research Group (LRG), 3 September 2015: http://www.leichtmanresearch.com/press/090315release.pdf 225. Deloitte US’s Digital Democracy Survey, Ninth edition, Deloitte Development LLC, 2015: http://www2.deloitte.com/us/en/ pages/technology-media-and-telecommunications/articles/digital-democracy-survey-generational-media-consumption-trends. html; Survey Shows Fewer Adults Considering Cutting the Cord, The Motley Fool, 13 November 2015: http://www.fool.com/ investing/general/2015/11/13/survey-shows-less-adults-considering-cutting-the-c.aspx 226. TV “cord cutting” accelerates, Flatpanels, 12 August 2015: http://www.flatpanelshd.com/news. php?subaction=showfull&id=1439361804 70

227. The Truth and Distraction of US Cord Cutting, REDEF, 20 October 2015: http://redef.com/original/the-truth-and-distraction-of- us-cord-cutting 228. Q1 2015 net losses were 31K subscribers, Q2 was – 605K, and Q3 was – 175K, for a total decline to September 30, 2015 of 811,000. See The Cord-Cutting Verdict for Pay TV, The Wall Street Journal, 9 November 2015: http://blogs.wsj.com/ moneybeat/2015/11/09/the-cord-cutting-verdict-for-pay-tv/; Q4 numbers were unavailable at the time of publication, but Q4 tends to be seasonally stronger than Q2 and Q3 (although not as strong as Q1); we estimate about 100K in net losses, and a total of less than 1 million for the year. 229. 99.4 million as of Q3 2015. See The Truth and Distraction of US Cord Cutting, REDEF, 20 October 2015: http://redef.com/ original/the-truth-and-distraction-of-us-cord-cutting?curator=MediaREDEF. The number is an estimate: the largest pay- TV providers publish quarterly numbers, and represent just under 84 million homes as of Q3 2015. See Major Pay-TV Providers Lost About 190,000 Subscribers in Q3 2015, Leichtman Research Group (LRG), 16 November 2015: http://www. leichtmanresearch.com/press/111615release.html 230. Deloitte US’s Digital Democracy Survey, Deloitte Development LLC, Ninth edition, 2015: http://www2.deloitte.com/content/ dam/Deloitte/se/Documents/technology-media-telecommunications/Digital-Democracy-Survey-DDS_Executive_Summary_ Report_Final_2015-04-20-tmt.pdf 231. At 101 million US households in 1997, that represented 72 percent pay-TV penetration, roughly comparable to our 2020 forecast of 70 percent. See US Households,1 Families, and Married Couples, 1890–2007, Infoplease, as accessed on 17 December 2015: http://www.infoplease.com/ipa/A0005055.html 232. Baseline Household Projections for the Next Decade and Beyond, The Joint Center for Housing Studies of Harvard University, 27 March 2014: http://www.jchs.harvard.edu/research/publications/baseline-household-projections-next-decade-and-beyond 233. Good News, TV Guys: ComScore Found Your Missing TV Watchers, Re/code, 14 October 2014: http://recode.net/2014/10/14/ good-news-tv-guys-comscore-found-your-missing-tv-watchers/ 234. Cablevision Now Offering Free Digital Antennas For Cord-Cutters, Consumerist, 23 April 2015: http://consumerist. com/2015/04/23/cablevision-now-offering-free-digital-antennas-for-cord-cutters/ 235. The number of broadband-only homes was 2.157 million in 2014, and 3.285 million in 2015, that is a gain of 1.128 million or more than 50 percent. Nielsen Total Audience Report: Q2 2015 (table 7, page 18), Nielsen, 21 September 2015: http://www.nielsen.com/us/en/insights/reports/2015/the-total-audience-report-q2-2015.html 236. For more information, see Peak Cable, Asymco, 19 March 2015: http://www.asymco.com/2015/03/19/peak- cable/#identifier_1_7041 237. Changing Channels: Americans View Just 17 Channels Despite Record Number to Choose From, Nielsen, 6 May 2014: http://www.nielsen.com/us/en/insights/news/2014/changing-channels-americans-view-just-17-channels-despite-record-number- to-choose-from.html 238. Deloitte US’s Digital Democracy Survey, Ninth edition, Deloitte Development LLC, 2015: http://www2.deloitte.com/us/en/ pages/technology-media-and-telecommunications/articles/digital-democracy-survey-generational-media-consumption-trends. html 239. $89.78 in 2014. For more information, see Major Pay-TV Providers Lost About 190,000 Subscribers in Q3 2015, Leichtman Research Group, 2 September 2014: http://www.leichtmanresearch.com/press/090214release.pdf 240. VIDEO TRENDS REPORT, Digitalsmiths, Q2 2015: http://www.digitalsmiths.com/downloads/Digitalsmiths_Q2_2015_Video_ Trends_Report-Consumer_Behavior_Across_Pay-TV_VOD_PPV_OTT_Connected_Devices_and_Content_Discovery.pdf 241. More Americans move to cities in past decade – Census, Reuters, 26 March 2012: http://www.reuters.com/article/2012/03/26/ usa-cities-population-idUSL2E8EQ5AJ20120326#KU0uUIix292I0FWb.97 242. Mohu MH-110633 Leaf Metro HDTV Antenna, Amazon, as accessed on 17 December 2015: http://www.amazon.com/Mohu- Leaf-Metro-HDTV-Antenna/dp/B00JC9J2NQ/ref=sr_1_3?ie=UTF8&qid=1448491046&sr=8-3&keywords=mohu+leaf+antenna 243. Nielsen Total Audience Report: Q2 2015 (table 7, page 18), Nielsen, 21 September 2015: http://www.nielsen.com/us/en/ insights/reports/2015/the-total-audience-report-q2-2015.html 244. 5 TV antenna tricks for the modern-day cord cutter, TechHive, 4 March 2015: http://www.techhive.com/article/2892160/smart- tv/5-tv-antenna-tricks-for-the-modern-day-cord-cutter.html 245. The Nielsen Total Audience and Cross Platform reports provide the following figures for ‘Broadcast only homes’ for Q1: Q1 2010: 11.170 million, Q1 2011: 11.193 million, Q1 2012: 11.067 million, Q1 2013 11.173 million, Q1 2014 11.617 million, Q1 2015 12.513 million. Nielsen Total Audience Report: Q1 2015 (table 1, page 11), Nielsen, 23 June 2015: http://www.nielsen. com/us/en/insights/reports/2015/the-total-audience-report-q1-2015.html; Nielsen Cross Platform Report Q1 2011 (table 1 page 5), Nielsen, June 2011: http://www.nielsen.com/content/dam/corporate/us/en/newswire/uploads/2011/06/Nielsen-cross- platform-report-q1-2011_web.pdf 246. Total Audience Report: Q2 2015 (table 9, page 19), Nielsen, 21 September 2015: http://www.nielsen.com/us/en/insights/ reports/2015/the-total-audience-report-q2-2015.html 247. Seasonal effects cause significant quarterly variations in TV watching in the US (and other markets), therefore it is important to compare the same quarter being measured. Technology, Media & Telecommunications Predictions 2016 71

248. In Q1 2013 Americans 18+ watched 311 minutes live and 29 minutes of time-shifted TV, and 310 minutes live and 34 minutes time-shifted in Q1 2014. And Q1 2015 was 295 minutes live and 35 minutes time-shifted. See Nielsen Total Audience Report: Q1 2015 (exhibit 1, page 10), Nielsen, 23 June 2015: http://www.nielsen.com/us/en/insights/reports/2015/the-total-audience- report-q1-2015.html 249. Historical Daily Viewing Activity Among Households & Persons 2+, Nielsen, November 2009: http://www.nielsen.com/content/ dam/corporate/us/en/newswire/uploads/2009/11/historicalviewing.pdf 250. iPhone, iTunes, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 251. Nielsen reports for Q1 2014 and Q1 2015. In 2014, weekly time spent by 18-24 year olds on multimedia devices was 24 minutes, 148 minutes watching video on the Internet, and 25 minutes for video on smartphone, for a weekly total of 197 minutes, or 28 minutes daily. In 2015, weekly time spent on multimedia devices was 81 minutes, 111 minutes watching video on the Internet, and 32 minutes for video on smartphone, for a weekly total of 224 minutes, or 32 minutes daily. 252. Nielsen reports for Q1 2014 and Q1 2015. In 2014, 18-24 years-olds watched 203 minutes daily of live and time shifted TV, and in 2015 they watched 170 minutes daily. 253. 18-24 year-olds watched 240 daily minutes of live and time-shifted TV in 2011, and 170 minutes in 2015, a 29 percent decline. Americans aged 2+ watched 326 daily minutes of live and time-shifted in 2011, and 309 minutes daily in 2015, a 5.3 percent decline. Nielsen Total Audience Report: Q1 2015 (table 1, page 11), Nielsen, 23 June 2015: http://www.nielsen.com/ us/en/insights/reports/2015/the-total-audience-report-q1-2015.html; Nielsen Cross Platform Report Q1 2011 (table 1 page 5), Nielsen, June 2011: http://www.nielsen.com/content/dam/corporate/us/en/newswire/uploads/2011/06/Nielsen-cross-platform- report-q1-2011_web.pdf (The Total Audience and Cross Platform reports are largely the same, just with a different title) 254. Traditional TV Viewing, by Age, Q1 2011 – Q2 2013, Nielsen: http://cdn.theatlantic.com/assets/media/img/posts/Nielsen-TV-Viewing-by-Age-Horizontal-Line-Chart-Sept2013.png 255. Nielsen Three Screen report Q1 2008, Nielsen, May 2008: http://www.nielsen.com/content/dam/corporate/us/en/newswire/ uploads/2009/06/3_screen_report_5-08_fnl.pdf; Nielsen Total Audience Report Q1 2015 Nielsen Total Audience Report: Q1 2015, Nielsen, 23 June 2015: http://www.nielsen.com/us/en/insights/reports/2015/the-total-audience-report-q1-2015.html 256. iPhone, iTunes, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 257. Pay-TV operators ditching lower-income customers, driving up average revenue per sub, analyst finds, FierceCable, 24 August 2015: http://www.fiercecable.com/story/pay-tv-operators-ditching-lower-income-customers-driving-average-revenue- su/2015-08-24 258. So How Many Millennials Are There in the US, Anyway?, MarketingCharts, 28 April 2015: http://www.marketingcharts.com/ traditional/so-how-many-millennials-are-there-in-the-us-anyway-30401/ 259. Upfront 2015: Why Didn’t TV Tune in More Ad Dollars?, Variety, 19 August 2015: http://variety.com/2015/tv/news/tv-upfront- advertising-2015-1201573711/ 260. US TV Market Posts Highest Ad Revenues in Almost Two Years, World Screen, 20 November 2015: http://www.worldscreen. com/articles/display/2015-11-20-usa-standardmediaindex-tv-advertising 261. Watching TV and video in 2025 (page 1), Enders Analysis, 4 November 2015 262. Watching TV and video in 2025 (page 4, figure 5), Enders Analysis, 4 November 2015 263. Watching TV and video in 2025 (page 5), Enders Analysis, 4 November 2015 264. The Communications Market Report, Ofcom, 6 August 2015: http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr15/ CMR_UK_2015.pdf 265. Christmas TV ad spend to hit a record £300m in best year since 1998, The Guardian, 7 December 2015: http://www.theguardian.com/media/2015/dec/07/christmas-tv-ad-spend-record-black-friday-cyber-monday 266. Global pay-TV market to exceed one billion by 2017, TVB Europe, 30 September 2015: http://www.tvbeurope.com/global-pay- tv-market-exceed-one-billion-2017/ 267. 20 percent of millennials with their own homes who have started families do not subscribe to cable, and the number is 25 percent for childless millennials who have their own homes. For more information, see Millennials and Cutting the Cord, The New York Times, 3 October 2015: http://www.nytimes.com/interactive/2015/10/03/business/media/changing-media- consumption-millenials-cord-cutters.html?_r=0 268. Only 1% of HBO Cable Subscribers Have Cancelled and Switched to HBO Now, Exstreamist, 5 August 2015: http://exstreamist.com/only-1-of-hbo-cable-subscribers-have-cancelled-and-switched-to-hbo-now/ 269. See Sky Sports wins live Premier League rights, Sky, 10 February 2015: https://corporate.sky.com/media-centre/news-page/2015/sky-sports-wins-live-premier-league-rights; and BT Sport wins rights to more live Premier League football matches, BT, 10 February 2015: http://www.btplc.com/News/Articles/ShowArticle. cfm?ArticleID=3396B02E-20AE-42B5-86F8-B834A1E4E0FD 72

270. For more information, see Telefónica adquiere los derechos televisivos de la Liga por 600 millones de euros, Expansion.com, 10 July 2015: http://www.expansion.com/empresas/tecnologia/2015/07/10/559febb846163f082f8b45a8.html ; LaLiga se asegura 1.600M€ al año por derechos televisivos, futbol.as.com, 3 December 2015: http://futbol.as.com/futbol/2015/12/02/ mas_futbol/1449086745_773942.html 271. For more information, see: www.deloitte.co.uk/sportsbusinessgroup 272. Number of UK pay-TV subscribers grows to 17.4 million, broadbandchoices, 15 June 2015: http://www.broadbandchoices. co.uk/news/tv/number-of-uk-pay-tv-subscribers-grows-to-17-million-00494 273. The number of pay-TV subscribers in Spain from Q2 2015 as published by Comisión Nacional de Mercados y Competencia; 29 percent is obtained by dividing the 18.3 million households in 2014 as per Instituto Nacional de Estadística by the number of pay-TV households 274. Manchester United plc reaches agreement with Adidas, Investis, 14 July 2014: http://otp.investis.com/clients/us/manchester_ united/usn/usnews-story.aspx?cid=972&newsid=21515 275. For information on Bosman ruling, see Bosman ruling, Wikipedia, as accessed on 18 December 2015: https://en.wikipedia.org/ wiki/Bosman_ruling 276. City Football Group announces US$400m China Media Capital led-consortium minority shareholding, City Football, 1 December 2015: http://mediazone.cityfootball.com/wp-content/uploads/2015/12/City-Football-Group-announce-new- partnership-with-CMC-Holdings.pdf 277. China Media Capital To Pay $1.3 billion For Soccer League Broadcast Rights, Forbes, 14 November 2016: http://www.forbes.com/sites/janeho/2015/11/14/li-ruigangs-china-media-capital-to-pay-1-3-billion-for-soccer-league-broadcast- rights/ 278. See Dalian Wanda scores 20% stake in Atletico Madrid, Atletico De Madrid, 31 March 2015: http://en.clubatleticodemadrid. com/noticias/wanda-group-is-now-the-owner-of-20-of-the-club-s-shareholding 279. See Wanda Group acquires Infront Sports & Media from Bridgepoint at EUR 1.05 billion, Infront, 10 February 2015: http://www.infrontsports.com/news/2015/02/wanda-group-acquires-infront-sports-and-media-from-bridgepoint/ 280. See World Cup: Does US really have the most fans in Brazil?, BBC, 25 June 2014: http://www.bbc.co.uk/news/blogs-magazine- monitor-27978699 281. Esports (also known as eSports, e-sports, competitive gaming, electronic sports, or progaming in Korea) is a term for organized multiplayer video game competitions, particularly between professional players. See Esports, Wikipedia, as accessed on 10 December 2015: https://en.wikipedia.org/wiki/Esports 282. There are two highly divergent publicly available reports that estimate the 2015 eSports market size. One suggests a market of $250 million, fairly evenly split between Asia, North America and Europe while the other gives a figure of $748 million, with Asia being over 60 percent of the total. See eSports revenues to pass $250 million in 2015 – Newzoo, gamesindustry.biz, 3 June 2015: http://www.gamesindustry.biz/articles/2015-06-03-esports-revenues-to-pass-usd250-million-in-2015-newzoo; The worldwide eSports market reaches 134 million viewers, SuperData, 4 May 2015: https://www.superdataresearch.com/ blog/esports-brief/. It is impossible to reconcile the two estimates, so Deloitte Global is using $400 million, which is below the midpoint. Market growth for 2016 is assumed to be 25 percent, in line with both reports. 283. eSports is bigger than Basketball, Medium, 7 March 2015: https://medium.com/@esportsclips/esports-is-bigger-than- basketball-8c5bbf84c240#.wm9680fdt 284. Activate Tech and Media Outlook 2016 (Page 104), SlideShare, 20 October 2015: http://www.slideshare.net/ActivateInc/ activate-tech-and-media-outlook-2016 285. This Is eSports: Where Pro Gamers Are YouTube Heroes and Entertainment’s New Rock Stars, SingularityHUB, 28 October 2015: http://singularityhub.com/2015/10/28/this-is-esports-where-pro-gamers-are-youtube-heroes-and-entertainments-new- rock-stars/?utm_content=buffer85846&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer 286. For more information on PewDiePie, see PewDiePie, YouTube, as accessed on 10 December 2015: https://www.youtube.com/ user/PewDiePie/about 287. For more information on VanossGaming, see VanossGaming, YouTube, as accessed on 10 December 2015: https://www. youtube.com/user/VanossGaming/about 288. Gaming Channels With The Most Subscribers: The Top 10 Gaming Channels On YouTube, NewMediaRockstars, 4 March 2015: http://newmediarockstars.com/2015/03/gaming-channels-with-the-most-subscribers-the-top-10-gaming-channels-on-youtube/ 289. New Report Details How eSports Is An Effective Engagement And Marketing Tool, Forbes, 25 February 2015: http://www. forbes.com/sites/insertcoin/2015/02/25/new-report-details-how-esports-is-an-effective-engagement-and-marketing-tool/ 290. Amazon acquires Twitch: World’s largest e-tailer buys largest gameplay-livestreaming site, VentureBeat, 25 August 2015: http://venturebeat.com/2014/08/25/amazon-acquires-twitch-worlds-largest-e-tailer-buys-largest-gameplay-livestreaming-site/ 291. This eSports company just got acquired for $87 million, Fortune, 3 July 2015: http://fortune.com/2015/07/03/esl-esports- acquisition/ 292. Russian eSports could bring billions of dollars to investors, RBTH Network, 27 October 2015: http://rbth.com/ business/2015/10/27/rusian-esports-could-bring-billions-of-dollars-to-investors_534365 Technology, Media & Telecommunications Predictions 2016 73

293. Cineplex buys into future of eSports, forming competitive video-game league, The Globe and Mail, 17 September 2015: http://www.theglobeandmail.com/technology/tech-news/cineplex-buys-into-future-of-esports-forming-competitive-video- game-league/article26401328/ 294. UK’s first eSports arena opens in London next month, Eurogamer, 18 February 2015: http://www.eurogamer.net/articles/2015- 02-18-uks-first-esports-arena-opens-in-london-next-month 295. Global Sports Market Grows as Gate Revenue, Media Rights Gap Closes, Sportscaster, 10 September 2015: http://www. sportscastermagazine.ca/business/global-sports-market-grows-as-gate-revenue-media-rights-gap-closes/1003408660/ 296. Juniper Research: eSports to Beat NFL Viewership by 2020, TechZone360, 3 November 2015: http://www.techzone360.com/ topics/techzone/articles/2015/11/03/412407-juniper-research-esports-beat-nfl-viewership-2020.htm 297. How esports fans spend their time, and their money, Polygon, 5 November 2015: http://www.polygon. com/2015/11/5/9676764/how-esports-fans-spend-their-time-and-their-money 298. ESports demographics: Fans skew male, spend more on games, GamaSutra, 6 November 2015: http://www.gamasutra.com/ view/news/258786/ESports_demographics_Fans_skew_male_spend_more_on_games.php 299. US ESPORTS FANS AREN’T JUST PC GAMERS, Nielsen, 29 October 2015: http://www.nielsen.com/us/en/insights/news/2015/ us-esports-fans-arent-just-pc-gamers.html 300. Super Evil Megacorp sees big potential in eSports for mobile game ‘Vainglory’, The Los Angeles Times, 10 December 2015: http://www.latimes.com/business/technology/la-fi-tn-super-evil-megacorp-vainglory-20151204-story.html 301. Sony creating new multiplayer esports game for Project Morpheus virtual reality headset, VentureBeat, 15 June 2015: http://venturebeat.com/2015/06/15/sony-morpheus-rigs-multiplayer-game/ 302. Gigabits are go? Tariff count takes off in 2015, Point Topic, 9 December 2015: http://point-topic.com/free-analysis/gigabits-are- go-tariff-count-takes-off-in-2015/ 303. It is possible that some packages that are marketed as Gigabit services may aggregate down (for downloads) and uplink (for uploads) speeds to attain the Gigabit. For example a service presented as Gbit/s may comprise 800 Mbit/s down, and 200 Mbit/s up. 304. For more information, see: http://point-topic.com/ 305. Recent announcements will benefit countries including Portugal, Ireland and Canada. For more information, see Vodafone rolling out 1Gbps FTTH in Ireland and Portugal, Telecoms.com, 2 Dec 2015: http://telecoms.com/457462/vodafone-to-start- offering-1gbps-ftth-in-ireland-and-portugal/; Bell promises to bring fastest internet possible to Toronto, CBC News, 26 June 2015: http://www.cbc.ca/news/canada/toronto/bell-promises-to-bring-fastest-internet-possible-to-toronto-1.3127407 306. Hands on with Hyperoptic’s gigabit fibre: The UK’s fastest residential Internet connection, Ars Technica UK, 19 August 2015: http://arstechnica.co.uk/information-technology/2015/08/hands-on-with-hyperoptic-gigabit-fibre-the-uks-fastest-residential- internet-connection/ 307. Prices in dollars, adjusted for purchasing power parity. See Gigabits are go? Tariff count takes off in 2015, Point Topic, 9 December 2015: http://point-topic.com/free-analysis/gigabits-are-go-tariff-count-takes-off-in-2015/ 308. Ibid. 309. For example, see BT Openreach begins 330Mbps G.fast broadband trial this August, Ars Technica UK, 20 June 2015: http://arstechnica.co.uk/business/2015/07/bt-openreach-begins-330mbps-g-fast-broadband-trial-this-august/ 310. Liberty Global Preps for DOCSIS 3.1, Light Reading, 10 August 2015: http://www.lightreading.com/cable/docsis/liberty-global- preps-for-docsis-31/d/d-id/717498 311. For a technical explanation of how this works, see DOCSIS 3.1 Enables Rapid Deployment of Gigabit Broadband, Light Reading, 7 July 2015: http://www.lightreading.com/cable/docsis/docsis-31-enables-rapid-deployment-of-gigabit-broadband/a/ d-id/716814 312. For example, Comcast in the US is planning to make Gbit/s services available across its markets by 2017-18. See Comcast planning gigabit cable for entire US territory in 2-3 years, Ars Technica, 24 August 2015: http://arstechnica.com/ business/2015/08/comcast-planning-gigabit-cable-for-entire-us-territory-in-2-3-years/ 313. Compressed files require 25 Mbit/s; live TV with a high frame rate can require double that. For more information, see Netflix, as accessed on 10 December 2012: https://help.netflix.com/en/node/13444; 314. Marc Scarpa, Wikipedia, as accessed on 15 December 2015: https://en.wikipedia.org/wiki/Marc_Scarpa 315. For a history of YouTube, see YouTube, Wikipedia, as accessed on 10 December 2015: https://en.wikipedia.org/wiki/YouTube 316. For a view on the Internet connection speed required for a 4K file, see Recommended upload encoding settings (Advanced), Google, as accessed on 10 December 2015: https://support.google.com/youtube/answer/1722171?hl=en-GB 317. Facebook Hits 8 Billion Daily Video Views, Doubling From 4 Billion In April, TechCrunch, 4 November 2015: http://techcrunch. com/2015/11/04/facebook-video-views/#.eai6wa:OGnj 318. International Space Station on UStream, NASA, as accessed on 15 December 2015: https://www.nasa.gov/multimedia/nasatv/ iss_ustream.html 319. For example, see How to Watch All the Beautiful New Apple TV Screensavers, Gizmodo, 19 October 2015: http://gizmodo. com/how-to-watch-all-the-beautiful-new-apple-tv-screensaver-1737421102 74

320. For an example of a cloud-based video monitoring service, see Nest Support, Nest, as accessed on 10 December 2015: https://nest.com/support/article/What-are-the-pricing-differences-for-Nest-Aware-subscription-plans 321. The maximum permitted size of apps on Apple’s App Store online store has increased from 2GB to 4GB. 322. See The Beauty of Inefficient Code, The Atlantic, 29 July 2010: http://www.theatlantic.com/technology/archive/2010/07/ the-beauty-of-inefficient-code/60613/; iPhone, iTunes, App Store, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 323. Ukko Networks hits 507Mbps in LTE-A trial, plans Europe’s fastest network, ZDNet, 12 February 2015: http://www.zdnet.com/ article/ukko-networks-hits-507mbps-in-lte-a-trial-plans-europes-fastest-network/; for a comprehensive list of offerings and trials, see LTE Advanced, Wikipedia, as accessed on 15 December 2015: https://en.wikipedia.org/wiki/LTE_Advanced 324. Verizon has stated that it may have “some level of commercial deployment of 5G” in 2017; Korea plans to have a 5G trial network in 2018. See Verizon sets roadmap to 5G technology in US; Field trials to start in 2016, PR Newswire, 8 September 2015: http://www.prnewswire.com/news-releases/verizon-sets-roadmap-to-5g-technology-in-us-field-trials-to-start- in-2016-300138571.html; China, South Korea commit to 5G leadership, while Japan and US rely on private efforts, Fierce Wireless Tech, 8 June 2015: http://www.fiercewireless.com/tech/story/china-south-korea-commit-5g-leadership-while-japan- and-us-rely-private-effo/2014-06-08 325. One study found that over half of UK households expected to add at least one connected device on 25 December 2015. Source: https://www.cable.co.uk/news/ cited in Christmas Day set to place added strain on home broadband networks, uSwitch, 11 December 2015: http://www.uswitch.com/broadband/news/2015/12/christmas_day_set_to_place_added_strain_ on_home_broadband_networks/ 326. For example Vodafone is planning on launching Gigabit/s services in Ireland, Spain, Portugal and Italy. For more information, see Vodafone Commits to Gigabit in Europe, Light Reading, 2 December 2015: http://www.lightreading.com/gigabit/fttx/ vodafone-commits-to-gigabit-in-europe/d/d-id/719615? 327. Supersonic DOCSIS: 15 Gigabit Cable 2020, 50-80 Gigabits 2030, Fast Net News, 5 September 2015: http://fastnet.news/index. php/cable/230-supersonic-docsis-15-gigabit-cable-2020-50-80-gigabit-2030 328. Deloitte Global analysis based on a number of publicly available sources including Gartner Says Worldwide Market for Refurbished Smartphones to Reach 120 Million Units by 2017, Gartner, 18 February 2015: http://www.gartner.com/newsroom/ id/2986617 329. The value for the wearables market is expected to reach $8,862 million as of 2016. See Wearable device market value from 2010 to 2018 (in million US dollars), Statista, as accessed on 12 December 2015: http://www.statista.com/statistics/259372/ wearable-device-market-value/ 330. Using the assumption that smartphone sales, including used smartphones, were 1.5 billion in 2015, and expected to reach 1.6 billion in 2016. 331. For information on upgrade programs, see ZTE Introduces New Lease-to-Own Option for Smartphones and Mobile, ZTE, 14 October 2015: http://www.zteusa.com/news-zte-introduces-lease-options/; Samsung said to plan smartphone-leasing program, CNet, 20 September 2015: http://www.cnet.com/news/samsung-said-to-plan-smartphone-leasing-program/; iPhone Upgrade Program, Apple, as accessed on 7 December 2015: http://www.apple.com/shop/iphone/iphone-upgrade- program. iPhone, iTunes, Apple Pay, Apple TV, Safari are trademarks of Apple Inc., registered in the U.S. and other countries. Deloitte Global’s TMT Predictions 2016 is an independent publication and has not been authorized, sponsored, or otherwise approved by Apple Inc.. 332. Apple’s super-sticky iPhone leasing plan is a hit, Fortune, 1 October 2015: http://fortune.com/2015/10/01/apple-iphone- upgrade-hit/ 333. Verizon Announces Yearly Upgrade Program for iPhone Users, MacRumors, 24 September, 2015: http://www.macrumors. com/2015/09/24/verizon-yearly-iphone-upgrade-program/ 334. According to Deloitte member firms’ Global Mobile Consumer Survey (GMCS), 46 percent of all smartphones in Germany have been bought from a retailer other than a mobile phone operator or shop that specialises on selling phones. For more information, see: http://www2.deloitte.com/de/de/pages/technology-media-and-telecommunications/articles/global-mobile- consumer-survey-20151.html 335. Device manufacturers are pushing back, and trying to control the trade in and refurbish markets. See Apple Canada tells Ingram to stop selling used iPhones to Wind, The Globe and Mail, 4 August 2015: http://www.theglobeandmail.com/report- on-business/apple-canada-tells-ingram-to-stop-selling-used-iphones-to-wind/article25835792/ 336. The article states 20 GBP to 108 GBP, which is converted to USD at a 1.53 exchange rate. See Join in the great recycling gold rush, Mobile News, 21 November 2014: http://www.mobilenewscwp.co.uk/2014/11/21/join-in-the-great-recycling-gold-rush/ 337. iPhone 6 resale value higher than previous models, analyst says, CNet, 24 June 2015: http://www.cnet.com/uk/news/iphone-6- resale-value-higher-than-previous-models-analyst-says/ 338. How to tell whether a phone is supported by your network: UK mobile operator frequency bands, PCAdvisor, 10 February 2015: http://www.pcadvisor.co.uk/how-to/mobile-phone/how-tell-whether-phone-is-supported-by-your-network-3597426/ 339. There may also be issues with emerging services, such as Voice over WiFi (VoWiFi), support for which varies by operator and handset. Technology, Media & Telecommunications Predictions 2016 75

340. Your Old Smartphone’s Data Can Come Back to Haunt You, PCWorld, 11 July 2011: http://www.pcworld.com/article/235276/ your_old_smartphones_data_can_come_back_to_haunt_you.html 341. Statistics That Will Make You Want To Recycle Your Cell Phone, S. C. Johnson and Son, 15 February 2015: http://www. scjohnson.com/en/green-choices/Reduce-and-Recycle/Articles/Article-Details.aspx?date=12-02-15&title=Statistics-That-Will- Make-You-Want-To-Recycle-Your-Cell-Phone 342. The percentage of ‘data exclusives’ for 2012-2015 has been extracted from Deloitte member firms’ Global Mobile Consumer Survey for selected developed markets. The following countries have been considered for 2014 and 2015: Australia, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Singapore, Spain, UK, US. Australia, Italy and Norway did not participate in the 2012 and 2013 editions. Netherlands and Singapore did not participate in the 2012 edition. For more details, see Deloitte member firms’ Global Mobile Consumer Survey: http://www.deloitte.com/gmcs 343. Total Voice Traffic, Ericsson, as accessed on 16 December 2015: http://www.ericsson.com/TET/trafficView/loadBasicEditor. ericsson 344. As of 2015, the time spent on smartphone for activities excluding voice in U.K. has almost tripled from between 2012 to 2015, from 36 minutes in 2012, to 1 hour 31 minutes in 2015. See UK Adults Spend More Time on Mobile Devices than on PCs, eMarketer, 16 April 2015: http://www.emarketer.com/Article/UK-Adults-Spend-More-Time-on-Mobile-Devices-than-on- PCs/1012356#sthash.KheWPuYA.dpuf; Similar trends for US, see Growth of Time Spent on Mobile Devices Slows, eMarketer, 7 October 2015: http://www.emarketer.com/Article/Growth-of-Time-Spent-on-Mobile-Devices-Slows/1013072 345. The percentage of ‘data exclusives’ for 2012-2015 has been extracted from Deloitte member firms’ Global Mobile Consumer Survey for selected developed markets. The following countries have been considered for 2014 and 2015: Australia, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Singapore, Spain, UK. US. Australia, Italy and Norway did not participate in the 2012 and 2013 editions. Netherlands and Singapore did not participate in the 2012 edition. For more details, see Deloitte member firms’ Global Mobile Consumer Survey: http://www.deloitte.com/gmcs 346. For IM volumes in 2012, see OTT messaging traffic will be twice volume of P2P SMS traffic this year, Informa, 30 April 2013: http://informa.com/media/press-releases--news/latest-news/ott-messaging-traffic-will-be-twice-volume-of-p2p-sms-traffic-this- year/#. For IM volumes in 2015, see Instant messaging to overtake email as biggest digital communication platform, V3, 7 July 2015: http://www.v3.co.uk/v3-uk/news/2416558/instant-messaging-to-overtake-email-as-biggest-digital-communication- platform 347. Deloitte Global analysis based on a variety of publicly available information including Summary of RCS and VoLTE Launches, GSMA, as accessed on 11 December 2015: http://www.gsma.com/network2020/summary-of-rcs-and-volte-launches/; VoLTE global status, Evolution to LTE report, Global Mobile Suppliers Association, 13 October 2015: http://www.gsacom.com/ downloads/pdf/Snapshot_VoLTE_extract_GSA_Evolution_to_LTE_report_131015.php4 348. Deloitte Global analysis based on a variety of publicly available information including VoLTE and VoWi-Fi: crucial deployment and assurance considerations for operators, Analysys Mason, 27 February 2015: http://www.analysysmason.com/Research/ Content/Reports/VoLTE-VoWi-Fi-white-paper-Mar2015-RMA01/[requires registration]; Voice over LTE on the Upswing as Availability of VoLTE Capable Devices Grows, IHS, 23 June 2015: http://www.infonetics.com/pr/2015/VoLTE-OTT-Mobile-VoIP- Services.asp; Wi-Fi calling in Europe: EE, Vodafone UK and Three UK take different paths, Fierce Wireless Tech, 18 November 2015: http://www.fiercewireless.com/tech/story/wi-fi-calling-europe-ee-vodafone-uk-and-three-uk-take-different- paths/2015-11-18; Mitel Announces Mobile Enterprise Portfolio for Today’s Mobile-First World, GlobeNewswire, 15 October 2015: http://globenewswire.com/news-release/2015/10/15/776466/10152436/en/Mitel-Announces-Mobile-Enterprise- Portfolio-for-Today-s-Mobile-First-World.html 349. Wi-Fi calling finds its voice, Ericsson, July 2015: http://www.ericsson.com/res/docs/2015/consumerlab/ericsson-consumerlab- wifi-calling-finds-its-voice.pdf 350. 40pc of Brits have mobile blackspot in their home, Mobile News, 16 June 2015: http://www.mobilenewscwp. co.uk/2015/06/16/40pc-of-brits-have-mobile-blackspot-in-their-home/ 351. For a view on the complexity of deploying small cells, see VoLTE and VoWi-Fi: crucial deployment and assurance considerations for operators (page 7), Analysys Mason, 27 February 2015: http://www.analysysmason.com/Research/Content/Reports/VoLTE- VoWi-Fi-white-paper-Mar2015-RMA01/[requires registration] 352. ACG Research: With VoWiFi, it’s all about the economics, Fierce Wireless Tech, 22 October 2015: http://www.fiercewireless. com/tech/story/acg-research-vowifi-its-all-about-economics/2015-10-22 353. For more information on IMS, see IP Multimedia Subsystem, Wikipedia, as accessed on 11 December 2015: https://en.wikipedia.org/wiki/IP_Multimedia_Subsystem 354. See VoLTE and VoWi-Fi: crucial deployment and assurance considerations for operators (page 4), Analysys Mason, 27 February 2015: http://www.analysysmason.com/Research/Content/Reports/VoLTE-VoWi-Fi-white-paper-Mar2015-RMA01/[requires registration] 355. GSMA WELCOMES LAUNCH OF WORLD’S FIRST COMMERCIAL INTERCONNECTED VoLTE SERVICE IN SOUTH KOREA, GSMA, 18 June 2015: http://www.gsma.com/newsroom/press-release/gsma-welcomes-launch-of-worlds-first-commercial- interconnected-volte-service-in-south-korea/ 356. For information on the technology used to handover calls from VoLTE to legacy networks, see SRVCC Single Radio Voice Call Continuity, Radio-Electronics.com: http://www.radio-electronics.com/info/cellulartelecomms/lte-long-term-evolution/srvcc- single-radio-voice-call-continuity.php 357. Deloitte Global has generated this estimate based on data points provided by a range of major social networks, messaging companies, and photograph back-up services. 76

358. This is the equivalent of 3.5 billion Gigabytes. 359. For more information on cameras sold, see The explosion of imaging, Benedict Evans, 3 July 2014: http://ben-evans.com/ benedictevans/2014/6/24/imaging; This Chart Shows How the Camera Market Has Changed Over the Past Decades, PetaPixel, 15 December 2014: http://petapixel.com/2014/12/15/chart-shows-badly-digital-camera-sales-getting-hammered-smartphones/ 360. The explosion of imaging, Benedict Evans, 3 July 2014: http://ben-evans.com/benedictevans/2014/6/24/imaging 361. The average MP count for smartphones has been extracted from GSM Arena, as accessed on 15 December 2015: http://www.gsmarena.com/ 362. Infographic: How to Get More Likes on Facebook, Kissmetrics, as accessed on 15 December 2015: https://blog.kissmetrics. com/more-likes-on-facebook/ 363. For examples of hot dog legs, see #hotdoglegs, Instagram, as accessed on 12 August 2015: https://instagram.com/explore/ tags/hotdoglegs/ 364. For an analysis of selfies, see Introduction page, Selfiecity, as accessed on 12 August 2015: http://selfiecity.net/#intro 365. The first photo booth was installed in New York in 1925, and charged 25 cents for eight photos (equivalent to about $5, or about £3, in today’s money), and took ten minutes to deliver. See Photo Booth, Wikipedia, as accessed on 12 August 2015: https://en.wikipedia.org/wiki/Photo_booth 366. Ibid. 367. For example, see Ex-Googlers Take On Google Photos With Machine Smarts, re/code, 9 December 2015: http://recode. net/2015/12/09/ex-googlers-take-on-google-photos-with-machine-smarts/ 368. Tumblr is one of the first apps to support the iPhone 6S’s Live Photos, The Verge, 10 December 2015: http://www.theverge. com/2015/12/10/9886668/tumblr-ios-live-photo-support-added Technology, Media & Telecommunications Predictions 2016 77

Recent Deloitte thought leadership Beyond the dumb pipe 3D opportunity for Technology, Media & The IoT and the new role for network Telecommunications Predictions service providers technology, media, 2015 and telecommunications Additive manufacturing explores new terrain An article in Deloitte’s series examining the nature and impact of the Internet of Things A Deloitte series on additive manufacturing Technology, Media & Telecommunications Beyond the dumb pipe: The IoT and the new 3D Opportunity for Technology, Media Predictions 2015 role for network service providers and telecommunications: Addictive Manufacturing Explores New Terrain www.deloitte.com/tmtpredictions www.dupress.com/collection/internet-of-things www.dupress.com/articles/3d-printing-in- technology-media-telecom-tmt-industry Smart device, smart pay Taking mobile payments from coffee ISSUE 16 | 2015 shops to retail stores Complimentary article reprint Cognitive technologies The e ootnitie o ­ine BY DAVID SCHATSKY, CRAIG MURASKIN, AND RAGU GURUMURTHY > ILLUSTRATION BY MARIO WAGNER Digital Democracy Survey A multi-generational view of About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its netor of member firms, and their related entities DTTL and each of its member firms are legally separate and independent entities DTTL (also referred to as “Deloitte lobal”) does not provide services to clients lease see  deloittecom about for a more detailed description of DTTL and its member firms consumer technology, media and Deloitte provides audit, ta­, consulting, and financial advisory services to public and private clients spanning multiple industries €ith a globally connected netor of member firms in more than ‚ƒ„ countries and territories, Deloitte brings orld…class capabilities and high…†uality service to clients, delivering the insights they need to address their most comple­ business challenges Deloitte’s more than ˆ„„,„„„ professionals are committed to becoming the standard of e­cellence telecom trends This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte ‰etor”) is, by means of this communication, rendering professional advice or services ‰o entity in the Deloitte netor shall be responsible for any loss hatsoever sustained by any person ho relies on this communication Ninth edition © ˆ„‚ƒ ‹or information, contact Deloitte Touche Tohmatsu Limited www.deloitte.com/us/tmttrends #TMTtrends Cognitive Technologies: The Real Opportunities Smart Device. Smart Pay: Taking Mobile Digital Democracy Survey: A Multi- for Business Payments from Coffee Shops to Retail Stores Generational View of Consumer Technology and Telecoms Trends www.dupress.com/articles/cognitive- www.dupress.com/articles/mpayments-mobile- www.deloitte.com/dds technologies-business-applications pos-system-in-retail Other thought leadership • Deloitte member firms’ Global Mobile Consumer Survey: www.deloitte.com/gmcs The 2015 Global Mobile Consumer Survey provides insight on the mobile usage of 49,000 respondents across 30 countries. Local market reports are available. • Tech Trends 2016: www.deloitte.com/us/techtrends • Cognitive Technologies in the Technology Sector: From Science Fiction Vision to Real-World Value: www.dupress.com/articles/cognitive-technologies-in-technology-sector-tmt 78

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