Verizon buys into alternative realities

Verizon has announced the acquisition of Jaunt XR, adding augmented and virtual reality smarts to its media division.

While few details about the deal have been unveiled, the deal will add an extra element to a division which has been under considerable pressure in recent months. The Verizon diversification efforts have proven to be less than fruitful to date, though this appears to be another example of throwing money at a disastrous situation.

“We are thrilled with Verizon’s acquisition of Jaunt’s technology,” said Mitzi Reaugh, CEO of Jaunt XR. “The Jaunt team has built leading-edge software and we are excited for its next chapter with Verizon.”

Jaunt XR will join the troubled media division of Verizon which has been under strain in recent months. The ambition was to create a competitor to Google and Facebook to secure a slice of the billions of dollars spent on digital advertising. On the surface it is a reasonable strategy, but like so many good ideas, the execution was somewhat wanting.

Since the acquisition of Yahoo, Verizon has had to deal with the after-effects of a monumental data breach, write off $4.6 billion of the money it spent on the transaction, spend big to secure a distribution deal with the NFL and cut 7% of its staff. The first few years of living the digital advertising dream has been nothing short of a nightmare.

Looking at the financials, during the last quarter the media division reported $1.8 billion in revenues. This was down 2.9% from the previous year and accounted for only 2% of the total revenues brought in across the group.

With Jaunt XR brought into the media family, new elements could be introduced to the portfolio. Details have not been offered just yet, though with VR, and more recently, AR expertise, there is an opportunity to create immersive, engaging content for the mobile-orientated aspects of the business.

This transaction will certainly add variety and depth to the services and products in the media portfolio, but soon enough you have to question whether Verizon is throwing good money after bad. This has not been a fruitful venture for the team thus far.

IBC 2019: Interactive takes centre stage as VR shuffles to side lines

Every couple of years there seems to be a massive resurgence for the promise of virtual reality before it is cast to the shadows. This year, interactive content took the limelight from VR.

This is not to say VR and augmented reality wasn’t present at IBC in Amsterdam. Throughout the exhibition halls you could see plenty of headsets and software to build the immersive environment, but on the conference stage it was barely mentioned.

The main stage is the business-end of almost every conference; it a technology or company isn’t a headliner, the ‘also-ran’ category list has gotten a bit longer. This is the conundrum which VR and AR has found itself in; there are some interesting technologies and discussions going on, but the most important people are talking about something else.

AR is progressing very quickly from the pale imitation which captured the imagination through the Pokémon Go app, but the illusive business case continues to frustrate. That said, an important trend which was evident through several sessions was interactive content.

This is an area which looks genuinely exciting. Everything from ‘Bandersnatch’ on Netflix, through to personalisation of sports content (selecting a commentator or parallel content) or Celebrity Big Brother, where users can select the camera they want to view and create their own viewing experience and story to follow. This is the next stage of content, and it is immediately more realistic than some of the blue-sky thinking ideas which are scattered throughout the exhibition halls.

Of course, this should not really be that much of a surprise. The idea of interactive or supplementary content being built into platforms is just one step along from how many younger generations consume content today. It isn’t a single point of consumption, its multiple screens, complimentary experiences and a variety of simultaneous touch-points.

Research from YuMe and Nielsen suggests the trend for adults who use their smartphone or laptop while watching TV content is increasing each year. For 2018, 187.3 million US adults admitted to using multiple screens simultaneously, up 6.4% from the year before. Users want more ways to engage with content and building interactive opportunities into content platforms is certainly one way to apply this trend in the real-world.

Hello Kitty guided to the AR gaming world by Google Maps

Hello Kitty is the latest product of a by-gone era to be given a digital face-lift as developer Bublar promises the launch of another location-based, augmented reality (AR) smartphone game.

Like Pokémon Go and Harry Potter: Wizards Unite, this title is seemingly targeting the consumers sense of nostalgia to grab a slice of the increasingly profitable smartphone gaming segment.

Powered by Google Maps, ‘Hello Kitty AR Kawaii World’ will bring take the iconic character Hello Kitty, first debuted in 1974, into the digital content arena with the promise of AR. Pre-registration for the game will begin at Hello Kitty´s 45th anniversary in November, with Swedish developer Bublar hoping to launch the title in early 2020.

“Our mission is to merge the real and imaginary worlds together in a fun way, connecting Augmented Reality and digital content to real-world locations,” said Wictor Hattenbach, Game Studio Director at Bublar.

“Our collaboration with Google Maps Platform gives us access to the most prominent mapping service in the world. Buildings, roads and parks will in the game be transformed into a Kawaii world for Hello Kitty and her friends based on Google Maps Platform.”

Although the marriage of augmented reality and mapping technologies does look to be a promising one in the smartphone gaming segment, this is only a tentative step. For the location-based gaming concept to be fully validated, there will be have to be a game which stands on its own two-feet, attracting interest on its own merit. Leaning on the concept of nostalgia is an effective strategy, but there are only so many horses to back in that competition.

So far, we have seen some successful ventures into the world of nostalgia. Pokémon Go was of course a rip-roaring success, and while there is promise for the Harry Potter franchise, the early signs have not been anywhere near as bountiful. That is not to say it won’t make money, but such was the profit-machine Pokémon Go was and is, it has set the bar very high.

The interesting element of the Harry Potter and Hello Kitty games is relevance today. Pokémon Go’s success was partly down to nostalgia, though it will begin to tail off as there is not an engaged audience today. The games are not played as much, and the TV series is no-where near as popular. Harry Potter and Hello Kitty have retained audiences which are constantly engaged through various different mediums.

Of course, what you have to bear in mind is that a large percentage of the audience will not be old enough to have credit cards, parents will have to authorise payments. This is where Pokémon Go perhaps can attribute a notable proportion of its success. That said, there is an element of longevity with these two titles which might not be present for Pokémon Go in the coming years, unless of course the brand can be refreshed through supporting channels.

As mentioned before, nostalgia is not a bad thing however. It will normalise the idea of location-based gaming in the eyes of the consumer, and once it has been normalised, a more varied ecosystem can be developed with a broader range of titles. The nostalgia effect will build market confidence that this is an area in the app economy which can be profitable.

It will be interesting to see how many more titles emerge over the coming months and years as location-based gaming becomes more popular. ‘Otherword Heroes’ is one which Bublar currently has in development.

This is another game which marries AR and location-based technologies to build a new type of smartphone experience, but it is a new story; it isn’t using nostalgia to drive downloads or popularity. Currently in public beta mode, using Bublar’s MMO-platform (massive multiplayer online) where real-time users create and interact with data linked to real-world locations.

The team intend to launch ‘Otherword Heroes’ towards the end of 2019, using the ‘freemium’ model. Users can download the app for free but will be able to enrich the in-game experience through in-app purchases, while advertising revenue can be realised through rewarded ads in-game to unlock or speed-up certain game content. It’s a common-enough model, though it does rely on scale.

The online gaming segment, especially content designed for smartphones, is growing rapidly across the world. This growth is not only being realised in the revenue columns of the spreadsheets, but also the number and variety of users. Smartphone games are increasing the accessibility of online gaming, bringing in users who would never have considered spending hundreds on consoles. The format is opening-up the segment massively.

Location-based gaming looks to be somewhat of a fad, driven by nostalgia, currently but soon enough stand-alone, novel concepts and content will emerge. We are really exciting about the prospect of location-based gaming and can’t wait to see what creative/crazy ideas emerge when the idea is normalised, encouraging more developers

Niantic’s Harry Potter launches but remains in Pokémon Go’s shadow

Harry Potter: Wizards Unite is up-and-running, but its dash from the starting line is no-where near as fast as Niantic’s gold standard, Pokémon Go.

Few would have predicted the roaring success of Pokémon Go. Most would have assumed it would have done well, but the sustained acceleration of downloads and revenues came as a surprise to most. Even now, almost three years after the launch of the game, Niantic is still hoovering up the cash; the first quarter of 2019 brought in an estimated $205 million; it left a lot for Harry Potter to live up to.

But if you are expecting new records to be broken, you might feel a little bit underwhelmed.

This is not to say Harry Potter: Wizards Unite is not doing well. Most app developers would sell their left leg for the numbers being reported over this weekend. According to estimates from Sensor Tower, Harry Potter: Wizards Unite was downloaded three million times over the opening weekend, bringing in $1.1 million in player spending. Projections for the first month stand at roughly $10 million.

For a single title, most developers would be thrilled by this, but Niantic will always have the Pokémon Go comparisons to deal with.

During the first four days of Pokémon Go, Niantic boasted 24 million downloads and player spending of $28 million. In the first month, player spending reached $206 million and downloads were almost 173 million. Realistically, Harry was always going to struggle to meet these expectations. But that is not to say it won’t be a success.

Your correspondent downloaded the game over the weekend and has been playing around with it over the last few days, and it is pretty good. The experience is better than Pokemon Go, the AR is closer to what many would expect and there is more of a story involved.

There are a few issues, though many of these would have been expected. Heavy data consumption should be expected, your correspondent used 636 MB in the first two days and wasn’t using it as much as most would. Battery life also takes a notable kick, five hours was knocked off what was to be expected on the device in question. Both of these factors might have a notable impact on how much users are using the game in the long-run.

But why has Harry Potter: Wizards Unite fallen short on the lofty goals? We suspect the nostalgia factor is the biggest contributor.

Firstly, lets have a look at the audience. Pokémon came into existence in 1996 primarily targeted at children, however even in the early days there was popularity with those in their 20s. Those who played the original games are 23 years older, though the TV series also proved to be incredibly popular across the world, running from 1997 through to today. There will be millions who are in their 20s, 30s and 40s who would have watched the show and felt the nostalgia bug when the game was launched almost three years ago.

The first Harry Potter title was released in 1997, though perhaps did not reach the peak of its fandom for a decade. During the 00s, the final books were being released and the films were taking the franchise to new audiences. Harry Potter remains popular today, but the core audiences are younger due to the longer period of time it took the spark to grow into a flame.

In short, the nostalgia bug bit for more people in control of credit cards for Pokémon Go than with Harry Potter: Wizards Unite. Many of those downloading the Harry Potter title today will have to ask permission from parents to make purchases, whereas we suspect a much higher proportion of those with Pokémon Go can make their own financial decisions.

Looking at statistics revealed by Survey Monkey a few months after Pokémon Go was released, 71% of players were aged between 18 and 50. The comparative numbers have not been revealed for Harry Potter: Wizards Unite just yet, but we suspect they will be a lot younger. For the final two films of the Harry Potter series, 56% and 55% were over the age of 25, but the books are designed for teenagers.

Secondly, we are going to have a look at the global appeal of both titles.

Although both are incredibly popular throughout the world, one originated in the UK and the other in Japan. Due to the fact the Pokémon TV series was animated, dubbing into new languages would have been much simpler, increasing the accessibility of the content. The TV series is available in 169 countries around the world, while the Harry Potter book series has been translated into 80 different languages.

Harry Potter is very popular in the likes of Japan, South Korea and China, though we suspect it does not exceed the popularity of Pokemon at its prime. This will have a translation into the nostalgia effect which drove the initial adoption of Pokémon Go and the continued success today. Let’s not forget, the US and Asia are the two biggest regions for gaming revenues and perhaps these markets favour the Pokemon brand over Harry Potter.

We confident the Harry Potter game will be a success, but it isn’t able to tap into the nostalgia effect of the right audiences. With the brand continuing to be more relevant than Pokemon is today, see the theme parks and sustained popularity of the movies, it will bring in revenues but perhaps not on the same scale in the short- to mid-term as Pokémon Go.

What we are less confident about is the impact this will have on the normalisation of AR in the entertainment world as a direct result. Yes, it will have an incremental impact and open the eyes of some, but we doubt this will be a watershed moment for the technology.

That said, we do not believe there will ever be a watershed moment for AR. This is likely to be a technology which gathers momentum slowly, gradually being introduced as additional features in every day life. Before we know it, AR will be everywhere, and we’ll wonder where it came from.

Niantic’s Harry Potter might take AR into the world of reality

Augmented Reality is a technology which has promised a lot but hasn’t delivered to date. Niantic will be hoping the hype converts into gain with the launch of Harry Potter: Wizards Unite.

Aside from being a title which taps into the nostalgic cravings of millennials, this is one of the first products which promises to genuinely make use of AR. Of course, we will reserve judgments until the product has been launched on Friday (June 21), but there will always be doubts in the build-up.

The doubts tie back to Pokemon Go. This was an incredibly successful app for Niantic and still brings in the profits. But, from an AR perspective, it wasn’t that genuine. This was an app which laid static images onto reality through the camera. For some, this might be AR, but realistically, AR has to interact with the environment. It was a half-way solution, but commercially it was incredibly successful.

There are perhaps two major reasons it was a massive money-maker for the firm. Firstly, it was a game which offered a new twist to users. Little could be compared to Pokemon Go at the time, and it captured the interest of millions. Secondly, nostalgia.

Nostalgia is a powerful draw for many, and in Pokemon Go, Niantic engaged numerous generations. The same could be said about Harry Potter. Spreading through the books and the movie franchise, this is a title which could attract interest from today’s generation through to those in the 40s. If the game is any good, it could make a ridiculous amount of cash.

The promise is this game will actually deliver on the AR expectations. Users will be able to explore the Muggle world through the app, encountering various characters, challenges and missions in different physical locations. Users will be asked to assume the character of a new recruit in the Statute of Secrecy Task Force to investigate The Calamity.

We’re not too sure what to expect, but we are pretty sure the downloads with soar over the first couple of days. The depth of the experience and the effectiveness of the new technology will drive popularity once the initial excitement has dipped.

One of the areas which is worth keeping an eye on is whether they can prevent the servers from crashing.

This was one of the issues which Pokemon Go faced. It would appear Niantic did not anticipate the popularity of the app, resulting in the service crashing constantly for weeks on end. We dread to think how much revenue was lost due to the fact users couldn’t actually log on, and we hope lessons have been learned. Surely the right amount of resource has been allocated but the same issue persists; predicting demand is a very difficult task.

The next couple of weeks could prove to be very interesting. Firstly, whether Niantic is finally embracing AR properly, and secondly, whether this opens the door for everyone else. If this app proves to be successful, consumers might have their eyes opened to the promise of AR. This app might be a very important factor in validating the technology for the general public.

The doors could be blown off the hinges, or at least if you are watching the doors on the screen of your smartphone.

Google has another run at the AR world

Google is taking another crack at the growing augmented reality segment with the launch of Glass Enterprise Edition 2.

While the first enterprise product has seemingly trundled along without fanfare, Google will be hoping the segment is ripe enough to make the desired millions. Although this is a technology area which promises huge prospects in the future, sceptics will suggest society, networks and the supporting ecosystem isn’t quite ready to make this dream a reality.

“Over the past two years at X, Alphabet’s moonshot factory, we’ve collaborated with our partners to provide solutions that improve workplace productivity for a growing number of customers – including AGCO, Deutsche Post DHL Group, Sutter Health, and H.B. Fuller,” said Jay Kothari Project, Lead for Glass. “We’ve been inspired by the ways businesses like these have been using Glass Enterprise Edition.

“X, which is designed to be a protected space for long-term thinking and experimentation, has been a great environment in which to learn and refine the Glass product. Now, in order to meet the demands of the growing market for wearables in the workplace and to better scale our enterprise efforts, the Glass team has moved from X to Google.”

This is a massive step for any Google idea. Graduating from the moonshot labs to be listed as a genuine brand in the Google family is a sign executives think there are profits to be made now, not in the future. Over the last couple of months, we’ve seen the likes of Loon and Fi make their way into the real world, and now it is time for Glass to hit the big time.

Google Glass was first brought to the market in 2013, though this wasn’t exactly a riveting success. Perhaps it was just a sign of the ecosystem and society at the time; people just weren’t ready for this type of innovation. However, Google is a company which often demonstrates innovation leadership and it was never going to completely give up on this idea. The products were taken back to the labs and refined.

What you have now is an enterprise orientated product which has the potential to run into the mass market. This makes sense for two reasons; firstly, there are more immediate usecases for the enterprise world, and secondly, businesses have more money to spend on these types of products than the consumer.

What remains to be seen is whether Google has any long-term interest in the hardware space or whether this is a game-plan to generate momentum in an embryonic segment.

When you look at the smart speaker segment, Google was always set to make more money in software and services than the hardware space. As soon as the traditional audio brands got the idea, its products were going to come up short. However, selling the hardware cheap to gain consumer buy-in while simultaneously demonstrating market appetite to the traditional brands was an excellent move.

Now there are more mainstream brands starting to develop their own smart speakers, Google can create partnerships to ensure its virtual assistance is exposed to the consumer and make money through means which are embedded in its corporate DNA; third-party relationships and online advertising.

Google might well have ambitions to take a leadership position in the AR glasses space, but you can also guarantee it has bigger plans to make profits through the supporting software and services ecosystem.

Who’s got the stones to buy Netflix?

Apple, Disney, Microsoft or Apple; one of the biggest questions which has circled the technology industry over the last couple of years is who could possibly acquire Netflix?

The streaming giant, Wall Street’s darling, has almost constantly been talked up as an acquisition target. However, another year has passed and it’s another year where no-one managed to capture the content beast. You have to start to wonder whether it will ever happen, but here we’re going to have a look at who might be in the running.

Netflix numbersWith subscriptions totalling more than 148 million, 2018 revenues exceeding $15.7 billion and operating income up to $1.6 billion, Netflix would certainly be a useful addition to any company. However, with market capitalisation now roughly $143 billion and debt which would make your eyes water, an acquisition would be a scary prospect for almost everyone.

First and foremost, let’s have a look at some of the players who might have been in the equation, but alas, no more.

Disney has been a rumoured acquirer for almost as long as Netflix existed. This is an incredibly successful company, but no-one is immune to the shift tides of the global economy and consumer behaviour. Getting in on the internet craze is something which should be considered critical to Disney, and Netflix would have given them a direct-to-consumer channel. However, there was always a feeling Disney would develop its own proposition organically and this turned out to be the case.

AT&T is another company which might have been in the fray, but its Time Warner acquisition satisfied the content needs of the business. All telcos are searching to get in on the content cash, developing converged offerings, and AT&T is a company which certainly has a big bank account. As mentioned above, the acquisition of Time Warner completes rules this business out.

There are of course others who might have been interested in acquiring the streaming giant, but for various reasons they would not be considered today. Either it would be way too expensive, wouldn’t fit into the company’s objectives or there is already a streaming service present. But now onto the interesting stuff, who could be in the running.

Microsoft logo

Microsoft

From doom to gloom, CEO Satya Nadella has certainly turned fortunes around at Microsoft. Only a few years ago, Microsoft was a shadow of its former self as the declining PC industry hit home hard. A disastrous venture into the world of smartphones was a slight detour but under the cloud-orientated leadership of Nadella, Microsoft is back as a lean, mean tech heavyweight.

Alongside the cloud computing business, Microsoft has also successfully lead the Xbox brand into the digital era. Not only is the platform increasingly evolving into an online gaming landscape, but it also lends itself well to sit alongside the Netflix business. If Microsoft wants to compete with Amazon across the entire digital ecosystem, both consumer and enterprise, it will need to expand the business into more consumer channels.

For Netflix, this might be an interesting tie up as well. Netflix is a business which operates through a single revenue stream at the moment, entertainment, and might be keen to look at new avenues. Gaming and eSports are two segments which align well with Netflix, opening up some interesting synergies with Microsoft’s consumer business.

“Microsoft is at a crossroads,” said independent telco, media and tech analyst Paolo Pescatore. “Its rivals have made big moves in video and it needs to follow suit. The acquisition addresses this and complements its efforts with Xbox. The move also strengthens its growing aspirations in the cloud with Azure, firmly positioning itself against Amazon with AWS and Prime video.”

However, while this is a company which could potentially afford to buy Netflix, you have to wonder whether it actually will. The Netflix culture does not necessarily align with Microsoft, and while diversification into new channels is always attractive, it might be considered too much of a distraction from the cloud computing mission. Nadella has already stated he is targeting the edge computing and AI segments, and considering the bounties on offer there, why bother entertaining an expensive distraction.

Apple Store on 5th Avenue, New York City

Apple

Apple is another company which has billions floating in free cash and assets which could be used to leverage any transaction. It is also a company which has struggled to make any effective mark on the content world, excluding iTunes success. With Netflix, Apple could purchase a very successful brand, broadening the horizons of the business.

The last couple of months have shown Apple is not immune to the dampened smartphone trends. Sales are not roaring the same way they were during yesteryear, perhaps because there has been so little innovation in the segment for years. The last genuine disruption for devices probably came from Apple a decade ago when it ditched the keyboard. Arguably everything else has just been incremental change, while prices are sky-rocketing; the consumer feels abused.

To compensate for the slowdown, CEO Tim Cook has been talking up the software and services business unit. While this has been successful, it seems not enough for investors. Netflix would offer a perfect opportunity for Apple to diversify and tap into the recurring revenues pot which everyone wants to grab.

However, Netflix is a service for anyone and everyone. Apple has traditionally tied services into Apple devices. At CES, we saw the firm expand into openness with new partnerships, but this might be a step too far. Another condemning argument is Apple generally likes to build business organically, or at least acquire to bolster existing products. This would stomp all over this concept.

Alibaba Logo

Alibaba

A Chinese company which has been tearing up trees in the domestic market but struggled to impose itself on the international space, Alibaba has been hoping to replicate the Huawei playbook to dominate the world, but no-where near as successfully.

Perhaps an internationally renowned business is exactly what Alibaba needs to establish itself on the international space. But what is worth noting is this relationship could head the other direction as well; Netflix wouldn’t mind capitalising on the Chinese market.

As with any international business a local business partner is needed to trade in China. Alibaba, with its broad reach across the vast country, could prove to be a very interesting playmate. With Netflix’s Eastern ambitions and Alibaba’s Western dreams, there certainly is dovetail potential.

However, it is very difficult to believe the current US political administration would entertain this idea. Aside from aggression and antagonistic actions, the White House has form in blocking acquisitions which would benefit China, see Broadcom’s attempted acquisition of Qualcomm. This is a completely different argument and segment but considering the escalating trade war between the US and China, it is hard to see any tie up between these two internet giants.

Google Logo

Google

If you’re going to talk about a monstrous acquisition in Silicon Valley, it’s difficult not to mention Google. This is one of the most influential and successful businesses on the planet with cash to burn. And there might just be interest in acquiring Netflix.

Time and time again, Google has shown it is not scared of spending money, a prime example of this is the acquisition of YouTube for $1.65 billion. This might seem like pocket change today, but back in 2006 this was big cash. It seemed like a ridiculous bet for years, but who is laughing now?

The issue with YouTube is the business model. Its advertiser led, open to all and recently there have been some PR blunders with the advert/content alignment. Some content companies have actively avoided the platform, while attempts to create a subscription business have been unsuccessful. This is where Netflix could fit in.

“Google has made numerous failed attempts to crack the paid online video landscape,” said Pescatore. “Content and media owners no longer want to devalue their prized assets by giving it away on YouTube. Acquiring Netflix gives Google a sizeable subscriber base and greater credibility with content and media owners.”

Where there is an opportunity to make money, Google is not scared about big cash outlays. Yes, Netflix is a massive purchase, and there is a lot of debt to consider, but Google is an adventurous and bold enough company to make this work.

However, you have to question whether the US competition authorities would allow two of the largest content platforms to be owned by the same company. There might not necessarily be any direct overlap, but this is a lot of influence to have in one place. Authorities don’t generally like this idea.

Verizon Logo

Verizon

Could Verizon borrow a page from the AT&T playbook and go big on a content acquisition? Perhaps it will struggle to justify the expense to investors, but this one might make sense.

Verizon has been attempting to force its way into the diversification game and so far, it has been a disaster. While AT&T bought Game of Thrones, Verizon went after Yahoo to challenge the likes of Google and Facebook for advertising dollars. A couple of data breaches later, the content and media vision looks like a shambles. Hindsight is always 20/20 but this was a terrible decision.

However, with a 5G rollout to consider, fixed broadband ambitions and burnt fingers from the last content acquisition, you have to wonder whether the team has the stomach to take on such a massive task. Verizon as a business is nothing like Netflix and despite the attractive recurring revenues and value-add opportunities, the integration would be a nightmare. The headache might not be worth the reward.

You also have to wonder whether the telco would be scared off by some of the bold decisions made from a content perspective. Telcos on the whole are quite risk-adverse organizations, something which Netflix certainly isn’t. How many people would have taken a risk and funded content like Stranger Things? And with the release of Bandersnatch, Netflix is entering the new domain of interactive content. You have to be brave and accept considerable risk to make such bets work; we can’t see Verizon adopting this mentality.

Softbank Logo

Softbank Vision Fund

Another with telco heritage, but this is a completely different story.

A couple of years back, Softbank CEO Masayoshi Son had a ridiculous idea which was mocked by many. The creation of a $100 billion investment fund which he would manage seemed unimaginable, but he found the backers, made it profitable and then started up a second-one.

Son is a man to knows how to make money and has the right connections to raise funds for future wonderful ideas. Buying Netflix might sound like an absurd idea, but this is one place we could really see it working.

However, the issue here is the business itself. While Son might be interested in digital ventures which are capable of making profits, the aim of the funds have mainly been directed towards artificial intelligence. Even if Son and his team have bought into other business segments, they are more enterprise orientated. There are smaller bets which have been directed towards the consumer market, but would require an investment on another level.

Tencent Logo

Tencent

Another Chinese company which has big ambitions on the global stage.

This is a business which has been incredibly successful in the Chinese market and used assets effectively in the international markets as well. The purchase of both Epic Games and Supercell have spread the influence of the business further across the world and numerous quarterly results have shown just how strong Tencent’s credentials are in the digital economy.

Tencent would most likely be able to raise the funds to purchase the monster Netflix, while the gaming and entertainment portfolio would work well alongside the streaming brand. Cross selling would be an option, as would embedding more varied content on different platforms. It could be a match made in heaven.

However, you have to bear in mind this is a Chinese company and the political climate is not necessarily in the frame to consider such as transaction. Like Alibaba, Tencent might be viewed as too close to the Chinese government.

No-one

This is an option which is looking increasingly likely. Not only will the business cost a huge amount of money, perhaps a 30-40% premium on market capitalisation, the acquirer will also have to swallow all the debt built-up over the years. There will also have to be enough cash to fuel the content ambitions of Netflix, it reportedly spend $7.5 billion on content last year.

Finally, the acquirer would also have to convince Netflix CEO Reed Hastings, as well as the shareholders, that selling up is the best option.

“If I was a shareholder or Reed Hastings, I’d be wondering whether it is better to be owned by someone else or just carry on what we’re doing now,” said Ed Barton, Practise Lead at Ovum.

“These guys are going down in business school history for what they have done with Netflix already, do they need to sell out to someone else?”

Netflix is growing very quickly and now bringing in some notable profits. The most interesting thing about this business is the potential as well. The US market might be highly saturated, but the international potential is massive. Many countries around the world, most notably in Asia, are just beginning to experience the Netflix euphoria meaning the growth ceiling is still years away.

What this international potential offers Netflix is time, time to explore new opportunities, convergence and diversification. Any business with a single revenue stream, Netflix is solely reliant on subscriptions, sits in a precarious position, but with international growth filling the coffers the team have time to organically create new business streams.

Ultimately, Hastings and his management team have to ask themselves a simple question; is it better to control our own fate or answer to someone else for a bumper payday? We suspect Hastings’ bank account is already bursting and this is a man who is driven by ambition, the need to be the biggest and best, breaking boundaries and creating the unthinkable.

Most of these suitors will probably be thinking they should have acquired Netflix years ago, when the price was a bit more palatable, but would they have been able to drive the same success as Hastings has done flying solo? We suspect not.

Bose joins the connected craze

Premium audio brand Bose has become the latest business to attempt to cash in on the promised, but yet to be realised, riches of the augmented and virtual reality world.

The new product, Frames, is claimed to have the ‘protection and style of premium sunglasses’, and ‘the functionality and performance of wireless headphones’, with the team positioning the product as the world’s first audio augmented reality platform.

“Bose Frames are both revolutionary and practical,” said Mehul Trivedi, Director of Bose Frames. “They look and act like classic sunglasses – until you turn them on. And then you’re connected to your phone, contacts, the web, and all its audible content, just like headphones. There’s nothing else like them – they’re a breakthrough you have to see, wear, and hear to believe.”

An acoustic package is set in each arm’s interior to produce discreet sound for the user. For touch and voice control, a microphone and multi-function button are embedded on the right temple for power and pairing, while also allowing the user to interact with Siri and Google Assistant, make calls and commands, or to pause and skip songs. For example, when paired with the user’s phone, Google Maps can rely directions, while the glasses can also rely information about whatever the user is looking at.

After shipping 10,000 pairs of the glasses to AR developers in 2018, the product is now available for pre-order, at a reasonable $199, with consignments to be made in the New Year. One of the questions many in the industry has been asking is whether the AR and VR will emerge from the niches and penetrate the mainstream market; with a well-known and respected consumer electronics brand pushing the case, the segment has a genuine opportunity.

While the industry has struggled to date, new research from IDC suggests there has been a bit of a rally over the last three months. Over the last quarter, IDC estimates shipments for VR headsets reached 1.9 million units, up 8.2% compared to Q3 in 2017. More competitive pricing and a broader number of options are credited for the boost, with Facebook’s Oculus Go and Xiaomi’s Mi VR (the same product branded for local markets) proving to be the most popular standalone products by a wide margin.

“The VR market is finally starting to come into its own,” said Jitesh of IDC. “On the consumer front, the combination of lower prices and increased content is beginning to resonate with users. Meanwhile, commercial adoption is also on the rise for a range of use cases, including training, design, and showcasing.”

With Bose entering the market, new momentum could be generated.

While the likes of Xiaomi and Facebook have brand awareness around the world, this reputation is not tied into consumer electronics and hardware. This might be an issue for mass market penetration for AR and VR devices, as consumers are generally quite fickle. They buy from companies and brands which they trust. Bose making moves in this market not only opens the segment up to new audiences but validates the technology in the eyes of the consumer.

It is too early to suggest AR and VR have made it, but the more companies like Bose who join the craze, the more normalised the products become in the eyes of the consumer. Trends are certainly heading in the right direction for a sluggish segment which is yet to gain genuine traction in the world.

Facebook eyes up the connected home space

Facebook has seemingly taken its first steps towards the connected home market with the launch of Portal.

As it stands, Portal is being marketed simply as a video calling product, though with partnerships with various content streaming channels and a tie-in with Amazon’s Alexa, the future could see Facebook enter the fray as a competitor in the smart home hardware segment.

Two products will be released to start with, Portal and Portal+. Portal will feature a 10-inch 1280 x 800 display, while Portal+ is a larger model with a 15-inch 1920 x 1080 pivoting display. Powered by AI, Facebook claims the smart camera automatically pans and zooms to keep everyone in view, while smart sound features minimize background noise and enhances the voice of whoever is talking. How effective the AI remains to be seen, however now the idea of smart communications products have been normalised in the home it won’t be too long before some pretty impressive products will start hitting the market.

Such a venture could prove to be a very useful gander for the Facebookers, as diversification is going to need to happen sooner or later. With younger demographics searching elsewhere for their social media fix, Snapchat and Facebook-owned Instagram benefiting, pressure will soon start to mount on the advertising business.

Shareholders are used to exceptional year-on-year growth figures, but it wouldn’t be a surprise to see these flatten; people are becoming less engaged by the platform, therefore spending less time exposed to adverts, while recent figures have shown key markets are not boosting total subscription numbers. Sooner or later a threshold will be hit; only so many adverts can be placed in front of users. Perhaps this is where the Portal products can help.

Unlike the other internet giants Facebook hasn’t really done an exceptional job of diversification. It has added more advertising products (i.e. different ways to engage users on the platform), but this isn’t genuine diversification. If the audience for the core product declines, Facebook’s business suffers; it doesn’t matter how many products there are if no-one is one the other side of the screen to see them.

Google or Amazon however have supported their core business with outside bets. Think of the cloud computing businesses they own, or the content platforms, or ventures into the grocery sectors. These are ventures which diversify enough to ensure negative impacts on the core business do not have a significant impact, however, close enough to lean on the brand and expertise.

With the Portal products, Facebook could make a play for the focal point of the smart home. This has a couple of interesting benefits, one of which will be controlling the gateway and therefore access to the consumer. By operating a window to the consumer, the owner of the window can charge access to gaze through. Partnerships are already in place with the likes of Spotify Premium, Pandora, and iHeartRadio, as well as Food Network and Newsy. This is a business model which could certainly be successful should Portal offer scale.

It is a simple, but effective idea. The window owner would also have the opportunity to launch new services and products which be installed as default, offering an entry-point to the data economy, in the same way Google dominates the mobile OS space with Android.

The focal point of the smart home is still an on-going battle, though Amazon and Google do seem to be winning with their smart speakers. The telcos have a chance with the router, though the proactive nature of the internet players is wrestling the ecosystem behind the speakers. However, today’s generations demand screens. Amazon has been trying to launch its own smart device with a built-in screen for months, though a difficult relationship with YouTube has not helped the situation.

Should Facebook be able to launch a video-orientated product, with high-enough specs, deep connections to the smart home ecosystem and smart enough AI applications, it could make a dent in the market. No-one has really produced a product which grips onto the space, and priced at $199 and $349, it isn’t out of the question for the Portal and Portal+.

Unsurprisingly, Facebook has made a point of security. AI applications are stored on the device, meaning data will be processed locally not transferred to the cloud. It’s almost as if Facebook has accepted it has a terrible reputation for data collection and management, and is offering an alternative to trusting the team with your personal information.

The big question is whether people trust the Facebook brand enough to give the business such prominent influence over so many different aspects of their lives. Even with a physical cover for the camera lens, users might be sceptical, though if there is ambition for additional services, there is a lot of work which will need to be done. The brand is not in a very good position when it comes to credibility and trust.

Another area which might prove to be a stickler for the product is that you have to have a Facebook account for it to work. This might not prove to be an issue at all in the long-run, though considering there will be people who don’t have and don’t want a Facebook account, or people who have intentionally deleted theirs as a result of recent scandals, it might be immediately ruling out a number of potential customers.

AR and VR headsets nosedive in Q1

Shipments of augmented and virtual reality headsets have plummeted year-on-year across the first quarter, according to statistics from IDC, as telcos unbundle the kit from premium contracts and handsets.

Despite the poor performance in the first quarter, down 30.5% year-on-year, totalling 1.2 million units, IDC does forecast the segment to return to growth for the remainder of 2018 as more vendors target the commercial AR and VR markets and low-cost standalone VR headsets such as the Oculus Go make their way into stores. The team estimate sales will increase to 8.9 million units in 2018, up 6%, with growth continuing upwards to 65.9 million by 2022.

“On the VR front, devices such as the Oculus Go seem promising not because Facebook has solved all the issues surrounding VR, but rather because they are helping to set customer expectations for VR headsets in the future,” said Jitesh Ubrani of IDC. “Looking ahead, consumers can expect easier-to-use devices at lower price points. Combine that with a growing line-up of content from game makers, Hollywood studios, and even vocational training institutions, and we see a brighter future for the adoption of virtual reality.”

Although bundling has become unpopular for the telcos, it is worth noting the importance of such sales models. Smartphone penetration was incredibly rapid in comparison to other technological breakthroughs, partly because consumers have more disposable income, but also bundling made the process of purchasing a device simpler and more cost effective. It normalised the product, before consumers become more savvy shoppers, exploring data only tariffs and separate purchases of devices. Telcos might not like bundling devices into contracts, but it is a very important factor in the progression of the data and digital economy, and aiding the market penetration of new devices.

Augmented reality is going to be the poster child of the segment for the immediate future, it is far more accessible, though it shouldn’t be too long before virtual reality starts making waves. IDC forecasts virtual reality headsets to grow from 8.1 million in 2018 to 39.2 million by the end of 2022, believing the commercial market to be equally important and predicts it will grow from 24% of VR headset shipments in 2018 to 44.6% by 2022.

AR and VR has certainly been making progress over the last 12 months, admittedly quite slowly, hopefully Q1 is simply a blip in the progress.