Apple credit card is up-and-running

As promised by CEO Tim Cook during the last earnings call, the Apple Card is set to debut this month, with the team already taking applications from consumers.

To start with, randomly selected Apple customers who signed up months ago have gotten access, though the team is now building a list of iLifers who would like to receive the card upon full-launch. To start with, the credit card will only be available to US citizens, though we can’t imagine it will be too long before the ambitious Applers spread their wings internationally.

For Apple, this is another step towards decreasing reliance on the iPhone, a product which has dominated the profitability column for quite some time. In the years of gluttony, few would have complained about this reliance, but nowadays, with smartphone shipments slowing down globally, the desire for diversification has intensified.

Working alongside Goldman Sachs, Apple has said customers can register their interest in the card in less than a minute, which perhaps seems irresponsible considering the seriousness of applying for credit. This little dose of reality will create little concern for either partner, both of whom will be relying on consumer over-indulgence to fuel profits.

That said, there are some interesting gimmicks being included with the service.

When using the card, all purchases will appear in the customers app, as is norm for the industry, but graphics will offer greater insight into spending habits. As you can see below, the distribution of colour on the card image and the graphs below detail how you are spending your money. Pink is for entertainment, yellow for shopping and orange for food, it is an interesting way to display purchasing patterns.

Apple Card

Other features include cash back and lower interest rates, though it is missing some of the perks which are so heavily hyped with traditional credit card providers.

What will be interesting to see over the next couple of months is the receptiveness of customers to a smartphone manufacturer entering into the financial world. Apple has one of the most admired brands worldwide and a cult-like following of customers, but whether this translates into something as important as financial services remains to be seen.

BT sells fleet management business and diversification opportunity

Just as almost every telco is searching for new ways to diversify and target non-core revenues, BT has decided to sell its Fleet Solutions business unit.

Financial details of the transaction have not been unveiled, but asset management group Aurelius have purchased the fleet management services business from BT. The telco has suggested the transaction will enable the team to focus investments and attention on more core activities. However, this divestment seems to fly in the face of trends, with telcos looking to secure additional revenues beyond the traditional.

“The acquisition of BT Fleet Solutions by Aurelius is an exciting and significant step forward in its development and will deliver for its customers, people and the BT Group,” said Gerry McQuade, CEO of BT’s Enterprise unit.

“Over the past five years, our Fleet business has grown into a multi-award-winning market leader in the sector. The unrivalled expertise and experience of its people in managing and maintaining complex fleets has been key to this success.”

With 65 in-house garages, 500 partner facilities and 950 employees, BT Fleet Solutions manages more than 80,000 vehicles for over 26 blue chip customers across the UK. Although this is business which is far removed from the core business of telecommunications, it could have been viewed as a path for the telco to offer services above and beyond traditional enterprise connectivity, especially as more fleets look to IOT to manage operations more effectively.

Fleet management is an area which has been suggested as one which could benefit from the spreading wings of connectivity and the blossoming world of IOT. More vehicles are being connected and monitored year-on-year, presenting an opportunity for telcos to expand revenues and expertise beyond traditional battle-grounds. This is where we are slightly confused by the transaction.

Of course, fleet management is more than connectivity. The nuts and bolts of the business are nuts and bolts, a completely different segment than where BT’s heritage lies. However, this was a foot in the door, an established presence in an enterprise vertical which the connectivity business could build on and offer customised solutions. Telcos are looking for ways and means to validate connectivity in new applications and services, and this could have been a way to do so.

However, it does seem the telco is doubling down on core business activities as opposed to exploring new options to diversify.

“With BT’s renewed focus on investing in the best fixed and mobile networks in the UK, and with BT Fleet Solutions well positioned to achieve further growth, the time is right for the business to find a new home,” said McQuade.

This is where the transaction becomes more understandable. BT, and all the other telcos for that matter, are under considerable pressure to boost the connectivity foundations of the UK. Money will have to be spent on deploying new infrastructure, both fixed and mobile, to ensure networks can meet the standards set forth by ambitious government targets. You only have to look at Prime Minister Boris Johnson’s recent objective of 100% full-fibre coverage by 2025, potentially cutting eight years off previous targets, to understand this pressure.

We understand the short- and mid- terms demands on BT, as well as the financial pressures it is currently facing, however we can’t help but feel this is a missed opportunity.

Telcos are searching for ways to engage the verticals with solutions which go beyond traditional connectivity solutions, and the BT Fleet Solutions business unit looked to be the perfect foundations to aggressively seek new revenues with customisable solutions built on IOT, AI and edge computing.

Unlimited data is inevitable with 5G, but try telling operators that

We’re quickly moving into the 5G era and many assume the concept of unlimited data bundles will be commonplace, but how will the telcos fare in this new world?

As it stands, the telcos are under pressure. This is not to say they are not profitable, but many shareholders will question whether they are profitable enough. Tight margins and a squeeze on core revenue streams are common enough phrases when describing telco balance sheets, but this could get a lot worse when you factor in unlimited data packages.

As Paolo Pescatore of PP Foresight pointed out, when you offer unlimited data you are effectively killing off any prospect of revenue growth per subscriber in the future. In some markets, there are still fortunes to be made, but in some, such as the UK where 4G subscription penetration is north of 100%, where are you going to make the growth revenues from when consumers are demanding more for less?

More consumers are seeking unlimited or higher data allocations but are not willing to pay for the experience. Some MNOs might be able to resist, but the more rivals who offer such tariffs the more the rest will be forced into line. It’s the race to the bottom which is profitable in the short-term, but growth will end quickly. The price per GB is only heading one direction and unlimited data allocations will end the prospect of upgrading customers.

O2 fighting for air

This is the conundrum which the telcos are facing in the UK right now. All four have announced their 5G intentions and all four are promising big gains when it comes to the next era of connectivity.

Starting with O2, the only one of the four MNOs not to have released 5G pricing to date, this is a telco which looks to be in the most uncomfortable position. Over the last few quarters, the management team has boasted of increased subscriber numbers, but this can only go on for so long in the consumer world. Soon enough, a glass ceiling will be met and then the team will have to search for new revenues elsewhere.

This is of course assuming it plans to go down the route of unlimited data, it might want to stick with the status quo. That said, if everyone else does, it will not be able to fight against the tide for fear of entering the realm of irrelevance.

The issue here is one of differentiation. The idea of attracting new customers by offering ‘bigger, meaner, faster’ data packages will soon end and telcos will have to talk about something else. O2 does have its Priority loyalty programme, but with rivals launching their own version this USP will fade into the noise.

Differentiation and convergence are two words which have been thrown around a lot over the last few years, though O2 has thus far resisted. Last year, CEO Mark Evans suggested he was not bought into the convergence trend and would continue as a mobile-only telco, though this opinion does seem to be softening.

If O2 is going to be competitive in the almost inevitable era of unlimited data, it will have to source growth revenues from somewhere. It is making a push into the enterprise connectivity world, which will bring new profits to the spreadsheets, though does it want its consumer mobile business to stand still?

Bundles of fun

This is where the other telcos in the UK have perhaps got more of a running start in the 5G era. EE has its connectivity assets in broadband and wifi to add value, as well as a content business of some description. Three is already known as the data-intensive brand, while its FWA push will take it into some interesting connectivity bundling options. Vodafone also has FWA, a fibre partnership with CityFibre and is arguably the leader in the enterprise connectivity market. The rivals are offering more than mobile connectivity as a stand-alone product.

Looking at Vodafone to begin with, the recent announcement is certainly an interesting one. The innovative approach to pricing, tiering tariffs on speeds not data allocation, will attract some headlines, while it is also super-charging its own loyalty programme, VeryMe. It has secured content partnerships with the likes of Sky, Amazon, Spotify and gaming company Hatch, while its FWA offering also includes a free Amazon Alexa for those who sign-up early enough.

Combining the FWA product or its fibre broadband service, courtesy of CityFibre, also gives them the ‘connectivity everywhere’ tag, a strength of BTs in recent years, to allow them to communicate and sell to customers in a different way. Perhaps it is missing a content play to complete the convergence bundle, but it is in a strong position to tackle the 5G world and seek additional revenues should the unlimited craze catch.

The same story could be said of Three. With the acquisition of UK Broadband, it has forced itself into the convergence game and kicked off the ‘race to the bottom’ with an unlimited 5G data offer. As long as you have a Three 4G contract, you can get 5G for no additional cost, assuming you have a 5G compatible phone of course.

Three’s strength and weakness lies in its reputation. It is known for being the best telco if you have an insatiable data appetite, this works very well for the 5G era, though it is also known for having a poor network. Three regularly features at the bottom of the network performance rankings, especially outside of the big cities where it has not done nearly enough to satisfy demands.

This will of course change over the next couple of months. Three is working to improve its network with additional sites and a new Nokia 5G core, however it will have to do a lot to shake off the reputation is has acquired over the last few years.

EE is perhaps the most interesting of the four. It has lost its position as the market share leader when it comes to 4G subscriptions, but it does have the reputation for being the best in terms of performance throughout the country. It is regularly the fastest for download speeds, but its 5G pricing is by far the most expensive to be released so far.

That said, with the BT assets it has for wifi and broadband, as well as the content options, there is plenty for the consumer to be interested in. Should BT be forced to readdress the pricing conundrum, it might not have the fear regarding a glass ceiling on revenues as there are plenty of other products to engage the consumer. It will be able to find additional revenues elsewhere.

MVNO no you didn’t

Outside of the MNOs, you might also start to see some competition. MVNOs are nothing more than ‘also rans’ today, but Sky has officially entered the 5G race. This is an interesting competitor, one who could cause chaos to the status quo.

Firstly, understand mobile is not the primary business for Sky. This is an add-on, where it is seeking to drive additional revenues and attract more customers through bundled services. It is the leader in the UK when it comes to premium content and has a thriving broadband unit also. Sky can add services on top of connectivity to make itself seem more attractive than the traditional mobile service providers.

Then again, there are only a couple of MVNOs who can pose this challenge. Sky is one, while there are persistent rumours Amazon wants to get involved with the connectivity game and Google has its own Fi service. These are also companies who are at the mercy of the MNOs in terms of the commercial agreement with the MVNOs, so damage is likely to be limited unless one network owner decides to go down the wholesale infrastructure route.

But you cannot ignore these companies. They are cash-rich, constantly searching for new ways to make money and have incredible relationships with the consumer. They are also the owners of platforms and/or services which are very attractive to the mass market; bundling could be taken into a new context with these firms.

Diversity is our strength

This is of course only looking at the services which are common throughout telco diversification plans today, there are other options. Orange has launched a bank, has experimented in energy services and is making a move towards the smart home in partnership with Deutsche Telekom. Over in Asia, gaming is an important element of many telcos relationships with consumers and this trend is becoming much more prominent in the European markets also.

Elsewhere, the smart home could certainly offer more opportunities for telcos to add-value to an emerging ecosystem, while the autonomous vehicles offers another opportunity and so does IOT. The issue which many of these telcos are facing is competition from the OTTs. Arguably, the battle for control of the smart home might already have been won by the OTTs, though the same could be said for autonomous vehicles and IOT.

In many of the emerging segments, telcos will remain a connectivity partner though they certainly need more than that. This will remain a consistent stream of revenue, though it will also sleepwalk telcos to utilitisation. In IOT, as an example, the major cloud players are crafting business units to engage enterprise businesses for edge and IOT services; this is a market which the telcos would love to capitalise on for both enterprise and consumer services.

Security is another which is increasingly becoming a possibility. The concept of cybersecurity is generating more headlines and consumers are becoming more aware to the dangers of the digital world. Arguably, the telcos are in the strongest position to generate revenue from this segment; there is trust in the brand and they have largely avoided all the scandals which are driving the introduction of new regulation.

Unlimited data is certainly not commonplace today, but with the services of tomorrow promising to gobble up data at an unfathomable pace, it would surprise few to see more people migrating to these tariffs. The question is how you make money once you have migrated everyone.

Diversification and the acquisition of new products is not a simple task, but then again, it is becoming increasingly difficult to imagine how single revenue stream telcos will be able to survive in the world of tomorrow.

 

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Breaking down the Supply Chain Review Statement

Although there was very little said during the Supply Chain Review statement yesterday, there are some interesting developments worth keeping an eye on.

Speaking to the House of Commons, Secretary of State for the Department of Digital, Culture, Media and Sport Jeremy Wright did as most expected he would and dodged the Huawei decision. Although we were promised a decision by March, the slippery politician has managed to create enough breathing room to get him through to September.

Despite some being disappointed by a lack of clarity on the competitive landscape for UK communications infrastructure, there were a few takeaways.

There’s no avoiding interference from Transatlantic geo-politics

Every politician will tell you decisions are made dependent on what is best for the British people alone, but it is impossible to avoid the US here. The White House and its aggressive policies are causing havoc around the world, including here in the UK.

Fundamentally, without a decision on Huawei there is no clarity for investment and progress into the digital economy will falter.

Wright said a decision on Huawei would be made irrespective of the political influences of the US, but US interference is unavoidable.

“The hon. Gentleman has said that he is concerned to ensure that this should be a decision about the interests of the UK and not the priorities of the US Administration, and I understand that,” Wright said in response to the suggestion the US has too much influence from Tom Watson, Shadow Secretary of State for Culture, Media and Sport.

“I can give him the assurance that decisions we take will be decisions in the best interests of the United Kingdom, but he knows that this is a hugely interconnected sector and it simply is not possible to make sensible judgments about telecommunications without recognising those interconnections.”

With Huawei being placed on the Entity List the performance, resilience and security of its products might be impacted in the future. Wright has said he will not make a decision on Huawei until he has all the facts, and the relationship between China and the US is a huge factor in this.

Kicking the can to avoid irritating the new boss

Despite there being pressure from influential Parliamentary groups and the telco industry to make a decision, it was always highly unlikely Wright was going to say anything until his new boss has taken residence in No.10 Downing Street.

Boris Johnson is the new Prime Minister and he will want to put his own mark on proceedings. The Huawei decision is an important one, not only for UK 5G infrastructure, but because it will impact the relationship with the US. BoJo has already shown himself as somewhat of a pet of the President and will most likely want to nurture this relationship as only he knows how.

Wright does not want to jump the gun on making a decision and potentially irritating the new boss, especially when there is a potential promotion around the corner.

David Guake, the Justice Secretary, has resigned. Education Minister Anne Milton has gone. Chancellor of the Exchequer Philip Hammond has publicly stated he would quit if BoJo won. Rory Stewart, the Secretary of State for International Development, formally announced his resignation over Twitter at 11.18am. And finally, it is highly likely Foreign Secretary Jeremy Hunt, BoJo’s opponent for PM, will be shifted elsewhere.

“The reality is that this statement is just a lot of words to confirm further delay. Why are the decisions now being left in the gift of the new Prime Minister? Is this just another case of putting the Tory party before the country?” SNP MP Alan Brown questioned.

As one of the few politicians who managed to remain neutral during the proceedings, Wright could find himself heading up a new department before too long.

Security framework will make UK more secure

This is perhaps the most encouraging snippet to emerge from a relatively shallow statement overall; security requirements will be heightened for everyone.

“Fundamentally, we must make a decision on the basis of what is in our security interests, but he is also right that if we were to focus solely on one company or country, we would miss the broader important point that our telecoms supply chain must be resilient and secure, regardless of where equipment comes from, because risk may transfer from place to place and our population is entitled to expect that the approach we take puts security at its heart, wherever the equipment comes from,” Wright stated.

Although there are few details available regarding the new security requirements, Wright has suggested there will be a more stringent framework set in place and on-going assessments to ensure standards are being maintained. This will be applicable to every supplier, irrelevant of where they have come from.

To start with, this will be a voluntary scheme for the telcos, but soon enough it will be cemented in place through legislation. This takes time, but it is encouraging that the Government recognises threats can come from anywhere, everyone has a globalised supply chain and cybercriminals are becoming much more capable.

If policies have the position of 100% secure is impossible and everyone is a potential threat, risk mitigation levels should be set higher. This is the best possible means to achieve a resilient and secure network, capable of dealing with threats irrelevant as to their origin or intention.

Vendor diversification is nothing but a smokescreen

It might sound like a wonderful plug, but suggesting the UK is going to encourage diversification in the supply chain is nothing but a distraction to attract PR points for DCMS.

“In addition, we must have a competitive, sustainable and diverse supply chain if we are to drive innovation and reduce the risk of dependency on individual suppliers,” Wright said.

“The Government will therefore pursue a targeted diversification strategy, supporting the growth of new players in the parts of the network that pose security and resilience risks. We will promote policies that support new entrants and the growth of smaller firms.”

During the statement, Wright promised work will be done to enable smaller and more innovative players to contribute to the 5G euphoria. This sounds good and, in theory, addresses a long-standing problem in the telco world, but let’s not get ahead of ourselves.

The telco industry has been attempting to create a more diverse supply chain for years, as well as adapting procurement models to ensure smaller companies can weave through the red-tape maze. There has been little progress to date and intervention from DCMS is unlikely to reap any material changes.

You also have to wonder whether Wright is tackling the challenge head-on. Wright pointed to funding which has been directed towards the West Midlands and other innovation hubs, however this is not the problem which the telco industry has been facing. The limited supply chain is most harmful in places like the access network or core. This is where there are so few suppliers and competition has been impacting the cost of deployment.

Wright might be encouraging diversification and growth for start-ups, but don’t be fooled by this statement; he is not directly tackling the biggest competition challenge the industry faces.

Long-overdue legislative overhaul and Ofcom empowerment

The legislative and regulatory landscape has needed an update for years and Wright is promising one. Not only would this put the security framework into law, it will also ensure Ofcom has the right powers to be effective in the digital economy.

“We will pursue legislation at the earliest opportunity to provide Ofcom with stronger powers to allow for the effective enforcement of the telecoms security requirements and to establish stronger national security backstop powers for Government,” Wright said.

Until the new legislation is put in place, Government and Ofcom will work with all telecoms operators to secure adherence to the new requirements on a voluntary basis.”

Many of the rules which govern the telecoms and technology industry have been written for a bygone era. This is an outcome which is largely unavoidable when you consider the speed at which progress develops nowadays. However, rules need to be brought into the 21st century.

Legislation will offer the Government more influence over commercial communications infrastructure while Ofcom will have its teeth sharpened. It’s a long-overdue update.

Not much said, but potential to progress

Overall, there was little said by Wright in terms of material progress, but there is enough evidence the UK is creeping forward toward contextual relevance. We saw hints of progress yesterday, but realistically, the new Prime Minister and his administration will dictate evolution over the coming months and years.

AT&T gets streaming with HBO Max

Gone are the days when the consumer could get all the content they wanted in one place as AT&T’s WarnerMedia joins the streaming landgrab.

With Netflix, Amazon Prime, Hulu, Disney, HBO and numerous other streaming services on the market before too long, the fragmentation of content is looking like it could be a serious problem for the consumer. Whether splitting the spoils has an overarching negative impact on the segments profits remains to be seen, but customers wallets can only be pushed so far; how many streaming services can each customer be expected to have?

That said, AT&T is in a strong position with this proposition. In HBO, it owns a lot of promising content already, playing into consumer nostalgia, and it does seem to be heading in the right direction in terms of original programming.

“HBO Max will bring together the diverse riches of WarnerMedia to create programming and user experiences not seen before in a streaming platform,” said Robert Greenblatt, Chairman of WarnerMedia Entertainment and Direct-To-Consumer.

“HBO’s world-class programming leads the way, the quality of which will be the guiding principle for our new array of Max Originals, our exciting acquisitions, and the very best of the Warner Bros. libraries, starting with the phenomenon that is ‘Friends’.”

With the service set to debut in Spring 2020, AT&T is promising 10,000 hours of programming from the outset. Full series of ‘Fresh Prince of Bel Air’, ‘Friends’ and ‘Pretty Little Liars’ will feature in the content library, as well as new dramas such as ‘Batwoman’ and ‘Katy Keene’.

Looking at future Max Original series, the list is quite extensive. ‘Dune: The Sisterhood’ is an adaptation of Brian Herbert and Kevin Anderson’s book based in the world created by Frank Herbert’s book Dune. ‘Lovecraft Country’ is a horror series based on a novel by Matt Ruff. ‘The Plot Against America’ will be a reimagined history based on Phillip Roth’s novel.

The ingredients are all in place to ensure AT&T makes a sustained stab at cracking the streaming market which has been dominated by the OTTs to date. There are a couple of questions which remain however.

Firstly, pricing. Can executives price the service competitively while also sustaining investments in content? Secondly, experience. Will the platform meet the high-expectations set by consumers thanks to the high-bar set by Netflix? And finally, culture. Will AT&T allow WarnerMedia to operate as a media business or will it impose the traditional mentality of telcos onto the business?

AT&T has bet big on the content world and it can ill-afford to fluff its lines on its debut. Having signed an $85 billion deal to acquire Time Warner and spent what seems like decades battling various government departments to authorise the transaction, the telco will need to see some ROI sooner rather than later.

The question is whether the momentum in the streaming world can be sustained. Platforms like Netflix, Hulu and Amazon Prime were attractive in the early days because there was consolidation of content onto a single library. With more streaming services becoming available, the fragmentation of content might well become a problem before too long. Consumers will have to make choices on what service to subscribe to, limiting the profits of the individual providers.

The days of subscribing to everything might be a thing of the past before too long; wallets can only be pushed so far.

Diversification into profitable segments is certainly a sensible strategy in the days of meagre connectivity profits, but $85 billion is a lot to spend on a hunch.

Verizon continues quest to correct content car crash

The Verizon mission to conquer the content world has been anything but a smooth ride to date, and now it is reportedly searching for a buyer for Tumblr.

According to the Wall Street Journal, Verizon executives are on the search to offload the platform. The Verizon Media Group has been under considerable pressure in recent months, as the promise of value through content and diversification has eluded the telco.

Looking at the most recent earnings call, Verizon Media Group revenue was $1.8 billion, down 7.2% year-on-year for the quarter. Declines in desktop advertising were primarily blamed, with the dip continuing to more than offset growth in mobile and native advertising. Considering the effort the telco had to exert to acquire Yahoo, not to mention the headaches it had to endure, some might have hoped there would be more immediate value.

The last couple of months have seen Verizon attempt to make money from the mockery, with a particular focus on job cuts. In January, it was announced 7% of the media unit’s workforce, some 800 roles, would be sacrificed to the gods of profits, and now it seems Tumblr is being marshalled to the alter.

What is worth noting is this is a platform which has promise.

After being acquired by Yahoo during 2013 for $1.1 billion, Verizon inherited Tumblr through the much mangled $4.8 billion acquisition of Yahoo in 2017. Although some might struggle to understand what Tumblr does, the all-encompassing blogging platform currently has 465.4 million blogs and 172 billion posts.

Tumblr is a tricky one to understand what it actually does, but instead of trying to pigeon hole it into a definition perhaps the better approach would be to let it just be itself. Tumblr defines itself as a blank canvas, allowing users to post text, photos, GIFs, videos, live videos and audio, or pretty much anything the user wants to.

Perhaps this is why Verizon has struggled with the brand and presumably failing to realise the potential. Telcos generally cultivate traditional and relatively closed-minded cultures. With Tumblr just being itself, rather than fitting into a tidy tick-box exercise, Verizon may be struggling to communicate the value to customers or even devise an out-of-the-box business model to monetize it effectively.

This assessment is perhaps supported by where the media business has seen success. Financial news for example, or the delivery of sports content. These are not exactly complex business models to understand, more difficult to deliver however, as they are more functional. These are the areas CFO Matt Ellis was boasting about during the earnings call.

While there has not been any official commitment or denial to the rumours from Verizon so far, there does seem to be some appetite from the industry. According to Buzzfeed, Pornhub VP Corey Price is ‘extremely interested’ in potentially acquiring Tumblr, promising to re-discover the NSFW edge, one of the factors which drove the popularity of Tumblr during the early days.

The future of Tumblr might be a bit hazy for the moment, but one thing is clear. Verizon is mapping out a very effective usecase on how not to diversify into the content world.

T-Mobile US finally makes foray into TV world

Some might have started to think it was never going to happen, but T-Mobile US has finally unveiled its own attempt to crack the content market TVision Home.

The service, which will initially be launched in eight US cities on April 14, is the re-branded and upgraded version of Layer3 TV, the platform it acquired in early 2018. It might have taken a while for the proposition to emerge, but T-Mobile US is entering the highly congested and increasingly fragmented world of content.

“The Un-carrier has already changed wireless for good, and today’s news brings us one step closer to taking on Big Cable,” said John Legere, CEO of T-Mobile. “And with the New T-Mobile, we can do more than just offer home TV service, we can offer millions of Americans more choice and competition for TV AND home broadband. I can’t wait to begin un-cabling cable and giving millions the opportunity to cut the cord with Big Cable forever.”

While this might not be the big splash some were hoping for, T-Mobile US does plan on launching a streaming service to compliment this cable offering later in the year. For the moment, this is an effort to disrupt a traditional industry, something which Legere is very good at doing, and there is of course an element of the unusual in the launch.

The TV service itself is not the Uncarrier move, but the Satellite Freedom initiative certainly is. According to T-Mobile US, 48% of US customers are locked into a contract and face paying hundreds in early termination fees. To win over customers, T-Mobile US will offer any Dish or DirecTV customers who make the switch a prepaid card with up to $500 on it.

For the moment, it looks more like a bundling service, though this isn’t necessarily a bad thing as it does address a point of irritation for the consumer. Netflix and Amazon Prime will be bundled into the service to start with, while T-Mobile US promises more third-party bundles in the future.

The service begins with 150 channels of local and national content for $99.99 a month, though existing T-Mobile US customers will get a $9.99 discount, while any premium services (such as Netflix, Amazon or HBO) will be extra. When you add everything together, it isn’t that much of a discount on the average cable cost across the US, which T-Mobile US claims is $107.30 per month.

The platform itself is simply an upgraded version of the Layer3 TV service which it acquired to $325 million last year, though considering how long T-Mobile US has kept everyone waiting, it does seem a bit underwhelming. While a lot has been promised, such as the box becoming redundant as the TVision app is installed on hardware, minimal details don’t inspire much confidence. T-Mobile US is promising to deliver on the commitments sharpish but considering how long it took to get the basic proposition to market we’re not entirely confident.

Ultimately, the success of this service will come down to two things. Firstly, pricing, T-Mobile US has been successful in the past by offering more for less, and secondly, the experience. Should the 150 channels offer good content, customers will certainly be happy, though there are plenty of examples of failed forays into TV because the content doesn’t deliver on expectations.

Another interesting development will be the personalisation features. T-Mobile US has stated each member of the household will have their own profile with the discovery engine presumably tailored to that individual. It might sound great, but we are still not convinced this is a feature which many customers will find that intriguing. It might be a nice to have, but we doubt it will be a factor in the buying decision making process.

While there is promise for the future, the launch is a bit flat. Legere has a reputation for creating innovative ideas and challenging the status quo, but this looks to be an assault on a segment which has already been disrupted. There are promises to launch a streaming service, and that might have been something more in-line with what the industry expected, but this service is attacking an industry where the revenues are already declining.

That said, you can’t ignore that this is an opportunity for Legere to make more money for T-Mobile US. The cable segment is declining, but it isn’t dead. The service is not necessarily anything new, but T-Mobile US does have an existing customer base to leverage. This might dictate the quality of content on the platform, possibly the decided factor for success or failure, and we already know Legere is a cunning businessman. Content owners will be intrigued by what he can offer.

Whether it was unreasonable to expect more remains to be seen, though this service doesn’t necessarily look any distinguishable from others on the market.

Don’t expect upstarts to knock Netflix off its throne – report

A new report from UK analyst firm Re-Think has painted a gloomy picture for those attempting to muscle into Netflix’s dominance in the streaming world.

With the likes of AT&T, Disney and Comcast all attempting to diversify revenues, the riches being raked in by Netflix in the entertainment streaming market must look very tempting, though the rewards will not come easily. This is not to say there is not room for new services, the price point creates an opportunity for multiple service providers in a single household, but Re-Think is predicting Netflix will continue to hoover up profits.

“Despite moves by major studio conglomerates come 2024 Netflix will remain the dominant force in streaming, earning more streaming revenue than the big three put together,” the report states. “Its market share will dilute from 63% last year to 52% by 2024, but our forecasts show that Netflix cannot be shifted from the number one spot.”

Despite going through years of dredge, swallowing the ‘reward’ of being a loss leader in an emerging market, Netflix shareholders are beginning to see the breaking dawn. During the last earnings call, CEO Reed Hastings proudly told shareholders revenues had grown 35% to $16 billion across 2018, with operating profits almost doubling to $1.6 billion. The business finished with 139 million paying memberships, up 29 million across the year.

139 million might sound like an incredible number already, but then you have to consider whether this is just the beginning. International subscriptions, outside of the US market, accounted for approximately 63% of the total offering plenty of headroom for growth. The team is forecasting an additional 9 million additional subscriptions over Q1 alone.

This is the challenge which the upstarts are facing. Not only is this a company which is sitting very comfortably in the number one spot, but it has momentum which it is doubling down on. At IBC last year, Maria Ferreras, VP of EMEA Business Development at Netflix pointed towards partnerships with telcos (carrier billing), more original and local content, as well as launching in new markets to continue the growth.

During the results call, Hastings confirmed these plans were scaling up. The relationships with local partners were working well, and the team were searching for more, while more investment was being directed towards content. Investments over the last twelve months totalled $7.5 billion, and this number will only grow. It probably won’t be on the same trajectory as previous years, but the number of big-budget titles are visibly increasing on the platform.

“The extraordinary success of Netflix has got it lined up in the sights of the big studios and content houses and the big question now is how well it will stand up to that assault on multiple fronts,” the report states.

Hulu is an established platform, as is Amazon Prime, but with Disney entering the market with an impressive portfolio, while Comcast is pushing forward, and AT&T will soon start making waves with its $85 billion acquisition of Time Warner. There is a lot of competition emerging on the horizon, but these the upstarts have a lot of distractions.

Over the next couple of months, we see two developments which will worth keeping an eye on in this space. Firstly, the protection of traditional TV services and also the consumer appetite for AVoD services, streaming with advertising.

Advertising is clearly big business. In the UK, you only have to look at the success of Sky as the leader in the premium content space as an example. Like the social media giants, Sky has created a sophisticated advertising platform, AdSmart, allowing advertisers to drive engagement through hyper-targeted campaigns. This model continues to work with Sky, but perhaps it is living on borrowed time.

The Netflix model is the opposite. An upfront payment and the promise of no advertising to break-up shows or movies on the platform. The more people who subscribe to Netflix, or similar platforms, the lower the tolerance for adverts will become. Netflix might be missing a cash generation opportunity, but it also might be irrevocably changing the industry. This will not happen overnight, but it might be the light at the end of the tunnel.

The second point, protecting legacy services, is going to be a tricky one. The likes of Comcast and AT&T will have cash revenues to worry about as they effectively cannibalise themselves in search of the OTT dream. Looking at the revenues on the traditional TV services, Re-Think is forecasting AT&T will decline from $64.7 billion in 2018 to $47.7 billion in 2024, Comcast from $25.8 billion to $20 billion and Disney from $11.5 billion to $9 billion.

Should these companies encourage users to migrate to their streaming alternatives, the decline could be even steeper. This might give the streaming service more opportunity to succeed in an increasingly fragmented market, but investors might get spooked. It’s a catch-22 situation, with one option killing revenues but the other holding back a more future-proofed concept.

The challenges for those trying to break Netflix dominance is not only dealing with the beast’s popularity, but also handling the internal politics of change. This might be much more of a challenge, especially when you consider the traditional culture of the challengers.

Ultimately the feedback here is relatively simple; Netflix is king and don’t expect the usurpers to wobble the throne too much.

Apple expected to launch half-baked streaming platform

Rumours are swirling around the Apple content business once again, this time pinning an April launch date on a streaming product which would offer third-party bundles in-app.

The aggregator platform for content is one which is becoming increasingly popular as the industry starts to realise how difficult it is to be a content creator. Apple has tried over the years, with only a sprinkling of success, but it seems it is hedging this new position by bundling other premium subscription services into the same content platform.

According to CNBC, Apple will create a video content platform to host its own content, which will be free to those who own Apple devices and offer the option for users to tie in premium subscriptions from third-parties. This sounds like an excellent idea, the fragmentation of content across different platforms is a frustration for users, though the absence of some might be a significant stumbling block.

As it stands, Apple has been unable to negotiate a relationship with HBO, though this is still a possibility, while the report also claims Hulu and Netflix will not be on the platform. For such an idea, and it is a good one which will appeal to consumers, all the various options need to be available. As it stands, with some of the most popular streaming services absent the appeal of the platform is severely dented.

“Any move is long overdue and comes at a challenging time for any new player,” said independent analyst Paolo Pescatore. “We’ve seen an explosion in OTT SVOD services.

“For the service to be successful it will need stand heads and shoulders over rivals, great content, great UX, a one stop shop destination. Unfortunately the market is hugely fragmented and consumers do not want to sign up to numerous services. There is an opportunity to unite all of these services. Whoever gets this right will be in pole position. If Apple has serious aspirations to compete in this landscape it needs to make a significant acquisition.”

But what could be the issue? Rumours are pointing towards the terms and conditions set forward by Apple; they might be asking for too much.

Looking at the App Store, Apple has traditionally asked for a 30% slice of any subscriptions bought through the platform, a number which decreases to 15% in the second year. It also demands 30% of in-app purchases, leading some developers to take users off-app to complete any transactions, creating a loophole in the terms and conditions. It seems these terms ate being extended to the aggregator platform and might be the reason Apple is finding difficulty in negotiating with partners.

Anonymous sources quoted by CNBC are suggesting HBO is resisting so far as Amazon Prime offered better terms than Apple. Sticking to its guns might sound like an attractive move to the management team and investors, but unless Apple gets a decent level of premium content on the platform to supplement its own mediocre library the platform will not be a success.

“Apple’s strength has always been seamless integration between hardware, software, services and now, presumably, content,” said Ed Barton, Chief Analyst at Ovum. “It has a lot of strengths to leverage in launching a video service. It’s problem is launching a video service in 2019 is about as hard as it has ever been, the competition is insanely strong and very well established in audience viewing habits.

“More well funded competitors are launching this year and making enough shows to attract and retain audiences is getting harder and more expensive. I don’t doubt Apple can launch a great video service, whether apple can sustain a great video service over the longer term in the brutally competitive environment for premium video is the question.”

Another strand of the software and services push will take Apple into the world of magazine subscriptions. Similar to the plans above, premium magazine subscriptions will be offered to users through the iOS news app, though considering the strife traditional content providers are in, Apple might be able to throw its weight around a bit more.

This is perhaps the problem Apple is facing; it thinks it is more powerful and influential than it actually is. Of course, Apple is one of the most respected and dominant brands on the planet when it comes to consumer hardware, though the software world is a completely different dynamic. It cannot bully companies like Hulu, Netflix and HBO into its own terms and conditions, as these are companies which are successful in the content world in their own right. Apple is trying to break into a new space, not necessarily the other way around.

That said, Apple does have a very strong relationship with its hordes of loyal customers. It can add value to any business it partners with, but perhaps it needs to realise it is only one hand amongst hundreds which is trying to lure customers onto its platform. What is clear right now, is that without enough headline grabbing content on the platform, the idea will certainly fall flat.

T-Mobile US ditches streaming for aggregator TV play

After T-Mobile acquired Layer123 back in 2017, the US has been holding its breath for another Uncarrier move to disrupt the content world, but its not going to be as glitzy as some would have hoped.

Speaking on the latest earnings call, the management team indicated there will be a foray into the content world, but it appears to be leaning more onto the idea of aggregation than creation and ownership.

“It’s subscription palooza out there,” said COO Mike Sievert. “Every single media brand is, either has or is developing an OTT solution and most of these companies don’t have a way to bring these products to market. They’re learning about that. They don’t have distributed networks like us. They don’t have access to the phones like we have.

“And we think we can play a role for our customers as I’ve been saying in the past at bringing these worlds of media and the rest of your digital and social and mobile life together. Helping you choose the subscriptions that makes sense, building for those things, search and discovery of content. We think there’s a big role for our brand to play in helping you.”

The T-Mobile US management team might be antagonistic, aggressive and disruptive, but ultimately you have to remember they are very talented and resourceful businessmen. A content aggregation play leans on the strengths of a telco, allowing the business to add value to a booming industry instead of disrupting themselves culturally trying to steal business.

Content streaming platforms have been an immense successful not only because of our desire to consume content in a completely different way, but also due to the companies who are leading the disruption. The likes of Netflix, Hulu and Amazon are agile, creative and risk-welcoming organizations. Such a disruption worked because the culture of these businesses enabled it. Telcos are not part of the same breed.

However, this is not a bad thing. The basic telco business model is connecting one party to another and this can be of benefit to the content segment. Telcos own an incredibly valuable relationship with the consumer as most people have an exclusive relationship with a communications provider (not considering the broadband/mobile split) and a single device for personal use. The telcos own the channel to the consumer.

Sitting on top of the content world, providing a single window and, potentially, innovative billing services and products could be immensely valuable to the OTTs, as well as securing diversification for the spreadsheets internally. The content aggregation model is one which is functional and operational, perfectly suited to the methodical and risk-adverse telcos.

Specifics of this Uncarrier move are still yet to emerge, but the T-Mobile US management team are promising to do something with the Layer123 acquisition sooner rather than later. It might not just look like what most had imagined initially.