Devices, Media, And The Future Of Everything

Good bye and thank you

by Josh Bernoff

Thanks for all who participated in this blog -- as readers and writers -- since our inception two years ago.

Since then I've personally moved on to The Groundswell, where we're talking about social media.

Forrester continues to cover the fascinating world of devices and media, so you'll see more blogs from us in the future. In the meantime, here are a few of my favorite posts:

Steve Jobs' Brilliant Strategic Move: Kill DRM

Internet Video Devices

Over the top TV and what's in the way

The iTunes debacle

OLPC, Nicholas Negroponte, and the threat to Microsoft

YouTube is goin' down

Flamin' laptops

TV at gas stations and airshows

Mobile video stinks

DVRs bedevil network ad sales and Advertisers worry about commercials

The end of analog TV

And finally, Cable a la carte -- and the argument still holds up after two years!

Look for Forrester in the news and more devices and media coverage from James McQuivey, Charles Golvin, and J.P. Gownder.

Meet me in the groundswell

[Josh] After 11 years of covering media, television, and technology for Forrester, I’m about to take on a new role: author.

Forrester is supporting me in my quest to understand a new the most powerful phenomenon on the Web – the trend toward people using social technologies and undermining the power of institutions in the process. We call it the groundswell, and it’s a hell of a phenomenon.

I’m really just a baby in this field. The expert is another Forrester analyst, Charlene Li, the queen of social computing (as we’ve called it in the past). Luckily for me, Charlene has agreed to collaborate with me on this project.

For those of you who’ve worked with me in my exploration of media trends, thank you. I’ve gotten to meet incredible people, learn amazing things, make friends and enemies, and get quoted an awful lot. What a great trip it’s been. I’ll be helping behind the scenes as analysts like Brian Haven, Maribel Lopez, Charlie Golvin, JP Gownder, and Paul Jackson pick up the torch, with help from a new analyst or two we’re hiring right now. Media trends like online video, digital video recorders, and HDTV are still changing rapidly, and we’ll be all over them.

If you’d like to join me in my new project, pop on over to blogs.forrester.com/groundswell. That’s where we’re launching the ideas behind the book. Be a part of it.

Internet Video Devices: Post-Apple TV Summary

[Josh] Today I visited AT&T, Intel, Sling Media, and TiVo. And, of course, we heard from Apple at MacWorld -- my colleague Charlie Golvin was there for that announcement. So here's a rundown of the necessarily incomplete list of Internet Video Devices with some brief analysis for each. This is random and not parallel, but hey, I thought you'd like to see the results of a few days research.

• Apple TV. We've been talking about this product for a year -- and we described a version of it earlier in this blog, under the name AppleVision. The Apple TV product is $299, with a 40 GB hard drive and connections to wireless home networks and output up to 720p HD. It features the usual iTunes video content and movies from Disney and now, Paramount. Also shows photos and plays music. PROS: Apple design, broad content collection, lots of Apple advertising to sell it. CONS: Set top boxes rarely, rarely catch on (CDi, WebTV, there's a whole slew of examples). They have to replace something (DVDs and DVRs replaced VCRs, for example). So forcing this onto the TV will be tough. $299 sounds great, but then you have to pay for all those movies and shows. No renting. And your home network had better have pretty good throughput if you don't want to wait for those videos (this applies to all the products below that use a hard drive).

• AT&T Homezone. Combines Dish Network satellite service with an AT&T broadband connection. Features a wide selection of content from Akimbo and MovieLink (see previous post). PROS: If you're getting Dish Network this is a hell of a deal, bundled service plus a nice DVR. And the movie selection is far broader than typical cable VOD, over 1000 movies. They're advertising heavily, too. AT&T will make sure your home network delivers. CONS: Only available in AT&T areas (remember, that now includes BellSouth). And you have to switch to Dish Network to get it.

• Moxi. So far just a plan to go into retail with their current cable box, and a CableCARD connection. PROS: People seem to really like the interface, nice integration with Internet and video content. CONS: Not available yet, don't know what content it will feature or pricing. And it's a new brand consumers don't know.

• TiVo. Internet content available through "TiVoCasts." These include CNET, the New York Times, RocketBoom, iVillage, and soon, some stuff from CBS, Forbes, and Reuters. You subscribe to them as you would to a season pass. PROS: Comes with a TiVo people already like, and there are about half a million TiVos connected to the net already. CONS: Not much of a content selection so far. And you have to buy a TiVo if you don't already have one.

• Xbox 360. If you connect it to the Net, you can get access to content downloads including Paramount and Warner movies and a bunch of TV shows. PROS: Probably has a head start of about a million Xbox 360's connected to the Net. Very simple, and the Xbox is already there. And the more Xbox's sell, the more prevalent this will get. The clear leader so far. CONS: When will YouTube get there . . . never. Could use some more download content, and some streaming content as well.

• Windows Vista PCs. Connect one to your TV and you can use the 10-foot interface and see content from . . . well, so far, from Showtime, Starz/Vongo, Nickelodeon and Fox Sports. PROS: The PC already has a net connection, and can function as a DVR. And some models will have CableCARD slots. CONS: Let's see. It's a PC, so it's expensive and an odd thing to hook up to your TV set -- are you only going to use it for games and video? And why so little content. The Web is full of video -- but not for the 10-foot interface in Microsoft's view.

• Sony Bravia TVs. Will feature an optional module that connects to the Net and streams content, including some from Yahoo! and AOL. PROS: Built into the TV (sort of), use the TV remote to access the content. CONS: You'll have to wait for Sony to get the content you want. And streaming has significant limitations because of home network bandwidth.

• Sling Catcher. This new product from Sling Media will come out by mid year. A hard drive accessory is optional. It will show video from your SlingBox on your TV, along with Net video from a PC. PROS: Low price, nice setup for your vacation home or spare bedroom TV. CONS: Like the Apple, is there enough in this device to get you to buy one and hook it up? And stay tuned, we'll find out more about the content for this soon, but for now, that's unknown.

Our report that lays this all out will be available to Forrester clients soon. But this was definitely the story of CES this year, as we had anticipated.

Technorati tags: Bernoff, Forrester, Internet video, Apple TV, AT&T Homezone, Moxi, TiVo, Xbox 360, Windows Vista, Sony, SlingCatcher

Akimbo and USBTV: Prepackaged Device Content

[Josh] Of all the things I saw yesterday, one of the most interested was Akimbo. The CEO is an old colleague of mine, Josh Goldman, and I had almost written the company off since it was (a couple of years ago) trying to sell a separate set-top box that downloaded content from the Net.

The current strategy is working far better. Akimbo has collected content from 200 sources -- networks programs, oddball stuff, and with help from MovieLink, recent Hollywood movies. This is your basic collection of nearly everything on the Net you'd like to see on your TV, except for user-generated content -- and I'm sure that's coming.

Then they go out to IVD platforms and say "hey, why not license our complete content collection." If the company is Sony, they may respond "no thanks, we'll do that ourselves." But if it's somebody a little less connected (or a little more in a hurry), they see Akimbo as far preferable to making their own deals with 200 content companies.

So far Akimbo is on an RCA standalone set-top box that does downloads and the AT&T Homezone service. It wouldn't surprise me if they make deals with Digeo and many of the other players entering this market. If you can't make your own portal, come to Josh Goldman.

I should mention they support one other product that's pretty interesting in its own right. SanDisk announced a new product called USBTV. It's a weeny little thing that comes in three parts. One plugs into your PC's USB port like a thumb drive with a weight problem. The second is an adapter that plugs into your TV. The third is a remote. You plug the USB part into your PC and copy over some content, including unprotected videos or Akimbo files. Then you plug the USB into the TV adapter and view the content using the remote. Slick as can be - and yet another way to do the Internet Video Device thing.

Back to the show . . .

Technorati tags: Bernoff, Forrester, Internet video, Akimbo, USBTV

Sony and Microsoft IVDs -- Keep Your Eye On The Device Portals

[Josh] Just a quickie before I head out on my bike.

Sony at its press conference revealed its Bravia TVs will have an optional module you can get to connect them to the Net. And Microsoft promoted HD video and movie downloads to the Xbox 360 in Bill Gates' keynote speech. We also heard about SlingCatcher from SlingBox, which allows you to get access to both SlingBox broadcasts and Net video on a TV.

There's more coming. But here's what to keep your eye on. Every one of these devices has a portal. Sony's will feature content from AOL and Yahoo. Microsoft has movies from Warner and Paramount. Ask yourself -- how do content companies get onto these portals? Who gets promoted? That's the real story here -- once these things catch on (and it will take a few years) the portals become sources of power.

Gotta fly . . .

iTunes sales are NOT plummeting! Press credibility, on the other hand . . .

[Josh] What an interesting couple of days it's been. What follows is a case study in how information -- and misinformation -- spreads on the Net.

We put out a simple little report about iPods and iTunes based on credit card transactions and publicly stated Apple data. And for those who aren't Forrester clients, I blogged the highlighs. In case you are wondering, we ran the report by Apple, and they declined to comment.

Since then:

- The New York Times ran a little fairly balanced pieced on the research. This got us on the media's radar screen. Then . . .

- A UK outfit called The Register and Bloomberg decided to dive in and highlight one finding of the report -- that iTunes sales had dropped in the first six months of this year. We got treated to wonderful headlines about iTunes sales "collapsing" and "dropping" and "plummeting" and so on. Now for the record, iTunes sales are not collapsing. Our credit card transaction data shows a real drop between the January post-holiday peak and the rest of the year, but with the number of transactions we counted it's simply not possible to draw this conclusion . . . as we pointed out in the report. But that point was just too subtle to get into these articles.

- Apple's stock actually did plummet -- 3%. I started getting calls from hedge fund managers. Apple's spokesman called and, although they refuse to go on the record with any facts, they're clearly upset. And I also heard from the Chicago Tribune, San Francisco Chronicle, LA Times, Financial Times, Toronto Globe and Mail, thestreet.com, etc. At this point I was trying to get people off the "65% drop" idea and onto some of the more interesting ideas in the report, with mixed success.

Now, you can't unring the bell. But I will try to focus you on the truth here, which is this: iTunes sales are leveling off, the Journal did an article about it last Friday with data from Soundscan. Apple is not in trouble -- it makes its money mostly from iPods, and iTunes is just a way to make that experience better. It's the music industry that has to worry, since the $1 billion a year or so from iTunes, globally, doesn't nearly make up for even the drop in CD sales in the US, which are now down $2.5 billion from where they were.

Finally, a word for Apple. Apple is extremely stingy with information about their business and public comment. Their unwillingness to comment on the record or off about anything they're working on or any industry results beyond the basic statistics fuels speculation, pro and con, from their supporters and detractors. In the research business we like facts -- and every other technology company is more open with them. So maybe it's time for Apple to share a bit more. When the real bad news hits -- and it's inevitable, no company gets everything right -- that openness would pay off.

I'd really like your comments ... interested in hearing from you.

Technorati tags: Bernoff, Forrester, Apple, iTunes

Is 20 iTunes per iPod a success story?

[Josh] Apple has continued to announce new milestones for iTunes, which is now up well over 1 billion song downloads and by some accounts represents 3% of the music industry. What could possibly be wrong with this picture?

Well, we decided to take a closer look at it. Specifically, my colleague Remy Fiorentino delved deep into iTunes credit-card transaction data to look at how buyers actually behave. Here's a link to the research (Forrester clients can see the whole thing; press, request a copy from our PR folks). But some surprising facts dropped out:

• About 3% of online households bought iTunes. On average they spent $35.54 in a 12-month period, in 5.6 transactions. But the median household bought only $16.83 -- the difference being that a few large transactions skewed the average higher.
• The median transaction size is just $2.97. One third of all transactions are for less than $1.08, the price of a single song (plus tax in some states). There's an awful lot of one-off buying going on.
• The "80/20" rule for iTunes is actually 80/34 (the top 34% of iTunes customers account for 80% of the purchases).

But what I think is the most interesting result didn't come from analyzing proprietary data -- it came from Apple's public statements. Remy painstakingly tabulated Apple's announcements about iTunes sales and iPod sales and came up with this chart. (Click it -- it's worth it.).

Since iPods went on sale, people are consistently buying about 20 iTunes per iPod. There's been a small uptick to 23 lately, but that's it. What's the explanation? It's either:

1. People are buying at a low but steady rate, but replace their iPod every few years -- which would imply that iPod user market is growing more slowly than it appears, or
2. People buy about 20 songs and then get tired and don't buy any more.

Or, both are true. Either way, this accounts for a little tarnish on the incredible iTunes success story, with only 20 purchased songs among those thousands of songs in your pocket.

Technorati tags: Bernoff, Forrester, Apple, iTunes

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

Microsoft responds to OLPC

[Josh] I ran into Jamin Spitzer, head of analyst relations for Microsoft, at the Forrester Digital Consumer event last week. He promised to show me Microsoft's response to the idea of a low-cost PC for the their world (see previous post)

They're pushing a smart phone solution. Here is a link he sent me on it. You have to scroll about half way down the text or half way into the Webcast to hear the part about the cell phone.

Now Nichalos Negroponte addressed this issue at our event. He pointed out that the screen on mobile phones is too small for these applications. Microsoft also talks about hooking it up to a TV. Negroponte responds that for those third-world children who have a TV set at home (not that many) that asking to use it for the phone isn't really going to fly with mom and dad. Especially if there are two or more kids.

I think he's right.

Microsoft as usual responds to these initiatives by finding some way to assemble the pieces it has to deliver some subset of the functionality and eventually get it right by version 3. And it often works. But here, Negroponte has an impossible to compete with business model -- no profit, distribution by the millions through governments, and a computer designed for kids.

The only way for Microsoft to compete with this is to design and give away cheap PCs. Which they may well do. Stay tuned.

Let me know if you agree with Microsoft that a mobile phone solution is best for the third world -- I'd like to hear from you.

Technorati tags: Bernoff, Forrester, Microsoft, OLPC, Nicholas Negroponte

OLPC: Microsoft, be very afraid

[Josh] I just got off stage at the Forrester Research Consumer event in Chicago. My job was to interview Nicholas Negroponte on stage.

Negroponte, formerly director of the MIT Media Lab and prominent thinker on matters digital, was here to talk about his new venture, OLPC (one laptop per child). Briefly, OLPC is a new PC, low power, no hard drive, that runs Linux and connects in mesh networks. More important is the distribution -- the OLPC organization, a non-profit, will be selling these at about $130 a piece to governments in places like Brazil, Argentina, Nigeria, and Libya. Quaddafi has agreed to give one to every single child in Libya. By year two, OLPC expects to manufacture 50 to 100 million of them.

Very importantly, and Negroponte emphasized this, this is not an underpowered machine. It's instant on, instant off, and according to Negroponte, blazingly fast.

Now Microsoft has an obvious monopoly on personal computing platforms worldwide. Apple is trying to to chip away at it one Mac at a time -- same with Linux. But in one fell swoop, in a period of two years if he gets what he wants, Negroponte will be shipping by the tens of millions.

Once the OLPC gets out, many, many software developers will develop apps for it. Mass attracts talent. And while the hand-crank powered machine is not right for an American Adult consumer, it has many attractive features, and -- Negroponte confirmed this on stage -- OLPC will license their patents on the device. Which means somebody else could create a "professonal" version. Remove the cost of the Microsoft software and you've got a very cheap, very capable, very portable machine. And you feel good, because when you buy it, you're helping third-world kids. As Negroponte said, it's better than a yellow bracelet.

Microsoft is talking about their own version based on a smart cell phone. But 100 million laptops later, if I were Microsoft, I would be very afraid.

What do you think?

Technorati tags: Bernoff, Forrester, OLPC, Nicholas Negroponte