Unpacking This Weeks News – Friday, Dec 2, 2016

Netflix Adds the Ability to Download Select Videos – by Jan Dawson

Netflix announced this week that users would now be able to download some of the videos available through the service on to their phones or tablets. Amazon already has a similar feature (with similar limitations), while YouTube’s Red subscription services offers a download option, though the free version of YouTube does not.

While I’ve seen several headlines suggesting that Netflix’s download feature applies mostly to the company’s original content, this doesn’t seem to be the case from what I’ve seen while browsing through the app. Big name movies such as Kung Fu Panda 3, Good Will Hunting, Cinderella Man and others are all there, as are many popular TV series. That’s not to say all content will be available but this definitely goes further than just Netflix Originals.

This feature now extends the scenarios in which Netflix can be reasonably used into several new ones, including flights and subway rides, and reduces the bandwidth required for watching when on the go, even when cellular signals might be available. One of the biggest limitations of Netflix until now has been it is effectively useless when there’s no connectivity available, or when the connectivity is restricted, as with airplane WiFi. This now removes those limitations for at least some content and makes the service even more attractive.

While much of the focus at Netflix has been on geographic expansion and investment in original content, this kind of investment in features and functionality is important too. The company is already at the forefront of investment in 4K content and this offline viewing will be another useful feature. These incremental improvements in the value of the service will be particularly important in its most mature markets, especially in the US, where it risks reaching a saturation point unless it is able to make the service appealing to new customers.

All of this also further erodes the value of traditional electronic sell-through (EST) and rental services such as iTunes, one of whose main differentiators in the age of subscription content has been the ability to download content before a trip for viewing in the air or while roaming. This isn’t a dramatic change in that dynamic, which was already moving very obviously in the direction of subscriptions, but it should increase pressure on Apple to consider what its role will be in this subscription-centric future for video. That future now needs to combine streaming and downloading content and the competition is intensifying.

Apple May Use Drones to Improve Maps – by Ben Bajarin

I think this signals how important the maps experience is for Apple and Apple customers. They are looking for ways to make the Maps app better and this drone strategy seems to be a way they believe they can get better mapping and better visuals both indoors and outdoors. The other interesting element here is what this data could mean for any future AR/VR play. Google earth in VR is a pretty compelling experience. Similarly, some early value propositions for travel or real estate has been the ability to be immersed in the hotel or condo or city you are interested in to get a first-hand visual experience. Maps or high-resolution images or video of real world objects is a key part of AR/VR so, thinking long term, this could be a play for that future as well.

Google’s advantage, in my opinion, has more to do with accuracy as well as their mapping to have a degree of premonition of your route. There are simply more details of the driving experience in Google Maps and their feature to predict traffic into the future. All of this is because or the massive data they get from having so many people use Google Maps. Obviously, the more people Apple has using Maps, the better every element of the experience can be for current and future experiences.

Whether the exact implementation of using drones is true, there does seem to be enough smoke out there around Apple’s initiatives to improve Maps and make the experience of location visualization much better for their users. We know from a range of estimates that the vast majority of Apple users in markets like the US and Europe use Apple Maps as their primary maps app. It is important to keep making the experience better and build upon that foundation which could turn out to be quite valuable in an AR/VR world.

Nokia is Back! – By Carolina Milanesi

Not really but the brand is back in the phone market under the licensing agreement that HMD Global closed back in May with Nokia and Microsoft. On December 1st, during Slush, the European startup event, HMD announced that, starting in early 2017, they will start to ship Android-based Nokia smartphones.

There is a lot of skepticism around the news, especially in North America, mainly because this market has never experienced the strength of the Nokia brand in the smartphone market. However, brand loyalty and purchase intention in markets such as India, South East Asia, Africa, and Latin America is still very strong for Nokia. These markets have not yet capped when it comes to smartphone growth and the price points needed to capture that growth are, more often than not, lower than where tier one vendors want to go. Local players addressing the space might not be able to leverage economies of scale that comes from being available across markets which is something that HMD will be able to take advantage of.

For many successful Chinese whitebox players, taking their products across borders is not necessarily an option as IP costs will drive their overall prices up, removing their advantage. Aside from licensing the brand, HMD has retained many key channel relationships Nokia held in these markets — a great advantage.

The opportunity in these markets is very much the same as it was for Nokia in mature markets with Windows Phone: first-time smartphone owners. In mature markets, this did not work. Not because of the quality of the Nokia phones but because of the operating system they were running. Nokia’s last attempt to go after these markets with an Android-based device was well received but short-lived due to the conflict of interest which arose from the Microsoft acquisition. In these markets, aside from first-time buyers, the opportunity also extends to consumers who want to upgrade from second-hand phones or unknown whitebox vendors.

We’ll have to see what the final products look like but the opportunity is certainly there for HMD to drive sales. While I do not expect the Nokia name to return to the top of the leaderboard, I see them capturing share from others. What will be key for the longevity of the effort will be to see what the upgrade path HMD will be able to build for its Nokia buyers.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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