Friday, September 20, 2013

Will Telco Video Services Go Nationwide, as Mobile Services Have?

There is an important dimension of the Verizon Communications effort to provide, for the first time, out-of-home access to live TV feeds its FiOS customers have paid for as part of their TV services, that has nothing to do with streaming and linear video.

That new dimension is an ability by Verizon or other place-based service providers to escape the bounds of their local operating territories. In other words, Verizon might someday be able to sell Internet-based video entertainment of the sort it now sells to FiOS TV customers within the geographic footprint of its fixed network.

We aren’t there yet, but Verizon is making progress, launching an upgraded version of its FiOS Mobile App that, for the first time, provides out-of-home access to live TV feeds, starting with nine channels: BBC America, BBC World News, EPIX, NFL Network (tablet only), HGTV, DIY, Tennis Channel, Food Network and Travel Channel.

The FiOS Mobile App also delivers select local channels depending on where they currently are in New York, New Jersey, Philadelphia, and Washington, DC.

Verizon’s browser-based FiOS TV Online service now offers 69 live TV channels that are accessible by authenticated customers in the home or on the go.

Verizon FiOS customers have been able to watch live television on their iPads, while connected to their in-home broadband access networks.

So far, no video service provider has permission from all programing networks to stream all standard fixed network service everywhere.  Time Warner Cable, Comcast, DIsh, Cablevision, and DirectTV all offer some level of live content that can be watched outside of the home.

Beyond the implications for the way people consume TV services, the coming change will be that fixed network service providers will be able to sell that content to customers anywhere in the United States, so long as they have access to a suitable broadband connection.

That could have important implications for the addressable market available to Verizon, which has a relatively limited U.S. fixed network footprint. AT&T also would benefit, but AT&T has a bigger network footprint.

One reason video service market share for AT&T and Verizon has slowed, though the telcos continue to take market share from cable operators, is that they cannot offer service everywhere.

An out of market capability could accelerate market share gains by telcos.

How is Home Automation, Security Business Different from a Decade Ago?

What makes the home automation and home security business different from the business that existed a decade ago? The ability to use broadband, and therefore, video, as a part of the security system. What makes the business different from two decades ago?
The ability to use a smart phone to control settings, from nearly any location, using only the device in a pocket or purse.
And that explains the new interest being shown in the home security and home automation business by ISPs.

"Already 10 percent to 12 percent of broadband households in the U.K. and France own a home control solution where they can control a device such as a thermostat or security camera via a smart phone smart phone or PC," said Stuart Sikes, president, Parks Associates.

What Declining Product Demand Looks Like at Colleges, Hotels

Declining product demand already has hit hotel revenue streams, in the form of vastly-lower telecom revenue from guests. Now it appears we are seeing similar declining demand for entertainment video subscriptions, in an important demographic.

It’s hard to ignore the lack of demand that has lead Northwestern University to get out of the business of providing a cable TV entertainment service on campus.

That would follow a general move away from providing in-room telephone service on college and university campuses with student housing that has been underway since the mid-2000s.

Some might say college students prefer to watch TV on devices other than TV screens. Others would say Netflix is the preferred choice for video entertainment, since paying for Internet access tends not be an issue, and access tends to be fast.

The big issue is whether college students are acquiring new habits that will persist after they have graduated. In fact, there already is evidence that earlier generations of students have indeed been less enthusiastic adopters of the subscription TV service habit when they have gotten into the workforce.

In fact, newly formed households have been buying subscription TV at lower rates than older consumers. While 3.2 million new U.S. households were set up since about 2010, the subscription TV industry (cable, satellite, telco TV) only added 250,000 subscriptions in that same period, according to SNL Kagan.

That is an issue for younger people overall, who seem to be losing their appetite for  subscription TV. It has been a standard pattern for some time that older people subscriber at higher rates than younger people.

Some might attribute at least part of that to lower typical incomes for younger age cohorts, and that is a reasonable enough assumption. But evidence is growing that even households with no apparent inability to pay.

For starters, Millennials watch less traditional television than any other demographic, suggesting they find the product less engaging than older people might.

Some 13 percent of 18 to 34 year olds (8.6 million) who already have broadband service are committed to a broadband-only existence, with no plans to buy a subscription TV service.

In addition, many consumers who do buy service are at least considering dropping their entertainment video service (17.9 million 18-34s, as well as 32 million 18-49s).

Perhaps seven percent of potential churn candidates indicate they would consider keeping their TV subscriptions if offered programming streamed live and on demand, anywhere.

More significantly, 58 percent of broadband-only subscribers would consider subscribing to TV for a bundle of networks from their broadband provider, streamed live and on demand.

The study, sponsored by programming channel Pivot, was conducted by Miner & Co. Studio in association with Beagle Insight.

The point is that demand for subscription TV is on the wane, among younger consumers.









To be sure, colleges and universities already had discovered that selling telephone service no longer makes sense, given widespread, virtually ubiquitous use of mobile phones by college students.

That mirrors similar trends for hotel-supplied telecom services, which also fell dramatically after 2000, which is very close to the peak year for fixed line usage in the U.S. market, as well.

According to PKF Hospitality Research, telecommunications revenue at the average U.S. hotel declined from a peak of $1,274 per available room (PAR) in 2000 to $269 PAR in 2011, a 79 percent decline.  

During the 1990s, telecommunications revenues used to account for three percent of total hotel sales.  In 2011, that number declined to just 0.6 percent of sales.

In fact, some would argue that telecommunications service in guest rooms now “costs” most hotels money.  In 2011, for every dollar of telecommunications revenue earned, the average hotel spent $1.46. In other words, in-room telephone service now is an expense item, not a revenue generator.

Also, as U.S. communications service providers also have discovered, it now is Internet access that is driving revenues, not voice services. An uptick in telecommunications revenue at hotels surveyed by PKF Hospitality Research in 2011 and 2011 suggests Internet access now is lifting revenue.


Thursday, September 19, 2013

Microsoft Will Buy Your Old Tablets and Smartphones

A sure sign there is weak device demand for Surface. But the growing prevalence of such programs sponsored by mobile service providers and major retailers suggests demand is a bit of a problem for many retailers.
http://feedly.com/k/16c5rT0

"Mobile Mostly" Content Consumption Trend Grows

With the caveat that what people mean by “mobile” can vary, people in the U.S. market seem to be spending more time consuming content, where time spent with other forms of media is flat. If tablets are included in the “mobile” device category, the fact that 2013 tablet shipments have grown 83 percent, while PC shipments dropped 13 percent, is going to make a difference.

Mobile was the only media type to grow in total U.S. consumer minutes spent per day from 2010 to 2012, according to Business Insider.


Mobile content consumption clearly has grown over the last two years, with time spent using mobile devices for activities such as Internet and app use, gaming, music and other content more than doubling over the past two years.
In 2013, the amount of time U.S. consumers spend using mobile devices—excluding talk time—will grow 51.9 percent to an average 82 minutes per day, up from just 34 minutes in 2010, according to eMarketer.


Users spent an average of 93 minutes a day on the top mobile activities in the first quarter of 2013, compared to 77 minutes in the same quarter of 2012. That represents growth of about 20 percent a year.


The average consumer spends 40 minutes of their day playing a game on an app and 30 minutes using social media. Watching videos seems to occupy about 10 minutes of time each day.


And some content sites are seeing extremely-high rates of growth for “mobile-only” usage. Pinterest, for example, seems to see 40 percent of users accessing content only from a mobile. Pandora, likewise, seems mostly used on mobile devices.


Those trends match the overall growth of mobile Internet consumption, which is growing at faster rates every year since 2008.


Between 2010 and 2013, mobile content consumption  nearly doubled, for example.






Movie Revenue Model is Breaking

Sometimes the decline of a business model is historically inevitable even before the peak of revenues for the model.


Voice revenues for the U.S. telecom business peaked, historically, about 2000. Skype was launched in 2003. The Telecommunications Act of 1996, the biggest change in communications regulation in 60 years, occurred just before the Internet explosion.


DVD purchases and rentals likewise hit an inflection point about 2000. By about 2010, even Netflix was predicting the decline of the model.


Rentals from Redbox kiosks likewise seem to have passed an inflection point.


Some think the movie business is headed for a huge change as well, according to Adam Leipzig  Adam Leipzig, CEO of Entertainment Media Partners.


“Studios are incredibly profitable now, and studios will continue to be highly profitable for the next three to four years, largely because they have reduced the number of movies they make, and also because they are being much more conservative in the way they manage their finances,” said Leipzig. “In the future though, five or six years down the road, this cycle will come to an end.”


“The studio profitability will go down,” he argues. And content production will change. “I’d argue that the best writing and the best character development is generally happening on Web or TV series. I would include shows from Netflix, as well as cable networks.”


There is a reason. “Studio movies are big economic plays; most summer movies cost $200 million to make, and another $200 million to market,” says Leipzig.


So there is a tendency to “play it safe.” That tends to mean studios want franchises, and that means sequels. The value of a franchise is that it is easier to market. People already know what to expect from a particular movie that is a franchise.


Filmmaker Steven Spielberg says it's becoming harder and harder for even brand-name filmmakers to get their projects into movie theaters.


“The business model within film is broken,” says Amir Malin of Qualia Capital, a private-equity firm.


Between 2007 and 2011, pre-tax profits of the five studios controlled by large media conglomerates (Disney, Universal, Paramount, Twentieth Century Fox and Warner Bros) fell by around 40 percent, says Benjamin Swinburne of Morgan Stanley. 

Swinburne predicts the studios account for less than 10 percent of their parent companies’ profits today, and by 2020 their share will decline to only around five percent.


Some argue consumers are shifting towards in-home consumption, and away from out of home consumption. 

That is true, but even in-home consumption spending, in the U.S. market is flat, and down from a 2006 peak.

One might argue those trends augur well for independent producers and new types of outlets. One might also argue that the worsening economics of traditional studio-based movie making will shift attention and spending towards new methods.

That should favor outlets such as Netflix, at least some TV networks and independent producers. If these observers are correct, content innovation already is shifting away from the major studies and towards television-based networks and producers.

Apple Sticks to Strategy: No "Junk"

Apple long has had a "premium product" strategy, even if it occasionally has produced lower-cost versions of some products, such as the iPod. But the philosophy of "no junk" remains the watchword at Apple, according to CEO Tim Cook.

Does that mean Apple never will create a lower-cost iPhone? That might not be the relevant question. The bigger question is whether Apple ever will try to make devices at price points the Chinese mass market will buy. The answer to that seems an emphatic "no."

For better or worse, Apple simply does not presently see any reason to deviate from its strategy, and is willing to lose the smart phone operating system or device market share battles. 

Apple is banking on the smart phone market being different than the old PC market, where Apple never escaped a niche. If Apple is correct, the smart phone market will eventually shape up for Apple as being between the pattern of PCs and MP3 players.

Though it was a niche supplier in the PC market, and the dominant provider in the MP3 market, Apple's smart phone business will be somewhere in between. Apple won't dominate in terms of share, but Apple will be relevant. 



Alphabet Sees Significant AI Revenue Boost in Search and Google Cloud

Google CEO Sundar Pichai said its investment in AI is paying off in two ways: fueling search engagement and spurring cloud computing revenu...