Thursday, November 29, 2007
Wednesday, November 28, 2007
Amobee gets new funding
I certainly see the potential of mobile advertising and mobile in-game advertising but I also have some reservations because of the consumer data I have in hand. I'm busy crunching data for my upcoming mobile gaming report titled The New Frontier: Portable and Mobile gaming. What I found is that a fairly large percentage of mobile users don't want advertising on their mobile phones, period. Further, heavy mobile gamers and mobile gamers who are already paying for their downloads are more interested in ad-supported free mobile games. Therefore, if mobile carriers want to use ad-supported mobile games to attract new gamers to the market, it won't be an easy task. They'll need to educate the market about the availability of such games first, and the mobile phone deck is not the ideal place. Carriers will have to leverage online channels, which provides higher visibility for such games. Also, in order to not cannibalize potential revenue from game downloads, they'll have to differentiate the premium offerings from ad-supported content through windowing or other tactics. Amobee's approach, subsidizing the game instead of making games totally free, is another alternative.
Those are just some quick thoughts and now I'll need to switch my focus to the Discovery channel, which is showing another episode of "Rise of the Video Game". What a great program!
Big Fish Getting Bigger
Big Fish Games has been in super growth mode for the past two years and all the growth so far has been organic. Apparently company executives are trying to find some good use of the pile of cash they've accumulated from innovative games and business models. Big Fish Games is one of the few vertically integrated casual gaming companies in the space, with development studios, publishing divisions, and its own game portal. In our recent report, Casual Gaming Market Updates, we mentioned that the casual gaming industry is diversifying along several dimensions, including game genres, target audience, and business models. This will be a good acquisition for Big Fish. They cannot just rely on the traditional try-before-you-download and web-based advertising models, which are still growing and generating a lot of revenue for them, partially due to their new affiliate models and growing audience reach; they need to invest in new growth areas, such as f2p MMOs. Several f2p MMOs are already having success in the United States, including Korean exports such as Maplestory and local online gaming companies such as K2 Network and Gala-Net, which are importing Korean content. MMOs tend to have appeal among both male and female gamers, which will help Big Fish tap into new demographics. Also web-based f2p games are cheaper to develop and can grow audience very quickly due to its accessibility. In the post-WOW era, it has become extremely difficult to develop a competitive subscription-based MMO and f2p MMOs are becoming more popular.
Hybrid Home Networks
In my coverage area (which includes television services, set-top boxes, residential gateways, PCs, media adapters, media servers, etc.), I still do sense a mindset around a wireless plus a wired (powerline, coax, twisted-pair, Ethernet, etc.) solution. Since service providers now are pushing home networking to extend the value and utility of broadband, television, and communications services, they in particular are probably going to go with hybrids.
Take, for example, the deployment efforts of both AT&T and Verizon as they are delivering deep-fiber-based broadband and television services to the home. As they are installing these services, they’re using residential gateways that have both a wireless (802.11g) + a coax/twisted pair (Verizon is using MoCA; AT&T uses HomePNA) solution to distribute TV content, broadband, communications, etc. They definitely see the value in having the wireless component, since it provides a homeowner with much greater flexibility of where to use a laptop computer or locating a desktop PC that may not be co-located to a coax, Ethernet, or phone outlet. However, as we’ll see multi-room DVRs start to be used in greater numbers (right now, Verizon and DISH Network are the only U.S. two service providers that make this available to their subscribers; AT&T is supposed to launch a multi-room solution next year; Telefonica's latest quarterly earnings report mentions that multi-room is in the works for 2008 for their Imagenio television service), they still depend on the wired solution to transmit that video from the master set-top box to the others in the home. And, I still hear lots of doubts from service providers and their customer premise equipment vendor partners that wireless alone will be capable of delivering a completely reliable and consistent signal, especially for high-definition signals. As we see more multi-room video efforts emerge from service providers, I’d expect that they’ll be enabled via set-tops and residential gateway devices that utilize the wired connection for video distribution and the wireless connection for mobility and flexibility.
Perceptions on Z-Wave, ZigBee and Insteon
I think Z-wave is well-know in the home controls industry; essentially unknown among consumers and just beginning to be known among home systems integrators. On one of our regular surveys (conducted in Q1 2007) of home systems integrators (the CEDIA channel), we asked about the familiarity with Z-Wave. Approximately 7% of integrators were aware of the technology and products incorporating it. Awareness of INSTEON was comparable; ZigBee significantly higher. Our Q1 2008 survey will reveal if the Z-Wave alliance has made any progress on this front.
Our consumer surveys reveal that control systems in general are low on the list of products consumers plan to put in their existing homes or new ones they plan on buying. Our research of home builders confirms that they are not aware of the affordable benefits of control systems in general and wireless systems specifically.
Intel's investment in Zensys has added credibility as has the inclusion of alliance members Leviton, Cooper, Monster, etc., but the challenge to all alliance members is building consumer awareness for the benefits of their products.
Tuesday, November 27, 2007
Google's Network-hosted Storage Solution
It’s a natural extension of the fact that Google operates some of the world’s largest data centers and has unique value-added features that it can add in terms of search and organization of the data. It looks like a nice synergy, based on what they’re already doing.
It also gets Google one step closer to becoming a full-fledged applications company that is more consumer-facing. That’s a benefit to them as they are definitely pursuing the strategy of offering network-hosted applications, including both software and storage, taking dead aim at Microsoft in these areas.
And, speaking of network-hosted storage applications, remember BT's Digital Vault service? It's a service that gives broadband users an online store for their online movies, music, photos and documents. I blogged about it back in August, when the company reported 125,000 users. As of the end of September, that number had grown to 300,000! Clearly, there's something about consumers wanting to secure their data, and a trusted service provider clearly has an opportunity.
Monday, November 26, 2007
Macrovision's Connected Platform on Cable Set-top Boxes
It would be interesting to see how Connected Platform compares to what Verizon and Motorola put together for the Home Media DVR solution now available with FiOS TV services. If Connected Platform lowers the cost of implementing this type of solution and also offers the robust content protection for which Macrovision is well known, it seems feasible that we'll see the cable folks embrace this type of solution in greater numbers. For their sake, I hope so. Verizon's hitting a sweet spot among consumers by offering a multi-room DVR solution that can also provide access to PC-based content.
Tuesday, November 20, 2007
Web Video: Taking a Bite out of TV Ad Revenues?
We've been watching how both traditional and upstart media outlets have been addressing digital distribution for some time now, culminating in the report Internet Video: Direct-to-Consumer Services, released in late 2006 (we've since updated our findings in a free white paper titled Broadband Video: A Market Update. This paper can be downloaded free from the Parks Associates Website.
In our 2006 report, we found that while big media of all types are actively engaged in some form of digital distribution, pure user-paid, movies-on-demand services will constitute a much smaller piece of total U.S. revenue than will ad-supported models, including the work of the major TV networks to put delayed primetime programming on the Internet via outlets such as ABC.com, CBS’s Innertube, NBC’s Rewind, and Fox Corp.’s MySpace. So far, this assumption has held true, as the major broadcasters are still reporting good returns on their Web properties (an active viewership, no signs of cannibalization, and the ability to charge higher rates for ad inventory). Outside of the iTunes TV show and movie download service (which at last report had generated 53 million downloads), user-paid services – and particularly those specific to movies – are facing many hurdles. In the report, we wrote:
“Internet video for movie content faces stronger challenges in terms of technological challenges, resistance from major retailers, lack of easy connectivity between broadband services and the television, and the continued consumer reliance on tangible media.”
Our own consumer data back the notion that the early successes for broadband video are the efforts focused on shorter (“snackable”) videos as opposed to movie downloads. The good news is that the number of broadband users paying at least monthly to download or stream video has grown significantly since we began tracking the space in 2005. The percentage of U.S. households with broadband that report paying for broadband video content now stands at 19%. The average amount of money being spent on broadband video content is also on the rise, an indication that some key success variables have been met. Certainly, the broader availability of content through a number of channels has increased, and as broadband speeds continue to improve and content-to-device linkages have simplified the process of getting content to viewing platforms, services have improved and demand has followed. So, that’s the good news.
However, the broadband video space is still in a strong degree of flux. Major players still have not figured out the formula to make the provisioning of online video a complete success. The hybrid approaches of Netflix and Blockbuster are intriguing. Both companies are betting on the DVD’s relevance for the next few years, and this is a prudent choice to make. We have not yet reached the point when all of the content that consumers want can be found on the Internet. We are also intrigued by the ad-supported content model, as early returns from the major networks (ABC, NBC, Fox, and CBS) have shown that consumers are willing to watch a few ads in return for free content. Certainly, most of the amateur video on YouTube will not have an ad value, but Google is addressing premium content for now. Also, several direct-to-TV solutions have emerged recently, which warrant attention as they could solve some of the critical challenges in providing a quality viewing experience in the living room. They could set the stage for a real shift in consumer video consumption and provide us with new models to study.
Business models for broadband video remain widely experimental at this point. Consumers continue to have different preferences for how they obtain and watch content. Some want to own their content, some prefer renting, and others wait for broadcast networks’ premiers. For content owners, retail or electronic sell-through yields the highest profit margins and will remain the preferred model. Cable TV service providers want to offer a mix of all business models. Currently, monthly subscription is the biggest revenue stream, but they are interested in growing their a la carte revenue through PPV, digital rental, and potentially electronic sell-through. Broadcast TV networks rely heavily on advertising revenue, and they are likely to position broadband video as a complementary platform in order to offer a 360-degree solution for advertising. Nevertheless, the TV networks are also interested in testing out electronic sell-through models since they are generating good returns on DVD sales for hit TV shows.
Advertising will become an increasingly important component of the broadband video space. With a substantial user base of online video viewers, advertisers will be drawn over the short term to volume and “eyeballs” rather than measurable advertising. Our own forecasts indicate that U.S. revenues for broadband video will grow to $9.7 billion by year-end 2011. Revenues driven from ad-supported video content will about 60% of that revenue, while user-paid services will grow from a relatively small base of 21% of total revenues in 2007 to about 40% by year-end 2011.
So, how big a bite will broadband video take from television advertising? Bear in mind that traditional television advertising is a huge business today (our report The Changing Face of Advertising in the Digital Age predicts that TV advertising will grow to a $72 billion market by year-end 2010), whereas our broadband video forecasts - although indicating very good growth - will tally perhaps $6 billion by year-end 2011 - that's still a pretty small percentage. Furthermore, as our soon-to-be-released report New Advertising Platforms and Technologies will argue, TV advertising isn't a static market. With a growing emphasis on attaching advertising to on-demand content and further work in promoting targeted and even personalized advertising, the "dumb box" is gaining IQ almost on a daily basis. So, although money may be flowing away from traditional media to the Internet, there's no reason to think that as the television takes on such Internet-like attributes as targetability, measurement, and metrics that the ad dollars will continue to support advertising on the television screen.
Finally, the dichotomy of broadband video is that its biggest opportunity and simultaneous challenge is making the video truly accessible in the living room. As we enter 2008, we're much closer to seeing a larger market emerge for 'Net-connected devices (TVs, media adapters, media servers, DVD players, game consoles, set-tops, etc.) that will deliver the TV experience. Growth for these devices will be robust over the next five years, as unit sales will be in the tens of millions. However, there will still be a gap between what the products are capable of doing (offering access to CinemaNow, YouTube, or other broadband video content) and what consumers will actually do. Our own forecasts indicate that broadband video revenues at the TV will tally around $1.7 billion by year-end 2011 - that's 17% of the total broadband video market.
Monday, November 19, 2007
I'd use Kindle
If you're reading this blog, you're probably the type of person who hops on a plane several times a month. My wife kids me, because I have a constantly-growing collection of paperback books that only get purchased when I'm on (or about to take) a trip. I also love my magazines and The Wall Street Journal - it would be great to get them all on one device, without filling up my briefcase and without having to worry about finding a recycling bin at the airport when I'm finished reading. (Yes, I AM that guy...not quite to Al Gore status, but trying in my own small way to save a tree.)
My only concern about the device is how many more additional subscriptions I'd need to have access to the magazines and books. The magazine deals look pretty good - a buck or so per month for access. I'd love it if my online subscription to The Wall Street Journal would also automatically grant access to it on Kindle. It doesn't appear that way, however. It looks like you need the additional mobile version of the Journal.
It'll be interesting to follow the sales of this device. I would think that it would be pretty popular as a holiday gift this season.
Friday, November 16, 2007
Is Competition Good for the Incumbents Too
AOL Revamping Games.com
AOL has one goal, or maybe two wrapped in one, as far as casual gaming goes: to get consumers in front of ad-supported games and up-sell premium versions. Currently, AOL Games’ revenue is split nearly 50/50 between ad sales and premium game purchases. The company believes ad revenue can grow further if it has proper content for ad-supported, Web-based, impulse style gaming. For example, AOL remains a strong proponent of instant-access Web demos and is looking at additional methods to drive traffic to the Games channel. Therefore, it is encouraging developers to provide both full version games and Web demos to capitalize on the immediate gratification ability of casual games. It believes immediate access of casual titles will be instrumental in moving users from free Web games to full-price downloads.
More importantly, we believe the revamp of Games.com is not only a gesture to echo AOL's overall advertising strategy, but will be critical to sustain AOL's top line growth as casual gaming is so popular among Internet users. The logic is that Games.com ranks close to 5000 by Alexa in terms of daily traffic, similar to Realnetworks' RealArcade in November 2007. RealArcade raked in $86.2 million in 2006. So if we assume an equal base and a nominal growth rate of 13% (AOL ad business' growth rate in Q3 2007), then what Games.com probably can contribute is in the range of $80-$100 million in the year of 2007. Consider AOL had $330 million of ad revenue in Q3 2007, the impact of Games.com will be nonnegligible.
Thursday, November 15, 2007
MoCA Technology Conference
Verizon is here in full-force, with a keynote address from their CTO, Mark Wegleitner and panel participation from others who have been key to the FiOS deployments and the home network efforts. Wegleitner indicates that Verizon expects to see seven million FiOS broadband customers by year-end 2010 (35-40% take rate) and 3-4 million FiOS TV subscribers (20-25% take rate). It was interesting to hear him say that the next things to watch in TV services will include HD VoD and even 3D television. Also, Verizon sees significant upstream bandwidth requirements building, given the amount of self-generated content being created and to support applications such as gaming, network-hosted applications, and storage, medical monitoring, and remote home monitoring.
I still sense that the cable industry hasn't quite figured out what to do with home networking. Although I've heard telcos and satellite providers speak about how they're going to use home networking technology to support multi-room DVR, I don't sense the same enthusiasm from the cable MSOs. They're going to have to roll with it in order to stay on par with the offerings coming from their video competitors. The take rate for Verizon's Home Media DVR take rate is now slightly higher than the 12% that the company was reporting in September 2006, although I don't have any more specific information on this right now.
Also, I'm struck by a lack of talk from the cable MSOs about network management, monitoring, remote support, and troubleshooting. This, in my opinion, is where the telcos really "get it." As much abuse as Verizon took from the financial analysts and Wall Street for its CAPEX plans, the financial guys better start paying attention to how increasing customer support requirements are going to significantly elevate OPEX if the carriers don't do anything about it. Werner from Comcast said that the cable MSOs don't see digital home management features as pay-per-services (such as BT's Home IT Advisor service). Okay, that's fair, but I just don't hear much of anything coming from them about using CableHome or other protocols to reduce customer support costs. Dave Waks, one of my panelists on an analyst and press panel, questioned why the cable industry can't simply use TR-069 to more predominately promote remote management capabilities. The biggest holdup, he indicates, is that TR-069 comes from the DSL Forum and wasn't developed organically by the cable industry. I had an interesting lunch conversation on this subject and asked the naive question, "Wasn't CableHome supposed to solve remote management for the cable industry?" The short answer is yes, but the commentary from my lunch companions is that CableHome was overengineered and has not been widely accepted. What I was told is that the cable operators realize that there is a problem that still needs to be solved. And, as my source noted, "Acknowledging that there is a problem is always the first step in any 12-step recovery program."
It is also interesting to hear from some international representatives here about how network upgrades are going to progress internationally for both telcos and cablecos. European telcos such as France Telecom, Telefónica, Telecom Italia, Neuf Cegetel, and others are now interested in network upgrades (as referenced in our IPTV: From Quadruple Play to Multiplay) report. Also, players in China and Singapore are also considering GPON deployments.
Wednesday, November 14, 2007
Honey, the Coffee Table Caught a Virus
Two recent news stories caught my attention. First, Seagate announced that some of the Maxtor hard drives it recently sold were infected with viruses. According to ZDNet, "Kaspersky Lab, an antivirus company identified the virus as Virus.Win32.Ruh.ah — a malware that can disable virus-detection software, although its prime function is to search for online game passwords and send them to a server in China." The second story is that Sony is partnering with Trend Micro to protect PS3 game consoles from virus infections. Initially, the service will be free for PS3 owners but after a certain date, they may need to begin paying for the priviledge.
I'm intrigued and puzzled. My current home have less than 10 devices with IP addresses but in the near future, I'll likely have more, with many new devices including TVs, next-gen DVD players, and coffee tables becoming Internet enabled. How am I going to know that they are safe? How can I be sure they come virus free and won't become the gateway to Internet malices? Who's responsible for protecting my non-PC connected devices and what are the available solutions? Should the residential gateway be the gatekeeper for all my IP devices and if it already is, how would I know? Do I need to start paying $10 or 20 bucks a year for each of these devices? Can someone help me?
Tuesday, November 13, 2007
New Life for Lifetime's Website
First IPTV Deployment in Latin America
Telefónica España does report 469,000 IPTV subscribers as of Q3, which is a 76% growth over last year's figure.
iPhone in Europe
The iPhone launch in Europe was not as successful as in the U.S.
O2 reportedly activated 8,000 iPhones on the launch day, and T-Mobile claims it sold 10,000 by the afternoon on the launch day. Germany and the UK have a combined population of approximately 143 million, meaning 0.01% of people bought an iPhone on the opening day, a percentage significantly lower than that in the U.S. Some of the reasons for the lackluster performance include the following:
High price tag: iPhone prices have been slashed by 1/3 since launch in the U.S. whereas it’s still sold at more than $500 in Europe.Lack of 3G supportA more competitive handset marketLower iPod market share in the MP3 market
In the long term, we expect iPhone’s sales in Europe to continuously under-perform that in the U.S.
Yuanzhe (Michael) Cai
Director, Broadband & Gaming
Monday, November 12, 2007
FCC and NCTA - roll out the bean counters
There's definitely room for disagreement from the cable side on 1) Whether the 70/70 threshold has been reached and 2) Whether new rules forcing lower fees are necessary. There is no question that the cable operators view the encroachment of AT&T and Verizon into the video services market as a significant threat, and they may have reason to question new FCC rules intended to promote competition where one could argue that - in certain locations - competition is now flourishing.
And, even if the message coming from the FCC is simply about allowing a broader array of content to be able to be carried on cable systems, I would suspect that the MSOs have plenty of reason to argue that this is already being formented, thanks to the dual threat and opportunity posed by the "over-the-top" video services that are now prevalent over broadband connections. In fact, we fully expect cable operators to begin to open up their walled gardens to allow for a wider variety of content to be carried over their broadband pipes, but also still groomed and optmized for a decent viewing experience.
It's a curious time for the FCC to be considering this provision in light of a market that is far more competitive now than at any other time. And, although we don't necessarily credit the cable industry for being consumer advocates, recent battles that they've had with the folks at The NFL Network and The Big Ten Network indicate that they are taking a harder line with new programming where simply passing the cost on to their subscribers may not be an option. We'll have to see where these 70/70 provision conversations lead.
Wednesday, November 07, 2007
Google Android vs. The Celco Cyborgs
So what will Google’s new open-source software mean for the mobile phone industry? I’ve spun this Rubik’s cube around as many ways as I can think of and always come back to “not much”. I’d like a more open, flexible cellphone as much as the next guy but the problem isn’t the OS. The problem is that (most) of the major cellphone players control their handsets like an obsessive mama. You can only use their handsets to access their applications via their network. And for those of you just joining us, this isn’t an accident. The mobile carriers deliberately do this because… you guessed it, they want to make money. They have nothing to gain from a hyper-competitive market that lets consumers can access what they want, where they want, and how they want. So why would a new Google OS package change their minds? I don’t think it will. T-Mobile & Sprint might be willing to experiment with it in hopes of luring some subscribers but I somehow doubt they are willing to give consumers the freedom needed drive down prices. After all, isn’t that was regulators are supposed to do?
Tuesday, November 06, 2007
The TV Writers Strike and the Future of Television
I see this impasse as a precedent-setting stage for both the writers and for the producers. Although the total revenues generated by Internet video services remain a tiny percentage of the overall entertainment industry (particularly paling when compared to current box office receipts, DVD rentals and sales, and current television advertising rates), what is occurring on the Internet today is going to be the face of television and entertainment tomorrow in a much more significant way. Consider the fact that many industry observers see our current television model (dominated by a linear delivery model) shifting to an on-demand model, where the important measurements are not based on a total audience at 8 p.m. Eastern, but rather a total audience plus the metrics about who chose to watch a certain streaming advertisement associated with the video. So, while the stakes that are being battled for today are relatively small (our own estimate is that TV downloads is only a $133 million market today - growing to $950 million by 2011), the total TV market revenues of tens of billions of dollars will soon be counted in the same way that Internet streams are today. So, getting the precedent of establishing revenue shares per streams is going to keep the writers involved in revenue streams when much more of the TV experience shifts to an “Internet-like” delivery system.
Intead of focusing on the revenue portion per download, I think that this battle is going to be built around the writers' share of the advertisign dollars generated per view. The major revenues for the on-demand video space are not necessary going to be driven by user-paid downloads. In fact, when you look at Apple’s user-paid download numbers, you’re actually starting to see a peak occur with total downloads of video. As DVRs and on-demand content become much more prevalent as vehicles to deliver video to viewers, advertising is going to be the major revenue generator. Our own estimates indicate that ad-supported Internet video revenues will grow from $1.4 billion in 2007 to $5.8 billion in 2011. If I were the writers, I’d want to focus there.
This current battle will definitely shape the way in which other creative personnel are compensated for their work, including actors and directors. There is precedent that will be set with the final agreement. In my mind, it hopefully does acknowledge the need to compensative the creative work behind this content, regardless of the delivery vehicle. So, yes, I would expect that this will impact conversations about residuals for other creative personnel.
For more insight into the online video space (including recent news and analysis), please see Parks Associates' white paper: Broadband Video: A Market Update. This paper is available for free download.
Monday, November 05, 2007
Oberon Banks on Web 2.0
The leap of Oberon represents an overall trend of casual gaming companies embracing Web 2.0 and social media. In a recent press release about our new casual gaming report, we asserted that casual gaming is still the most popular online entertainment activity but warned casual gaming companies that social networking and online video are catching up quickly. "“The casual gaming industry cannot rest on its laurels. In order to counter the growing competition from other online activities, the industry needs to continue to grow its fan base and find ways to better monetize its existing audience.”
In the casual gaming report, we provided further commentary regarding casual gaming and Web 2.0:
Compared to the flamboyant marketing campaigns of the core video games, the majority of casual games have no brand recognition, and publishers lack financial resources for traditional advertising or marketing. Although casual game portals promote casual titles, it is word of mouth that helps casual games become successful. Social networking is therefore a perfect fit for casual game marketing. Several companies have begun to leverage popular social networking Web sites. PopCap is mulling over the possibility of placing Bejeweled or Zuma on MySpace or Facebook. Kongregate, a new game portal that relies on user-generated game content, has a widget for players to share their game scores and achievements on Facebook and will soon add friend challenges and embedded gaming functions. Nevertheless, the traditional casual games players are not avid users of social networks. Although for companies like Kongregate and casual MMOs/virtual worlds that are targeting younger audience, combining casual games and social networks make sense, it seems for companies mainly focusing on older females, the network marketing mechanism will work better because the audiences are already familiar with Mary Kay or Amway. A more advanced implementation of Web 2.0 marketing is for game publishers to set up their own social networking circles to spread the word and promote games. Big Fish Games broke ground in this area by establishing two parallel programs -- Principal Network Partner (or PNP) and MyGameSpace. They mirror network direct marketing schemes, sharing sales revenue with users and affiliates. To date, these two programs account for 25 -30% of new users to the Big Fish Games portal.
Friday, November 02, 2007
No More Pivot for the Cable Guys
During Sprint’s 3rd-quarter conference call, Paul Saleh, the acting CEO, announced that the company has decided to halt further market deployments of its Pivot service, citing provisioning complexity and difficulty to simplify POS (point of sales) activation. Nevertheless, he said that Sprint is still strategically aligned with cable MSOs (whatever that means). Sprint will keep supporting the 33 markets launched so far.
Many industry executives I talked to two years ago praised Sprint’s decision to become a carrier of carriers and divest its landline assets. It seemed like a good strategic move at the time as telecom operators were bleeding landline subscribers. What a change of fortune it was. AT&T and Verizon are rebounding from their dog days, thanks to improving performances of their service bundles. Sprint, on the other hand, lost its focus for a while and was unable to stop wireless subscriber churn. Without strong performance of its bread-and-butter business, any strategic talks are just that, strategic talks. It also appears that managing relationships with business partners can be much more complex than managing consumer relationships.
Telcos must be cheering at the news as this will delay cable MSOs’ rollout of quadruple play services and give them some breathing room. I’ve said that telcos are likely to take the early lead in the quadruple play race, kind of a revenge for their loss in the triple play war. On cable MSOs’ side, they now need to investigate other options such as leveraging the AWS wireless spectrum they acquired last year or buying a wireless carrier.
Thursday, November 01, 2007
Sony Seeking Rescue for PS3
Two pieces of news came to my attention about Sony Computer Entertainment in late October. The first is music to gamers’ ears: Sony decided to cut the price of the 80 GB hard drive PlayStation 3 from $599 to $499. Also a 40GB model for $399 will go on sale on November 2nd to catch the holiday season in the
The price cut came at no surprise considering PS3’s lagging sales. While Microsoft is reaping the benefits of Halo 3 and Nintendo’s factories are still burning the candle at both ends to meet consumer demands, Sony is desperate to narrow down the gap between itself and its competitors. The new prices will make PS3 more comparable with the other two consoles.
The second news is Sony confirmed it will sell its PS3 chip production to Toshiba, which is another major manufacturer for game console chipsets. Sony has invested at least $1.7 billion in this business; the divestiture of this expensive division will release some of its capital and potentially grant Sony access to lower priced chips, thus reducing the total cost of PS3.
The question is whether these moves will change Sony’s position as the “underdog” in this cycle of console war. While the long-term winner is still undetermined, the price cut will surely ignite the fuse in the short run. Need evidence? Since Sony cut the price in the same proportion in the
Historically Sony has been a long distance runner, not a sprinter. In the previous generation, PlayStation 2 sold more than 90% (still counting) after the first two years, compared to 79% for Xbox and 56% for GameCube.
Lower pricing is key to driving adoption initially but a good variety of quality games will be crucial in the long run. The problem is high quality game development for PS3 can be challenging because PS3 is very technologically advanced for the developers to digest and many third party developers have turned their attention to Wii. So what Sony will have to do is to first rely on the first-party games such as Heavenly Sword to showcase the power and versatility of the machine and wait for third-party developers to catch up and help spur PS3 sales in 2008-2009 timeframe. We are expecting an inflection point of PS3 sales in 2008, driven by lower prices and better games, the two main factors that contributed to the runaway success of PS2.
Meanwhile, Sony is in a perfect position to leverage its media assets to ramp up the offerings of video, music downloads and PVR to boost the average user spending per month, provided it can orchestrate the interests of its different divisions. Although it has been slow to bring the meals to the table, digital media distribution is likely to contribute to its bottomline in the future. I am also holding my breath for its highly expected virtual world Home and casual MMO Free Realms. Both of these initiatives are scalable and have the potential to be played on multiple platforms. They can help attract a diverse group of gamers, among other benefits.
Labels: electronic gaming
Huge Retail Win for HD DVD
While the HD DVD camp has had some wins of late, this may be the biggest. Wal-mart is the second largest consumer electronics retailer in the United States. This is even better news for consumers. There is now a high definition player under the magical $100 price point. Additionally, it likely will lead to price cuts of other players from retailers like Best-buy, Circuit City and Amazon. Could we actually be closer to one high definition format? We will see.
But how can I get the upgraded remote controls, Verizon? The first generation FiOS TV remotes are definitely lacking some touches that the new ones have.
Grey's Anatomy had better record correctly tonight, or there will be heck to pay.