Chart: Internet Access by Device

As our readers know, every now and then I like to post a chart and tease out the highlights. Today, I want to do that with some updated data. Across many global markets, consumers were asked which devices they have accessed the Internet on, either through an app or browser, over the past 30 days. This data is updated frequently so we can track the growth of internet access by device over time.

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Mobile/Smartphones: This is be obvious and we can expect continued growth in internet access by smartphones for the foreseeable future.

Tablets:¬†Tablets remain the other growth area. Given the slowdown of tablet growth overall, we can make a few observations. The first is the tablet is continuing to steal internet time from other devices, mainly the PC. The second is the tablet market is actually growing. However, it is doing so by the secondary market. Meaning that many of those initial rush of iPad buyers are continuing to hand down older iPads to other family members as they upgrade their iPad. Since this upgrade isn’t happening all at once but is trickling in over time, we see slower sales but larger use of tablets. Another is the continued explosive growth we see of Chinese white box tablets. In certain markets like Russia, India, Mexico, Brazil, and to some degree China, these low cost, no name brand tablets are quite popular. Most are dedicated game players or portable TVs, but internet access at some level should also be assumed. This is happening to a degree in the US as IDC highlighted RCA being in the top 5 of tablet vendors for Q3 2014.

As I see this data on tablets and see quarter after quarter of more people say they are getting on the internet with a tablet than the quarter before, it shows us the category is still viable and still growing.

PC/Work PC: I like that these two categories are separated in the survey. It helps us get an understanding of how much larger the consumer PC segment is vs. those who use a PC at work. When you look at both numbers, it is possible to interpret their lines and believe the PC market is simply not growing. This certainly looks to be the case. We are not adding brand new PC users at anywhere near the rate we once were. Also, as I alluded above, more PC users’ internet use is likely shifting to other devices.

I point this out in many of my focused PC industry analysis reports through my firm Creative Strategies. What we discover when we study PC behavior in both consumer and enterprise environments is the device is becoming a much more focused product than a general purpose one. People use it for specific tasks and have now defined what tasks it is better for vs. others. A great example of this is Facebook. In our studies, we found over 75% of daily US Facebook users access Facebook on their phone but while sitting at their work PC. Facebook has a browser based version so why not just use it? We find people simply prefer the mobile version, so we see this dual use of a PC and smartphone at the same time. Responses we’ve heard were that it was faster, more private, more convenient, and they could use the mobile¬†app to get a particular task done, even though they could have done the same thing on the PC. If general purpose computing moves from the PC to devices like the tablet and even more so to the smartphone, it will bring dramatic implications to the PC ecosystem.

Television: Increasingly, more people are accessing the internet from their TV. It is important to note in this data that a game console or set top box is included. This is not referring to a dedicated connected internet TV, but to the use case of connecting to the internet in some way from your TV. Clearly Netflix, online console gaming, and other use cases drive this, but the fact it is slowly increasing tell us quite a bit about the role the TV will play going forward and the internet services are poised to be monetized from the big screen.

Given this survey comes from over 30,000 responses, what the lines also show approximates volumes. The higher the percentage of the line, the more people using the device to access the internet. Like most surveys, it does not include mobile only consumers, but we can be assured there are more people accessing the internet from a mobile device than a PC, even though these lines don’t show that. What this chart sheds light on is what the internet by device landscape looks like in the multi-screen user world. The “internet embedded into everything” is the theme. What devices dominate its usage is the interesting part to watch going forward.

TV and Killer Apps

The Financial Times recently released a special report titled “Digital and Social Media Marketing.” The folks at Social Commerce summarized the lengthy release and drew out several bullet points I find especially interesting regarding the state of television:

  1. The average American still spends about five hours a day glued to TV; the smart money in digital is being invested in making TV advertising better
  2. TV is not dead, it is just evolving into a two screen experience, the TV display and a tablet or smartphone. “Lean-back” TV experiences, passively consumed from the comfort of the couch, are giving way to “lean-in” TV experiences, where viewers multitask viewing and interacting on smartphones and tablets
  3. A survey by Time Warner’s Medialab found that 65 per cent habitually multitask with a digital device while watching TV. Much of this activity is in social media discussions of TV shows (tripled in the last 12 months), stimulated by TV networks to sell TV advertising space by showing their content is more engaging
  4. This report only confirms what I had previously suspected: multitasking is now widespread. I used to think only younger demographics multitasked but it seems that these days people of all ages use tablets or smartphones while doing other tasks. It’s done by business execs but also by those in the home. People use their smartphones or tablets while talking on the phone and while watching TV.

    Since the late 1990s I have used a laptop while sitting in front of the TV. I now often use a tablet, but until the devices came out, I was the only one in my house who took advantage of a second screen. Now my wife and the grandkids play games or surf the Web on their tablets while watching TV. In a sense this qualifies as part of the two-screen living room experience but I believe this model has enormous potential when the device is intrinsically tied to TV viewing itself.

    There are currently a lot of apps designed to enhance the TV viewing experience. I have Comcast’s XFINITY TV app, which lets me record programs remotely; the IMDB app, which gives me info on movies, TV shows, actors, and entertainers; the TV Guide app; and more. All better my TV experience but I believe that this is only the tip of the iceberg when it comes to the future of two screens in the living room.

    When the Apple II came out in 1978, Visicalc, the first PC spreadsheet, was developed for it. It became the killer app that moved the machine from hobbyist stature to the business world and it quickly became a tool that even large businesses started using to manage their financial forecasting. When the IBM PC came out, a product called Lotus 1-2-3 became its killer app that caused the IBM to take off like wildfire in a short time. The key for both of these products’ growth was what the industry calls an SDK, or a software developer kit, which provides tools for developers to write applications for the machines. In fact, tens of thousands of apps fueled the growth of the IBM PC and PC clones as well as the Mac and to this day remain an important part of their software ecosystems.

    Various companies have been creating smart TVs, Web browsers, and their own apps but what is missing is a dedicated SDK that can work on one or multiple PC platforms and encourage the development of apps for the TV. More importantly, this SDK focus should be more on the tablet or the smartphone and how they connect to the TV to deliver a richer viewing experience. I think we will soon see a model in which the TV is just a smart screen with apps designed to work with it via tablet, smartphones, and perhaps PCs or laptops.
    There has been a lot of talk about an Apple TV and I actually have a bet with my son on this. I think it will make a physical TV as well as a new souped up set-top box that gives all digital TVs access to its program. My son, on the other hand, believes the real magic will be with the SDK and a new Apple TV box. He says it doesn’t make sense for Apple to make an actual TV at this time. However, we both believe that the Apple TV focus will be on the iPhone and iPad; the TV will be more of a screen that is tied to and interacts with an ecosystem. It could ultimately change the way we view television and, in true Apple fashion, redefine the second-screen concept.

    Just look at what Google is doing with Google TV. It too has a similar model in mind. Android TV apps are already popping up but the platform needs a dedicated SDK that just focuses on the TV to give developers the ability to create products that make the two-screen experience fly. Microsoft is also trying to drive a two-screen experience, albeit through the Xbox at the moment. I expect the company to flesh this out further in the near future.

    It will be very interesting to watch what happens in the coming months with this two-screen concept. Google, Apple, and Microsoft all have their big software developers’ conferences within weeks (and miles) of each other. (Google I/O begins on May 15, Apple’s WWDC on June 10, and Microsoft’s Build 2013 conference on June 26.) They will all likely announce big news around their new operating systems and development tools for their core products, but I also expect that they will make clear their plans for a future TV.
    The connection between smart TVs and mobile devices is still in infancy. This could be the year however, when these mobile devices take on a more interactive role within the TV viewing experience. By July we may finally get a real glimpse of what the two-screen TV future will actually look like.

Thinking About The Future of TV All Wrong

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I’m convinced that most of the commentary from the pundits and speculators around Apple TV and the future of TV in general is all wrong. There are some bits that I think have merit. Thinking about channels as apps for example is on the right path. Letting networks and brands have more control of their viewers is also on the right path. Thinking through how we will interact in active vs. passive ways with our contnet is also on the right path. But at a fundamental level there is something not being emphasized enough in this whole discussion of the future of TV.

TV is a Communal Experience

Right now, for most people, the TV is a communal experience more than it is a personal one. For example most people’s TV screen is in a communal place. It was designed from the beginning to be something that people gathered around and enjoyed together. This is not going to change. By nature of the size of the screen and its location, if more than one person lives in a house, the large TV monitor is a shared experience.

Most of the commentary I read around the future of TV brings with it a bias of an extremely personal revolution rather than a communal one. I get the sense as I read much of the ideas put forth around the future of television that many assume that the TV screen and the entire broadcast experience itself will become more personal. Now, while I think the TV experience will become more personal, I don’t think it is the large TV screen where the revolution will take place.

The large television set is a communal computer not a personal one. Therefore, its evolution will happen within the communal context.

Second, Third, and Fourth Screens

Using a smartphone, tablet, or traditional PC while watching TV is now common place among owners of such screens. These devices have something in common which the TV does not. These screens are highly personal. They are owned and customized and are portals to a very personal computing paradigm. So it is on these screens that I am expecting the coming TV revolution.

As we gather around the TV, it is the most personal screens which we have customized, where it makes the most sense to bring the personalized experience with broadcast content.

Nearly every major network studio has an iPad app. Some have Android apps but not all of them. Not only do the networks have apps but now many individual TV show brands are also beginning to have an app. One only has to look at the Colbert Report app for a shining example of the possibilities when TV shows themselves start creating software.

A Hybrid Entertainment Experience

The key to thinking about the future of TV is to understand that the TV set itself will remain a communal and shared screen. But our personal devices, like tablets and smartphones, will increasingly become the avenues by which what we watch on the big screen becomes personal and even intimate. Of course both these screens will still function as independent entertainment experiences, but the real revolution will come when you use them together.

The real shift is that content companies (like the big networks) will also need to become software companies. It is my belief that the televsion is the laggard in the computing paradigm. It is the screen that is yet to truly be a platform which software developers can take advantage of. When this happens the TV revolution will begin and take us on a path no one yet envisions.

Why Content is the Biggest Roadblock for Apple TV

It appears as though the “Apple is making a TV” discussion is coming back around. Probably because of rumor reports that “sources in the know” are talking about a brand new product category.

Apple has a hobby business in a product called Apple TV. At some point in time this hobby will become a business, the question is when. The other question is will it be in the form of a full blown television? Will it simply be a set top box? Or perhaps will the iMac become a 40′ or larger monitor /TV?

These are all interesting questions and I can see good arguments for and against all of them. However the real issue as I see it is the content industry.

Problem #1 Hollywood
What many people don’t know is that Hollywood is nearly impossible to deal with. Unlike the record labels whose business is more distrubution, the movie studios and TV networks prefer controlled distrubution. Both the TV studios and the movie studios carefully control when, where and how their content is distrubuted.

They have exceptionally strong legal rights to their content and because of that they are in the driver seat. Take for example Starz, HBO and Showtime.

If you have ever wondered why there is no digital “subscription” service for first release titles of movies it is because Starz, HBO and Showtime own the rights to first run movies as a subscription service. This is why as a part of their subscription services comapnies like Netflix, Apple, Amazon etc can not offer a digital download or streaming subscription service which includes new releases on DVD.

This is why the only options to date to get a first release on DVD digitally is to buy it or rent it.

For any company to offer a subscription service to download or stream new release movies they would have to get HBO, Starz and Showtime on board, not to mention the studios, who I think have more lawyers than employees.

This is why in 2006 Starz tried to launch their attempt at a movie subscription service. The challenge with Vongo was that it didn’t have movies newer than 6-8 months depending on the studio.

The primary reason for this is because the studios want people to go buy DVD’s not subscribe to a service for the cost of a DVD that allows them to stream it as many times as they want. Because of that only the premium pay-per-view model is available for a movie in digital form until it has been on DVD for at least 6-8 months. So all though Starz, HBO and Showtime on the rights to a subscription movie service they studios don’t give them those movies until 6-8 month’s after it has come out on DVD.

Historically Blockbuster and now Netflix and Redbox get away with offering a subscription service for physical DVD’s because of copyright laws. Legally anyone can pay full price for a DVD and sell or rent that DVD at whatever price they can fetch. Unfortunaly digital copyright laws work differently.

Hollywood tighlty controls their first tier window of physical and digital DVD distribution and I don’t see that changing anytime soon. The fact of the matter is the purchasing of DVD’s is what they want people to do and they will protect that business to all ends.

To make a long story short, it would take a miracle for us to see a subscription service to stream new release DVD’s.

Problem #2 Comcast, Dish, DirecTV and others
What about a service to subscribe to network TV shows? We do this already since we pay a fee do Comcast, Dish, Time Warner, DirecTV or someone else. So it would seem logical to assume someone can offer something similar through the Internet.

The only problem is those above service providers pay hundred’s of millions of dollars for the rights to offer that content as a subscription service. The reason we get 100’s of channels for a fee each month is because hundreds of millions of dollars were spent to reserve the right to distrubute that content.

Put yourselves in the shoes of ABC, NBC, CBS etc. They get massive amounts of money up front for their programming. Do you think they are going to jeapordize that by letting people stream or access their content for free or cheap?

Although some networks today allow next day viewing for free with mandatory ads I am betting that at some point in time that model changes as well. What’s more is that even though supporting free streaming by ads is a business model, it comes no where close to hundreds of millions of dollars up front.

Hulu is in fact already experimenting with only allowing people to watch a show online the next morning if a fee is paid then anyone can watch it after seven days with ads.

I would expect in the near future if you want to stream a show for free online you will need to wait at least a week after it has first run. This will instantly kill any chance at the water cooler affect of a show and most likely discourage online streaming all together.

If you add up all the business model issues facing any company who hopes to offer or disrupt the current TV ecosystem it amounts to a monumental challenge.

The bottom line is the biggest hurdle for Apple to make Apple TV a business is not a technical one, it is a legal one.

I completely agree that the televion will someday become the next big platform to deliver rich content and services to and that it NEEDS to be disrupted in a major way.

But to quote a friend of mine who is a Hollywood lawyer:

“Two things drive Hollywood – fear and greed.”

I’m not optimistic that either of those forces will work in the technology industries favor.