The Netflix Effect

on January 17, 2019
Reading Time: 4 minutes

Netflix is causing profound changes to happen within the entertainment industry. While my opinion, I believe Netflix is the gold standard for a streaming service, sans any live TV option. We can debate how crucial live content is to Netflix’s service, I’m still not convinced it is that important, but where Netflix is causing the most turbulence is in original series.

I outlined why in a post a wrote a few years ago, where I called Netflix’s actual business model stories as a service. If I were to give the edge to any volume producer of episodic based stories I give it to Netflix. Netflix produces a consistent stream of quality episodic content and stories, and in many ways, their model is more aligned with a book than a TV show.

Observationally, the big networks like CBS, ABC, NBC, etc., do a good job with hit shows which are well produced single episodes. Their goal is more the story of the individual episode than the story of the entire series. The networks deliver most of their shows to be stand-alone productions, with a mild continuing narrative, but the emphasis is on a single entertaining hour than a story that plays itself out over a dozen episodes. Netflix’s focus, and Amazon’s in this regard is more on the story arc than the encapsulated single episode. This is where their content model is much more like a book than their competition. I’d argue the latter is more compelling, entertaining, and essentially more in line with what drives customer engagement. This is also the underlying psychology driving binge watching. It is extremely common to binge read more than one chapter in a sitting of a great book, and thus the behavior follows for episodic content when there is a continuing compelling narrative.

I’d also argue, that the model Netflix is betting on, which Amazon follows, is much more aligned with their customer-centric business model of direct customer subscription. The model the networks use which is more focused on the story in a single episode than over the series is more aligned with the network business model of advertising supported.

The latter point convinces me the network attempts to go directly to a consumer like CBS has done and NBC has announced is likely to fail. To be successful here, they would need to entirely change their content production strategy to be more narrative than single episodic. While these networks have had success doing this before, shows like Lost, for example, were highly narrative based, it is not something they do as consistently or repeatedly as Netflix or Amazon have demonstrated.

The wholesale shift to subscription-based streaming of entertainment content is upon us, and it is an era where I’m not sure what the traditional cable networks play. At the moment, I don’t feel they are well positioned. However, there may still be a role in a broader bundle, perhaps with Amazon Prime, or another kind of light service like Apple may offer. But I can say with a relatively high degree of certainty their ambitions to go directly to the consumer are likely to fail.

Disney the Only Other Competitor
While Apple remains a wild card, it seems that Netflix, Amazon, and Disney are the three who have the best track record for a direct to consumer media and entertainment subscription. Regarding overall budget, only Disney outspends Netflix, and a good portion of Disney’s budget goes to live sports. For example, Disney’s sports rights made up just under $8 billion of their total ~ $13 billion content spend in 2018 alone. The rest they spent on original content. Netflix, in contrary, spent just over $12 billion on original content in 2018 greatly surpassing how much story based original media Disney spent. While Disney’s subscription cost is a bit lower than Netflix’s, one does wonder how much more Disney has to increase on original content to drive their new subscription service.

Disney’s brand is powerful, and they have super-power infused branded content to market and drive the subscription. Initial forecasts I’ve seen project Disney acquire approximately 3-5 million subscribers to this new service in 2018. To put that into context, Netflix has consistently added 5 million new users in the US every year. Given Disney’s brand, marketing power, lower price, and unique content, it seems reasonable 5 million subscribers in the first year is achievable and may even be conservative.

Overall, it is clear this shift is happening, and Netflix has had an effect on the entire industry causing forms of turbulence and even some disruption among the traditional entertainment industry players. Netflix is not without its challenges. Their recent price increase validates many observers concerns that unless they see significant S-curve growth cycle, they will have to keep raising their prices to existing customers to justify the massive annual content spend.

The big concern that still lingers is the overall tolerance to pay for a variety of content services from consumers. The worry is consumers will eventually suffer from subscription burnout paying $X to Netflix, $X to Disney, $X to Apple, $X to Amazon, and so on. This is uncharted territory since historically consumers have gotten value and become accustomed to the bundle model for media and entertainment. A la carte subscriptions change the nature of competition, and in a way, competition for share of wallet among these services becomes more fierce than in a bundled world. At this point, it is tough to say which model is better for consumers in the end.

Apple’s Services Playbook

on January 17, 2019
Reading Time: 4 minutes

It’s hard to have a conversation around Apple that does not include Apple’s services business. Rightly so, as the services revenue for Apple is likely to be one of the largest contributions to their overall company growth as well as one of the more predictable revenue streams. In Dec of last year, I wrote an article called Apple’s Services Challenge for our subscribers to our Think.tank industry analysis service. In that article, I point out how Apple’s services business is certainly an opportunity, but it will also be a new challenge for the company.

The challenge can be summed up as Apple being required to think beyond their own hardware for services support. In Apple’s Service Challenge I wrote the following:

A point about services I think is important to make is how a consumer will often separate the money they shell out for a service from the brand that offers it. To say it another way, services are neutral. The nature of subscribing to a service has historically assumed that service is widely available where the consumer wants it. The caveat being things like cable TV service (until late) or something like satellite radio, but neither of those models has ever yielded significant scale in the wider consumer market. Services that do scale take a more horizontal/modular approach and benefit from being as widely available on all shapes of hardware. This will be true of Apple’s first-party services as well. The consumer mindset is one of “If I subscribe to Apple Music, I feel I should not be limited to just Apple hardware to get the most out of my monthly subscription.” Or said another way, consumers will find subscribing to a service a harder sell if it is not more widely available. It is simply the new expectation in the digital age and wanting content anytime, anywhere.

Services growth will require a new playbook from Apple. One that incentivizes them to embrace the hardware, like Apple Music in the case of Sonos and Amazon Echo device. Hardware + platforms like the case of Samsung, LG, and Vizio TVs (more to come I’m sure). And platforms, like the case of Android, Windows, and any other platforms that may emerge and grow to take enough share for Apple to prioritize. Apple’s embracing of third-party hardware and, in some cases, competing hardware was entirely predictable, yet it seemed to catch many off guard. This is simply the services playbook, and Apple is now required to play by some new rules to grow their business.

Where Apple’s Playbook is Unique and Differentiated
Apple has accomplished many industry firsts. No other company in the history of consumer electronics has sold, at scale, a premium computing experience. Apple sells north of ~200 million iPhones every year, at an average ASP above $700 and Apple stands alone in this feat. Apple set financial records, App Store records, and the list goes on. But ultimately, what makes all these achievements possible is Apple’s monolithic vertical integration.

While it is true, some part of their services strategy will require them to break slightly from their vertical strategy, and it will not change the overarching strategic imperative to bundle hardware, software, and services together tightly. Apple has set the bar when it comes to hardware and software integration, and if they can bring services into this equation and things like Apple Music, a future TV/video service, Siri, and other new core experiences and out-integrate the third parties then it gives their hardware and software strategy even more strength in differentiation.

Looking back at a hindsight view of Apple, most of the focus on analyzing Apple as a hardware company. While I’ve always more strongly argued Apple is a software company the reality is they are equally a hardware and a software company. Now that the services business gets a great deal of attention, people like to wonder if Apple is, or should turn into, a services company. Such logic falls into the either/or fallacy that so often plagues Apple analysis. Ultimately, Apple is not a hardware company or a software company or a services company. Their future depends on them being hardware, software, and services company with each pillar deeply intertwined and integrated together.

In this equation, Apple’s first-party services a consumer subscribes to will be available on third-party hardware and competing platforms because it is unreasonable for Apple to assume every one of their customers will ONLY own their hardware. As I outlined, consumers will separate a service like Apple Music, or an Apple TV/video solution from Apple’s total hardware and if they pay $10,$20, or even $30 for an Apple content service they will expect that on any hardware they choose such as a smart speaker or TV. But that does not mean Apple does not care about a product like HomePod or Apple TV. What it means, in simple terms, is Apple will make those products the best endpoint to consume their first party services because those services will be more deeply integrated into Apple hardware and, therefore, will be the best of the Apple experience overall. This does not mean Apple’s services won’t work well on third-party hardware, just that Apple’s goal is to make their services the best on their hardware. Ultimately, this may end up being a catalyst to make Apple’s hardware and services even better.

Where this gets quite interesting is how Apple will be competing with companies they have not directly competed with before. In content, for example, they are now competing or will be competing with Amazon, Netflix, Disney, TV networks and even movie studios. While these companies and others which will enter the fold as new competition for Apple will excel is that they are first and foremost services companies and, for the moment, said services focused companies will do this better than Apple. Apple will do hardware better than most, if not all pure-play services companies, and they will likely meet in the middle in software. Each company brings a unique element to the equation but looking forward I find many fall into the temptation to emphasize the value of services and weight them more heavily than hardware. When the reality is, consumer electronics has always been a hardware-focused business and consumers are drawn to hardware objects of desire.

For Apple, and specifically, the management team and company culture are entering a period of testing as the historically unprecedented cash machine of iPhone begins to decline slightly and quickly stabilize as a revenue stream. Apple needs to find new growth engines, and while that can certainly come in the form of new hardware products, management needs to establish a clear playbook for the services business and challenge their people to bring the Apple process to new territory.

Why Apple Could Have a 5G iPhone in the 2019 Lineup

on January 16, 2019
Reading Time: 3 minutes

Perhaps the biggest buzzard in the tech industry these days, besides AI, is 5G. 5G, or fifth generation cellular networks will eventually deliver 1-10 gig speeds of wireless data to smartphones, cars, smart cities, and smart devices.

5G is considered a transformational technology because it has the potential to be used in ways 1G to 4G could not be used in the past. Besides higher speeds, 5G modems could find their way into automobiles, street lights, roads, buildings, and throughout the home. It will be used in new types of business and consumer applications where a wireless connection link will be important to any device or application where connectivity is critical for it to work.

Smart Home: It’s Connected Folks, not Magic!

on January 16, 2019
Reading Time: 4 minutes

Every year I go into CES with a list of what I hope to see, and I walk away with sore feet, some excitement and a couple of unexpected trends that have little to do with technology and a lot to do with poor marketing. And man, those trends bug me! Two years ago, it was AI washing, and this year it seems that tech companies got out of their way to portray the connected home like a magical space where everything that is connected and smart will also be self-sufficient when it comes to initiating complex business transactions. In the connected home of a not-so-distant future, appliances will order supplies like detergent, self-diagnose issues and call for a repair service and more. As I listened to the pitches and watched the beautiful videos, I could not help but think of today’s reality and how much will have to change before what those tech companies are selling becomes true.

My Reality

Here is a bit of a reality check on my home. Just before Christmas our fridge started tripping the breaker every time we used the water dispenser. We had noticed that the floor around it looked swollen and we feared a leak. My not so smart fridge had not told me anything other than that cry for help by tripping the circuit. The steps I took to solve the situation were many and not straightforward ones:

  • I first contacted my home insurance to check on coverage, but the insurance would not say anything until an assessment was made. They advised calling a repair person to establish the cause of the possible leak
  • I then yelped an appliance repair person
  • I made the appointment
  • The repair person found the fridge was leaking which meant that the insurance was not stepping in, so I had to close my claim
  • The pipe that takes water from the filter to the water dispenser was compromised, so the repair person took it out and ordered one
  • A week later the repair person came back, but the pipe that was ordered did not fit, and a new order had to be placed
  • Three days later the new and correct pipe arrived and was fitted but a second pipe was compromised
  • So, two new pipes were ordered as to be on the safe side we swapped them all out
  • Three days after that the pipes arrived and were fitted.

As you can imagine I would have welcomed AI with open arms if it meant to have my fridge functioning sooner. But the reality is that AI would have only helped to ease part of my pain.

AI Does not Account for Business Models

There is no question that self-diagnose would have helped catch my fridge issue earlier as well as order the right pipe. But the rest of the process involved was quite complex and one that would be solved more by business agreements than technology. How would my fridge know if the repair is covered by insurance? Actually, how does the fridge know I have insurance at all? Do I trust my fridge to call the best repairman for the job?

It seems to me that brands painting this idyllic picture of a home that is basically self-supporting is so far away from reality not because of the technology needed to make it happen but because all the business ties that would bring that picture to market are just not in place. Because of all this background work, but also country-specific requirements related to privacy we will also have a vision that will not be the same across markets. What a brand might be able to deliver in the US, is likely to be very different when taken to European markets or Asia.

Brands understand the need to build these alliances mostly in the e-commerce and payment space. Last year at CES, Samsung announced its partnership with Mastercard and FreshDirect and ShopRite for its Smart Hub Fridge so users can buy groceries directly from their connected fridge when they are running low on some items. Providing integrated solutions able to replicate what the Amazon Dash button does for washing powder or detergent also seems an easy enough answer for connected appliances of today.

Yet, the vision depicted by LG during their press conference was one of pure magic that required not only business relationships but also a great deal of information from the user. Another significant neglect in this idyllic portrait is to recognize that today much of the relationship consumers have with their appliances is through a third party and not directly with the brand that was purchased. Whether that relationship is with BestBuy or another Big Box Retailer or with a home appliance insurance, chances are the brand we bought is the last player we think we will ever interact with. So, the question is: would we trust it?

The Disservice of Painting the Big Picture

While painting the nirvana of the connected home is very tempting, I think that ultimately this picture does a big disservice to the opportunity the connected home has to offer. An opportunity that has a lot of value in the short term in just providing me, as the homeowner, with a lot of information. Going back to my real life example. All I needed my fridge to do was to provide me with information about the leak and the correct pipe number to purchase. That would have been a huge help in saving time and money.

While maybe not as grandiose as the picture these brands want to paint there is plenty of value that can be delivered today that will drive sales and loyalty as well as confidence in the future bigger picture. It might not be as sexy for early tech buyers, but it is certainly much more approachable to the mass market buyers.

Baby steps will also allow these brands to be ready to support customers and most importantly to make sure they are not seen as the weakest link when something does not go according to plan in a chain of events that are out of the brand’s control. I would be expected to blame brand X for a fridge that breaks down but is it fair I blame them for a poor repair service? Well if the fridge initiated that repair and I had no voice in choosing the provider, of course, it is fair. Are brands ready for the extra pain?

The Voice Assistant War: What If Nobody Wins?

on January 15, 2019
Reading Time: 4 minutes

One of the clearest developments that came out of 2018, and prominently on display last week in Las Vegas at CES 2019, was the rise of the embedded voice assistant. Amazon’s Alexa and Google’s Assistant were omnipresent at the show, thanks to their extremely wide range of partners and, in Google’s case, their enormous outdoor booth. Samsung’s Bixby also made a much stronger showing in a wide array of Samsung products, and was even touted as the company’s home for AI-based developments. Combine that with recent numbers from Amazon and Google about compatible device shipments, and it’s clear that voice assistants have gone mainstream.

But as large and important as the market for voice assistant-capable devices may be, there are still a great deal of uncertainties about where they could be going. At a basic level, of course, is the evolving market share battle between the leading players. Amazon is generally seen as winning the war so far, but Google has been coming on strong, plus Apple, Microsoft, and Samsung are too big to ignore, especially given how young this market still is.

The dynamics of the voice assistant are now becoming much more complex. At this year’s CES, for example, we started to see even more devices that are supporting multiple voice assistant platforms. On the one hand, this makes sense, because it’s not at all clear who, or even if, there will ever be a true voice platform winner. By allowing people to select from multiple voice assistant options, vendors are giving their customers more flexibility. But there are some potential downsides to this approach as well, because including support for multiple platforms inevitably adds more complexity and development costs (and, therefore, potential price additions) to most devices. Plus, when you scratch beneath the surface, you can find instances where switching between voice assistant platforms could even impact functionality because of varied capabilities (or lack thereof) across different platforms.

Lenovo’s clever new Smart Tab devices are an interesting example of this potential conundrum. Both the $200 M10 and $300 P10 are 10” Android tablets running the Oreo version of the OS—meaning they have the Google Assistant feature built in—but when they are put into their bundled smart dock, they default to Amazon smart display “Show Mode,” similar to the Echo Show. The Google Assistant features work when the tablets are undocked, but won’t work in the dock, because Lenovo optimized the Smart Tabs’ visual capabilities to work only with Amazon’s platform. Now, there’s certainly nothing wrong with that choice, and for the record, the Smart Tabs look to be a very attractive alternative to existing, non-mobile smart displays, but it does highlight some of the tradeoffs that vendors supporting multiple voice assistants have to make.

An even more confounding problem that consumers are likely to start facing this year is owning multiple products with different smart assistant platforms. With embedded voice assistants being built into everything from toilets to showers to home appliances—thanks to impressive (and inexpensive) semiconductor solutions from companies like Qualcomm, Intel, and others that make them easy to integrate—it’s soon going to be hard to buy home devices that don’t have some kind of voice capabilities. On tech focused devices, it makes sense to consider the particular voice platform(s) supported as a key purchase criterion. For other non-tech devices, however, the voice assistants will simply become a feature that may be a nice to have and not a make-or-break factor. The end result is that people are likely to end up with multiple different voice assistants—and that could get messy very quickly, especially if they are turned on by default (as they are likely to be).

While some people may be perfectly comfortable working across multiple voice assistants, and actually remembering which ones are enabled on which devices, most people are likely to get quickly confused in such a scenario. In fact, it could be frustrating enough that people stop using the voice assistant capabilities entirely. Of course, more tech-savvy consumers could just pick a particular platform and only enable it on the devices that support it to simplify things. Even then, however, there can be challenges if multiple devices try to respond simultaneously to a given request. Most of the major platforms are working to address the multiple device response issue as we speak, but it remains to be seen how effective it will be as more and more voice assistant-enabled devices start to make their way into people’s homes.

As we’ve seen in plenty of other device platform battles, it’s very difficult to get people to stick with a single ecosystem. For example, while Apple may tout some impressive capabilities across its range of iOS, MacOS, watchOS, and TVOS devices, there are very few people who only own Apple devices. Similarly, even though a significant percentage of US homes may own at least one Android-based device with Google Assistant support or one Alexa-based device, it’s not at all clear that means they’re only going to stick with that platform. We live in a very heterogenous device world and that heterogeneity is likely to spread over to the world of voice assistants as well, with implications that could prove to be challenging moving ahead.

There’s no doubt that voice assistant platforms are an important and increasingly impressive new technology, but let’s hope they don’t become victims of their collective success.

A CES Vet’s Final Take on CES 2019

on January 14, 2019
Reading Time: 4 minutes

In my column last week, I mentioned that this CES was my 44th. Over the years, I have served on their advisory committees, led major supersessions and dealt with various CES leaders who have guided this show over the last 52 years.

For most of those 52 years, CES was part of the Consumer Electronics Association, an association designed to serve what was loosely called the consumer electronics industry. But in their early days, if the product had any electronics and would be of interest to a consumer, it would show up at CES. This included refrigerators, toasters, watches and just about any consumer-related technology one could imagine.

CES as a show has had real ups and downs over the years. It was the major go-to electronics show for most of the 1970s and early 1980s until Comdex hit the scene. From late 1986 until about 2001, Comdex became the leading technology show. PC’s had taken center stage in the world of electronics, and while CES still existed, its attendance began to suffer. During that period more and more people favored Comdex over CES. In those days, the PC invaded the consumer mindset as it was a PC, DVD and multimedia player, content creation tool, etc. Also, more and more consumer electronics dealers had to become PC retailers too and needed to go to Comdex to cut deals with the PC vendors during that time.

But by 2001, the PC had become more of a multi-purpose tool and less a dedicated product just for business, and consumer usage and Comdex itself lost its need to exist. That is when CES got its second wind, and it has been uphill for it ever since. A few years ago, CEA realized that the meaning of the term Consumer Electronics had changed since it was founded and they changed their name to CTA or Consumer Technology Association to reflect what is now an even broader and more important use of the term consumer electronics.

That was in full display at this year’s CES as automakers, health and fitness companies and even insurance companies were there to show off how technology is being used in most or all of their consumer applications and services. The show drew at least 180,000 people who were treated to 2.5 million square feet of exhibit space spread throughout 5 or 6 venues across town. The Las Vegas Convention Center wants to purchase property across from the LVCC area almost half way up to the Las Vegas Strip in what will be a massive expansion of parking and exhibit space over the next five years.

The growth of CES over the last ten years has been stunning. It is the largest trade show that comes to Las Vegas, and the 2nd largest consumer electronics show regarding attendance behind Berlin’s IFA that drew 245,000 last fall. However, CES only allows industry professionals to attend, while IFA, in the end, opens it up to anybody, so regarding actual industry attendees, CES is probably the largest consumer electronics show.

With this growth, the show in some ways has become more difficult to cover and navigate. With venues spread around town, it is virtually impossible for any individual to see everything at this show. As I stated in last week’s column, a person going to this show must spend time looking at the companies or technologies they want and need to see and then map out a plan to visit the booths that show them off.

Each year when I go to the CES, I look for at least one stand out product. In 2014 it was Oculus Rift. This year it was LG’s Rollable OLED TV. In both cases, these products were not just standout products but ones that will have a significant impact on our tech world. Oculus Rift ushered in the era of VR and more recently AR and mixed reality. LG’s Rollable TV will set the tone for the next generation of TV’s by introducing the concept of rollable and flexible displays over the next 7-10 years. It also emphasizes the point that displays are our window into a world of information and entertainment and can come in all types of shapes and sizes.

In Ben Bajarin’s ThinkTank column for our subscriber’s last Thursday, he pointed out:

“Displays will be everywhere. Not just on our pockets, in our cars, all over our homes, in mirrors, in glass in our homes and office buildings, retail, etc. We are a visual species, and the Cambrian explosion of displays has not yet happened. But what we see as a technology showcase around displays at CES is an easy way to predict what the Cambrian explosion of displays is going to look like when it happens.”

There was one other theme at this show that was striking. Over at the sands, at least 1/3d of the top floor was dedicated to health, wellness, and fitness. This is a big deal for CES and a big deal for humanity in general. Technologies represented in this area had a significant focus on keeping people healthy and helping them track their health-related issues. Omron’s blood pressure watch will be a game changer for those who deal with blood pressure issues and can now check BP anytime and anywhere. There were a plethora of fitness trackers on display, including one from SpireHealth that could be snapped into a bra or underwear or clothing in general called a HealthTag, to check respiration, heart rate, sleep duration and quality, stress and anxiety and activity levels.

The auto industry was there in a big way as they were intent in showing off their latest connected cars. Even John Deere was there showing off a smart, related tractor. And of course, just about everywhere you turned there was some type of exhibit relative to a connected home, IOT or smart this or smart that. All wrapped around an AI story even if AI was not necessarily integrated into their product itself. Talk about 5G was prominent at CES although the real news and focus on 5G will be more predominant at Mobile World Congress in Barcelona in late February.

Ben sums up what is behind CES’s staggering growth in his ThinkTank column mentioned above:

“What is critical to all of this is an innovation cycle in components, being fueled by the sheer size of the consumer electronics industry which is evident at the size CES and the truly global movement of electronics. I’ve said for many years that the tech industry best times are still ahead and every year this show gives me confidence this is true.

Short term economics may consume the news cycle, and bring the appearance of technological slowdowns in pockets of the industry. But do not be fooled, in the future technology will deeply touch every single business industry in the world and every single business industry in the world will be a technology industry.”

Podcast: CES 2019

on January 12, 2019
Reading Time: 1 minute

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell analyzing the big news announcements coming out of this year’s CES trade show in Las Vegas, including developments in 8K TVs, gaming PCs, 5G, autonomous cars, robotics and more.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is:

Are Apple’s Interests Diverging From Customer Needs?

on January 11, 2019
Reading Time: 3 minutes

While Apple has attributed the slowdown of iPhone sales to being caused by a range of business and financial issues, not included in their list is the product design itself. Yet, I think some of the design decisions made over the past few years have impacted the iPhone’s popularity. These design decisions came about from a company that paid little attention to customer preference, usually believing it knew best. That’s what happens to many companies that are successful, thinking they’re smarter than their customers, develop a level of arrogance, and misread the market.

Foremost and symbolic of this arrogance has been the removal of the headphone jack that provided no consumer benefit yet was something everyone understood. Why, customers asked, would Apple make the phone less convenient to use, abandoning a standard that most customers relied on. It required users to abandon their wired headsets, switch to Bluetooth, or use a dongle that could be lost and often cost extra.

When customers continued to complain about low capacity batteries, making it difficult to get through the day on a single charge, Apple continued to make their phones thinner and more powerful, but with no improvement to battery life. People wanted more time between charges, not thinner and more fragile phones. In fact, most worry about thinness, because they buy a protective case.
If there was any question about a user’s anxiety of depleted batteries, just look at the proliferation of battery pack sales of all sizes and shapes, some now even built into suitcases.

In fact, this obsession for thinness has become Apple’s design language and mission across all of its products, leading to a wide range of performance problems, quality issues, and even recalls. And let’s not forget an array of over-priced dongles that now adorn the walls of Apple stores and comes across as another way to grab another $50. What’s notable is removing all these ports was not even needed. Numerous PC notebooks are just as thin and light as MacBooks and have a full array of ports. It’s more likely they were removed to save a few dollars.

Apple moved to facial recognition to replace the fingerprint sign-on and verification. But it required learning a new set of gestures and replacing something that users liked and worked well. Apple did an excellent job in implementing this change, and, for some, improved the sign-on process, but they did little to prepare their customers for the transition. Like so many companies these days, they never included detailed instructions with their phones and left it to you-tubers to produce videos to explain how to use the new features.

Even today I can surprise most iPhone users by showing how they can turn their keyboard into a trackpad by holding down the space bar. Apple just assumes users are savvy enough to learn new features on their own. Another sign that they don’t think enough about their users.

Lastly, Apple has not created a coherent product line for their phones. While most companies create a good, better, best product lineup, Apple has created a new, old and older lineup to provide products at varying prices. I would question whether even the biggest Apple fan can reel off the differences between an iPhone 8 and an iPhone 7.
Apple differentiates many of their new models by processor speed, but slowness on an iPhone is mostly attributable to the wireless connection rather than the processor speed. In other words, they tout the advantages on things that matter only slightly. Frankly their lineup is a mess.

This reliance on older models to create their lineup seems to be the result of laziness and lack of product development resources, even while the company has expanded many times in size and created a huge new headquarters. That laziness is exhibited by the lack of development across their line of computers and actually exiting product categories that offer potential for innovation, such as routers and monitors. The Eero home WiFi mesh network is something you’d expect from Apple to improve their customer’s experience. What are all these people working on?

Today you need to spend close to $1000 to get the current model of the iPhone or even more when you the add more memory and buy an extended warrantee. Apple took a huge risk in increasing its pricing to compensate for lower volumes. I guess that’s not working out so well.

Yes, Apple is facing numerous problems that are not of their own making, but that’s even more of a reason why their lack of innovation, and lack of attention to customer needs is now becoming more apparent.

Setting The Ground Rules For What Qualifies As 5G

on January 10, 2019
Reading Time: 5 minutes

Even though some 5G services were launched during the fourth quarter of 2018, it appears that this week’s CES is serving as the unofficial start of the 5G marketing wars. After a 2-3 year hiatus of significant mobile-related activity at CES (for a time, CES was the venue for iconic device debuts), 5G is one of the big deal themes at this year’s confab. Verizon CEO Hans Vestberg delivered a keynote address (sporting a very un-Verizon-like T-shirt), and there’s been lots of attention to 5G phones, absent any significant actual product announcements.

But the real news this week has been the kickoff of what looks to be a protracted debate, played out in the media and on Twitter, of not only who has the best 5G, but what is and what is not 5G.  AT&T got this party started last year, when it launched what it called “5G Evolution” in a handful of markets. But really, this was AT&T’s marketing term for what had been referred by most in the industry as Gigabit LTE. Notwithstanding the fact that Gigabit LTE delivers performance akin to early 5G services, AT&T took some modest heat for slapping the 5G moniker on what is, in actuality, an advanced LTE service. Then, in the waning days of 2018, AT&T rather quietly launched Mobile 5G in parts of 12 cities. This very controlled market launch was to a handful of hand-picked customers (i.e. you cannot walk into a store and buy the service). Although this is actual 5G, using the company’s mmWave spectrum and 5G new radio (NR) equipped cell sites, it’s really more of a large commercial market test than a generally available service, at this point. (see the column I wrote here)

But the gloves came off this week. AT&T stirred the hornet’s nest by announcing that it would change the indicator on its phones from ‘LTE’ to ‘5G e’ in its 5G Evolution markets. Verizon responded more expensively and corporately, with a print and social media onslaught, including a full page ad in the Wall Street Journal, both taking the high road (‘what’s good for the industry and consumers’) while calling out AT&T (“we won’t take an old phone and just change the 4 in the status bar into a 5”). T-Mobile responded more characteristically, with a series of John Legere tweets, including this hysterical video.

So before things get even uglier, I recommend setting some ground rules at this early stage of 5G. There are three broad things to consider here: what can be officially called 5G; what is fair to call a 5G launch; and what the 5G experience is going to look like.

What Can Be Officially Called 5G? There are two essential components: a cell site must be equipped with 5G New Radio (5G NR), as defined by the 3GPP(!) Standards body; and the device must have a 5G modem (such Qualcomm’s X50 5G NR or Intel’s XM 8160 5G). In an ideal world, the combination would include the 5G Chipset (like the Snapdragon 855 system that Qualcomm introduced in October). A service like AT&T’s 5G+ that uses a 5G hotspot like the NETGEAR Nighthawk qualifies as 5G in under this definition. One nuance here is that Verizon’s 5G Home (the fixed wireless access it has launched in parts of 4 cities) uses a proprietary standard called 5G TF. But we expect any Verizon rollout of mobile 5G and using a 5G smartphone would employ the 3GPP version going forward.

What Can Be Fairly Deemed a 5G ‘Launch’? On December 21, 2018, AT&T announced its 5G+ service, using its 39 GHz mmWave spectrum, in 12 markets. The service itself qualifies as 5G, even though the only device available at this point is the NETGEAR Nighthawk 5G hotspot. However, I do not consider this to be a commercially available 5G service, because a customer cannot actually buy the service at this time. It’s only being made available to “selected businesses and consumers” – that is, those that AT&T selects. It’s different than Verizon’s 5G Home service, since if a home is in an area covered by Verizon’s mmWave service in the four launch cities, they can get the service.

During 2019 and into 2020 especially, it is going to be important to consider what really qualifies as an available 5G market, despite what the operator press releases tell us. My rules of thumb are:

  • It must use 5G radios and 5G chipset enabled equipment (see above)
  • It must be commercially available. In other words, if you live in an area the operator says is ‘covered’ by 5G, you can buy a 5G device (hotspot or phone) and a 5G service plan. By that definition, AT&T’s 5G+ service is not commercially available today.
  • It must cover some critical mass of a launch market. My standard here is relatively generous, but an operator cannot launch 5G on a handful of sites in a major city and call that service ‘launched’. Everyone will have their opinion here, but I think a good rule of thumb is that 5G coverage is available in at least 25% of the footprint of that market. And not total Swiss cheese, either. So, if AT&T says 5G is launched in downtown Dallas, I’d expect that 5G light to be on in a reasonable swath of the downtown core.

I call on operators to be more transparent on 5G coverage. This does not mean they have to specify exactly where or how many cell sites. But something on the order of ‘we have 30%, or 50% of downtown Atlanta covered’. Or if the guy in the store can draw a rough boundary line. It is only when some sort of metric like this is available that anyone could be reasonably advised to pay a premium price for a 5G phone and/or 5G service plan.

What Will the 5G Experience Look Like? The best 4G LTE services in the United States today, generically called Gigabit LTE, can deliver some pretty killer speeds: I’ve seen 300 Mbps and better. It’s achieved by an alphabet soup combination of carrier aggregation (up to 6 CA now!), LAA, 4×4 MIMO, and 256 QAM. AT&T, Verizon, and T-Mobile are already delivering this in many cities – each of them marketing and branding the service slightly differently. These are the markets AT&T calls ‘5G Evolution’.

Truth be told, AT&T can sort of be forgiven for wanting to put a sexier brand around these Gigabit LTE markets, because with 60 MHz of new spectrum being deployed (AWS, WCS, FirstNet) and the alphabet soup above, the speed and capacity improvements are measureable. It is very possible that Gigabit LTE services, in many instances, will be as good as or better than 5G, at least for the next couple of years. In fact, if I was advising a customer who wanted the best overall data experience, I’d tell them to choose the operator with the combination of largest Gigabit LTE footprint and best capacity situation. Who that actually is varies from one market to another at this point.

The bottom line is threefold: First, we need to have an accepted definition of what qualifies as a 5G service. Otherwise, operators, and the industry, bear the risk of turning off customers and negatively impacting 5G adoption. Second, operators should be more transparent about 5G coverage. Don’t announce a market as ‘launched’ for the sake of a press release, especially if it’s only a handful of sites and customers cannot actually buy the service. Third, we all need to understand that for the next couple of years at least, there will be overlap between the best ‘4G LTE’ experience and early 5G services. Some 4G will look like 5G, and some 5G will look like 4G. A little confusing, yes, but that’s the new reality.

Big CES Announcements are TVs and PCs

on January 8, 2019
Reading Time: 5 minutes

What’s old is new again, or so it seems at this year’s CES trade show in Las Vegas.

After years of gadgets, drones and other gizmos grabbing the headlines, a lot of the big announcements from this year’s show are coming from some of the oldest categories: TVs and PCs. To be sure, there are plenty of interesting (and odd—smart toilets, anyone?) products on display at this year’s CES, but there are a surprisingly large number of news announcements and important speeches from many TV and PC vendors.

Admittedly, most of the news on the TV and PC side is more evolutionary and not really breakthrough, but frankly, that’s the state of the consumer electronics industry overall these days. In addition, as with most categories, there was a great deal of discussion about the integration of AI into these “traditional” devices, demonstrating how the concept of artificial intelligence really is reaching across the entire tech industry.

The news cycle for TVs kicked off on Sunday with the surprise announcement that Apple and Samsung were working together to integrate iTunes, HomeKit and AirPlay2 (and likely its forthcoming video streaming service) directly into new Samsung TVs. It was followed the next day by somewhat similar announcements from LG, Vizio and Sony for their new TVs, with the exception of iTunes, which will remain a Samsung exclusive through this spring. Essentially, this development means that Apple is offering a software-based solution for providing access to their services and removes the need for consumers to buy an AppleTV box. (Interestingly, it also means Apple is building a Tizen—and likely soon an Android—version of iTunes.) In exchange, Apple gets access to a wide range of current smart TV customers for their video services. It’s a clear example of Apple’s evolution towards a services focus and, thankfully, highlights the company’s willingness to bring those services to devices other than those with an Apple logo.

As expected, there was a lot of announcements surrounding 8K TVs, but, of course, little content to show for it. (Heck, it’s still hard to find much 4K content—but the new Apple integration with smart TVs will include support for 4K, so that should help.) A wide range of vendors offered an enormous range of sizes for 8K, all of which promised sophisticated upscaling to work with existing 4K content. Thankfully, rather than positioning 8K as a replacement for 4K, Sony only put out 8K TVs that are 85” and larger—bigger than most all of their 4K TVs. So, for them, it’s really just an extension to their screen sizes that also happens to be 8K ready. Unfortunately, most of the other TV vendors weren’t quite as clear on their positioning of 8K vs. 4K.

Finally, though the company had already previewed it last year, LG announced that they would be shipping their roll-up OLED-based TV as a real product this year. No pricing was announced, but the 65” foldable 4K display-based device is expected to be available towards the middle or end of this year.

On the PC side, Dell, HP, Lenovo, and Samsung all unveiled their latest laptops and desktops, with a range of offerings that covers everything from low-end Chromebooks, through mainstream consumer and business-focused PCs, up through high-end gaming machines. In fact, there was a particularly strong focus on the gaming side at CES, with some impressive new offerings from several players.

Dell took the opportunity to present their new Alienware Legend design (and latest CPU and GPU offerings) for their Alienware line of products. Long an iconic, though aspirational, gaming PC brand, the latest Alienware offerings include the new Area51m, the first upgradeable notebook to use desktop CPUs (up to Intel i9) and GPUs (up to Nvidia RTX 2080). For more mainstream gamers, Dell also announced updates to their G line of notebooks (the G15 and G17), both of which offer 8th Gen Intel CPUs and Nvidia discrete GPUs. On the premium consumer side, Dell finally (!) fixed the “nosecam” in their otherwise excellent XPS13 by putting an extremely small new video camera above the screen, yet still kept the extremely small bezels.

From HP, there were several new gaming-focused devices, including the first release of a Nvidia GSync format BFGD (Big Format Graphic Display), the 65”, 1440p, $4,995 OMEN X Emperium 65 first demoed last year, as well as updates to its Omen line of gaming notebooks (Omen 15) and desktops (Omen Obelisk). HP also showed one of the first AMD-powered Chromebooks, the HP Chromebook 14 (Acer announced one as well), as well as a more upscale convertible Chromebook dubbed the Chromebook x360 14 G1. For business users, HP showed a new take on an OLED screen-based notebook (the Spectre x360 15) that promises to offer better battery life than first-gen OLED notebooks.

Lenovo showed several new additions to its Legend line of gaming-focused PCs, as well as a slew of gaming-focused accessories. On the traditional PC side, Lenovo touted some interesting AI features in its latest Yoga machines, such as the Yoga S940, including the ability to filter out ambient audio during online conference calls, and the ability to shift content to connected displays based on where you are looking, amongst others. In addition to PC updates, Lenovo continued to grow its offerings in the smart home market with the Lenovo Smart Clock, a $79 smart alarm clock with a display—somewhat similar to a mini version of their Smart Home display. Speaking of which, the company also debuted two tablet versions of their smart display, called Lenovo Smart Tabs, that let you carry the screen element around your house like a typical tablet, but then dock into a base station that offers integrated speakers and other features consistent with the standalone Smart Display. With models at $199 and $299, it’s a clever variation on the connected display category that could appeal to consumers looking for more multifunction devices.

Samsung introduced its first ever gaming laptop, the Samsung Odyssey, a further reflection of the growing interest in PC gaming. In addition, they offered new designs for their convertible Notebook 9 Pro and Pen series, the latter of which leverages the same design (and even same color) as the pen from their Note 9 series smartphones. It’s the first time Samsung has shown this level of integration between their different product lines and, hopefully, is a portent of more to come.

There was also big news that’s been announced (and some still to come) from big PC component players. AMD, in addition to securing a highly coveted CES keynote spot for CEO Lisa Su (fresh off a year where the company impressively achieved the status as the best performing stock on the S&P 500), unveiled their second-generation Ryzen mobile CPUs. Expected to be used in both ultrathin and gaming-focused devices (thanks to integrated Radeon GPU cores), the Ryzen mobile parts come in both 15W and 35W versions. AMD also debuted new 7th gen A Series CPUs, powering both the HP and Acer Chromebooks.

Intel, for its part, provided more details on 10 nm CPUs that the company plans to ship in systems by the holidays of this year. Codenamed Ice Lake, the SOC (system on chip) offers CPU architecture enhancements, significantly improved integrated Gen 11 graphics, as well as Thunderbolt 3, WiFi6, and DL Boost, for accelerating AI functions. One of the first systems to include it will be a future iteration of Dell’s XPS line. Intel also previewed the first real-world implementation of its Foveros 3D chip-stacking technology in a tiny motherboard platform codenamed Lakefield. Lakefield will incorporate the hybrid architecture SunnyCove CPU design (which features one Core CPU and four Atom CPU cores) the company first mentioned back in December at their analyst day, At their CES press conference, Intel showed more details about the SOC design, as well as a few examples of potential form factors leveraging the new platform.

Nvidia’s big news for the PC market focusing on gaming, with the debut of the $349 RTX 2060, which brings their ray-tracing capable Turing architecture technology down to mainstream price points. The company also discussed more about their GSync efforts (such as with the aforementioned HP 65” gaming display).

All told, it was an impressive display of admittedly incremental, yet still important advances in what continue to be the two largest categories in the consumer electronics world.

A CES Vet’s Guide to CES

on January 7, 2019
Reading Time: 4 minutes

As I head off to CES, this will be my 44th year of attending CES. I have actually attended around 50 CES shows as I also went to the Summer CES events in Chicago in the late 80’s and early 90’s too.

Given that I am a seasoned vet of CES shows, I am often asked how best to cover this show. This year there will be over 190,000 people attending CES with venues concentrated around the Las Vegas Convention Center and the Sands Convention Center. And because the show has grown so large, exhibits have expanded to at least two other major hotel conference centers in other parts of the town.

My first suggestions on how to deal with CES are practical ones.

1-Wear very comfortable shoes. Do not break in new shows at the show. Trust me, that is a bad idea. You will be walking at least 5-7 miles a day while perusing the exhibits and going to meetings. Last year I averaged 15 miles each day.

2-Carry a small container of hand sanitizer. With an expected 190,000 people spreading germs right and left, you will want to use a hand sanitizer often.

3-Carry a small bottle of water if you can and sip from it often. Las Vegas is a dry climate and you can get dehydrated very fast with all of that walking.

4-Your rooms are almost all enclosed and only getting forced dry air from the hotel’s air systems. Ask you hotel to send up a humidifier to your room. (These are always complimentary) Your sinuses and respiratory system will thank me for that recommendation.

5-While cabs area available, cab lines can be long. Plan accordingly. If you have a Uber of Lyft account, they seem to be more plentiful during CES and are often a better option. In the past, Uber and Lyft could not pick up at the Las Vegas Airport but they now have been given permits to pick up in parking garages in both terminal 1 and 3.

6-Look closely at the bus schedules that CES attendees have been sent. This is also a good option although from most hotels not near LVCC or the Sands, it could take as much as 45 minutes to get to either LVCC or the Sands from places like MGM and Mandalay Bay. For media, there are buses running between the Sands and Mandalay Bay for the press days every 30 minutes.

As for covering the show, do go through the exhibitor map and find out who you want to see and develop a strategy of how to navigate to these locations in advance. Also, factor in the issue of thousands of people clogging the aisles at any given time, which means you move very slowly through these aisles to get to any location at any venue.

CES is now a highly diversified show. While it still has a consumer electronics theme, big auto companies like Ford, Mercedes, etc are there to show off how smart their cars have become. The health industry is represented by everything thing from HMO’s who are pushing health monitoring tools to keep their customers healthy to medical device companies like OMRON, who will show off their first blood pressure watch that just got FDA approval.

The big sports companies are there showing off all types of smart technologies they are embedding in their equipment and companies who make beds are there to introduce the latest and greatest smart beds.

One particular thing CES has done in designing their current exhibit areas is that the more established and larger consumer electronic exhibits are at the LVCC. This is where Sony, Samsung, LG, Hisense, Intel, Qualcomm and dozens of the bigger brands show off their wares in giant booths. Then over at the Sands you will find Eureka Park, where a great deal of the start ups and smaller companies introduce new products and various countries like France, Germany, UK, Israel, China and others have special areas where they highlight new technologies and CE based companies they want to show off to American audiences.

I will spend two days on the exhibit floor and will spend one full day at the Sands and the other day at LVCC.

Although the show will have just about everything that is new in technology represented, there will be some major themes and one important keynotes worth noting.

Keynotes- AMD’s CEO Lisa Su will give AMD’s first keynote in the history of CES on Wednesday at 9:00 AM at the Venetian Palazzo Ballroom.

AMD is has remerged as one of the major powers in semiconductors and with their new Ryzen PC chips are on target to challenge Intel in the PC arena in new ways. Their graphics chips already dominate the dedicated gaming console market and high end PC graphic processors are used in many of the major PC gaming platforms on the market today. Ms. Su’s keynote will be an important one as she outlines their updated processor strategies and give the audience a glimpse of new things to come.

Here is a link to all of the CES Keynotes.

As for Themes of this years CES, you can expect to see a lot of new 8K TV’s introduced as this is the next big thing in televisions. Although we don’t even have a lot of 4K programming, that has not kept the TV industry from advancing their technology and preparing for the new big wave in TV design.

On reason you will see more 8K TV’s at this years show is that all of the big TV vendors are preparing for the 2020 Olympics in Tokyo Japan where much of that event will be broadcast in 8K. Sony has lead this charge as their recording and broadcast equipment will power these 8K broadcasts. Most TV vendors want to have models in place by end of 2019 so people can upgrade to 8K in time for the 2020 Olympics.

VR and AR will also be a big part of the show as new VR glasses and content will be unveiled and we should see at least two interesting AR goggle’s or glasses debuted in what could be the launch of the first AR style glasses aimed at a broad consumer market.

We will also see at least one foldable smartphone/tablet from Royole called the FlexPai. Samsung could also showcase their foldable smartphone that they debuted at their developers conference in Oct. Speaking of foldable screens, LG will reportedly show off their foldable TV screen that they gave a glimpse of at last year’s CES show.

Over at the Sands there will be dedicated areas for Fitness, Health, Robotics Drones, and IOT/Home Automation. I expect Alexa to be the star of all of these areas except robotics.

The one over used word that will permeate CES will be AI. Expect to hear it everywhere even though many who have ascribed AI in their products don’t even understand AI in depth. Never-the -less, AI will be added to all types of devices and their functions, some meaningful and others gimmicky, but AI will be every where you turn at this giant Consumer Electronics Show.

Here Come the Consumer Robots

on January 4, 2019
Reading Time: 4 minutes

One category of products I’ll be watching closely next week in Las Vegas at the Consumer Electronics Show (CES) is consumer robots. While the commercial/industrial robot category has been growing fast (and is a category IDC is watching closely), the consumer market has been slower to take off. I expect things to pick up over the next few years, and we’re likely to see some interesting new products unveiled for 2019 at the show. The big question is this: Are mainstream consumer ready to bring a robot into their homes?

Single-Purpose Robots
To date, the biggest category of consumer robots has been single-purpose devices. The most popular: Vacuuming robots. This category has evolved from strictly high-end products from category pioneer iRobot years ago to a wide range of lower-priced (but often less “smart”) products from a long and growing list of lesser-known vendors. Today, robot vacuums make up an ever-increasingly percentage of the vacuums sold in the world, but I’d argue they are still not a truly mainstream product. What the vacuuming robot category has done is drive interest in other single-purpose robots. In recent years the category has expanded to include a wide range of other types of products, including robots that clean pools, empty gutters, mow lawns, and more.

Two of the key new features of some of the more advanced vacuuming robots is the addition of smartphone apps and integration with some of today’s smart assistants such as Amazon Alexa and Google Assistant. The introduction of apps brought a long list of new capabilities, from scheduling jobs to viewing reports. And smart assistant integration has made it possible to initiate jobs with your voice. It’s this last piece, voice-enabled robots, that really begins to make this category interesting.

Educational Bots
Voice integration is one of the key attributes of another key consumer robot category: Educational Robots. This segment includes a wide range of products, from robots that truly aim to educate children, to devices focused on entertaining people young and old. One of the more interesting companies in this space is Anki, which has shipped several small robots into the consumer market. The company’s latest is called Vector, and he’s an engaging little fellow that responds to voice commands and can do rudimentary tasks such as tell you the weather, set a timer, take a photo, and even play Blackjack. Perhaps more importantly, Vector is a small, relatively inexpensive ($250) product that utilizes Artificial Intelligence to get smarter—and to better understand its humans—the longer it is in your house. And Anki recently enabled Alexa support, too.

AI is currently an overused buzzword in tech, but when it comes to consumer robots, it’s going to be key to the evolution of the category. One of the pioneers of consumer robots, Sony, recently re-introduced its family-focused consumer robot dog Aibo. The first Aibo shipped back in 1999 and shipped through 2006. The relaunched version for the United States costs an eye-watering $2,900 but includes a three-year subscription to Sony’s AI Cloud. Using the cloud, Aibo uploads its day-to-day experiences, and over time it builds a database of these experiences, which leads to each dog having its own unique personality and traits.

What companies such as Anki and Sony are doing is utilizing AI to create robots that move beyond educational or entertaining to something more. They’re working to create highly personalized robots that know and understand their owners, and that can provide some level of real companionship over time. Some will find this endearing, others will find it creepy, but this is clearly the direction today’s consumer robots are headed.

Consumer Interest In Robots
To date, the market has proven there is an appetite for vacuuming robots. Smart robots such as Vector and Aibo haven’t been in market long enough to prove there’s a sustainable category here, yet, but the growth of smart assistants in the home—primarily in the form of smart speakers—seems to indicate that consumers broadly are warming to the idea of voice-enabled devices in the home. As others have noted, it’s not a stretch to assume that a company such as Amazon, which has both a consumer smart assistant in Alexa as well as an existing robot division (it bought Kiva Systems in 2012), will eventually bring to market a consumer robot. The question is, when? Based on my research, the company would be wise not to rush a product into market before consumers are ready.

At IDC we recently surveyed U.S. consumers about their interest in a robot for the home. The results were mixed at best. While more than a quarter of the 1,932 respondents said they were interested in a single-purpose robot, nearly 45% of respondents said they had no interest in buying a robot for the home. Interest in smart-assistant-enabled robots, security robots, and child- and elder-care robots were all in the single digits. We didn’t specifically ask about privacy, but its likely that this is one of the key blockers for many consumer after a tumultuous year where trust around privacy has taken a beating.

We went on to ask respondents who expressed an interest in consumer robots which brands they would like to buy from if they offered a robot in the future. Amazon and Apple topped the list, followed by Google, Samsung, and iRobot. At present, only the last two offer robots.

Obviously, consumer sentiment around robots for the home is far from fully formed. That said, interest is likely to grow as more of these types of products enter the market. This year will be an important one for the category in this regard, and we’re likely to see some very interesting products announced next week. However, it’s still very early days in the consumer robot market. It’s going to take years for the category to grows into a mainstream product segment, but it should be a very interesting ride along the way.

Digging a Little Deeper into Apple Revenue Warning

on January 3, 2019
Reading Time: 5 minutes

What was supposed to be a slow return to work after the holidays, mostly prepping for CES, got much more exciting thanks to a letter to Investors that Apple’s CEO Tim Cook wrote on January 2 warning investors about the performance in the December ’18 quarter.

You can find the full letter here, but in essence, Tim Cook points to weaker iPhone sales in Greater China due to a more fragile economic environment, longer replacement cycles due to more carriers moving away from subsidies, the battery replacement program and higher prices driven by a weak Dollar.

After reading the letter in its entirety and listening to Cook’s NBC interview, there are a few points that I think are worth highlighting.

Greater China

The data shared on Greater China points to a mixed-bag performance for Apple rather than overall doom and gloom. iPhone sales were so weak in Greater China that they negatively impacted overall revenue. Yet the fact that other products and services performed well would indicate that the concern some expressed of a possible Apple boycott on the back of the US sanctions as yet to materialize. Growth in services revenue also suggests that the current user base in China remains engaged in the ecosystem, a behavior that we know drives loyalty.

What is happening is that a weaker economy now impacted by the sanctions is lowering consumer confidence. Many are jumping to the conclusion that Apple’s loss in China is a win for the Android ecosystem players as consumers churn. There is no question that Huawei, OnePlus, Oppo, Vivo, and Xiaomi have grown in China offering an alternative to non-local brands but this has been true for quite some time, and most of their growth has been coming from within the Android ecosystem. While current economic conditions might drive some iPhone owners to look at switching camps looking for cheaper devices, it is more likely they will delay their purchase especially if they do not “need to upgrade.”

We will know more next quarter when buying behavior during Chinese New Year will bring some clarity on whether the slow down Apple is experiencing in iPhone sales will continue and whether other brands will be impacted by the weaker consumer confidence.

Installed Base Outside of Early-Tech

Many industry commentators are blaming the current iPhone performance on Apple’s decision to increase prices of the new iPhone Xs and Xs Max compared to last year’s iPhone X. I think this might be a little too simplistic an explanation of the current environment Apple is facing.

Apple proved with the iPhone X that a high price did not deter consumers. In markets such as the US where most consumers are on installment plans the difference between the iPhone X and the iPhone Xs is a few Dollars a month. What might have played more of a role is that some iPhone X owners might not have seen the need to upgrade to the iPhone Xs especially if they were not on an annual upgrade program or the bigger size of the iPhone Xs Max was not of interest. While this is not changing the fact that replacement sales are impacted it does paint a different story for the future.

Cook’s specific mention of widening the annual upgrade program to more markets, offering installment plans options with more trade-ins and making it easier for people to transfer their data on new devices are all steps that point to wanting to nudge mainstream users to move to newer models. This is where the problem lies — those more pragmatic buyers who are satisfied with the features their current model offers. From Apple’s comments it seems that this is now a larger group than it used to be in previous years and the part that Apple underestimated. This is likely to be an industry-wide problem and Apple’s retail strength will make tackling it much easier than for any other vendors.

Considering other devices sales remained strong this quarter despite availability constraints on Apple Watch, AirPods and MacBook Air, we should also consider that some of the disposable income that in previous years might have been put towards a new iPhone might instead have been diverted towards another Apple product. Not a bad thing for Apple!

I do also wonder if the current iPhone lineup might have played a role in the lower upgrade sales as mainstream consumers are resisting some of the changes such as larger form factors, Face ID and the lack of a headphone jack. This is the first time Apple has a full portfolio of products that are two years old or less. Uncertainty around these new features coupled with the battery replacement program might have pushed potential buyers to keep their older iPhone with a new battery and renewed life. I see these as deferred sales rather than lost sales. When the time comes, it will be interesting to see if these pragmatic buyers will spend more money upgrading to the latest model and seeing it as a multi-year investment or whether they will choose an older product at a reduced price.

Hardware and Services: An Intertwined Opportunity

Don’t be too quick to criticize Apple on the new portfolio and consider how hardware and services are intertwined in Apple’s future. For Apple, it is paramount to drive users to newer models and not just because of the hardware revenue those sales generate. Newer products with the latest features make sure users can engage in new services and use features that increase stickiness to the ecosystem. This engagement is what Apple must continue to foster to be able to benefit long-term from the user base they have built.

It is very telling that at a time when Apple decided to no longer disclose iPhone sale volumes, they also decided to start sharing services gross margins. Apple made it clear they want investors to focus more on the opportunity services offer to the company long term. If you think about this opportunity, there are no other smartphone vendors other than Google that can say their users are generating revenue for them even when they are not buying new products. So, while lower iPhone sales are certainly something to be concerned about Apple continues to show there is an upside in other product categories and services.

Apple vs. Other Smartphone Vendors

This final point is possibly the most important one to keep in mind when we compare Apple to other smartphone vendors. Apple’s revenue while highly dependent on iPhone over the years does not end with the iPhone. While it is true that no other single product has done for Apple as much as the iPhone, the product offering as an aggregate still puts Apple ahead of all other vendors who might be selling higher volumes but have no direct way to monetize from their users once the sale has occurred. The only exception being Xiaomi, but with the caveat that its monetization helps recuperate the initial loss on hardware. All other Android vendors are mostly working to drive value to Google rather than themselves.

Even Samsung, a brand that offers a much broader range of products, even broader than Apple, is still struggling to benefit from the user base to drive not just services revenue but also cross-device stickiness.

Apple’s strong reliance on iPhone revenue makes it hard to not see Apple as a smartphone vendor but measuring its future opportunity only on iPhone sales is shortsighted.

Top Tech Predictions for 2019

on January 2, 2019
Reading Time: 10 minutes

Though it’s a year shy of the big decade marker, 2019 looks to be one of the most exciting and most important years for the tech industry in some time. Thanks to the upcoming launch of some critical new technologies, including 5G and foldable displays, as well as critical enhancements in on-device AI, personal robotics, and other exciting areas, there’s a palpable sense of expectation for the new year that we haven’t felt for a while.

Plus, 2018 ended up being a pretty tough year for several big tech companies, so there are also a lot of folks who want to shake the old year off and dive headfirst into an exciting future. With that spirit in mind, here’s my take on some of what I expect to be the biggest trends and most important developments in 2019.

Prediction 1: Foldable Phones Will Outsell 5G Phones
At this point, everyone knows that 2019 will see the “official” debut of two very exciting technological developments in the mobile world: foldable displays and smartphones equipped with 5G modems. Several vendors and carriers have already announced these devices, so now it’s just a question of when and how many.
Not everyone realizes, however, that the two technologies won’t necessarily come hand-in-hand this year: we will see 5G-enabled phones and we will see smartphones with foldable displays. As of yet, it’s not clear that we’ll see devices that incorporate both capabilities in calendar year 2019. Eventually, of course, we will, but the challenges in bringing each of these cutting-edge technologies to the mass market suggest that some devices will include one or the other. (To be clear, however, the vast majority of smartphones sold in 2019 will have neither an integrated 5G modem nor a foldable display—high prices for both technologies will limit their impact this year.)

In the near-term, I’m predicting that foldable display-based phones will be the winner over 5G-equipped phones, because the impact that these bendable screens will have on device usability and form factor are so compelling that I believe consumers will be willing to forgo the potential 5G speed boost. Plus, given concerns about pricing for 5G data plans, limited initial 5G coverage, and the confusing (and, frankly, misleading) claims being made by some US carriers about their “versions” of 5G, I believe consumers will limit their adoption of 5G until more of these issues become clear. Foldable phones on the other hand—while likely to be expensive—will offer a very clear value benefit that I believe consumers will find even more compelling.

Prediction 2: Game Streaming Services Go Mainstream
In a year when there’s going to be a great deal of attention placed on new entrants to the video streaming market (Apple, Disney, Time Warner, etc.), the surprise breakout winner in cloud-based entertainment in 2019 could actually be game streaming services, such as Microsoft’s Project xCloud (based on its Xbox gaming platform) and other possible entrants. The idea with game streaming is to enable people to play top-tier games across a wide range of both older and newer PCs, smartphones, and other devices. Given the tremendous growth in PC and mobile gaming, along with the rise in popularity of eSports, the consumer market is primed for a service (or two) that would allow gamers to play popular high-quality gaming titles across a wide range of different device types and platforms.

Of course, game streaming isn’t a new concept, and there have been several failed attempts in the past. The challenge is delivering a timely, engaging experience in the often-unpredictable world of cloud-driven connectivity. It’s an extraordinarily difficult technical task that requires lag-free responsiveness and high-quality visuals packaged together in an easy-to-use service that consumers would be willing to pay for.

Thankfully, a number of important technological advancements are coming together to make this now possible, including improvements in overall connectivity via WiFi (such as with WiFi6) and wide area cellular networks (and 5G should improve things even more). In addition, there’s been widespread adoption and optimization of GPUs in cloud-based servers. Most importantly, however, are software advancements that can enable technologies like split or collaborative rendering (where some work is done on the cloud and some on the local device), as well as AI-based predictions of actions that need to be taken or content that needs to be preloaded. Collectively, these and other related technologies seem poised to enable a compelling set of gaming services that could drive impressive levels of revenue for the companies that can successfully deploy them.

It’s also important to add that although strong growth in game streaming services that are less hardware dependent may imply a negative impact on gaming-specific PCs, GPUs and other game-focused hardware (because people would be able to use older, less powerful devices to run modern games); in fact, the opposite is likely to be true. Game streaming services will likely expose an even wider audience to the most compelling games and that, in turn, will likely inspire more people to purchase gaming-optimized PCs, smartphones, and other devices. The gaming service will give them the opportunity to play (or continue playing) those games in situations or locations where they don’t have access to their primary gaming devices.

Prediction 3: Multi-Cloud Becomes the Standard in Enterprise Computing
The early days of cloud computing in the enterprise featured prediction after prediction of a winner between public cloud vs. private cloud and even of specific cloud platforms within those environments. As we enter 2019, it’s becoming abundantly clear that all those arguments were wrong headed and that, in fact, everyone won and everyone lost at the same time. After all, which of those early prognosticators would have ever guessed that in 2018, Amazon would offer a version of Amazon Web Services (called AWS Outpost) that a company could run on Amazon-branded hardware in the company’s own data center/private cloud?

It turns out that, as with many modern technology developments, there’s no single cloud computing solution that works for everybody. Public, private, and hybrid combinations all have their place, and within each of those groups, different platform options all have a role. Yes, Amazon currently leads overall cloud computing, but depending on the type of workload or other requirements, Microsoft’s Azure, Google’s GCP (Google Cloud Platform), or IBM, Oracle, or SAP cloud offerings might all make sense.

The real winner is the cloud computing model, regardless of where or by whom it’s being hosted. Not only has cloud computing changed expectations about performance, reliability, and security, the DevOps software development environment it inspired and the container-focused application architecture it enabled have radically reshaped how software is written, updated, and deployed. That’s why you see companies shifting their focus away from the public infrastructure-based aspects of cloud computing and towards the flexible software environments it enables. This, in turn, is why companies have recognized that leveraging multiple cloud types and cloud vendors isn’t a weakness or disjointed strategy, but actually a strength that can be leveraged for future endeavors. With cloud platform vendors expected to work towards more interoperability (and transportability) of workloads across different platforms in 2019, it’s very clear that the multi-cloud world is here to stay.

Prediction 4: On-Device AI Will Start to Shift the Conversation About Data Privacy
One of the least understood aspects of using tech-based devices, mobile applications, and other cloud-based services is how much of our private, personal data is being shared in the process—often without our even knowing it. Over the past year, however, we’ve all started to become painfully aware of how big (and far-reaching) the problem of data privacy is. As a result, there’s been an enormous spotlight placed on data handling practices employed by tech companies.

At the same time, expectations about technology’s ability to personalize these apps and services to meet our specific interests, location, and context have also continued to grow. People want and expect technology to be “smarter” about them, because it makes the process of using these devices and services faster, more efficient, and more compelling.

The dilemma, of course, is that to enable this customization requires the use of and access to some level of personal data, usage patterns, etc. Up until now, that has typically meant that most any action you take or information you share has been uploaded to some type of cloud-based service, compiled and compared to data from other people, and then used to generate some kind of response that’s sent back down to you. In theory, this gives you the kind of customized and personalized experience you want, but at the cost of your data being shared with a whole host of different companies.

Starting in 2019, more of the data analysis work could start being done directly on devices, without the need to share all of it externally, thanks to the AI-based software and hardware capabilities becoming available on our personal devices. Specifically, the idea of doing on-device AI inferencing (and even some basic on-device training) is now becoming a practical reality thanks to work by semiconductor-related companies like Qualcomm, Arm, Intel, Apple, and many others.

What this means is that—if app and cloud service providers enable it (and that’s a big if)—you could start getting the same level of customization and personalization you’ve become accustomed to, but without having to share your data with the cloud. Of course, it isn’t likely that everyone on the web is going to start doing this all at once (if they do it at all), so inevitably some of your data will still be shared. However, if some of the biggest software and cloud service providers (think Facebook, Google, Twitter, Yelp, etc.) started to enable this, it could start to meaningfully address the legitimate data privacy concerns that have been raised over the last year or so.

Apple, to its credit, started talking about this concept several years back (remember differential privacy?) and already stores things like facial recognition scans and other personally identifiable information only on individuals’ devices. Over the next year, I expect to see many more hardware and component makers take this to the next level by talking not just about their on-device data security features, but also about how onboard AI can enhance privacy. Let’s hope that more software and cloud-service providers enable it as well.

Prediction 5: Tech Industry Regulation in the US Becomes Real
Regardless of whether major social media firms and tech companies enable these onboard AI capabilities or not, it’s clear to me that we’ve reached a point in the US social consciousness that tech companies managing all this personal data need to be regulated. While I’ll be the first to admit that the slow-moving government regulatory process is ill-matched to the rapidly evolving tech industry, that’s still not an excuse for not doing anything. As a result, in 2019, I believe the first government regulations of the tech industry will be put into place, specifically around data privacy and disclosure rules.

It’s clear from the backlash that companies like Facebook have been receiving that many consumers are very concerned with how much data has been collected not only about their online activities, but their location, and many other very specific (and very private) aspects of their lives. Despite the companies’ claims that we gave over most all of this information willingly (thanks to the confusingly worded and never read license agreements), common sense tells us that the vast majority of us did not understand or know how the data was being analyzed and used. Legislators from both parties recognize these concerns, and despite the highly polarized political climate, are likely going to easily agree to some kind of limitations on the type of data that’s collected, how it’s analyzed, and how it’s ultimately used.

Whether the US builds on Europe’s GDPR regulations, the privacy laws instated in California last year, or something entirely different remains to be seen, but now that the value and potential impact of personal data has been made clear, there’s no doubt we will see laws that control the valued commodity that it is.

Prediction 6: Personal Robotics Will Become an Important New Category
The idea of a “sociable” robot—one that people can have relatively natural interactions with—has been the lore of science fiction for decades. From Lost in Space to Star Wars to WallE and beyond, interactive robotic machines have been the stuff of our creative imagination for some time. In 2019, however, I believe we will start to see more practical implementations of personal robotics devices from a number of major tech vendors.

Amazon, for example, is widely rumored to be working on some type of personal assistant-based robot leveraging their Alexa voice-based digital assistant technology. Exactly what form and what sort of capabilities the device might take are unclear, but some type of mobile (as in, able to move, not small and lightweight!) visual smart display that also offers mechanical capabilities (lifting, carrying, sweeping, etc.) might make sense.

While a number of companies have tried and failed to bring personal robotics to the mainstream in the recent past, I believe a number of technologies and concepts are coming together to make the potential more viable this year. First, from a purely mechanical perspective, the scarily realistic capabilities now exhibited by companies like Boston Dynamics show how far the movement, motion, and environmental awareness capabilities have advanced in the robotics world. In addition, the increasingly conversational and empathetic AI capabilities now being brought to voice-based digital assistants, such as Alexa and Google Assistant, demonstrate how our exchanges with machines are becoming more natural. Finally, the appeal of products like Sony’s updated Aibo robotic dog also highlight the willingness that people are starting to show towards interacting with machines in new ways.

In addition, robotics-focused hardware and software development platforms, like Nvidia’s latest Jetson AGX Xavier board and Isaac software development kit, key advances in computer vision, as well as the growing ecosystem around the open source ROS (Robot Operating System) all underscore the growing body of work being done to enable both commercial and consumer applications of robots in 2019.

Prediction 7: Cloud-Based Services Will Make Operating Systems Irrelevant
People have been incorrectly predicting the death of operating systems and unique platforms for years (including me back in December of 2015), but this time it’s really (probably!) going to happen. All kidding aside, it’s becoming increasingly clear as we enter 2019 that cloud-based services are rendering the value of proprietary platforms much less relevant for our day-to-day use. Sure, the initial interface of a device and the means for getting access to applications and data are dependent on the unique vagaries of each tech vendor’s platform, but the real work (or real play) of what we do on our devices is becoming increasingly separated from the artificial world of operating system user interfaces.

In both the commercial and consumer realms, it’s now much easier to get access to what it is we want to do, regardless of the underlying platform. On the commercial side, the increasing power of desktop and application virtualization tools from the likes of Citrix and VMWare, as well as moves like Microsoft’s delivering Windows desktops from the cloud all demonstrate how much simpler it is to run critical business applications on virtually any device. Plus, the growth of private (on-premise), hybrid, and public cloud environments is driving the creation of platform-independent applications that rely on nothing more than a browser to function. Toss in Microsoft’s decision to leverage the open-source Chromium browser rendering engine for its next version of its Edge browser, and it’s clear we’re rapidly moving to a world in which the cloud finally and truly is the platform.

On the consumer side, the rapid growth of platform-independent streaming services is also promoting the disappearance (or at least sublimation) of proprietary operating systems. From Netflix to Spotify to even the game streaming services mentioned in Prediction 2, successful cloud-based services are building most all of their capabilities and intelligence into the cloud and relying less and less on OS-specific apps. In fact, it will be very interesting to see how open and platform agnostic Apple makes its new video streaming service. If they make it too focused on Apple OS-based device users only, they risk having a very small impact (even with their large and well-heeled installed base), particularly given the strength of the competition.

Crossover work and consumer products like Office 365 are also shedding any meaningful ties to specific operating systems and instead are focused on delivering a consistent experience across different operating systems, screen sizes, and device types.

The concept of abstraction goes well beyond the OS level. New software being developed to leverage the wide range of different AI-specific accelerators from vendors like Qualcomm, Intel, and Arm (AI cores in their case) is being written at a high-enough level to allow them to work across a very heterogeneous computing environment. While this might have a modest impact on full performance potential, the flexibility and broad support that this approach enables is well worth it. In fact, it’s generally true that the more heterogeneous the computing environment grows, the less important operating systems and proprietary platforms become. In 2019, it’s going to be a very heterogenous computing world, hence my belief that the time for this prediction has finally come.

Podcast: 2018 Year in Review

on December 22, 2018
Reading Time: 1 minute

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell analyzing the big news developments impacting the tech industry this year, including social media and data privacy concerns, price hits to the previously soaring FAANG stocks, developments in assisted and autonomous cars, challenges to AR and VR products, changes in the smartphone and PC businesses, the reinvigoration of the semiconductor market, and the impact of artificial intelligence.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is:

News You Might Have Missed, Week of December 21st, 2018

on December 21, 2018
Reading Time: 4 minutes

London Gatwick Airport Shuts Down Due to Drone Activity

On Thursday the runway at Gatwick airport remained closed until 3 a.m. and then was shut down again 45 minutes later after “a further sighting of drones.” It was still closed as of Thursday evening, and police are hunting for the drones’ operator.