Mobile Operators Account for 1.2% of GDP; Mobile Industry 4.7%

The mobile industry in Asia Pacific was worth more than US$1 trillion per year to the region’s economy in 2014, equivalent to 4.7 per cent of the region’s gross domestic product, with over a quarter of this economic contribution generated directly by mobile operators, a study sponsored by the GSMA.

Mobile operators directly contributed US$286 billion to the total in 2014, equivalent to 1.2 percent of regional GDP.

It is forecast that the Asia Pacific mobile industry will be worth US$1.8 trillion by 2020, accounting for 5.9 percent of projected regional GDP by this point.

In 2014 the mobile ecosystem directly and indirectly employed 12.5 million people in Asia Pacific, a figure expected to rise to 15 million by 2020. T

he industry also makes a substantial contribution to the funding of the public sector, with approximately US$130 billion contributed in 2014 in the form of general taxation. This is set to grow to over US$150 billion by 2020.

The study reveals that Asia Pacific now accounts for half of the world’s unique mobile subscribers and mobile connections and will continue to grow at a faster pace than the global average over the next five years, adding 600 million new unique subscribers by 2020.

Migration to 4G networks and services in markets such as China is now occurring at a faster rate than was the case in developed regions such as Europe and North America

At the end of the first quarter of 2015, there were 1.8 billion unique mobile subscribers in Asia Pacific, representing 45 per cent of the region’s population.

China, India, Indonesia and Japan account for over 75 percent of the region’s subscriber base.

Many of the largest markets in the region are still relatively underpenetrated, however.

India, Pakistan and Bangladesh, for example, have a combined population of over 1.6 billion, but a unique subscriber penetration rate of only 36 per cent on average.

Connecting these unconnected citizens will therefore be a major focus for both the mobile industry and policymakers in the region over the coming years.

The number of unique mobile subscribers in the region is forecast to grow by five percent per year over the remainder of the decade (2014 to 2020 CAGR), faster than the global average (four percent) and making Asia Pacific the second-fastest region globally behind only Sub-Saharan Africa.

Total mobile connections in the region stood at 3.7 billion in the first quarter of 2015.

Fourth generation networks accounted for nine percent of connections, a figure expected to reach a third of the total by 2020.

South Korea and Japan lead the world in 4G adoption, but the region also contains markets where 4G deployments are at an early stage (such as India, Indonesia and Pakistan) or where 4G licensing has yet to take place (such as Bangladesh, Myanmar and Vietnam).

Smartphones now account for 40 percent of connections in the Asia Pacific region and are set to account for 66 percent of the total by the end of the decade.

According to Cisco, mobile data traffic growth in Asia Pacific will grow at a 58 percent compound annual growth rate through to 2019.

Digital Realty Buys Telx

In a move that shifts its strategy “up the value chain” and obviously positions it against rival Equinix, Digital Realty Trust is buying Telx in a deal valued at $1.9 billion.

The acquisition almost doubles Digital Realty’s  data center “footprint,” but the other important change is access to Telx’s interconnection business. That moves Digital Realty “up the stack” in terms of products.

Digital Realty describes its business as “data center and colocation solutions.” It describes Telx as a supplier of “data center colocation, interconnection and cloud enablement solutions.”

The latter two clauses--interconnection and cloud enablement--represent the move up the stack. The additional facilities will be easy to integrate.

As of the end of March 2015, Telx managed 1.3 million square feet of data center real estate spread across 20 facilities in the U.S., two of which are Telx-owned. Of the rest 11 were leased from Digital Realty.

The announcement comes several weeks after Equinix agreed to pay £2.3 billion ($3.6 billion) for TeleCity, a move that allowed Equinix to create what many would say is Europe's biggest data center company.

Equinix is one of the world's biggest colocation providers and is likely to be one of Digital Realty's chief rivals following the move for Telx.

Hard to Pick Winners, Winning Strategies in OTT Subscription Video

Most observers sense an inflection point for streaming video has been reached. Most observers would agree that potentially large shifts of revenue, market share, profit margins and market size are possible, as the transition gains momentum.

That perhaps is the counterpoint to trends showing that ESPN, for example, has lost subscribers over the last year; some 3.2 million accounts, leaving a current base of about 93 million households.

That matters for Disney since ESPN is expected to make up 25 percent of Disney’s total profit in 2015.

But who the winners and losers are, and how much they stand to gain or lose, is a big question.

Less contentious is the idea that streaming revenues are about to grow rapidly. Premium OTT revenues are expected to grow from $4 billion in 2014 to between $8 billion and $12 billion in 2018, with Netflix remaining the largest single mass-market provider, according to industry executives polled by MTM on behalf of  In May 2015, Ooyala and Vindicia.

Beyond that, there is great uncertainty. Industry participant say it is difficult to determine which services will be successful. There also is a general expectation that the mass market will remain dominated by a small number of major service providers.

There was a strong consensus that Netflix will remain the largest single subscription OTT video provider in the United States (a reasonable and likely safe prediction).

But many expect Netflix market share to dip from the 85 percent market share Netflix held in 2014 to around 50 percent market share in 2018.

The issue is how many other significant providers can exist. A common thought is that the number will be few, for any number of reasons, including the time and expense of aggregating a critical mass of content.

Most industry participants believe that the market will continue to be dominated by a small number of major OTT service providers, most likely the existing incumbents with established subscriber bases and strong positions in the market.

The reason is that the main barriers to entry for new entrants are believed to be access to large volumes of differentiating, exclusive premium film and TV content, an ability to attract new customers, and an ability to sustain substantial investment over time. The leading linear distributors have all that.

In that view, today’s major linear video providers have the inside track. They have the financial assets, content and customer relationships, distribution economies and brand names to succeed in what is expected to be a highly-competitive and expensive business.

Also, as the market becomes more crowded and competitive, new entrants will find it increasingly difficult to differentiate their services from the market leaders. Fundamentally, streaming or linear businesses are about unique content.

Most industry participants believe that developing a critical mass of premium content with mass-market appeal, such as original content or early-window film and TV content, is now harder.

Existing content libraries have largely been licensed and the cost of new premium content is growing as well.

With increased competition, premium content costs additionally are widely believed to be rising.

Upstarts will have to spend heavily to catch up. And many studios are locked into long-term content deals, making it harder to quickly license a critical mass of attractive content.

But integration, multi-platform client development and high-quality user interfaces also are essential.

Just the task of acquiring and creating unique content will be expensive, time-consuming and difficult, especially for later entrants.

Even price differentiation--a common and effective positioning--will be difficult, given the low price at which Netflix sells.

The issue is whether today’s leaders can manage the new business without simultaneously destroying the legacy business.

On the other hand, Niche services, perhaps as many as 15 to 20 entities in total, each will have an opportunity to acquire audiences of 100,000 or more paying subscribers by 2018, with many more attracting smaller numbers of subscribers.

Those services, in other words, will not scale.

Logical candidates in the niche segment are services selling into existing fan bases. Many of these services are likely to be bundled with wider subscription or membership offerings and marketed and retailed through third-party distribution platforms.

Some of the potential categories reflect the similar niche audiences in linear TV: sports, kids, anime, foreign drama, expat and ethnic services (e.g. Korean, Hispanic) and personality-based offerings (music, performing arts).

Still, the economics of niche services are likely to remain challenging. Profit margins will be relatively low, while technology, content and marketing costs will tend to be relatively high.

The study aimed to ascertain prospects for streaming video subscription services in the United States, as seen by industry executives in the business.

As multiple new OTT services launch in 2015 and 2016, industry participants believe that content

Apple Share of Mobile Device Profits Grows to 92%

As has been the recent pattern, Apple earned 92 percent of the total operating income  from the world’s eight top smartphone makers in the first quarter of 2015, up from 65 percent of profits in 2014, according to Canaccord Genuity managing director Mike Walkley.

Samsung earned 15 percent of industry operating profits.

First Photo of Pluto from New Horizons, After 9-Year Journey

The New Horizons spacecraft traveled nine years and three billion miles to take this picture of Pluto. Some of us were taught Pluto is a planet. These days, it is not a planet. Sometime later in 2015, perhaps Pluto again will be declared a planet. 

Perhaps Ceres (orbiting the sun between Mars and Jupiter) will get the appellation as well. 

Google: Non-Search Assets To Drive Near-Term Growth; Long Term Growth Built on Connectivity Assets?

Marginal cost pricing is part of the strategy, of course. Google will be more aggressive about this than legacy ISPs.

But even legacy ISPs will face pressure to price at marginal cost.

Huge implications, to be sure.

Google: Non-Search Assets To Drive Near-Term Growth http://m.seekingalpha.com/article/3319235?source=ansh $GOOG, $VIA, $VIAB, $FB, $GOOGL

Netflix Credential Sharing is Marketing, Not Piracy

When is "piracy" actually a form of "sampling" and therefore a customer acquisition tool? When it is done by Netflix.

About half of U.S. households buying Internet access also buy an over the top video service, according to Parks Associates.

Parks also defines as video piracy the use of shared credentials by people other than account holders. Whether Netflix considers such sharing “piracy” is questionable, since Netflix seems to encourage the practice.

You might wonder why a subscription service would encourage people to give other non-subscribers access. Creating a new habit is one reason. Encouraging sampling is another reason.

Consider the firm’s finding that 20 percent of OTT users 18 to 24 use an OTT video service paid by someone outside the home,.

Only 10 percent of OTT subscribers 25 to 34 admit to this behavior. That’s the key behavioral insight. Netflix gambles that non-paying users will become paying subscribers once they reach their mid-20s.

In that sense, the credential sharing creates permanent behaviors that rather quickly become buying habits.