The Death of the 30-second TV commercial

Into the last phase of what has been a 2 year joy-ride. Must say friends taught me more than classrooms in these two years and it is them who i'll miss the most, when everything here gets over. Talking about things getting over, are there reasons to believe that the traditional broadcasting industry is on a downturn ?? Is the industry out of ideas to stem the viewership shift to Social media?? If the numbers about their falling Ad revenues is anything to go by, then this industry is in for one big & tough test.

The Websites in question are abc.com & hulu.com and i must say these sites hold good potential to eat quite a large chunk of the broadcasters revenues. Warner brothers some time back created a lot of media attention (has this become a cliche ???) by stating that a deal with Fox & NBC backed hulu.com was imminent. Most of the prominent content owners are looking to bypass broadcast networks using broadband and cellular networks to reach the final customer. You cannot fault the content owners to be fair. For decades the broadcasters have controlled the customer preferences giving him very less choice on content and mostly pushing "preferred" content. The Content owners on their part unsuccessfully tried to move away from clutches of the broadcaster. Netflix is one such not-so-profitable attempt. Netflix generated one time sale of DVD's for these companies but nothing much altered the bigger pie, the Ad sales. Apple TV was another such attempt. But i dont believe, Apple TV will be as big a hit because the idea of making viewers pay for Ad-free shows when they can view the same shows on TV for free(with small interruptions for TV commercials) looks fundamentally faulty. Neither Apple TV nor Netflix created the impact they were expected to create. The Content companies have been targetting the Ad sales(the mother of 'em all) of the broadcaster and i think they have hit the bulls-eye with hulu & abc. And yes the whole thing is still a beta. The Internet is the only place where customers accept applications that dont work right. Ever imagined a beta automobile or a beta aircraft ?

But figure this !! will you actually watch through a TV commercial on a youtube when you are at freedom to just skip through the buffered content ?? Well yes but only if the speeds are no longer a concern and the ad slots & durations are intelligently planned. There is no shortage of media planners these days to plan ad slots & durations and the bandwidth is very close to becoming a commodity. There arises another question. Are the internet audiences as captive as the TV audiences ? Well you'll have the answer to that question once you visit the website. Razor sharp quality, fast buffering, look of a theatre screen etc etc . See it to believe it. Although social networking is still not part of the entire package, i'm sure it is in the development stage (Its still a beta isnt it!!). Forget about the TV broadcasters, if social networking is eventually a part of it, i think it may well give youtube the scares(which is primarily making its living out of pirated and user generated content). Hulu will have quite a lead over others when warner eventually hosts content on its site. There may also be a shift of viewership from pirated & UGC to copyrighted content when the copyrighted content is made available for free. But again this viewpoint is quite subjective and only time has the right answer . Just one drawback though, geographical filerting(Damn !!!), the term mastered by BBC & Sky and unfortunately carried forward(hopefully not for long) by these new age companies. Then how did i get access to it? Well Microsoft remote desktop is quite an option.

Most people will eventually if not initially realize that they have only two modes of watching copyrighted content. Either pay for professional content or watch ad supported content for free. If i were given that option, i will have no qualms in watching ad supported copyrighted content for free. One thing is very clear, the world will have no dominant distribution model & gatekeepers for the coming decade. This is world the content owners have wanted for so long. The faster the broadcasters understand it & acccept it, the longer they stay in the business.

Web 2.0: A Threat to IMS ??

Just back from an exciting trip to the beaches of the Arabian Sea and must say it was the best trip of my life till date. The Sounds of the Sea are still ringing in my ears. So am finally back here answering the trivia which everyone thinks is the main reason why IMS deployments is on the backburner across the telecom world, Web 2.0. Web 2.0 is broad terminology given to the second generation of web-based communities, Social Networking sites, web video etc with User Generated Content as the core. It is expected that Web 2.0 based applications will comprise almost 60% of Service provider traffic by 2010 (Surely the prediction has to be conservative !!!). Then how can this be a threat to IP Multimedia Subsystem, if not anything it should be the key driver for IMS networks of the future. IMS talks about the core being service independant and since the core is IP, this opens a lot of new exciting avenues for the service providers to deliver innovative services to the end subscribers.

Proponents of Web 2.0 who speak about the slow death of IMS do so on 3 key fronts

• When operators from the Internet age, viz., google, skype etc enter the telecom space, the usage will be through their own web-clients. So the calling will be VoIP based, video & data will be on pure internet. So there is no requirement of softswitches in their networks and most of their networks will comprise of high end servers which will perform key functions like traffic switching.
• The Investments in these servers (both incremental & initial) is many times less than those in IMS Softswitches. This again places operators like Skype, google etc in a position of advantage.
• It is much more easier to source & manage content with servers in the backend. IMS Softswitches introduce an additional layer of processing in the network.

So is the picture really this gloomy for telecom operators ?? Is there no way out for them from the onslaught of these Internet companies ?? What about the BT's and FT's of this world who have already committed billions of dollars for deploying IMS ??

To Answer the above questions, lets take a macro look at the entire scenario. The Traditional Telecom operators are catering to each & every Subscriber of the World Telecom Subscriber base today (which is close to 3.5 billion). These companies have been here since long. They own large parts of telecom networks today and have vast expertise when it comes to managing networks and customers. I Also dont think google or skype is interested in managing telecom networks. Applications are what they specialize in and they want to stick to it. Chances of a google phone or Skype telecom service seem very very remote. Google all but killed the speculation about google phone last month by launching Andriod OS. What it will eventually do is comeout with Android loaded PDA's with vendors like HTC. People have read too much into the story of google bidding for 700 Mhz spectrum. Its not clear who has won it yet, but what google wanted to ensure was that the open access specifications remain - thats where google finds a huge market for its applications.

I Believe the eventual ecosystem that will develop will be that of Web 2.0 applications being delivered on IMS core. Last week we saw a deal between T-Mobile & Yahoo for "One" search on Mobile phones, deals between T-Mobile & Myspace, Hutchison(3 Mobile) & Skype etc are all suggesting market movement towards this phenomenon. Applications are what these Internet companies are targetting and they get a larger audience for their applications through this route. They may get much larger audience by having their own telecom networks but what about the lack of expertise in managing networks. A Further Evolution of this ecosystem may result in companies like Skype picking up stakes in telecom operators to ensure guaranteed audience for their applications. So the operators who have invested in IMS networks may sleep well without getting too much worried about their investments because they will still remain the key stakeholders (when Web 2.0 landscape fully emerges). Coexistence is the key !!! Coexistence is the future !!!

As always looking forward to your comments....

Virtual Dreams for the Real Market

Its been quite a long time since i actually updated my blog. Well have to be frank, just caught up with work which was much less important than updating my blog :), anyways the point is i'm back again after a small hiatus and i hope there wont be many more of those small gaps in the future.
I'm writing this article amidst all that speculation about the much hyped Virgin Mobile's India plans. Its only a matter of days now and then we'll see the world's most successful MVNO entering India (ummmm.....Grrrrr......uhhhhhhh through a non MVNO route). There's no doubt about Richard Branson's excitement about India as a business opportunity, Virgin's full fledged India foray was only a matter of when if not how. Virgin Music is planning an FM foray, Virgin mobile already present through multi branded mobile retailing JV with essar, Virgin Travel also mulling India entry etc. But i just cant help but write about its much hyped foray into Indian mobile space. One has to ask the question that if not MVNO route then which is it going to follow ?? (Because MVNO's arent allowed in India till date). Cross holding of more than 10% is also not allowed between service providers, so the 50% JV with Tatas doesnt allow Virgin to enter market with its own branded services. The Route which they are supposedly taking is the Franchise one (Remember Pizza Hut to Yum Restaurants). So the Virgin-Tata JV company is to become a franchise of Tata Indicom. Smart !!! Very Smart !!! Yet another case of a corporate entering the Indian telecom market through a backdoor route. I bet some months after the launch of ops, some arm twisting - some Branson visits - some threats of other british investments withdrawn will result in DoT allowing MVNO's (Does the story remind someone of Reliance and what happened in 2000)
So will a franchisee license allow virgin to sell its own branded phones ?? I Dont think so. It should be either Tata or Virgin-Tata cobranded phones & services. Will a supposedly high ARPU targetting virgin mobile want to get its brand associated with a mass market brand. What happens to its brand equity after it does get a MVNO license and is allowed to sell products & services under its own brand. If that was the story about one side of the coin, lets look at the other side, which thankfully looks brighter. Is there a business logic behind its India entry ? Lets analyse this in parts.

• Virgin is entering a market which is adding around 8mn subscribers every month. Every major operator is adding more than 1 Mn a month here. Its total world subscriber base today stands below 15mn. In such a scenario, if Virgin goes for a pan-India foray, it shouldnt take more than 3 years for it to double the subscribers. What we are talking is, in just 3 years there is a possibility that Virgin's India subscriber base far exceeds its cumulative subscriber base in its entire operators in the rest of the world. This looks a real possibility. If i were a virgin shareholder, i would jump up and down when i hear this analysis.
• The Second question: Is there a captive market for the much talked about virgin's services ?? Virgin till date has been hugely successful (and ofcourse profitable) with its VAS offerings. It plots success for similar strategy in india. I think this would be an ideal recipe for disaster. For Example, try selling(even promoting) a rescue date feature here and you wont stick around for long. It should learn something about Indian values & culture. The Target audience for its present VAS offerings look very limited in India. I'm telling this because, they are blindly launching 2 of their popular VAS offerings in UK & US in India (the rescue date feature being one of them)
• The Government wants to clear the route for MVNO licensing to get around the problem of spectrum crunch. Dont be too shocked if government offers sops on the platter to these companies or to the whole concept of Active Infrastructure sharing for that matter.
• Learn from Singapore: Well in the quest for hugher ARPU's, it shouldnt alienate its TMS. In short learn from Singapore. Positioning itself as a premium brand will ensure long leaves for its employees for sure.

Having said these, i do actually believe that Virgin will be a success in India but albeit in a much lesser scale than what Mr.Branson believes(atleast in the short to medium term). Virgin Mobile in India, will present him a second opportunity to crack the Asian market, after its bitter exit from Singapore in 2002. The Competition wont be quiet either. Vodafone sure knows how to tackle Virgin and its surge thanks mainly to the experiences it learned in its home market. Indiatimes (8888) will grab any opportunity to enter the wireless segment and till date, apart from yash raj films, no one has so much local Indian content as Indiatimes, so dont expect it to keep quiet either. The other side of competition will surely come from existing operators who will leave no stone unturned to expose virgin's backdoor foray and make its initial few years, surely the ones to remember. If i were Richard Branson, i would take all this and even more to double my existing world subscriber base in just 3 years.

Size does Matter !!!

It all started with the much hyped acquisition of Lucent Technologies by Alcatel. It also happened at a time least expected. It spun quite a few heads in the Telecom circles around the world. They were busy working out the economies behind the acquisition but no one could justify the timing, although just about everyone had no doubts about the value (both shareholder & customer) that can be generated out of the acquisition. The Equipment Vendor industry was undergoing the semi boom period when the acquisition happened. Service Providers across the world were investing on network upgradation in order to meet increasing demand for bandwidth. But this didnot necessarily mean good profitability because the vendor industry was fragmented with each company having its own R&D roadmap ahead of it which offset the higher revenues. Alcatel didnot just see the product synergies, it also analyzed the R&D synergies arising out of the acqusition.

To Counter the strategies of the mammoth Alcatel-Lucent, a spree of consolidation swept across the industry. Be it Ericsson - Marconi or Nokia - Siemens (which by the way is a joint venture), the advantages seemed too attractive to neglect. Rather than offering 5 or 6 saperate boxes of the same technology to the market, the vendors would rather offer 3 Quality ones which would inturn save on huge R&D and production costs. The Savings can either be passed on to the consumer or can be routed for further R&D. This would inturn keep the share holders happy.

Fast Forward to end of 2007 and we see gloom and doom spread acrss these merged entities. The Companies are regularly missing their synergy targets and this has left the banks(which lent money for the acquisition) fuming. It is not hunky dory on the customer front as well. NSN has already lost 2 key orders (BSNL 45 Mn order being the most significant) and Alcatel/Lucent is struggling to win any tenders. The Same Telecom Analysts who were gung-ho about the consolidations before are now predicting a doom or these companies. The Surge of chinese vendors in western markets is adding to their concerns.

Now comes the tough part - my analysis of the situation. Well i believe people were expecting too many things too soon out of the merged entities. What the so-called analysts fail to understand is that the merger is not the be-all and end-all. Companies also have to shell out huge sums for restructuring both operations and on the basis of employee skill sets. NSN merger reportedly laid off 10000 people, there have been no official numbers of the layoff by Alcatel Lucent but i expect it to be more than 5000. The biggest challenge will be synergizing the R&D. Both companies will be at different stages of R&D and of different technologies. Evolving on an R&D roadmap which is in line with company strategies will be one of the huge challeges. For Example, prior to acqusition, the biggest chunk of Lucent revenues were Mobile/Cellular Infrastructure and Alcatel was a market leader in SDH/SONET equipments. Now where does Alactel-Lucent concentrate (and channelize its R&D) ?? It will take time for companies to realize their synergies and it will take more time for these to reflect in company bottom lines. And for all those who are complaining against the chinese juggernaut, i believe, a merged entity is better equipped to take them on rather than a stand alone one.

So what does all this come down to ?? Well thankfully, the industry is still in the hands of good, sensible telecom business managers and the wave of consolidation will definitely continue although with much reduced steam than before. And who is next on the blocks ?? There was quite a few companies with good potential.. I believe Tellabs tops the list followed by the struggling Mobile handset division of Motorola. Juniper Networks may soon be on the blocks especially after Huawei's stake-buy in 3 Com.