2015 saw a number of notable developments across the tech space. Apple released its latest version of the iPhone, which was a smash hit, especially in China, and also the Apple Watch, which wasn’t. Google continued to make strides toward putting a self-driving car on the road, touting such technology as transformative. It remains to be seen, however, whether consumers, not to mention regulators, will feel the same way.
Meanwhile, Amazon became consistently profitable, ironically not due to its retail might but because of its cloud computing unit, Amazon Web Services. The strategy of investing nearly all of its revenues into high-growth areas appears to be finally paying off. Not to be forgotten was Facebook, which continued to be aggressive, refining its ad platform and adding important new features, including live video feeds, while targeting other promising areas such as speech recognition and virtual reality.
So what’s in store for tech in 2016 and beyond? Here’s a look at four top trends:
Streaming services will continue to gain favor at the expense of cable and satellite companies. Network television has been in decline for decades. Now, it’s cable and satellite’s turn to suffer – and the fall is likely to be swift and thorough. The so-called cord-cutting revolution that began a few years ago is here to stay. Each year, an increasing number of consumers are abandoning pricey cable and satellite subscriptions for more affordable options such as Netflix, Hulu and Amazon Instant Video – all of which have made significant investments to acquire and produce their own original content as the streaming arms race heats up. No one on the cable and satellite side is immune, not even ESPN, which despite holding the rights to a collection of highly coveted live sports content is shedding millions of subscribers, according to a recent 10K filing by Disney. The future is clearly on-demand, app-based entertainment providers, and traditional players like ESPN will need to adapt to survive. The new Roku TV is a perfect example of how the future of TV will look like.
Apple will solve the issues surrounding the Apple Watch, helping wearables become an even faster-growing segment of the tech industry. The Apple Watch was met with much fanfare when it was released in April, but the hype did not translate into widespread adoption. While the technology was innovative and the fitness features were attractive, the price tag ($400) raised some eyebrows. Another problem was that it had to be tethered to the phone, which was a major deterrent to some would-be buyers who wanted a standalone device. The next version of the Apple Watch (widely rumored to be coming this spring) needs to be cheaper and detachable from the phone. We think that will happen. But to make this product really resonate with consumers, the marketing effort behind this initiative needs some re-tooling. Young people are not wearing watches, and it’s up to Apple to do a better job of telling them why they should. This is what happened with the initial ad campaigns surrounding the iPhone, which ultimately became an ingrained part of the culture. A successful rollout of the next Apple Watch should lift the entire wearable industry in 2016, including leaders Garmin and Fitbit.
This will be the first full year that virtual reality will be a viable consumer product. Oculus and Sony are coming out with VR gaming headsets this year, and it’s potentially a game changer. This should boost game console sales and re-energize existing successful franchises like “Call of Duty,” “Madden” and “Halo,” possibly making Activision and Electronic Arts big winners moving forward. Facebook, which owns Oculus, might be the biggest beneficiary, however. It has the ability to seamlessly integrate immersive VR experiences into their platform, and since nearly everyone is on Facebook, that will cause VR’s momentum to snowball. Virtual reality is the next big thing, having the potential to completely upend a cross section of diverse industries beyond just video games, from movies, to medicine, to sports and education.
Fintech and digital payment technology will continue to expand. Financial advice will always require a human element. Certain components of financial planning are just too complicated for an internet-driven solution, including tax, estate and business succession planning. That said, there’s no question that as increasing number of investors consider online financial planning options money managers and advisors will have to tweak their businesses to accommodate this trend. Also, digital payment services like Apple and Android Pay, as well as Bitcoin and the Blockchain, will gain greater acceptance as consumers become more educated and retailers make the necessary capital investments to accept such services.
There are many exciting trends emerging in 2016. Even so, with technology things can change very fast and new opportunities seem to consistently arise. That is why it’s so important to position your portfolio for the future as these themes continue to evolve into this year and beyond.
Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki, an investment advisory with approximately $415 million in assets under advisement. Gerber Kawasaki clients and employees may own positions in various companies mentioned in the article, but readers shouldn’t buy anything without doing their own research. Securities offered through LPL Financial, Member FINRA/SIPC.
By Ross Gerber
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
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