Still Time to "Harvest" Video Revenues

The number of U.S. telco video subscribers will rise from 8.8 million in 2011 to 18.6 million in 2017, according to Parks Associates now forecasts. That gain by telcos will come from share presently held by cable TV customers and satellite providers.

Satellite's share of the subscription video  market will drop to 30 percent by 2017, while cable's share will fall to 52 percent, while telco IPTV share will rise to 18 percent.

Cable video subscribers will decline from 60.7 million in 2011 to 56.1 million in 2017.

Those figures show the difference between incumbent and attacking providers in a mature market. Under those conditions, “harvesting” is a typical business strategy for leading contestants in declining markets. 

When executives believer there is no real opportunity to reverse a product slide into the declining side of its product life cycle, it makes sense to harvest cash, but not to invest too much to “save” the business, or turn it around, as the judgment simply is that the business is mature and inevitably will decline.

It does make sense to invest only enough to slow the rate of decline, of course. Attackers, on the other hand, can do nicely for a while simply by taking market share.

Video is largely becoming a harvesting exercise for cable operators, just as long distance calling and legacy voice are examples of “harvesting” by telcos. 

As the attacker in voice and business services, cable operators still can grow revenue in the near term, as telcos can grow revenue in video. Over the longer term, though, even attackers can only achieve so much, in a maturing market. 

For cable, consumer voice revenues have ceased to be much of a growth business, which explains the shift to business customers. Telcos and satellite video providers still have room to continue taking video share, though. Sooner or later, that might run into resistance, especially if over the top video, featuring the same content now part of video subscriptions, takes off. 

A new ABI Research study suggests that nearly 20 percent of online video consumers consider online video as a replacement for entertainment video subscriptions. That obviously represents “significant risk” to the traditional video entertainment business.

ABI Research suggests the magnitude of potential revenue loss could range as high as $16.8 billion in the U.S. market, for example. Telcos won’t face those issues, as they are predicted by virtually every study to continue taking market share, as cable TV operators and satellite providers continue to lose market share over time.

But at least one analysis has satellite providers overtaking cable TV providers in revenue in 2017.

So the near term trends might not be “linear,” as some forecasters still project cable TV operator and satellite provider  video revenues growing for a period, Digital TV Research forecasts.

But a change that shaves as much as $17 billion from U.S. providers would seem to be a longer-term danger, as ABI Research also suggests U.S. video entertainment penetration is dropping at a rate of about 0.5 percent per year through 2017.

That arguably is an optimistic scenario for cable TV providers. Ignoring changes of market share between the contestants, a loss of perhaps half a percent a year of subscribers won’t make a large dent in a revenue stream that collectively represents more than $90 billion in annual revenue.

If the number of subscribers were directly related to the amount of revenue, then a half percent a year decline would represent perhaps $450 million in lost revenue each year. At such rates, it would take decades before service providers lost $17 billion.

Whatever share shift one expects, the game now for video service providers is to “take or protect” market share.

North America pay TV revenues ($ mil.)

Why Google, Facebook, Apple "Mobile Service Provider" Rumors Never Cease

From time to time there are new rumors that Facebook, Apple or Google "might" become mobile service providers, using a mobile virtual network operator model. Some think it doesn't make sense.

But the rationale for being a mobile service provider is a bit more complicated than it used to be. For starters, "voice" revenue is not the only reason for doing so. These days, Internet access makes almost as much sense.

Also, for application providers with other revenue models, becoming a service provider would allow creation of packages and plans that cold be much more differentiated than currently are available from the leading mobile service providers.

But the lure of revenue might still be important. In the global telecom business, there have been complaints for years from telecom executives that third party app providers build businesses on the back of telco-provided access services, but that the access providers do not share in the revenue created.

In a potentially new development, some application providers might be taking a similar view, sensing that they create huge value for telcos, but do not participate in the access revenue stream, for example.

Strand Consult now speculates on whether Facebook, for example, is willing to look beyond advertising as a source of revenue, and whether Facebook would become a mobile virtual network operator, as a way to create a new revenue stream, as well as recapture some of the value it believes it is creating in the ecosystem.

As some have speculated about the value of Facebook creating its own branded smart phone, Strand Consult now speculates about the value of Facebook becoming a service provider.

Becoming an “MVNO is a logical step for Facebook the world’s largest communication platform,” Strand Consult analysts argue.

One billion users already consider Facebook as their de facto telephone book for friends and family and use the platform for communicating by SMS, text, image and video, the firm argues.

Aside from its huge user base, Facebook has credit card credentials on file already for millions of its users, many of whom purchase premium games, driving one sixth of Facebook’s revenue.  

How much could Facebook earn as an MVNO? Facebook currently earns annual revenue per user of $4.  An MNVO can earn between $10 a month and $50 a month per customer with an operating margin between 20 percent and 25 percent.

Facebook arguably is in no mood to consider such diversions. But Google or Apple, both with key application and gadget businesses, might have more motivation to do so.

Smart Phones and Tablets Converging?

In 2011, the majority of all mobile phone owners consumed mobile media on their smart phones and tablet devices, marking an important milestone in the evolution of mobile from being a communication device to a content consumption tool.

Smart phones also have subsumed the MP3 player, to a great extent. Smart phones likewise have generally replaced cameras, alarm clocks and GPS units.

You might also wonder if the other trend could materialize, namely the tablet becoming a replacement for a smart phone. That seems generally unlikely for the 10-inch version of the tablet.

But with tablets now available in seven-inch screen form factors, with some smart phones pushing up to five inches screen size, there is greater potential for a tablet to become a replacement for a smart phone. After all, the form factor difference is between five inches and seven inches.

More important is the relative importance of “voice” and “content consumption” as computing appliance functions. Virtually all computing appliances now are becoming ways people interact with, and consume, all sorts of media and content, even if the smart phone also does duty as the “voice” appliance.

In fact, smart phone and PC user behavior really is converging. In October 2012 about 55 percent of U.S. mobile subscribers used  downloaded apps, while 53 percent used a browser. About 39 percent used social networking apps, 34 percent played games and 29 percent listened to music, according to comScore. That isn’t so different from what most people do on PCs, to say nothing of tablets.

In December 2011, 8.2 percent of all web page views occurred on devices other than PCs, for example, with mobile devices accounting for 5.2 percent of traffic, tablets driving 2.5 percent, according to the latest Nielsen Cross-Platform Report.

In 2011, the majority of all mobile phone owners consumed mobile media on their smart phones and tablet devices, marking an important milestone in the evolution of mobile from primarily a
communication device to a content consumption tool.

Mobile Content Usage 3 Month Avg. Ending Oct. 2012 vs. 3 Month Avg. Ending Jul. 2012 Total U.S. Mobile Subscribers (Smartphone & Non-Smartphone) Ages 13+
	Share (%) of Mobile Subscribers
	Jul-12	Oct-12	Point Change
Total Mobile Subscribers	100.0%	100.0%	N/A
Sent text message to another phone	75.6%	75.9%	0.3
Used downloaded apps	52.6%	54.5%	1.9
Used browser	51.2%	52.7%	1.5
Accessed social networking site or blog	37.9%	39.4%	1.5
Played Games	33.8%	34.1%	0.3
Listened to music on mobile phone	28.3%	28.7%	0.4

Of course, the application convergence also goes the other way: smart phones increasingly are used as a primary content consumption screen.

A study by Orange shows a  stark contrast in mobile media habits between teenagers and adults in the U.K. market, for example.

For teenagers, the mobile phone is the primary screen, for the first time, not the TV or PC.

Also, adults are using multiple screens more interchangeably than ever before, choosing the most suitable screen for any particular situation, Orange says.

In the United Kingdom, 83 percent of teenagers have a smart phone and 95 percent have one in Spain. In addition, 92 percent of teenagers in the United Kingdom say mobile is a “way to always have a media device at hand” and 55 per cent of teenagers in the UK say that they prefer their mobile over other screens.

Consumers also are increasingly using their mobile or tablet to replicate the same experience on their PC, about  62 percent of consumers in the United Kingdom agree. Consumers also are multitasking. Some 90 percent of consumers access the internet at the same time as watching TV,  in the United Kingdom.

At the same time as interchangeable usage is occurring, larger screens on smart phones are making accessing multimedia easier, and “smaller” sized tablets are increasing their portability. In Spain, 16 percent of tablet owners also own the more portable Samsung Galaxy Tab, for example.

The percentage of people primarily accessing mobile media ‘out and about’ on both their mobile and tablet has significantly increased across all markets.

In the United Kingdom 58 percent of respondents say they use their devices to access content and media while out and about.

Tablet use to access content and media “out and about” has grown from 11 percent of users in 2011 to 21 percent in 2012 in the United Kingdom.


And though some would say tablets are not a substitute for a PC, about 75 percent of tablet media users want to “find the same things on their tablet as on their PC,” the study also found. That doesn’t mean people believe they can “work” on a tablet in the same way as on a PC.

But where it comes to content and information, they do expect they will be able to consume all the same content they would expect to get on a PC.

One of Google’s studies of tablet use over a two-week period, which had users recording every occasion that they used their tablet, shows that tablets really are not PCs, any more than smart phones are used in the same way that PCs are used.

Most consumers use their tablets for fun, entertainment and relaxation while they use their desktop computer or laptop for work, Google User Experience Researchers Jenny Gove and John Webb say. About 91 percent of the time that people spend on their tablet devices is for personal rather than work related activities.

And, as it turns out, when a consumer gets a tablet,  they quickly migrate many of their entertainment activities from laptops and smart phones to this new device.

The most frequent tablet activities are checking email, playing games and social networking. The study also found that people are doing more activities in shorter bursts on weekdays (social networking, email) while engaging in longer usage sessions on weekends (watching videos/TV/movies).

Tablets are multi-tasking devices with at least 42 percent of activities occurring while doing another task or engaging with another entertainment medium. Tablets aren’t PCs

As it turns out, lots of things people can do on PCs don’t “need” to be done on PCs. Content consumption, email and other communications actually represent most of what many business users really “have to do” on a PC.

Also, tablets are more accurately described as “untethered” devices than “mobile” devices, to the extent that tablets primarily are used at home. Unlike smart phones that go everywhere and laptops that travel between work and home, few consumers take their tablets with them when they leave the house.

That shipments of tablets are expected to grow from 72.7 million units in 2011 to 383.3 million units by 2017, according to NPD, would not surprise many observers.

Growth in emerging markets, expected to account for up to 46 percent of worldwide shipments by 2017, an increase from the 36 percent share in 2011, might be more surprising.

The tablet forecast also illustrates an important change in connected appliance trends. In the past, “PCs” have been one category of appliances, while MP-3 players, phones and digital organizers, game devices, cameras and e-reading devices have been distinctly different categories.

These days, many of those devices have overlapping functions. Taken as a whole, the changes suggest the crucial role “content consumption” now plays as a lead application for most devices. Though PCs, cameras and organizers still largely have “work or business” use cases, virtually all the other devices are oriented around content consumption.

It's Really Hard to Stand Out in a Market

A study of the customer experience of mobile apps and websites of 17 major financial services companies shows little differentiation, Foresee Results says. That shouldn't really be too surprising. It is hard, in any market, to truly create exceptional, unusual, unique products and experiences. 

Only credit unions, measured in aggregate, meet the threshold for excellence with a score 80 on the 100-point scale of the ForeSee Mobile Satisfaction Index. Of course, in fairness, it is arguably fairly hard to differentiate a banking app. 


ForeSee’s research shows that apps provide a superior experience to mobile websites and may be the key to competitive differentiation and growth. However, all companies measured have a ways to go to provide a compelling mobile experience: traditional websites (as experienced on personal computers) still provide the best customer experience for financial services companies.

Thus far, there is little differentiation between competitors, since satisfaction with all measured companies’ mobile experiences range between 73 and 79. A full set of scores is below:

Cable's "Mobile" Strategy is Mostly "Untethered"

Time Warner Cable is a partner with Comcast, Cablevision, Cox Communications and Bright House Networks in a public hotspot network of about 50,000 locations, and now is adding WeFi service as well. Time Warner invested in WeFi early in 2012. 

Though cable operators have not been able to really figure out how to create a big mobile communications business, the current effort aims to extend use of fixed connections inside and outside the Time Warner network footprint. 

Untethered communications, inside or outside the network footprint, is part of the strategy. In fact, in many cases a mobile phone uses a Wi-Fi connection more than the mobile network.

Big Data Should be About "People"

Big data can be an important tool for understanding and changing the world. 

How Are People Using Tablets?

"Post-PC" is Only Partly About "Devices"

Most would credit Steve Jobs, former Apple CEO, for popularizing the phrase "post-PC." Precisely what that means will continue to be debated for at least a while. But most would probably agree that the phrase suggests a growing use of computing appliances other than a PC, and reliance on cloud-based apps and services more than locally-resident software. 

On the other hand, post-PC also can mean that many different appliances might converge on a common operating system core and end user look and feel. Consider Windows 8 and Windows Phone 8. 

Microsoft wants to unify Windows Phone devices, Windows 8 tablets and PCs, and its Xbox game console,  PCWorld argues. 

Some of us would argue it is nearly impossible to separate mobility (with the key location awareness) from cloud computing, though. Others might that is part of a growing shift to "ubiquitous" computing as well, where computing is not a "destination" activity tied to a desk.

Part of the post-PC reality is that the cloud increasingly provides storage and processing for a wide range of appliances that can be highly distributed and much cheaper than PC appliances have been in the past. 

It also is true that what people want to do with computers has changed. In October 2012 about 55 percent of U.S. mobile subscribers used  downloaded apps,  while 53 percent used a browser. About 39 percent used social networking apps, 34 percent played games and 29 percent listened to music, according to comScore .

None of that would surprise much of anybody. What might be more unexpected is that consumption profiles of PC and mobile applications is so similar.

In 2011, the majority of all mobile phone owners consumed mobile media on their smart phones and tablet devices, marking an important milestone in the evolution of mobile from primarily a communication device to a content consumption tool.

In December 2011, 8.2 percent of all web page views occurred on devices other than PCs, for example, with mobile devices accounting for 5.2 percent of traffic, tablets driving 2.5 percent, according to the latest Nielsen Cross-Platform Report.

One of Google’s studies of tablet use over a two-week period, which had users recording every occasion that they used their tablet, shows that tablets really are not PCs, any more than smart phones are used in the same way that PCs are used.

Most consumers use their tablets for fun, entertainment and relaxation while they use their desktop computer or laptop for work, Google User Experience Researchers Jenny Gove and John Webb say. About 91 percent of the time that people spend on their tablet devices is for personal rather than work related activities.

And, as it turns out, when a consumer gets a tablet,  they quickly migrate many of their entertainment activities from laptops and smart phones to this new device.

The most frequent tablet activities are checking email, playing games and social networking. The study also found that people are doing more activities in shorter bursts on weekdays (social networking, email) while engaging in longer usage sessions on weekends (watching videos/TV/movies).

Tablets are multi-tasking devices with at least 42 percent of activities occurring while doing another task or engaging with another entertainment medium. Tablets aren’t PCs

As it turns out, lots of things people can do on PCs don’t “need” to be done on PCs. Content consumption, email and other communications actually represent most of what many business users really “have to do” on a PC.

So one reason we are in a "post-PC" era is that content consumption now has become perhaps the most salient activity people want to engage in, on a computing appliance. Diverse screen form factors are important. Cloud platforms are critical. Mobile Internet access is key. 

But what people want to do on a "computer" is the foundation. In an era where content consumption is paramount, a PC is not always the "right" or "preferred" or "only" appliance.

Why Governments Should Not Control the Internet

How hard is it to disconnect a country from the Internet, really? Not so hard, in many countries, says Renesys. 

"In some countries, international access to data and telecommunications services is heavily regulated" and "there may be only one or two companies who hold official licenses to carry voice and Internet traffic to and from the outside world, and they are required by law to mediate access for everyone else," Renesys says.

"Under those circumstances, it's almost trivial for a government to issue an order that would take down the Internet,' Renesys says. 

Unintended Consequences of Regulator Policy Decisions

Telecom policy makers always face tough choices when designing national communications policies. Because “for every public policy there is a corresponding private interest,” no single set of policies will universally be seen as “fair.” What helps big carriers often hurts smaller carriers. What favors mobile operators can disadvantage fixed network providers.

And, even where rules only affect a single provider, such as LightSquared or Dish Network, the affected providers might not think government rules are especially fair. And there always is a risk of unintended consequences, even when a policy is well intentioned.

Something like that, with price implications for lighter mobile data users, arguably has happened as an unintended result of an apparently unrelated decsion by the Federal Communications Commission regarding Verizon’s purchase of 700-MHz spectrum.

The FCC decided that Verizon was violating the “open access” rules of the 700 MHz spectrum licenses it purchased in 2008 by charging customers an additional $20 per month to tether their smartphones to other devices.

Verizon paid the fine and allowed tethering on all new data plans. Perhaps it is not a major issue, but one result of that ruling is that Verizon Wireless essentially has abandoned the “light user” part of the postpaid mobile broadband market, according to the Technology Policy Institute.

Basically, Verizon and T-Mobile USA offered lighter users the more-expensive data plans, before the decision. Afterwards, Verizon became the highest-priced alternative for light data users.

You might argue that the changes are completely coincidental. You might argue the changes do not reshape the market. 

But it is possible to argue that a decision ostensibly related to “open access” caused the leading mobile service provider to change its retail packaging in ways that made it the sole “high price” provider in the market where it had been within $5 to $10 a month of all the other leading providers. 

That's an unintended consequence, you might argue.

Search Can Predict Smart Phone Launch Success

Google says search predicts smart phone sales with over 90 percent accuracy.

In its "2012 Smartphone Launch Predictor" study, Google found that an extra 1,000 news stories in the weeks before launch will likely lead to a nine percent boost in smartphone sales.

About 52 percent of purchase-related searches occur before launch (and over one third of general smartphone searches).

An extra 25,000 mobile searches will likely increase smartphone sales 17 percent. One month after launch, those searches boost sales 20 percent.

Tablets a Nightmare for Microsoft?

Are tablets potentially a nightmare for Microsoft and other leaders in the PC market? Some think that could happen. The indicators include a shift of buyer spending towards tablets, and away from PCs.

At work, there is a trend of workers substituting tablets, smart phones and Apple PCs for Windows machines. Office suites can be sourced online, at free or low costs. Developer attention is shifting to iOS and Android.

And then there are the questions about Windows 8 and Windows Phone. Those fears might be overblown. But the data points seem to suggest there is legitimate danger. We will know more as Windows 8 rolls out, and as Windows Phone efforts intensify in 2013. 

Digital Wallet Value Proposition Might be Clearer for Online Payments

New markets often do not develop as proponents originally envisioned, at least in part because end users and customers often decide that the value represented by an innovation is different than what was intended by the developers. At least where it comes to products or services they never have seen before, people are unpredictable. 

That might also be true for "mobile wallets" and "digital wallets," which generally are seen as innovations for retail checkout and shopping. But it might turn out that people find more value for online shopping and checkout. 

Today’s consumer types in an average of 44 fields when shopping online, and V.me gets you down to five or six, Visa says. 

Smart Phone Becomes “Primary” Screen for Teenagers, for First Time

Once upon a time, the movie theater was the primary content consumption screen, followed by the television. These days, a smart phone, tablet or PC increasingly is likely to have become the primary media consumption screen for a significant percentage of users, a study by Orange suggests.

The “Orange Exposure 2012/2013” study shows a  stark contrast in mobile media habits between teenagers and adults, for example.

For teenagers, the mobile phone is the primary screen, for the first time, not the TV or PC.

Also, adults are using multiple screens more interchangeably than ever before, choosing the most suitable screen for any particular situation, Orange says.

In the United Kingdom, 83 percent of teenagers have a smart phone and 95 percent have one in Spain. In addition, 92 percent of teenagers in the United Kingdom say mobile is a “way to always have a media device at hand” and 55 per cent of teenagers in the UK say that they prefer their mobile over other screens.

Consumers also are increasingly using their mobile or tablet to replicate the same experience on their PC, about  62 percent of consumers in the United Kingdom agree. Consumers also are multitasking. Some 90 percent of consumers access the internet at the same time as watching TV,  in the United Kingdom. 

es the tablet device is designed to be used as a content consumption device.

At the same time as interchangeable usage is occurring, larger screens on smart phones are making accessing multimedia easier, and “smaller” sized tablets are increasing their portability. In Spain, 16 percent of tablet owners also own the more portable Samsung Galaxy Tab, for example.

The percentage of people primarily accessing mobile media ‘out and about’ on both their mobile and tablet has significantly increased across all markets.

In the United Kingdom 58 percent of respondents say they use their devices to access content and media while out and about.

Tablet use to access content and media “out and about” has grown from 11 percent of users in 2011 to 21 percent in 2012 in the United Kingdom.

And though some would say tablets are not a substitute for a PC, about 75 percent of tablet media users want to “find the same things on their tablet as on their PC,” the study also found. That doesn’t mean people believe they can “work” on a tablet in the same way as on a PC.

But where it comes to content and information, they do expect they will be able to consume all the same content they would expect to get on a PC.

Tablet devices arguably also are used as commerce platforms. Some 62 percent of tablet users have used their tablet to pay, redeem or reserve something over the last six months.  

Some 58 percent of tablet users paid for something online. The point is that tablets and smart phones are changing user behavior.

Freemium Apps Grow Google Play Revenue 350% in 2012

Freemium app revenues in both iOS and Google Play stores have, over the last two years,  more than quadrupled, for both Google Play and the Apple Store. 

In 2012, global "freemium" app revenues on Google Play have grown 3.5 times over 2011, App Annie says, Those revenues include content or virtual goods sales inside the free to use apps and advertising. 

Premium revenues (paid apps)  for both app stores remained relatively flat in 2011 and 2012. 

Click to enlarge