cloudalps (hidden peaks)

High Tech Economics – implications from a global perspective.

Nokia CEO provoking the leak of new Windows Mobile Phone

Nokia is in need of some positive press these days but especially anything that can highlight future potential in order to reverse the trend of its stock.When you hear CEO Stephen Elop talk to Nokia employees about the “super confidential” device he is about to show and that they cannot blog about it…. this sounds like a marching order to do exactly that.What do you think? Watch the video by engadget!

Nokia CEO Stephen Elop shows N9 Windows Phone i…

Filed under: Hardware, Media & Entertainment

Can Hulu disrupt TV like iTunes the music industry?

The evolution (or rather disruption) of TV is an interesting and quite visible battle of digital convergence – essentially an extension of what happend to the music industry ever since digital audio appeared on PCs around 1988.

It will not take two decades for TV to be transformed fundamentally despite its more complex technology and business architecture compared to music because the key drivers of change are the same as for music and those are now progressing rapidly. Nevertheless, several critical components of the TV business model are about to be disrupted:

1. Content: the decomposition of the old, huge interest/target groups of TV into to ever more, narrowly defined groups due to ever more distribution channels immediately impacts the production of content through the decomposition of a few big budgets into many but much smaller ones trending down to free or user-generated content

2. Distribution: while actual  TV broadcasting evolved from analog over digital terrestrial and cable broadband to satellite, mobile data networks and the wireline internet provide formidable challenges today. In most countries, mobile and internet access are provided by different entities than those that broadcast TV which accelerates the dynamics. It also makes MSO (cable companies) enter the voice / telephony business to counter the telcos’ attack on TV which happens either indirect (by providing the bandwidth for Hulu & Co.) or direct (by IP-TV services or Over-the-Top TV offerings). In the US with its high cable internet market share, conflicting interests between content (TV) and bandwidth plus (regional) market dominance complicate the situation.

3. Devices: the plain old TV set dies quicker than “dumb terminals” did in IT. While today’s LED/LCD/Plasma flatscreens come with enough computing power to access the internet directly – some even include a Netflix application – the consumption of TV is about to move to other devices including iPads, smartphones or PCs; the busier and more mobile the consumers the less will they sit in front of TV sets.

4. Advertising: with the falling apart of huge audiences (see 1), advertising has the chance to be sent to groups of much narrower socio-economics (e.g. watersports enthusiasts aged 25 to 45) that watch some sort of “minority” programming. While monetizing the “long tail” is still not trivial, advertisements will become more expensive in terms of individual impressions (an outdated metric since it lacks any indication of a response) but will be bought in smaller amounts for more specific target groups and often only for some sort of response (a click at a minimum but increasingly actual store visits).

5. TV-Complements: may be “TV dinners” are most tightly linked to traditional TV watching at home as a product category but so are DVDs (since those players are hooked up to TVs), a category whose shrinking revenues made Disney reduce its respective headcount just weeks ago. The common enemy here is again internet access (i.e. Hulu and Netflix vs. DVDs) and mobile data (e.g. smartphones to check on sports results vs ESPN-like TV channels).

While The Economist in a recent article foresees a “nasty, long-running fight between media companies and distributors”, the above components are under so much pressure individually and collectively that one could also imagine a more rapid decline of demand for traditional TV content from traditional distributors. Most under 20 years of age spend more time in front of an “internet screen” than in front of TV which makes building Brand Equity a challenge for many big advertisers which in turn will reduce the time for media companies to fight with their distributors.

Not only can Hulu serve the youth segment better than TV can today, it also gets more solid feedback in the form ad video banner clicks, Facebook “likes” or other consumer action while TV can still only provide statistics of their remaining audience that might or might not sit in front of the TV set. While this battle seems to have a clear winner, it will not imply an iTunes-like effect for now. TV/video content is much harder to decomposition into the equivalent of songs and its consumption requires more attention of eyes and ears so that advertisements likely will remain a currency that consumers can use to pay for not only content but even its transmission (the data caps in mobile or bandwidth limitations in wireline internet access).

Filed under: Media & Entertainment

About Thomas Rupp

Economist & MBA focused on leveraging Disruptive Technologies in IT and Telecommunications, mostly for Enterprise clients. More than 15 years at Microsoft, currently as Global Program Manager for Cloud Support Transformation. Sloan Fellow 2010 (MSc in Management) at Stanford Business School. Ultra Marathoner, Foodie, Diver and Audiophile.