Surprise: Innovators Prefer Android

The Nielsen chart below (sourced from Slashgear, Sept 1) shows that the further people are along the adoption curve the less sure they are about the operating system they want in their next smartphone (based on likely smartphone upgraders).   Only 7% of Innovators are unsure about what operating system they want …but 30% of Late Adopters are unsure.   That’s no surprise, though it may indicate opportunity for players to reshuffle their positions as the market matures.

What is surprising though, at least to me, is the bimodal pattern for Android preference.  I had assumed that the Android phone is perceived by consumers as “the poor man’s iPhone”, with user stereotypes in my mind similar to this piece…that could be summed up as Android: Cheesesteak, iOS: Sushi

But the Nielsen data at least partly contradicts this stereotype, which can be seen more clearly if you take out the “not sures” and base percentages on those who are sure.    Android preference increases as you move to the end of the adoption curve – to the later adopters – that’s  true.   But Android preference also pops up at the top of the curve, among those likely to be the first to adopt new technology.   Apple preference is relatively strongest…among Early Adopters and the Early Majority.

This may relate to a heated discussion on Stackoverflow about developer preference between the operating systems.     The original post and reported data suggest that Android preference is rising sharply among developers; that Android surpassed iOS preference around mid-year.   The many doubting comments point to the non-representativeness of the data (e.g., do iOS developers ask their questions on sites other than Stackoverflow?) and question what it means (e.g., do Android developers ask more questions on Stackoverflow due to the inferiority of Android documentation?)

But seeing two pieces of information from different sources (and contexts) pointing in the same direction makes me wonder…is Google in fact making headway against Apple at both the bottom and the top of the tech-savvy spectrum?

Soft Programming and the Missing Platform

At the Mediapost Future of Media Forum earlier this week panelists were asked what companies they expect to join Amazon, Apple, Facebook and Google as dominant players in the new media world.

No specific company names were mentioned but there was an interesting discussion between the moderator, Josh Quittner, Editorial Director of Flipboard, and Steve Lacy, CEO of Meredith Corporation about what makes Amazon, Apple, Facebook and Google so dominant.  “Platforms” was the key word of the discussion…the notion that these companies have created an environment for interacting with consumers that other players gravitate to.  As the discussion evolved, the phrase in my mind was “network effect”; the more consumers converge on these platforms the more gravitational power they gain to attract more content…and more usage.

That is not to say that other companies won’t break in…someone on the panel said there will be hundreds of new and successful companies capturing emerging, lucrative niches.  But the implication of the discussion was…if a new major player emerges it will most likely be the creator and owner of a new platform that speaks to some fundamental consumer need.

The question then becomes, is there a missing platform?  The clue is in an article that appeared in today’s New York Times, among the many that paid respects to Steve Jobs.  As per the article, despite the huge impact of Apple products on the way we consume media, TV, the medium that captures the bulk of our time, remains relatively untouched.   Both Apple and Google have taken aim but Apple TV is still a miniscule player and Google TV seems to have little or no traction.   My bet is that somewhere in this area the new platform and perhaps new corporate player will emerge.

What do people want in the area loosely defined as TV?   This includes traditional cable and satellite delivery, multi-platform and over the top delivery of online video, players like Netflix, Hulu, Amazon, iTunes and YouTube… all competing for share of the consumer’s video-viewing time.

I think the consumer wants what they want in every other sphere…choice and control…to find through the mass of everything available the content they want to watch at any particular moment in time.

Soft programming is the phrase I would use to describe the consumer need.   Hard programming is the old-fashioned model – we’ll schedule this show at 8P as a lead-in to this show at 9P.   Video search is on the other side of the spectrum – zero programming – if you know what you want we’ll help you find it.   Soft programming is something in-between…a user-friendly narrowing of the consumer’s choice without forcing anything down his throat.   The Netflix recommendation engine is an example of soft programming that works beautifully within Netflix…though it doesn’t help the consumer cut through the myriad video offerings impinging on him from all sources.   Another example of soft programming is old-fashioned channel surfing.   That’s how the consumer used to deal with the problem rather than fully accepting any hard programmed stream.   But there are going to be too many video options for that venerable method, or existing clunky channel guides, to address the need.

Will one magical solution come to the rescue?   Of the many barriers, I’ll name two.  Content owners and distributors will do anything before they allow a third party filter to come between their assets and the consumer…unless their hand is somehow forced.  And second, perhaps less of a show-stopper but bothersome, the consumer will resist buying any additional piece of equipment, any new “box”….see Apple TV and Google TV.

But any unmet consumer need is like water building up around a dam.  As video content, linear and on demand, continues to inundate the consumer from a myriad of sources, the need for a smart, personalized, soft programming filter will grow.  Eventually some Jobs-like genius will invent the video content platform of the future…and, to get back to the original question, his or her company will be the one that joins Apple, Amazon, Facebook and Google as a major player in the new media age.

What’s The Best Cable Unbundling Strategy?

Last week I wrote a post questioning whether TV Everywhere is a sufficient defensive strategy for cable providers.    If the issue for some customers is simply that the price of cable has become too high offering cross platform access for the same price may not solve it.   Even if we see rising consumer uptake of TV Everywhere it may not indicate effective defense, not if the uptake is focused on core users while the mostly likely cord cutters – less upscale, younger, lighter TV viewers – continue to fall away.

Given that line of thought, it was interesting to see yesterday’s item in Reuters on the sudden interest of cable operators in a la carte offers after years of resistance.   In other words, operators seem ready to open another defensive front by offering consumers more limited, lower cost network bundles. Citing some key paragraphs:

“The plan represents a complete reversal from cable operators’ long-held opposition to what is known as ‘a la carte’ programming. Over the last decade, the cable industry battled ferociously with regulators to protect the right to bundle programming, arguing it offered customers the best value.

But executives now say the change is a necessary response to shifting dynamics such as higher carriage costs and using the Web to watch programs, as well as a weak economic recovery that has forced many consumers to cancel cable television subscriptions.”

If unbundling the video offer is an edging its way onto the table, the question becomes how to unbundle to minimize negative impact and maximize retention effectiveness…

The only marketplace example I’m aware of is Time Warner Cable’s TV Essentials package that went into test market last November and is scheduled to expand beyond the test according to press in the last few days.   This is a striped-down basic package that omits ESPN and other sports-focused networks at a price of $30-$40 a month.   The package is not heavily promoted but rather pitched to customers when they call to disconnect service.    No on-demand content is included for free, but for incremental cost.

I understand that operators are under multiple pressures, not just from increasingly price sensitive consumers but from rising programming/carriage costs and from media companies that rely on the bundling of their primary and secondary networks and who are particularly allergic to the notion of a la carte.   And I realize the desire to keep limited low-cost bundles in the background, encouraging as many customers as possible to pay full or premium prices…

Yet I’m not sure the generic bargain-basement approach to unbundling is necessarily best.   There may be a sweet spot in the space between the $30-$40 price of TV Essentials and the average cable video bill of roughly $75.   Though sports programming is most expensive it is also the most irreplaceable; a striped down package that’s only sports or only sports and news may motivate households – particularly lower income households with men – to keep at least one foot in cable rather than cut the cord.

And if younger audiences are among those most likely to defect, some combination of a striped down channel lineup and cross platform on demand access may be most potent…some hybridization of a lower cost bundle and TV Everywhere.   For if Netflix and Hulu (Amazon and iTunes) are the competitors that cord cutters are most likely defecting too, offering an option that’s more similar to these competitors may be the best defensive strategy.

Why The iPad Changes Everything

I would love to know how iPad owners compare the experience of watching full length video on their device versus watching the same content in traditional lean-back mode on their TV screens.   I think this is the critical question.  If the full length video experience on the iPad is judged equivalent or close to equivalent to traditional TV viewing, for most content most of the time, then we can expect the iPad and the tablet form generally will fundamentally change the future of TV.

I bet the same question for laptops would get a very different answer.   There are times, places and circumstances when people watch full length video on their laptops but, given the option, I expect they would mostly prefer to port the content to the big screen.   In contrast, the iPad may be more than an on-the-go, on the train, in the airport alternative; to the degree that it is a strong viewing option for full length video in any circumstance…that makes it a game changer.

Prior to the iPad all full length video was ultimately headed toward one door.    For Netflix, Hulu, Amazon, etc…the critical step was to get ported over-the-top to the TV screen.    It is in this scenario that on demand competitors might actually supplant cable and satellite subscriptions for at least some group of people who cut the cord.  And it is in this scenario that on demand competitors could compete with cable and satellite time –fighting for control of viewing behavior in the 10-foot screen.

In this pre-iPad reality, laptop and smartphone screens would likely play a secondary role for actually consuming full length content; their usage would be tilted to short form.  They would play a key role in helping people find the full length video content they’re looking for and let them socially interact around it.   These roles for other screens remains…but the iPad blows up the centrality of the traditional TV experience and opens another major door for full length video consumption.

Right now the numbers are small.   The latest U.S. penetration number that I’ve seen for tablets is 6%, as cited by Mark Walsh in MediaPost a couple of weeks ago.     Nielsen reported just under 5% earlier this year.    Sales projections are very bullish though:  Gartner is projecting worldwide tablet sales of 63.6M in 2011, up from 17.6M in 2010 and rising to 326.3M in 2015…so there may be 5-6 fold increase in penetration over the next few years.   Most important is data reported by In-Stat : “50% of tablet owners are viewing not only feature-length movies on their device, but TV shows as well”.    We don’t know how much, how frequently…but we have some indication that tablets are being widely used as a multimedia device, as a way to watch long form video.

And in that role they have the potential to change everything.

Media Multi-Tasking And The Battle For Attention

The average amount of time that people give to some media platforms is trending up (mobile and Internet) and others are trending down (magazines and newspapers).  But the average amount of time they give to all media combined is rising inexorably.

This is shown in an eMarketer item with the figures below: an average of 660 minutes or 11 hours a day across all media in 2010, up 1.5% from 2009 and up 3.9% from 2008.   This analysis does not include pre-recorded music which would surely drive the numbers higher.   You have to wonder where it will end; is there no limit to the amount of media that people will consume?

Media multitasking is one of the things that keeps the total number rising; people using two or more media simultaneously.   eMarketer is explicit; the time that they report is for each medium separately; an hour spent watching TV while online is counted in both the TV and the online numbers.  The rise of the total suggests that as more media find their place in people’s lives they are increasingly layered on top of one another.  So the question becomes not what medium are people using at any given time but which of the various media they’re using is capturing most of their attention; what medium is in the foreground while others are playing in the background.

A study conducted for Yahoo! by Nielsen, reported in mid-2010, suggests that when TV and online are used together online is likely to be in the foreground and TV in the background.    The way I read this press release, 75% of respondents ever use TV and Internet together and 51% of the 75% do so daily.   So 38%, a bit more than a third, show daily simultaneous use of TV and Internet.   What’s really telling, beside the frequency of the behavior, is that the online activity is generally unrelated to the TV programming or commercials being viewed – and 54% report that the Internet is the primary focus of their attention.   54% is not overwhelming; plenty of people are reporting background Internet usage.    But the picture you get, at least for some of the people some of the time: unrelated Internet activities like Google or Facebook are in the foreground of their attention while the TV plays in the background. The frequency of this pattern will of course be higher for younger people.

An implication of this for programmers and TV advertisers:  you need to be (or be advertising on) foreground TV, not background TV.   TV that’s winning the cross-media battle for attention.

In this regard I’ll suggest a hypothesis.  The medium that wins the battle of attention, for any given consumer at any given time, is the one where the consumer is making the most deliberate content choices.    Online tends to win against TV, though not overwhelmingly, because simultaneous users are more active online, choosing what they want to see and do while the TV plays on.

And so…if people choose to watch their TV fare on-demand, from over-the-top sources like Netflix or Hulu, that deliberately selected content will be more likely than more their more casual TV choices to capture attention versus other simultaneous media the user is engaged in.   To the degree that there is advertising on on-demand and over-the-top TV content, that real estate will be increasingly valuable in a media-multitasking world.

Is Over-The-Top Driving Long-Form Growth?

I’ve made the assertion that people will always prefer to watch long form video on the 10-foot screen as a human truism that will drive how the market evolves.   But I’ve felt a little pang about being so dogmatic since I don’t have data to support it.   And what about the iPad; might it not become a major outlet for watching movies and TV shows?

So it was interesting for me to find this CNET item from November 2010 citing a comment from Netflix CEO Reed Hastings:  the tablet craze affects us very little:

“People prefer large screens,” Hastings said. “So the impact of Xbox, PS3, the Wii phenomenon–huge impact. The impact of the iPad–it’s a great system, but the Mac laptops outstrip the iPad for Netflix viewing by a huge factor.” Long-form video viewing does not translate that well to mobile platforms, he asserted.

So this downplays the impact of the iPad, from a company whose strategy is driving the trends; they would be in a position to know. Though it suggests that the 4-foot screen, in the form of Mac laptops, is a major outlet for Netflix product.

I’d love to see data on number of streams and time spent with online video broken down by screen type – current state and recent growth. My hypothesis: the 4-foot screen dominates current online video consumption by far, but dominates less as length of stream increases, with the 10-foot screen being relatively stronger for longer form and the driver of long-form growth.

Though another paragraph in the CNET article suggests that this hypothesis may be U.S. centric, perhaps true only for a culture in which the TV is the center of life:

Former News Corp. executive Peter Chernin, who joined Hastings on the panel, said he agrees, with regard to the U.S. market, but that the story will be very different in developing markets, where big-screen TVs are less commonplace and cheap tablet devices will soon be readily available.

I’ve also argued that over-the-top will penetrate the home through the path of least resistance, assuming that Internet-connected TV, the simplest connection from a consumer perspective, will be the key driver. But both the CNET article and a June 8, 2011 MediaPost piece citing new data from CBS research chief Dave Poltrack suggest that video game systems are currently behind the growth in over-the-top consumption:

Poltrack contrasted Netflix’s remarkable growth with rather tepid adoption rates of other so-called “over-the-top” TV streaming platforms, such as GoogleTV, Boxee and AppleTV, but said that video game platforms such as Microsoft’s Xbox, Nintendo’s Wii, and Sony’s PS3 have become a major means of streaming TV programming, and that many of those platform users are actually doing so via Netflix.

So…it’s a box that already exists in the household, that’s already connected to the TV for some other purpose that is serving to-date as the main over-the-top conduit. And that makes some basic human sense.

How Will Networks Co-Exist With Over-The-Top?

I was busy poking fun at the Nielsen position on cord cutting the other day.   But it’s hard to deny that the trend seems relatively minor in the scheme of things.

A J.D Power and Associates study released yesterday shows that just 3% of residential TV customers have cancelled their multichannel subscriptions, 6% among Generation Y customers.   I’d argue that 6% among the younger audience is not insignificant; it’s a factor.   But those levels won’t be turning the TV world upside down.

This may sound odd, but I think the most important aspect of cord cutters not that they’re cutting the cord with their multichannel providers.   The most important thing is they’re likely to be driving online video over-the-top to their 10-foot screens.   The cord cutting aspect of the cord cutters…may be misdirection with regard to future trends.

To clarify terms, when I say “over-the-top” I mean streaming online video to a TV set rather than a computer or mobile screen and watching in lean-back mode, the way people traditionally watch TV.

Because over-the-top streaming is initially focused among the young, the tech-savvy, lower incomes, light TV viewers…it is more likely to replace traditional TV for these audiences.     But, as over-the-top becomes mainstream, only a minority of people will actually cut the cord.   Thus the key scenario, the one that will eventually play out for the majority of households, is that both traditional and over-the-top TV will compete for time in the 10-foot, traditional TV viewing experience.

I think some basic, human factors will drive to this scenario:

  • People will always prefer to watch long form programming on the 10-foot screen.   Watching full-length TV shows and movies on 4-foot and 2-foot screens will increase; the iPad will help drive its growth.    But the average length of an online video stream is still under 5 minutes.   I’d argue that the average length of online streams won’t really take off till the mainstream consumer is sending online video over-the-top to his TV.
  • Over-the-top will penetrate the home through the path of least resistance.   That path is the Internet-connected TV; the least number of extra boxes and wires entailed.   Blu-Ray players and Internet-connected game consoles will be secondary; boxes people already own for other purposes.   This path mitigates against cord-cutting; why buy a spanking new TV and then cut down your viewing options?    It also ties the rate of behavior change to TV replacement cyles and the briskness (or not) of new TV sales.
  • Network programming will continue to alleviate the burden of choice.    Lighter TV viewers may be able to subsist entirely on a diet of on-demand viewing.   But for heavier TV viewers it would be onerous to deliberately select everything they watch.  Channel surfing is a key part of their diet that can be supplemented but not entirely replaced with on-demand options.  And so…as over-the-top migrates to heavier TV viewers, a pattern of coexistence rather than replacement will be seen.

Here’s an interesting data point from the Leichtman Research Group.  30%  of all households report having at least one TV connected to the Internet via a video game system, a Blu-Ray player and/or the TV itself.   But only 10% of all adults watch video from the Internet via one of these devices at least weekly.    So a substantial number of households already have the capability; most don’t use it regularly.    Of course the numbers are much higher among Netflix subscribers…

When people have both forms of TV, traditional and over-the-top, available to them in lean-back mode, what do they do, what trade-offs do they make, what gets cannibalized?   If I were a network executive, this future scenario would concern me the most.

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A Funny Thing About Cord Cutters

Much has been written about the Nielsen position on cord cutting…that it is, in fact, happening, but among segments that are not of core importance to the TV industry.  A key paragraph from the June 2010 Nielsen press release below:

“….shifting to online video mainly appears to be happening in small pockets of the population, including young, emerging households.  Households with no cable subscriptions at all, but who subscribe to a broadband service, also reflect a younger population of college graduates and lower to middle income consumers who may not be fully convinced of the need to pay for digital cable.  However, Nielsen data shows that these individuals are typically light TV viewers who watch 40% less TV per day than the national average.   And while they stream about twice the average amount of video, they still only stream about 10 minutes per day, hardly an indication of a monumental shift to online-only viewing.”

The delicious irony of this position:  according the the theory of disruptive innovation (Clayton Christensen, The Innovator’s Dilemma, 2003) it is precisely among non-core audiences that disruptive innovations gain their initial foothold.   Check out this quote from The Innovator’s Dilemma:

“First, disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits.  Second, disruptive technologies are typically first commercialized in emerging or non-significant markets.   And third, leading firms’ most profitable customers don’t want, and indeed initially can’t use, products based on disruptive technologies.   By and large, a disruptive technology is initially embraced by the least profitable customers in a market…”

So…according to the Nielsen analysis, disruption of the TV business is proceeding more-or-less in textbook fashion.  Not what they intended I’m sure.

One niggle to applying the concept of disruptive innovation to cord cutting: disruptive innovations generally deliver a lower quality product (offset by other benefits).   At least at first.   While most cord cutters would likely argue that the quality of their viewing experience through their over-the-top devices is quite as good as they would get from multi-channel providers.

I’d argue, though, that cord cutters are sacrificing ease-of-use.  Not every mainstream consumer would know what over-the-top device to get or how to hook it up.  Lack of knowledge and a hassle factor keeps the disruption isolated among demographic pockets with greater economic need and some technological savvy…who are willing to go through a little trouble.

We’ll have to see, as going over-the-top gets easier for consumers, whether cord cutting expands beyond (and how far beyond) these initial demographic pockets:

  • Will exclusive content, only available through multi-channel subscriptions, become a critical barrier against the increased penetration of cord cutting?   Live sports, in particular, may be a key factor that keeps people from cutting the cord so long as there is no easy/legal way to get major sports events over-the-top.   If this is true we may see female-headed households and those who care less about sports become the next demographic frontier for cord cutting.
  • Is there a psychological barrier for a significant portion of TV viewers (particularly heavy viewers) against the on-demand only type of experience that cord cutting entails?   To the degree that there is an inherent need to surf channels…there may be an anti-cord cutting barrier for heavy viewers.
  • Will the TV Everywhere initiatives of the major TV players help forestall disruption of their business?

It will be fascinating how it all plays out…

But one thing we must not do is dismiss the phenonomenon based on its initial audience characteristics.   Quite the contrary.


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