Tagged: content

Tablet Wars 2012: Best Hardware or Best Content?

18 months have passed since Apple launched iPad creating in one single swoop an entire new market. Several hardware manufacturers were selling a class of devices referred to as tablets, but they were based on Windows, the same operating system that powered the PC in general. The iPad tablet used an operating system that was designed entirely for user interaction based on gestures and touch, a proposition that was instantly embraced by the public.

For more than a year Apple has enjoyed almost an absolute supremacy in this market. Samsung, one of the most notable competitors, barely made a dent into that dominance. Late of 2011 Amazon issued a challenge that was considered by some pundits as serious, launching a new tablet, the Kindle Fire. This ménage a trois relationship is still evolving with no apparent forgone conclusion. Who is going to win?

Deloitte predicted in its annual Technology, Media and Telecommunications Predictions that in 2012 almost five percent of tablets will be sold to individuals that already own a tablet. This represents about five million tablets worth between $1.5 and $2 billion spent by people who buy their second tablet. This is quite remarkable, a historic record for any device. But the most interesting part of this prediction is that Deloitte anticipates that tablets will come in a broad range of size factors, not just the iPad’s 10-inch size.

In the quest for satisfying the huge demand for tablets and for carving up the largest stake possible out of this market, hardware manufacturers will try to fill in this space using different strategies. Some will make cheaper tablets, smaller in size or less powerful, but good enough to do most tasks, or larger tablets for more demanding applications, better graphics.

The business model will change. Currently Apple has a huge gross margin of 24%, but this may be about to shrink to more earthy levels. Currently 85% of overall gross margins come from iPad and iPhone. Deloitte predicts that hardware manufacturers will be willing to forgo gross margin on the device now and recuperate that later through profits made on subsequent service revenues: content purchases, subscription and rentals.

This just highlights the real game in the tablet wars. It is not about the hardware, it is about the ecosystem. The tablet is only the sweetener designed to tempt the buyers to enter the theatre and stay captive to content attractions. This is where the real action is. This is where Samsung is at a great disadvantage because it doesn’t have anything that comes close to iTunes. And again, this is not about what you see, the iTunes software, but about the market place behind it where major media houses agreed to sell their wares. The core of the ecosystem is to have this multi-layered engagement that binds the content creators, distributors, networkers, software operating system and device manufacturers together to the level at which the choice is too good to resist and too easy to effect for most of the potential customers.

Amazon is probably the best better prepared to fight that battle. Google is a formidable player, but it has spread too thin and over the years had a few tensed episodes with some of the key participants in the Android ecosystem. The Google market place is at times chaotic, some would say.

What about Microsoft? This is a big unknown. Its marketplace hasn’t competed nearly well with Apple’s iTunes and AppStore. Zune looks OK, but it is not as good as iTunes. The range of offerings makes Microsoft’s global marketplace look like a lemon stand versus Wal-Mart when compared with iTunes.

Apple forged great relationships with major content providers much better than anyone else. Until this situation changes, the other tablet manufacturers will face an uphill battle because they cannot recuperate the manufacturing costs which will prevent them from competing successfully in this market.

In the end, it is all about content, simplicity of delivery, user friendliness and the positive vibe of the marketplace. This is where the likes of HTC will have a really hard time to compete. Even Nokia will find it difficult to survive if Microsoft doesn’t build a more consumer friendly and richer ecosystem. This is something that I expect Microsoft will improve this year in preparation for an innovation-reboot with Windows 8.

Tomorrow, Apple will launch the new iPad 3. Things will get pretty interesting this year.

Rupert Murdoch Adopts Social Media

At the start of the year Rupert Murdoch surprised many by opening an account on Twitter. Why did he do that when he was so dismissive of the role of the Internet in the production of content, reducing the public chatter to the “noise” level? Regardless of his motives, this fact alone is a strong signal that social media will increase in significance and we are in for a big change.

When I checked his Twitter status first time he already had over 14,000 followers. Today he had over 120,000 while he has produced over 48 tweets in less than two weeks. Rupert Murdoch must feel the power of social connectivity, and he must wonder where all this connectedness is taking us to in the near future.

The tweets are decent and he handles the rejections and the insults professionally; his many years of tough experience in the very competitive business of media have made him immune to all kinds of attacks.

Maybe the huge “faux pas” his son made in UK gave him a scare. The public reaction and the backlash by the British political institutions were severe. He could have lost the entire empire, if not he has already lost it in the sense that the credibility or the respect imposed by fear inspired by the sheer power of his corporation diminished considerably. Twitter is a way of making out with the public.

Maybe amidst of all this he saw that News Corporation started to lose its height in stature and become small compared with the news produced by the public and consumed by the public.

A year ago he announced plans to charge for content. We don’t know exactly how that is going at the moment, but what we know is that people get the uncensored news from other people much faster. When an earthquake occurs, the global social networks nervous system reacts far faster than any professional news outlet. If you want pictures, you go to Facebook or Flickr to see them, as you know real witnesses have already posted fresh information almost instantaneously. Meanwhile, the professional media is begging viewers to send photos and videos to them as part of their content.

In one of his latest tweets, Rupert Murdoch says “Consumer electronics show this week. Expect to see amazing new tech developments like last year. Will upend, improve delivery, not content” (in reference to CES Las Vegas 2012). Somehow, he is still sceptical about the role of the technology in the creation of content. He does not see the impact on the cognitive level of people and how that stimulates the creativity of content by offering better media production tools and lowering the publication costs to nil.

He says later, “Second thoughts! Content does remain king, but new tech will help improve much, especially education”, but you could see the scepticism is still there.

Well, the evolution of the global social network is exponential, so we should see what happens in one year. In the televised debate “Intelligence 2” on Bloomberg, on the question of should the traditional media disappear (be given good riddance), the public was swayed even more against the idea that the traditional media is still relevant.

More power to the participatory Public!