Digital Consumer

• 29Jan

  Can Netflix’s US Online Success Be Replicated in Europe?

  Connected TV 1 Comment

  Much has been written in recent days about the rosy financials released by Netflix earlier this week. While most digital consumer companies are reporting collapsing profits or flattening revenues, Netflix certainly stands out from the crowd.

  Several commentators have pointed to the recession as a direct cause for Netflix’s current success. But I agree with Netflix CEO Reed Hastings: “There’s no way for us to tell”. There is a lot of speculation at the moment in general about the recession’s positive impact on spending on home entertainment, such as pay TV, DVDs and digital music. I’ve heard this argument during previous recessions and I’ve never seen convincing data that proves it one way or the other. It’s tempting to point towards one set of data in isolation – the Netflix story is a good example – and draw this conclusion, but there is really no evidence of cause and effect. Netflix’s growth is just as likely, in fact more likely in my view, to be a result of customers simply adding their service to what they already get, or switching from alternative sources. It is not clear at all that the overall market for home entertainment is benefiting from a direct switch away from out-of-home spending.

  Netflix’s story is strong evidence that premium online video is taking off in a big way, and the company confirms that it has underestimated the positive impact of having its technology integrated in connected TV devices such as flat panel TVs, Blu-ray players and Xbox 360s (a trend we noted as a key theme at CES). Even though the installed base of these devices is relatively low, they are already driving new customers towards the Netflix service, not least because the partners receive payments from Netflix whenever that happens.

  It would be dangerous to assume that Netflix’s success can be replicated easily in European markets. Even in the US, connected TV content is in its infancy and Netflix is investing significant sums in building online content libraries. In Europe this process would inevitably be much more expensive on a per-user basis because of the fragmentation of the European content market. Rights would need to be negotiated on a country-by-country basis, and within a single country the costs per user relative to the US would inevitably be much higher.

  Europe’s Netflix equivalents, such as Lovefilm in Germany and the UK, are currently nowhere near the same scale. Lovefilm is estimated to have revenues in the region of $60m compared to Netflix’s $1.36bn, and Netflix is clear that this scale is a key factor in allowing it to invest in new distribution technologies.

  In case Netflix does eventually look at the European market, these considerations should be made alongside the fact that European interest in home video has never been anywhere near the levels of the US. On a per-head basis spending on VHS and DVD rentals, as well as purchases, have historically been much lower. One way or another the Americans just love movies more than Europeans.

  Twitter: twitter.com/dmercer15

  Client Reading: Digital Media Survey: An analysis of US Online Premium Video Users

  

• 23Jan

  What happened to BT Vision on the Xbox 360?

  Connected TV, Broadband 3 Comments

  FierceIPTV published an article recently that suggested that there was buzz at CES about the concept of IPTV on the XBox. This was mentioned by Bill Gates in his CES 2007 keynote, but according to FierceIPTV the buzz quickly fizzled out.

  I hate to contradict a normally reliable source, there was also considerable hype around IPTV on the Xbox a year later, at CES 2008, when BT and Microsoft announced that BT Vision, BT’s IP VOD service, would be available on the Xbox 360 by the middle of last year. But as I reported back in July 2008, things had already become ominously silent, and we should not be expecting any further announcements by CES 2009. Indeed, at CES 2009 Microsoft told me that they had nothing more to report on the BT Vision project and that it was entirely in BT’s hands.

  I still believe a launch is possible, but we should not underestimate the technical and commercial barriers, and I suspect it is a combination of these that is holding things back. I also believe the pressure is more on BT than on Microsoft to move ahead, because BT’s IPTV service has not performed to expectations and it will be looking at the growing installed base of Xbox 360s as a way to boost its user base.

  Twitter: twitter.com/dmercer15

  Client Reading: Online Content: Xbox 360 Sets PS3 New Challenge In Battle For Online Entertainment Leadership

  

• 21Jan

  Free Leads France in Broadband Satisfaction

  Broadband No Comments

  Free, the (for English speakers) annoyingly named French broadband service provider, tops our recent survey in customer satisfaction. 81% of Free’s customers report themselves to be somewhat or very satisfied with their broadband service.

  Free set the French broadband market alight several years ago now when it became the first provider to introduce a triple play bundle (TV, phone, internet) at the then unprecedented monthly fee of €29.99. Other providers quickly followed and €29.99 became the standard offer in the French market.

  Anecdotally I’ve heard varying reports about Free’s advantages and disadvantages over the years. While some customers clearly rave about the company, I have heard of some complaints about quality, particularly regarding its IPTV service.

  In fact, our survey suggests Free is not number one on every metric: in terms of reliability it is beaten by Alice, Neuf and Orange. Numericable is seen as significantly less reliable than its competitors.

  Not surprisingly, it is on value for money that Free is seen as the best performer, which is entirely in line with the company’s strategy.

  Twitter: www.twitter.com/dmercer15

  Client Reading: Broadband Satisfaction and Customer Churn:France Survey Results 2H’08

  

• 16Jan

  Don’t worry about the economy, folks: we’re just “resetting to a new baseline”

  Technology business No Comments

  I couldn’t help smiling at the latest euphemism for the world’s economic problems: “The economy and the industry are in the process of resetting to a new baseline”. If you didn’t know we were going through the world’s worst recession in living memory (if you’ve been alive for less than 80 years, at least), you could be forgiven for thinking things were ticking along quite nicely, and the captains of industry had got together in a little huddle and decided to redraw a few graphs, but there was really nothing much to worry about.

  Perhaps Intel CEO Paul Otellini’s comment was meant to be taken ironically, though I rather doubt it. Quarterly results announcements are not normally a venue for dry humour. But we take every ray of sunshine we can get these days, especially in the midst of a cloudy, cold, damp British winter.

  So thanks, Paul, you’ve set us up nicely for the weekend. As thousands more people collect their redundancy cheques we can rest assured that as soon as you’ve reset your baseline “growth will resume” and everything will be back to normal. If only it really was a laughing matter.

  Twitter: www.twitter.com/dmercer15

  Client Reading: IFA 2008: Internet and 3D Offer Hope During Europe’s CE Recession

  

• 15Jan

  Games console downloads emerge as key distribution channel

  Games 2 Comments

  Strategy Analytics has just published its analysis of a survey of console and PC gamers in the US. The ability to download content to games consoles is a relatively recent innovation but is now a feature of all the major systems – Wii, Xbox 360 and PS3.

  Our survey found that nearly a third of gamers in the US claim to buy and download games to a video games console. 21% are doing so on a monthly basis or more frequently.

  This compares to 35% of gamers who claim to buy games from a retail store at least on a monthly basis, or 28% who are ordering packaged games online for home delivery. Buying from retail stores is still the number one choice for less frequent games buyers.

  We also found, perhaps not surprisingly, that the games console brands (Wii, Xbox, PS3) are the first choice when it comes to buying games online. 27% of gamers willing to buy games online would choose the games console brand, compared to 19% who would go to the games publisher and less than 15% who would visit an online games specialist or general online retailer like Amazon.

  Microsoft’s recent revamp of its Xbox 360 interface was intended in part to encourage greater participation in online activities and paid-for downloads. It seems as though many console users are indeed ready and willing to make the most of online services and games downloads. While there is a clear opportunity for console platforms to develop new revenue streams, the outlook for bricks and mortar retailers appears to be less rosy.

  The study comes from Strategy Analytics’ Digital Media Survey, conducted between April and June 2008 sampling 3,526 age 15+ broadband users across Germany, France, Italy, Spain, UK and the US. The US sample was 1000 broadband users.

  Twitter: www.twitter.com/dmercer15

  Client Reading: Digital Media Survey: An analysis of US Gamers

  

• 14Jan

  Sky Broadband: Satisfaction High But Customers Still Want Higher Speeds

  Broadband 1 Comment

  We have just published results from our broadband subscriber survey in the UK. The work was carried out in late 2008, and we have been going through the analysis country by country. Results from the US, Germany and France have already been released.

  As I noted after the US findings, consumers often claim to be satisfied with a product or service. You can understand why providers of that product or service focus on satisfaction surveys as evidence that they are doing a good job. It is only after further probing that we discover that people are really quite willing to move to a new provider if the conditions are right.

  A similar pattern has emerged in other countries, including the UK. As we highlight in our press release Sky comes out top in terms of customer satisfaction, with 87% of their customers reporting themselves “very” or “somewhat” satisfied with the overall broadband service. That sounds like an impressive result, especially compared to the 61% who say they are satisfied with Tiscali’s service.

  But even Sky’s broadband customers can be bought at a price. More than half say they would be somewhat or very likely to switch to another provider in return for a 20% reduction in monthly fees, and three quarters might drop Sky in return for a doubling in broadband speeds.

  The debate about upgrading national broadband networks is growing in intensity as governments consider investing in infrastructure to stave off the economic downturn. Opponents to this spending often claim that internet users aren’t interested in or don’t need faster speeds. Our survey evidence seems to refute this quite clearly: the majority of broadband users in all our studies indicate a strong willingness to move to services with higher access speeds.

  That’s good news as long as competition is allowed to flourish. Even though the broadband market is maturing, competitors can win new customers by offering superior service and attractive pricing.

  Twitter: www.twitter.com/dmercer15

  Client Reading: Broadband Satisfaction and Customer Churn UK Survey Results 2H 08

  

• 13Jan

  CES Wrap: Against the odds, the future looks bright

  Computers, HD and 3DTV, Technology business 2 Comments

  Last year we questioned whether the CES wow factor would make a return. Perhaps it is going too far to say the 2009 event fulfilled those wishes, but I got the sense that, in spite of the gloomy economic background, there was greater depth and commercial potential to the innovations than in recent years. And again perhaps it is reading too much into what inevitably are subjective impressions, but it may have been the challenging economy that encouraged exhibitors to demonstrate their readiness to benefit from the next technology transitions when the upturn finally appears.

  Of course there was nothing really new, and it would be wrong to go to CES or any other event with excessive expectations. Most innovations are evolutions or enhancements of existing technologies. The key is to look for genuine progress towards significant commercial opportunities, and this was clearly evident in connected TV, 3D and portable devices.

  While previous shows have seen a degree of experimentation in internet and web-enabled TV, this year there was a sense that widespread commercial rollouts are finally imminent. There is certainly no consistency in the approach to web TV, and, as we have seen, early implementations may be missing the real driver of consumer demand. But at least the products will be out there on retailer shelves, and vendors can start to learn what works and what doesn’t.

  3D is at an even earlier stage in its lifecycle, although some would argue that its gestation began several decades ago. With so many false dawns behind it, 3D scepticism is understandable. But doubts over user acceptance should not cloud the fact that technical implementations are clearly improving year after year. The very best, such as Nvidia’s 3D gaming demonstrations, are very impressive indeed and well suited to their applications. Others, such as Panasonic’s 3D Blu-ray, can be extraordinarily good when the content production chain has been well designed, but are weaker with legacy material. As we move through the next decade 3D will certainly be playing an increasing role in some form or other in the digital home.

  The other broad trend is the increasing power of portable and mobile devices. Our research is tracking the role of personal technologies in bringing Internet applications to the digital home. As truly portable computing becomes ever more powerful, as evidenced by Nvidia’s new ION motherboard, growing numbers of consumers will see such devices as their primary digital home content gateway, connecting ad hoc to the large TV screen as required.

  These trends, while they will have near-term commercial impact, will also drive major new revenue streams for technology vendors and content providers alike over the coming decade. For that reason CES 2009 fulfilled its purpose to provide a vision of the future of consumer technology. The fact that fewer people – 110,000 attendees is the latest estimate – were there to see it is a sure sign that the industry is in the midst of a downturn, but it should not divert us from the fact that new technologies will inevitably replace old ones, fuelling new growth opportunities as soon as the economy allows.

  Twitter: www.twitter.com/dmercer15

  Client Reading: Digital Media Devices Global Market Report

  

• 11Jan

  CES: Macrovision Repositions Towards Content Discovery

  Connected TV No Comments

  Macrovision is not a name many consumers will be familiar with, except perhaps those with a close interest in breaking content protection systems. Macrovision evolved as one of the early leaders in this market, and its technology is today deployed on 249 million TV set-top boxes and 12 billion DVDs. It also prevents the copying of many pay-per-view television programmes.

  Over the past year or so Macrovision has moved forward aggressively to reposition itself as a player in the wider content discovery business. Its major move was to acquire Gemstar-TV Guide in May last year, giving it a leadership position in TV guide technologies.

  We discussed Macrovision’s plans for the next wave of TV interfaces with Richard Bullwinkle, the company’s chief evangelist. Richard demonstrated the new Neon guide, which will include innovations that will bring greater power and personalisation to the interactive TV guide. Neon will allow viewers to see not just lists of TV programmes, but also what content is available on their home network devices as well as from the Internet.

  Where and when Neon gets deployed depends on CE manufacturers and service providers. But Macrovision clearly has a head start because of its TV Guide market leadership. And as Richard was keen to point out, competitors looking to develop internet TV applications that provide information about television programming should be aware that Macrovision has lots of intellectual property in this space.

  One issue which I debated with a number of players here at CES is the problem of tailoring TV and internet guides to multiple users within the household. While nobody expects TV users to “log on” before they can watch TV, the fact that Macrovision’s and other new services allow increased personalisation does beg the question: which member of the household has control as the “administrator”, and how easy will it be for younger household members in particular to override security restrictions. When content is being sourced from all over home networks and the Internet this is likely to become an increasingly vital question and it didn’t seem to me that anyone at CES has really solved this one yet.

  Client Reading: Digital Media Devices Global Market Report

  

• 10Jan

  CES: 3D from Panasonic and Samsung

  Games, HD and 3DTV 3 Comments

  I saw Panasonic’s demonstration of Blu-ray-based 3D system this morning. Demos are running in two small theatres on the Panasonic booth. They consist of 10 minutes of various movie, sports and games clips. Viewers are required to wear glasses. The material runs from a BD disc in a modified Blu-ray player.

  I’ve heard many positive reactions to 3D Blu-ray here at the show. It certainly seems to have a wow factor for some viewers. While the demos are certainly impressive, I have two general concerns. The first, which I highlighted yesterday (http://www.strategyanalytics.com/blogs/343/), concerns headwear. The second concerns the impact of the quality of the material. It was quite noticeable during the Panasonic demonstration that some material is considerably more effective in 3D than others. Perhaps it’s just my eyes, but some of the early sports clips involving many rapid and complex movements lacked clarity and could become quite difficult to watch for any length of time.

  By contrast, the brief clips from this year’s Beijing Olympics were immensely impressive. Apparently these were captured with special dual-camera systems from Panasonic, and the investment clearly paid off. But that is the point: before 3D begins to penetrate the sports and other broadcast sectors producers will need to make significant investment in upgrading cameras and other studio equipment. No doubt that is something Panasonic, one of the leading vendors in this market, is looking forward to.

  Likewise with movie content, fast action scenes still clearly present a challenge. Most of the other movie clips were impressive, and this is encouraging for the 3DBD opportunity which will clearly depend primarily on movie content.

  Panasonic is hoping for a 2010 launch, but much will depend on whether it can persuade other CE players and partners to unite around a single standard. That will be absolutely vital if 3DBD is to become successful because content providers will not want to adapt their productions to incompatible technology platforms.

  It also looks like something I wrote yesterday may have to be revised slightly. Samsung is demonstrating technology that turns any HD content into 3D, again with the user having to wear glasses – these link to a TV emitter via infra-red, similar to Nvidia’s system.

  The demo includes Xbox games, so it looks like 3D console gaming could be closer than we thought. The technology depends on processing chips within the TV, so it will be some time before it becomes widespread. In the meantime I’m sure Microsoft will be looking at alternative approaches to upgrading its Xbox platform for 3D.

  Client Reading: Digital Media Devices Global Market Report

  

• 10Jan

  Nvidia and Viewsonic excite CES crowds with 3D gaming

  Games, HD and 3DTV No Comments

  We saw impressive demonstrations today of Nvidia’s new GeForce 3D Vision glasses. These use two LCDs which synchronise with special 120Hz monitors via infra red emitters. Although Nvidia claims that 3D effects are apparent with most existing PC games, it has currently approved around 300 games. The certification process is a major investment for the company, but necessary in order to ensure user confidence.

  True 120Hz monitors are now available from Viewsonic and Samsung. Viewsonic has branded its 22” model FuHzion, and it retails for $349. The company believes this price point is now right for the mass market. Personally I think they are being over-cautious – It’s not so long ago since standard 15” and 17” LCD monitors were priced well above this level, so $349 for a 22” with the latest technology seems almost a bargain, at least for hard core gamers who are looking for the best possible experience.

  Games are the obvious place to start for the coming 3D revolution, since many games have 3D capabilities built in from day one. It will begin with the hard core PC games community and spread out to other PC and eventually console users. The latter will depend of course on whether the major platform owners choose to introduce 3D technologies, and they may be reluctant to do so until 3D capabilities are more widespread in the HDTV market.

  Our position has always been that most consumers are reluctant to use specialised eyewear when watching TV. Philips and other companies have demonstrated much improved eyewear-free solutions in recent months. But there’s no doubt the various glasses-based approaches are also improving and becoming more comfortable and effective. The ideal solution in television and video will not depend on glasses, but if that can’t be deployed to the mass market any time soon, Nvidia’s technology and others like it may begin to gain wider acceptance.

  Client Reading: Digital Media Survey: An analysis of US Online Premium Video Users

  

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