Digital Media Strategies

We cover all of the major media sectors, including advertising, TV and video, music, games and social media.

December 22, 2006 16:12 dmercer
The world's biggest consumer technology show kicks off again in Las Vegas January 8th, although I'll be there from the 6th for the press build-up. I guess it's a sign of age that it seems to come round more quickly every year.

We'll be looking for three major themes this year: HD-everything, home media networking, and internet TV. None is new of course, but at least in the case of the last two we are looking for signs that these are ready for the big time. There are sure to be headlines around Cisco's cable-bypass box (a phrase that does more than most to confirm its US-centric origins). "Cable" for most people outside of the US means little more than a piece of wire, or, if you're lucky, a broadband service that's unreliable. OK, Benelux and Switzerland may be exceptions, but the cable industry by and large has nothing like the strength it has in the States and the term "cable" certainly doesn't just mean multichannel TV. So I hope Cisco comes up with a sexier name that crosses cultural boundaries.

The connected home remains an ambition rather than an achievement, so we'll look for evidence that Vista will do a better job of getting consumers to build their entertainment systems around a media center PC than XP MCE has done so far. As with most things Microsoft I suspect we'll have to wait until a couple of updates before everything works as it should.

Sparks should really be flying between the HD-DVD and Blu-ray Disc camps now that commercial activity is well under way. Behind the war of words, however, is the rarely posed question of whether most people need either system at all. DVD doesn't do a bad job, after all. Outside of the PS3 trojan horse strategy, we can't see huge near-term demand for either system in a stand-alone configuration. DVD is safe for a while, and Hollywood is just going to have to put up with a slow market now that DVD has matured.

Some pundits will tell you we soon won't need discs at all. HD web video is already out there and becoming ever more viable as broadband speeds increase. It's a classic mistake to position this as an either-or issue. There's plenty of room for both online and offline models and content owners will make sure they position product to maximise revenues across all platforms.

My upcoming blog and research themes will include Sky+, HDTV, more CES, Blu-ray/HD-DVD, games consoles and all things broadband. If there’s anything else you’d like me to cover, drop me a line.

December 21, 2006 13:12 dmercer
This blog will offer a personal perspective on developments that are changing how consumers access and use digital media and devices and how companies are maximising the growth opportunities these changes present.

My qualifications are 20 years of studying the industry and working with clients across the value chain. My day-to-day work as a professional analyst continues and that’s where my clients will find the really meaty stuff. But I hope this blog will serve as a useful taster of some of that research and our thinking. It will also clearly have a different style and approach to the published research from me and my colleagues. Of course, as an analyst I believe my professional work is balanced and fair, and this blog will be no different. But I will draw more on personal experience than would normally be the case, and certainly won’t be afraid to get stuck in to issues that I feel are worth the effort.

My experience and research is global, and even though I’m based in Europe, I like to think I’m up to speed on most of what’s going on in the US and elsewhere to a degree, and certainly accumulate my fair share of carbon emitting airmiles over the course of a year. But I will be consciously trying to give a European slant to my commentary, if only to balance the (probably justifiably) perceived bias of “most things web” towards the perspectives of our American cousins.

My aim is to put details in the context of the big picture issues as I see them. I welcome all comments and feedback. The usual disclaimer of an analyst’s personal blog: the contents do not reflect the opinions of Strategy Analytics, and they may not always be in line with what the company publishes, even under my name.

December 21, 2006 13:12 dmercer
One thing people continually fail to predict accurately is pricing. I have included myself in this in the past and we strive harder to improve. So much analysis of what will happen is based on today’s, or even worse, last week’s pricing. Our technology vendor clients hate to see dramatic price crash predictions, but that’s pretty much the rule of thumb. Latest example is Circuit City, whose shares crashed this week after they admitted being taken by surprise by flat panel TV prices. So whose forecasts were they relying on?

Prices fuel many press stories, naturally enough. The PS3 is said to be losing ~$200 a piece. Well, maybe, but that was last week’s news. As production ramps up the price equation has already moved on from any retrospective teardown analysis. The laser diodes and Cell processors will be churned out in their millions over the next few months, and the Japanese will do what they’ve always done best – squeeze every last ounce of inefficiency out of the manufacturing process – and costs will plummet. And Sony will meet their PS3 targets in my view, in spite of so much negative press, and go on to dominate the next console cycle.

I have lost count of the press calls I have taken wanting comment on how badly PS3 is performing. I do my best to explain that a few weeks is irrelevant in the ten-year lifecycle of a games console, but it’s hard work when most of the mainstream press is only interested in what might happen tomorrow. Sony haven’t thanked me for running this damage limitation campaign single-handed. It wouldn’t do Howard Stringer any harm to make his next task to sack whoever it is claims to do PR for them – there surely is good news somewhere inside that organisation but only they know why they make it so hard for anyone to find it.

December 21, 2006 13:12 dmercer
So I thought I’d start out with a few personal perspectives, bugbears and gripes to kick things off. That way you’ll get to know me a little more personally, and those of you who are clients will hopefully recognise some of what follows from our various communications over the years.

The rate of change continues to accelerate. We will see more innovation in the digital consumer space in the next 5 years than we have seen in the past 10, probably 20. The two sides of that coin are frightening and compelling. The opportunities are unprecendented, but matched by the risks.

Everywhere we look we see underestimation of the rate of change. I was asked, by a TV advertising executive, at a conference 2 years ago whether online TV and video would become a reality within 20 years. Yes, you read that right – 20 years. Our research in early 2004 was some of the first to show that broadband adoption was leading to a decline in TV viewing, but the TV industry didn’t want to know.

I haven’t the faintest idea how consumers will be getting most of their video in 20 years’ time, but it surely won’t be a scheduled linear broadcast one-way model. And the TV industry does seem finally to be waking up, fortunately more rapidly (not that this is difficult) than the moribund music industry did 5 years ago.

There was at least one empty seat at last night's Tottenham game against Southend. I had a ticket but was unable to attend. Sky chose to show the Newcastle-Chelsea game so I delved into the world of live internet TV football. TVU Networks ( is one of a number of largely Asian websites offering live streaming of television channels from around the world, but again largely Asia-based. So I found myself watching KBS, the Korean public broadcaster’s, live transmission from the other side of the world of a game taking place 60 miles away from my home. Such is the power of the connected world. And I paid nobody an extra cent.

At least it worked for maybe 20 minutes, during which time quality was bearable. I get BT’s “up to” (one of my list of marketing phrases to be banned once the Mercer government is formed) 8Mbps broadband service, and should peak at 6 according to my local friendly BT engineer. Realistically it probably caps out at 3-4, and I use WiFi between PCs and BT's Home Hub. KBS’s stream was certainly not reaching my PC at anything near that rate but the experience demonstrates why any picture is better than a thousand words (so why am I writing this then?). Blurred images and barely identifiable players are preferable to any radio commentary, although I have admiration for the skill of sports radio commentators. But internet TV couldn’t last the required two hours and after several frozen screens and dropped connections I gave in to the power of Murdoch and turned to the digital radio commentary on the BBC’s Five Live Extra via Sky's set-top box.

The big picture question is: can pay TV survive in a world where everything is available anywhere at any time? Look for sports rights holders to pursue the renegade TV redistributors (why haven’t they already?) through the courts, just as the record companies chase down P2P downloaders. But the stable door has surely opened. OK, so the user experience is not up to the job today but it’s only a question of time. Cisco, Skype and others are all planning to turn this into a real rival to "television", and I for one will not bet against at least one of them succeeding.