What Are Gamers Doing With Their Consoles? Watching Video Apparently.

Monday February 27, 2012 – Shelby Cunningham

The amount of time game console owners spend watching streaming video through their consoles is increasing. It only makes sense that this shift would happen -- the shift to using multipurpose devices to control the living room entertainment choices. It also makes sense that consumers access video streaming on the game console.

Gamers are familiar with the interface of their chosen game consoles, and as we know, the user interface is critical when it comes to winning consumers over. STB, TV, Blu-ray and media streamer makers have been struggling to come up with the perfect user interface that integrates programming from multiple sources, and so far no one has fully succeeded.

And what are console owners watching? Well, paid streaming services like Hulu Plus and Netflix. That’s right; they’re paying for the content they’re watching. About 24 million people worldwide are currently paying for an internet video streaming subscription service. This number, which includes non-console as well as console subscribers, will only increase, doubling over the next 4 years. And this doesn’t even count the number of videos that are purchased directly from the PlayStation and Xbox stores.

While the PC may foster illegal downloads due to ease of access, the more closed game console environment encourages consumers to buy subscription services they can enjoy on any screen. And while gaming will remain the top feature for game consoles, video streaming has proven itself to be a strong second.

Pay TV Market: Drinking Their Milkshakes

Tuesday February 21, 2012 – Greg Scoblete

“I drink your milk shake. I drink it up!” - Daniel Plainview

In the famous conclusion of the movie There Will Be Blood, an enraged Daniel Plainview explains to a quivering Eli Sunday that his oil well had been drained dry by Plainview's neighboring wells. Even though Plainview was not a leaseholder on Sunday's once-bountiful land, he was nonetheless able to reach out and leach away Sunday's precious resource. To, in those memorable words, "drink his milkshake."

Competition in the pay TV market typically doesn't end as it did in There Will Be Blood (with a bowling pin to the head) but that doesn't mean that competitors aren't energetically trying to drink each other's milkshakes. But until now, that competition was geographically bounded and limited to another competitor (or two). A Cablevision might find itself fending off Verizon FiOS, DirecTV and Dish - but they never had to worry about Time Warner, Comcast or an AT&T reaching out with their straws and sucking up their customers.

Even as broadband Internet access has allowed video services like Hulu, Netflix and Amazon to spring up with a catalog of video and TV shows available nationally, incumbent TV service providers avoided the temptation of using the Web to poach away customers from providers outside of their service footprint. 

That, however, appears to be changing. In the UK, satellite broadcaster Sky announced that it would be bringing some of its content and "most popular programming" to anyone with an Internet connection and ability to pay. In the U.S., Verizon said it would team up with Redbox to offer a streaming video service to non-Verizon FiOS subscribers.

Two services does not a trend make and it remains to be seen if content rights holders like HBO and Starz will bless such a move by allowing premium content to be included in any "off-net" offering. Such streaming services will ultimately rise and fall on the ability to secure attractive content (or cut-rate pricing). But rights holders, which have been engaged in increasingly contentious (and costly) retransmissions battles with their service provider partners, are no longer in an unassailable position themselves. Last week, Netflix rolled out its first original program, Lillyhammer, and both Google and Amazon are reportedly ponying up millions to produce their own original shows for their own streaming services.

If this keeps up, consumers may actually get a workable a-la carte video menu, albeit via a series of low cost, Web-streamed services and not from a single service provider. As for the incumbents, maybe it's time to reach for that bowling pin.

Apple's China Problems Are Everyone's Problems

Monday February 13, 2012 – Stewart Wolpin

It's funny (as in funny ironic) to read all sturm und drang about working conditions in Apple's Chinese factories, led by an "exposé" in the January 21 issue of The New York Times.

Why ironic? Because every single major CE company has manufactured some or all of its products in China for a decade or more.

So why did The Times suddenly target Apple? Because Apple applied the target to its own back by being so ridiculously successful.

Factory facts

First of all, I can't for the life of me figure out why any of this is news. We in the industry know the conditions at these factories. Yet in the wake of The Times' report, we act like Capt. Renault in Casablanca who is shocked, SHOCKED, to find there's gambling going on – before being handled his winnings. Even consumers couldn't be so naïve to understand how and why these gadgets are so cheap.

As a footloose and fancy free freelance American, I always felt vaguely uncomfortable amidst the seemingly neo-fascist factory regimen I encountered at the many Asian factories I've visited over the years. But intellectually I understand the Asian collectivist culture, especially in rural China largely uninfected by Western ideas of individual exceptionalism. Just re-watch some of the opening ceremonies of the 2008 Beijing Olympics and it's easier to grasp Chinese factory culture we might otherwise feel queasy about.

None of this is news to Apple, either. Since 2005, in fact, the company has released an annual "Apple Supplier Responsibility" audit. In its 2012 edition, the report notes:

“We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made. Our suppliers must live up to Apple's Supplier Code of Conduct as a condition of doing business with us.”

Well-intentioned, perhaps self-serving. But Apple has its defenders.

For instance, a worker's advocate organization called Business for Social Responsibility (BSR), which disputes the assertions and opinions attributed to it in the Times' piece, asserts:

“My BSR colleagues and I view Apple as a company that is making a highly serious effort to ensure that labor conditions in its supply chain meet the expectations of applicable laws, the company's standards, and the expectations of consumers and other stakeholders.”

Then there are the Chinese themselves. One Chinese blogger responding to The Times' piece (responses collected by The Times) points out:

“If people saw what kind of life workers lived before they found a job at Foxconn, they would come to an opposite conclusion of this story: that Apple is such a philanthropist.”

Apple knows it's under more scrutiny here at home. For instance, CEO Tim Cook told employees the company had opened its supply chain for independent evaluations by the Fair Labor Association.

Where are the jobs?

In the wake of Apple's astounding revenue results, commenters have pondered why Apple doesn't share its largesse with our domestic work force.

Anyone who has even a basic understanding of how the business world works knows this wish is obviously naïve. It's not necessarily money that stops Apple and other CE companies from returning manufacturing jobs to the U.S., it's the lack of educated workers.

Just about a year ago, President Obama met Steve Jobs amid a group of Silicon Valley bigwigs. Jobs told the President he'd love to manufacturer Apple goods in the U.S. again. But he couldn't find the 30,000 engineers needed to run the factories because of the U.S.'s restrictive immigration policies and failing educational system.

Maybe it’s time for the CE industry and its customers to look in the mirror. Instead of expressing mock surprise at conditions in Chinese factories, maybe it’s time to focus on why there’s a disconnect between where products are developed and where they’re manufactured.  

What OTT Will Be

Monday February 6, 2012 - Greg Scoblete

What a difference a quarter makes. Not six months ago, nearly anyone who comments on tech for a living was piling on Netflix (myself included). The (admittedly bungled) decision to spin off its DVD rental business and raise prices triggered a wave of derision, and a rush of subscribers to the exits. The company graced many a year-end list of the biggest flops in technology.

But that was then. With its recent financial statement, Netflix is a genius again, adding 610,000 new customers and achieving revenue targets that, while still down, beat Wall Street expectations.

The up and downs obscure a larger truth about how Netflix is situating itself that speaks to the broader development of Internet-delivered video content to the home. As CEO Reed Hastings has said, Netflix sees itself as HBO - a broadcaster of high quality content that just happens to travel into your home via the open Internet. It's a mix of original programming and content that it licenses from studios. Hastings has said explicitly that he sees Netflix as a supplement to, not a replacement for, video services delivered to the home via the Comcasts and DirecTVs of the world.

Hastings' vision goes a long way to explaining why Over the Top (OTT) video isn't ushering in a wave of cord-cutting defectors from pay TV services (thank the economy for that). Those pining for a "virtual cable service" are going to have to wait a considerable while longer - unless Apple figures out how to strong-arm cut-rate retransmission deals it's probably not going to happen anytime soon.

As Netflix's ambitions have been circumscribed, pay TV providers are opening their arms to OTT content.

As IP STB manufacturer Amino's former CEO Andrew Burke explained to me in an interview last year, service providers no longer view it as a threat but as an opportunity. With a new generation of hybrid set top boxes and interfaces that can blend linear TV, OTT and a service providers own video on demand library, pay TV providers realize the value they can offer in providing a quality OTT experience, Burke said.

Perhaps the biggest question facing Netflix is not whether they can scramble the pay TV universe but whether they can top Boardwalk Empire. 

Regional DTV Transitions to Fuel IDTV Growth

Tuesday January 31, 2012 – Maya Jasmin

Coming off of my first Consumer Electronic Show (CES) earlier this month, I must admit that while I was definitely impressed I was not awestruck as the next-big-thing  is seldom front and center at the confab. So amongst all the many gadgets in the likes of Ultrabooks, 3D gaming devices, Smart Cars, etc… smart TVs were the most alluring to me.

Of course, we’ve known for some time that 3DTV/Smart TVs are designed to bait consumers into buying new high-end sets.  But with most of North America, Japan, and Western Europe at a point of saturation and in economic uncertainty, what is the outlook for new sets integrated with digital terrestrial TV tuners, Internet connections and 3D technology?  DTC is forecasting relatively strong growth for worldwide Integrated Digital TV (IDTV) shipments but only in parts of the world where consumers have yet to experience the analog-to-digital TV transition; high-end bells and whistles will not likely boost TV sales in places where the transition has already occurred.  DTC expects 147 million IDTVs to ship in 2012, growing to nearly 250 million in 2016, with growth generated in regions where tuner mandates are accompanying approaching analog shut-offs, namely Latin America, Eastern Europe and Asia Pacific.

So even with impressive displays at CES and ramped up marketing efforts by manufacturers, it seems that 3DTV/Smart TV sales, or lack thereof, is contingent upon external forces, namely the economy. And until it improves and consumers feel comfortable with making purchases outside of necessity’s realm, the 3DTV/Smart TV market will continue to be a niche element in overall IDTV shipments.