The Sky Is [Not] Falling (But PNDs Might Be)

Tuesday, May 26, 2009 – Stewart Wolpin

It's been reported that the U.S. GPS satellite constellation, maintained by the U.S. Air Force, is in danger of failure next year. While the author of said report exhibits a Chicken Little attitude toward the GPS guardians, it's hard to believe responsible parties would allow such a catastrophe to befall not only national security but to a critical consumer market.

How critical? CEA says in 2009, 17.4 million portable and transportable GPS navigation devices – in English that's GPS handhelds (Personal Navigation Devices (PNDs)) from folks like Garmin, Magellan and TomTom, as well as car-based GPS navigation systems – will be sold, more than twice as many as were sold just two years ago (8.75 million). According to CEA, GPS gadgets will be a $4-plus billion business this year.

Big business, right?

The Real GPS Business

Wrong. As the kids would say, BFD. This whole PND bubble may soon burst, even with a healthy economy and a healthy GPS satellite system.

Why? PNDs and car navigation systems represent a tiny fraction of the actual GPS navigation device market. Consumers are suddenly realizing their cellphone makes a better PND than a PND.

First, the statistical argument to support the first assertion.

Firm figures are hard to come by, but most if not all 3G smartphones include GPS capabilities (and most, if not all, new smartphones are 3G enabled), supported by subscription navigation services offered by Verizon, Sprint and AT&T.

According to our forecast, nearly 160 million smartphones were sold worldwide last year. Apple has sold more than 15 million iPhones, which may be more units than any single PND supplier, and which require no added GPS subscription – essentially, you get a free PND with every iPhone.

This also doesn't include 3G phones that aren't smart but still include GPS capabilities. AT&T says most if not all its 3G devices will include GPS capabilities this year, Verizon reports "most of our new feature phones and many smartphones (RIM, Windows Mobile devices) are VZ Nav[igator]-capable" and most of Sprint's phones are 3G/Sprint Navigation capable.

DTC estimates about 200 million cellphones will be sold in the U.S. in 2009, and about 91 million of these will be 3G.

Sort of makes those 17.4 million PNDs look as insignificant as an ant hill next to the Empire State Building, doesn't it?

It Makes A Nice PND

Now, to the second assertion – why cellphones are better PNDs than PNDs. Two reasons.

First, cellphones don't rely just on the GPS satellite system. Cellphones actually are equipped with assisted GPS (A-GPS), which means they use the cell network to assist the GPS system in locating you. A-GPS also means your location can be acquired in half the time than using just GPS, even indoors when your phone can't "see" the GPS satellites.

Second, cellphones are connected. Unlike most PNDs, cellphones can receive live traffic updates and up-to-date POIs (Points of Interest), including where to find the cheapest gas at any particular moment. And it could also mean that advertisers know where you’re located, which may not be a plus.

Yes, cell-based navigation services run around $10 a month (except for iPhone), but it'd take around three years before these fees would equal the price of a standalone – and not as well-endowed – PND.

So, why in this economy would a consumer with a GPS-equipped cellphone buy an additional slow, dumb traditional PND?

GPS satellites may come and go – but the halcyon days of the PND may already have come and gone.

VGS Media Center: How Will Version 2.0 Look?

Monday May 18, 2009 – Shelby Cunningham

Video game system (VGS) providers put their money on transforming their consoles into living-room media centers by building systems with internet connections and video optical disc drives in their latest devices. So far, so good. A percentage of gamers have embraced the online services, and DVD and Blu-ray Disc (BD) movies get played in the consoles.

The best strategy for a successful home media center is still being formulated, however. VGS makers will soon be giving us a glimpse of the next step in the media-hub strategy. Will they get it right?

All three console makers, with Xbox leading the pack, have had enough success with online services that offer games and video streams/downloads, that it’s certain that they will beef up these online offerings. So now that people have shown they want to sit on the couch and download games and media straight into their living room, will the next generation of consoles rely 100% on downloads and built-in memory and nix the optical disc drive all together? If rumors are correct, the first purely download-reliant VGS is right around the corner. The new PlayStation Portable (PSP) that many believe will be announced at E3 in early June will supposedly be sans optical disc drive and will rely on delivering all games digitally. Considering the unspectacular sales of UMD movie discs, this move isn’t surprising.

But let’s not stick a fork in the disc drive yet.

How will consumers react to not being able to play their last generation games on their new VGS if there is no receptacle for packaged media? Will they grudgingly accept that they will have to re-purchase the games as downloads? Or will Sony give PSP buyers a break and offer some free downloads with purchase? As for now, consumers aren’t ready to throw out their physical media. According to recent estimates from NPD, only 3% of home entertainment spending in March 2009 was on web-based downloads and online streaming. It also found that only 5% of consumers downloaded movies onto their video game consoles. Considering the relatively small uptake of game and movie downloads, console makers who choose to remove the disk drive altogether will have to risk alienating gamer enthusiasts.

How do we deliver this avalanche of content to all our gadgets?

Monday May 11, 2009 – Antonette Goroch

With a large amount of entertainment programming streaming to TVs, mobile devices, and PCs, the need for efficient content creation, management and distribution is more critical than ever.

DTC’s most recent research estimates that there were more than 239 million worldwide pay TV subscribers , 99 million mobile TV/video subscribers, and just under 12 million Internet video subscribers in 2008. And that doesn’t include people who only view free content. With this many people watching over limited bandwidth, technical efficiency is the new brass ring.

Source: DTC

One example of the quest for efficiency is greater use of IP to the contribution level of content production, rather than just distribution to the end user. Companies, such as T-VIPS and other “behind the scenes” content management players are helping providers move content to and from multiple points using IP networks. This is of fundamental importance with multiple platforms that must now be considered. These range from a patchwork of set-top boxes, PCs, and mobile devices to multiple audio and video codecs, transmission networks, and varying bandwidth capacities that each piece of content must be calibrated for. Larger infrastructure companies are feeding this trend as well. Cisco, for instance, managed NBC’s Olympics coverage from Beijing in 2008 using such an IP-based system.

Although dabbling with new consumer distribution pipelines gets lots of attention, the more sophisticated use of IP technology to manage content before it gets to the consumer represents a dramatic – and likely permanent – shift in the business of content distribution.

Why Viewing Local TV on Mobile Phones isn’t DOA in the U.S.

Monday May 4, 2009 - Myra Moore

The naysayers are pronouncing local TV broadcasts to U.S. mobile phones dead on arrival because they say mobile phone service providers will never agree to let ATSC Mobile DTV receivers be built into service-provider handsets.

The argument goes like this: In order for local broadcasters’ OTA services to be successful, consumers must be able to view the programming on their mobile phones. In other words, with the exception of portable TVs for automobiles, consumers won’t purchase (in meaningful numbers) separate devices to view local TV programming. So far, we’re in agreement.

A frequent sentiment expressed among industry players at the recent National Association of Broadcasters (NAB) Show (April 20-23), is that mobile phone service providers will be perpetually unwilling to open the door to local TV broadcasters because free OTA broadcasts won’t deliver a direct revenue stream to service providers. Not surprisingly, no announcements have been made from providers like Verizon and AT&T to imbed OTA digital TV receivers in company-subsidized handsets when broadcasters begin the first transmissions later this year.

ATSC Mobile DTV is new and commercially untested; it will increase handset costs; and if service providers are considering the eventual inclusion of ATSC receivers, they’re certainly not going to tip their hands now. But we think there are a couple of reasons why service providers won’t be hostile to the idea.

· Free-to-air mobile TV reception can give consumers a “free” taste of receiving TV programming, which may lead to additional video snacking of premium content provided by the service provider.

· As more and more features are added to our Swiss Army Knife phones, the inclusion of broadcast TV receivers may be like cameras in mobile phones – ubiquitous and necessary to be competitive. In Japan, the vast majority of mobile phones (whether acquired through the provider or independently) includes a broadcast mobile TV receiver. The country has an installed base of more than 20 million TV-capable handsets. Most mobile phone providers selling full-featured handsets and services willingly choose to include 1seg TV receivers because many consumers want to receive local TV programming on their handsets.

Of course, it’s too early to know if the U.S. market will be similar to the Japanese (or Korean) market, but it seems premature to dismiss the idea that ATSC mobile TV receivers might someday make their way into phones.