Over Connected?

Monday October 31, 2011

If there’s any doubt that the consumer electronics industry doesn’t understand the importance of content delivery via the internet, take a look at the number of connected devices shipping over the next few years. Over 111 million living room-centric connected devices (including game consoles, Blu-ray Disc players and connected TVs) will ship in 2012. The number of these devices shipping will experience a 50% increase between 2012 and 2014, and almost double between 2012 and 2016.

In addition to Blu-ray Disc players, game consoles and connected TVs, tablets and smartphones are already streaming video direct to consumers (many while sitting in their living rooms), and many pay TV suppliers are specifying Ethernet ports in the next generation of set-top boxes.

Soon your entire living room will be full of connected devices. But is it necessary to include an Internet connection in every consumer electronics device? Are consumers really going to use all of these connections? We suspect that there may be some consolidation in living-room connected devices in the near future, but for now it looks as if few consumers will be without a connection….or two, or three, or more.

Smartphone Wars: The Empire(s) Strike Back

Monday October 24, 2011 – Stewart Wolpin

This has been one wacky and wild week for smartphones, lots of fun if you're an analyst or tech pundit, not so much fun for consumers trying to make heads or tails of this sudden series of one-upmanship announcements.

Earlier this month, Samsung fired the first shot with its three Galaxy S II models, two versions sporting a 4.52-inch screen and the T-Mobile edition humming on a 1.5 GHz dual core engine.

BOOM!

Late last week, in case you missed the news, Apple unleashed the iPhone 4S starring Siri, the voice-controlled comedienne…er, personal assistant.

WHAM!

Then this past Tuesday, Motorola smacked down with its skinny 7.1mm thin Droid RAZR that supplies 12.5 hours of talk time.

SMACK!

Almost simultaneously, beleaguered BlackBerry quietly announced BlackBerry BBX, its long-awaited one-OS-to-rule-them-all (all being BlackBerry smartphones and the Playbook tablet).

SHHH!

At around the same time during Apple's quarterly briefing, CEO Tim Cook noted the company had sold "just" 17.07 iPhones in its fiscal Q4 compared to 20.3 million in Q3.

DAMN!

But then we heard a record 4 million 4Ss had been sold in the phone's first weekend of availability.

SLAM!

Tuesday night/Wednesday morning (depending on which side of the international date line you were on) in Hong Kong, Samsung swung back with its Galaxy Nexus with a 4.65-inch screen and the first smart phone running Android 4.0 Ice Cream Sandwich.

SWEET!

At around the same time (again, I'm getting a headache about relative time in Hong Kong, New York and London), Microsoft CEO Steve Ballmer confirmed new Windows Phone 7.5 "Mango" phones would be coming from Nokia next week. This follows up last month's announcement of the Samsung Focus S and Focus Flash Windows Phone 7.5 phones.

THWAK!

The next day (Thursday), Samsung swaggered that it had sold more phones than Apple in its last quarter, more than 20 million units.

POW!

I need a nap.

What it all means

My head is swimming not just with this sudden swirl of smartphone spectaculars, but how radically the cellphone space has changed in just a couple of years when Android appeared to give Apple a run for its iPhone core and made the flip phone as old-fashioned as a corset.

Three things are striking about all this recent activity.

1. If iPhone 4S had come from any other phone maker, it would have been laughed off as hopelessly antiquated – a "new" 3G phone with a 3.5-inch screen? That's sooooo 2010!

2. Yes, Samsung sold more smartphones than Apple last quarter – before iPhone 4S, after Apple pulled back the 4 in anticipation of the 4S, and before Apple spread its distribution wings to include Sprint domestically, moved more aggressively internationally (Apple says 12 percent of its Q4 revenue came from China), and started selling $99 and free iPhones, finally recognizing true market growth lies at the low end of the market.

3. In cases of too-little-too-late, are BlackBerry and Microsoft Windows Phone doomed? With the way Apple and Android have seemingly split the smartphone market between them, and considering the failure of the PlayBook, BlackBerry's recent service outage and subsequent reports of a mass migration of BlackBerry users to iPhone, and how late Microsoft has been to roll out Windows Phone updates and products, it's hard not to think the A's have it.

The Siri affect

The game changer in this competition free-for-all could be Siri. She (yes, I'm already anthropomorphizing her) has generated an immense amount of positive publicity that has smothered the specification drawbacks of iPhone 4S as well as both Siri's serious side and her drawbacks (you have to connect to the Internet to do everything and anything, even local tasks such as simple voice dialing). As if in a final tribute to the late Steve Jobs (RIP), Apple's reality distortion field perception has once again triumphed over reality.

But you can tell Apple's competitors are spooked by Siri – both Microsoft and Google have taken swipes at her while touting their own sound solutions. Only the worried malign new competitive features with absurdly dismissive "man will never fly" predictions.

Regardless of her pros, cons and sideline sniggering, however, bear in mind, Siri is technically still in beta. She's already proven to be a sexy prodigy, so she has nothing but upside potential as she grows up and moves to phones with faster network connections and more powerful processors. (Personally, I'd play Yenta and try and match Siri with IBM's Jeopardy-champion Watson. What do you get for the couple who knows everything?)

And we know the last project Steve Jobs was actively involved with before his death was the true iPhone 5. Due next summer, this is the iPhone we geeks were all expecting and presumably will be a 4G model (finally!) with a larger screen (finally!) powered by the company's new quad core 1.5-1.7 GHz A6 processor, which should provide Siri with the platform that could turn her into a supermodel.

And probably one more thing…

POW!

Will TV Everywhere Kill Set Top Boxes?

Monday October 17, 2011 – Greg Scoblete

As someone with little interest in watching TV on the TV, I've never quite understood the appeal of watching it on devices that are not the TV. But I also understand that my tastes are hardly mainstream and are probably downright un-American, and so the "TV Everywhere" trend gains steam. As it does, it raises an inevitable question: if you can indeed watch TV everywhere, what becomes of the set-top box (STB) market?

In the past few weeks, its turf has definitely been assailed. Microsoft fired a volley with the announcement that it would offer both free and pay TV on the Xbox 360 gaming console. Among the providers lining up to offer their content were some big names: Comcast, HBO, ESPN, Bravo and SyFy. The TV functionality isn't confined to the states either, with European providers, such as BBC, Canal+ and Lovefilm signing on.

The Xbox deal doesn't sideline a pay TV STB - at least one box would be required in the home to deliver programming. But it might convince some consumers to forgo a second box for ancillary TVs used for gaming. Economically, it's something of a wash: to access pay TV on the Xbox 360 requires a $60 annual subscription to Microsoft's XBox Live, about what you would pay per annum to rent a basic STB. The Xbox itself probably couldn't push the needle on STB shipments, but if Sony and Nintendo hop onto the bandwagon, that's another story.

DirecTV also made a move to disperse its programming to mobile devices with a product that's, dare-we-say, slightly Slingbox-ish. Dubbed the Nomad, this small STB lets consumers view DVR-recordings on up to five mobile devices. It can't stream live TV but can automatically sync DVR recordings with mobile devices.

Outside of devices, apps have been proliferating that let users view TV on their mobile phones and tablets. Not every content provider is enthusiastic about TV Everywhere, however. YES is battling Cablevision over the latter's iPad app, saying its programming cannot be distributed to mobile devices outside the home (a stance echoed by Viacom). But clearly more pay TV providers are looking for alternative means to give their customers their TV fix beyond the set top box.

Does this mean STB shipments will wither? Probably not in the short-term. TV Everywhere is aimed at out-of-home viewing - for those forlorn commuters stuck in a train or an airport. If you have access to a secondary TV in the home, it's unlikely you'd pop open the iPad to squint through the latest Mad Men. In the longer term, if the Xbox experiment proves successful and other game systems and content providers saddle up, it could make it easier for service providers to skip additional box installations. There's a clear benefit there for the pay TV provider - fewer boxes to inventory - and for the consumer as well, as they'll be one less device cluttering up the entertainment center.

But in this instance, content is king. Despite the impressive roster of names, the Xbox still doesn't boast the kind of channel line-up your average pay TV consumer has access to.

Digicam RIP

Monday October 10, 2011 – Stewart Wolpin

As the new iPhone 4S arrives, and as Android acolytes chuckle at iPhone 4S’s suddenly tiny screen and Android-like notification pulldown bar, and Sprint agrees to buy $20 billion worth of iPhones over the next three years, one segment of the tech industry, digital camera makers, may just accuse Apple of murder.

With iPhone now sporting a CMOS 8 MP camera with face detection and 1080p video recording, the cheap digital camera could be dead-tech walking.

But iPhone 4S's enhanced camera specifications are the least of the problems facing point-and-shoot digicam makers.

Psst! Wanna cheap iPhone?

Apple (or, rather AT&T, Verizon and Sprint) will be giving away the iPhone 3GS – as in free, with a two-year contract – and selling an 8 GB iPhone 4 for $99.

Hmm, let's ponder the digital camera buying dilemma as a consumer would. A whole iPhone 4 with a 5 MP camera and 720p video recording for $100, or a digital camera that can't upload pictures to Twitter or attach snaps to a text message for around $150?

Okay, maybe that's not much of a dilemma.

Yes, digital cameras have better lenses and can do a lot of other fancy photographic tricks. But face tracking, funny frames, funhouse effects or in-camera editing can't come close to compensating for connectivity.

Plus, who says a cheap digicam is a better camera than a smartphone? While I still use a high-end point-and-shoot camera for business, I suffer no geeky qualms leaving it at home for casual candids. iPhone 4 takes remarkably good photos and, presumably, the iPhone 4S will take even better ones. In fact, I recently took similar night shots with an iPhone 4 and with a new digicam, and the iPhone shots were far superior – with no special exposure or "night scene" settings.

I'm also playing with both the Sprint and AT&T editions of the Samsung Galaxy S II smartphone, each with an 8 MP camera and 1080p video capture, and I'm shockingly impressed with the results of both.

And, I'm guessing, so will the great unwashed. Camera, shmamra. Camcorder, camshmorder. Who needs 'em? And the numbers bear out this dismissive attitude.

Apple outsells whole industry?

According to DTC, 440 million smartphones will shipworldwide this year – and that projection was made before anyone knew Apple would expand iPhone 4S sales through Sprint and offer a free and sub-$100 iPhone.

In its last quarter, ending in July this year, Apple sold 20.3 million iPhones. Anyone doubt iPhone shipments may surpass 50 million by the end of the year? Anyone? Bueller?

Conversely, DTC projects only 121 million digital cameras will be shipped worldwide this year. In other words, Apple alone could ship the equivalent of 40% of the total number of digital cameras that will ship worldwide this year.

Oy.

And then DTC believes only a third of all digital cameras are capable of recording HD video, the only digital cameras providing a true alternative to the iPhone 4 and most of the new 5 MP/8 MP-720p/1080p-equipped Android phones introduced this year.

Double oy.

And, again, this is a projection made before Apple announced AT&T, Verizon and Sprint would give away iPhones. Anyone now doubt this digital camera shipment projection may be a bit short? Anyone? Bueller?

Yes, the new iPhone 4S is good news for lots of folks in the tech biz. But smartphones have practically made pocketcams obsolete, and now have their laser sites are targeted at the digital camera business.

Content Can't Be King Without Customers

Monday October 3, 2011 – Greg Scoblete

It's been a raucous few weeks in the pay-TV space. First, Netflix suffered the mother of all PR debacles as it split its streaming and rental service into two entities, causing rampant consumer confusion and forcing the CEO into a public apology. (To add comical insult to injury, the Twitter handle adopted by Netflix's new brand Qwikster, was already occupied - by a foul-mouthed, pot-smoking malcontent).

News of the bifurcation of Netflix and the company's expectation that it would lose a million more subscribers than they initially thought as a result, sent the company's stock plummeting. Suddenly, formerly bullish analysts were realizing that Netflix's streaming library didn't have quite the roster of attractive content that its disc business did (an artifact of an increasingly anachronistic law that treats digital distribution differently than physical distribution).

Then, Starz piled on, by pulling out of Netflix's service after the two failed to come to terms. It turns out that Starz wanted Netflix to charge customers even more for "premium" movies, above the monthly $7.99 fee for Netflix's current streamed offering.

But perhaps the bigger news, at least potentially, came from Reuters, which reported that several cable operators were "privately working on a plan to force programmers to unbundle their networks and allow customers to subscribe to channels on an individual basis."

This move to "a la carte" programming has long been resisted by pay TV providers, who have argued that consumer choice would leave niche programming to whither on the vine. But now it's appearing like an economic imperative not only for them, but their customers. Take the economics of the pay TV providers first. They are being battered with soaring retransmission fees. In 2010 alone, those fees soared a whopping 46.7 percent and, according to Reuters, have been outpacing inflation in the past decade with growth between six and 10 percent. Do you remember your last 10 percent raise? How about your last 46.7 percent raise?

Typically, pay TV providers handled these increases by passing them along to their customers. But then the global economy collapsed, taking millions of American jobs with it. According to Felix Salmon, a stunning 40 percent of U.S. households today spend all of their income on food, shelter, transportation and healthcare. Even if that number is wildly inflated, it's obvious that the consumer, at least in the U.S., can no longer absorb such price hikes - and the pay TV providers know it.

Netflix and other Over the Top providers were seen as a possible solution for these penny-pinchers - a way to preserve access to content without the steeper monthly fees of a cable or satellite bill. But a la carte pricing could strangle a nascent OTT threat in its crib - if the pay TV and content providers can agree to favorable terms. The content providers in particular need to think long and hard about a pricing strategy that involves ever-escalating costs to the end-user in an era of economic austerity (or, worse, depression). Content may be king, but what good is a kingdom without any subjects?