The Changing Flow of Story Telling: The Potentially Large Impact of the Second Screen 0

Today there is a tremendous amount of focus on the proverbial “second screen.”  But today when most refer to the second screen they mean some screen adjacent (and subservient) to the television.  I think this relationship is changing.  As I’ve outlined in other places, ownership rates of connected devices has increased significantly in recent years.  CEA predicts some 350+ million IP connected devices will sell in 2013 alone.  Worldwide the tally will be well in excess of a billion devices.  Among this count are tablets – which globally sold over 150 million devices alone in 2012.  Global smartphones will approach 900 million in 2013.

Television continues to enjoy a greater installed base, but the proliferation of mobile/portable devices with connectivity and screens will cause that to change quickly.  More, device usage among owners is changing quickly. We now spend 11 hours a day consuming media.  At the same time, consumer attention is becoming increasingly fragmented across media platforms and devices. Flurry recently reported that consumers are spending 127 minutes per day in mobile apps, up 35 percent from 94 minutes a day during the same time just a year ago. At the same time, desktop web usage actually declined slightly – falling 2.4 percent from 72 to 70 minutes.  This means that U.S. consumers are spending nearly two times more time in mobile apps than surfing the web on desktop computers.

Time spent with mobile apps is starting to challenge time spent watching TV. Flurry estimates that the average U.S. consumer watches 168 minutes of television per day, based on data from the United States Bureau of Labor Statistics for 2010 and 2011. As the chart shows, in December 2010 individuals spent about 66 minutes a day in mobile apps and 162 minutes a day in TV viewing.  Today those numbers are at 127 minutes and 168 minutes. I think by 2014, we could see individuals spending more time on average inside mobile apps than they spend watching television.

Time spent within apps is also morphing.  Entertainment apps and utilities gained market share at the expense of social networking and games. Last year, games took up 50 percent of time spent in mobile apps while social networking accounted for 30 percent. This year, gaming’s market share is down to 43 percent while social networking comes in at 26 percent. A recent report from Ooyala Global found “among users of connected devices, share of time spent viewing on tablets has grown 90% over the last two quarters, with nearly three-quarters of tablet viewing time spent on long-form content. Tablet owners in particular spent 71% of their total tablet video viewing time watching videos of ten minutes or longer and 30% of total tablet viewing time was spent watching content over an hour long.”

Today, consumers are increasingly engaging on multiple devices. We’ve become digital omnivores. According to recent research from Nielsen,  40% of Americans use their tablets or smartphones at least once a day while watching TV and 85% do so at least once a month. The Diffusion Group recently reported when it comes to the use of social TV apps among tablet-based social TV users, 84% use social networks like Facebook and Twitter to interact with friends about the TV program they are watching at that time (34% do so daily), 88% search the web for information about the program they are currently watching (22% do so daily), 70% text or instant message others about the program they are currently viewing (20% do so daily), and 63% use apps that synch in real-time with the TV program being viewed (16% do so daily). TDG reports, “the same phenomenon is observed among smartphone owners, though the frequencies of social TV activity vary (a bit lower for all but texting/instant messaging, which is a task better suited for smartphones as opposed to pads).”

Here is where I see the potential for the greatest impact on the “second screen experience:” if consumers are starting their engagement of a given media asset on a mobile/portable device then the flow of engagement changes and tablets (or smartphones) become the primary screen.  TVs become subservient to them.  Consumers will still watch content on the television, but how they get to that content is different.

What are the implications for story tellers? Here are a few things to think about:

1)      Engagement is going to start with smaller screens but that isn’t necessarily where consumers want the engagement to end. Today, many studios and other content owners are using second screens as a dumping place for what they commonly view as secondary content (outtakes, interviews, etc).  How does this change when the second screen is where the engagement is beginning?

2)       Consumers are going to push content to the TV from their mobile devices. This means content engagement on the TV might not start in the beginning of the story.

3)      With engagement starting on mobile devices, there are implications for video quality

4) With engagement starting on mobile devices, there are implications for video length

5) There are also implications for monetization of the content.  If consumers start with the content on the second screen they might buy it on the first screen.

The Changing Flow of Video – from the Tablet to the TV 0

The popular news site, Huffington Post, recently released a new iPad app to accompany the HuffPost  Live – the social video site it launched back in August.  As the app description states,

HuffPost Live is a live-streaming video network that uses the most engaging stories on The Huffington Post as the jumping-off point for real-time conversations and commentary – and invites viewers to join the discussion as on-air guests. Topics range from current events to entertainment to tech to parenting to health and fitness.

gigaom recently wrote how the App could be a second-screen break through. I think it points to the changing nature of tablets and TVs. Tablet ownership has increased significantly in the last year – from about 11 percent of US households last year to 31 percent today.  I expect tablets will be in nearly 50 percent of households by year-end.

Over the last year there has much discussion about tablets as second screen devices to the TV.  We are seeing how tablets as second screen devices are changing storytelling. But I also see the role of tablets changing – as individuals increasingly use tablets and smartphones to tee-up videos and other content for the TV. In this way,  we could be witnessing the beginnings of a change in the flow of video content that starts with the tablet instead of the TV.

Today writers/directors/producers are using tablets and second screens to tell a story that is tangential to the primary story.  But ultimately, viewers might find these tangential stories more compelling or of more interest to them and might want to push these secondary story lines to the primary set. With apps like the HuffPost Live app, users can utilize their tablets to serve up content to their TVs.  Users are ultimately gaining more control.

An Integrated Hardware/Software Approach 0

Over the last few weeks both Google (see Nexus Tablet and Nexus Q) and Microsoft (see Surface) have announced major hardware initiatives.  In both cases, these hardware initiatives have been primarily focused on the mobile/tablet ecosystem.  Even Microsoft’s recent software announcement – Microsoft SmartGlass – is targeting the growing tablet ecosystem.  Both companies are taking a more hands-on approach to the growing tablet ecosystem as they seek to more closely integrate their software strategy with a hardware component.  These moves are partly in the hopes that a hardware component will spur software demand and help buoy their entire platforms respectively.

On Apple’s 1Q12 Numbers, iPads and other Apple-related Musings 0

Apple surprised to the upside (though it really shouldn’t be a surprise) with their quarter results today.  Here is a quick overview of what they reported for fiscal 1Q12:

  • Revenue: $46.3bn (+64% q/q +73% y/y) v. consensus of $38.9bn and company guidance of $37.0bn.
  • Gross margin: 44.7% for the quarter (up 440 bps q/q) v. consensus of 40.8%.
  • Operating margin: 37.4% (up 660 bps q/q) v. consensus of 32.5%.
  • Earnings Per Share: $13.87 v. consensus of $10.08 and company guidance of $9.30.
  • Mac sales: 5.20M (+6% q/q +26% y/y) v. consensus of 5.16M.  This figure includes 1.48M (+16% q/q  +21% y/y) desktops and 3.72M (+3% q/q +28% y/y) portables.
  • iPhone sales: 37.04M (+117% q/q  +128% y/y) v. consensus of 30.2M
  • iPad sales: 15.4M(+39% q/q +110% y/y) v. consensus of 13.9M
  • iPod sales: 15.4M (+133% q/q) v. consensus of 13.6M

There has already been much written on the results so I’ll just add my thoughts (in bold) to the commentary below:

Tablet and eReader Ownership – How to Read Apple’s Numbers 0

Later today, Apple will report Q1 figures.  We know much has changed in the tablet market over the last three months.  Earlier this week, Pew Research Center’s Internet & American Life Project reported tablet and eReader ownership (unsurprisingly) surged during the 2011 holiday season.

This is consistent with what I expected (and subsequently reported) following Black Friday and the (unofficial) start of the holidays. Starting with Black Friday (but really through the entire holiday season) several things too place to help drive tablet sales.  First, prices came down significantly.  Prices for many of the “high-end” tablets were marked down significantly and lower priced tablets entered the market in calendar Q4.  A declining price helps up-take.  Secondly, both devices have been in the marketplace for 18+ months and are moving quickly into mass market appeal.  We are moving into the fat part of the adoption curve.  Finally, tablets were the loss-leader for many retailers on Black Friday.  While the volume wasn’t high on a single-store basis, in aggregate there were a plethora of tablets (from a variety of OEMs) bought during the weekend across a myriad of retailers from Best Buy to Big Lots to Radio Shack to Staples, to ToysRUs.  CEA estimates 14 percent of those who purchased tech over the weekend bought a tablet – up from six percent in 2010. eReaders also did well over the weekend with an estimated 15 percent of tech shoppers buying an eReader.  This figure is up from 13 percent in 2010 and two percent during the 2009 Black Friday weekend.

According to Pew, both tablets and eReaders are now owned by about roughly 1/5 of the US population.  More than a third of those living in households earning more than $75,000 (36%) now own a tablet computer and almost a third of those with college educations or higher (31%) own tablets.

Why the Kindle Fire and the Barnes & Noble Nook Tablet are Good for Traditional Retail 0

This month Amazon’s new tablet the Kindle Fire and Barnes & Noble’s Nook Tablet go on-sale this month.  While both products are technically the house brand of competing retails, they’ll be widely available  in a variety of retail channels.  One would typically presume that a consumer interested in the Kindle Fire would just go to Amazon.com to make the purchase while someone interested in the Nook tablet would go to BN.com or a B&N store.

In fact, shoppers like to compare – even when they think they’ve made up their mind.  A series of new tablet offerings – both garning strong media buzz – is a positive for retailers. While it is always difficult for a retailer to make margin selling what is a akin to the house brand of their competitors, the introduction of several competing devices creates a catalyst for consumers to enter into stores and compare.  This will help drive traffic, potential sales of the devices, but even more important is sales of the higher-margin accessories. With the significant decline in physical media, several other elements are becoming traffic drivers.  Today’s hottest hardware devices are now traffic drives.  Confusion or multiple available selections within a category are also key traffic drivers.

Tablets Don’t Need to be $99 to Sell 0

A little over a week ago, HP decided to exit the WebOS tablet market and began to liquidate the HP Touchpad at the firesale price of $99.  It should come as no surprise, these disappeared quickly. As I recently wrote, increasingly the future of tablets (and like devices) will be Web apps so good browser-enabled devices
will find traction within these markets if they are competitively priced.  In the last 6 months I’ve constantly been asked what it will take to find traction in the tablet marketplace.  I’ve suggested a $300-$350 price point would significantly stoke sales.  A quick analysis of the secondary market pricing (ie eBay) of HP Touchpad’s suggest the $300-$350 price point is close.

I pulled data for 6,180 ended eBay auction listings for “16GB” “HP TouchPad” tablets.  I narrowed my results by only including those listed as new. The closing prices ranged from a total price (closing price + shipping cost) of $110 to $1400.  I excluded a few outliers that closed with a price below $110 or above $1,400.  The data come from auctions ending on or between August 14th and August 27th.

I further narrowed the 6,180 observations by excluding all listings that didn’t end in a sale.  I was left with 4,623 ended listings for a total value of 1,135,956.14. Here are a few summary statics and graphs of the underlying data.

Bids

Of the 4,632 listings nearly a quarter (23.8 percent) were ended with the Buy-It-Now option.  An additional 12.4 percent ended with just one bid and 6.6 percent ended with a Best Offer price. A total of 69.6% of the listings ended with bids for a total of 60,469 bids. Remember I’ve excluded all listings that didn’t end in a purchase so we are only looking at purchased items. For the listings that ended with bids, the average listing received 18.8 bids and the median number of bids was 19.

Shipping

Shipping for the 4,623 listings ranged from $0.00 to $50.00.  Of the 4,623 listings, 1,981 offered free shipping (42.85%). Including free shipping, the average shipping cost was $7.49 and the median shipping cost was $8.00. Including free shipping, 56.5 percent of the listings had a shipping cost below $10.

Price

The real story in the secondary market for HP TouchPad tablets is what happened to price and volume.  Prior to the price cut, about 5 new 16GB HP TouchPad tablets sold each day on the secondary (eBay) market. Now, the secondary market is averaging about 600 tablets each day and this was nearly 1,000 completed listings on the Monday immediately following the price cut.

 

[table id=14 /]

 

Prior to the price cut, the secondary market price for HP Touchpads was about $350 – roughly 70 percent of the MSRP.  With the official price cut, the secondary market price also fell quickly though it didn’t fall as low as the HP price of $99.  The secondary market price dropped to and remained at about $250 – a decline of nearly 30 percent but still 150 percent above the liquidation price of $99.

 

[table id=15 /]

 

The $250 price point is a bit lower than the $300-$350 range I’ve been suggesting as the needed price point to significantly drive tablet unit volume. However, because some buying risks do exist for the secondary market, the price point for the primary market will naturally be higher than the price point in the secondary market. As I showed above, the secondary market had a 30 percent price discount to the primary market in advance of the price cut to $99. A simliar discount now would suggest a primary market price of $350.

 

Update: as TechCrunch reports, the cost on a Touchpad might be around $300 – close to the market clearing price.  This uggests HP could sell the hardware near cost and cross subsidize with content sales.

Why the Future of Tablets Isn’t in Apps 0

Pudits like to point to apps (and importantly the availability of apps) as the deciding factor in the success (and failure) of tablets and other app-oriented devices.  Most developers have the bandwidth to support at most two (and sometimes three) development platforms.  The largest app developers – the Pandoras and Kindles of the world – will allocate resources for greater development.  These business models are built on the ubiqitious availability of their offerings, but beyond say the top 20 percent most developers will only be able to support one or two platforms.  With this, many suggest only the two largest platforms (iOS and Android) will survive thrive because their users will have access to the lifeblood of mobile computing devices – apps.  Other platforms will still see development of course.  This development will be focused more on niche applications and then of course the 20 percent who are developing for most available platforms.

But HTML5 is coming (quickly). There is an increasing amount of HTML5 Web app development happening.  This will drive the app ecosystem to the cloud and means that any browser-enabled device will be able to compete against devices with large native app ecosystems.  This will significantly open-up the battle within device hardware.  The recent firesale of HP’s TouchPad tablets highlights the market dynamics at play.  Despite selling for $99, the secondary market price for TouchPads is close to $250.  Despite the fact that large-scale developement will slow significantly for WebOS devices, these devices have strong video and audio feature sets and a small selection (the 20 percent) of native applications for some of the more popular tablet activities collectively covering most of the services consumers are interested in.

Understanding “Mobile” Shopping 0

Earlier this week, the New York Times reported on a study by Forrester.  The key finding: “Even though just 9 percent of shoppers own tablets, sales from tablets already account for 20 percent of mobile e-commerce sales and 60 percent of tablet owners have used them to shop.”  Certainly tablets are set to have a disruptive impact on a variety of services and devices, but it is important to frame “mobile” in the correct light.

The term “mobile” is being thrown around too loosely.  Mobility is a relative term, but it is frequently being used in the absolute sense.  There are several device attributes that influence the degree to which a device/experience is mobile. These include device size, power or battery life, and availability of content. Size and batter life are self explanatory. The smaller a device the higher degree of mobility it affords users.  This of course assumes some constant level of usability.  One could easily imagine a device so small it isn’t useful to the end user. In this way, size could have asymptotic characteristics.  Size influence on the device’s degree of mobility can also be general (applied to the entire size of the device) or it can be specific to an attribute of the device like screen size, antenna, etc. For power and battery life, the great the longevity of power the greater the degree of mobility provided by the device.  Power longevity also doesn’t necessarily mean battery life. The in-vehicle experience readily provides 12V power to devices used in and around vehicles, but these are still mobile devices in the general sense for which we are using it here.

The degree of mobility a device provides is also a function of the content it provides the end user.  This content can take many forms and can be delivered in many ways.  Content includes video (ie Portable DVD players) and audio (ie portable tape players to MP3 players).  It could include maps (ie GPS) or other information (ie data available on the Internet).  It can be delivered to the device physically (ie tapes, CDs, DVDs) or digitally.  Content delivery influence on mobility is also a function of time.  It can be delivered before the device moves into a “mobile” state – this is generally the case with devices requiring physical media.  But content is of course increasingly being delivered while the device is in a mobile setting using spectrum.  This use to be only really applicable to radio and some TV, but is increasingly applicable to all forms of content. The greater the access to content, the greater degree of mobility the device can provide.

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