We won't really know until Motorola's new tablet is launched in its finished form, but first demos of the Android 3.0-based Xoom suggest it will win the hearts of many of this year’s 30+ million tablet buyers. As we reported in our free-to-download 2011 Predictions Report, global revenues from tablet sales will exceed netbooks this year. Motorola’s stand at CES is crammed to overload this morning with gadget lovers desperate to get a first sighting of Google’s new “Honeycomb” OS in action. Those who made it were not disappointed. I recorded a video of the device in action. Enjoy! David Mercer Client Reading: Global Tablet Sales Forecast by Country

With a couple of hours to go before this year’s technofest in Las Vegas gets under way, I thought I’d issue a friendly warning to the growing number of firms (Intel, Samsung, LG are culprits so far) who seem to be planning to major on “Smart TV” as a key theme of this year’s show. Even before the doors open we already have a quotation from LG Electronics' Baeguen Kang: "Smart TV is an inevitable trend: As people experienced smartphones and tablet PCs, the larger screen on a TV is very attractive for apps and Web content.” So whatever people do on phones and PCs, they will inevitably do on their TVs? If this is an indication of the strategic thinking behind many of the innovations we are about to see unveiled this week, I can scarcely imagine the horrors which await us. When will manufacturers learn? As Google’s disastrous first attempt at connected TV has neatly demonstrated, people do not want the web on TV. How many times do we have to go through this learning process? What people want on TV is video content, and if that’s going to be “smart” it had better deliver some level of intelligence about what video content viewers are likely to enjoy. As I said in our (free to download) 2011 Predictions report, television viewers don’t want a million things to choose from: they want their TV to tell them what they are likely to enjoy. Surprise me, enlighten me! That has value, and if it unexpectedly appears at this year’s show I’ll be the first to label it “smart”. David Mercer

We don’t do this very often folks, but as a seasonal gift we have made our 2011 Digital Home Predictions report available to everyone, whether a Strategy Analytics client or not. You can download the full report here. A lot of the talk at the moment is about Google’s troubles with its TV offer: there will be little to see at CES after all, much to the annoyance of Google’s many partners no doubt. But this setback should not be seen as a a sign of general malaise in the connected TV industry: Apple has just reported that its TV solution is finally gaining some traction, and we expect continued progress from other key players in the rollout of internet TV to the big screen during 2011. We may even see Facebook moving into this space. Headline number of the year will be tablet revenues, which we predict will exceed netbooks. We also think Apple needs to revamp iTunes to take account of the connected device era, and Nintendo may have to take the plunge and launch the successor to the Wii. We’ll see further innovations in the TV control arena, with touchscreens, phone apps and motion control all featuring more widely. But 3DTV is likely to see only slow progress: sure, people will be buying 3D-enabled sets, but less than 20% will be watching 3D content on them. And one more stat to whet your appetite: more than one billion people worldwide will be using social networks for the first time during 2011. And since you are one of them, please go ahead and read the full report, and any comments and feedback are always appreciated. Best wishes for a peaceful holiday season. David Mercer Client Reading: Profiling the Connected Media Consumer - UK

Two thirds of people who are thinking of buying an iPad in the next 12 months are expecting to pay less than the current lowest retail price, according to the latest research from our Tablet and Touchscreen Strategies service. 66% say they will pay less than $500 or €500, and half of those say they want to pay less than $300 or €300. We surveyed nearly 5000 consumers across the US and 4 major European markets. These findings won't concern Apple too much as there is enough momentum from early adopters to support growing iPad sales for the next few months. But they should serve as a clear warning that today's price points are unsustainable in the longer term. Already we are seeing a proliferation of (mostly Android-based) tablets arriving on retailers' shelves, often at iPad-undercutting prices. Staples is offering a 10" Viewsonic, Android 2.2 device at $400. I am awaiting delivery of a £150 7" Android 2.2 tablet from UK electronics specialist retailer Maplin. Clearly these devices will not match Apple in every respect; many observers doubt whether the latest versions of Google's OS are up to the job. But then the question is what "job" tablets are expected to carry out. iPad behaviour so far has been truly multifunctional, with a mix of games, browsing, video, communications, and the huge variety of apps which are impossible to categorise. I overheard one potential tablet buyer in Staples inquiring (of the Viewsonic device) whether it was good for reading books, and specifically whether it could do "things like Kindle". Unfortunately she happened to address the question'to a sales assistant who claimed to be "still training" on these devices and so couldn't commit to an answer. But the fact that customers are inquiring about specific capabilities suggests that all-round superiority may not necessarily be a requirement for tablet market entrants hoping to eat into Apple's dominant market position. That's not to say that device implementations shouldn't pass the bare minimum of usability requirements. There are still too many early Android devices floating around which really are not fit for purpose, even if they are practically being given away. Consumers want to pay $300 or $400 but they expect something that does at least a few things reasonably well. The sooner Android matures and its partners introduce devices to undercut the iPad, the better for the tablet market as a whole. Client Reading: Apple's iPad: Users, Buying Intentions and Price Expectations

Is it a sign of Trouble at’ Mill? Or just another corporate shake-up while business goes on as usual? Microsoft yesterday announced the departure of leading Entertainment and Devices executives Robbie Bach and J. Allard. Microsoft CEO Steve Ballmer will take charge of the division, with Don Mattrick running the Xbox side and Andy Lees the mobile business. There are clearly problems for Microsoft in its mobile business. All the various iterations of its mobile phone software over the years have failed to make significant market impact as Apple and, now, Google, make the running. Microsoft’s biggest problem is that consumer is still a relatively small and fragmented part of its overall business. It’s losing out to Apple, and others, in the consumer market because its primary corporate focus continues to be business users of Windows. Apple, which, not through lack of effort, never achieved prominence in business markets, has been able to focus its strategy on the consumer space without the hindrance of adhering to a corporate software strategy. From Microsoft’s perspective it might seem logical to group Xbox, music players and mobile phones under one roof, but this makes less obvious sense to the outside world. Xbox has been successful largely because it has been left alone to formulate its own strategy focused on games, entertainment and the digital home. Dan Mattrick, whom I met last summer to discuss Xbox strategy, should now try to persuade Ballmer that the Xbox team needs to remain a discrete unit with liberty to forge its own direction, and if necessary outside of the demands of the corporate Windows strategy if necessary. With the launch of Natal imminent, the continued ramping up of online services based around the Xbox 360, and the plateauing of Xbox 360 sales, Microsoft can ill afford a dilution in focus because of this disruption to the senior management team. David Mercer Other Blog Posts Of Interest: PS3 Global Market Share Reached 31% in Q1 2010 Sony’s PS3 to Win Current Games Console Battle; SA Forecasts 47.5 Million Global Console Market in 2010 Sky Player Finally Arrives Where It Belongs, But Work Still to be Done TV or Videogame? 1 vs 100 on Xbox Live Offers Lifeline To Appointment Viewing Client Reading: Taming the Waves: Games Console Life Cycles and Platform Competition

I was with Intel executives by chance today, shortly after the first rumours, based on a New York Times story, that Intel, together with Google, Logitech and Sony, are working on a TV set-top box and service. Intel was demonstrating the capabilities of its Atom platform across a range of CE devices. In particular it was showing how its CE4100 processor combined with the MeeGo middleware joint initiative with Nokia could enable more flexible and more advanced IPTV services in the future. Amino, which has sold more than 4 million IPTV set-top boxes worldwide, was on hand to claim that the Intel platform has allowed it to develop new devices much more quickly than traditional processor platforms from ST, TI and Broadcom. And Telecom Italia is set to become the first major telco customer of an Intel-based IPTV platform when it rolls out new boxes in the next few weeks. Intel claims to be in talks with many other telcos, including tier ones, about deploying its solution. Intel made it clear today that its new platform could support Android, as well as many other OSs, while refusing to confirm the rumours of a partnership with Google. Our view is that it would be very surprising if Google did not enter the TV market before very long. It is certainly possible that Intel and Sony could be key partners, although unlikely if these prove to be exclusive deals for any player. Intel for one has made it clear it will be friends with anyone, whether in service provider or retail models. Intel’s roadmap calls for participation at all levels of the TV market, including entry level devices, but initially its strategy is to drive added value at premium price points. It seems that Intel is finally getting grips with the consumer electronics market after many failed attempts over the years. David Mercer Client Reading: Connected CE Devices: Global Market Forecast and Outlook

Nokia’s annual development showcase is taking place this week in Stuttgart, conveniently placed, for the 2000+ international visitors, adjacent to Stuttgart airport, which is not nearly as bad as it sounds. After a day of analyst meetings we spent today listening to senior executives outline the company’s future plans and examining its latest device and service offerings. A major highlight was the unveiling of the recently announced Booklet 3G, Nokia’s first foray into non-handheld devices. Actually that’s not quite true, but you have to be an industry veteran of at least 20 years’ standing to remember when Nokia last manufactured PCs, or indeed the myriad of other products it used to be known for. It abandoned most of its traditional businesses as part of its rationalisation response to the Russian economic crisis of the early 1990s, and after it identifed mobile phones as the next technology wave the company has never looked back. Nokia’s explanation for (re)entering the PC space is that convergence is happening and is here to stay. In other words, it sees computing competitors (read Apple, Google) eating into its phone business, as phone handsets take on more and more of the capabilities associated with the PC. The logic is that Nokia can counter these threats by bringing its communications expertise to the PC space. The Booklet 3G is Nokia’s first response. I hope it is not their last. We could waste many hours discussing the finer points of English vocabulary, but this is indeed a “netbook”, at least as far as anyone can point to a clear definition of that word, and that may not be very far. It could also be a “laptop”, which is how John Hwang, who heads this new Nokia business, described it yesterday. Or to be precise, “a high end mini laptop”. So take your pick. It is, without doubt, a computer. From the various videos and demonstrations it seems that Nokia is trying to position the Booklet as a handheld device aimed clearly at portable applications. Promotional videos featured young, attractive (inevitably) people holding their Booklets in one hand while walking along streets, chatting idly with friends and surfing the web in attractive (inevitably) locations like ski resorts and wine bars. Actually I made that up, but you get the picture. For the record, the key features are Windows 7, 1.6GHz Intel Atom Z530 processor, 1GB RAM, 120GB HDD, claimed 12 hours battery life, 10.1” display, HDMI, GPS, accelerometer, Bluetooth, webcam. You may have spotted a couple of items which mark the device out from the usual netbook crowd. With GPS, accelerometer and 3G the Booklet is clearly designed to further strengthen Nokia’s position in the navigation and mobility applications segment. Retail price will be €575 plus tax. Nokia is confident (you can assume the deals are more or less done) that the Booklet will be heavily subsidised by mobile operators in return for the user’s long-term commitment to big fat monthly mobile data fees. The booklet is a nice-looking, well designed and high quality device. The to-ing and fro-ing around its categorisation is not coincidental, since its specification probably comes close to some low end notebooks/laptops. But prices for those start at €300 or less, while top end netbooks struggle to reach Nokia’s price point. As with Nokia’s phone business, it seems that close cooperation with operators will be necessary to ensure that Nokia’s return to the PC business is not a short-lived affair. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Devices Global Market Report

BT launched its Total Broadband Anywhere service today. It is available to Option 3 broadband customers starting at an additional £5/month and includes a free smartphone. The contract is for a minimum of 18 months. The “50” option (£5/month) includes 50 minutes and 50 texts over Vodafone’s network. Higher price packages are available, up to £35/month, which includes 600 minutes and 700 texts. All packages include unlimited WiFi downloads and 10MB of data over GPRS connections. Two BT ToGo smartphones are available initially, both from HTC (whose brand is also on the devices) – the HTC S620 and S710. BT’s Gavin Patterson told us that he was working with other phone vendors and expected more devices to be available in future. 3G is also a possibility for the future, although BT does not believe it is necessary today, and clearly there are other network access technologies, such as Wimax, which may come along as well. The basis of BT’s Anywhere package is WiFi, so the devices will connect to the home wifi network, BT FON hotspots (currently 82,000 in the UK and an additional 190,000 worldwide), and 2500 BT Openzone hotspots in the UK and Ireland. The devices are based on Windows Mobile and preconfigured with customers’ BT Broadband settings, so that BT Yahoo email works “out of the box”. Other email accounts are also set up easily, simply by inputting an email address. Mobile security is also integrated. BT Broadband Talk is available at WiFi hotspots. I asked BT if this announcement represented the company’s mobile strategy, and the answer is a qualified “no”. It is first and foremost an extension of the company’s broadband offer, and gives customers the option to use a portable broadband device in mobile situations. If BT Broadband customers choose to drop their mobile service provider, the BT ToGo phones clearly allow them to do this, at a cost. Although BT wouldn’t put a number on it they clearly expect that a reasonable number of broadband customers will use BT ToGo as their main mobile service over time. At the same time they claimed they were not going “head to head” with other mobile service providers like Vodafone and Orange. If ToGo does start displacing mobile phone contracts, this could clearly change. The biggest concern with BT's approach is that it relies on a network partner's 2.5G service outside of WiFi hotspots. 10MB does not go very far for web browsing or any serious media applications, and while BT suggests most people will be happy just to download a few emails, it remains to be seen whether this will be a limitation for most users. Client Reading: Google-backed FON Movimiento: Peace, Love and Free WiFi

Or at least, boxes that are provided, ie "managed" by traditional TV companies like cable, satellite and IPTV service providers. The rumours are rife that Google is planning an Android for the TV space, and should be no surprise since Vincent Dureau joined the company a couple of years ago, having been CTO at OpenTV, the interactive TV market leader. He isn't there to improve search, that's for sure... What commentators such as Techcrunch are missing is the critical distinction between a TV service delivered, managed and controlled by a set-top box as part of a vertical platform, and TV that is available through open systems. I'm sure Google can come up with plenty of cool interactive TV apps, but that is neither here nor there if the vertical service provider doesn't see them as a profit generator for themselves, not Google. Google's models, for the moment, depend on open technology frameworks, not getting into bed with vertical service providers. So the company should focus its TV efforts on pairing up with emerging web TV players like Akamai and Move Networks, which are forging a path towards Round the Back delivery of HDTV over the internet. It should also work with manufacturers of "Digital media devices" as its route the end user, ie TV plug-ins that get the web video straight to the big screen where people want to see it. What web TV lacks right now is a sound business model, and that may be where Google's advertising savvy comes in rather handy. Client Reading: Digital Disruption: Imminent and Long Term Threats to the Audiovisual Industry Online HD: Disney's ABC Throws Down Gauntlet To Competitors, and Access Providers

As one country finishes its analogue switch-off, another begins. On Monday morning at 8.45am Sweden’s Culture Minister, Lena Adelsohn Liljeroth, switched off the country’s last remaining analogue terrestrial transmitter at Hörby in Skåne. Two days later, in the UK, the same process is just beginning. This morning 20,000 households in Whitehaven, in Cumbria in northern England, woke up to find that BBC2 was no longer available on the analogue terrestrial service. Actually, if everything went according to plan, this should not have surprised any of the residents of this small coastal town. Over the next month the remaining analogue channels (BBC1, ITV and Channel Four) will also be removed, leaving room for the replacement DTT channels offered by Freeview. Is this a case of the UK falling behind? It would be easy to play the blame game as different European countries progress at their own pace towards an all-digital future. Sweden in fact is the fourth country (after the Netherlands, Luxembourg and Finland) to end analogue terrestrial TV, and a number of German Laender are also digital-only. The UK may just be beginning the process, but it is not the slowest. France and Spain have yet to begin switch-off, and Italy has just revised its schedule. The irony is that the countries that have succeeded in moving quickly towards switch-off are not necessarily the most successful in promoting digital TV. In fact, the UK still has the highest penetration of digital TV in Europe (more than 80% of homes have at least one TV able to watch digital channels). The secret in the Netherlands, Sweden and Germany is that many homes there have not used analogue terrestrial TV for many years – they use analogue cable TV, and continue to do so. It is in the less cabled countries – such as France, Spain, Italy and the UK - where switch-off is most challenging. Even though digital penetration in the UK is high, the switch-off process will be arduous. Converting all the second and third TV sets, as well as recorders (VCRs and DVD recorders) to digital will not be a trivial task. If Whitehaven proves successful, the UK's 2012 deadline will looking increasingly realistic. sub=addfavbtn&add=http://www.strategyanalytics.com/blogs/dmercer">