Economic Growth So Sluggish that the Apple iPhone 5 Could Boost GDP

Sales of the new Apple iPhone could add between a quarter and a half of a percentage point to the annualized rate of economic growth in the fourth quarter, J.P. Morgan Chase & Co.'s chief U.S. economist Michael Feroli estimates. 

The forecasting firm Macroeconomic Advisers reduced its forecasts for economic growth to a 1.5 percent annual rate in the third-quarter and 1.4 percent in the fourth quarter. 

So it is that a single smart phone going on sale for the first time can move the needle. 

Europe Communications Gear Markets are Global Weak Spot

If you have been following 2012 communications service provider sales and revenue, you know it has not been a good year. That also is true of overall information technology sales.

Measured in local currencies to eliminate currency fluctuations, 2012 IT product growth will be  3.6 percent,  lower than Forrester Research's January 2012 prediction of 5.3 percent. 

Slower economic growth in the United States, Europe, China, and India, is the reason for the slower growth, says  Forrester Research

But Forrester Research also points out that the slowdown is concentrated in Europe, and notably,  and one technology product category: communications equipment. 

In local currency terms, the tech markets of the United States and Asia Pacific will grow by four percent to five percent, while emerging markets in Latin America and Eastern Europe, Middle East, and Africa will expand by over eight percent.

The weak spot will be Western and Central Europe, where the tech market will shrink by 2.5 percent. Software, IT consulting and systems integration services, and IT outsourcing will grow by four percent to five percent or more, and computer equipment by almost three percent.

But communications equipment purchases will decline by almost one percent. 

JP Morgan Raises Tablet Forecast, Lowers PC Forecast

JP Morgan has raised its forecast of tablet sales and revenue, while lowering sales and revenue forecasts for PCs. 

The revised 2012 tablet revenue estimate is $57.7 billion, where it was $52.8 billion previously. The revised tablet unit estimate is 118.5 million, compared to 106.8 million previously. 

The implied 2012 growth rates of revenue and unit estimates are 50.4 percent and 67.5 percent, versus 40.5 percent and 53.5 percent previously. 

JP Morgan also expects increasing pressures on pricing as tablet vendors test price elasticity. So JP Morgan also has revised its 2012 tablet average selling price to $487, down from the $495 previously expected. And JP Morgan admits the ASP reduction "may not be conservative enough," implying a belief that ASPs could drop more than that. 

None of those revisions will come as much of a surprise. Tablets are the new "hot" device in the consumer electronics business. Moreover, tablets are well suited to the growing "main" function of a digital appliance, namely content consumption. 

In past years, the demand for content consumption was clearest in the case of MP3 players. These days, the primacy of other forms of content consumption, which had been only latent when most people consumed such content on PCs, now increasingly is visible. 

As it turns out, for many people, the lead applications for an Internet-connected device revolve around content consumption, not content creation, as was the case for PCs. 

So do tablets "replace" PCs? Yes and no. Tablets are not substitutes for PCs where it comes to many forms of content creation. But tablets are useful and viable substitutes for the consumption related functions of a computing device connected to the Internet. 

89% of Mobile App Store Downloads are "Free"

Once upon a time, many thought mobile app stores would create a huge app sales business. It hasn't turned out that way. 

Free apps will account for 89 percent of total downloads in 2012, according to Gartner. Worldwide mobile app store downloads will surpass 45.6 billion in 2012, with free downloads accounting for 40.1 billion, and paid-for downloads totaling five billion.

In-app purchases, on the other hand, will drive 41 percent of app revenue in 2016. Gartner expects the number of downloads featuring in-app purchase will increase from 5 percent of total downloads in 2011 to 30 percent in 2016, and its contribution to the store revenue will increase from 10 to 41 percent in the same period. 

"In terms of the apps that consumers are buying, 90 percent of the paid-for downloads cost less than $3 each," said Sandy Shen, Gartner research director. "Apps between 99 cents and $2.99 will account for 87.5 percent of paid-for downloads in 2012, and 96 percent by 2016."

Gartner expects Apple's App Store to have more than 21 billion downloads in 2012, which is an increase of 74 percent over 2011. 

Global Mobile App Store Downloads, 2010-2016 (Millions)

	2011	2012	2013	2014	2015	2016
Free Downloads	22,044	40,599	73,280	119,842	188,946	287,933
Paid-for Downloads	2,893	5,018	8,142	11,853	16,430	21,672
Total Downloads	24,936	45,617	81,422	131,695	205,376	309,606
Free Downloads %	88.4%	89.0%	90.0%	91.0%	92.0%	93.0%

Source: Gartner (September 2012)

74% of U.S. Mobile Users 25 to 34 Have Smart Phones

U.S. smart phone penetration continued to grow in July 2012, with 55.5 percent of mobile subscribers in the U.S. now owning smartphones, according to Nielsen.  

This is a significant increase compared to July 2011 when only 41 percent of mobile subscribers owned smartphones. 

Overall, young adults are leading the growth in smart phone ownership in the U.S., with 74 percent of 25-34 year olds now owning smart phones smart phones, up from 59 percent in July 2011. 

Teenagers between 13 and 17 years old showed the most dramatic increases in smart phone adoption, with the majority of American teens (58 percent) owning a smart phone, compared to roughly a third (36 percent) of teens saying they owned a smart phone just a year ago.

What's Good for Apple Might be Doubly Good for Amazon

Many observers would note that Apple's registered iTunes users are a potential business asset. If so, Amazon is even better placed. Perhaps 31 percent of Amazon users have a credit cards on file with Amazon. 

In a Forrester survey of 4,650 US consumers conducted online in August 2012, 31 percent reported that they had a credit card on file with Amazon, compared with 18 percent that have one stored with Apple, and five percent with Google. 

Amazon and Apple approach the respective roles of content and devices in opposite ways. Apple merchandises content to sell devices, while Amazon merchandises devices to sell content, services and goods.

Amazon reports that in 2011, consumers that bought a Kindle read four times the books (print and digital) they did before they bought a Kindle; that's up from 2.8 times in 2008. 

Also, some 23 percent of consumers Forrester Research surveyed also said they'd be interested in purchasing an Amazon smart phone,  it were available.

60% of Viewed Online Video is "Long Form," Ooyala Video Index Indicates

Long-form video content such as movies, sports and TV shows accounted for more than 60 percent of the total time users spent watching video online in the second quarter, a study by Ooyala notes. The share of time tablet viewers spent watching long-form videos also grew 47 percent in a single quarter, Ooyala says. 

The Global Video Index, derived from the viewing trends of 200 million online viewers around the globe from April 1 through June 30, 2012, shows the lines between broadband and broadcast media continuing to blur as premium content shifts to a more mobile, multi-screen environment.

Long-form video running longer than 10 minutes represented more than half of all viewing for the first time in the second quarter of 2012. 

The growth of video consumption has been rapid. Tablet, mobile, connected TV video views doubled between the fourth quarter of 2011 and the third quarter of 2011, Ooyala says. 

Web Display Advertising Dropped 5.4% in 2nd Quarter 2012

Web display advertising declined in the second quarter of 2012 by 5.4 percent, Kantar Media says. The study did not track specific changes in advertising other than display formats, though. Search advertising and other "non-display" formats are not part of that specific finding. 

What the decline means is the issue. Some might speculate that mobile ads are leading to lower average selling prices. 

One can argue advertisers are shifting spending to non-display formats, or to TV or some other form of marketing. 

Whatever the reason, the declines are somewhat surprising. The continued weakness in print media is not surprising, nor is the growth of TV advertising. 

Sprint 4G LTE Coming to100 Additional Cities

Sprint announced today that its 4G LTE network build is under way in more than 100 additional cities within its existing nationwide 3G footprint. Some of the major metropolitan areas in which Sprint 4G LTE is expected to be available in the coming months are Boston; Charlotte, N.C.; Chicago; Indianapolis; Los Angeles; Memphis, Tenn.; Miami; Nashville, Tenn.; New Orleans; New York; Philadelphia; and Washington, D.C.,  Sprint says.

Broadband Connection Sharing Makes a Big Difference for HD Video Viewing Experience, Study Finds

After analyzing data from all its hosted video views in the United States over the course
of several weeks, Wistia found that about 18 percent of viewers cannot watch high definition video content without buffering. Wistia defines “HD capable” as a minimum of 2 Mbps per active user.

Wistia also gathered data from 25 companies and organizations including internet firms, universities, Fortune 500 companies, government agencies and technology companies.

Across these 25 organizations, the average percentage of non-HD capable views
was 25.6 percent. “In other words, a quarter of these viewers, some at Fortune
500 companies, could not watch streaming HD video,” Wistia says.

Wistia’s data on HD viewing capability at 100 hotels, ranging from national chains to luxury
establishments, indicates that 61 percent of the time, users could not view high definition video.

What is not clear is what percentage of the video views were attempted from mobile devices, on mobile networks, compared to fixed network connections.

The data does indicate that the degree of connection sharing makes a difference in user experience, whatever the aggregate total bandwidth at any location might be.

Can Wi-Fi Compete with Mobile? How Much?

Whether Wi-Fi can be a functional substitute for mobility networks was a subject of serious contemplation a decade and a half ago. The speculation might rise again. Cable operators in the U.S. market are cooperating to build bigger Wi-Fi networks that customers of any member cable TV company can use, out of market. 

Broadcom expects most major U.S. cable operators will have vast networks of public Wi-Fi hotspots activated in their respective subscribers’ homes in 12 to 18 months, according to Jay Kirchoff, Broadcom VP.

As a simple historical matter, hopes that municipal Wi-Fi networks really could provide a functional substitute for mobile service proved to be false. 

But the original thesis was based on an assumption that phones could use a municipal or commercial Wi-Fi network as a network substitute for mobile networks. 

It is at least possible that new lead applications and devices, especially tablets, plus a greater range of smart phones that can use a Wi-Fi connection, could create at least some new deployment scenarios.

Tablets, unlike mobile phones, mostly are used in "untethered" mode, not "mobile" mode. So it is at least possible that untethered applications and device usage modes could create a different and viable role for "public" Wi-Fi networks. 

In many ways, a new lead device, the tablet, could underpin new rationales for public Wi-Fi. 

Pandora Faces Monetization Issues

Pandora faces a scale problem very similar to that of Free Mobile in France, which is disrupting the French mobile market by attacking retail prices, but has to keep scaling paying customers at a high rate to reach the breakeven point. 

Where Free Mobile's problem is the rate at which is can keep growing its subscriber base, Pandora's problem is to scale ad revenue to keep pace with its rate of subscriber additions. 

Pandora already is probably one of the five biggest mobile ad businesses  in the United States, some would argue. 

Pandora mobile ad revenue has increased by 86 percent to $60 million in its fiscal second quarter of  2013. Total revenues were $101 million. Pandora also saw a 112 percent increase in the number of ads delivered. 

But  the average price per ad declined 27 percent. Both Pandora and Free Mobile have common business problems, namely the task of reaching scale in its operations and, at the same time, matching that scale to revenue growth and operating costs. 

What Apple and Netflix now Have in Common

With the news (or rumors) that Apple is going to launch its own streaming music service to rival Pandora, Apple now joins Netflix in contemplating a major expansion, possibly a repositioning, of core content services.  

The issue is the difference between real time services and pay per view. There is a market for non-real time, pre-recorded content. That's what CDs, pay per view and movies on demand are all about. But that is only part of the video business. 

Perhaps the bigger part of the business is "linear" or "real time" content, including radio, sports content, news and other real time content. 

That's why the recent Netflix moves into original "TV series" content are important. Up to this point, Netflix has been a good vehicle for enjoying pre-recorded content. In the future, Netflix will start to emulate the value of a TV network, offering a mix of pre-recorded and ultimately "live" programming. 

For similar reasons, Apple wants to sell "radio" or streaming experiences, not just pay per view or pay per listen or a different way to buy pre-recorded content. 

Video Production in the Cloud

Aframe is a cloud-based solution for video creators. The potential implications for service providers are fairly clear. Cloud-based solutions require Internet connectivity that is fast enough to compensate for the lack of local storage and processing.

Also, at least in principle, there are new requirements for cloud storage and processing services.

The cloud-based video asset management system was built with production people in mind, especially the ability to share content straight from the camera. 

Challenges in this field include moving huge amounts of data and so Aframe has worked on storage solutions so that files can be saved in the format they are created in and without compression.

On the other hand, the solution also suggests that solutions for the movie production ecosystem require universal connectivity and an understanding of business requirements, more than any specific "tweaking" of connectivity services as such. 

J.D. Power Confirms What You Thought: People Love Their iPhones