The Changing of the Guard

Changing-of-the-Guard

 

IBM, Cisco, Intel, Microsoft, Dell, HP, and other large legacy hardware and software companies have something in common these days. A declining revenue stream. Big time.

IBM_logo     cisco      intel_logo

Its not just one or two companies, its most of the big ones. And the results will ultimately effect employees as each quarter passes and they are forced to reckon with Wall Street earnings and reports. The stock market takes no prisoners.

Online newcomers with ‘disruptive’ business models and software are flourishing. Box, Dropbox, Workday, Amazon, Salesforce, Facebook, LinkedIn, all have reported record quarters. Even Apple despite its recently declining stock price is still growing. Just about anything that has to do with mobile phones and tablets has the ‘Midas touch’.  Google Inc. said last Thursday that its revenue grew 31% in the first quarter, while profit rose 16%.

IBM last Thursday reported its revenue dropped.

Software giant Microsoft Corp., once known for rapid sales of PC software, reported that the business that includes its Windows operating system turned in essentially zero growth

Intel Corp., which has struggled to get its chips into mobile devices reported a first-quarter profit drop of 25% on revenue that declined 2.5%.

Oracle Corp., reported a 1% drop in its revenue in its most-recent quarter.

The disparities are the result of technology shifts—the rise of mobile devices and slowing growth in personal computers, conventional software replaced with online versions and cloud outsourcing by corporations. Companies want to rent software and computer systems. The deals are smaller and take less time to implement. Companies want to get out of the construction business—building and rolling out expensive software and hardware systems.

Web-based technology makes it easier for consumers and corporate employees to try new things and makes it harder for older technology suppliers to keep rolling out huge hardware and software deals month in and month out. Hardware, chips and hard drives get faster, smaller and cheaper now every 3-6 months making large purchases by corporations old before the equipment barely gets installed.

Workday Inc which was founded in 2005 and went public in October, reported that revenue for its fourth quarter ended in February rose 89%

Box Inc., founded in 2005 that lets customers store their data online and tap into it from mobile phones and PCs., revenue grew more than 150% in 2012 and it expects another doubling again this year.

“Their biggest challenge is they live in a world of legacy business models,” said Ed Anderson, an analyst with technology research firm Gartner Inc.

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Television is no longer TV, its IP!

The old generation networks: ABC, NBC, CBS and FOX. The new-generation networks?  Hulu Plus, Amazon Instant video, Netflix and YouTube.

Consider this:  Microsoft recently reported that Xbox 360 owners spend more time online watching video and listening to music than playing games. The company announced 35 new entertainment partners being added to the Xbox 360 in the next year, including the NBA, NHL, Nickelodeon, and Univision. ESPN is expanding its programming on the Xbox to include live feeds of all of its channels. Microsoft is also launching a music service to compete with iTunes.

                

The Wii U, debuting this fourth quarter, will also feature Netflix, YouTube, Hulu Plus, and Amazon Instant Video.

And, Outside of games, the PlayStation Network also now delivers access to streaming content from Hulu Plus, Cinema Now, Amazon Instant Video, Netflix, NFL Sunday Ticket, NHL Game Center Live,  MLB.TV,  ESPN and Crackle TV, while users will soon have access to YouTube from the PlayStation Vita.

You’ve got wonder, how will Nielsen ever be able to count the eyeballs watching? At this point, they can’t. They are the ‘dinosaur’ technology.

When my Mom and Dad had breakfast in the mornings, they would pass the newspaper back and forth. Back then, I looked at the classifieds for things to buy second hand and they even had a classified section in most magazines and papers for the ‘personals’. Wanted to go the movies (you know the movie we saw ‘advertised’ by trailer last night during a network show on CBS, say Ed Sullivan or Mary Tyler Moore), we checked the newspaper.  Real estate listings and needed to buy a used car? Newspapers.

               

Fast forward 15 years. Now we check our mobile phones for movie trailers and times. Dating? Not in the newspapers, on mobile or a laptop or tablet. News? Forget the paper. And for many years, the papers were in denial – they kept printing tons of papers, special sections, extra editions and even tried to launch new newspapers in certain cities to compete with the entrenched and big local guys. They lost millions of dollars and saw their stock price get hammered and many folded. The bigger ones put up paywalls (i.e. NYT’s, WSJ, etc.)

Then the music CD died and the way music was listened to and purchased changed. No one could believe that there wasn’t going to be any more music CD’s nonetheless a Tower Records or Wherehouse to close their doors. But they did. And the CD has all but disappeared.

Movies? Same thing is happening and will happen. It may take longer because of the nature of the medium. Movies are different than music in that the files are way larger and with music you listen to ‘Hotel California’ or your favorite music many times over and over. Movies? How many times can you watch the same movie over and over. However, Blockbuster and stores like them are disappearing. Replaced by iTunes, RedBox, (and RedBox I believe has a limited life span even though they are going gang-busters today), Amazon Instant Prime, YouTube, IMDB (yes you can buy movies and stream them there too) and many others.  Even Wal-Mart is in the mix (Ultraviolet and VUDU).

In my generation and others behind me, its what you owned and had that was important. Today, its how you access it. No ownership. No physical ownership that is. Its just not important. When and how you get it, is.

The final frontier is the television. And it’s a big frontier. And, there is more at stake than a plastic CD in a rectangular box that will disappear. Advertisers and the big 4 networks stand to lose the most. Including producers, writers, actors and the like. Add a DVR into the mix and the new choices that the younger generation has now and you’ve got a real problem CBS, NBC, ABC and FOX.  The upfront TV buying season which some estimate generates $19 billion fuels most everything we see on TV. About $9.5 billion for network and $ 9.9 billion for cable.

Network estimates individually for 2012-2013 season are:

  • CBS: $2.92 billion,
  • ABC: $2.65 b,
  • Fox: $2.15 b,
  • NBC: $1.78 b.

So, when Game consoles, tablet makers, mobile phones and the like are all putting mainstream content up and online for consumption, someone stands to lose. Another way of thinking about this would really be a shift of dollars from Network and Cable to third screens. It won’t disappear but in ten years it’s going to look awfully different than it does today. And the way all of this is counted and rated will actually become easier than how Nielsen has done this for decades ( a diary that you write in? Really?).

A new report from Nielsen, the TV audience ratings and measurement people, shows that the number of people who watched TV at least once per month—a pretty low bar—declined from 90 percent of the population to 83 percent last year.

Proportionately, that means TV lost 8.5 percent of its audience in 2011. As many as 17 percent of people never watch TV, the survey of 28,000 consumers in 56 countries.

That’s a huge loss of interest in a medium that in industrialized nations is regarded as a standard like electricity or hot running water.

The number of people watching video on a computer at least once per month is now higher, at 84 percent, than those watching TV.  The implications are obvious.  Some not so obvious. One is that cable affiliates pay big fees to Networks for carriage. If no one is watching, no one will be paying. And, younger kids don’t care what ‘network’ its on, they care when it will be available to see on Netflix or Hulu Plus. A real shift in economics and habits. And I don’t think the TV industry is paying attention. But they will, they will have to.

Welcome to the new world of multi-screens and time shifting. TV as we once knew it not TV, its IPTV.

Apple’s Half Approach To The ‘Clouds’

This weeks Apple announcement is not quite as cloud centric as you may think. Unlike Googles approach with having a chromebook browser with Linux running underneath and no local storage, Apple is still tethered to the device we use. It’s a world of ‘apps’.

In Google’s view, you do everything using a browser with no local storage or apps. In Apple’s world, while it has taken an elegant approach to its delivery mechanism and user experience bar none, it is still largely delivering a localized environment.

In Google’s world, chromebooks and other devices like these will still need to grapple with the unreliable world of ‘wireless’ connections – or sometimes lack of them and the consumers long time habit and behavior of wanting the content close by them, local.

With Apple’s announcement, they are positioning themselves to take full advantage of the ‘post’ PC world – that is they know that by 2013 (a scant 2 plus years away).

Gartner and others predict mobile phones and THEIR screens will be the No. 1 way we access the Internet to view the web. Here are some more rather startling mobile facts:

*82 percent of consumers have used their mobile phones in a store, 55 percent in a doctor’s office or hospital, 17 percent during a movie at the theater, 14 percent while flying on a plane and 7 percent during church service. Around 17 percent of mobile users have shown a clerk in a store a picture of a product on their mobile phone, saying in effect, “I want this please,” which is a new shopping behavior that is surprisingly being driven by men. 45 percent of users check their mobile devices first thing in the morning, according to InsightExpress.

*Research has determined that mobile advertising is four-to-five times more effective than online advertising, on average…due to various factors, including lack of clutter in mobile, typically one ad per page, and the mobile pages themselves typically do not have a lot of stuff going on—they tend to be very clean. Also, the proportion of the ad on a mobile screen is greater, so it gets more share of eyeballs.

My takeaway from these numbers is that we are steadily becoming a mobile and tablet world, not a PC one.

This is a world the Apple knows better than anyone and using iCloud, it has taken a very good shot at delivering a cloud experience with what really is a local one.  Apple is extending what Apple does best, its core strengths into the cloud. And this is simply the basic integration of Apple’s hardware and software – their elegant OS.  The major difference being it does not yet rely on the browser as the central driving force in the picture (Google’s chrome) rather in Apple’s view what they are giving us an elegant CMS or content delivery system that we manage.  Google is betting on its browser, and they too know its coming to the small screen, therefore, that’s why we are seeing the Android store downloadable app strategy they are pushing out..

Apple which supports its web apps in the App store will have a rude awakening one day as eventually everyone but them will play on a browser using HTML5, but for now Apple’s user experience is by far the best.  A good example of this is when you go to read GoogleNews on your iPhone using Safari and at the bottom of the screen a small box pops up saying ‘ if you want to access Google News, click here to put this app on your device’. If you agree, a small app-like icon gets created on your iPhone using HTML5 just as if you downloaded it through iTunes.

So, Apple IS a cloud player indeed, distributing its OS X online, supporting over the air updates, allowing iTunes to be streamed to any iOS registered device. And iTunes did something that neither Google nor Amazon has done – signed deals with the major music players for their content (video/films excluded for now). This allows us to avoid the time consuming process of uploading our music collection to iCloud (I think I have about 60gigs of files). We can purchase a subscription to Music Match for $24.99 year, and MM will mirror my music collection with the iTunes store – ALL of my music, not just iTunes purchased music. These tracks can now be streamed back to me from the cloud on any MacOS registered device.

However, unlike other pure cloud players, this isn’t a web based operation for all of this. Apple still is enabling core SDK kits (software development kits) for developers to build in access and API’s (application program interfaces) that will let developers integrate their own apps within Apple’s cloud.

To perhaps make this analogy clearer of why it is not a pure based cloud play, look at iTunes. Your music library stays right where it is, with YOU – MM provides software that identifies songs and tracks you have and purchases you made at iTunes against the vast iTunes catalog of music to support MM. All of this not really ‘cloud’ based, but still local.

For us users, the benefit is an elegant, easy intuitive way to sync our content between all of our tablets and mobile devices (Macs included). And this sync does include most other services and docs Apple’s got to offer, calendars, contacts, documents, online storage and photos.  This is far different than Google that has a true cloud offering using GoogleDocs where you store the document and edit in the clouds.  With Apple, you make changes locally and then those changes are synced to the cloud.

This method allows us to be far less vulnerable to the woes of the wireless world or lack of it at times. And, ultimately, it will keep us all purchasing not just apps but what Apple REALLY wants us to buy – newer iPads, newer iPhones and brand new Macs.  Apple is really in the hardware business, unlike Google that wants to drive everyone to the web on inexpensive chromebooks running Linux to see more advertising or Amazon that wants to drive purchases online. It a half hearted approach but it’s a damn elegant one and one that I am particularly enjoying because everything just works!

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Apple’s ‘iCloud’ Just Might Be Netflix’s Achilles Heel.

Apple took a long time to get the Internet. Geeks were still installing FTP clients and web browsers for years after Apple belatedly included TCP/IP and PPP to their OS and, when Apple finally did integrate the Internet into Mac OS, it was in a very tacked on kind of way. A browser, an app for making web pages, eventually a few vertical online stores. I think that’s all about to change tomorrow a the WWDC.

The upcoming ‘iCloud’ announcement will vault Apple into the music cloud business, pitted against Amazon and Google (and a few others, but they are the 900lb. gorillas in the room). Apple has been in the business of selling movies and music for a long time now. Far longer than Google and longer than Amazon, at least digitally (no physical plastic CD). Now they will announce ‘iCloud’.

There have been many guessing at what this will look like and include, and I’ll make a few guesses too and I’m sure not all of them will be correct. But its fun nonetheless to postulate. Netflix is unquestionably the king of movie rentals by far. They have the breadth of product, elegance of delivery online and a reasonable cost/subscription plan. Apple is the king of online movie ‘purchases’. Based upon the fact that Apple has been building out a $1B data center in maiden N.C. , it is more than possible that they have infrastructure to support ‘movie’ lockers. That is, you buy a movie and can now store that film remotely in your cloud ‘locker’. This is the one thing that Netflix (at the moment) can’t replicate very easily.

First, it does not have the infrastructure in place (at the least own the facility) even though they host through Amazon’s EC2.  Yes, they can build it out there, but it would be costly.  Second, to my knowledge ownership is a digital right that must be negotiated and exists separately from a pure rental right with the studios. Something that is NOT easy to get from the Hollywood majors – and I know because I’ve been there before several times before. And third, Netflix core business premise is rentals – it has never been the place we turn to purchase a film thereby making it even harder to shift consumer habits that so far lie with an Amazon or iTunes.

This IMHO, could be considered an Achilles heel for Netflix. Not that they couldn’t get here, but perhaps they will get here AFTER Apple does. And first mover advantage is HUGE online and especially in the entertainment space. An storing your movies is altogether another issue – especially once you begin storing your movies in a cloud. They are NOT easy to move (file size is 750megs -1gb or more compared to a typically small 4-5mb mp3 file) nor would you want to. Right now, people are complaining about how you need to upload your MUSIC files to Google or Amazon’s music cloud offering. Imagine what they’d be saying about uploading movies? Again, this is all a guess of mine. Some other thoughts and guesses about tomorrows announcement by Apple MIGHT be:

 

• Your Mac, Windows, or iOS device can sync with all or part of it in the same way that your iOS devices sync with your computer’s iTunes library today because your music library exists in the cloud now.

• Continuous syncing of iOS devices in real time. The implication is never having to plug your iPhone or iPad in to your computer again. You won’t need a computer to sync anymore.

• One login using your Apple account: On any Mac, sign in as a guest using your Apple account credentials and you’ll be brought to the same desktop you get on your personal machine. Files will be downloaded from the cloud (or your home network) on demand, and you’ll have access to all the apps you’ve purchased via the Mac App Store, downloaded and installed on-demand, and removed securely, along with your data, upon log-out.

• Play music on your mac, then with a tap shift the music to your iPhone when you’re on the go. A sizable portion of the playlist will quickly transfer over so there’s no reliance on continued wi-fi access or 3G streaming. A ‘cloud’ benefit.

Lion and iOS 5 will change the playing field for many. It will be interesting to find out exactly how Apple will do this and when tomorrow at WWDC (Worldwide Developer Conference). You can watch it live here on Monday, June 6th at 10am: http://www.macrumorslive.com/.

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Apple’s App ecosystem…some notes

For those of you who don’t read these things, here are some takeaways and bullet points from the latest report from Distimo. The full report can be found here: http://www.distimo.com/

Less than two months after the launch of the Mac App Store, a top 300 Mac application already generates half the revenue of a top 300 iPad application on average.

The average selling price of the top 300 applications is seven times higher in the Mac App Store ($11.21) than on the iPhone ($1.57) and almost three times higher than on the iPad ($4.19).

The Mac App Store has 2,225 applications available in the store approximately two months post-launch. Comparatively, the Apple App Store for iPad had 8,099 applications two months post-launch.

Although on the Mac gaming has been less popular than on Windows, the Mac App Store promises a bright future for Mac gaming: there are already 646 games in this store (29%), and 39% of the most popular applications are games as well.

The proportion of free applications in the Mac App Store is lower than in any of the other application stores analyzed in this report: only 12% of the applications are free.

The 300 most popular free and 300 most popular paid applications in the three Apple application platforms (iPhone, iPad and Mac App Store) are published by 1,014 publishers in total. 173 publishers distribute applications in more than one of these stores (17%), the Mac App Store being one of these stores in 49 cases (5%).

LTE capable iPhone = 10 Mbps speed is coming – faster than a speeding bullet!

LTE ( Long Term Evolution) – Verizon’s LTE field trials in Boston and Seattle have shown downlink average rates of 5 to 12 Mbit/sec and of 2 to 5 Mbit/sec, which will give mobile customers browsing speeds comparable to a typical wired home Internet experience, the company said. More than likely we will see this around this summer with the release of the iPhone5.

How wonderful is that. The problem is that once you have that kind of speed to use, you’ll use it alright. And especially with video. That’s just what Verizon and eventually ATT want. Why? Because they won’t have ‘unlimited’ bandwidth plans anymore for mobile – they will meter – http://bit.ly/hO .

And they will have to. Not only will you be bale to use this for sending and receiving video, pictures and other data, but you’ll be able to make crystal clear VOIP calls using software on your phone – thereby getting around the minute usage meter. But you can figure that the carriers will simply meter bandwidth and replace metered minutes with metered bandwidth. I’m not sure which is worse but I guess it will depend on whether you talk, text or tweet (which is really 2nd gen texting anyway)?