Unpacked for Friday October 21st, 2016

Apple’s Eddy Cue says TV needs to be reinvented – by Carolina Milanesi

At a Vanity Fair conference in San Francisco this week, Apple’s content guy, Eddy Cue, repeated something his CEO Tim Cook has said before: TV needs to be reinvented. What was interesting is he specifically referred to the difficulties of navigating and finding content.

As reported by Macrumors, Cue said television needs to be reinvented because of confusing, hard to navigate interfaces. “You live with a glorified VCR,” he said. “You’re still setting things to record. There are 900 channels, but there’s nothing to watch.” He went on to say there’s incredible stuff to watch but the interface makes it impossible to find content. “The problem is the interface,” he said. “The ways you interface with it are pretty brain dead.”

This seems to be very much in line with the rumors we have been hearing over the last few months that referred to Apple’s intention to focus on a content guide rather than on a TV set. The current version of the Apple TV has already started to show the potential with the focus on apps, Siri universal content search and single sign on. While many think this is a plan B for Apple, given the inability to close content deals, I believe it is not a bad plan at all. Focusing on the content guide part allows Apple to do several things.

It would strengthen our reliance on Siri to look for content, something we can already do today with the latest Apple TV. It would give more visibility to Apple as to our viewing habits, helping Siri to get smarter in making recommendation on content as well as search. As users get to their content through the Apple guide but not necessarily pay Apple for the content, they will see Apple as an enabler strengthening their ties. As we know, users are loyal to content, not TV stations or service providers, which means Apple will be helping disenfranchise content providers even further. Lastly, it might help with original content production.

Cue also said Apple is very much interested in original content and they would have made Game of Thrones if they had had the opportunity to do so. As we know, Apple is planning a series on apps as well as “Carpool Karaoke”. He also added Apple is looking to be a platform for their own content but for competitors’ as well as the focus remains to deliver on the experience of bringing the content to users with the least friction and the best user experience. Sadly, however, this does not necessarily mean all competitors will play nice as we have seen this week with Spotify said to be de-prioritizing developing an app for Apple’s tvOS. It is clear Apple needs to grow the current base of Apple TV owners if it wants to appeal to more content providers an,d in order to do that, they might need to think about a different hardware approach, either by lowering price or maintaining price but adding functionality. Right now, Apple TV is for hardcore Apple buyers which represent roughly 20% of the Apple installed base. While this is not a small number, it might just be that content owners are looking for more so they can make up for the revenue that would go to Apple for using their store.

Nintendo Reveals the Switch – by Ben Bajarin

Today, Nintendo revealed their newest member of the Nintendo game console family called the Nintendo Switch. The product combines a range of ideas that have been tried before but elegantly put together in one device.

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As you can see, it looks like a tablet with standard game controller buttons on the side. The game unit is both mobile, to played on the go in this form, but can also be the heart and mind of a game console that plugs into a TV for a bigger screen and multiplayer experience. The Switch is both a TV gaming console system and a portable gaming console system in one package.

Interestingly, the company which has experimented with solutions like this is NVIDIA with their Shield gaming tablet, gaming handheld, and gaming set-top box; Which is why it wasn’t surprising to learn that a custom version of NVIDIA’s mobile Tegra processor is what is powering the Nintendo Switch.

Honestly, I’m extremely skeptical of this approach. This type of solution, which tries to be a hybrid TV gaming console and mobile console, runs the risk of not being good at either. Now, the caveat for Nintendo is they don’t have the most graphically intense games and, to be honest, their biggest asset is their proprietary game titles like Zelda, Super Mario Brothers, Pokemon, Donkey Kong, etc. The fact these extremely popular brands will run only on this system is what may help it succeed but even then, I question if this is the right approach.

I’m not convinced Nintendo’s customers want another mobile screen. In fact, I’d argue Nintendo would have been better off focusing their software on iOS and making custom gaming controllers for iPad and iPhone. Take, for example, this approach that Apple shows off in many of their Apple stores.

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This is not that dissimilar of an approach to the Nintendo Switch. Yes, Nintendo would have more control over the entire experience if they control all the hardware and thus, design a better experience but I wonder if the world is heading in the direction of us using the phones and tablets we have with us to play games vs. buying another portable screen.

While I fully understand why Nintendo wants to control the entire hardware and software experience, I do feel they are leaving money on the table by not focusing their first party software strategy more on iOS and Android than their own mobile hardware platform.

Verizon Reports Results and Sheds Light on iPhone and Note7 in the Process – by Jan Dawson

Verizon reported its results for the third quarter on Thursday morning. It’s the first of the four major US wireless carriers to report, though both T-Mobile and Sprint have provided some preliminary numbers and, among those three, it saw the worst performance in terms of the traditional postpaid phone business — it lost subscribers while the other two made solid gains. However, it did better in prepaid and overall, though there are some ongoing worries about the FiOS TV business. Verizon said soft demand for linear TV was one of the challenges it faces.

However, the company also shed some light on both the iPhone 7 and Note7 in its remarks. Executives said the Note7 recall had impacted upgrade rates, which were up in Q2 but down year on year again. In general, device sales were slow for much of the quarter but picked up right at the end thanks to the iPhone 7 launch. However, the “backlog” in meeting demand, especially from upgraders, also impacted the overall upgrade rate among the base. Verizon is expecting supply to eventually meet demand sometime this quarter but wasn’t sure at what point.

More broadly, it’s looking like the iPhone 7 will drive a healthier upgrade cycle this quarter for the wireless carriers than we’ve seen in quite some time, after several quarters of falling upgrade rates across the board. Though we’ll only see a minor impact in the Q3 numbers reported over the coming week or so, we should see a much stronger impact in Q4, when the vast majority of this year’s upgrades to the iPhone 7 will happen. It’ll certainly be worth listening to the other carriers’ earnings calls for any commentary about how sales are going so far this quarter.

More broadly, Verizon continues to face several headwinds at once – it has reduced its landline footprint significantly in recent years and has also dramatically slowed the rollout of its FiOS services, both of which are limiting its upside in both broadband and TV services. Meanwhile, it’s investing more heavily in alternative video services, with both skinny bundles through FiOS and its Go90 over the top service. The latter has some impressive viewing figures on a per user basis – 30 minutes per day – but Verizon still hasn’t provided any actual user numbers, which leaves us without much context for the usage figures.

On the wireless side, we’re seeing the ongoing impact of intensifying competition as both T-Mobile and Sprint compete more aggressively for a fairly static base of customers with pricing and promotions designed to lure customers from the competition. Verizon lost postpaid phone subscribers in a third quarter for the first time ever, likely as a result of both increased direct targeting from Sprint (which lured away Verizon’s old “can you hear me now?” pitchman), and more general competition from T-Mobile and AT&T. Verizon is the only carrier that continues to refuse to offer unlimited data plans to new customers under any circumstances and it will be interesting to watch whether it can hold out indefinitely on that point.

Tesla Hardware Upgrade to Enable More Autonomous Cars – By Bob O’Donnell

Tesla Motors unveiled a next-generation set of sensor hardware and compute engine for its line of electric cars and announced that, going forward, all of its cars will be enabled for fully autonomous driving with future over-the-air software updates. Of course, exactly what’s meant by “fully autonomous driving” remains to be seen, but it is, nevertheless, an important step for the company.

One of the big winners in the announcement is NVIDIA, whose DrivePX 2 platform was selected to sit at the computing heart of this new technology upgrade. The DrivePX 2, which was unveiled at this year’s CES, features NVIDIA’s Tegra CPU and Pascal GPU engines and is targeted exactly at the kinds of semi-autonomous and fully autonomous driving applications Tesla promises will be enabled over the new several years.

In addition to the DrivePX 2, the upgraded Tesla solution features eight new 360° cameras, 12 ultrasonic radars and one forward-facing radar versus one forward-facing camera and a lesser number of lower-resolution radar sensors. According to the company, these additional and upgraded sensors are essential in enabling the additional levels of autonomous control they plan to offer.

In a strange and controversial move, Tesla CEO Elon Musk chided people not to write negative articles about the potential concerns around the semi-autonomous capabilities this new upgrade will enable (something I did several months ago in a piece for USAToday: “Is semi-autonomous driving really viable?”). In fact, he actually said doing so essentially amounts to “killing people” because it could somehow delay the expected safety benefits autonomous cars are expected to bring.

While I’m certainly positive about the potential for saving lives and improving overall automobile safety, attempting to shut down debate on a discussion-worthy topic seems dangerous itself—particularly in a democratic society with a free press.

Despite this problematic stance, it is good to see Tesla continuing to press forward with its ambitious plans for improving autonomy and safety in cars. There’s no question that, without their aggressive efforts, the rest of the auto industry would be moving at a slower pace.

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Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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