Apple seems to be at a bit of a cross-roads at the moment. Attending a Mobile World Congress wrap-up event in Cambridge last week, Zeitgeist listened carefully to one of the key speakers, William Webb, casually toss off the following epithet; “Since Steve Jobs died, so has all innovation… Everyone was catching up with Apple, then they did and Apple ceased to innovate.”
As a brand, the company is still strong. The above TV spot is one of the more effective pieces of advertising on the box right now. As a service, the story is less clear. So much ink has been spilled over the years writing about the imminent arrival of a fully-fledged Apple TV service, that the most recent rumours with Comcast did little to raise expectations. Variety called a deal between the two companies “improbable”. Elsewhere, Business Insider said yesterday it was time for Apple to launch a music subscription service – the chart below will make tough reading for the iTunes side of the business, with negative growth in 2013.
Strategic clarity seems to have escaped the company of late. Are Apple’s greatest days behind it then? We say, don’t bet on it.
Signs of promise, but are reports of TV advertising’s death greatly exaggerated or not?
Near the end of the masterpiece manqué that is “Touch of Evil”, Orson Welles’ character pays a final visit to an old friend, a gypsy played by Marlene Dietrich. Usually a dab hand at fortune telling, the woman looks at the fallen detective dejectedly, and with pity tells him that his time is over, the world has moved on. What with the release of Google TV, as well as the newest incarnation of Apple TV, the industry could certainly said to be volatile. Reuters have an excellent primer on what both behemoth’s machines actually do, here. This will surely only divert eyeballs away from advertising. Why watch a commercial when I can easily watch other media from the Internet before Pop Idol returns from its break, as is possible with Google TV? Why watch broadcast television at all when all the films, music and photos I want are streamed from my computer’s iTunes via Apple TV?
Furthermore, increasing DVR penetration can also do nothing but dent the impact of above-the-line advertising. In an article in Variety by Brian Lowry a few weeks ago, the journalist commented that digital video recorders were now in 38% of US homes. “To which many will doubtless say, ‘Only 38%? But everyone I know has one!'”. As Lowry points out, this delayed and fast-forwarded viewing has led Nielsen to create special designations, such as ‘Live+7’, to allow for the different impact of viewing an ad after its original airtime, as commented on by The New York Times recently. More importantly however, the rise of the DVR – from only 1% penetration less than five years ago – “points to a shift that threatens to hasten the separation of haves from have-nots”. Augmentation of these platforms will, Lowry writes, cause a fracture between those doomed to watch commercials, and those suitably kitted-out to avoid them. In particular, the problem for advertisers, and hence the networks they support, is that those people that own DVRs tend to make up a more desirable part of the population, which 30-second spots will no longer reach.
“[W]eaving messages into programming will become even more of an imperative… Taken to its logical extreme, advertisers peddling big-ticket items will have to think twice about whather 30-second spots are an efficient use of marketing budgets. The companies still relying on TV… will be the ones pushing inexpensive products[.]”
So it would seem the structure of television as we know it is an endangered species, soon to shuffle off the coil. William Gibson once wrote that the future exists already, it’s just not well-distributed. Surely this is the case here, and what we are glimpsing at the fringes with uptake of new platforms for viewing multiple media serving as a looking-glass into what will be the widespread norm in the coming years. Yet despite these new technologies, and the continued rise of all things digital, a front page article in Variety at the beginning of the month noted,
Advertisers appear to be returning to TV again, with automakers, especially, shelling out more coin… In fact, the major broadcast and cable networks were cheered at the start of the summer by a better-than expected upfront advertising sales market.
Indeed, The Economist reported last week that, with the recovery of the ad market, the two clear winners are the Internet, and, yes, television. The article states that at the end of last year spending on British TV was predicted to fall by 0.2%. It is now forecast to grow 11.6%. The previously moribund ITV has seen advertising revenues shoot up by 18% in the first half of this year. And while disruptive technologies may eventually take hold, the fact remains that people are watching more and more TV; 158 hours a month in America, two hours more than last year. Markets less mature that the US or UK have not yet faced the technological developments that await. “30% of Chinese regularly use the internet, whereas 93% watch TV”.
The article doesn’t address the fact that this is likely to change though, and importantly it’s likely to change a lot more quickly than it has done in the West. Moreover, the articles states that “search engines and online banners… do not offer emotional experiences.” But this is not all that the internet offers as far as branded experiences go. To see some great examples of work done to promote this past summer’s onslaught of films, click here. But the thoughts of The Economist clearly are the prevailing philosophy at the moment. According to an article in the FT last week, online advertising “increased by 10% in the first half of the year, but has fallen behind that of television and other traditional media for the first time.” Cinema also gained 12% and outdoor was up 16%. Press continued it’s slow decline. The thinking is that in the midst of still-prevalent economic uncertainty, advertisers are flocking back to a medium that they trust. For how long this trust will hold is a question that few in the world of above-the-line and TV networks will want to answer.
“All is unceasing and rigorous competition in nature”, said the Marquis de Sade. Rivalries come and go, it is the victor who must with each success continue to innovate and ultimately change, enduring the onslaught of new competitors. Yahoo vs Google, Microsoft vs Google, WPP vs Google and more recently Apple vs Google and Apple vs Amazon vs Google; in similar circumstances, we have gone from Sega vs Nintendo, to Sony vs Nintendo, to Apple vs Nintendo.
Apple themselves have pushed beyond their preliminary battle with Microsoft to a place where they now court multiple rivals in all the different markets that they affect with products like iTunes, the App Store and Apple TV. Steve Jobs, in September last year, said that the iPod touch was being released with gamers in mind after having had much feedback from the public as to what they used the device for. This was part of the reason why the iPod touch was cameraless, unlike its smaller, cheaper cousin. Nintendo must have known it was only a matter of time until their paths would cross…
Zeitgeist has very fond memories of inadvertently reshaping the bones in his thumbs while playing the Mario Brothers trilogy for hours and hours back in the day. The Nintendo Entertainment System, their first console, was fantastically successful. Somewhere along the way, however, the company got a bit lost. The turnabout it managed thanks to the Wii (and to a lesser extent the DS) is extraordinary; Sony and Microsoft saw share of their respective PlayStation and X-box platforms gradually erode to give Nintendo a position of dominance, becoming the market leader less than a year after its launch; PSFK named it one of their top ten brands of 2010. In the last week though, Nintendo have reported an earnings drop – its first in four years – hurt by slow sales of the Wii and possibly effected by piracy as well, according to Le Monde. Just as Apple are encroaching on Nintendo’s sovereign territory, the reverse is also true, as Nintendo have been offering Netflix movie rentals for a while now. Will the DS soon be facing off against the iPhone, iPod and iPad? According to Le Monde, in 2008 Apple’s iPhone represented 5% of the gaming market, Nintendo 75%. Today the iPhone’s share is 19%, Nintendo’s 70%. It is the casual nature of its games that made the DS and Wii appeal to a market that other consoles never even considered. Now though, those casual gamers are equally at home playing on an app on their iPhone, as well as on Farmville on Facebook. Variety says, (emphasis added),
“More than 32 million people tend their virtual crops each day, and the game has a total user base of 80 million. That’s roughly seven times the number of people who play the online smash ‘World of Warcraft’.”
Of course, rivalries like this will become increasingly common in this sector, as technology platforms – what the great Lawrence Lessig calls “layers” – continue to converge, allowing for excellent, mutiple functionality on one product (look at the iPad as an example). Somewhat counterintuitively, customers may not readily embrace this convergence, as behavioural economics tells us that people put more trust in a product that performs one dedicated task well; they assume anything else will be somehow diluted. Neither Nintendo or Apple should fret, exciting times are ahead. There is speculation in the Le Monde article, among others, that Nintendo should take the fight to Apple by releasing its own phone. Zeitgeist would find that a real treat. Almost much as much of a treat as the original Japanese advert for Super Mario Bros. 3. Enjoy.