Disney and Apple launched online video services this month, with both companies falling short of perfection. It’s interesting to compare the two platforms, dubbed Disney+ and Apple+. One is the brain child of an entertainment giant struggling with technology, the other was created by a tech giant struggling with content.
When Disney+ went live last week, demand outstripped capacity and users were locked out. Apple+, on the other hand, had no such problems. Its programming could be seen by anyone interested enough to log in. Unfortunately, the content offered has not excited anyone. It was reckoned workman-like, at a moment when Apple needed blockbuster pizzazz to break out of the over-the-top pack.
Disney’s server problem was solved in hours, if not minutes. By now, I doubt many people remember it. Fixing technical issues is a left brain, linear process. Apple, on the other hand, has to contend with a chaotic, right brain challenge. You don’t create world class content by assigning more engineers and spinning up more servers. So now there’s talk of former HBO chief Richard Plepler doing a deal with Apple – he has a proven track record. That’s no guarantee in the entertainment business, but it’s the way to bet.
Silicon Valley and Hollywood have a lot more in common than people realise. In both ends of California it’s about finding executives who can manage very talented, highly mobile people who can create marvels out of thin air. A track record of success, even if liberally sprinkled with failures, will attract investors in Los Angeles and San Francisco alike. Both cities are magnets for risk-tolerant capital, outrageous concepts and creative talent. The difference is that in Silicon Valley fortune seekers of modest gifts end up in cubicles making a hundred grand or two a year, while in Hollywood they’re waiting on tables.
The market for new smartphones is slowing. The global market is approaching saturation, where everyone who might use one has one, and annual sales are dropping. The pace of improvements is slowing, too. The marginal attraction of new apps and more powerful and faster hardware is diminishing.
In 2018, smartphone sales numbers stopped growing, according to two data analysis companies, Strategy Analytics and Counterpoint Research. Strategy Analytics executive director Neil Mawston wrote in his guide to the latest figures that it’s the “first time ever in history the global smartphone market has declined on a full year basis. It is a landmark event”…
This was a five-percent drop over the 1.51 billion sold in 2017, and when you’re talking about billions of phones, a five-percent drop is relatively substantial.
That’s a problem for smartphone manufacturers, but hope is on the horizon. 5G networks need 5G-capable smartphones, and over the next five years that will be the primary driver of upgrades and new phone sales.
A mass market stampede toward 5G phones won’t happen until mass market 5G service is available. That build out will happen slower than mobile carriers have led city councils and county boards of supervisors to believe. And it will be far from comprehensive – the true benefits that will justify a kilobuck smartphone purchase will only be available in urban areas with high revenue potential for carriers.
The big technical question that hasn’t been answered is battery life. 5G service requires more intensive processing, which burns up energy, as do faster bit rates generally. The first units on the market won’t be optimised – can’t be until real consumers start using and abusing them in the wild – so it will be at least another year – 2021 – before manufacturers and carriers really understand power budgets. But 5G smartphones will burn through battery life faster than 4G phones, and that’s a problem yet to be solved.
It looks like 2020 will be the year that genuine 5G smartphones will finally be in the hands of consumers. Two developments this week cleared away significant uncertainty about who will be offering 5G phones, when it will happen and whose technology they’ll use.
The two companies settled a long running legal dispute over intellectual property rights to core 5G technology, including a deal for Apple to buy modem chips, which do the heavy processing work of wrangling radio waves into data streams at one end and reading them at the other.
The second announcement came shortly afterwards. Intel said it’s giving up its quest to build competing modem chips and leaving that market segment to Qualcomm. Not the entire market, though. There are a lot more kinds of chips that go into smartphones, 5G and otherwise, and Intel still plans to make them.
One of the benefits, if you want to call it that, of a monopoly is faster standardisation. Which reduces supply chain uncertainty for manufacturers and simplifies technical challenges for carriers, increasing the odds that predictions of mass market 5G product and service availability by the end of 2019 will come true.
Those early handsets won’t be made by Apple. Major Android phone makers are pushing to have 5G products in the market for this year’s Christmas selling season, but Apple didn’t make the same promise. Now, it can’t. Apple won’t be able to design and tool up to make Qualcomm-based iPhones until 2020, perhaps not until the second half of the year.
But there’s finally a clear roadmap for all major smartphone makers to make the jump soon enough to begin building a meaningful 5G user base in 2020. Mobile carriers will be judged on the basis of how well they deliver on the hype and the deceptions they’ve relied on so far. We’ll finally know what 5G really means.
Apple unveiled a new subscription video service last week. If it were any other company except Apple making the announcement, there would have been a huge yawn from the market. The Apple TV service, at least what we know of it, isn’t significantly different from other over-the-top services. They’re borrowing business model bits from several different platforms and putting the pieces together a little differently and, but overall it looks very familiar.
Apple will have exclusive programming, as the big OTT players do, and that will help it position its video brand as it has for HBO and Netflix, but it’s just icing on the same cake as everyone else’s.
What makes it different is the Apple branding, and Apple’s ability to leverage its existing customer relationships and its hardware/software ecosystem. It’s a fair question whether that’s going to be enough to make it stand out in the TV business, but it’s a unique advantage and Apple is smart to use it like this. The future growth of the company will have to come from services. Apple’s hardware and software lines aren’t hurting, but the market is maturing and whatever growth comes its way will be incremental.
The move into video by Apple – and others – and is a lot like the early days of digital satellite TV in the mid–90s. There was some programming that was unique to particular platforms – such as DirecTv’s NFL package – but for the most part programming line-ups were identical. What distinguished them was 1. bundling – DISH, for example, focused on low-cost packages – and 2. distribution – DirecTv and U.S. Satellite Broadcasting (my company) were launched via RCA’s then-formidable consumer electronics retail channel.
Apple brings customer relationships and system (and revenue) integration to the table. Netflix, Roku, Hulu and the rest built subscriber bases, but do not play in the consumer technology space. The question is whether Apple’s advantages amount to a unique selling proposition that’s meaningful to consumers. If Apple TV creates the same kind of seamless user experience that iPhones and Macs deliver – seamless technically, operationally and transactionally – then it has a shot. If it can’t, it’ll be just another OTT service.
Apple and Samsung are in a dead heat in the U.S. Both companies captured 35% of smartphone sales for three months ending in August of this year, according to Kantar Wordpanel, a market research firm based in London. Apple is showing strength in carrier distribution channels, particularly with Verizon…
“Apple maintained strong momentum in the US one month before the release of iPhone 8 and iPhone 8 Plus, and grew its sales share by 3.7 percentage points year-on-year, compared to Samsung’s growth of 0.8 percentage points,” [Dominic Sunnebo, Global Business Unit Director at Kantar Worldpanel said]. “Weaker sales through Verizon hurt Samsung as Apple approached a 50% share within the largest US carrier – an even higher proportion than at AT&T, a traditional iPhone stronghold.”
Kantar bases its market share estimates on operating system sales data. Overall, Android has a commanding lead, with 63% of the U.S. market. But Apple is gaining ground. Its 35% share of operating system sales is up 4% from the same period a year ago, while Android’s share has dropped 3%.
In China, the world’s biggest smart phone market, Apple’s iOS gained 4% year over year, climbing to 18% market share, while Android dropped 4% to 82% – still a commanding lead. Windows is at a big fat zero percent in China, which is the principal reason its worldwide share crashed to virtually nothing, according to some estimates.
Huawei is the leading manufacturer in China, with 31% of smartphone sales. BBK Electronics, which sells under the Oppo and Vivo brands, is second with 20% and Apple is third. “The flagship iPhone 7 and iPhone 7 Plus were the two top-selling models in urban China during the period”, according to Kantar’s press release.
Augmented reality – AR – will take a big step forward later today when Apple launches iOS version 11. It includes ARkit, which is Apple’s new platform for running augmented reality apps, instantly putting the technology onto more than 300 million devices, as soon as the iOS update is downloaded.
At least, that was the hot gossip yesterday at the Mobile World Congress Americas trade show in San Francisco. It’s always risky to take Apple rumors at face value, but AR companies at the show are taking this one seriously.
Up until now, AR hasn’t gained much traction in the consumer market, Pokemon Go notwithstanding. But it has a growing foothold in industrial and business-to-business markets.
With augmented reality, a smart phone screen or totally geeked up glasses can overlay digital information on the real world. The photo above shows AR glasses displaying port labels for a circuit board as soon as the wearer looks at it. That kind of automatic information speeds up work and reduces errors.
I wrote about Vuzix, a company that makes AR glasses, nearly five years ago. They had great expectations – as did Google with its Glass product – for consumer applications, which were not fulfilled. Since then, they’ve focused on industrial applications and found happiness in vertical markets. One customer they talk about it is Airbus, the European airliner manufacturer. When workers are assembling complex wiring harnesses, the digital overlay on the Vuzix M300 glasses sorts out wires by color and tells them which hole each one needs to go into.
The immediate effect of Apple’s presumed announcement will be to boost the commercial side of the AR business. The cost of adopting the technology will drop to near zero for anyone who already has an iPhone, and the bar won’t be that much higher for someone who just buys one off the shelf. Pure consumer applications will be slower out of the gate, but with an instant market of hundreds of millions of users, it won’t take long to catch up.
According to a story by Oscar Raymundo in Macworld, Apple’s business model might have shifted from making self-driving cars to developing software that’ll be offered to other manufacturers…
In 2016, however, Apple seemed to have pivoted the initiative, opting for creating just the self-driving software to license to established car-makers instead of assembling an entirely new Apple vehicle. This is a departure for Apple, which has created a legacy by developing both hardware and the software aspects of all its products.
He’s right, that would be a major strategic departure for Apple, which is why it would be a good idea not to bet the ranch that you won’t see an iCar, or whatever they’re going to call it, sometime in the future. Elon Musk expects Apple to get into the manufacturing game, and he has as much insight into what they’re doing as any outsider – in other words, no hard data but enough knowledge about the business to make an educated guess.
DMV registration carries with it an obligation to file public reports about any accidents, and to submit information once a year about whenever there a “disengagement of the autonomous mode caused by the failure of the technology or when the safe operation of the vehicle requires the test driver to take immediate manual control of the vehicle”. So we won’t have to wait too many months for a window into Apple’s development process.
In the meantime, if you’re cruising Cupertino, look for a tricked out Lexus.
The event will shift to the second week after Labor Day, which presumably will get it out from under Apple’s shadow – as in the past, CEO Tim Cook’s fall announcements, which are usually mobile-focused, will happen right smack in the middle of CTIA’s opening keynote session. Which is just as well – the line up of speakers is sadly diminished from years gone by, when the top executives from U.S. mobile carriers were regularly featured. This year, it’s strictly second bananas on the keynote stage.
FCC luminaries aside, the policy focus is shining on cities. Several panel sessions will be devoted to figuring out how to work with communities, or at least get them to go along with plans to deploy dense 5G networks in the coming decade. A lot of the talk will center on the smart city concept, which should involve creating layers of virtual, open source data-driven infrastructure, but too often is just about repackaging existing products and services for the municipal market. Even so, I’m hoping to find new applications and architectures.
The Internet of Things is also getting a lot of attention, although it seems to be as much, if not more, more from parallel events than from the main CTIA show. On Tuesday, I’ll be going to the Telit IoT Innovation conference, which should be a good, general update on the state of IoT, if they’ve kept the information to sales pitch ratio at a manageable level.
Apple edged out Samsung for most highly rated manufacturer, scoring 81 points, a gain of one. Samsung wasn’t far behind, getting an 80, which was unchanged from 2015. Satisfaction fell off sharply after that, though, with Motorola/Lenovo in third place with 77, HTC in fourth with 75, and LG and Microsoft/Nokia tying for fifth at 74. “All others” got 73 out of 100.
When individual models are rated, it’s Samsung that comes out on top. Its Galaxy Note5 scored an 86, with Apple’s iPhone 6s Plus close behind at 85. HTC’s Desire and LG’s Leon LTE were at the bottom of the list, both receiving a rating of 67.
Mobile carriers don’t do as good a job satisfying U.S. subscribers as the manufacturers. The industry overall rated a satisfaction score of 71 out of 100, as did AT&T and Verizon. Sprint was at the bottom with 70 and T-Mobile did the best of the big four with a 74. Subscribers like both the brick and mortar and web store experience offered by the carriers, as well as network coverage and call clarity. The highest level of dissatisfaction was with call centers, service plan choices and mobile broadband speeds and reliability.
Google won’t be making self-driving cars, but Apple probably will, although it’s coming late to the game. That’s how Elon Musk handicaps the autonomous vehicle sweepstakes. He’s in a better position to judge than most people. His company, Tesla, already has a semi-autonomous car on the market and is trying to break out of its Silicon Valley-centric niche and into the mainstream of mass market manufacturers.
Musk talked about the steep competitive slope new entrants into the automotive business have to climb at a recent conference. According to an article in TechCrunch, Musk believes Apple got started too late…
“I think they should have embarked on this project sooner,” Musk said. “I don’t know… They don’t share with me the details. I don’t think they’ll be volume production sooner than 2020. It’s a missed opportunity. There’s a dozen car companies of significance in the world, the most any company has is approximately 10% market share.”
He brushed off the idea that Google will be building autonomous vehicles itself – “they’re not a car company”, he said – but it is building the market and mainstream automakers that partner up with them will be competitive.
In other words, Apple and Google aren’t changing their core strategies. Apple appears to be leading with hardware and hoping to build a closed ecosystem around it, just as it’s done with computers, phones and other devices. Google, on the other hand, seems focused on building a platform that mass market manufacturers will adopt.
It’s far fetched to think that Google and Apple could dominate the self-driving car universe. Musk certainly isn’t bullish on that idea, and there’s no denying incumbent automakers are still the safe bet. But then again, ten years ago iOS and Android were just development projects, and the smartphone smart money was on the likes of Nokia, RIM and Palm.