On Mobile Trends – 2013 so far…

While it’s difficult nowadays to write about telecoms or the mobile sector without drifting off into other areas of the TMT industry, Zeitgeist spent an evening last month as a guest of Accenture in Cambridge, discussing the successes and failures of the recent Mobile World Congress in Barcelona. It came in the middle of a year so far that has already some significant shifts from mobile companies, in terms of branding, operations and revenue streams.

2013 has seen some interesting news in mobile. The week before last marked, incredibly, the 40th anniversary of the first phone call made from a mobile phone. This year also saw Research in Motion renaming itself to BlackBerry, with shares sliding 8% by the end of the product launch announcement for its eponymous 10 device. It saw Sky acquire Telefonica’s broadband operations, while responding to major complaints about the speed of its own broadband service. It has seen Huawei, which in Q4 of 2012 sold more smartphones than either Nokia, HTC or BlackBerry, come under scrutiny particularly in the US for its lack of transparency. Moreover, after much editorial ink spilled on Facebook’s lack of initiative and innovation in mobile, the release of the ‘super-app’ Chat Heads has piqued interest as it looks to compete with Whatsapp, Viber, iMessage et al., which Ovum reckons cost MNOs $23bn in lost revenue every year. This news mostly pertained to developed markets; JWT Intelligence’s interview with Jana CEO Nathan Eagle features some interesting insights on mobile trends in emerging markets.

Interestingly, 2013 thus far has also been witness to the beginning of more flexible contracts and payments. At the end of March, T-Mobile USA announced it would offer the iPhone to customers for cheaper than its rivals, and customers would not have to sign a contract. It effectively ends handset subsidies – something which Vodafone pledged to do last year and was punished by the stock market when it failed to do so – spreading the full cost of the phone over two years “as a separate line item on the monthly bill”, which may strike many as still quite a commitment. Customers must pay the bill for the phone in full in order to be able to end their tenure with the network. The New York Times elaborates, “Despite T-Mobile’s promise to be more straightforward than other carriers, some consumers might still find it confusing that they have to pay an extra device fee after paying $100 up front for an iPhone.” In the UK, O2 is going a similar route. At the end of last week the company announced similar plans to T-Mobile. While still keeping contracts as an option, the FT explained the company was looking to a plan, dubbed O2 Refresh, “that decoupled the cost of the phone from the cost of calls, texts and data. Customers will be able to buy a phone outright, or pay in instalments over time, and then sign up to a separate service contract that can be cancelled or changed at any time.” Although O2 said in the article that they expected customers to pay the same as they would on a standard contract, the new plans by both network providers will surely add to customer churn. Brands will have to work harder to develop true loyalty rather than relying on the lock-in feeling that adds to switching costs for many customers. Conversely, this added flexibility may make the providers feel less like utilities, creating more choice and differentiation.

At the aforementioned conference Zeitgeist attended last month, Accenture hosted an evening they dubbed “MWC: Fiesta or Siesta?”. It soon became apparent that many of the speakers invited were less than enthused with the conference this year. This was partly because there were no extraordinary leaps in technology or hardware on offer. It was also because of, as one speaker lamented, “the proliferation of suits”. Another speaker complained it was like listening to The Archers: long storylines “that ended up having no conclusion”. The very essence of the conference though is not about trendsetting, or cool new consumer devices. Mobile operators are utilities, the excitement around such an event is not going to be as visceral as that of SXSW or Embedded World. It led some to wonder whether the “real innovation was being developed in such ‘niche’ events, away from the “glitz”. Moreover, perhaps Samsung’s decision not to launch their new S4 handset at the Congress alluded to this lack of excitement, or at least a wish not to be drowned out by other announcements.

Among exciting trends on display at MWC, M2M – something Zeitgeist has written about before – was front and centre at the conference, particularly with regard to cars. Phablets continued to make their foray into the consumer’s view, with bigger screens meaning more data transfer. Zeitgeist wondered whether such a transition would put even more pressure on networks already struggling with large data handling. And although Firefox’s new OS gave some – including those at GigaOm – hope that it could provide more innovation through diversified competition in the marketplace, others, including Tony Milbourn, Executive Chairman of Intelligent Wireless, speaking at the event, thought it “underwhelming” after “lots of hype”. Bendable screens were also to be found at MWC, but those speaking at the Accenture conference like Richard Windsor of Radio Free Mobile said it was early days and much was still to be seen from this new type of phone. Its potential though, he readily conceded, was formidable. Wearable technology was a huge issue at the conference and one that Zeitgeist is particularly interested to see develop, especially as companies like Apple, Sony and Google enter the fray.

It seemed then that the Mobile World Congress failed to reflect what is turning out to be a tumultuous year in telecoms. Not only is there an increasing desire to address consumer needs – in the case of more flexible contracts and more consumer-facing company names – but as economies sputter their way toward ostensible recovery we are also starting to see M&A activity return to the sector. Time will tell whether new technologies, such as M2M or bendable screens can breathe new life into the sector.

News Corp rendered asunder

Si fractus illabatur orbis, impavidum ferient ruinae

‘Should the world break and fall about him, its ruins will strike him unafraid’. Rupert Murdoch’s world can, without a great deal of exaggeration, surely be said to breaking and falling about him right now. After months of very public airing of dirty laundry, ranging from phone hacking to bribes at the highest levels of society and government, News Corporation could no longer survive in its current form. Though hidden away, nestled in the hills of the South of France for a short time, the news did not escape Zeitgeist’s notice. The empire, which The New York Times reports as being valued at $54bn, will be split into (increasingly unprofitable) newspapers on one hand, entertainment (movies, TV, cable and publishing) on the other. Murdoch said the split would “simplify operations”, though usually that phrase tends to be used as reasoning for when companies merge, rather than disintegrate.

On a personal note, when working a short stint at 20th Century Fox Film several years ago, it was interesting to see the News Corp dynamic at work. Publications like The Sun were a great place for the company to have articles generated concerning subject matter of the upcoming summer blockbuster we were trying to market. At the same time, emphasising the symbiotic relationship of the corporation, a message came down from up high that one of the team’s proximate objectives in the short-term was to shore up and direct eyeballs to The Sun, even at the expense of our own goals. Such a quid pro quo will no longer be necessary in the future.

Movie Moves

From industry paradigm shifts to Paramount trailers and viral websites…

Zeitgeist has had it’s eye on the UK production company Shine for some time, watching it grow into the powerhouse it is today, all under the stewardship of Elisabeth Murdoch. Elisabeth, married to Matthew Freud of Freud Communications, has seemed to want to keep her distance from the Murdoch dynasty since leaving the fold ten years ago, unlike her brother James, who worked for News Corporation in Asia before taking the helm at Sky in the UK. Indeed, Elisabeth’s husband has – strangely for a man whose career is public relations – made little to no attempt to keep his barbed views of News Corp.’s Fox News to himself, saying he was “shocked and sickened” by the content and bias of the cable network. So it thus came as some surprise to Zeitgeist to learn that a deal was recently completed for Shine to become part of the Murdoch empire for £415m. What this will mean to the independence and creativity of the group remains to be seen. But I suppose if the sustainability-themed Avatar can make it out of the notoriously arch-conservative News Corp leviathan, anything’s possible.

In other news, Netflix has been in the papers again. After announcing it would be partnering with several consumer electronic devices, (Mashable made the analogy of having a Netflix button on your remote control), this week the company announced it was trying to develop a remake of the classic UK TV show House of Cards, with Kevin Spacey starring and David Fincher directing, committing to 26 episodes, “taking it into uncharted territory that would put it in direct competition with HBO and other premium cable channels”, writes Mashable. This will be the first time that the company has commissioned and created its own content, further disrupting models of distribution, which itself is a bit of a house of cards. While Netflix pushes into other companies’ territory, Amazon encroached on Netflix‘s by announcing at the end of last month that they would be offering premium customers access to 5,000 TV shows and movies. Though Reuters points out that moves like these are attempts to “woo” companies like Time Warner and the afore-mentioned News Corp., the reality is more tricky, as the same article points out in the very next paragraph,

Media companies so far are cautious about allowing their content to be used on these types of services because they compete with cable operators that pay a premium to carry TV programs and movies. The fear is that people will drop pricey cable subscriptions — known in the industry as “cord cutting” — in exchange for streaming video offered by Netflix or Amazon for instance.

Yesterday it was reported that Paramount will release a film on DVD and on the peer-to-peer service BitTorrent at the same time, with the latter platform supposedly functioning to incentivise people to then buy the DVD. Might a ten-minute teaser have been better than releasing the entire film? Such a teaser is being provided at the moment by Warner Bros., which recently developed iPad apps for both Dark Knight and Inception, providing the first five minutes of the film for free.

Ten days ago, Facebook announced that it would be getting into the film-rental game, as reported by the FT. This is a broader stroke for Facebook in an effort to create a benevolent ‘walled garden’; an area for users to navigate the web, communicate with who they want and angage in the services they want, without ever having to leave the Facebook environment. Zeitgeist never thought they’d be mentioning the recently-released Chalet Girl on this blog, but Variety reports the film has made an interesting marketing move of releasing an interactive trailer on Facebook, where users have the option of “like”ing the trailer at various points. Peter Buckingham, head of distribution and exhibition at the UK Film Council, sagely points out the novelty of such an exercise for film marketers; “The film industry really has not woken up to how important metadata is”.

There are exceptions, however. This past week saw the release of a trailer for an eagerly-anticipated (by nerds) summer film, directed by JJ Abrams of Star Trek and Lost fame and exec-produced by Steven Spielberg – Super 8. And what is the best way to reach said nerds? Why, firstly by providing a super-nerdy website that doles out microscopic kernels of plot information on the film under the guise of hacking into a computer from the late 1970s, and secondly by releasing said trailer on Twitter (see top image). As Zeitgeist has said before, know your audience.

On Convergence

Today the problem lies not in acquiring information, but in how to apply it effectively and efficiently in order to solve the problem at hand. The impact of the increasingly easy access we have to information was scrutinised recently by President Obama at Hampton University, “With iPods and iPads and Xboxes [sic] and PlayStations—none of which I know how to work—information becomes a distraction, a diversion, a form of entertainment, rather than a tool of empowerment”. As Le Monde details, the speech as a whole was really geared toward warning people of the dangers of excessive use of technology; about making sure it is the parents rather than the X-box that tucks the child into bed at night.

The statement in of itself though, is strange, given the person saying it. It is generally agreed that Obama won the election with his revolutionary form of fundraising. It meant he raised more money than fellow Democratic nominee Hillary Clinton, who stuck to her old-school guns by going to uber donors in their sizable Upper East Side and Malibu residences. Not only that, but the way he went about it – a truly grassroots system of peer advocacy; viral awareness through social networks to encourage micropayment upon micropayment – showed he was intuitively in touch with the electorate, and with a new way of doing things. To hear these Luddite words from Obama, complaining about the X-box, is odd coming from someone whose campaign advertisements appeared on in-game billboards on the X-box’s Burnout Paradise, moreover from someone who is a self-confessed Blackberry addict. His self-deprecating manner is patronising and unnecessary; people elected him because he is elite, which should not be seen as a bad thing, as Jon Stewart points out, “The Navy Seals are an elite squad… why must the President be a dumbass?” Bill Maher has more: no longer has more because this content has been removed by HBO, sorry. It was pretty funny though.

The information we all now have access to over the Internet is truly staggering. YouTube now receives 2bn hits daily (though not without repercussions), which rivals that of this blog. However that is no reason for condemnation, as long as whatever it is (text, audio, video; i.e. content) can be accessed efficiently. The problem at the moment is that this is not the case. ‘Convergence’ has been a buzzword for what seems like a lifetime in the world of digital. It is happening, but only in fits and starts, and to some extent it is being hampered by conglomerates whose corporate interest (quite understandably) in the bottom line does not exactly dovetail with what convergence is really about – open source.

The constantly stimulating blog Only Dead Fish featured a very well-written and thought-provoking article on convergence. Having studied the matter as part of its Master’s degree, Zeitgeist thought it knew all there was to know about such matters. This article challenged any existing, simplistic preconceptions. The author quotes Grant McCracken, who says, of the iPad as a converged device,

“The iPad critics can’t see this third space because they work from a utilitarian point of view.  For them, iPad will create economic value only if it solves practical problems.  But Apple has always seen the economic proposition as a cultural one, as an opportunity to speak to the entire consumer in all of his or her complexity, not just the problem solver.”

The author goes on to reference Henry Jenkins’ ‘Black box’ fallacy, “sooner or later all media content will flow through a single black box”. This is indeed one interpretation of the idea of convergence, and it is not necessarily wrong. However, what Zeitgeist believes convergence means for the consumer is not about a black box; we enjoy being able to access content through our myriad devices. What it does mean then is seamless interaction between these devices, i.e. being able to watch my TV show on the commute from work, returning home to dock the device in my TV and have it immediately start playing there, etc.

Conversations over social networks will play an increasing role as these platforms converge (and privacy continues to erode). However, the question remains on everyone’s lips about how to monetise all these goings on. One colleague of Zeitgeist’s suggested a provider like Sky might end up providing an offering where consumers can pick a package that includes The Guardian, some music (Sky has a lacklustre service for this already) and the Cookery Channel, believing that people would be more willing to pay for content in packages rather than in small, one-off payments. Of course, News Corporation could, with little difficulty provide a similar service, whereby they provide access to The Times, The Sun, Sky Sports events, Sky Songs and new films released by 20th Century Fox as packages.

The American humourist Frank Clark wrote that “If you can find a path with no obstacles, it probably doesn’t lead anywhere”. Convergence as a term could easily turn out to be one of those unobtainable zeniths, along the lines of world peace; an abstract term. The possibilities though of seamless connectivity of content between platforms is an extremely attractive one, both for consumer and advertiser.