Digital Consumer

Apple cynics seem to have taken the initiative following the announcement of Apple’s iPad internet tablet. I tend to shy away from anything as hyped as this product has been. Surely the most hyped Apple device ever… And for that reason alone I am feeling underwhelmed. Is the iPad really what this was all building up to?

Let’s think about the applications:

Books - ok, I get this. if you want e-books this seems like a reasonable way to carry and read them. A nice way to read newspapers as well – I’m not sure the publishers will make money from it though.

Web browsing and applications - I suppose the brower must work well. This is definitely the primary set of apps in my view. Consumers need an easy and fast way to get to websites quickly when they’re at home and don’t want to boot up the laptop.

Music - ok, but who would rather listen to their music through a 1.5 pound portable device with (presumably) tinny speakers rather than either a) a small iPhone/Pod plus headphones, or b) plus docking device?

Photos - yes of course – iPad could be a very nice digital photo frame.

Games - could eventually become a killer app but control and input functions will need to be adapted to a larger screen device and iPhone app developers need to get to work to match the screen’s HD resolution.

Productivity applications - I’m struggling here. is this really how the iPad is going to get used? The virtual keyboard may be good, although early reports are not promising. But think about how are people going to hold or rest this device: sitting down in a chair - it would have to rest on the flat table, so you are leaning over it to use it properly. Sitting in an armchair - so it’s on your lap, but again you have trouble positioning the screen at the right angle; or standing, so you hold it resting in one arm and only have one arm free to touch the screen. Or you use a stand and add-on keyboard, and it becomes… a laptop! OK, maybe the iPad could be used occasionally for productivity applications, but I just don’t see this device as a breakthrough for work-based devices.

and finally… Video.
Video playback is reported as stunning - I can believe this. But where are the extra video content applications or TV deals? The specialised video apps like TV-transfer? No HDMI for TV connection? Apple seems to be struggling more than ever to break into the home video market in a big way.

And no multi-tasking… this is crazy. I can’t play music while I surf?!

Form factor: maybe I was expecting too much from Apple, but really the iPad is hardly a revelation. Have they done what we expected? ie take all previous tablet-type implementations, improved on them and added innovative style and usability and content integration to create a unique package? I don’t see this from what I’ve read and seen. And it’s too heavy to be held in one hand, much heavier than some e-readers.

Wireless:
So the key question - how often would this device be used in truly mobile situations, and of those situations, how often would a user need to have cellular data service? The cellular service can be bought ad hoc - and I think it will be primarily. Not much new recurring revenue for carriers there then…

The iPad is surely primarily a “free data” wifi device. It doesn’t need always-on connectivity for messages and voice - I’m always going to carry a phone for those. I can get online for websites and apps via hotspots when needed, and primarily use my home broadband to load it up with content.

Having said all this, of course the lower than expected price points mean they will sell millions to Apple fans who won’t blink at spending another $500 on the latest Jobs gizmo.

(And did anyone at Apple really not investigate the unfortunate connotations of the device name for the female market? - one wonders if Jobs has really lost his touch.)

Client Reading: Consumer Imperatives for Digital TV Media Browsers

When I switched my home television service  from DirecTV to Comcast last summer, the slick sales guy on the other end of the line promised me that I would be receiving an identical channel lineup to the one I was currently receiving.  “Apples to apples,” he promised. “Only cheaper.”   What’s not to like?

You’d think that I, someone who gets paid to research and write about digital television, would have done more due diligence on his own account. 

I didn’t.

So, when it became apparent that two “must have” channels for me (NatGeo and BBC America) were not in my Comcast tier, I called again to inquire.  Seems that to get those, I would have pay an additional $15 a month to buy up to the next highest tier, one filled with numerous channels of no use or interest to me.   Suddenly the calculus changed.  This was no longer a good deal.  

This time, it’s not coming from the FCC

Recent movements suggest that change may be afoot. 

No sooner had Comcast announced the launch of its OTT-mitigating Fancast Xfinity TV service than rumors started circulating about Apple’s talks with CBS and ABC.  Seems the folks in Cupertino are mulling a subscription-based video service, obviating the need for iPhone/iPod users to depend solely on the Apple iTunes service for downloads.

If the Apple service is successful at elegantly bridging  the ‘’screen gap,” and delivering compelling online content to the tv screen, it could fundamentally alter the way MSOs sell content.  The much maligned “bundled” system currently in place, whereby consumers are required to purchase content in blocks of channels–rather than individually–could finally be on the chopping block.  And that’s good news.

What is interesting, though, is that the catalyst for this change will be the market—not a government mandate as previously feared.

A la carte used to be somewhat of a cause célèbre in the television world, and one that the FCC has been wrestling for years. It was only the more recent emergence of “net neutrality” that has stolen the spotlight from the issue.

Former FCC Commissioner Powell’s administration commissioned a 2004 report finding that, under an mandated a la carte scheme, customers would end up paying more.  That report has since been largely discredited and found to be riddled with misinformation and half-baked analysis.  Successor Kevin Martin embraced “cable choice,” though apparently more for the way it allows parents to monitor and block channels, than for household consumer budgetary reasons. One analyst firm  rather dramatically predicted ‘economic ruin’ if the FCC went ahead with its plan.

Who moved my talking points?

Government-mandated a la carte is bad for cable consumers, who would wind up paying higher prices to receive the same level of service and fewer channels than they receive today.”-NCTA Issue Brief, January 2009

The National Cable Television Association (NCTA ) talking points were crafted to respond to a possible “government takeover” of television.  In the context of a market driven change, the memo reads somewhat differently.  Most of the arguments fly out the window, and the market will call the cable industry’s bluff on the supposed technological barriers to offering personalized programming.

As usual, the problem does not lie in the technology, but rather in the business model

The very nature of cable advertising is in flux, brought upon largely by digital television.  The 30-year old model in place today, whereby flagship channels lead certain tiers and support fledgling new ones, could be facing some changes.  While the NCTA estimates that half of cable companies’ revenues come from national ad sales, this is certainly shifting.  Intelligent two-way networks will herald in addressable advertising—the next step in demographic targeting.

Indeed, vendors I spoke with only months ago alluded to some “user identification” scenarios that could pinpoint actual viewers within a household, based on their “jitter signature.”  Seems that we all shake and tremble in our own unique ways, and it is possible to use these signatures like fingerprints, and serve up completely targeted advertising. 

To be sure, , vendors will need to overcome the “creep out” factor first, but the general idea is the same.  Linear advertising as we know it is going the way of the dodo, and the MSO’s ‘old math’ will need to change.

It’s not about choice…it’s about the illusion of choice

Our research shows time and time again that consumers are tired are feeling that they are being screwed by their pay television providers.  The nickel and diming in all aspects of consumers’ lives has grown out of control.  Our latest survey work (to be published in Q1) found that only about 20% of pay tv customers felt that the ““value for money” they were getting from their pay television operator exceeded expectations.

Part of the issue is consumers’ feeling that they have no control, that they are somehow being  taken advantage of..

Choice—or more importantly, the illusion of choice—is an extremely powerful tool.   Think of the immensely popular Build a Bear Workshop franchise, whose stores dot shopping malls across the world.  BABW allows customers to design and personalize their very own stuffed creatures by visiting eight “stuffed animal-making stations,” where they can choose (and buy) everything from stuffing to clothing.  The concept has been a huge hit, and the company is now a $300 million/year concern, with over 400 stores worldwide. 

What is the secret to the company’s success?  Certainly not selling adorable plush animals; anyone can do that.  Rather, BABW has perfected the illusion of choice and flexibility.  All customer start at the same default position: buying a bear.  The trick is, they end up paying more for the additional  features relevant to them.

How about “Build a Bundle?”

What prevents MSOs from employing a similar strategy—allowing customers to design their own bundled offerings?  All would start at the same default position, the $XX/month basic tier.  The real money comes in the add-ons.  Critics say this is not how advertising works in the cable industry.  Guess what?  It’s about to change.

My (still untested) hypothesis is that, if customers were given the choice to “personalize” a  television bundle, ARPUs would actually increase–or at least stay the same.  Allowing them to configure a package conveys the illusion of choice and control, and makes customers think they are in the driver’s seat.

Sounds like a great project-opportunity…phone lines are open if someone out there wants us to test the concept.

Cisco has agreed to acquire Tandberg, the videoconferencing specialist based in Norway, for around $3bn. Cisco has long targeted video conferencing, or telepresence, as a major growth opportunity, and also sees a mass consumer market for home telepresence solutions in the longer term.

The Tandberg move will boost Cisco’s position in the global corporate telepresence market, which has been a growth segment in recent years, and not just because companies are cutting back on travel.

Our main interest, of course, is the emergence of consumer telepresence solutions and other emerging media businesses. Cisco states that it hopes the Tandberg group, which will become the Telepresence Technology Group within the Emerging Technologies Group at Cisco, will drive video innovation. We look forward to hearing how Tandberg will drive further innovation in the critical video element in Cisco’s strategy.

Twitter: twitter.com/DavidMercer_SA

Client Reading: Digital Media Devices Global Market Report

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