We all seem to have less time to ourselves these days. But there seems to be more to watch – on more platforms – than ever before. What trends have led to this, and what’s the result? Much editorial ink has been spilled over the years about how our lives seem to be getting busier, with less free time to ourselves. This is somewhat of a painful irony given that many of our more intellectual ancestors thought our evolution as a species would quickly lead to a civilisation mostly consumed by thoughts of how to fill the days of leisure. In last week’s New Yorker, Harvard professor Thales Teixeira noted there are three major “fungible” resources we have as people – money, time and attention. The third, according to Teixeira, is the “least explored”. Interestingly, Teixeira calculated the inherent price of attention and how it fluctuates, by correlating it with rising ad rates for the Super Bowl. Last year, the price of attention jumped more than 20%. The article elaborates,
“The jump had obvious implications: attention—at least, the kind worth selling—is becoming increasingly scarce, as people spend their free time distracted by a growing array of devices. And, just as the increasing scarcity of oil has led to more exotic methods of recovery, the scarcity of attention, combined with a growing economy built around its exchange, has prompted R. & D. in the [retaining of attention].”
It’s such thinking that has persuaded executives to invest in increasingly multi-platform, creative advertising during the Super Bowl, and to media production companies taking their wares to the likes of YouTube and Netflix. But it’s all circular , as demonstrated last week when Amazon announced it would be producing films for cinema release. The plurality of such content over different channels carries important connotations for pricing strategies. At its most fundamental, what is a product worth when it is intangible and potentially only available in digital form? It chimes with an article written earlier this month in The Economist on the customer benefits of e-commerce. Though most knee-jerk reactions would assume price is the biggest benefit to customers, recent research illustrates this is not always the case. Researchers at MIT showed on average people paid an extra 50% for books online versus in-store. This isn’t because that latest David Baldacci is sold for more on Amazon, but rather because of the long tail. Which means more products are able to find the right owner, for a price, whereas in store comparatively they go unsold. More channels have meant more availability for content, which should benefit consumers in that more content destined to be a hit now finds a home, where once it might have been lost if turned down by the major TV or radio network stations. The Economist elaborates,
“Seasoned publishers have only a vague idea what book, film or song will be a hit. A major record label can sign only a fraction of the artists available, knowing full well it will unwittingly reject a future superstar. Thanks to cheap digital recording technology, file sharing, YouTube, streaming music and social media, however, barriers to entry have been dismantled. Artists can now record and distribute a song without signing to a major label. Independent labels have proliferated, and they are taking on the artists passed over by major labels. Hit songs are still a lottery, but the public gets three times as many lottery tickets.”
So while we may have less time to consume it, more content over more channels will allow for greater chances for breakout hits, particularly with avid niche audiences. Amazon Prime video content was until recently confined to a niche audience, and the show Transparent dealt with niche subject matter. But the show has broken out into the zeitgeist and won two awards at the recent Golden Globes ceremony. (Full disclosure, we know a producer on the show and were lucky enough to visit the set on the Paramount lot in Los Angeles last summer). It is likely such a great show – recently made available free for 24 hours as a way to upsell customers to Prime – would not have found a home on traditional TV networks, and thus in people’s homes, were it not for this plurality.
It would be impossible to capture the disruptive influence the latest digital technologies are currently having on the world in a single blog post. But what Zeitgeist has collated here are some thoughts and happenings showing the different ways technology is changing our lives – from the way we do business to the way we interact with others.
Last night saw a highly enjoyable occurrence. No, not the Academy Awards in general, which as ever moved at a glacial pace as it ticked off a list of predicted favourites. Rather, it was a specific moment in the ceremony itself, when host Ellen DeGeneres took a (seemingly) impromptu picture of herself with a cornucopia of stars, tweeting it instantly. The host declared she wanted the picture (above) to be the most retweeted post ever. The previous holder was none other than the President of the United States, Barack Obama, whose re-election message saw over 500k retweets. It took Zeitgeist but a few minutes to realise that Ellen’s post would skyrocket past this. Right now it has been retweeted 2.7m times. Corporate tactic on the part of Samsung though it may have been, Zeitgeist felt himself feeling much closer to the action – being able to see on his phone a photo the host had taken moments ago several thousand miles away – and the incident helped inject a brief air of spontaneity into the show’s proceedings. Super fun, and easy to get definitive results in this case on how many people were really engaging with the content. But can we quantify how much Samsung and Twitter really benefited from the move, beyond fuzzy marketing metrics? Talking heads on CNBC saw room for improvement (see below).
The big news of late in tech circles of course has been Facebook’s $19bn acquisition of messaging application Whatsapp. Many, many lines of editorial have been spilled on this deal already. In the mainstream media, many commentators have found the price of the deal staggering. So it’s worth reading more considered views such as Benedict Evans’, whose post on the deal Zeitgeist highly encourages you to read. Despite the seemingly large amount of money the company has been acquired for – especially considering Facebook’s purchase of Instagram for a ‘mere’ $1bn – Evans sagely points out that per user the deal is about the same as Google made in its valuation when it purchased YouTube. So perhaps not that crazy after all. The other key point that Evans makes is on Facebook’s dedicated pursuit to be the ‘next’ Facebook, or conversely to stop anyone else from becoming the next Facebook. With a meteoric rise in members (see image below, as it outstrips growth by both Facebook and Twitter), Whatsapp was certainly looking a little threatening.
The worry for investors is how Facebook will monetise this platform, when the founders have professed an aversion to advertising. Is merely ensuring that Facebook is the ‘next’ Facebook a good enough reason for such acquisitions? Barriers to entry and sustainable advantages will be few and far between going down this route. The Financial Times, in its analysis of the acquisition, points out that innovation is quickly nipping at the heels of Whatsapp. CalPal, for example, is one example of a mobile application that lets users message each other from within an app. In the markets, there has been a relatively sanguine response to the purchase, but only because of broader trends. As the FT points out,
“External forces have also helped to push the headline prices of deals such as WhatsApp into the stratosphere. A global excess of cheap money, along with a scarcity of alternatives for growth-hungry investors, has boosted the stock prices of companies such as Facebook and Google.”
One of the most visibly exciting developments in technology in recent years is the explosion of the wearable tech sector. But it is Google’s flagship product, Glass, that has met with much ire and distress. An excellent piece of analysis appearing in MIT Technology Review last month hit the nail on the head when it identified why Glass was having trouble winning people over. The article rightly identifies the significant shift in external appearance inherent in making the switch from a device that needs to be taken out of a pocket as makes it clear when it is being interacted with (you need to cover half your face with the product to talk to someone, for example). The article also details the savvy approach Google have taken to the distribution of their product. It’s always sensible to try and mobilise the part of your base likely to be evangelists anyway, so as to build advance buzz before a full-blown release. But to get them to pay for the privilege, as Google are doing with their excitable fans, dubbed Explorers, is a stroke of genius for them. However, the key issue, and what the article states is an “insurmountable problem”, is that “Google’s challenge in making the device a successful consumer product will be convincing the people around you to ignore it”. It is this fundamental aspect of social interaction that is worrying many, and now Google is worried too. As detailed in the FT, the company has acknowledged that the product can look “pretty weird”. Recognising it has a “long journey” to mainstream adoption, it published a list of Dos and Don’ts. Highlights include,
“Ask for permission. Standing alone in the corner of a room staring at people while recording them through Glass is not going to win you any friends… If you find yourself staring off into the prism for long periods of time you’re probably looking pretty weird to the people around you.”
It indicates that Google may have a significant ‘Glasshole‘ problem it needs to attend to. The case may be overstated though. One of the problems may just be that potential customers have yet to see any practical uses for it. This is beginning to change. Last week, Virgin Atlantic announced a six-week trial of both Glass and Sony smartwatches. The idea will be for check-in attendants to use the devices to scan limousine number plates so that passengers can be greeted by name and be instantly updated on their flight status.
In the arts, digital technology has inspired much innovative work, as well as helped broaden its audience. David Hockney, one of England’s greatest living artists, recently exhibited a series of works produced entirely on his iPad at London’s Royal Academy of Arts. He is far from alone. Last week’s anniversary issue of The New Yorker featured work from Jorge Colombo on its front cover, again produced entirely on an iPad. Such digital innovation allows for increased productivity as well as new aesthetics. When done well, art can also involve the viewer, encouraging interaction. Digital technology helps with this too. Earlier in the year The New York Times covered how the New York City Ballet redesigned part of their floor in a new scheme to attract new visitors to the ballet. The result, roughly life-size pictures of dancers arranged on the floor, has seen great success, and an explosion of content on social media platforms like Instagram, where users have taken to posing on the floor as if interacting with the images (see above). It’s a simple tactic that now reaches a far greater audience thanks to new digital technologies.
A recently published book, ‘Now I know who my comrades are: Voices from the Internet Undergound’, by Emily Parker, seeks to demonstrate the ways in which digital technology has made helped to coalesce and support important activism in regions such as China and Latin America. But, as The Economist points out in its review, the disappointing situation in Egypt puts pay to some of the author’s claims; there are limits to how productive and transformative technology can be. In business, these hurdles are plain to see. A poll taken by McKinsey published last month shows that “45% of companies admit they have limited to no understanding on how their customers interact with them digitally“. This is staggering. For all executives’ talk of the power of Big Data, such technology is useless without the proper structures in place to successfully analyse it. We also perhaps need to think more about repercussions of increased technological advances and how they influence our social interactions. In the recently opened film Her (starring Joaquin Phoenix, pictured below), set in the very near future, a new operating system is so pervasive and seamless that it leads to fraught, thought-provoking questions on the nature and productivity of relationships. When does conversation – and more – with a simulacrum detract from interactions with the physical world? These considerations may seem lofty, but as we illustrated earlier, the germination of such thoughts are being echoed in discussions over Google Glass.
So technology in 2014 heralds some promise for the future. Wearable tech as a trend is merely the initial stage of a journey where our interaction with computing systems becomes seamless. It is on this journey though that we need to make sure that businesses are making the most of every opportunity to streamline costs and enhance customer service, and that individual early adopters do not leave the rest of us behind to deal with a bewildering and alarming new way of living. One of our favourite quotations, from the author William Gibson, is apt to end on: “The future’s already here, it’s just not very evenly distributed“.
The videogame industry, like many of the protagonists in the games it creates, is under attack. The competition is fierce. Not only is there healthy competition amongst legacy companies – including Nintendo, Sony and Microsoft – but new devices are increasingly distracting consumers, and digital disruption elsewhere is changing the way these companies do business.
Part of the problem is cyclical; the market has gone longer than usual without a major new console launch from either Sony or Microsoft, which in turn makes game manufacturers hesitate from making new product. But the industry needs to be wary that their audience has changed, in multiple ways. Sony are now starting to talk about their PS4 (due to be released in around six months’ time), beginning with a dire two hour presentation recently that failed to reveal price, release date, or an image of the console. And the word over at TechCrunch? “A tired strategy… [O]verall the message was clear: Sony’s PS4 is an evolution, not an about-face, or a realization that being a game console might not mean what it used to mean.”
We’ve written before on creative destruction in other industries, and talked before about shifting parameters for companies like Nintendo. The inventor of NES and Game Boy is currently struggling with poor sales of its new console, while at the same the chief executive of Nintendo America recently stated that digital downloads of videogames were becoming a “notable contributor” to their bottom line. Companies like Apple are surrounded by perpetual rumours of developing their own videogame platform. New companies in their own right, such as the Kickstarter-funded company producing the $99 Ouya, is among several players shaking up the industry. The upshot of such turmoil – a “burning platform” as the Electronic Arts CEO described the situation in 2007, referring to the dilemma of holding onto the burning oil rig and drowning in the process, or risk jumping off into who-knows-what – is a loss of market share. Accenture in January published a report predicting the demise of single-use devices such as cameras and music players whose revenues would be eaten into as more and more consumers flocked to tablet and other multi-purpose gadgets. Videogame console purchase intent was not researched, but it is not hard to make the analogy.
It was enlightening and reassuring then to read McKinsey Quarterly’s interview recently with Bryan Neider, COO of Electronic Arts. Some interesting take-outs follow. First, in 2007, the company recognised there was a problem: “game-quality scores were down and our costs were rising”. The company wanted to shift from having a relationship with retailers to having one with gamers. This meant having a focus on digital delivery. This fiscal year, digital is forecast to represent 40% of the overall business. Neider recognises this closeness to the consumer makes them even more susceptible to their whims and preferences, so they’re relying far more on data-backed analysis than they have before, including a system with profiles of over 200m customers. This data is used for everything from QA to predicting game usage. Neider elaborates,
“Key metrics answer the following questions: where in the game are consumers dropping out? What is the network effect of getting new players into the game? How many people finish a game? Did we make it too difficult or too long? Did we overdevelop a product or underdevelop it? Did people finish too fast? Those sorts of things are going to be critical… However, the challenge is that parts of the gaming audience are pretty vocal—they either really like a game or they really don’t like it. The trick is to find ways to get feedback from the lion’s share of the audience that is generally silent and make sure we’re giving these people what they want.”
Interestingly, the company’s structure was changed to reflect individual fiefdoms according to franchise – be it FIFA or Need for Speed – the needs for which are managed in that line of business. Each vertical competes with the others to deliver the highest rates of return, while also being able to draw on central resources (marketing, for example). Electronic Arts, as a developer of software for other manufacturers, will to some extent always be at the mercy of which devices are in vogue and the cycle of obsolescence. It is impressive though to see that the company has recognised the need to change the way it does business. The operational and technological sides of business don’t seem to have distracted Neider from the key insight in the industry, “Ultimately, we’re in the people business“.
We have reported before on the quota China imposes on Hollywood films coming into the country.
Zeitgeist remembers being in a meeting while doing at stint at 20th Century Fox back in 2004, when presentations were optimistically suffixed with the potential for China to drop said limit. It was always an inevitability, and when last month DreamWorks Animation announced a pact with Shanghai Media Group and China Media Capital, it was clear something bigger was on the cards. This has been the case for a while though, as US production companies have sought to get into China’s goodbooks with relevant films (witness Kung Fu Panda and the most recent iteration of The Mummy franchise).
Good news finally came to studio heads and cinema exhibitors. While the quota hasn’t been dropped, it has been dramatically extended to allow another 14 films into the market each year (from the current 20). This can only be good news for Hollywood, coming at a time when DVD and Blu-Ray revenue is slowing; Bloomberg recently reported that more films will be streamed than watched on disc this year. In China, however, views are mixed. Variety summarises,
“Theater owners are very upbeat, filmmakers are split — will this mean unnecessary competition, or a boost to moviegoing habits? — and Hong Kong industryites are watching things closely.”
The country already means big business for Hollywood, with the piece of rubbish that was Transformers 3taking in $170mn, and Avatar making $210mn. Year on year, the number of screens in the country increased 33%. 803 cinemas opened in the past 12 months there. So the supply-demand ratio is currently extremely favourable (with Hong Kong hopefully not being a harbinger). One would have to be very naiive however not to consider the political landscape of China, which is inscrutable to say the least. Whether dealing with the electoral process in Hong Kong, or the media landscape – from TV to social media – it can be difficult to know where you sit at any time. Variety again,
“Filmmakers face… rigid – and opaque – standards of control and censorship [in China]… [I]f a filmmaker doesn’t meet those sometimes abstruse rules, it won’t be admitted.”
What the Chinese government will have some difficulty in regulating though is the black market, which should hopefully see film piracy diminish as a source of revenue. With an assumed lowering of cost per purchase of pirated film, it should mean even more Chinese get to see Hollywood product (though admittedly without compensating the studios for it, at least initially).
As well as receiving net net more money from China from its films, the deal made also allows Hollywood to receive 25% of the Chinese box office back on imported films, previously at 13%. What should be a lucrative influx of revenue for the film studios comes at a welcome time. Not only is the business shifting from discs to digital delivery – which currently is proving harder to monetise – it is also under increasing pressure to collapse its sacred windows – the time period between when a film is released in cinema, DVD, POV, TV, etc. A few weeks ago, Netflix, an increasingly powerful player in the mix as it broadens its availability to the UK, and becomes a content creator, called the windows structure “pretty archaic”.
While releasing films on multiple platforms simulataneously might produce a spike in opening weekend returns, it comes at the cost of angering a lot of cinema owners, who would not take kindly to the idea of their film being available to watch at home at the same time they are trying to charge you £12 to watch it in a big dark room with a bunch of strangers. Zeitgeist’s radical solution is to allow the windows to collapse, and then for the government to allow the film studios to vertically integrate with the exhibitors again, like in the old days. But that’s another article…
While the Mobile World Congress cools down – TechCrunch has some interesting thoughts – we wanted to touch on another tech issue, that of M2M.
Machine-to-machine communication is nothing especially new, but it is expected to see an explosion in use in the next 5-10 years. It is often referred to as ‘The Internet of Things’. Consultancy firm Analysys Mason recently held an interesting webinar on the subject, focussing on the B2B applications. The graph above is taken from one their webinar, and illustrates the expected rise in M2M device connections worldwide through 2020, according to device. Notably, the auto industry will see some expansion (think cars talking to each other to avoid colliding, staying in the right lane, basically driving themselves, a burgeoning trend recently picked up in The Economist).
Significant take-up will come from the home, with your dishwasher telling you when it’s time to put it on and your fridge telling you you’re out of milk and taking the trouble to order some more from Ocado without you lifting a finger. Zeitgeist asked one of the speakers, Steve Hilton, about how such devices could be promoted in the B2C world. One of the first things Mr. Hilton said needed to be done was to stop calling it M2M, instead communicating in a way that “isn’t all tech-y speech”. It would require focussing on the “fun”, “great” things you can do. Entertainment and security products using M2M will be of particular interest.
Currently though in the consumer sector this is a little-known technological movement that marketers will need to think carefully about how to communicate to their consumers, without making them worry about Skynet.
UPDATE (15/3/12): Not one to allay fears of any Skynet-like worries, CIA director David Petraeus last week commented on the rise of M2M devices and how much easier it will be to snoop on unsuspecting citizens, saying it would “change our notions of secrecy”. Wired elaborated,
“All those new online devices are a treasure trove of data if you’re a ‘person of interest’ to the spy community. Once upon a time, spies had to place a bug in your chandelier to hear your conversation. With the rise of the ‘smart home’, you’d be sending tagged, geolocated data that a spy agency can intercept in real time.”
The magazine gave the article the level-headed headline ‘We’ll spy on you through your dishwasher’.
A quick thought while Zeitgeist takes a well-deserved break in the hinterlands of the Côte d’Azur, and that centres on continued desire for content and immediate access, versus a dilapidated infrastructure for providing that content. A recent front page article from film industry trade paper Variety expressed concerns over who will be able to fill the shoes as the new head of the Motion Picture Association of America, headed by the much-loved Jack Valenti, and latterly the effective Dan Glickman. The post requires juggling many balls and keeping disparate parties happy, from the cultural binaries of Washington and Los Angeles, to the contrasting desires of consumer and corporation, (the issue of Net Neutrality being a particularly important example).
One principal concern for whomever takes hold of the reins will be that of the continuing threat of piracy, and the fear of ending up like the moribund music industry. One significant move that Glickman was able to implement was ensuring the creation of a post for “copyright czar” at the White House. Worries continue though as, according to the article, “technology advances make Internet speeds ever faster”. While this is true in a normative sense, in practice things are not as simple. For while improvements in technology may make computers ever more capable of handling more data at faster speeds, the delivery systems that support the transfer of this data are not being kept up to date, specifically in the US and UK. Telco networks AT&T and O2 have both recently pulled their unlimited data plans for mobile use. What is the impact for services like Facebook, Twitter and Foursquare? Unfortunately it can only have a negative one, as users may begin to worry about updating their status if it will push them over their data limit for that month.
All these moves – including other industry machinations such as the decision by Hulu, a free, legal website, to begin charging – will serve only to further consumer confusion and distance the brand from their audience.
If Content is King, then last week saw the gentry discussing how best to serve their master. The other day Zeitgeist watched a fascinating roundtable from the TechDisrupt conference, where talking heads with varied interests discussed how content would be created, distributed and consumed in the future. The below are some of the more pertinent and interesting things we managed to peel from the chat.
Sarah Chubb, president of Condé Nast Digital, noted that Apple was lending a helping hand to the sales of the publishing empire’s magazines. Since the launch of the iPad (recently revealed to have sold 2m units in 59 days), Chubb states that the device has played a significant role in boosting sales. Regarding the iPhone / iPad split, she says 60% of GQ readers are accessing the publication through their iPad, 40% through the iPhone. For Vanity Fair, fully 90% is from the iPad, which is incredible after such a recent release and given that the iPad was only released outside the US in the last week or so. In related news, it was announced today that The Financial Times “iPad app has registered three times more downloads in its first two weeks since launch, than its iPhone app managed”.
Fred Davis, founding partner of Code Advisors, ruminating on how people perceive content now, makes the declaration, “It’s not about owning, it’s about accessing”. This is crucial. This is ‘I want my MTV’ for the next generation. As we have moved away from purchasing tangible goods like CDs – and to an increasing extent DVDs and books – the pleasure of owning content dissapates. People, however, still want to be able to use that content, and use it immediately. This is where, helpfully, cloud computing comes in. Perhaps this new type of demand makes the iTunes model – when compared to Spotify et al. – antiquated. Buying a track on iTunes is about owning content. It can be bought quickly and easily over your phone via a Wifi or 3G signal, but once purchased, the song is on your phone, it is not kept in the cloud somewhere for you to access at any time from any device. It is not easily shareable.
John Hagel of Deloitte talks of companies of the future having to make a choice between what they want to excel at: product development or customer relationships. In other words, product profitability or audience profitability. Is the company’s USP going to be “Come to us because we know your product” or “Come to us because we know you“? Zeitgeist ponders whether a company, GE for example, might not be able to manage both.
The IPTV service Boxee recently signed a deal with Google to make use of its Android OS, linking with Google TV. In related news, units that the OS operates on outsold iPhone for the first time this quarter. The CEO of Boxee, Avner Ronen, was also one of the speakers present at the conference. Taking an optimistic stance, Ronen stated that one of the benefits of increased fragmentation and availability of content was that, in a free market mindset, the more content published, the more competitive the environment and thus the better the content.
Of course, piracy is an enormous factor, and Davis pointed out that there is still a problem with people not equating downloading a song illegally off of Limewire with shoplifting from WalMart. Perhaps it is now too late for any efforts at education in this matter, as the MPAA seem to have singularly failed to educate the public. Chubb countered that people were now willing to pay for things in mobile that they wouldn’t normally pay for otherwise. This dovetails with the idea of paying not for the content itself, but for the instant access to it. The film industry, in particular, has combatted the threat of piracy in other ways. Now that international box office accounts for some 65% of a film’s total gross earnings, release windows are being narrowed for simultaneous releases. “Iron Man 2″ was released at the end of April here in London, a full week before the US launch. The world premiere was supposed to have taken place in Leicester Square, but sometimes even savvy film execs come up short, especially against volcanic ash.
Ultimately, the way we interpret ownership is undergoing significant change. What we used to be possessive of, with the arrival of the mp3 we suddenly felt inclined to share. Increasingly we do not have need of the physical product, merely the ability to use it when we wish. This might easily be linked to the continuing vogue for ephemeral clothing that is besetting the fashion industry, where cheap clothing is made to be worn once then tossed aside like New York Times stock. Zeitgeist thought it fascinating to watch these people prognosticate on the future of content; they may all be completely wrong, of course, but then that’s the interesting thing about the future, isn’t it?
There was much more discussed, and you can see the whole video here.