A plethora of devices are becoming connected. Samsung announced its Televisions would offer Blockbuster streaming. Blu-ray players are increasingly coming with Netflix. The Xbox 360 will soon connect to Twitter and Facebook. The primary commonality between these offerings is they all take the consumer out of the Pay TV experience. Losing consumer attention to other devices and services is a problem that needs eyeballs. Instead of standing pat, Verizon has integrated connected services into its set-top boxes to keep users engaged.

On first blush, content from Veoh or the addition of Twitter may not be particularly impressive. But, what Verizon will do is integrate these services with the television watching experience – something a connected HDTV or Blu-ray player will never do as the content is likely coming through an HDMI cable from a STB. This is increasingly important in a networked world and such applications will help keep connected consumers in the pay TV environment despite the availability of content beyond the set-top box. In a world where, according to Yankee Group’s consumer survey only 20% of respondents would never cancel their Pay TV for Internet content such services will be increasingly important – if not necessary.

There are a few interesting things about this announcement that should be evaluated:

1. Potential for widgets. Content aware widgets could be compelling for consumers, content owners, and developers. Twitter on the TV is interesting, but being able to see live tweets about the program you are watching is compelling. The same can be said of Facebok status updates, unless of course you don’t want your social group to know about your penchant for Rock of Love. Where could widgets go from here? In short, anywhere. How about an IMDB application that allows consumers to see who is in the program they are watching, what else they have been in, and when those programs are airing. Perhaps IMDB’s owner Amazon would like to sell DVDs at the same time as you are searching for information? There is a lot of opportunity for widgets to enhance the TV experience and Verizon should be careful only to add widgets which do this and not fill the curiously named Widget Bazaar with all manner of widgets just to fill it. For Verizon, widgets could mean revenue from sales of premium widgets (not highly suggested as consumers may think of widgets as part of the service), advertising revenue from branded widgets, or sell-through of goods through a widget, such as a DVD from Amazon.

2. Viral Marketing. Just as Tweetdeck and other applications stamp where your tweet originated, offering Twitter on FiOS will help to virally brand the service. A Facebook update to the effect of Josh is watching Burn Notice (and definitely not Rock of Love) on FiOS TV will help to freely promote the service.

3. More Content and services. As Verizon builds out its services partnering with more content owners such as Youtube, MLB.tv, and others will be integral to bringing broadband content to the TV in a compelling way. However, many of these services are available on Verizon’s Home Media DVR platform – a name which fails to capture the true value of the tier. A joint re-brand of bazaar and Home Media DVR could be done at the same time.

In short, these developments do more to thwart losing attention than they do to gain customers. In an economy where consumers are looking to save money these features alone will not compel subscribers to opt for FiOS. However, these applications will help the service enhance its appeal to the tech saavy that spend more on pay TV but are also yearning for alternative connected devices. Additionally, the exposure of these services through the viral nature of social networks could expose subscribers to the service in a way that makes them compelled to subscribe. AT&T is clearly poised to quickly jump on this bandwagon as well, as has DirecTV but MSO’s may be more challenged to bring these services to market quickly.

Ultimately, pay TV providers are recognizing the threats of connected devices and are launching their first salvo in the war for eyeballs. It will only get more interesting from here.

With more than 40% of respondents to Yankee Group’s consumer survey saying they are likely or very likely to buy a smartphone as their next device, device manufacturers must wonder if best of breed devices will become extinct. Their concerns are legitimate. Converged handsets offer turn by turn GPS, ever improving still and video cameras (now with on board editing!), MP3 playback, and so much more. So, will Best Buy’s shelves be overflowing with devices as consumers bolt past the GPS aisle to reach the smartphones?

In short, the answer is no. In fact, smartphone owners are MORE likely to buy best of breed devices than standard mobile phone owners as seen in the cart below.

The data shows that not only are smartphone owners likely to buy many best of breed products but they are more likely to buy them than phone owners whose devices do not offer a range of features. This data is important for CE manufacturers hoping to continue selling best of breed devices to consumers who already own a converged device.  Most devices listed, save Netbooks are mature products so even though intent to buy is low that should not scare off manufacturers. Consumers still want discrete products even after they buy do it all devices.

I am currently at 30,000 feet flying to San Francisco aboard Virgin America. At the same time my PC is powered up, my laptop has Wifi (pretty fast, too), and I am posting blogs, checking e-mail, tweeting, and soon will be watching Hulu.

The inclusion of in-seat power and enough room to somewhat comfortable use my PC even though the person in front of me is compelled to be at full resting position. My first experience with in-flight Wifi is an important one. As I fly to San Francisco, Apple will be presenting WWDC. Clearly, this is an important event that I need to stay on top of and in-flight Wifi means I can be updated on the event in the air, im or skype with clients or reporters, and blog all while on the go.

Now, there may be some who are opposed to Wifi because air is the last bastion of privacy we seem to have left. But progress cannot be stopped. After my first experience with in flight Wifi, I know my impressions of its importance have changed dramatically. Being able to get three or four extra hours of work done and being up to date when I land is really useful. It also lets me catch up on all those Family Guy episodes I have missed the last few weeks.

Many firms look at the console primarily as a gaming device. Here at Yankee Group we prefer to view the console as a multimedia gateway providing access to a world of entertainment. Before E3 I posted survey data highlighting the trend towards non gamers using the console to access multimedia content. After E3 it is important to review the announcements in that context.

The winner: Microsoft. I am surprisingly forced to continue my recently commenced Microsoft love-fest. First, the Zune HD impressed me. Then I found quite a bit of joy using Bing (Love the homepage photos despite the name). Finally, the E3 announcements really intrigued me. Microsoft wins because it is extending the console far beyond gaming. The incorporation of Facebook and Twitter are important steps in that direction. Replacing the Xbox movie store with Zune’s store could help foster interest in that device as well.  Notwithstanding Natal, which is not very Anywhere, but rather fascinating nonetheless Microsoft laid out a clear vision for the Xbox and that vision involves much more than gaming. If MSFT had only announced Hulu on the Xbox they would have been unstoppable.

Place: Sony. There is a pretty substantial drop between Microsoft and Sony. As the Playstation team talked about the addition of more games to the device they did little to discuss how they were incorporating more content (and new business models such as free streaming) but they did discuss those matters a bit. The combination of the PS3 and the PSP continue to be an underutilized asset for Sony but that could change with the PSP Go and the new Sony Store. Thus, if Sony can make this store better than the original connect store that didn’t even synch with the Walkman they could present a powerful connectivity message. But until they deliver on the promise, Microsoft remains ahead.

Show: Nintendo. Nintendo wants to reach out beyond the primary gamer in a different way than Sony or Microsoft.  Nintendo wants to reach out to more females as evidenced by their announcements. Lacking was a focus on bringing more multimedia content to the console and bridging the DSi and the Wii into an ecosystem similar to that promised by the PS3 and the PSP. Until such a time when Nintendo wants to reach out beyond casual gaming they remain woefully behind the competition in making the console a multimedia hub.

Blackberry does it again!

Last month I blogged that those (based on Yankee Group’s consumer survey) likely or very likely to buy a multimedia handset as their next device would opt for a Blackberry more often than an iPhone. Well, with all the rumors flying about new iPhone hardware pending, the most recently completed survey wave fielded two-three weeks ago indicate that people are more likely to want a Blackberry now than a month ago.

Apple, which garnered 31% of interest last month declined to 25%. A six percent drop in interest.

Blackberry, which registered with 44% of respondents last wave grew to 50%. A six percent increase.

Seems like Apple’s loss is Blackberry’s gain.There are a number of factors that could be contributing to this change:

1. Questions over the next iPhone. With Apple beginning to choke off iPhone supply and remaining tight lipped about their next device (which everyone believes will be announced on Monday June 8th) consumers could be assured by the ever present availability of the Blackberry.

2. Blackberry World. While not much has been said about it since its launch the fact that an iPhone rival has a viable application store could be helping Blackberry gain interest.

3. Multi-carrier strategy and price. Again, hammering on this point the wider availability of Blackberry has to be a major factor for consumer interest and having devices at a slew of price points also helps.

It will be very interesting to see if interest grows again after the launch of the next iPhone or if some of the shine of the device has rubbed off as competitors play catch up. We will be fielding our next survey next week to gauge the consumer reaction to the news of the iPhone (or lack of news is one is not announced) and the launch of the Palm Pre.

Speaking of the Pre, Palm which is days from launching the device but even as we near the date the Pre was the device du jour for only 3% of respondents which is unchanged since the previous wave. Palm’s single carrier strategy or the limited marketing that has yet availed itself to the mass market could be limiting interest. If consumers are still exhibiting tepid interest in Palm in the next wave of the survey it will indicate the Pre’s ability to rival the iPhone or the Blackberry (or even an Android phone) will be limited. We’ll make the call on whether it is a dud or a stud next month.

Rumors are swirling regarding the impending announcements at E3, which starts tomorrow in Los Angeles. So far the world is convinced there will be a new PSP, Wii Fit Plus, and maybe a slimmed down PS3. One theme that has transcended trade shows this year is connectivity and I expect the trend to continue at E3 whether it be the Sony store coming to the new PSP or social networking coming to the Wii Fit or perhaps Hulu arriving on the Xbox 360.

Yankee Group’s consumer survey, fresh from fielding is hoping to understand how the console is being used to access multimedia content. Is there a difference between platforms? Do more non-primary gamers use one console or another to access content? The results should excite console manufacturers. The question was asked to current generation console owners “Are you the primary gamer” followed by “Do you use the gaming console to access multimedia content from the internet?”

The good news for Microsoft and Sony is that 28% and 27% of primary gamers are using their consoles to access multimedia content, respectively. A full 15% and 14% of non-primary gamers are also using the console for the same purpose. That data represents owners with multiple consoles, when looking at the data for owners of only an Xbox 360 or a PS3 the numbers change. The PS3 takes the lead with 27% of primary and 14% of non-primary to 21% and 12% for Xbox.

So, what does this mean? Just a few years ago the console fell under the auspice of the primary gamer but Sony and Microsoft have found ways to broaden the audience to others in the household. Widening the user base is imperative to position the console as a multimedia device. It will be interesting to watch the trend and see if more primary and non-primary gamers continue to adopt the console as a multimedia hub if more content partnerships are put in place.

In terms of the intra-console wars, the data puts Sony in an interesting position. Microsoft has negotiated a partnership with Netflix which certainly makes it attractive to primary and non-primary gamers alike. However, Sony is ahead in PS3 owners to Xbox owners. Sony has earned this position while only having an ala carte download service. Perhaps the decision to include Blu-ray in the PS3 has proven even more prescient as it is a device that is attractive to the non-primary gamer and invests them in the PS3 experience.

These companies are destined to continue battling well into the future for the hearts, minds, and more importantly the dollars of the primary and non-primary gamers. Content owners, such as Hulu that were wary of Boxee and its hundred of thousands of users upsetting the balance of power need to keep their eyes on the game console – the Trojan horse in the living room.

I, like many others have often asked if Microsoft should get out of the Zune business. Their first generation hardware was little more than a rebranded Toshiba Gigabeat and the second generation offered a less than gasp inducing improved navigation button.

While the hardware had been less than impressive the software has evolved into a social networking platform. Zune has focused on community with an attractive and immersive interface that aids in discovery of new content. If you have not yet had the opportunity to use the software I recommend giving it a try. You can create a profile without being a Zune pass member, which is not for everyone.

Unfortunately, in order to compete in the cutthroat digital audio player space a company must have a killer experience and cutting edge hardware (Which is why the new Sony Walkman is likely to again be subjugated to also-ran status). Microsoft may finally have cracked the code with the just announced Zune HD.

The Zune HD will mimic the iPod Touch insomuch as it will have a fully integrated web browser (IE) and WiFi (a Zune staple). But the Zune will also feature technology the current iPod Touch lacks such as – an OLED screen and an HD radio tuner with tagging.

The HD radio piece is a rather interesting one as Zune will be the first portable HD radio on the market. More importantly than being the first, combining HD radio, song tagging, and a subscription service create a powerful message for Zune. A Zune pass subscriber can tag a song on the radio and when in WiFi range download it for free and listen to it ad infinitum. This differentiates the service from streaming players like Last.fm or Napster and makes connectivity and the subscription service more valuable.

If Microsoft can allow restrictionless sharing of music between Zune subscribers (the infamous activity once referred to as squirting) while bringing the social interface of Zune from the web to the device they may finally gain bigger market traction.

Could a large screen and multimedia features position the device as a gaming console as well? The incorporation of the Zune store on Xbox makes it clear Microsoft would like to tap that audience in some fashion. If Microsoft can follow the Sony model of combining the power of the PSP and the PS3 with Zune and Xbox 360 a whole new audience of buyers may beckon.

This is a huge step forward for Zune but we must do a reality check. The DAP space is mature and growth has slowed significantly. Yankee Group survey data shows many iPhone users have begun to use their handset as the primary way to listen to music. It is expected users of other smartphone platforms will exhibit similar behavior on a smaller scale. Thus, the  evolution of Zune towards a multimedia platform will be necessary for it to compete and Zune HD is an important step in that direction. Zune HD will have its work cut out for it as it continues to face stiff competition with the iPod Touch, multimedia handsets, and MIDs. However, if the platform, service, and experience prove successful perhaps the outlandish notions of a Zune phone may not seem so unreasonable.

These days it seems one cannot escape a conversation before the topic of app stores is broached. Perhaps this is because I am a tech analyst (providing this reason a good likelihood of accuracy). But for those not professionally engaged in technology, the incessant Apple commercials touting that they have an “app for that”, the launch of Blackberry World, frequent G1 advertisements, and the relentless press coverage of the “iPhone killing” Palm Pre would make all aware that smartphones have arrived.

But does this chatter really turn into consumer dollars? This was the question we sought to understand in the recent Yankee Group Consumer survey. This online survey, which was fielded in mid-April revealed a number of interesting points.

Of the 1,432 survey respondents 41% (583) said they were very likely or likely to purchase a multimedia handset with a data plan as their next phone. To me, this is a pretty astounding number and indicates the market is primed for a converged device a wildly different scenario than the unsure days leading up to the launch of the first iPhone. Interest is not restricted to the young as evidenced by the more than 14% of those 65+ who were very likely or likely to buy a smartphone. Income also presented little resistance to interest as more than 30% of those earning under $10,000 were also very likely or likely to buy. No gender gap in interest existed either with both men and women clamoring in equal regard for multimedia handsets.

These desires are particularly interesting in light of the current economic turmoil which has many respondents saying they will spend less on devices and services in the next 12 months. If their intent to spend less holds true and they desire a smartphone with a data plan they will be forced to pare back on other services to afford their increased monthly mobile spend. Other SPs should be concerned that their portion of walletshare may be reduced as a result.

Now that interest has been established the next logical question is what brand/platform of phone will consumers want. Everyone wants an iPhone, right? Not exactly. Apple was the second most desired handset with Blackberry leading the pack. Nearly 44% wanted a RIM device while 30% expect to purchase an iPhone. This survey was fielded after iPhone 3.0 was announced as well meaning that that release may not tip the scales in Apple’s favor. The results also indicate that Google has its work cut out for it as less than 4% of respondents were planning on buying an Android based phone.

RIM’s success could be attributed to a number of factors – not the least of which is an increasing demand gap between it and iPhone in all age segments over 35. The data also likely indicates a desire for consumers to remain with their current carrier or the attractiveness of the range of price points that Blackberry is offered at. Blackberry also offers devices on all major carriers while Apple and Google currently do not. In order to win over those that do no want their devices and platforms manufacturers must consider releasing devices through multiple carriers, a lesson Palm should learn quickly.

Further analysis of interest – cut by carrier will likely yield interesting results in platform interest. Will Verizon subs be uninterested in iPhone because their carrier does not offer it? These types of questions and more will be looked at by Andy Castonguay in an upcoming report.

Hardware and software have long been separated. But in the increasingly converged world the two are becoming indistinguishable, merging into a unified user experience. Such is the philosophy with Pure Digital’s Flip Video. The company which sells low cost to more expensive HD cameras provides more than just a capture device by embedding easy to use editing and sharing software.  But this blog post is not about mega market trends (ok, maybe it is a little). Instead, it is about my experience with the Flip Mino HD.

I won’t delve into form factor or storage capacity because many sites can do the Flip more justice than I in that regard. But what is important is the experience from capture to editing to sharing. While I am not a rookie when it comes to video editing (my program of choice is iMovie ‘09) but it took time and effort to become adept at it. Time and effort are two things that manufacturers cannot expect the mass market to afford to their products.

On to my experience of filming the fly over of Fenway Park on opening day. After capturing the jets flying over Fenway I plugged in the Flip. The sharing software installed automatically. Within moments I was viewing the clips from my camera in the Flip interface. After downloading the clips to my PC I was presented a few options from creating a movie to sharing the clips, of which the quality of the resolution surprised even me. Before making my movie, I edited the clip down from three minutes of waiting for the jets (and the oft incorrect exultations of “Look there they are”) to the five seconds in which the jets zoomed by the window. Easy enough. By moving the start and end points to where I wanted them and clicking ok my clip had been trimmed. A few moments later I was creating my movie by combining a few clips.

Making a movie was a simple drag and drop interface that made adding a title, music, and credits as simple as a few button clicks. Sharing the completed file was just a click or two away. Anyone who buys a flip – regardless of their technical saavy could create a video and share it within a few minutes. And there-in lies the beauty. Even is competitors like Canon or Sony decide to release their own Flips – they will be hard pressed to match Flip’s success unless they too offer the entire experience.

Overall, what I took away from the experience was that Flip helped bring video editing to the masses. In truth there are a lot of people such simplicity would not appeal to. You cannot add animated titles, picture in picture, geotagging, etc. But for the mass market that wants a simple to use product to share videos, Flip has accomplished its task. Without the software/experience it’s easy to think that Flip would not have been nearly as successful as it has been. Clearly, convergence is happening and software and hardware must combine to make a product greater than the sum of its parts.

Sample Below:

Boston Marathon

The Internet has been rife with speculation about the imminent demise of Blockbuster Video. It’s easy for popular wisdom to assume that Blockbuster is a relic of a bygone era, out shined first by Netflix and then by digital distribution. Popular wisdom would be wrong.

Video consumption is a topic that we focused on in the first wave of Yankee Group’s 2009 consumer survey. The online survey asked Where have you rented movies from in the last 12 months and of the respondents that had rented videos in the last year, 56% had done so from a physical store while only 22% had rented through a mail service like Netflix. Usage reflects a small gender gap skewing females towards physical stores 59% to 54%. For the ballyhoo of online rental, just 8% of respondents had done so through a console or store like iTunes most of which were under 20.

The interesting aspect of this data is, by and large consumers don’t expect their habits to change considerably in the next year. The exact same percentage of respondents who rented through the mail in the last year plan on doing so in the coming year. In fact, physical stores still rank as an ideal choice for 47% of respondents, and 81% of those that had rented from a store in the last year expected to in the next year. Online distribution received the biggest bump with 15% saying that online would be a medium used in the next year.

The data makes it clear that the purpose of renting through services like Netflix or from a store are vastly different. Those that rent through the services like Netflix consume more content – and thus an all you can eat model is compelling to them. Of “mail” renters 44% said they have and watch VoD while 34% of in-store renters said the same. Frequency of use is also substantially different. More than 53% of mail renters watch VoD multiple times a week while only 38% of in-store renters said the same.

In-store renting is for more casual viewers – those that do not want to be encumbered by an all you can eat model. With the demise of Blockbuster – where will the casual renter go? Ironically, if Blockbuster can hold out the economy may actually help them with 22% of respondents saying they will rent more from mail and in-store instead of going to the theater. But the bell has seemingly rung for Blockbuster.

If Blockbuster does fade to black users will have services like redbox, which offer a limited selection of DVD rentals from over 1,200 locations inside of grocery stores, malls, and airports, to keep them busy. What such a scenario means for classic movies – you know, those from last year or older remains to be seen. They may disappear from the consciousness of society or be scooped up by online services or pay TV providers which could use them to bolster their VoD offerings and win over the casual viewer more effectively.