Unpacking the Week’s News: Friday, February 10, 2017

Apple Renewed Focus on Apple TV Business – by Carolina Milanesi

On Tuesday, Bloomberg reported Apple has hired former head of Amazon’s Fire TV business Timothy D. Twerdhal. At Apple, Twerdhal is in charge of Apple TV marketing, replacing Pete Distad, who will be now working with Eddy Cue on content deals. Prior to Fire TV, Twerdhal was an executive at Netflix and a VP at Roku.

Just over a week ago, during Apple’s earnings call in response to a question from Morgan Stanley whether TV and original content might be the way Apple could spend some of its $200 billion-plus of cash, Tim Cook said:

“In terms of original content, we have put our toe in the water with doing some original content for Apple Music, and that will be rolling out through the year. We are learning from that, and we’ll go from there. The way that we participate in the changes that are going on in the media industry that I fully expect to accelerate from the cable bundle beginning to break down is, one, we started the new Apple TV a year ago, and we’re pleased with how that platform has come along. We have more things planned for it but it’s come a long way in a year, and it gives us a clear platform to build off. Two, embedded in the 150 million paid subscriptions that I mentioned in my opening comments, there are a number of third-party services that are a part of that, where we participate economically in some of that by offering our platform in selling and distributing. And then thirdly, we are obviously, with our toe in the water, we’re learning a lot about the original content business and thinking about ways that we could play at that. Thanks for the question.”

Apple’s latest attempt to “fix TV” was to improve content access by enabling single sign on. The main issue, however, has been the lack of support from the larger providers such as Comcast, Verizon FIOS and Charter, which made the functionality much less appealing. One has to wonder why Apple did not wait to sign up one of the larger providers unless it was not a question of time but rather a question of providers not wanting to be disenfranchised. Think about how much of the Comcast experience is about the Xfinity X1 with its voice-enabled remote or the inclusion of Netflix as if it was just another TV channel.

It is clear Apple TV is becoming a bigger interest at Apple and, while Cook spoke about content, I would think a reason is also the role Apple TV could play in the connected home. Already today, Apple TV can function as a hub for the connected home but more could be done. Of course, selling Apple TV as a hub alone will not work so content still needs to be a big part of the value proposition. Apple has dipped its toe in the water with original content but that alone is not going to be enough. A big hit like Game of Thrones would certainly bring fans to the platform but, with production costs estimated at $10 million per episode, getting an appropriate return on investment seems unlikely. More recent speculations about allowing movies still in theaters to run on Apple TV at a higher price seemed like an interesting idea with wide appeal.

While the new hire clearly has had plenty of experience in the TV business, it is interesting he will not be the one working with Eddy Cue on content deals. Past rumors had been raised that Cue’s tough negotiating techniques were the core reasons why Apple was not getting the studios to play nice.

Marketing, of course, must play a bigger part in Apple TV’s future. Up to now, Apple has not dedicated much prime time advertizing to Apple TV. While sales in 4Q16 were down over the same period last year, we have seen AT&T bundling Apple TV with Direct TV subscriptions and, according to AT&T, the offer was very successful. Aside from talking about Apple TV, Apple could do more in terms of iTunes content offers both for TV series and movies. For consumers who like to own content, not just stream it, Amazon seems to be a more competitive option.

Vizio gets a Fine for Invasive Tracking of TV Users – by Jan Dawson

TV maker Vizio this week settled with the FTC and the state of New Jersey over allegations it had been tracking user data from its smart TV sets for several years without adequately disclosing the practice to users and doing it in a way that was overly invasive. The fines are minimal – well under 1% of Vizio’s annual revenue – but it will also have to stop the tracking and notify users. That may cause a PR headache, not to mention a fair amount of consternation and confusion among users.

Vizio surely isn’t the only TV maker to be gathering data in a way users either don’t know about or don’t understand well. Part of the problem with Vizio was it described the data gathering program as being about improving recommendations and the like but gave no hint the TV was collecting data even when consuming content through other services or boxes connected to the television, let alone that the data would be sold in great detail to third parties.

But this problem is likely far from unique to Vizio – I’m betting lots of other TV manufacturers do similar things with similarly little disclosure. Part of the problem with consumer electronics in general and a competitive segment like TVs in particular is it’s very low margin – Vizio filed an S-1 in preparation for an IPO in 2015 and the document showed its margins were consistently around 2-3%. With such thin margins, any new business that can add a layer of profit on top of pure hardware sales looks very attractive and Vizio made a point of talking up its data analytics capabilities in the S-1.

What we need at this point is a broader investigation of what other TV makers are capturing from their equipment and what happens to it afterwards. Vizio’s data collection was particularly egregious because it provided raw IP addresses to third parties. But even practices that stop short of that level of user identifiable information could be going too far. But this issue doesn’t even stop with TV makers – so many connected devices for the home now have the potential to collect so much data about us and, though we tend to assume they’ll ask for permission and even then only share anonymized data, that’s not always the case, especially with smaller, less well known vendors.

I’m betting LeEco isn’t delighted about any of this either – it’s agreed to acquire Vizio and the acquisition should close in the near future, meaning that much of the remediation of this issue will happen under LeEco ownership. Given how central Vizio is to LeEco’s US business, this isn’t a great start to the relationship.

Lenovo Develops Energy-Efficient Soldering Technology – By Bob O’Donnell

In a tech news world dominated by big product announcements and major innovations, every once in a while it’s nice to take a step back and look at something really basic like soldering. Though I can virtually guarantee few people have given much thought to the process of melting metal to secure chips or wires onto circuit boards, the truth is, soldering is an essential part of the manufacturing process for every high-tech product made. You could not make any of the tech products we all rely on (as well as many, many other things we use every day) without soldering.

So, while it may not be the most exciting topic in the world, an important improvement in how soldering is done really does matter, particularly when it offers economic and environmental advantages. This week, PC market leader and major tech manufacturer Lenovo announced a new breakthrough in soldering they call Low-Temperature Solder (LTS) that allows the company to create solder joints at a lower temperature, thereby reducing the amount of energy required to do an essential manufacturing task.

Specifically, the company believes its patented new approach can reduce their carbon emissions by an impressive 35%, which translates to about 5,956 metric tons of carbon dioxide or 670,170 gallons of gasoline per year. Even better, the lower-temperature process reduces the stresses that can typically happen with higher-temperature soldering, leading to a reduction in problematic solder joints and an overall improvement in reliability. Essentially, the process allows Lenovo to use the kind of lower temperature soldering techniques that used to be available with lead soldering (which was discontinued for environmental reasons about 10 years go), but with more environmentally friendly tin-based solder.

The company developed the new solder mixture after years of experimentation and has already begun to use it in the production of several of their high-end notebooks, including the 5th generation X1 Carbon. By 2018, Lenovo plans to use the technique across many of their manufacturing lines and, even better, according to their news release, “intends to offer the new procedure for use on an industry-wide basis free of charge.” Nice.

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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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