Sunday, November 6, 2011

"Technology" Alone Will Not Disrupt Video

There is a recurrent theme among technologists that technology itself can "disrupt" the video entertainment business. Sometimes it is peer-to-peer delivery, at other times mobility, user-generated video, or really-fast broadband or local storage or sometimes even search that is believed to set the stage for a disruption of the video entertainment business. 

Those viewpoints miss the mark, for a simple reason. The value people seek in professionally-created video and movies is hard to replicate on an amateur basis. And the mere existence of an additional distribution channel (P2P, mobile, Internet) can be helpful, but only when the content owners agree to license the content people want to watch. 

Skype co-founder and Atomico investor Niklas Zennstrom now says "peer to peer is not disruptive today." One might argue it was not necessarily disruptive in the past, either. What was "disruptive" was the "stealing and sharing" of valuable content, not the method of sharing. Take away lawful access and technology by itself cannot disrupt anything.

In fact, that is not likely to be the case even when content owners decide to cooperate with new technology platforms to a greater extent. Content owners will not "disrupt" themselves in the sense of destroying the value of the businesses they now run. 

They are more likely to experiment with packaging and retail pricing in ways that augment, rather than disrupt, the existing order of things. For attackers to succeed, they will still need access to the content people want to watch.

What would disrupt the business, though, is a shift in end user demand. Lack of demand for the product (video cord cutting, for example) would open the way for disruption, since declining revenues would trigger more-aggressive moves by the content industry itself. But new technology, by itself, will not disrupt the video entertainment business, unless by "disruption" one only means the adoption of new channels that displace older channels. 

Typically, that is not what one means when using the term "disruption," which implies creation of entirely new "value" and a shift of revenues, often because some new technology is available. That often is the case. 

This illustration from Wikipedia shows how a technology can "disrupt" older ways of doing things, for example. 



InnovationDisrupted marketNotes
8 inch floppy disk drive14 inch floppy disk driveThe floppy disk drive market has had unusually large changes in market share over the past fifty years. According to Clayton M. Christensen's research, the cause of this instability was a repeating pattern of disruptive innovations.[11] For example, in 1981, the old 8 inch drives (used in mini computers) were "vastly superior" to the new 5.25 inch drives (used in desktop computers).[8] However, 8 inch drives were not affordable for the new desktop machines. The simple 5.25 inch drive, assembled from technologically inferior "off-the-shelf" components,[8] was an "innovation" only in the sense that it was new. However, as this market grew and the drives improved, the companies that manufactured them eventually triumphed while many of the existing manufacturers of eight inch drives fell behind.[11]
5.25 inch floppy disk drive8 inch floppy disk drive
3.5 inch floppy disk drive5.25 inch floppy disk drive
CDs and USB flash drives3.5 inch floppy disk drive
DownloadableDigital MediaCDsDVDsIn the 1990s, the music industry phased out the single. This left consumers with no means to purchase individual songs. This market was filled by peer-to-peer file sharing technologies, which were initially free, and then by online retailers such as the iTunes music store and Amazon.com. This low end disruption eventually undermined the sales of physical, high-cost CDs.[12]
HydraulicexcavatorsCable-operated excavatorsHydraulic excavators were clearly innovative at the time of introduction but they gain widespread use only decades after. However, cable-operated excavators are still used in some cases, mainly for large excavations.[13]
Mini steel millsVertically integrated steel millsBy using mostly locally available scrap and power sources these mills can be cost effective even though not large.[14]
MinicomputersMainframesMinicomputers were originally presented as an inexpensive alternative to mainframes and mainframe manufacturers did not consider them a serious threat in their market. Eventually, the market for minicomputers became much larger than the market for mainframes. Similarly, the market for main frames and mini-computers was seriously disrupted by personal computers. Although they were not at all competitive at the time of their introduction in the 1970s, by the mid 1980s they had improved exponentially and could compete directly with the more expensive machines.[citation needed]
Personal computersMinicomputers,Workstations.Word processors,Lisp machines
Desktop publishingTraditionalpublishingEarly desktop-publishing systems could not match high-end professional systems in either features or quality. Nevertheless, they lowered the cost of entry to the publishing business, and economies of scale eventually enabled them to match, and then surpass, the functionality of the older dedicated publishing systems.[citation needed]
Computer printersOffset printingOffset printing has a high overhead cost, but very low unit cost compared to computer printers, and superior quality. But as printers, especially laser printers, have improved in speed and quality, they have become increasingly useful for creating documents in limited issues.[citation needed]
Digital photographyChemical photographyEarly digital cameras suffered from low picture quality and resolution and long shutter lag. Quality and resolution are no longer major issues and shutter lag is much less than it used to be. The convenience of small memory cards and portable hard drives that hold hundreds or thousands of pictures, as well as the lack of the need to develop these pictures, also helped. Digital cameras have a high power consumption (but several lightweight battery packs can provide enough power for thousands of pictures). Cameras for classic photography are stand-alone devices. In the same manner, high-resolution digital video recording has replacedfilm stock, except for high-budget motion pictures.[citation needed]
High speedCMOS video sensorsPhotographic filmWhen first introduced, high speed CMOS sensors were less sensitive, had lower resolution, and cameras based on them had less duration (record time). The advantage of rapid setup time, editing in the camera, and nearly-instantaneous review quickly eliminated 16 mm high speed film systems. CMOS-based cameras also require less power (single phase 110 V AC and a few amps for CMOS, vs. 240 V single- or three-phase at 20-50 A for film cameras). Continuing advances have overtaken 35 mm film and are challenging 70 mm film applications.[citation needed]
SteamshipsSailing shipsThe first steamships were deployed on inland waters where sailing ships were less effective, instead of on the higher profit margin seagoing routes. Hence steamships originally only competed in traditional shipping lines' "worst" markets.[citation needed]
TelephonesTelegraphyWhen Western Union infamously declined to purchase Alexander Graham Bell's telephone patents for $100,000, their highest-profit market was long-distance telegraphy. Telephones were only useful for very local calls. Short-distance telegraphy barely existed as a market segment, which explains Western Union's decision.[citation needed]
AutomobilesRail transportAt the beginning of the 20th century, rail (including streetcars) was the fastest and most cost-efficient means of land transportation for goods and passengers in industrialized countries. The first cars, buses and trucks were used for local transportation in suburban areas, where they often replaced streetcars and industrial tracks. As highways expanded, medium- and later long-distance transports were relocated to road traffic, and some railways closed down. As rail traffic has a lower ton-kilometer cost, but a higher investment and operating cost than road traffic, rail is still preferred for large-scale bulk cargo (such as minerals). Since rail has always been faster than contemporary road vehicles[citation needed], it is viable for passengers in populated regions like Western Europe, south and east Asia and the Northeast Corridor. When urban density increases, rail systems often become more attractive and make a comeback.[citation needed]
Private jetSupersonic transportThe Concorde aircraft has so far been the only supersonic airliner in extensive commercial traffic. However, it catered to a small customer segment, which could later afford small private sub-sonic jets. The loss of speed was compensated by flexibility and a more direct routing (i.e. no need to go through a hub). Supersonic flight is also banned above inhabited land, due to sonic booms. The Concorde service was withdrawn in 2003.[citation needed]
PlasticMetal, wood, glass etc.Bakelite and other early plastics had very limited use - their main advantages were electric insulation and low cost. New forms had advantages such as transparency, elasticity and combustibility. In the early 21st century, plastics can be used for nearly all household items previously made of metal, wood and glass.[citation needed]
Light-emitting diodesLight bulbsA LED is significantly smaller and less power-consuming than a light bulb. The first optical LEDs were weak, and only useful as indicator lights. Later models could be used for indoor lighting, and future ones will probably be strong enough to serve as street lights. Classical light bulbs for lower light indoor use remain, possible mainly[dubious ] because of sentimental and aesthetic value, although some lamps using other technologies have designs resembling light bulbs. Incandescent light bulbs are being phased out in many countries.[citation needed]
Digital synthesizerElectronic organ andpianoSynthesizers were initially low-cost, low-weight alternatives to electronic organs and acoustic pianos. Today's synthesizers feature many automated functions and have replaced them for home and hobby users.[citation needed]
Mobile TelephonyMobile Discount OperatorsMobile Discount / No Frills Operators (MDOs aka. MVNOs) first focused on a low-distribution-cost-through-internet sales model. In later times, innovations like low-priced mobile-internet tariffs were brought to market. This tripped the development of a new discount category in the market which was later entered by the large discount retail chains with own branded offerings leveraging their distribution power in the lower tier of the market.[citation needed]
LCDCRTThe first liquid crystal displays (LCD) were monochromatic and had low resolution. They were used in watches and other handheld devices, but during the early 2000s these (and other planar technologies) largely replaced the dominant cathode ray tube (CRT) technology for computer displays and television sets, although CRT technologies have improved with advances like true-flat panels and digital controls only recently.[citation needed]
Digital calculatorMechanical calculatorFacit AB used to dominate the European market for calculators, but did not adapt digital technology, and failed to compete with digital competitors.[15]
GPS navigation devicenavigationalMapThe old navigational system using maps, needed knowledge of the use and posession of a sextant, a clock and an astronomical almanac known as "Ephemeris". A clear sky was paramount for the calculating of an exact position. GPS can show the exact position, either on a projected map or in degrees N/S/E/W (low end models), in any weather.
UltrasoundRadiography(X-ray imaging)Ultrasound technology is disruptive relative to X-ray imaging. Ultrasound was a new-market disruption. None of the X-ray companies participated in ultrasound until they acquired major ultrasound equipment companies. [16]
WikipediaEncyclopediasThe paper version of encyclopedias have been outcompeted by Wikipedia. Although one can argue about the validity of all the information on Wikipedia, the sales numbers of encyclopedias confim that Wikipedia has taken over the encyclopedias market.[citation needed]

But those examples also suggest why a disruption of the video entertainment business is going to be different. In none of those cited examples was there a controlling "gatekeeper" whose own behavior could cause a newer technology to "fail." People were free to adopt the substitute product in place of the older product.


In the case of video entertainment, there is no viable "substitute product." What people want, and will continue to want, is the older product of professionally-created video. The only thing technology might change are the distribution channels. The content owners themselves are gatekeepers who can prevent any substantive change in access, pricing or packaging. And that limits the amount of disruption any underlying technology change can cause, in and of itself. 

Saturday, November 5, 2011

Minimum Viable Product Development: Steve Jobs Didn't Do It

As popular as the approach seems to be, one wonders whether Steve Jobs, former Apple CEO, ever bothered with development using the "minimum viable product" approach. 


One can safely assume he did not, as minimum viable product development requires some amount of end user feedback about the prototype.

The whole point of designing using this approach is that a development team collects the maximum amount of validated learning about customers with the least effort. Jobs never seemed to think that consumers could provide much valuable input about products that solved problems they didn't know they had.


In this, as in other fundamental ways, Steve Jobs broke the rules. Keep in mind that the point of a minimum viable product approach is not to create a "minimum" commercial product, but rather to quickly test a concept with real users, at low cost, to validate an implementation.

FCC Chairman Genachowski on Spectrum Crisis

"We can predict the crisis that is coming," says Federal Communications Commission Chairman Julius Genachowski. "Because demand is going up and supply is staying flat." "If we don't increase the supply of spectrum we're going to throttle the growth and the opportunity and the job creation we can get from mobile innovations," he says.  FCC Chairman Genachowski on Spectrum Crunch

Friday, November 4, 2011

Era of E-Commerce is Over

Forrester Research e-commerce forecast
John Donahoe, CEO of eBay, has said that the concept of e-commerce is dead and buried, since consumers really don’t care about where they buy, so long as they get the cheapest price. You can thank increasing use of mobile technology for that change.

Now consumers are walking into retail stores, and using their phones to identify better prices for goods they like, and will use either online or offline purchasing to get the price they want.


“Over the last 12-18 months we at eBay have changed our view on e-commerce,” he explained. “We’re now seeing a profound change in how consumers are behaving, and we’re going to see more changes in the next three years than we’re seen in the previous 20 in terms of shopping and payments." 

NFC handset forecast
"Mobile devices are blurring the lines between online and offline at a rate no one would have predicted.” eBay boss declares era of e-commerce is over

As for eBay’s strategy, Donahoe said the company is presenting itself as a retailer-agnostic platform. Price comparison applications on the site will show a broad range of suppliers, all displayed on a level playing field with the competition. eBay will simply process the sale.

Android Dominates U.S. Smart Phone Share

Some 87.4 million people in the U.S. owned smartphones during the three months ending in September 2011, up 12 percent from the preceding three month period. Google Android ranked as the top smartphone platform with 44.8 percent market share, up 4.6 percentage points from the prior three-month period. 


Apple has the number-two position, growing 0.8 percentage points to account for 27.4 percent of the smartphone market. RIM ranked third with 18.9 percent share, followed by Microsoft (5.6 percent) and Symbian (1.8 percent).



Top Smartphone Platforms
3 Month Avg. Ending Sep. 2011 vs. 3 Month Avg. Ending Jun. 2011
Total U.S. Smartphone Subscribers Ages 13+
Source: comScore MobiLens
 Share (%) of Smartphone Subscribers
Jun-11Sep-11Point Change
Total Smartphone Subscribers100.0%100.0%N/A
Google40.2%44.8%4.6
Apple26.6%27.4%0.8
RIM23.5%18.9%-4.6
Microsoft5.8%5.6%-0.2
Symbian2.0%1.8%-0.2

Sprint Accelerates Network Vision

Sprint CEO Dan Hesse says "Network Vision is coming along so well, we've accelerated from three to five years to just three years." Investors might be concerned about the timing of capital investment, as the acceleration means "we'll be spending more money sooner."

But Spring doesn't really have time to delay the full transition to a flexible network that will allow Sprint to light its Long Term Evolution network faster, as well as support additional LTE bandwidth it might wholesale from partners, as well as sell capacity to LTE customers.

Google Doesn't Want to be a Service Provider


From a return on invested capital perspective, the difference between Google’s current business model and that of a facilities-based wireline service provider like Verizon could not be starker,” say Sanford Bernstein analysts Craig Moffett and Carlos Kirjner.

“In 2011, we expect Google to post an ROIC of 56 percent, or 38 percent when including goodwill,” they say. “In 2010, Verizon’s wireline segment (which includes FiOS) sported an ROIC excluding goodwill and ‘one-time items’ of  just 1.6 percent.”

“Including goodwill and similar intangible, and smoothed one-timers, it was minus one percent,” the analysts say.

Those are good reasons why Google will not want to become a service provider, even as it considers the virtual necessity of offering entertainment video and voice services in addition to broadband access on its 1-Gbps test networks in Kansas City, Kan. and Kansas City, Mo.

Wireline networks have the weakest returns on invested capital with a 1.5 percent gain over the last decade, Moffat says Wireless networks had a meager return of 0.3 percent. Cable garnered a 2.5 percent return. Low returns from invested capital
Satellite networks had the best return on invested capital at 5.5 percent. It’s no wonder that DirecTV shares have trounced other companies in 8-year returns. Others stocks—AT&T, Comcast, Dish, Sprint and Verizon—have negative returns.



Google, reports the Wall Street Journal, is looking to add video entertainment services, and possibly voice, for customers of its 1-Gbps fiber to home network in Kansas City, Mo., and Kansas City, Kan. The moves would be logical.

Many observers have wondered how such a network, delivering only 1-Gbps Internet access service, at prices "comparable" to existing services provided by telcos and cable companies, could possibly generate enough revenue even to break even.

As it turns out, Google has no magic rabbit to pull out of its hat. The costs of its network are not dissimilar from the costs any other service provider would incur. And few service providers would contemplate building a fiber-to-home network with a single revenue stream, namely Internet access.

Of course, Google could have chosen to operate as a "wholesale only" provider of bandwidth to other service providers. It could still do so. But the few U.S. examples of access network providers who attempt to operate "wholesale only" have not proven highly viable, most would probably conclude.

The only way to approach break-even apparently is to operate the network the way all other such networks are operated, namely providing retail triple-play services to consumers.

Nobody expects Google to become a "service provider" with its own facilities, on a wider scale. But that isn't the point. To some small extent, Google might become a distributor of voice and video services, not just a broadband access provider. But once it secures distribution rights, there are other possibilities.

So far, it seems unlikely Google would get licensing rights that will immediately save consumers money. In fact, any video rights will likely include the normal clauses that require Google to pay as much as other video distributors. But if Google were to focus its services only on "over the top" delivery, it might still have a clear price advantage, compared to other service providers who must build and operate access facilities, of course.

Google might also find it only can get content rights if it agrees to bundle channels in the typical way cable, satellite and telco TV providers do, which would limit the amount of innovation Google could attempt. Also, until Google got serious volume, the prices it pays for content rights will not allow significant retail price discounts.

But any move by Google into the triple-play services market would be a bit of a shock, even if nobody thinks Google wants to become a traditional service provider. The broader issue is that if Google can get what essentially amounts to "streaming rights" to most of the standard TV channels, it would have a bit of room to challenge not only the telco, satellite and cable providers, but over time might gain some leverage to package those channels differently.

In the near term, we should anticipate little change, as the content providers will act in ways to protect the existing distribution model. Longer term, if Google should get traction, matters will change. Google Ponders Pay-TV Business

When Robotaxis Will Displace Auto Rentals

Inevitably, people are going to wonder when, and under what circumstances, robotaxis are going to displace auto rentals, just as there was s...