The rumors of a Motorola dismemberment plan have sprung anew with a Wednesday article in the WSJ.  Everyone, get your axes ready – either to grind or to hack off your favorite piece of the Moto beast.  The latest round of speculation points to the possibility of Motorola combining their handset and set top box divisions to build a new integrated future. Of course, speculation also exists pointing to the potential spin-off of these units.  Who are all these unnamed speculators anyway?  Whether it is to sell them off or create competitive advantage, the merger of the two units raises some interesting prospects.

If Motorola can come up with a workable structure to blend its mobile device unit with its set top box unit, then that new combined group would hold tremendous promise to integrate consumers’ digital media in an exciting way.  That combination would certainly attract the interests of companies like Huawei, Asus and others looking to gain more prominent market positioning in the mobile and CE industries.  Of course, if Motorola could do that easily, it wouldn’t be looking to dismantle itself and sell off the valuable morsels to the highest bidder.  So while I think the combination of the two units is a fine notion at a high level, the fact remains that Motorola has failed to integrate its two most important business groups in any significant way and will have to undergo major cultural and organizational changes to realize that vision. Back in early 2007, I met with then CMO of Motorola, Casey Keller, at a trade show to discuss media integration and device interaction between mobile handsets and set top boxes.  Keller shared the view that Motorola held the strongest potential hand in the business to do that, but was facing an anemic mobile device pipeline (how many ways can you sell a RAZR, after all?) and new levels of challenge on the set top box side as well.  So, vision took a back seat to triage and the more important task of stopping the bleeding, but execution proved to be elusive.  From YE 2006 to YE 2009, Motorola’s annual device sales dropped by approximately 65%.

Three years later, the Motorola device group is showing solid signs of rebirth with its recent line-up of smartphones architected around the Android platform.  The new expanding portfolio leverages Motorola’s greatest recent advance: the highly customized Motoblur experience that presents users with all their social networking and primary apps in a single view.  If this concept catches fire, it provides an interesting potential roadmap for Motorola to upgrade its set top box experience to include similar capabilities for social networking but, perhaps more importantly, media sharing among a consumer’s multiple devices.  With its massive share of the North American set top box market, Motorola holds a unique hand of assets and partners.  Cable companies have been desperate to extend their relevance beyond the TV and laptop and a set top box that easily interacts with mobile and CE devices, integrating digital media could be just the trick.

But the window of opportunity for this integrated approach is limited, so, Motorola, god speed. As Jeff Goldblum famously said in Jurassic Park, “Life, uh, finds a way.” In the consumer media world “life” is the idea of acquiring, enjoying and moving media on any device you want, whenever and anywhere you want.  Consumers are already experimenting with this in many forms.  Whether it is the game station, laptop, media gateway, transcoders, mobile apps, etc, consumers have a huge selection of ways to get media from A to B, but few are terribly satisfying from either a user interface or device compatibility basis.  This leaves Motorola with some wiggle room to merge the set top box business and mobile device unit to generate a new integrated vision of consumer media.  The vision will need to be both technical and cultural to bridge the gaps between the two business units, which share nothing beyond a company brand.  But with proper execution, such an approach could save set top boxes and the Motorola brand from being another set of fossils on the anywhere evolutionary path.

Now that CES is a week behind us and I’ve had some time to put my thoughts together and recover from the dreaded CES flu, I’ll be writing a few blog posts on three big CE products/trends that garnered considerable attention during the show:

1. Connected Cars
2. eReaders
3. 3D-TVs

 I’ll start with a short post on connected cars, as this is really the first year where they received standout coverage: Over 380 in-vehicle technology exhibitors graced CES’ floors this year, Ford CEO Alan Mulally delivered a keynote, and a CEA press release issued before the show claimed that sales of in-vehicle technology topped $9.3 billion in 2009. Yes, you heard correctly, $9.3 billion.

A number of players will profit when more technology finds its way into our cars. Some statistics presented during the show highlight just how much network operators, automotive companies and legislators stand to win. Take a look:

• Network Operators: Demand for voice and data carriage in connected cars will open up a new market for network operators. On average, over 26 million hands-free calling minutes are purchased each month by OnStar subscribers. Alcatel-Lucent’s ngConnect Program prototype also demonstrated what LTE data plans will do for in-car streaming media.
• Automotive Companies: In-vehicle technologies are driving automobile purchases more than many analysts had anticipated. 32% of Ford buyers indicated that Sync was critical or important in their purchase decision when buying a car. What’s more, 70% of customers who participated in Sync demos across the country indicated that they are more likely to buy a Ford vehicle.
• Legislators: Legislators concerned with driver safety will be pleased with some statistics from Nuance, a speech recognition solution provider. Analysis of driver eye movements shows us that drivers keep their eyes on the road 200 to 300 percent more when using speech rather than manual input for tasks like music selection.

Given the diverse set of players in this emerging market, Yankee Group is including a number of questions on connected cars in its updated Consumer Survey. As data begins to come in, expect to see a publication on the subject in the near future.

That’s French for “After now, the deluge”. And that’s about how I feel about today’s CES opening in just 2.5 hours. It’s going to be a very busy day.

But before the networks melt (or at least glow bright red with heat) from 120,000 people blogging away, I thought I’d recap a few highlights of the last 18 hours deserve some note. Instead of running down the facts of each announcement, I’ll let links to New York Times articles do that for me; I’ll just add my reasons why the events are significant. Specifically:

• Vendors are pushing 3D as the next high-definition. Every flat panel vendor here is hoping that 3D televisions will be the next must-have upgrade. I must admit that I’ve been impressed by the demos here; I saw Sony’s 3D technology with Taylor Swift performing last night, and it was one of the best broadcasts I’ve seen with passive glasses. All that said, with the inconvenience of 3D glass and most flat panels only one to three years old in the U.S., I don’t think most consumers will even consider replacing them for another 3 to 10 years, dooming the trend until the latter half of our new decade. I’ll be touring Panasonic’s booth this morning (it’s the size of a football field), and may have to say about this tonight.
• TVs are adding connected apps in a big way. Both Panasonic and Sony are boasting Skype conferencing on their connected TVs, and that’s far from the last app they’ll be adding. Whether built-in or add-on connected TV apps are the wave of the future, there’s no question in my mind that connected TVs will be a bigger trend than 3D in the short term, and it may be true later in the decade as well. Vince Vittore’s report published just yesterday is a timely analysis of this trend.
• Consumers may be pushing companies to become more vertically integrated. Apple’s been able to win over consumers over the last decade because it can orchestrate hardware, software, and media to create a single unique consumer experience. Microsoft’s one success story in the last decade has been XBox, which is similarly vertically integrated. Sony’s recent successes have been with Playstation Network melded to its PS3 and PSP gaming systems. Despite the appeal of open partner, these vertically integrating offerings are winning consumers and creating profits. The very fact that Google had to create its own Android phone to drive adoption suggests that we may be seeing the open pendulum swing back toward soup-to-nuts offerings.
• Cars are moving to glass cockpits. Despite the dangers of distracted driving, car companies are madly rushing to put Internet connected screens in car dashboards. I don’t actually believe that Anywhere connectivity is the juice that makes this trend take off, but rather the replacement of traditional car instruments with electronic icons, maps, and controls. By the end of this decade, analog guages in cars like we do in airplanes today: amusing antiques.
• Tablets just aren’t here yet. Despite the excitement over Apple’s rumored iTablet and Steve Balmer’s announcement of an HP tablet last night, the reality is that these connected devices are still a dream rather than reality. The litmus test? Try to buy one. It will take more than CES to get this trend moving, but it will probably take Steve Jobs bringing tablets down from his mountain later this month to make it reality instead of vapor, and even then, no one’s going to be using those tablets in any volume until at least Q2.

Happy New Year from Las Vegas!

Andy Castonguay, Dmitriy Molchanov, and I will be covering the 2010 Consumer Electronics Show all week from this city in the desert, trying to keep up with the tsunami of news and announcements from the show. You can follow our updates here at blogs.yankeegroup.com. If you want a more real-time set of updates, you can follow me on Twitter at @cdhowe or check Yankee Group tweets at #YankeeGroup.

On the agenda today is the “pre-show” activity when most companies try to beat the rush of press releases through the rest of the week. Notable today in the pre-dawn hours was an announcement of D-Link’s Boxee Box for streaming Internet audio and video to your TV. Seemlingly purpose-built to cause heartburn for cable TV executives, it’s the harbinger of many more Internet TV boxes to be showcased this week. That said, the idea that you can now buy an off-the-shelf device that for Boxee is a big deal; heretofore, consumers have had to install their own software on a PC or Apple TV.

All that said, two big stories today are our of Silicon Valley instead of Las Vegas. Specifically,

• Google announces its Nexus One phone this morning. Google will be hosting a press conference in Mountain View today to provide first looks and details on its HTC-built, Android-powered Nexus One mobile phone. Google employees received their own Nexus One’s as holiday gifts at the end of the year, but today will be the first time the general public gets an official look at the specifications and terms of sales. My view of the Nexus One is that it is an buying alternative for people who want an iPhone experience, but don’t want to buy into the Apple business model or the AT&T network. And Google does appear willing to sell it unlocked, thereby teasing us with the possibility that it is network neutral phone.
• Apple is building buzz toward its as-yet-unannounced tablet.. Apple announced today that iPhone and iPod touch users have now downloaded a total of 3 billion apps from the iTunes App Store. That totals more than 10.2 million downloads per day. This momentum is fueling a media frenzy headlined by the Wall Street Journal regarding Apple’s likely announcement of a tablet computer on January 27 in San Francisco. Stay tuned for more on that one; there are very few actual facts available as of yet. However, this story could become a CES show-stealer equivalent to Apple’s iPhone announcement in 2007 if some facts do get out.

Look for more info as we get our badges and the show really gets going.

Farewell to the Noughties, a decade sandwiched between two crises: The dotcom bust and the current – but sputtering – downturn.  In that time, Europe accomplished much: The Euro was adopted, DSL went mainstream and telcos went NGN.

Not least, consumers woke up to the pleasures of mobile content, although it’s questionable whether MNOs will ever see a fair return for their expensive 3G licenses. Roaming charge crackdowns and market saturation haven’t helped financials either.

Time again to put a nebudchadnezzar on ice? There’s plenty under the tree for 2010:

1. Ethernet will be everywhere. Ethernet is in the LAN, it’s in the WAN, it’s transforming mobile backhaul economics, and it’s converging the datacenter. Fiber remains best, but clever vendors (see Hatteras, Actelis) are delivering copper-bonded Ethernet in the first mile. And new Ethernet exchanges (see CENX and Equinix) aim to speed order to cash with their interconnect services. Want a unifying communications fabric? Well duh!

2. The CDN bubble will burst. Telco CDNs can offer compelling features, but how many service providers can the market sustain, even if video traffic is exploding? Many partnerships are already in place: Tata Communications with BitGravity, Verizon with Velocix, Deutsche Telekom with EdgeCast and Global Crossing with Limelight Networks and EdgeCast. If you’re not in the game now, you’ll need deep pockets to buy in.

3. The cloud’s hot air will expand. Resilient, liquid (and probably Ethernet-based) connectivity is going to save the outage-prone cloud. To invest in cloud services enterprises require robust network as well as applications-specific SLAs, as well as network redundancy, say Yankee Group enterprise surveys. Offering on-demand VPN connectivity to cloud services (on a wholesale or retail basis) could help defuse concerns about their security and resilience.

4. Equipment vendors will want to be your new best friend. The ratio of CAPEX to revenue currently stands at 12.6 percent among European operators, according to Yankee Group analysis. It’s not going to recover much. That’s why European equipment vendors like Alcatel Lucent, Ericsson and Nokia Siemens Networks are on a charm offensive with managed services propositions and aims to transform telco business models. Listen to their pitch. And talk to Huawei:  With a new SDP partner program and growing software division, it’s got more in its arsenal than cheap kit.

5. Smart wholesale will become sexier than dumb wholesale. Get big, get niche or get out. Embrace revenue-sharing models with non-traditional partners. And work mobile angles: International remittances, GRX to IPX interconnect, content transcoding, white-label mobile UC and M2M are among many rich avenues of investigation.

Best wishes for the New Year – and decade – look forward to continuing the conversation!

Connected homes filled with Anywhere consumer devices sound like such happy places. But  consumer electronics vendors forget that such connectivity also means that consumers get to see their every mistake, and some of those mistakes can be bad for their brands—very bad.

Jarrett Sloan, one of YG’s software gurus, recently had the misfortune of personally experiencing one of Samsung’s mistakes on his Samsung HT-BD1250 Blu-ray home theater system. Samsung recently issued a firmware update for that system, and Jarrett dutifully applied the update using his wireless Internet connection. All was well and good until the system restarted, at which point the system only displayed “LOAD”. His system had been “bricked” by the update.

Read the rest of this entry »

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.

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.

On Friday last week I was invited to a preview of Orange’s Spring/Summer 2009 Collection. As I’ve mentioned in the past, Orange structures its product innovation work in bi-annual runs it calls La Collection, just like fashion collections. in the course of a short hour, I and a number of internal and external people were rushed through all the latest and greatest to come out of Orange’s labs. Here’s a quick run-down of what I saw and what struck me:

• 24/24 Actu: the first service that I saw was probably the one I found the most interesting, although that might be because it’s personally of interest to me. 24/24 Actu is a web portal that aggregates national news from various sources, both print, audio and video. It breaks it down in themed and searchable chunks. Essentially, the user types in a topic in the search bar and gets all articles, radio snippets and video clips related to said topic. The service is functional and a user pilot is to begin soon. The only snag: the business model is “currently unknown”.

• New Livebox: After 5 years, Orange’s lifebox gets a facelift, both external and internal. On the looks side, I’m not all that impressed. It’s still big and has a less sexy design in my opinion. Not that I care much though, to be fair. More interesting to me is the ergonomy redesign. The menus and navigation finally look like something, and though we’re not at Fios Media Guide levels yet, we’re getting there. Widgets are promised, both from Orange and third-parties.

• Hi-Fi Adapter: This is a device that you plug on your (traditional) stereo and allows you to stream all the music content on your PC (or from Orange’s LiveRadio service) on your stereo. Gimmicky, but nice.

• Tabbee: A concept I’m really struggling with. Tabbee is a 299 EUR touch screen device that allows you to access internet through the home wi-fi. I have a lot of trouble thinking anyone would dish out that much money for a device that sits at home and allows you to do the same thing as you PC, only on a smaller screen. If I want to check out my email without walking to my PC, I use my iPhone…

• Media Remote Control: the idea of the media remote control is that your smartphone works as a universal remote control to select content on your PC or other available devices and stream it to any other connected devices. I thought the technology was sleek, but I don’t really think this is hugely likely to catch up.

• Medical office: this is a service dedicated to doctors. It allows for automatic backup and encryption of any files and correspondance on patients. It’s certainly user friendly; beyond that, not being a doctor myself I have no idea how attractive it may be to one.

• Telepresence: you don’t present telepresence anymore, but since Orange is embracing Cisco on this line of products, they do. Sleek as ever, and Orange, unsurprisingly, offers a fully managed service on top of reselling the equipment and selling the connectivity.

• Visual Voicemail: taking a leaf from the iPhone book, Orange launches VVM for all mobiles.

• IM for emerging countries: this service is effectively an SMS-based IM mobile client which can interoperate with existing IM clients. The idea is to have a non-IP based service that doesn’t rely on a mobile data network. The pricing will be key, of course, and it sounds like it will be pay as you go, which I think is an issue…

• Application Shop: Again, inspired by the success of the iPhone app store, Orange intends to launch a device agnostic app store. The store will install each app as rendered specifically for the customer’s mobile. This competes or completes Orange’s existing app delivery channels (own web portal and Gallery) depending on your point of view.

• Orange TV Player on iPhone: this is an iPhone app that allows you to stream and view Orange distributed TV channels on your iPhone. Looks sleek and makes good use of iPhone ergonomy and capabilities. It’s a paying service (of course) and must squeeze the juice our of your battery like all hell, but it’s sexy.

Overall an interesting collection. I kept thinking throughout that none of this was really very innovative. The communication spin was that simplicity was also innovation and while you might agree with that, I felt that none of what I saw was exactly conceptually new or unexpected coming from a telco such as Orange.

That’s not to say that the services presented are uninteresting or without potential (though I would argue that some in there are unlikely to experience more than confidential distribution), but I think it’s a misnomer to call what was shown there “innovation”. Coming at a time where the French press questions Orange’s capacity to innovate, I’m not sure that, sleek as some of these services were, the Spring Summer 09 collection will have convinced them otherwise…

If you need visuals to form an opinion, Telecom TV has covered the event: