Juniper Research predicts that connected healthcare and fitness device services will produce $1.8 billion in annual revenues by 2019, according to a new report, a sixfold increase from 2015, which has predicted revenues of $320 million.
The services market is due to explode because in order to succeed, connected fitness devices will have to shift their focus from just hardware, to software and services author James Moar writes.
"Connected fitness and health devices provide a way to collect biometric data, not interaction platforms," he said in a statement. ‘People want to interact with the devices at the app level – the draw is the information. Because of this, and the omnipresence of sensors, the importance of the hardware will diminish at a much faster rate than other CE market segments."
A report last August put the connected healthcare device market at $3 billion in 2019. It's because of the prevalence of the smartphone that connected devices are even emerging as a mass market category, the report contends, but that connectivity is also a threat to devices as continually advancing smartphone technology can make devices obsolete.
"The ability of smartphones to incorporate device functionalities as apps is both a risk and an opportunity for the smart wireless device market," Moar writes in a whitepaper. "On the one hand if a device is too dependent on app functionality it could potentially be displaced by app-only offerings (as is the case with more basic fitness tracking devices), but the flexible app platform accompanied by uniform connectivity technologies means that it is easy for consumers to incorporate peripherals into their lifestyles in a way that would not be possible if they were interacting with the device alone."
Juniper predicts the growth in the space will be driven by freemium models that offer a basic app and even device for free and charge for more advanced features. People will track their fitness and health data for free, but they will pay for apps and services that interpret and analyze that data and make it meaningful.
The research firm predicts 12.9 million users will be engaged with these paid service platforms by 2019, with the majority of sales focused in developed markets with large healthcare infrastructures.
"This targeted use of the data, as well as much of the value deriving from long-term usage, means that simple consumer-facing devices that track basic metrics face an uncertain future," Moar writes. "With multiple studies showing high abandonment rates and basic functionalities increasingly being integrated into smartwatches and more complex fitness devices, device vendors will have to rely on more innovative software to drive engagement beyond mere measurement."