CES chief Gary Shapiro explains the coming chaos of the gigantic tech trade show (interview)

The world still loves technology, and that’s good for one of the industry’s biggest events, the 2015 International Consumer Electronics Show, Jan. 6 to Jan. 9 in Las Vegas. Gary Shapiro, the president and chief executive of the Consumer Electronics Association, promises that it will once again be the place to go for innovation.

CES is expecting about 150,000 attendees, including 5,000 journalists and 35,000 international visitors. That’s about the same as last year. This year, we’re going to see a lot more wearable computers, 3D printing, Internet of Things sensors, health and fitness trackers, car gear, drones, virtual reality headsets, iPhone accessories, and even some products that will protect our privacy for a change.

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Our preview interview with Shapiro has become an annual ritual (here’s last year’s). Shapiro is predicting a solid holiday selling season for tech gear, and he’s excited as usual about some of the cool gadgets coming our way. He also stays abreast of the big tech policy issues and the overall state of the consumer electronics economy. Here’s an edited transcript of our interview with Shapiro.

VentureBeat: What will be different at CES this year?

Gary Shapiro: The big change for attendees is that we’ve divided the show into three areas. Tech East is the Las Vegas convention center and the Westgate, the Renaissance, all that area. Tech West is the Sands and the Venetian and a couple of hotels around there. We’re not calling those areas tech zones anymore, though. We’re calling them marketplaces.

Then we have a new area where we surrendered to the fact that we have a lot of people from the content, advertising, and marketing world doing deals, a lot of CMOs. We gave them their own hotel, the Aria. There will be a lot of conference sessions there, exhibits, meeting places. They’ll be able to stay there and hopefully put less pressure on with people driving around Las Vegas. We’re very concerned that we don’t get too big, too unusable, to a point where people just avoid us. That’s a big move for us.

VentureBeat: Are you expecting about the same size audience this year as last year?

Shapiro: Yes. The official number is “over 150,000,” which we’ve hit the last three or four years now. Last year was 160,000 or a little bit over. All indications are we’ll be somewhere close to there. We lost some people last year because of East Coast weather. You never know what’s going to happen — weather, strikes. We’re looking at the hotel pickup numbers. Our international is a lot stronger than last year, but you never know. Pre-registration is free. People still have to show up.

VentureBeat: How does the square footage look?

Shapiro: The exhibit space this year is bigger. That’s all I can say right now. We have companies that drop out at the last minute — they don’t have the product ready or they don’t get a visa or somebody’s sick — so we never announce that number until after the show. But we’re expecting to have a bigger footprint. Last year we had 2.06 million square feet of exhibit space.

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We will have more startups. Eureka Park, our startup showcase, has grown dramatically. We’ve had a waiting list, even though we expanded it. The startup area has been a phenomenal success.

VentureBeat: How many companies did Eureka Park have last year?

Shapiro: There are 375 startups in Eureka Park, up from 220 last year. It’s grown dramatically. When it started four years ago we had about 50.

VentureBeat: Why is it important to get those startups there, compared to the bigger companies?

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Shapiro: When I attended my first meeting of the governing body of the organization in 1981, the theory announced by the chairman that everyone discussed was that they were debating whether to raise costs — $6 a square foot to $7, something like that. The chairman, who was with Panasonic — a big exhibitor back then — what he said became an article of faith to the board and the staff, which is that we run the show so anyone with an idea can expose it to journalists, retailers, investors, partners, people from around the world, and get distribution. That’s what the show’s about.

Four years ago, we had the idea to get real startups, have a curated area, partner with the National Science Foundation, and subsidize it. It costs maybe $1,000. You show up and you get a little space to sit, some other things that would cost a lot more otherwise. For the 2014 show, there was almost $100 million in financing that came to our exhibitors. That’s pretty significant. Eureka Park has become a critical area of the show. A lot of people go there. Other than the United States, the next biggest area is France, with about 40 companies. Hungary has a few companies, even. Startups and innovation are things every country in the world seems to want.

We partnered with Kickstarter. They had 25 companies last year. Some of them launched their campaigns at the show. It’s four days of unlimited feedback for the companies. We’ve had 100 percent satisfaction. Everyone who’s ever done it thinks it’s the best thing in the world. They’re exhausted at the end, of course. We caution them that they should show up prepared to listen, prepared to change their business plans. That’s the heart of the whole theory of CES. We love the big companies too, but they’re paying the freight, in large part, for the smaller companies.

VentureBeat: What are some of the top trends that are accelerating, whether it’s 3D printing or wearables or what have you?

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Shapiro: The 3D printing marketplace is more than double what it was last year, both in terms of the number of companies and the size of the footprint. It’s not yet a consumer product with people rushing out to buy it. It’s very big with small businesses. We have a lot of people entering the marketplace. It’s one of these things that’s going to keep growing.

We predict the same thing with unmanned systems, what you call drones. That’s a new marketplace for us. We have a lot of new entrants, a lot of different approaches around the world. The U.S. is a little slower where this marketplace is concerned. Although yesterday the federal government announced 40 different companies using these drones. It’s a product that can do a lot of things and provide a lot of different services around the world. It’s growing quickly.

Cybersecurity is another new marketplace, as well as personal privacy (with nine exhibitors). One that’s growing very large very quickly is smart homes. Gaming is up. We have 637 exhibitors who say they have a gaming product, versus 511 last year. We had Oculus last year as part of someone else’s booth. This year they’re a huge separate exhibitor.

VentureBeat: Does anything seem to have slowed down or fizzled compared to past years?

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Shapiro: Not that I’m aware of. Eureka Park is up dramatically, as I said. Smart watches are up more than 50 percent. 3D printing is up 100 percent. Our auto section has grown. Everything is bigger. The show is bigger.

VentureBeat: How are the Apple-related products?

Shapiro: I just had a meeting about planning the 2016 floor, and the thought is that we’ll expand the iLounge, the Apple-related area of the show, because Apple is introducing new products. The expectation is that with new products coming, we’ll be introducing more of that. [This year’s iLounge has shrunk from 121,000 square feet and 396 exhibitors last year to 78,000 square feet and 174 exhibitors this year, mainly because of tighter curation].

VentureBeat: What about UltraHD?

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Shapiro: UltraHD isn’t a separate area of the show. It never really has been. The sales are hot on that right now. We learned yesterday that what I thought was an aggressive forecast is going to be exceeded in 2014. The TV category will be showing curved, OLED, and connected televisions. But of course 4K TV will just become TV, the same way we stopped talking about HD. Everything’s going to be UltraHD in just a few years.

VentureBeat: You guys have signaled that it’s going to be a pretty good holiday for gadgets.

Shapiro: No question about that. TVs have just gotten back on the most wanted list for gifts, speaking of. They’d been off for a few years. They’re back on because of 4K, because the prices have gotten very attractive. Smartphones and tablets and games are on there, obviously. As far as the holiday selling season, we’re seeing more consumers wanting to spend on consumer electronics than in all of our years of polling.

VentureBeat: The Internet of Things seems to be something almost every big company is talking about.

Shapiro: Technically we had an Internet of Things area at the show last time. In 2015 we don’t. But what we do have is a number so large that I didn’t believe it. 900 companies will have Internet of Things products. That seems pretty high to me. But still, this is self-identification, the companies associating themselves.

VentureBeat: Are there any interesting public policy issues that the CEA is dealing with this year? There’s no SOPA at the moment, but has anything else had you busy in Washington?

Shapiro: Where to begin? First of all, for the first time, we have all the FCC commissioners and all the FTC commissioners, including both chairmen. That’s 10 top government officials. There’s some talk that in the weeks before the show, they’re going to release this new net neutrality thing, but there’s a lot of other stuff on their plate, including spectrum options and things like that.

Congress has a lot on its plate that it needs to come back and talk about, including privacy, immigration, trade. The new trade deal in Geneva just collapsed a few hours ago, sadly. Everyone’s walking away from the information technology agreement.

VentureBeat: Why would that have been a good agreement, if you could explain it to people who aren’t familiar?

Shapiro: 10 or 20 years ago there was this thing called the Information Technology Agreement, which we pushed really hard for. It said that information technology products have no tariffs among the countries that signed the deal. That meant you could buy computers from anywhere in the world, basically — Japan, China, Korea, the U.S., Europe. Consumers got a great deal. They could buy products without any tariffs. Some countries — like Brazil, which is not a signatory — the tariffs can go up to 60 or 80 percent.

What happened was, the technology changed. A lot of things converged. Countries started putting tariffs on certain things, depending on what they wanted to do, to raise revenue or protect different industries. There have been some efforts to get together and resolve these differences. We thought we had a deal about a year ago, but then China blew it up, frankly.

President Obama, a few weeks ago, announced that he had gotten a deal with China. That was huge. What happened this week, though, looks like this deal was unacceptable to the Koreans and Taiwanese, because it excluded some products that they really cared about — monitors and things like that. We’ve been working our butts off for the past week while they’ve been meeting in Geneva to try to work it out. It’s not officially dead yet, but it may be soon.

VentureBeat: Last year we talked a lot about this boom in technology companies — all the innovation in the U.S. Do you feel that things are still strong in the U.S. and for the tech boom in general?

Shapiro: Oh, yeah. This last year, I spent less time in the office than I ever have in any year of my job. I’ve been traveling around the country and the world talking to tech councils and tech groups, going to conferences, speaking to interest groups, seeing all this stuff going on. Innovation is everywhere.

Steve Case, he had this bus that went around the country. He was giving out $100,000 investments, and there was no shortage of good ideas around the country. The U.S. is in a really good place right now. Manufacturing prices are low here. The rest of the world seems to be turning downward. Oil prices are low. The economy is strong. We’re still getting a lot of people who want to innovate here. The immigration issue is one that we want to deal with next year. Generally, though, we’re doing well. It’s a perfect storm.

VentureBeat: There’s still some tech-related societal problems — censorship, government spying, lots of hacking still going on. What are your thoughts on some of these downsides?

Shapiro: In Europe, it seems like every other day they’re doing something to hit a U.S. tech company. The strategy appears to be to put up walls around a U.S. tech sector and tax them. That’s something that’s not helping. Europe has not produced a lot of innovation and they’re frustrated about it. I was speaking about this in Geneva a few weeks ago. They really want to be something, want to do something, and unfortunately they keep choosing a path that’s very bureaucratic and not very healthy. They have some great innovation in certain areas, but the tech space in general isn’t doing well.

Spying hasn’t been helpful to U.S. companies doing business abroad. It’s been used as an excuse by the Europeans and others to try to be less available to U.S. companies. That’s an issue. We’re looking at the effect of hacking on consumers as far as credit cards. That’s where the Europeans are definitely better than us. They haven’t had the problems we’ve had, with Home Depot and Target and the like.

VentureBeat: I see CEA chief economist Shawn DuBravac has a book out about the age of data now.

Shapiro: Sean is our economist, yeah. It’s the third book from the CEA. The first two books were by me. Sean focuses on the future. It’s a great read, very interesting. He’ll be sharing the keynote space with me.

VentureBeat: What are some of your favorite thoughts about the future? Any fun things that you see technology bringing to our lives?

Shapiro: When I started out, CES was a lot about entertainment and a little bit about information and computers. Then it became about education, information, and entertainment. Now it’s fundamentally changed, as we’ve gotten into low-cost components, especially the sensors that are being put together in clever ways and solving major societal problems.

We have a special program this year focused on not only health care, but on doctors. The chief medical officer of Qualcomm is part of it, and others. We’re attracting health care professionals to see what’s going on there. At the same time, the federal government just made an announcement about reimbursing doctors getting information from an FDA-approved device. That’s a reimbursable expense, which is huge in terms of changing medical care.

Wearables are growing rapidly, and the definition of wearables is changing at this show. One company has a product, a cervical insert for women who want to know when their body is ready to conceive or not. It can do everything a Fitbit does, only more precisely. That’s really interesting.

VentureBeat: Do you have any observations about the keynotes?

Shapiro: We have the two keynotes before the show now, with Samsung and Mercedes. For our opening, Mark Fields, the new CEO of Ford, is speaking. I’ll be introducing him after I speak, the first day of the show. Then we go to Intel. To me, the chip companies are really helping to find the future, whether it’s Qualcomm or Intel or Nvidia. Those are huge. We have a Nobel Prize winner speaking, Professor [Shuji] Nakamura.

Besides the single-person keynotes, we just announced some other panels that are interesting. John Chambers of Cisco, Neil Smit from Comcast. We have the head of CBS. That’s exciting. At the C Space we have Google, Twitter, Yahoo, IBM, Ryan Seacrest. Altogether we have 750 or 800 people speaking. We have a lot of stuff going on.

VentureBeat: You’re expecting about 5,000 journalists and 35,000 international people?

Shapiro: We set these numbers up as our outside points. We have no reason to think they’re wrong. I don’t think we’ve ever not met the number we’ve projected, but you never know with weather and things like that. You get paranoid when you’re putting on an event. It’s always nice to exceed expectations, but the numbers have been the same for a while.

The number that really counts is the independently audited number, where we hire someone and they actually contact everyone and work out their own formula. They come up with actual precise numbers, and those are the numbers we use. For now, I’m expecting more than 150,000 attendees, more than two million square feet of exhibitor space, more than 140 companies, more than 35,000 international, more than 3,500 exhibitors, more than 5,000 press, 20 product categories, 25 marketplaces, 250 conference sessions, 750 speakers, more than 2,500 financial professionals, 20,000 products introduced.

As far as differences, last year we had 15 product categories. This year we have 20. We asked about deals this last time, and we tried to use some math that we haven’t done before. That’s how I was able to give you that number about what happened with Eureka Park. We also found that companies exhibiting at CES in 2014, several ended up being sold for an incredible amount of money, a couple of billion dollars altogether.

VentureBeat: I noticed that there seem to be more press conferences happening at the same time. Has that opened up a bit beyond the usual big companies?

Shapiro: For years we’ve been trying to manage that process, having them work things out before the show so you can attend those. We moved it to Mandalay Bay, and that eats up a lot of the pressure because companies have more time to set up their press conferences. That seems to be working. If you’re talking about press conferences outside that area, that’s something we don’t control.

VentureBeat: A lot of the Chinese companies are doing them now, like Xiaomi. There are just more large players around the world now who want to get in front of the press.

Shapiro: There’s an incredible number of press at the show, and they want to take advantage of that. It makes sense. We’ve announced that we’re having a show in Asia. Earlier you asked me that question about the iLounge. We’re not allowing companies which are just doing accessories and things like that. We’re requiring companies to have a brand or some real innovation. We’re curating the event in Asia. It’s going to be in Shanghai.

We’re hearing frustration from some of the Chinese companies. They want to be an established brand, and so part of their strategy has to be getting their name out there, having a press conference. They want to be known for innovation, not just for the cheapest manufacturing. Press conferences, in the scheme of things, are a very effective way of getting the message out.