Netflix has abandoned its plan to separate the streaming and DVD businesses, something that shareholders and the Street (not to mention customers) are sure to be happy with. I’m not sure that this was as bad an idea as it seemed, though. The problem with all the streaming players, as I’ve noted in prior blogs, is content availability. Netflix may have recognized that it has two very different businesses going here. One is the business of supporting people who routinely rented movies for “movie nights”, and the other the people who just couldn’t find anything interesting on TV for a time-slot in a given evening. For the former, you can dip a long way back into the long tail of content; the latter tend to want material they like, and typically they want it in a short-slot form factor to fit in the hour interval they can’t fill with channelized material. Can the company juggle the two as a single offering? We’ll see.
This week will mark the start of Apple’s iMessage service, which is arguably both an exploitation of Apple’s dominance in mobile and a direct threat to network operators. iMessage lets any iOS 5 device send unlimited messages to any other iOS 5 device, and while the media hype that this eliminates a 20-cent-per-SMS windfall for carriers is nonsense (everybody who texts often has an unlimited plan), the Apple move COULD be an indication that Apple is indeed going to push cloud services to its customers that would gradually encroach on telco gravy trains. Voice, for example, might come along.
Telcos may have mixed views of all of this. If they’re required by law to allow third-party services that compete with their own (a US principle, and similarly we believe for Europe if regulatory trends are upheld) then it would seem logical that Apple and others would jump into the services space, not only for current services but for the emerging mobility/behavioral models as well. But the big thing would be that if Apple keeps going this way it is in my view inevitable that it become an MVNO in every geography where that’s possible and profitable. That would suck a lot of margin out of the mobile players. A few Street pundits have told me that they believe AT&T’s T-Mobile aspirations are due in no small part to an MVNO fear; T-Mobile would be a very logical player to partner with since they have EU affiliations as well as US ones, and a deal with them could have real scope for Apple.
Google would certainly jump where Apple did. While Google and Samsung delayed their launch of a new model, which is said to include the “Ice Cream Sandwich” version of Android that unifies the separated tablet and smartphone lines, it’s clear that they’re the most credible counter to Apple and also the flagship for Android, at least until Google’s MMI deal is done. The EU approved that buy and we’re now waiting only on US DoJ, something that I hear will be coming eventually.
All of this comes at a time when operators are struggling with monetization and changing business models. We’ve been as frustrated as they have with the snail’s pace response of equipment vendors to the operators’ goals, but we have noticed significant progress over the summer. Alcatel-Lucent and NSN in particular have been tightening up their articulation and telling a service-layer story that has some substance, though their full details are still not on their website and there are still significant differences in how well the message is told among the various regions and even sales teams. The question now is whether the operators can recoup their losses in the service layer.
How this will go for vendors is hard to say, because ironically they’ve just now figured out that they needed a better content monetization story. Apple is now demonstrating that the vendors need to support a mobility/behavioral story too, because operators will be assailed in that zone shortly. In theory, for Cisco and Juniper at least, the cloud should be an easier tale to tell because they have data center assets to play on. Huawei, who has recently announced its own enterprise push, can also harness enough hardware presence to be credible as a “cloud vendor”. However, they’ve had those assets all along and have done a sad-to-awful job of positioning them. Alcatel-Lucent and NSN will now have to scramble a bit to create a good cloud story, but they at least don’t have to scrabble over the rubble of previous bad positioning to get there.