Monday, 30 April 2012

What I've been reading this week

I’m of the belief that participants in the TMT industry need to read widely in order to understand the present and future dynamics of the market. To that end, this post is a collection of the articles that have caught my eye.

This (now: last) week: Samsung overtakes Nokia, Facebook & Netflix results disappoint while Apple and Amazon delight, Cameron mines asteroids ; MIT weaves a building.

New business models

In case you were under a rock this week, one of the biggest stories was Samsung overtaking Nokia as the world’s largest mobile handset manufacturer. My only caveat on this story is that I’m not a massive fan of Strategy Analytics’ data – it tends to have a slight slant, particularly as they’re the only people Samsung give data to. Still, the writing’s clearly on the wall for Nokia...

...and all’s not well internally – here, Nokia’s Windows strategy receives a good kicking from former executive Lee Williams. He really doesn’t like Stephen Elop. Bad times in Espoo.

I quite like Google Wallet, but one thing that I can see coming is that the Android licensees (think Samsung, Sony, LG etc...) might want to try their own payment platforms in competition with their patron. In any case, Big G are much more likely to succeed than the existing payment oligarchs or the telecoms majors.

US online consumers spend 23% of their disposable income online. That’s a pretty big proportion and demonstrates why the above story is important. Another big takeaway is that 11% of UK consumers spend more than 50% of their disposable income online (the highest proportion in the group), demonstrating why we in the UK have a great opportunity to be online innovators.

If you haven’t already seen it, the Valve employee handbook is well worth flicking through. This is how to engage employees...

I can’t decide whether (as the article suggests) there’s really a market for Green Affluents who’ll live in a $3.5Mn house but drive a $35k Prius. I suspect practicality is the key reason they choose said vehicle. Sports cars are great but bloody annoying in traffic, hence the success of the MINI. Interesting article, nonetheless.

Digital media

As regulars will know, I’m bearish about Facebook. Their latest results are worrying as it seems to me that for every user they add their margins decline. That’s what happens when you’re not able to innovate in step changes, but instead iteratively reduce the functionality of a platform that is increasingly unusable and uncool. I still think there’s a good business in there somewhere. Wholesale changes are needed to let it out.

I’m bearish about Netflix too and so, it appears, are the markets. Here’s why: it’s competing with pay TV companies with much deeper pockets and its own suppliers (Sony & Disney in particular) who have their own vision for the future of post-theatre distribution.

Zynga, however, seems to be diversifying away from Facebook – it only got about 88% of revenue from them last quarter, compared to 93% in the previous. I’ll be watching that trend with interest as Zynga is in some ways are more compelling platform than Facebook.

Games, however, are no longer the main time-hog on phones, at least according to Flurry, who are sometimes right about these things. As an aside, it entertains me how many companies claim that their way of telling what users are doing is the best, when really they’re all different lenses on the same thing.

Still, the naysayers can ignore Jimmy Wales, who should stick to encyclopaedias and free expression. Hollywood is really just a funding mechanism and won’t be disrupted as he describes. The tech industry fundamentally doesn’t get media.

TV is more indispensible than social networking according to Ipsos. This tallies with all of my own research into this question, however I am glad we don’t have to actually choose!

An expose on Yahoo’s content strategy, which seems to be to compete for mass market brand audience with TV. Except TV has mass market eyeballs and Yahoo doesn’t...

The article is a bit “so what?”, but these are six interesting London digital businesses, regardless of the sex of their founders.

Comscore talk up some data about how (un)important click through is as a measure of ad campaign effectiveness, but isn’t this self-evident? If I find the page an ad is on interesting, then I’m more likely to pay the ad more attention and therefore click on it?

Emerging markets

Another example of how the Indian government is seemingly seeking to impede the growth of the country’s stagnating economy; this time by forcing web companies to physically locate their infrastructure in India. Digital innovation is one of India’s obvious growth areas (and desperately needed as labour arbitrage decreases), so why stifle that creativity? Because it’s easier than doing the things that are actually needed, like reducing corruption and bureaucracy and creating a sustainable physical infrastructure, probably.

I hope Germany will forgive me for including it in emerging markets, but from a digital point of view it is Europe’s laggard and therefore the focus of considerable interest. In this case, two of the major broadcasters are launching their own VOD portal.

New technology

Asteroid mining might seem pretty science fiction, but a NASA study last year did admit that it was already technically possible provided $1.5Bn of capital was available for start up costs. Since there are 9,000 near Earth asteroids of diameter 45m or over and each of those could contain the equivalent of a year’s worth of earthbound platinum mining, it’s not surprising that these guys have some pretty serious backing for their scheme to mine them.

A new way of using a robot to “weave” a building, courtesy of MIT. Neat.

Superpower politics

It was a week of results. The biggest news was that Apple defied the (muppets) in the financial markets whose uninformed gambling had led to a run of falls in the tech’ company’s valuation over the preceding weeks. Apple sells great products with margins greater than most software companies and does so in increasing volumes. The latter will continue to grow in my view as Apple starts to sell in more markets – it’s share in most categories (apart from tablets) is small and it’s yet to sell iOS to enterprise in significant volumes. That’s for quarters hence.

Amazon’s results were pretty good too, with earnings a little down but crucially sales of platform extending device the Kindle Fire were up and the device is now nearly 55% of the Android tablet market. The important word in the statement is “gifted”. At its price point this is a major way in which Fire will end up in consumers’ hands...

A neat blog from WSJ about why Google and Facebook aren’t making a big hit in mobile. Simply put, their employees don’t commute. Personally, I think that Google are doing an okay job, but then they have global operations that don’t have the luxuries of their Silicon Valley campus. Enough said about Facebook, the better.

The launch of Google Drive as competition to iCloud was a well publicised development this week. Here’s a succinct comparison of them.

Just for fun

This is the ultimate New York pad. Warning: no TMT content!

I love these NASA visions of the future from the 1970’s. Pop cool.

Thursday, 26 April 2012

The falling cost of mobile towers

In geekier moments, it entertains me that mobile telecoms towers – one of the dullest parts of the TMT world - are also one of the hottest areas in telecoms rights now. Nowhere is this more true than in Africa, which regular readers will know is the market I find most interesting. This post focuses on the opportunity in towers in Africa.

Cellular towers are the building blocks of mobile telephone networks. Typically they consist of a pylon on a leased site (“passive” network components), to which is attached the base station and antenna (“active” network components). In a country like the UK the average network has about 14,000 of these location, many of which are shared. In India, Airtel alone has over 70,000 towers, whereas in Africa networks even in the largest countries like Nigeria make do with a few thousand apiece.

The latter fact hints at why towers are hot property and why the three largest infrastructure companies are involved in a land grab for these assets. Tower sharing enables a dramatic reduction in the cost of one of the most expensive parts of the infrastructure. If one independent provider buys tower assets off a number of networks, consolidates them, then operates them as one business in an efficient manner, then everyone benefits.

The need is particularly keen in Africa, where the average cellular tower and its active elements cost about $200,000 to install – this is four times the cost of other emerging markets. The reason for this massive difference is the lack of other types of fundamental infrastructure in Africa. Want to install a tower in a rural area? You’ll have to contend with the fact that there’s no roads to transport the kit on, no power grid to make it run or fibre backbone to connect it to the network. So you’ll most likely need a helicopter, a generator (and/ or solar panels) and a bunch of microwave kit. Then you’ll need regular deliveries of diesel and guards with AK47s to make sure it doesn’t go missing.

As you can see, building new towers is an expensive, time consuming business and without the market share of a market leader like MTN or Vodacom, it’s too expensive to build and run on your own. It’s therefore no surprise that it’s challenger brands that are keenest to enter tower sharing deals with the likes of American Tower, Eaton and Helios. Even better than the operational benefit is the large chunk of capital that can be released by selling off this infrastructure. My estimate is that $9Bn of value can be released by African operators from selling their towers and buying access to them from opex.

The figure shows how the market’s excitement in these assets has led to a significant decline in the average cost of a tower. In the early days of the market – 2005 through 2008 – tower deals were on a huge scale and in developed markets but as the model became more established, the competitors better capitalised and the vendors more aware of the benefits, operators in smaller markets started to put their assets on the market. This has led to the average price of a tower on the global market falling from over $500,000 in 2005/06 to less than $200,000 in 2011/12.

I expect to see many more deals coming to light in emerging markets this year, just another part of the quiet expansion of developed market telecoms companies into these new frontiers.

Tuesday, 24 April 2012

Smaller African telecoms groups as acquisition targets

Following my previous analysis on the attractiveness of buying and selling telecoms incumbents, this post looks at smaller African telecoms groups and their potential for acquisition by the larger players in the market.

I classify African telecoms players into 4 tiers:
  • Tier 1 are the largest international and regional players, each with over 50Mn African customers. There are four companies in this category: France Telecom, MTN, Vodafone (including its majority-owned subsidiaries Vodacom and Safaricom) and Bharti Airtel. The Tier 1’s have huge financial clout and have are aggressively acquisitive.
  • Tier 2 are smaller international players with significant African investments or large regional players with presence in a few locations. Maroc Telecom, Etisalat and Vimpelcom are the most notable examples of these entities.
  • Tier 3 are regional groups, sometimes owned outside the continent by small investors. Globacom, Comium, LAP Green, Millicom, Telkom South Africa and Lintel fall into this category
  • Tier 4 are independent or largely independent operators, sometimes former or current incumbents. There are some large companies in this category – Cell C in South Africa, ETC in Ethiopia and Econet in Zimbabwe being nice examples

Until 2009 there was a different name in the top tier – Zain, a group that operated in 16 African countries and was acquired by Bharti for $10.7Bn. There is a good deal of sentiment amongst observers that I’ve talked to that Bharti significantly overpaid for the asset, which was itself a mish-mash of organically grown and inorganically acquired operators. Whether it was a good, bad or indifferent idea, Zain was the last really big deal done on the African continent.
Another super-deal is an unlikely route to growth as only MTN is a conceivable target and its market capitalisation makes it unwieldy for anyone outside of the top couple of global operators. The Tier 3 and 4 operators are much more realistic targets, particularly the five small groups that collectively provide service to about 50 million African mobile users. The figure below shows my valuation estimates for the five.

Of these operators, I’m personally most interested in the top 3 – Comium and Lintel are both owned by Middle Eastern investors and are part of larger investment portfolios. Running through the three, Globacom looks attractive because of its focus on the large Nigerian market – although it has another four country operations, they are small and probably easy to integrate or divest. Millicom is the asset that looks most like Zain – it has about 10 country operations and tends to be a top-3 operator in each. Finally and probably most likely to be up for sale in the near future, LAP Green has some great positions in markets like Zambia and Niger, where there is comparatively little competition. As its owned by a Libyan Government investment vehicle, it’s possible that it might be realistic to expect that country’s new government will seek to capitalise on the asset in order to fund reconstruction.

Looking at the players and their operations, it seems to me that the most obvious buyer for LAP Green is Vodafone. The other operators – MTN in particular – have too many overlapping operations. Given the state of regulation and competition law in much of Africa, that merger would be painful. My gut feel, however, is that Vodafone and its subsidiaries would find the likely complex nature of LAP’s ownership unpalatable. More likely suitors for them are probably from the Middle East. Etisalat is a strong possibility as the asset would give it a big jump in market share.

Focussing specifically on MTN, since they’ve been the most vocal about expansion this year, if I were a betting man (which I’m not), my top 5 likely targets for them would be:
  • mCel in Mozambique, although that carries with it the prospect of taking on the TDM fixed line business
  • Econet or Telecel in Zimbabwe, provided they could get past governmental desires to keep players locally owned
  • Onatel in Burkino Faso
  • Gabon Telecom - I suspect Vodafone would be a strong competitor for that operation if it became available as the asset looks a lot like Telecom Ghana
  • Whatever’s left of Libyana and Al-Madar in Libya – unlikely to happen in the next year because of the chaos in that country and likely to be contested by Maroc Telecom
Additionally, it’ll doubtless keep buying up GSM licenses to expand its footprint, as it has recently done in Benin and Ivory Coast.

I’ve wittered on about this for long enough. I’ll keep watching developments and see how right I am!

Monday, 23 April 2012

In the wake of Nitel, African governments would be well advised to dispose of incumbent Telcos

In light of MTN and Maroc Telecoms’ (unsurprising) revelations that they are looking for acquisition targets on the continent, I thought it worth looking at their potential targets. First up, the classical entry point into markets – incumbents.

The privatisation of incumbents and the liberalisation of telecoms markets is one of the greatest achievements of the European Union and has reaped great dividends in the strength of European telecoms companies on a global scale and in the availability of high quality services to citizens. It’s a model that all other countries should look to and seek to replicate.

Africa is probably the polar opposite of this situation. As the figure shows, African governments have been almost criminally inept at privatising their state owned telecoms companies. In some cases, this has been simple greed – the example of NetOne in Zimbabwe being a prime example – in others, corruption and incompetence have led to numerous failed processes. Nitel, which now looks headed for ignominious bankruptcy, is by far the best example of the latter. The term basket case was invented for it.

Others have succeeded. Although the Ghanaian government seemingly regrets the price at which it sold Telecom Ghana to Vodafone, I suspect that history will prove the sale to be a smart move. Few African governments have the capital or lines of credit to upgrade the shonky old infrastructure left over from times past, but all of them need the fundamental backbone network services that only a fixed line incumbent can realistically provide. This need is particularly acute in those countries enjoying rapid economic growth, necessitating high quality (especially B2B) Internet services that mobile hasn’t a prayer of supplying.

The large regional and global telecoms players certainly do have capital and, given the reins, the ability to make it count operationally. In my view, selling early - even relatively cheaply - will unlock massive economic benefits in service sector growth, public sector efficiency, education and overall competitiveness. Keeping hold of telecoms incumbents in the hope that they will one day become highly valued assets is folly. What’s more likely is that if they’re retained alternative networks will come in and make them even less viable. Or worthless, as is probably now the case with Nitel.

Flipping the story around, investors should be interested in fixed incumbents provided they are able to negotiate large guarantees from governments over the status of telecom and ICT deals. As African governments modernise, their need to ICT services will sky rocket and telecoms groups will be able to make super-profits by exploiting assets they build for the public sector for commercial customers in the markets. In my view, the business model for incumbent acquirers should be grounded on long term B2B revenues.

That’s probably enough on incumbents. Each case is quite different so I’d rather not over-generalise! It’ll be fascinating to see what transpires in the months and years ahead.

Saturday, 21 April 2012

What I've been reading this week

I’m of the belief that participants in the TMT industry need to read widely in order to understand the present and future dynamics of the market. To that end, this post is a collection of the articles that have caught my eye.

This week: how engaged are millennials, how effective is customer engagement, how we’re heading for another bubble, how annoyed are Anonymous and how to play Mario on the coffee table

Business models
 A fascinating look into the organisational structure... or unstructure... of Valve, the developer behind Half Life, Steam and many other groundbreaking pieces of code.

 40% of customer experience initiatives have unproven ROI. It doesn’t surprise me, to be honest. I imagine that online and social initiatives are even less proven. Doesn’t mean don’t do them, just means you need to think how to measure them.

Quite an in depth study on the millennial consumer. It turns out that the stereotypes about this group’s laziness and sense of entitlement are incorrect – this is a heterogenous but generally engaged, participative and consumptive generation.
An article on Boston’s approach to becoming a more digital city. It starts off very slowly, but is quite interesting nonetheless. Basically, the message is focus on one citizen issue at a time (in Boston’s case, pot holes) and fix it end to end.

 London hasn’t got it’s apps right, but it’s sure powering ahead as a centre for digital businesses.

Digital media

Oh, here we go again. Nothing says “tech boom” like money pouring into cloud based “media management and monetisation” platforms. It’s as if everyone’s forgotten the lessons of The Platform, Ooyala, Maven Networks, Brightcove and all of the other people who’ve said they could do this but couldn’t get the big content owners to sign up. Rant over.
Actually, rant back on - $40Mn more cash for Path, the utterly pointless social network with no users (2 million actually, but I’m one and I don’t use it anymore) and no obvious use. It isn’t gameification, it’s too late to be Foursquare. Fools and their money...
 ...nearly pay $6Bn for Groupon, which is on a real downer. I wonder if that’s because it’s a fad that was easily replicated and then passed? Perhaps that’ll be it.
It’s acquisition central this week. Twitter just announced that its acquired, a social analytics and revenue engineering team. Twitter’s on a hiring binge at the moment, with lots of jobs appearing on its website for sales and marketing jobs in its new London European HQ...
...and WPP has added price comparison to its ever-growing list of digital businesses.

 Here’s Facebook’s next acquisition: Viddy, the video equivalent of Instagram and now pushing ahead of it in terms of weekly downloads. I suggest you try it, since it’s quite good fun!

 Harry Potter is the gift that just keeps giving. £1Mn in eBook sales in 3 days is pretty damned impressive for a franchise that ended several years ago. Pottermore looks like a good idea all of a sudden.

Google Play is yet to get going, but perhaps making 600 MGM movies to its catalogue will give it a boost. One thing that springs to mind is whether Play will finally get Google TV moving as a platform to compete with Apple TV, Netflix and the like.
Finally on video, Sony says that the future of the TV is the tablet and that cord cutting is a possibility. I say they’re talking rubbish, but I still think that as a whole Sony is on a strong upwards curve and is launching differentiated, high quality products that are finally desirable again.


Red are intent on disrupting the major Japanese camera manufacturers and given the buzz around “Red Dragon”, their $6k, 6K resolution CCD/ lens kit they’re really kicking on from irritant to genuine threat. Only Canon seem to be able to respond, as illustrated by the use of prosumer EOS cameras to shoot the recent action movie “Act of Valor”.

And another camera story. Even cheaper than Red, but a bit less capable. Clever tech and very disruptive, nonetheless. Amazing that something so small can capture HD in RAW.

Canon’s response – I was very impressed by them at NAB. Shows that focussing on their core - rather than diversifying into workflow as Panasonic and Sony have done – can reap dividends.

As well as Google, GM are working on driverless cars, which could see the light of day by 2015. To start with, there’ll be limited to bumper-to-bumper traffic, but given how many accidents happen at these speeds, even this would have a positive impact on travel times.

I wrote about Google Glass last week. It transpires that Oakley has also been doing a great deal of work in this area and holds 600 patents. I’m becoming certain that this will be a major category in the next 2 years.


Sergei Brin on the threats to the Internet. I agree with much of this, although I can’t say that I see Facebook or Apple as significant threats, more likely governments and the entertainment industry that lobbies them.

Meanwhile, in a more proactive protest against web scanning, extradition treaties and people who basically don’t agree with them, Anonymous (who have a cool logo for a terrorist organisation) took down the CIA website this week...

They’ve also done what the rest of the world should have done and attack F1 for agreeing to race in Bahrain, a country with a disgustingly low regard for human rights and free speech.
 Emerging markets

A brilliant op-ed on the stifling effect of the Chinese Government on innovation by artist and activist Ai Weiwei. Worth reading.

Consolidation happening in the online side of Bollywood. The article isn’t terribly well written. What it hints at is Bollywood producers looking for digital ways for their increasingly online audience to find and consume their products.

Estonia is the world leader in digital government. A reasonably superficial but still useful article on some of the things they’ve done over the last decade or more. Worth pointing out that Estonia had no infrastructure or process to replace and is a very small country. Doing this in a developed market would be hard. It does however set the template for emerging countries in Africa.

Just for fun

Want a coffee table that’s also a working games console controller? Etsy provides...

Wednesday, 18 April 2012

Impressions from NAB: the future of asset management in media

Media Asset Management (MAM) was a much talked about subject at NAB and to a lesser extent so was analytics, with Adobe in particular showing off some neat visualisations of content performance based on their “Pass” technology. Something that still stood out for me, however, was the manifest lack of any visions for how the broadcaster of the future will merge these different data sets to create value. For posterity, here are my thoughts on the subject.

The need

Broadcasters need to be efficient. This is, sadly, a fact. No one in the industry can afford to be as (relatively) profligate as a dotcom or a big FMCG.

To enable increased operational efficiency, broadcasters also need to start understanding a lot more about their customers. More than just the basic CRM data that a pay provider collects or the (basically bunk) data from entities like BARB, which collect small samples of user-reported data and extrapolate to wide audiences.

They need this information to provide better reporting to ad-buyers, particularly in the multi-platform world they participate in. They also need it to make better programming decisions. Like it or not, program commissioning is inherently risky and uncertain. I strongly believe that some of that risk can be managed with a statistical approach and that although there is art in the relationships held by commissioners, their talent-spotting eyes are not the exclusive path to success.

Today’s issue

This shouldn’t be seen as an attack on the broadcast industry, but it can be a little bit siloed at times! The great MAM solutions that have already been put into, or are about to be put into broadcasters are pretty good at orchestrating content production and distribution workflows but they are a little proprietary in the way they operate. Similarly, audience analytics is a profession in its own right and information from it tends to be maintained in similarly proprietary systems. ERP and finance systems that tell a user how efficient physical and human resources are being deployed represent a third silo of data.

Someone trying to work out whether a particular production technique leads to more efficient return on investment on a particular channel to market by addressing a profitable customer group would need to somehow model data from multiple separate systems. Even then, there’d likely to be rather a lot of assumptions to bolt everything together.

A lesson from the telecoms industry

It’s simple on paper and probably quite tricky in practice, but it feels that what’s needed is an enterprise data mart that sits over the top of the different data sets to create a single view of the customer. Those of you who, like me, have a mobile telecoms background will recognise this as broadly similar to the data marts that helped telecoms companies make more informed marketing ROI decisions in the latter part of the last decade.

A lot of the information required to make this happen is available operationally. For example, metadata schemas contain detailed information on the nature of talent in a show, the amount of time they’re on screen, the nature of the programmes technical and editorial make-up.

I can see one hurdle. On the production side, this type of system would require broadcasters who also create content to start to take a much more consistent, numbers-based approach to operational planning, particularly to link content to its production cost. In my experience although robust planning processes are followed, they tend to focus on the eventual costs and returns of things rather than the units of effort that make them up. For example, a camera team can either cost $50,000 for a production, or it can cost ([cost of camera] + [cost of labour])*number of days. Simplistic, but powerful if you understand your whole cost base at that level and can compare it to the success of the output...

...which is why I wonder why no one is yet offering a technology that would make this kind of facility possible for a broadcaster. The telecoms companies I worked for developed their own and then plugged tools like Business Objects, SAS and Unica into them to enable analytics and campaign management to take place. I doubt there’s appetite in the TV industry to do the same. So perhaps there’s an opportunity here for someone.

Impressions from NAB: production workflows and the cloud

So, day 2 of NAB is over and as everyone's jet lag faded, so the show began to liven up. Having looked at cameras yesterday, I spent today focused on production workflows and in particular the cloud.

It's worth saying that thinking about production workflows is a worthwhile exercise. About $600Mn is spent on production worldwide in a given year. Technology and related services is a good 10% of that.

In that context, most major, developed market broadcasters have already “done” file based workflow over the last five years, reaping the benefits of improved efficiency, particularly in multiplatform distribution. The end of tape is finally in sight in these organisations. With those big ticket projects finished for the time being, it was notable that several of the technology vendors that have historically made good money from them are now looking for service-based models, typically in partnership with more service-oriented companies. As it’s 2012, these models tend to involved the word “cloud”.

By way of example, Dalet mentioned at this morning’s executive breakfast (almost as a footnote) that they are now partnered with IBM and Cinegy has been the technology behind Deluxe’s Media Cloud for a couple of years. EMC trumpeted its acquisition of Isilon, a slightly nerdy technology that enables archive drives to be larger.

These partnerships give media technology vendors a way of accessing smaller producers, who’d traditionally default to Avid Interplay. For the media services crowd (of which Deluxe is the most progressive) cloud based workflow enables them to create a new business in file-based, given that their role is increasingly untenable in the world after physical distribution. EMC’s interest is easy to understand. They’re after BIG DATA. And at 48GB/ hr, data doesn’t come much bigger or more valuable than moving pictures.

In this market they’ll compete with some new entrants. I saw a number here today, but none has yet bettered A-Frame, who recently secured another $7Mn in venture funding and were clearly generating a buzz here. It’s easy to see why. Their simple pricing model ($99 per seat, per month of service and 500GB of storage) is really easy for an independent producer to buy. Furthermore, the platform’s flexibility – rushes can be ingested by FTP or through ingest stations in various cities including London and LA – means that it gets around some of the issues in cloud based management.

What will make or break A-Frame in my view is the ability to scale up to support playout and archiving workflows. If they can do that, then they can really start to attack the Interplay market in the larger producers and eventually in smaller broadcasters. At the moment, the “collaboration” workflows that it is best for are not the ones where the big spenders are focused. Even so, I still think that they had the most compelling business model I saw today. I’d be stunned if they weren’t acquired by one of the bigger players in the near future.

Playout cloud must be an interesting area, but it wasn’t mentioned at the conference. Since content arrives at the playout centre from many different areas and leaves down more than just broadcast channels, it seems silly that broadcasters still have one physical network operations centre (NOC) where things are physically switched with vastly expensive kit from the likes of Harris, Miranda and Digital Rapids. I understand the need for broadcast-level reliability, but cloud services are pretty robust these days.

In summary, as with 4K, there were no whizz-bang announcements to get the pulse racing, but still, some interesting tastes of things to come.

Tuesday, 17 April 2012

Impressions from NAB: 4K cameras, workflows and screens

Only at NAB will you hear a senior representative of a global technology company reply to a slight on the efficacy of his production workflow with the phrase “Well, Stallone’s using it on his new movie”. This exchange on Canon’s stand regarding their new EOS C500 movie camera was one of the more entertaining moments in what was otherwise a relatively subdued first day at the National Association of Broadcasters annual conference in Las Vegas.

Canon’s new camera is a part of a major trend emerging at this year’s NAB, namely 4K – the successor to HD. In simple terms, 4K has roughly double the resolution of today’s HD – 3840x2160 pixels plays 1,920 x 1,080. What this means in real terms is stunning, photo realistic visuals on big TV panels, the largest of which are now so big that HD looks grainy.

All three major camera makers – Sony, Panasonic and Canon - launched 4K units this year. Not being a cameraman they all seemed much the same; however market disruptor Red seemed to have attracted the most attention, with queues round the block to see its new Red Dragon CCD and lens system. Tellingly, it’s priced at a bargain $6k, vastly cheaper than mainstream rivals. The movie camera market is going away from the traditional players as fast as post-production technology.

Once it’s captured, a further production issue with 4K is in processing. Because the files are so big, more horsepower is required for craft editing processes. I asked a number of asset management systems vendors, Intel and IBM about their roadmaps in this area and was met with telling silence. Only Japan’s NTT appeared to have thought about the problem and were demoing a set of rack-mounted processors to run 4K workflows.

Finally, there’s the consumption devices themselves. Sony demonstrated a prototype 46” LCD that offered both 4K and an impressive glasses-free 3D capability. I spoke to one of its engineering minders, who pointed out that in order to provide the latter functionality – which he thought would be readily available in Japan this year – you require a panel that can do 4K anyway.

I can definitely see consumer devices becoming available this year. Whether there are any sources is another matter. High capacity BluRay was mentioned as one possibility. Satellite also offers the bandwidth to get it into homes, however set top boxes would need to be refreshed and there’d need to be enough sets to make it economically viable. I’m not sure that 3D is today, which may well suppress broadcasters’ desire to offer it.

Monday, 16 April 2012

Thoughts on the future of gaming from the LBS Tech Media Summit

I was lucky enough to be asked to facilitate the gaming panel at the London Business School’s Tech Media Summit on Friday. I say lucky, as the panellists were an excellent group with a lot of strong opinions about the future of the gaming industry. Since the discussion was so rich, I thought I’d share my three biggest takeaways from the session*

HD gaming is the new console gaming... but it’s going to remain a (profitable) niche

Basically, console gaming is here to stay, but it will remain a relatively niche activity, compared to casual games. I found it interesting that EA now refer to the console as “HD” gaming. This makes total sense. The way I like to think about the industry is analogous to the moving picture industries. Console games are like movies (PC games are like arthouse movies) and social games are more like TV shows.

In more detail, although movies have the massive budgets and huge total audience draw, there are very few made in a year and they actually make up only a small amount of people’s consumption. Something like 5%, I believe. On the flip side, there’s a huge amount of TV made and the market is worth far more than movies in aggregate, but each individual programme is comparatively cheap to make and only occupies the audiences’ attention for a matter of an hour (or a few hours for a series). This says to me that the gaming industry should consider the lessons of TV and set itself up for cost-controlled, efficient processes at the outset rather than repent that huge cost base at leisure. For “HD”, the lesson is to act like a venture firm, not like a creator. Place your bets...

Freemium is the winning business model in casual gaming

It should come as no surprise that the panel thought that freemium was the best model, even for big budget titles. There are many examples of people spending more than the $60 purchase price of a game on in-game purchasing. My personal view is that the TV/ movie example probably also works here though – people are willing to pay $15 for a ticket once in a while but wouldn’t tolerate adverts in their big screen experience. On the other side of that market, it must be said that many movies monetise themselves principally through merchandising. Which is why Hasbro is now a movie maker (or, more accurately, a movie financer).

There wasn’t a lot of love for the “Spotify for games” models espoused by OnLive, nor for the idea of playing HD games through social networks like Facebook. I heartily agree with both of these views. Ultimately, an on-premise console strapped to a massive HD screen is relatively low cost and delivers by far the best experience. Deloitte’s Media Democracy Survey shows that HD remains a killer feature for content consumption, so why compromise on it?

Just like movies and TV: I want to be selfishly immersed in the former, but I’m willing to have the latter interrupted by adverts/ sponsorship/ social media because frankly I consume it for a cheap and transient thrill.

Audio and acceptance - the next killer gaming features

This was one of those moments of insight that only comes from a top quality group. The panelists’ view was that audio was the next killer feature for mobile games. By which they meant both spoken controls and games that only use audio to generate the user experience. This makes so much sense as it would enable games makers to access other moments in people’s lives, be that walking down the street or sitting in traffic. Also, by isolating just one sense the games makers can create some fascinating sensory experiences – being chased by zombies being just one.

A second feature I picked up that’s perhaps a little more esoteric was the idea that gaming was now socially acceptable. Having grown up being labelled a nerd for liking Duck Hunt, Street Fighter and Golden Eye, I find it gratifying that games are both conversation materials and, through Words With Friends and its competitors, conversation starters. Going back to the TV analogy, although some people are described as “film buffs”, similar names are rarely used for TV audiences... because they’re the most massy of mass markets. Namely: everyone.

Those were the bits of the discussion I found most enlightening. Hopefully I’m doing the session justice because it really was fascinating! Plenty for me to think about.

*: in addition to the rather swanky LBS Moleskine notebook that we were given as a little gift. Thanks LBS!

Sunday, 15 April 2012

What I've been reading this week

I’m of the belief that participants in the TMT industry need to read widely in order to understand the present and future dynamics of the market. To that end, this post is a collection of the articles that have caught my eye.

This week: Spotify, Indian semis and the Academic Spring build momentum, HTC, Yahoo lose it; how the iPad dominates online shopping and why blue is the future of Internet infrastructure

Emerging markets

India’s semiconductor consumption is expected to grow 20% this year, to over $9Bn. The appetite of newly-middle class consumers for tech’ is huge – most good tech’ products provide unmatched aspirational bang for the buck compared to more traditional products like cars.

TV set top boxes are just one such product. Technicolor have shipped 5Mn of them to Tata Sky customers. A huge number and demonstrative of the enduring value of TV in a market that has become consumerist in the era of smart devices.

This is the sort of regime we’re dealing with in China – one that covers up horrendous breaches of food hygiene with death sentences and gagging orders. Worth reading, particularly if you think that capitalism is “civilising” China.

In more positive news, China’s version of Twitter - Sina Weibo – continues to gain subscribers and is now becoming a platform for social sentiment analysis.

On the other side of the world, this is a neat use of Twitter by Smart in Argentina. Argentines, like many other Latin Americans, are huge users of social networks, particularly on their mobile devices.!/smartArg

An article about how Blackberry is the smartphone for Africa. Except it isn’t. Local competitors are cheaper and although they lack the brand cache, they have the look. Those who 5 years ago set the trend by having Blackberry are moving onto to iPhone and its imitators.

And on the above topic, a spot on article about how designers should look to design for Africa’s strengths rather than focus on the things it can’t do.

Final point on Africa. As I’ve reported in my Telecoms Infrastructure benchmarks, investment is drifting south. This data about major chains’ strategies for opening new hotels shows the same focus on sub-Sahara for growth.


Anonymous is flexing its (virtual) muscles again, this time by crashing the Home Office website in protest of various extradition treaties and online privacy policies. Seems that some of the Syndicate world of tech mega corporations and sinister digital terrorists is coming true... a bit.

Business models

The academic publishing market is a curious one, because it’s two sided without incentive on either side. What this means is that authors pay to be in journals and libraries pay to stock and consume said journals (largely online in this day and age). Since authors are also the ultimate audience it’s no surprise that academics are doing it for themselves and looking to cut out the middleman. Providing robust enough peer review will be the biggest issue, I suspect.

HTC’s annual results show the way that Samsung has taken the driving seat in the non-Apple smartphone world by offering sleek devices and decent customer services instead of nerd-chic naming and shoddy experiences. I’m afraid to say that I think HTC are in a bit of trouble. A colleague thinks they might end up merged with Taiwanese electronics brother Acer. Interesting, but there’s a certain frisson of turkeys and eagles about that combination!

Localising brands will become ever more important as every country becomes a serious consumer economy over the next two decades. This link is to an amazing Japanese Starbucks and goes to show that even the most iconic brands can adapt.

Digital media

Spotify’s revenues are now just short of $900Mn. Pretty impressive!

Sport is one of the last content types that commands large live audiences and inspires round-the-year loyalty. No wonder the biggest teams are so highly valued for their brand pulling power.

No, no and thrice again no! Another set of analysis muppets who’re unable to distinguish between TVs that COULD be connected to the Internet and TVs that are actually connected. Their 31% of US households is roughly double the likely number. Even if they had got the proportion right, their survey isn’t big enough to be statistically relevant.

A very detailed analysis of the infrastructure of porn sites and one that points to the future of the mainstream Internet. The amount of traffic, throughput and even the dwell times are multitudes that of conventional text + picture websites, thanks to the preponderance of streaming video. YouPorn is responsible for about 2% of the total traffic on the Internet. Interesting reading and safe for work!

I posted a link a couple of weeks ago about the forthcoming Yahoo! restructure. And here it is in the flesh – the usual stuff, frankly – more customer focus, more geographic focus. What’s needed more, I think, is more business model focus.

New technology

I’ve said it before and I’ll say it again – wearable displays are (in my opinion) the next big thing in interface. Worth looking at this link just to see how unobtrusive this prototype is – that Sergei Brin was willing to wear it out tells you that the rumours of a reasonably imminent launch might not be far from the truth.

Ten years ago a video encoder with the capabilities of this $500 one would have cost hundreds of thousands. Although reliability is one of the crucial selection factors in the multi-billion dollar broadcast switching market, there must be some concern about the onset of software driven playout solutions.

A short, but insightful article on life after photo-lithography. Or in other words, how the next generation of silicon chips will be made faster and more efficient. I’m not as polar in my view as the blogger, for what it’s worth. I don’t think innovation is dead, I just think we’ll find new architectures that make the most of what we have – the days of smaller = faster are gone. Now chips do with massive parallelism what they used to do with watts and clock speed.

Superpower politics

A neat little blog post on the reality of Google’s 170Mn Google+ users, which makes the excellent point that most of them are actually using “Google+ enabled” services rather than the actual social network. I actually prefer Google+ to Facebook as an experience, but it is a bit quiet...

If the data in this infographic is correct (and it’s based on analysis of 3.4Bn shopping sessions) then 89% of US mobile shopping revenue comes from the iPad. Now, this is probably a technicality in that iPads are computer replacements in the way that smartphones are not so much of that shopping will be offsetting online (and is probably only a small proportion of the latter). Still, I’m now eagerly waiting for Apple Wallet to come along and create another revenue stream to take advantage...

Tuesday, 10 April 2012

Facebook's $1Bn game of whack-a-rat

One story dominated this morning’s London newspapers – Facebook’s audacious/ inspired/ lunatic $1Bn acquisition of tiny start-up Instagram. It’s no surprise that this is front page news. Everything that Facebook does these days seems to be so. But behind the “wow, that’s a lot of money” stories there should be serious concern about Facebook’s strategy and long term viability.

To me, this acquisition smacks more of desperation than inspiration. In my view Facebook stopped being a genuine innovator in about 2007 and has rested on its laurels ever since.

That was fine until smart computing took off, enabling the mass market of consumers to aggregate several social feeds together in one place. Simultaneously, people’s usage of social networking began to mature. Rather than consolidating all of their activity into one place, they diversified based on needs. Now the (sizable) leading edge of consumers can have Facebook to stalk their friends, Twitter to stalk celebrities, Linkedin to look for a new job, Pinterest to check out new things to buy, Flickr to share photos... You get the idea.

This leaves Facebook in a tricky place. It is no longer cool – it’s even becoming something of a hate figure in sections of the Internet community. It’s no longer innovative – the Facebook homepage is now a mish-mash of different creative and functional ideas borrowed from its newer, cooler rivals. In fact, as the recent IPO filings exposed, it’s really not that profitable and is very dependent on partners like Zynga, whose business models mean they have to diversify off the platform to seek larger audiences.

Fundamentally though, Facebook has one massive problem. Its own business model – flogging banner ads and basic sponsorship - is neither innovative nor particularly profitable. The only thing Facebook offers is the ability to shift very large volumes of inventory. But in what market does non-exclusive volume ever equate to high margins? And don’t give me “targeting” as a possible upside. Advertising is a game of probabilities, not of certainty, and ads are already targeted quite efficiently. For this reason, Facebook is the Yahoo of social networks, not the Google. An Alpha, not an Omega.

But still, at this juncture Facebook does have one thing in its arsenal. Cash. Or at least, a giant line of credit. So what’s it going to do? The classic incumbent's approach - buy up as many of those pesky little start-ups as it possibly can and roll them into its ever more confused user experience. Just as it did with Gowalla.

A game of whack-a-rat, if you will. And just as with the game, the rats will keep popping up. For every Instagram, there’s a Lightbox.

Saturday, 7 April 2012

What I've been reading this week

I’m of the belief that participants in the TMT industry need to read widely in order to understand the present and future dynamics of the market. To that end, this post is a collection of the articles that have caught my eye.

This week: 300Mn reasons to be nicer to my clients, Apple go at gaming, lots of Chinese tech and Akira’s bike rides again

Business models

Fascinating – a “modest” improvement in customer experience versus your peers is worth about $300Mn in annual revenue, according to this study. I need to be nicer to my clients!

The UK coalition government is putting a cap of £100Mn on IT contracts and projects. A brilliant idea in my view as my experience suggests that any project that is too large for one person to direct is doomed to failure.

As if things aren’t bad enough for RIM, a big marketing event in the UK ended with someone being stabbed. There is a high degree of muppetry about everything they do now – for the record, I dug out my Playbook and updated to the 2nd version of the O/S. It’s still a useless paperweight with no applications.

Superpower politics

JP Morgan predict that Apple will ship 70Mn iPads this year as they advance inexorably towards becoming the first trillion dollar corporation...

...and this would put the cat amongst the pigeons! According to this Anandtech article, Apple are working on a game controller for iOS devices, which would finally open the iOS family to exploitation as a proper games machine... or it could just be another random rumour...

...and also in content, the battle between (Amazon’s) Lovefilm and Netflix in Europe is just getting going. Here, Lovefilm scores an early point by getting BBC content into Germany, a market with 80Mn consumers that Netflix is yet to launch in. Great for the BBC too – it’s content is the best in the world, it just needs to make more from it.

Amazon have also got their Prime content service onto the home page of Sony’s PS3 consoles, opening yet another new avenue for them to sell through.

Google’s global datacentre capability continues to expand as it announces work on the final leg of a $700Mn expansion in Asia...

...but Google’s not managing to get Android standardised (if it wants too). Less than 3% of Android users are using the latest Ice Cream Sandwich version of the O/S, compared to nearly 80% of iOS users being on version 5. The real smartphone/ tablet battle to come is between Samsung and Apple (with Sony, LG, Motorola et al playing a disrupting role), not between Google and Apple.


China’s at it again. This time hacking military institutions in India. Naughty...

Digital media

Remember Yahoo? The darling of the pre-dotcom boom has seen better days and things seem to be getting worse. In this scathing blog post one of its senior execs lambasts (using a few choice expletives) the company’s decision making and strategy. Ouch.

Some data about smartphone usage by wealthy owners in the US. They’re more likely to have an iPhone than anything else, which possibly explains why they’re more likely to download apps than the average – 80% of them do so, versus about 60% in the broader population. Also interesting because so many of them are turned off m-commerce by a preference for the in-store experience. Perhaps something retailers can learn from?

More data, this time about marketers’ expectations for 2012 in terms of their platform usage. 22% predicting they’ll do less traditional and a great big slug saying they’ll focus on social. My prediction: that’s all talk! Definitely good to create a buzz by doing something new, but the risks of doing so are pretty high because there’s no playbook. I think that nouveau digital will remain an addenda to broadcast, banner and search... [Warning – PDF link]

...Although the majority of CMOs say that budgets are shifting to digital. Makes sense, but I suspect these are fairly traditional methods being applied to smart devices, rather than new models on new devices.

A-Frame are an exciting company that enable TV production in the cloud – they’ve just received some new investment to enable expansion. I personally think it’s too soon for cloud based production workflows as digital ones aren’t fully embedded in the business. But hey, I’m all for UK digital businesses doing well!

Emerging markets

Content opportunities are emerging all over the BRIC, N10 and beyond. Freemantle are the 4th largest pure-play content producer in the world, so it’s no surprise that they’re getting involved in syndication partnerships in Asia Pac.

It’s interesting that Chinese shoppers are keen on e-commerce (although given the traffic in their cities, it’s hardly surprising) however PwC’s conclusions are hyped and obviously incorrect. Only about a 100Mn or so Chinese are actually able to be surveyed, so the 70% of consumers that shop online probably looks more like 5%.

Despite security concerns, Huawei are having a good time selling cheap kit to telecoms companies and governments in the emerging markets. No doubt helped by big slugs of Chinese bank and government finance... Ericsson are still #1 though

Lenovo are about to launch a new smart TV product in China, doubtless hoping to get a slice of the pay TV market as it develops.

And to wrap up on Chinese technology, here’s another cheap tablet, this time Chinese branded as well as made. $50. Ugly, but no doubt impressive for the money.

Breakthrough technology

As regular readers will know, I think that replacing the human behind the wheel with a machine that drives for him or her is the best way of increasing safety and reducing emissions. This video shows what the junction of the future could look like.

Bionics that are human controlled are also a huge and emerging market. This fairly weak article still highlights an interesting technology that enables paraplegics to walk.

Just for fun

I grew up loving Akira and its exotic, futuristic infrastructure. Now its creator has built a full scale working replica of the famous reclining motorbike from the series. Amazing.

Wednesday, 4 April 2012

Is it time to give the Cognitive School another chance?

There was a time when the process of strategic management involved a smart Manager sitting down and really thinking about the direction to take his or her business.

This was a time before personal computing, widespread data availability; before Michael Porter and the cult of the McKinsey Way. Since there was no way to do rigorous analysis outside of the rarefied academic labs of RAND, people contented themselves with the application of intellect, experience and context. This was called the “Cognitive School” of strategy.

Of course things have changed since then. We have a better way, a way that, empowered by cheap computing and a flood of data from the Internet, enables the 21st Century strategist to test any hypothesis to death in a matter of days. Never has the Excel Wizard been more valuable than now.

Now the market’s obsession with Big Data has led to a new wave of analytical tools hitting the streets. These, we’re told, will supplement weak human logic with the two towers of software and silicon. All options will be considered and “visualised” based on data cleansed by dozens of filters and cross-references. Our strategies will get even more efficient, less fallible; as befits a world with scarcer resources and ever more vicious competition.

I hear these messages a great deal. And they worry me. For starters, people often forget the arms race paradigm. Once one side has a weapon, given enough resources everyone will have the same weapon. Very few or none of the strategy houses or corporate strategy functions are also analytical software developers so we’re all buying the same kit and tweaking it a little.
We’re all adding this technology in the assumption that it will bring advantage, but I don’t believe that it will. Not just because everyone will pretty soon have the same weapon, but for human reasons too.

Even Excel has the power to take away people’s ability to think and to empathise. Imagine what the next wave will do. In my view great strategy is all about the cognitive process that takes a fundamental piece of insight and turns it into strategic advantage. Coloured blobs on a screen can’t do that. Better still, the same thinking techniques also allow outstanding analysis. But analytical techniques blunt creative thought. And because everyone will have spent a fortune on the weapon, we'll spend our time tweaking it incrementally to eek out just a bit more performance, when we could be using our Mk 1, Model 0 brains to make giant leaps and create genuine advantage.

I think we as a profession need to figure out how to reboot the Cognitive School. Embrace the cult of genius and understand how to commoditise data collection, filtration and analysis into its rightful place as an input into strategic management. It shouldn’t, in my view, be at the core.

Or perhaps I’m just a white collar Tramp, railing against Modern Times? Fortunately, the solution to this dilemma is quite simple. Think about it some more.

Tuesday, 3 April 2012

Media Democracy B-Side - recommendation

This State of the Media Democracy B-side covers online recommendation, an interesting subject that was mentioned only briefly in the main report.

Social recommendation online remains very much a la mode. With the launch of pinterest, recommendation has kicked into a new gear since consumers can now create their own beautiful, curated shop front of products. The question for us was whether the mass market of consumers were willing to give and take recommendations and therefore give us a hint as to the long term success of the new wave of rich social sharing sites.

Overall we found that people were more likely to take advice than give it. 62% of respondents had bought a product based on online recommendations and 68% had decided not to buy because of negative reviews. On the opposite side of the transaction, only a third of consumers had posted a review.

Further analysis shows that the second statistic masks some interesting underlying trends. It turns out that smartphone users are about 25% more likely to recommend a product than the average and that tablet users are 50% more likely.

With at least 2Mn UK consumers having acquired tablets in 2011 and a further half a million or more in the first few months of 2012, this year could be a year of explosive growth in online participation (as opposed to browsing). Perhaps this is why older demographics showed such high growth in recommendation – over 70% YoY in the over 40’s, who are also more likely to own tablets than other age groups.

The implications for marketers of mass recommendation online are potentially pretty sizable. So far social has been a small part of the mix – good for shifting lots of inventory, but not particularly impactful. In 2012 the marketing and PR community may have to become more sophisticated than just persuading people to hit “like”.

Deeper analysis also revealed something curious. It seems that reading the newspaper makes you more likely to respond to leave comments online. Respondents who hadn’t read a newspaper in the preceding 6 months were 50% less likely to recommend a product. This trend is exhibited to a similar degree in all the markets Deloitte surveyed – it isn’t a random statistical blip.

It seems that years of writing letters to the editor makes one very keen to speak one’s mind! If anyone has a better explanation – I’d love to hear it. I’m a bit baffled!