True Internet/TV convergence - It’s almost here

September 17, 2008 · Filed Under Product Reviews · Comment 

As an avid TV viewer and internet junkie, I’ve always had that dream, the dream of a television-viewing experience where the Internet was not only always accessible but integrated right into the experience. There was no switching back and forth between environments. I viewed what I wanted when I wanted online or via broadcast and tapped into information about what I was viewing through a small bar or window that could either sit on the screen or be safely minimized. If I saw something that I wanted to buy, I didn’t have to grab my laptop or switch out to Windows. I simply accessed the information about the product right on the TV screen, and bought it right then and there.

Now, a group of events appear poised to make this dream a (partial) reality. Last week, Intel and Yahoo! announced a somewhat unlikely partnership that would result in Internet-enabled HDTVs that play and use on-screen Yahoo! widgets to give viewers direct access to Web-based content, applications, and contextual advertising. It could be the germ of what might become my idea, brought to life. In fact, execs at Intel and Yahoo! did note that viewers might be able to, say, buy the shoes Lauren is wearing on an episode of The Hills, or anything similar to that sort of thing.

The digital TV part is pretty much going to be taken care of soon. The FCC’s decision to strong-arm the nation and broadcasters into the digital spectrum is probably the best thing to happen to television since color, IMHO. Sorry, all you people still fiddling around with your rabbit ears, but it’s an idea that really needed to happen at one time or another, for a lot of reasons. Those complaining about next year’s switchover on February 17, 2009 might end up feeling quite differently once they see everything the programmers and partners can do with a digital screen.

The Intel/Yahoo! tool and the Sidebar feature look like a really good start. I love that these toolbars can slide on and off the HDTV screen, providing you with instant access to content you’ve stored online. What’s missing, of course, is the deeper integration that would offer direct interaction between your live TV show and the Internet as I mentioned earlier, but I know that’s coming. So, for example, on Deal or No Deal, you could play along with the contestant, select your cases, and even see what’s in them (via an overlay). You could also select a winning case and, perhaps, be entered into a live drawing—maybe you’d compete directly against the on-air opponent for a million dollars! This is the type of digital world I always envisioned.

So do these exciting developments represent true integration and convergence? Not quite yet. In fact, significant hurdles remain. Few of the glowing reports about the Internet TV revolution and the surprise Intel-Yahoo! partnership mention that not enough people have broadband access anywhere near where their TV is located (or have broadband period in some areas of the country). So consumers either need to wire their homes (not gonna happen) or add access points near their TVs. An obvious alternative would be for these Internet-ready TVs to come wireless-ready, too. But these hurdles will be overcome. Eventually.

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Online Movies - Are we there yet?

February 25, 2008 · Filed Under Product Reviews, Technology · Comment 

The recent surrender of HD-DVD in the latest format war has got us thinking about online video rentals - so we thought we’d review the options available today.

Streaming or downloading full movies instead of renting or buying physical media is nothing new. As happens time after time in the world of technology the real first adopters are the adult industry and the hackers/pirates. The adult movie folks have been providing video content only for years now. And we all know well that hacker-kids have distributed full dvds in online format for some time as well. If both these groups can handle it successfully why not the movie studios?

With the rise in popularity of Youtube consumers have grown familiar with online videos and the entire medium has gained market acceptance. Fears that studios once had over the customer acceptance of less-then-highest quality video have disappeared. Consumers bandwidth will only increase in the future allowing for higher quality.

Netflix: As part of the base netflix subscription all customers can watch unlimited movies online - free. Tough to argue with that deal. The biggest downside is the selection, of course the online library of movies are limited. Quality is above average and the program is very easy to use. As netflix offers more movies into this category it will have an even bigger market impact. We have to wonder when/if they will start charging for the service. Another challenge for Netflix is getting onto the TV and into the living room - not everyone is willing to watch movies on the PC or laptop. Watch for a partnership with Microsoft, Nintendo or Sony in the future. But right now it is the market leader for cost and ease of use.

Amazon Unbox: Amazon has been at this market for quite some time (opened in 2006). Unbox offers a wide selection of newly released and classics at near DVD prices ($14.99 for most movies) and rentals for lower cost (4.99 in most cases). Although the service received mixed reviews when it was released it has improved over time.

The videos can be played on about 20 handheld devices (again - big drawback if you can’t connect the PC to the TV). They’ve since partnered with Tivo to allow purchase of videos which can be sent directly to your living room Tivo system for review. Of course Tv shows are also available for those into that type of thing (who really buys and watches old tv episodes?!)

Apple - iTunes: When it comes to online media - iTunes is still the name we all think of first. Apple has made available movies for download since 2006. Of course they use the itunes market place and application to support the download service. The move catalog matches the size of Amazon’s and most physical rental stores. Pricing is equivalent to Amazon (about $14 a pop) with the edge going to Apple for ease of use. Naturally the advantage is apple’s in the device category as legions of iPod Video’s and Nano’s can show movies and tv shows purchased through itunes. Recently Apple released the AppleTV device (getting into your living room.. sound like a familiar theme?). It allows for move rentals (HD content too) as well as the rest of the itunes HTPC functionality - plugged into your TV of course. So far its received a bit of a lackluster response (for an Apple product that is) and we’ll hold our breath before we tell anyone to run out and buy one.

Comcast (ondemand): The biggest name in the video on demand cable industry - comcast leads the pack. One of the first cable companies to roll out on demand video (which comes free with their digital cable package). This competes with downloadable purchases and rentals head to head. Comcast has the advantage in many areas since they are already entrenched in the consumers living room, have market share and control much of the delivery. The ease-of-use factor cannot be dismissed either. Consumers have embraced the video on demand service in a surprising fashion and other cable vendors have been struggling to catch up.

Directv on demand: Directv is fighting to catch up to Comcast on the movie delivery/video on demand front. Their vod service is still in beta. The distinct disadvantage for Directv is not controlling the consumers broadband as Comcast does, meaning Directv VOD users must rely on their existing dsl/broadband to download video content to their DVR system.

Slingbox & Orb: Both worth a mention here as similar software packages and devices which allow for ‘place-shifting’ of video content. You can pull your recorded TV episodes from the living room and watch them on the cell phone, in the hotel room, or at work. Not mounting any big-time competition with the video rental/download services yet - but keep an eye on them. Either could provide a medium or means of easy distribution in the future.

None of these are set to overtake Blu-ray or DVD sales in 2008 - but with the delay in adoption of hidef movies caused by the format wars you can bet that they’ve gained traction.

You can bet your gold-plated dvd’s that downloads will overtake physical disc purchases by 2011.

Any comments or additions are welcome. We’ll be glad to update this as they come in.

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Are Big Changes Coming To EBay?

February 1, 2008 · Filed Under Recent News, Technology · Comment 

January 23rd was a big day at EBay; Whitman publicly announced her coming departure, and the EBay Board of Directors voted unanimously to appoint John Donahoe to replace her. 

Donahoe has been in charge of EBay’s Marketplace Business Unit since March 2005.  In the 3 years since he arrived the revenue and profit of the unit, which accounts for more than 60% of the service’s total earnings, has more than doubled.

No stranger to management, he sits on the Board of Trustees for both the Stanford Graduate School of Business and Dartmouth College. 

He’ll need to hit the ground running, as Whitman doesn’t leave small shoes to fill. How effective has she been at what she does?  Time Magazine called her one of the world’s most influential people, which isn’t surprising when you take into account Forbes Magazine listing her estimated worth at $1.4 billion last year.

Since becoming CEO of EBay in March of 1998, Whitman guided a small company headquartered in San Jose California with less than 50 employees into an international phenomenon that today runs a global business consisting of over 11,000 employees and earned net revenues of $7.67 billion in 2007. 

Talk about having a full plate. Not only has Whitman been managing EBay into an international corporate giant the past decade, she’s also on the Board of Directors for Proctor & Gamble as well as DreamWorks Animation, the movie studio responsible for such hits as Shrek and it’s sequels, Over The Hedge, Madagascar, The Prince of Egypt, and Chicken Run.  In fact, before she ever worked at EBay she made her way up to management through both Proctor & Gamble and the Walt Disney Company.

Whitman will remain as a member of EBay’s Board of Directors. 

Seeking to allay concerns over the change of management, Whitman released a statement to the press, in which she commented: “During
the last three years, John and I have worked very closely together to arrive at this day, and we’ll continue to work together through the transition.  I’m extremely confident in John’s skills and the abilities of John’s veteran management team.  eBay and its millions of users are in great hands as they head into the future.”

Why would the highly successful CEO of a company that earned gross revenues of over $7,000,000,000 in the last year suddenly decide to step down? 

Such a move makes sense now because it’s hard to see how EBay could go anywhere but down from the plateau to where Whitman has guided it. Several sources mention rumors that the reason Whitman is stepping down now instead of later is because she intends to run for Governor of California in 2010.  Two years would give her plenty of time to build up her political machine and prepare to run as a candidate. 

What does all this mean for people who depend on EBay’s services?  Can EBay buyers and sellers expect any changes to the on-line auction house giant now that there has been a change of CEO’s? 

The only changes Donahoe has discussed publicly thus far were experimenting with new pricing frameworks that would cause more of the items listed on EBay to be purchased for a fixed price rather than from bidding on auctions.  He also mentioned dropping the rates charged to to the sellers for listing their items on EBay’s website. 

These changes may not be welcomed by Ebay investors as warmly as sellers.  But in the eyes of the users they should be welcome.  In recent years ebay consumers (both buyers and sellers) have bridled over cost increases and fees. The user base has degraded a bit due to these increases.  Combine these losses with the missteps made by management in buying Skpye (which Ebay is rumored to be shopping to buyers) and it becomes clear that some change is needed.

Both moves seem geared to increase consumer use of the service, as buyers can be confident in obtaining an item being offered for a fixed price since no one can log in at the last minute and outbid them as the auction is expiring, and lowering the rates for listing items for sale will encourage regular sellers to post even more items with the service. 

Several market watchers noted that EBay didn’t show the same robust growth after the aqquisition of Skype, an internet telephone service for which there were high expectations. 

Looking at the growth the company has enjoyed the past 10 years, other market observers think after such long, dramatic growth such a dip in profit is nothing to be concerned about. 

Taken as a whole, Whitman has handed off a company to her successor that has been outstandingly successful, and based on what he’s done in the short time he’s been there, there’s no reason to expect any major changes or negative impact from this development. 

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ebooks success: Can Amazon Kindle Inspire?

January 29, 2008 · Filed Under Product Reviews, Technology · Comment 

E-Books: A Guessing Game

 

In honor of Amazon.com’s Kindle let’s play a game and try to guess the forecast for ebook sales over the next few years.

 

In 2007 the ebook market is in the infancy stage. Despite Sony and Amazon.com both releasing consumer friendly devices ebooks have yet to gain widespread consumer acceptance.

Based on the reach which Amazon.com has in customer base, the proliferation of technology and the comfort of consumers purchasing electronics and virtual goods online - I forecast the sales of ebooks in 2008 will be $25 to $40 million. This is a small fraction of the overall publishing revenue per year as you can see below.

 

A few numbers of note (numbers are rough estimates):

2007 Literature Rate: 50%

US Population:300 Million

PC Penetration: 60+%

Itunes Downloads: 2.5 Billion

Amazon.com customer base 40+ million

# of books purchased per year - per consumer: 4

Publishing Industry revenues in 2006: $25 Billion

 

 

As we see electronics advancing the trend is convergence. The long term trend will no longer be for a separate gps, handheld, cell, mp3 player, etc - but for one unified device.

We can already see this happening with cell phones, organizers, cameras and mp3 players. As technology evolves this trend will only increase. This will result in a super-set of market size for any good or service that can be delivered to that device. Ebooks will be just such a product. In 10 years I see pocket sized devices that project onto any surface, that read and translate any text, are simple, powerful and consumer friendly. Based upon this the potential consumer (or market size) for ebooks will be in the range of 50 Million in the US, 400 Million Worldwide.

In technology the market is nearly always guided by innovators and then grown by imitators. The cutting edge innovators first create the product, unit or system in order for the innovators to make it affordable and bring it to mass production. This holds true for older products such as dvds, downloadable movies and music. From Beta video players to 8-tracks the innovation piqued curiosity in the marketplace, but little else. Until the imitators came along and created copies and more drove prices down.

The same will hold true in the e-book marketplace. As Amazon and Sony are on the cutting edge of innovation - others (like Microsoft) will sit back, watch customer reaction and learn.

At the right time the imitators will enter the market and bring volume of both product and consumers.

Let’s compare ebooks to the popular itunes - as itunes provides a near-as possible model (discounting the hardware device for ebooks which has yet to appear)

Examine the itunes sales for 5 years (again - estimates):

Itunes:

Year 1 = 70 million
Year 2 = 370 million
Year 3 = 602 million
Year 4 = 1.5 billion

Year 5 = 2.5 billion

As we can see - low volumes for the first year but nearly double each year after. I will concede that Apple’s ’star’ power has helped itunes sell in such rapid pace.

Discounting that affect for ebooks (although it certainly a possibility.

2008: 40 Million

2009: 75 Million

2010: 135 Million

2011: 200 Million

2012: 350 Million

These figures are arrived by extrapolating the # of consumers who purchase books per year, as well as textbooks (which I predict will be the first large ebook market to hit critical mass). They are much lower then itunes volumes as you can see - as we’ve got a much lower base of consumer for books then for music.

 

 

Adoption of ebooks will be similar to music. The major difference in adoption really lies in the behaviour of the consumer. Music is vastly more popular of a medium then literature, and is much less ‘easier’ of a consumable. Meaning that consumers can make use of downloadable music in many different ways, while working, playing, in recreation and anywhere that the device follows. The consumption of music does not require dedicated attention as does literature. This creates a much tougher challenge for the adoption of ebooks - both in terms of device (hardware) and usage patterns. Music is rather indifferent to device, some may be stylish, others not - but all have the overall same delivery methodology. Until the innovators can find an acceptable delivery platform the volumes will not materialize. However, once the acceptable platform is found it will be imitated and the pattern will closely follow that of the music downloads.

 

The attitudes of digital content have changed dramatically in recent years. The Internet as we know it and worldwide web passed the 10 year maturity mark and has saturated through the population at a staggering rate. As this has happened the flow of information and data has followed and opened up opportunities and marketplaces which we could only dream. As the generation X’ers grew up into expendable incomes of their own they began to influence online purchases. These purchases are no longer limited to physical goods (ie . amazon.com) but now virtual services and goods such as movies, music and ebooks are common. Music content delivered electronically opened the floodgates and direct delivery of movies via electronic methods is now hitting its stride. As often occurs with new technology the old producers had difficulties (and still do) monetizing their product in a new delivery method. Early delivery methods were prone to theft and abuse. Ebooks have struggled to catch on to this new marketplace as no consumer friendly device has been introduced to satisfy the apparent need. There are many less consumers for electronic literature then movies and music, and whereas a movie or music can be delivered to a computer literature is not often read online. Attitudes have changed, but roadblocks still remain.

 

Hardware devices play the pivotal role in widespread adoption of ebooks. The critical hurdle which must be overcome is finding a consumer friendly hardware device which can be marketed to the masses. The Kindle (Amazon’s) is a leap forward on that front. The device addresses several important consumer concerns such as ease of use, ease of purchasing ebooks, readability, portability and battery life. The Kindle is an advanced ebook reader and Amazon is a true innovator. The major flaw (or hurdle) to the Kindle is the price-point, $399. At that price the average consumer will not jump into an unknown or unproven technology. The major advantage of the Kindle lies in the wireless ability to connect to the ebook marketplace and download fresh content. The benefit Amazon has given to the market is in innovation. The new device will test out the market and provide feedback to other device makers on what works, what is accepted by the consumer and what does not. The hidden benefit is in market awareness. Since Amazon is such a large public entity many have been exposed now to the Kindle (many more consumers then those exposed to the Sony ebook reader). Market awareness is raised for the ebook product itself and downloadable literature.

The flattened marketplace of our era has created many opportunities for businesses, products and sales. The ebook will reach out to educators and recreational consumers alike -given time, consumer acceptance and ever changing technology.

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