The speculation on Apple’s and Google’s plans for entertainment products seems endless, but it also seems to be ramping up. As is always the case with rumors and speculation, it’s far from clear that there’s any substance behind the stories, but there are at least some grounds to wonder a bit. After all, there aren’t many consumer markets left.
At the high level, the issue for both companies seems to revolve around the viewing experience. Google makes money on ads, and commercials are ads. Apple makes money on devices, and TVs are devices. Both companies covet some presence in the space of the other, and the best defense is a good offense. The question is how both companies could deal with the margin and competition issues, both of which would be raised by a play. And remember that with their MMI deal ratified by regulators in both the US and EU, Google is free to manufacture stuff on its own. Is that threat enough to force Apple to be more aggressive?
Maybe, but it’s not clear that TV is the place for that aggression to play out. I’m not sure I believe that Google wants to make TVs. I’m similarly unsure that they want to make STBs, so for Google I think an Android-for-TV-and-STB strategy might be the strongest play, buttressed by an appliance approach that’s an evolution to Google TV in some way. Apple may want to make TVs, but whether they do or not they face the challenge that if Google has any TV strategy at all, then Apple has to either make a TV or create a licensed iOS version to host on one. That’s something Apple has always resisted.
On the STB side, the whole opportunity rests on the presumptions that (first) there’s a clear value in creating an ad link between streaming and RF TV, and (second) that an STB is the best way to do it. Technically, having an STB create a merged HDMI stream from the Web (for ads) and traditional linear RF TV is feasible. The question is whether it’s valuable. For online ads inserted in video, advertisers have focused on using the targeting benefits to reduce their overall cost rather than to increase ad spending justified by creating additional sales. That suggests that were inserted ads to replace broadcast commercials, the net receipts by the networks could well be lower. Thus, no offering here seems logical.
Cisco jumped on the usage-price trend with another of its releases that seem to tell operators to suck it up and spend on Cisco. The latest one seems to say that usage pricing is somehow going to increase data usage, logic that I’m frankly unable to decipher. Operators are generally opposed to usage pricing as a long-term revenue strategy, according to my surveys, and they’ve been that way from the first. That doesn’t mean that they don’t see a role for it, in mobile in particular. The majority would rather see third-party charges, meaning the right to charge OTTs for access to users in some way, and that’s something the FCC says it doesn’t want. All want to get into the higher-level service business themselves, and most of those with usage-price plans would see them more as a combination of bridge to a service-driven transformation and a barrier to rampant traffic growth driven by OTT efforts.
Cloud computing is one of the operators’ specific revenue goals outside their normal bit-pushing, and there are renewed claims that PaaS is “about to take off” as a cloud service. True, perhaps, but not because of technology maturity. The real driver is the maturing of the application of the cloud, from the early web-oriented apps toward the business core. A realistic core application cloud would have to be one that spreads across the enterprise and one or more cloud providers to create elastic, fail-proof, resources and also support new applications better suited for cloud deployment than for central IT. That combination of requirements would be met most easily by a software platform that subsumed the whole notion of computers, OSs, and middleware into “what the application runs on”, which is a pretty good description of PaaS. Beware, EC2 competitors!