This is the very first MobiHealthNews In-depth -- our weekly series of longer form journalism focused on industry trends, pressing issues, and important events. This week we rounded up some digital health-related takeaways from the massive International CES 2014 event that recently took place in Las Vegas. The event's original name, the Consumer Electronics Show, points to its core focus, but the rise of direct-to-consumer and not-so-direct-to-consumer health and fitness devices has slowly and surely become a dominant theme of the event. This was true for 2014 more than any other year as some pundits claimed digital health stole the show. More on digital health at CES 2014 in the pages to follow.
Wading through a saturated fitness tracker market
By Jonah Comstock
We've been referring to the activity tracker space as "crowded" for a long time. Increasingly, the space is also starting to become commoditized -- features that used to make trackers stand out, like sleep tracking, are rapidly becoming standard and expected.
At the CES 2014, the Las Vegas event formerly known as the Consumer Electronics Show, we saw a bloom of new activity trackers, something that has been going on all year but a show like CES makes very obvious. And beyond just a lot of new small players, it saw an unprecedented number of large consumer electronics companies previewing fitness trackers for 2014 release: The Sony Core, the LG LifeBand Touch, the Epson Pulsense, the Razer Nabu. That's with the Samsung S Band still to come and the Nintendo Fit Meter recently in stores.
CES and NPD show us: The tracker space is growing and booming
The recent NPD numbers have given us some idea of exactly how big the space is, and why these big players might want a piece: the digital fitness category, which includes smart pedometers and fitness trackers sold in retail technology stores is a $330 million market. NPD Group Executive Director and Industry Analyst for Consumer Technology Ben Arnold told MobiHealthNews he sees a lot of potential for growth.
"I'm fully expecting the market to double within the next year," he said. "I think it's just natural for a market this nascent to double the sales we saw in a previous year."
And three companies right now own 97 percent of that market: Fitbit, Jawbone, and Nike. At first blush, it's hard to reconcile that stratification with the sheer number of trackers MobiHealthNews is keeping track of. How are so many companies playing in that leftover 3 percent?
Here's a few points to keep in mind. One, many of these trackers just aren't in stores. Basis Band, for instance, is still a product you have to buy online. The Misfit Shine has just recently hit Best Buy and Apple Stores, but before that was in the same boat. NPD doesn't track those numbers and can't really, although they do track online resellers. It's not unreasonable to think the smaller players are still selling a lot of units themselves, but this remains a black box. The only insights would have to come from the companies themselves.
Arnold also said sports retail stores aren't necessarily being tracked as closely by NPD, a firm mostly focused on technology. So athlete-focused brands like Polar or Garmin might be being underestimated.
Second, some trackers may be falling into other categories. The BodyMedia Core device, for instance, with it's clinical bent and focus on weight loss, is more likely to be considered a health device than a fitness tracker. Nintendo's Fit Meter is likely being counted as a video game accessory, even though it functions very much like an activity tracker. And corporate wellness-focused trackers, like the Virgin Pulse Max or the Fitlinxx Pebble aren't showing up on this radar as long as employers buy them direct from manufacturers.
Finally, though, as mentioned above, the space is just growing. The demand is so high that the would-be new players are seeing that the time is right to get involved.
"If the market doubles, those three products aren't going to catch all the additive sales," Arnold said. "So I think there is room for some of these upstarts."
What will happen when CE companies crash the start-up dominated tracker space?
It's tempting to say that brand recognition will be a major boon to big names in the tracker scene, but experience doesn't necessarily bear that out. Of the big three, Nike is by far the biggest brand, not even to mention the company's close relationship with Apple. But it only has 10 percent of retail sales to Fitbit's 68. The companies have more money to pour into R&D and marketing than startups certainly, and could possibly leverage other technologies they manufacture. For instance, Samsung's S Band, if it ever launches, could connect to Samsung phones in some novel way.
But the real challenge for these companies to make progress in a space with such established leaders is to really innovate the space, something that is much harder than it sounds. Sony's approach seems to be going bigger than health -- the LifeLogger app they previewed at CES brought in all kinds of phone data onto a visual timeline with the activity data from the Core. Razer Nabu, on the other hand, is all about taking social to another level, possibly even vibrating when other Nabu users in the wearer's social network are physically close by.
These innovations (they might less charitably be called gimmicks) will sink or swim based on whether or not the value they provide is something the consumer actually wants or needs. And one consumer need that the current devices don't fulfill is invisibility -- consumers might want to track their fitness without having an additional device to charge, manage, and keep track of. With that in mind, some of the companies entering the space, like LG, Razer, and Epson are hedging their bets with smartwatches or smartwatch-like features. This takes them out of exactly the same space as Fitbit, Nike and Jawbone, but it doesn't take them out competition with those trackers.
Can fitness trackers survive the smartwatch and the M7?
One question we've been asking for a while that still hasn't been answered is this: is the fitness tracker, as a dedicated, distinct device, going to persist as a category? Or will smartwatches, or even phones themselves, prove themselves adept enough at fitness tracking to make a dedicated bracelet obsolete? What makes the activity tracker category so different than the Mp3 player or the PDA when they first launched -- two devices which have now been largely absorbed by smartphones that can do everything they can do?
Apple's introduction of the M7 motion co-processor earlier this year -- and the succession of apps that have jumped on board that trend speaks to this risk. Just a few weeks ago, Fitbit itself introduced tracker-free tracking to its app, something Arnold commented on.
"To me, that is sort of a statement about the role that hardware plays in the struggle between dedicated hardware, you know sensors embedded in your body, versus a phone that has an extra accelerometer in it or you know another processor that can help you with all that information paired with an app that can make sense of it," he said. "I mean that's a huge issue that the market is going to have to deal with, this age old hardware versus software argument. And that's probably what I'll be looking for in 2014."
MobiHealthNews asked a lot of fitness tracker makers about smartwatches last year for our activity tracker podcast. A popular answer among them was that there's one thing you can only get by having a dedicated device on your wrist, and that's having a dedicated device on your wrist. The tracker itself -- wearing it, checking it, showing it off to your friends, sharing the data on social media -- is all part of what makes it work as a behavior change device. It's physicality fuels an experience that people find motivating. People look down at their wrist and think "How much have I moved today?"
Similarly, fitness bands are starting to be seen as a fashion accessory, not in spite of their fitness functionality but because of it. In the 21st Century, it's trendy to be techy, and people are proud that they're taking steps to be more active. We saw this in a Vogue piece last year, a recent piece from Refinery29, and the various color and design options the major players are releasing.
There is some evidence that fashion and reputation are driving these trends. Rashes aside, people like to wear activity trackers. But whether that's enough to save the FuelBand from the fate of the iPod remains to be seen.
The barrage of trackers we saw at CES are going to shake up the space, one way or another. But exactly what form that will take is another question. Depending on whether they can make themselves stand out, the big guns could edge out the startups dominating the market, fail to get a hold at all, or redefine the category, possibly washing away the fitness band as we know it.