Devices, Media, And The Future Of Everything

When TiVo met cable . . .

[Josh] It's always revealing to see how the theory of devices stands up to what happens in practice.

Yesterday I installed my TiVo Series 3, the new HD box from TiVo. It includes two CableCARD slots, which are designed to eliminate the need for a set-top box, and with it, the complex and flaky cabling that is sometimes are necessary to connect Tivo or other third-party electronics to your cable.

Comcast cable guy #1 showed up yesterday at 1:30 with the two CableCARDs. Installation didn't work right so he called up Comcast cable guy #2, the tech wiz. An hour later cable guy #2 had installed the CableCARDs and gotten them working.

In theory this means that I can now record and watch HDTV shows on my TiVo. And it works great, except for one little thing . . . the CableCARDs won't receive all the channels properly. In particular HBO doesn't work -- when you tune to it you get a screen full of text with lots of ID numbers, generated by the CableCARD, along with a phone number to call (which is, of course, 1-800-COMCAST). Sort of jarring in the middle of the work of art that is the TiVo interface. And when you call, they send various signals down the wire which, at least in my case, don't fix anything.

Now after explaining this to my wife, she asked the obvious question "Who's fault is this, Comcast's or TiVo's?" I opened my mouth to answer but found I had no answer -- and thereby hangs the problem. Comcast doesn't really want you to use somebody else's DVR, so they want to blame the problem on TiVo. And TiVo says they've designed the device properly, the problem must be on the cable side. In reality, the problem is that the conditional access system and all the other communication between devices and the cable head end is complex, and clearly this CableCARD thing isn't quite ready for a device as complex as a TiVo.

What do you think?

Technorati tags: Bernoff, Forrester, TiVo, CableCARD, TiVo Series 3

Note to ESPN: It's a phone

[Charlie] Yesterday Disney called it quits for Mobile ESPN, the Mobile Virtual Network Operator (MVNO) launched barely eight months ago but fell at least one order of magnitude short of their subscriber targets. Certainly Mobile ESPN made many missteps, from their unsubsidized $499 price for their first (and only, at the time) phone to their marketing that failed to clearly establish the offering as a service and not just a phone. I draw two key lessons from their demise:

• MVNOs require a well-defined and targetable audience. ESPN has a powerful brand but it is extremely broad and appeals to everyone from casual fans who just enjoy the entertainment of Sportscenter to the maniacs at whom they were aiming, who devour heapin' helpings of minutiae. The questions that MVNOs like Helio and AMP'd have to answer are whether they have a unique appeal to a specific audience, whether that audience is willing to spend what they are charging, and whether they are able to successfully reach that audience.

• A phone's primary purpose is communication. This was the greater failing -- ESPN crafted a mobile service offering based on the assumption that their content was the primary experience. But even the most devout sports nut (ok, except for a couple of tens of thousands) still cares more about using their phone for voice and messaging than for ESPN's content. This is the same lesson Apple learned with their iPod Photo misstep -- devices have to be targeted at their primary function and do it well; other features are all secondary.

Disney has got it right on the second point in their other MVNO (Disney Mobile) -- they're offering families better control over their communications and tools for parents to feel comfortable with giving their kids a mobile phone at a young age. I'm not sure about the first point, though -- especially as kids grow to an age where the last brand they want to show their friends is Disney. But then again, Virgin and Boost have the same problem.

Think differently? Let me know.

Apple brings net video to the TV

[Josh] Sorry for the brevity, filing this one between meetings in Sao Paulo, Brazil.

As we expected, Apple announced movie downloads -- and a new device they call iTV. We predicted this back in January -- only we called it "Applevision." Apple knows video isn't really worth doing unless you can get it to the TV. iTV won't be out until next year.

What's right about iTV: (1) it's on the TV, (2) it potentially gives access to Internet videos to the TV, (3) it's cheap, less than $300.

What's wrong, or at least open questions: (1) it doesn't have a hard drive or tuner to store programs, (2) wireless video streaming is verry iffy in terms of quality, (3) Will it support the thousands of videos out there not in QuickTime or FairPlay format, like Google video and YouTube? Probably not. (4) What kind of picture quality can you get from stored, streaming video. (5) New set-top boxes that don't offer spectacular functionality typically don't do well.

We'll see what happens, but this is not going to be a runaway success. Put in a cablecard, a tuner, and a hard drive and then I'll get interested. What it may do, though, is stimulate companies like Motorola/Comcast, DirecTV, Cisco, and Microsoft to build set-top boxes that are also DVRs and can access Internet video. And THAT would be interesting. (Although it would reveal just how crappy Net video really looks on a TV set.)

Technorati tags: Bernoff, Forrester, Apple, iTV

SanDisk -- A Smart Memory Giant In The Making

[Ted] It's impressive to see what SanDisk is doing to the non-iPod music player business. The company's strengths -- low-cost memory products, tremendous retail reach, and an increasing sophistication in CE and IT applications and products -- give it a very strong operating platform. The recent MP3 player announcement only highlights the company's opportunity.

So, will SanDisk displace Apple? Well, no time soon. Apple's tremendous market development is leading it to create a world class ecosystem for Apple products. If you buy a Mini Cooper with an iPod connector, it's a safe bet that your next MP3 player will be an iPod.

So what's SanDisk's future? In a phrase, it's smart memory. Everybody gets dumb memory. It's a memory card. But smart memory is a whole different animal. When compared with dumb memory:

• Smart memory is a platform for media. I think we can all imagine a future where consumers stop by an airport kiosk, broadband connection, or subway station vending machine to download movie bits onto a smart memory key fob. Come to think of it, with UWB in place, it might be a matter of passing the fob over the video bit bucket.
• Smart memory is beholden to a more complex ecosystem. It's much harder to get value out of smart memory than dumb memory. For example, in music, we need a music store. And that will reward a bigger company with a focus on business and application development (and not just technology development).
• Oh yeah, smart memory carries a price premium. And that's why SanDisk is going after it.

So why is SanDisk poised to become a giant here? Well, it's already an $2+ billion dollar company that grew more than 28% last year. It has pioneered memory formats as a memory pure play. It recently acquired MSystems, a partner in developing the U3 application framework. It is focused on new memory-based applications. It's practiced as a supplier to other device makers.

Disagree? Lemme know.

[signed] Ted

Technorati Tags: Forrester, SanDisk, iPod

Dell Needs To Explain Why It Will Never Happen Again

[Ted] If you ask me, Dell has done a great job in handling the burning battery problem. Just as Johnson & Johnson did with Tylenol, Dell chose to step up and accept responsibility. Sure, we could argue whether they should have done it sooner or how it could have gone on for so long, but the fact that they did it all -- AT THIS SCALE -- is responsible behavior. The payoff for Dell's mea culpa will be stronger brand trust (which is already among the highest of any tech brand -- Dell's trust score of 4.3 falls behind only Bose, Apple, and ironically, Sony's).

HOWEVER . . .

Dell has not yet completed its responsibility to consumers and enterprises. It has not yet asked a senior executive like Michael Dell or Kevin Rollins to stand up and explain why this happened and what steps Dell is taking to ensure that IT WILL NEVER HAPPEN AGAIN. Consumers and CIOs alike must be able to answer the question: Will I trust Dell for my next PC? And without a clear communication of what caused the problem and what concrete actions Dell is taking to prevent it happening in the future, potential buyers will be left to decide for themselves whether Dell products are too risky to bet on.

If I were Michael Dell, here is what I would do:

1. Explain how -- exactly how -- this happened. Was it poor engineering? A lack of understanding of the typical notebook operating environment? Poor communication with Sony?
2. Bring in Sony CEO Howard Stringer to explain Sony's role -- and remediation -- in this fiasco.
3. Explain what -- exactly what -- Dell will do differently to ensure that this doesn't happen in the future: process changes, quality control changes, supplier management changes, testing changes, etc.
4. Provide regular updates to customers on the progress towards those changes.

Disagree? Lemme know.

[signed] Ted

Technorati Tags: Forrester, Dell, Sony

Why Sony's Mylo Adoption Could Be So Low

[Josh] Sony's announced a new product called Mylo -- a wireless communication device. So ask the TechPotential question -- how many will they sell. This is a perfect example where we can look at the size of the Potential market -- and the restrictions that apply to it -- and see that a potentially promising new idea could have a limited market. My colleague Charlie Golvin lays out the case pretty clearly:

[Charles Golvin] Target audience: 18 to 24 year olds who “live online”

If this is supposed to become your primary communications tool then it needs to be connected all the time. How many of these people are actually within WiFi coverage all the time? Today I’d say it’s essentially zero . . . even students on a fully unwired college campus go off the grid . . . Perhaps agoraphobics or other shut-ins with a wireless home network.

The pricing is ridiculously high given what the device offers, let alone the fact that the target audience is almost certainly already equipped with a mobile phone, MP3 player, digital camera, portable game player, etc. With flat rate mobile data pricing coming down along with huge buckets of text messages, and services like eqo that provide Skype calling from your mobile, the value proposition at this price point looks pretty meager to me. And don’t forget that if you want to store music and other content beyond a smattering you’ve gotta pony up for additional storage — at Sony’s premium for Memory Stick.

Finally, it’s a completely closed environment — if your buddies are on MSN/Live or AIM, this device isn’t for you unless you can convince them all to move to Yahoo! or Google, nor will clients that access these networks emerge unless they strike a deal with Sony to allow that. This is completely different than the Nokia 770 model, which relies on a true open source environment and has seen a robust growth in applications from garage and other developers. And it’s quite different from the UMPC model — you’ll find that using the web browser on this device you’ll encounter a whole lotta sites (e.g., YouTube) whose content won’t render.

Nope, I think mylo will struggle to find an audience of meaningful size and will likely experience some very, very rapid price declines along the way.

Technorati tags: Bernoff, Forrester, Mobile devices, Mylo

Microsoft's Zune Is A Risk Worth Taking

[Ted] Okay, it's time to weigh in on Zune. In a word, Zune is risky. But the bigger risk is losing a place at the table when digital media decisions are made. So it's a risk worth taking.

Three things make Zune extremely risky for Microsoft because its Zune strategy will:

1. Cast Microsoft's DRM in a proprietary shadow. Today, Apple's FairPlay DRM technology is proprietary -- no other hardware manufacturer or media retailer can use it. That protects the tight link between iPod and iTunes and makes Apple the only mass market online outlet for protected music, movies, and TV shows. Microsoft has been the "open" alternative -- its WMA DRM technology is easily and cheaply licensed and available to anybody. But Zune, which will use WMA, will need to compete against Creative, Samsung, Sony, and SanDisk, as well Apple. And that means Microsoft will be tempted to introduce proprietary features that favor Zune over those other players. Adding proprietary features is a risk that Microsoft is takes at its own peril -- as the recent ruling in the EU over Windows Media Player shows.
2. Create a group of disgruntled MP3 player partners. Michael Garternburg's post on Zune's impact is worth reading.
3. Raise concerns about where Microsoft might go next. When your software component supplier starts competing with you or your buddy, you look at them with a jaundiced eye. Microsoft has entered market after market to the discomfort of long-established partners. Might Microsoft next build a Zune phone to compete with the Q? If you're Motorola, you've got start wondering . . .

However, for Microsoft, these risks are worth taking because every day Apple is locking in more control over the future of portable digital media. And if Microsoft can't make its DRM the dominant technology in digital media, then it will miss out on a great software-driven market. And Zune could be one vehicle to displacing Apple's dominance.

So, what should Microsoft do to make Zune a success? I wrote about the future of digital devices in a report called "Sell Digital Experiences, Not Products" (which costs $$ at Forrester.com). The report introduced a "connected devices" architecture that describes the relationship between a service such as a media portal, a control devices like a PC or set-top box, and portable device like an MP3 or portable game player. The advantage of this three-part architecture is that it reveals where the value-creating opportunities -- and the failure points -- are. For example, to beat Apple, Zune must:

• Significantly improve on music discovery. Apple's music discovery consists of hits and serendipity. Suppliers like Last.fm, ChoiceStream, and the emerging ZING offer an intriguing alternative -- replace the local record store guru with online expertise.
• Go way beyond music to video, gaming, voice, etc. This one's been written about.
• Put community and eBay-style entreprenurialism at the center. Xbox Live is proving that a marketplace can be built around gaming. Zune should build on that to give media programmers a place to establish and sell their expertise. Want a daily bebop recommendation? Sgn up for the Bebop-a-loo-bop RSS feed. Want a great soundtrack for Halo 3? It's yours for a fee.

Disagree? Lemme know.

Technorati Tags: Forrester, Apple, Microsoft

Let's not get too excited about mobile video

[Josh] CNBC is having me on today to talk about mobile video. I love all this attention to video on new devices, but let's have a look a close look at this.

Cell phones can do video now -- that is, increasing numbers of them can. Verizon is pushing VCast, and MobiTV has reached 1 million subscribers.

And portable devices can do video too -- movies come out on Playstation Portable, and Apple has sold (as of last announcement) 15 million downloadable videos at $1.99 a piece.

So why am I underwhelmed by the potential of mobile video? Because:

1. It's too small. The right size for video is a 42-inch plasma or LCD screen -- and that makes for an awfully big phone, don't you think? Instead we have the very nice 2.5-inch screen of the video iPod and the similar small screen of the PSP (and the even smaller screens of most mobile phones). Now if you happen to be running on the treadmill at the gym, or waiting for the bus, this will do. But it's no way to watch video that's produced at 1 million dollars per half hour.

2. It's too expensive. Forget the cost of the devices. Video online generally requires a subscription, and most people don't want to pay. Forrester's surveys show that even among the youth that are supposed to be all excited about this, less than 10% are willing to pay even a token amount. And advertising, which supports the rest of TV content, isn't a factor here. Advertisers need measurement, which is missing. And they need an effective delivery of video messages that's biggest enough to make an impression (see 1. It's too small.) And I'm not convinced consumers will put up with ads in mobile video, especially if they have to pay some amount for it as well.

So, where do I come down? Mobile video will become a niche market. There will be people interested in it, and there will be lots of content, but compared to television -- hell, even compared to online streaming video, which is doing great -- it will look very, very small.

Technorati tags: Bernoff, Forrester, Mobile video, iPod video

Intel Announces The Continua Health Alliance

[Ted] Occasionally we have guest bloggers. Today, Forrester's Liz Boehm has written her analysis of Intel's recent healthcare technology announcement. Over to you, Liz.

[Liz]

Intel just announced the formation of a new healthcare industry consortium -- the Continua Health Alliance -- which will grease the skids for interoperability among mobile, healthcare unbound devices. (We define healthcare unbound as technologies in, on, and around the body that free care from formal institutions.) The group includes industry heavyweights Cisco Systems, Kaiser Permanente, Medtronic, Motorola, Panasonic, Partners HealthCare, Philips, Samsung, Sharp Electronics, and Welch Allyn.

I talked with David Whitlinger, Intel's Director of Digital Health Standards, and he told me that the consortium will:

• Promote interoperability standards, complete with certification and logo. As it is today, healthcare unbound providers are on their own to build proprietary connections to devices, figure out how to transfer the data securely to a central hub, and then to redistribute it to relevant care partners. Continua Health Alliance's main goal is to ID appropriate standards and publish connectivity guidelines to reduce the flood of proprietary, one-off connectivity. But it's not a standards body -- Continua wants to, wherever possible, adopt and adapt existing data interface standards like USB, Bluetooth, and Wi-Fi. Vendors that go along with a connectivity certification will get to display a logo signifying compatibility with other Continua-certified products and services.
• Facilitate regulatory approval for standards-compliant solutions. Today, getting country-specific device approval is a mess. Continua plans to help by working with regulatory agencies to anticipate Continua devices and services and facilitate approval for Continua-certified solutions.
• Lobby for reimbursement for personal telemedicine products and services. The majority of healthcare costs aren't paid by patients -- they're paid by third-parties like government and private insurance. The problem for getting payers to pick up the tab is ROI. Continua plans to lobby payers for coverage by funding studies that demonstrate the financial and health outcomes of healthcare unbound products and services. And these aren't small companies -- don't expect their influence to go unnoticed.

Meanwhile interest in the healthcare unbound market is up, but actual market growth isn't hot yet. Players face challenges of market fragmentation, there's a lack of consumer awareness and trust, limited reimbursement, not to mention an onerous regulatory approval processes. Continua is taking aim at a lot of the core issues, but we're not out of the woods yet.

• Alliance founders should spur demand as well as simplify supply. Building consensus among competing technology and service providers is going to be a BIG challenge. But building a brand that consumers recognize and trust is key to overcome the average Joe's ignorance and fears about healthcare unbound solutions. And when we're talking about the average Grandpa Joe, health, privacy, and technology become a much bigger brand issue.
• Prospective alliance members must say goodbye to proprietary "walled gardens." In addition to the founding promoters, Intel has also recruited such notables as GE Healthcare, IBM, Omron Healthcare, and others for the alliance. I think that this alliance stands to significantly advance the healthcare unbound ball and we should see broad participation among industry players. Intel expects anyone will be able to join with the cost remaining low for cash-straped start-ups, but members should expect to tap the piggybank for lobbying and marketing that are critical to alliance success.
• Eco-system partners should demand "Continua inside." Healthcare service providers like hospitals, home health agencies, and disease management firms that want to explore new technology-enabled business opportunities stand to gain substantially from Continua's success. Interoperability not only creates solution flexibility and mitigates investment risk, but also fosters price competition among interoperable technology vendors. Providers should make "Continua certification required" part of their healthcare unbound RFPs and partnership discussions.
• Investors and venture capitalists should dig out their personal telehealth business plans. At a recent MIT Executive Forum event in New York, Bill Burkoth of Pfizer's Strategic Investments Group (PSIG) echoed common investor hesitancy to support small, struggling healthcare unbound solution vendors. The Continua Health Alliance stands to significantly smooth healthcare unbound start-ups' path to market, removing many of the barriers that put the kibosh on funding. Is the alliance all good news for the start-up market? Not exactly. Interoperability will not only foster price competition for commodity devices, but it also allows devices to be decoupled from ongoing-revenue-generating services that form the core of many start-ups business plans.

TechPotential: Thinking About Benefits

[Josh] This is our second post about the new service TechPotential. For the original post, click here.

The thing I notice most about new devices -- especially those that fail -- is that people aren't thinking carefully enough about the benefits of technology. Consumers adopt stuff because it helps them to do something useful, fun, or interesting. Sometimes it seems like technology companies, from Sony to Microsoft to startups, build products because they can.

This is where timing comes in. For new consumer technologies, the timing is right if the product can be immediately useful to people based on the technology they already have. iPod takes flight when people have a lot of MP3s already. Home networks build on broadband and multiple PCs.

In 2000 (!) we formulated these rules for new technology and benefits, which still hold true:

• Benefits must be simple extensions of existing behaviors. The iPod took off in 2002 because it extended established behaviors: listening to music on the go and collecting digital music on computers. Benefits vary widely — some products enhance entertainment, while others save time or money — but no matter the benefit, timing is crucial. For example, Research In Motion (RIM) wisely delayed the launch of its BlackBerry product by a year to 1998, waiting for enough users to adopt the POP3-enabled email systems that its product needed to work properly.

• Benefits must be in line with costs. Sales take off when costs match benefits and not before. When digital cameras cost an average of $590 in 1999, only 300,000 sold. By 2000, the average price had fallen to $354, and more than 4 million sold. Contrast this with WebTV, whose $21.95-per-month fee was out of sync with a benefit — Internet access on the TV — that was of little value to the consumers who could comprehend it. The cost-benefit equation varies based on the economic situation of the buyers. Career-oriented professionals are quite willing to pay $40 per month for broadband, while less-affluent consumers waited for $150 DVD players before surging into stores.

• Benefits must be more visible than the technology. In 1998, home networks demanded the technical expertise of a network administrator. But when Windows XP shipped in 2001, the benefits of wireless routers became more visible than the technology, and the market grew. Marketing must help make benefits obvious. TiVo's initial marketing promised to help consumers "take back control of their TV," but few could translate this into a clear benefit at the time.

Click on this chart and see why you think some took off and some didn't. Are we right about benefits?

 

Technorati tags: gadgets, predictions, Bernoff, TechPotential, Forrester