Google and Motorola: A Match Made in...

Monday October 29, 2012 – Greg Scoblete

When Google purchased Motorola in 2011 it was widely perceived as a defensive maneuver to stock up on the company's intellectual property in the face of Apple's thermo-nuclear patent war against Google's Android operating system.

Google may not have appreciated it at the time, but rather than suiting up with Motorola's IP armor, they appear increasingly weighted down by Motorola's loss-making baggage.

In a financial report that broke earlier than Google had planned, it was revealed that losses from Motorola's mobile division totaled a staggering $505 million for the quarter. Motorola's home division losses were a not-as-horrific $22 million. In short, Motorola is fast turning into a major liability for Google's bottom line.

This has, not surprisingly, led to calls for Google to off-load the struggling company, something Google is reportedly exploring. Google has, to date, maintained an arms-length relationship with Motorola lest they offend their other hardware partners selling Android smartphones, tablets and set-top boxes. Yet there is another avenue open to Google which may promise to right the ship.

In short, they could pull a Microsoft and copy Apple.

Microsoft, like Google, built its empire on software, letting other manufacturers tackle the hardware (the Xbox being a notable, successful, exception). Yet earlier this year, Microsoft broke from this tradition with the introduction of the Surface tablet. Timed with the release of the new Windows 8 operating system, the Surface is a tacit acknowledgement that Apple's approach to hardware and software integration delivered genuine value to consumers. Throw Amazon's Kindle Fire tablet into the mix and it's clear that the new battleground in tech is between software ecosystems (including operating systems, app stores and digital content libraries) that are closely fused with hardware.

Other manufacturers will offer Windows 8 hardware, of course, but Microsoft has realized that to play in this new arena, they needed to stake their own hardware mark. No surprise that there are now persistent rumors that Microsoft will build its own smartphone next.

Indeed, Google has already stepped down this road: they have partnered closely with several manufacturers (Samsung, Asus and now LG) to produce Nexus-branded gear to show off the latest iterations of Android. But Google could do more. They could, in theory, harness Motorola to the same end. Motorola makes all the products necessary to compete in the platform war including set-top boxes, smartphones and tablets. A closer fusion of the two may alienate Google's hardware partners, like Samsung, but where are they going to go? Android is a vastly more popular mobile platform than Windows and unless Windows 8 is a smash hit, manufacturers will need to offer Android tablets and smartphones to stay in the mobile market.

Moreover, with the introduction of Google Fiber and the company's continued push into the TV space, leveraging Motorola's set-top box experience and pay TV provider relationships gives Google a strategic advantage that neither Apple nor Microsoft enjoy.

Will Google do it? Probably not, but in a tech world that is increasing embracing Apple's model, it's interesting to note that it's now Google that's "thinking different." And paying a price.

Digital Radio Is Rising

Monday October 22, 2012 – Jing Sui

The latest improvements for digital radio are allowing traditional broadcasters to marry broadcast signals with ever-growing popular Internet radio offerings, as well as carve out new business models for established broadcast transmissions.  Today, there are four main digital radio systems: the European Digital Audio Broadcasting (DAB) system, Digital Radio Mondiale (DRM), Japanese ISDB-T, and U.S. HD Radio. DTC’s latest forecast shows 12.5 million digital radios shipping worldwide in 2012 and estimates a 32% increase in shipments between now and 2017, to 16.5 million units. 

The latest frontier of digital radio is proving to be in consumer automobiles. In the U.S., a wide array of leading automakers: Acura, Audi, Bentley, BMW, Buick, Cadillac, and among others have included HD Radio in their new models’ dashboards. In additional to the original features that HD Radio established (such as display album art and other images), more advanced features like iTunes tagging, Artist Experience and Digital Traffic and Data are now included as standard features.  In Europe and Australia, DAB/DAB+ in-car radio receiver is also becoming common.

Hybrid radio, which allows consumers to load apps onto mobile devices to let broadcast radio and the internet work together, is also getting people’s attention. Without additional costs, this marriage of radio and internet allows radio listeners access to broadcast radio programs by streaming audio via smartphone and tablet devices. But more importantly, the new concept adds new features such as on-screen programming guides and the ability for broadcasters to insert additional ads to be viewed on a smartphone or tablet screen. However, challenges still exist as streaming audio may not be the most efficient way to reach listeners.  But in today’s market where few mobile devices include broadcast radio receivers, streaming over the internet is the best way to reach listeners who are on the go. 

DAB Countries*	DRM Countries*	ISDB-T Countries*	HD Radio Countries*
Australia	Austria	Japan	U.S.
Belgium	France		Mexico
China	Germany
Czech Republic	India
Denmark	Australia
Germany	Canada
Hong Kong	UK
Malta
The Netherlands
Norway
South Korea
Sweden
Switzerland
UK
*Systems that have already been adopted (excluding those under testing or on trials)

Microsoft Chases Undecided Vote

Monday October 15, 2012 – Stewart Wolpin

In a few weeks you'll have a choice to make – and I don't necessarily mean the presidential election. Just as the race between President Obama and Mitt Romney, most have made up their minds between the two major smartphone contenders, Apple iOS and Google Android.

But just as in politics, there is a wide swath of undecided, or non-smartphone owners – around 45 percent of U.S. mobile users are still using feature phones as of Nielsen's last market sounding in July.

This undecided group, just as in the presidential race, is shrinking rapidly. A year ago the non-smartphone owning U.S. population was 59 percent, and the current Nielsen figure is likely to shrink further given the 45 million-plus iPhone 5s expected to be sold between now and the end of the year.

Ten days before we vote for president, on October 26, the choices for the smartphone undecided will expand with the official availability of Microsoft's Windows 8 platform. Several Windows Phone 8 (WP8) handsets such as the brightly-colored Nokia Lumia 920 and 820 and HTC 8X and 8S will follow.

Judging by the specifications of these WP8 handsets, Microsoft and its partners recognize the nature of this undecided vote. They are modern, but not close to bleeding edge, and with their fashion-forward accessories, seem to place a greater emphasis on color and style then any Android or even Apple phone.

Microsoft and WP8 handset makers realize the vast chunk of current smartphone owners lean toward the geek who cares about such things as processor speed, display technology, relative screen size and other digital decorations.

The undecided – the constituency Microsoft is aiming at – is less tech savvy. Microsoft, perhaps cynically, believes current feature phone owners can be distracted by pretty pastel baubles and just enough technology to keep costs – and pricing down.

And they may be right. Except…

How big is 45 percent of the market?

If this is Microsoft's strategy, I detect a flaw: the undecided market may not be as large as Microsoft and the WP8 crowd believes.

With the coming of iPhone 5, you can now buy an iPhone 4S for $100 and get an iPhone 4 for free on contract. There are dozens of similarly inexpensive or free Android phones available, including the brand new Motorola Droid RAZR M with its 4.3-inch screen and 16-hour battery at $100.

It seems Microsoft assumes its high handset prices and lack of a less sophisticated third-party candidate that keeps the undecided from switching to a smartphone.

It isn't.

I asked a friend, a professional in the advertising field, why he had not switched from his feature phone. His reason – the monthly data plan cost. The new shared data plans being offered by the major carriers may lessen this monthly burden but won't eliminate it.

So, following the 80/20 rule, convincing feature phone users to switch to smartphones will be increasingly difficult. My guess, just as there are still stubborn folks with analog TVs, VCRs and wired landline phones, around 20 percent of feature phone users are likely to remain unreachable feature phone users.

Which means Microsoft is chasing just 25 percent of the undecided vote, which Apple and Android also are pursuing with equal ardor – and with more advanced (if aesthetically less flowery) devices.

Considering the market and familiarity advantages enjoyed by Apple and Android, Microsoft can't optimistically hope to grab any more than a single digit share of the entire mobile phone market.

I do like the WP8 operating system and I wish Microsoft luck. But its chance of affecting (much less winning) the smartphone election are less than any other third-party candidate.

Will Pay Providers Turn the Tables on Game Consoles?

Monday October 8, 2012 – Greg Scoblete

A growing number of consumers have turned to video game consoles for more than games. Streaming video services such as Netflix and Amazon Prime form an increasingly important component of a game console's value proposition (which is why Nintendo made a big splash for their new TVii feature on the forthcoming Wii U).

Even cable companies have gotten into the act, creating apps that enable an Xbox to serve as a set-top box for secondary screens in a subscriber's home. It's a marriage that would seem to redound to everyone's benefit - console makers get added functionality and cement their toe-hold in the living room as the device of choice tethered to the TV; pay TV firms get the cost savings from not having to service additional cable boxes.

Yet with pay TV subscription rates at saturation levels in the U.S., there's a huge hunger for additional growth opportunities. Some providers, such as Verizon and AT&T, have been dabbling in home security and home automation as a way to mine additional dollars from their subscriber base. But more - apparently many more - are looking to gaming as well.

According to a recent report in Bloomberg, most of the major cable and IPTV providers have been actively exploring a cloud gaming option to serve up to subscribers:

In addition to AT&T, Verizon and Time Warner Cable, Comcast and Cox Communications Inc. are also in talks to offer video-gaming services, the people said. They’re all looking to go beyond social games from Zynga Inc. and casual games such as “Tetris” and “Solitaire,” with technology that can deliver the most advanced action games from top publishers such as Electronic Arts Inc.

Cloud gaming - like anything with "cloud" preceding it - is a hot topic and pay TV providers will find that they're not alone in pursuing the lucrative gaming dollar. Samsung has announced plans to integrate cloud-based gaming into several of its HDTVs, while Sony earlier this year scooped up cloud gaming service Gaikai to bolster its own gaming portfolio.

Moreover, the addition of gaming services, while certainly attractive from a revenue perspective, adds a new layer of capital costs. With many networks instituting data usage caps to contain the growth of over-the-top video, online gaming would represent another bandwidth-intensive service vying for space in the pipeline.

Nonetheless, it's clear that interest in, and the infrastructure for, cloud gaming is growing. Chip-maker NVIDIA has already indicated that its GPU chips are finding a home in more and more data center servers. All that's missing, as of today, is a proven business model (perhaps the biggest name in cloud gaming, OnLive, has skirted - rather ignominiously - with financial ruin).

From Russia, With Gadgets

Monday October 1, 2012 – Stewart Wolpin

For most Americans, despite Détente and Perestroika and blinis and borsch, Russia remains behind at least a heavy velvet curtain. As a technology analyst/forecaster/reporter, Russia remains a fascinating mystery. But a recent visit Moscow and St. Petersburg solved some of the Russian technology mystery.

It turns out the state of Russian consumer electronics isn't that much different than anywhere else in the west, with one glaring difference.

First, Russia isn't as big a market as we think (okay, as I thought). While the largest country geographically on the planet, the Russian Federation doesn't even have half the U.S. population – 143.2 million according to one Russian source, with nearly half in the western Central and Volga areas.

In the 20-plus years since the fall of communism, Moscow has been transformed from a gray city in both physical color and emotion (according to several denizens I spoke to old enough to remember) into a typical modern colorful Western capital. The sprinkling of archaic remnants of the hammer and sickle adorned either somber monolithic official buildings or on gleefully mocking cheap tourist souvenirs (Lenin, Stalin, Khrushchev and Brezhnev reduced to crude nesting dolls).

In addition to discovering there are no pews in the spectacular Russian Orthodox churches, I was surprised at how westernized Moscow and St. Petersburg have become and how quickly – within a generation – the metropolitan areas have adopted Western capitalism, at least as far as technology are concerned.

Digital Russia

There is a preponderance of mobile phone stores in Russia as there are everywhere. The most ubiquitous are what could be deemed the Radio Shack of Russia, the massive 13-year-old, 4,700-store Euroset (EBPOCETb in Cyrillic), the fifth largest retailer in Russia and Belarus. There are large neat store-sized mall-based Euroset locations and smaller more hectic street stores and kiosks selling both mobile phones and portable computers and software.

While I spied a higher percentage of iPhones among the populace than I expected, there are only Apple resellers in Russia, including Euroset; Apple has been expanding its Russian distribution and is reportedly looking to open its first Russian location, in Moscow, sometime next year.

Ably serving Russia's more general consumer electronics and appliance needs is M.video (M.buqeo in Russian), a 20-year-old chain with more than 260 locations throughout the country. I visited a couple of stores and, other than prices labeled in the Cyrillic "p" denoting rubles rather than euros or dollars, discovered I could have been in a smaller version of any suburban Best Buy – same product arrays, same brand names, same hovering semi-helpful polo-shirt-wearing sales staff.

…with one exception: Blu-ray.

Where's the Russian Blu-ray?

Blu-ray isn't that popular in Russia, for reasons I've yet to discern.

M.video's Web site incorrectly labels Blu-ray players "DVD player Blu-ray." In the M.video stores I visited, 10 times as much shelf space was devoted to DVD hardware – including a surprisingly high percentage of DVD karaoke decks (including many from Russian DVD brand BBK) and DVD HTiB systems – than to Blu-ray players.

Why isn't Blu-ray more popular? Perhaps there remains a residual subconscious Russian loyalty to red – DVD is a red laser technology and "blue" often denotes the U.S.

Okay, maybe not. But it's not the cost. I found the comparative Blu-ray vs. DVD deck pricing differential is less severe than elsewhere. Perhaps it's the seeming Russian fondness for karaoke – I saw no karaoke Blu-ray decks, perhaps creating an opening for some enterprising Blu-ray deck maker.

Both the Euroset and M.video chains continue to grow, illustrating the vitality and youthful demographic of the still neophyte capitalistic society looking to become as westernized as New York, LA, London, Berlin, Paris and even Tokyo. We conquer not with armies, but with culture and economy.

Oh, and in Russia, "borsch" is spelled sans the final "t" we use in the U.S. Another velvet curtain parted.