I have been waiting for Apple to screw up — get lazy, lessen its obsession with quality, watch its lunch get eaten by competitors or something that will fundamentally signal that the Cupertino-based company has begun its inevitable decline. Judging from Apple’s most recent quarterly earnings results, issued today, I’m going to have to wait for a very, very long time to see Apple’s shine start to dim (the boring and overblown backdated options thing notwithstanding.)
Not only has Apple not stumbled, it also keeps soaring. For its fiscal Q1 07 (for the calendar quarter ended 12/31/06), Apple posted a stunning 78% increase in net income, year-over-year, based on a 24% hike in revenue. Net income for the company rose to slightly more than $1 billion, compared to $565 million during the year-ago quarter. Revenues jumped to $7.1 billion, compared to $5.7 billion during fiscal Q1 06.
iPod sales, which more than doubled year-over-year, drove the growth. The number of iPod units sold leaped by 141% to 21.1 million during the quarter, up from what was then a record-breaking 14 million units shipped in Q1 06. iPods accounted for nearly half of Apple’s revenue, or $3.4 billion, 120% higher than the revenue generated by the portable devices in Q1 06.
And here’s the thing: not too long ago, some Wall Street analysts were predicting that Apple’s iPod sales would decline by right about now because, after all, the product is getting pretty mature, even if Apple has rolled out a number of differentiated models. The theory was that Apple had to come out with an iPhone or else it faced stagnant growth.
Well, here we are — iPods sales show no real signs of a slow-down and Apple will hit the market mid-year with what will no doubt be a monster hit, the iPhone. Even Mac sales are rising — the number of units shipped jumped 28% year-over-year to 1.61 million during the quarter.
It’s hard to think of any other company in the tech or communications sector that is in a better position.
Posted by Cynthia Brumfield at 8:15 PM | Print | Comments (0)IPD contributor Gary Arlen cast his knowing eye around CES last week and offers the following all-you-need-to-know recap of the show’s events, Arlen-style.
If ever there were a “can’t-see-the-forest-for-the-trees” environment, it is the Consumer Electronics Show. Amidst the avalanche of digital product hype — which now ranges from mega-screen TV monitors to thumb-sized video receivers, not to mention Internet-powered doorbells and butt-rumbling automotive sound systems — it’s hard to sort out what’s truly significant.
Even a week after the gargantuan 2007 show ended, the proliferation of products and promises blurs together. I’ve often thought that the best CES coverage should come six to 10 months after the event to see which of the products actually reach market and appeal to real consumers. Is this the year we should believe that Hewlett-Packard’s home media server will jump off the shelves, unlike the three previous annual promises? Or will Sirius Radio’s backseat video service (first shown in 2005) become a “winner” now that it has some MTV and Nickelodeon content? Is Akimbo’s IPTV service more viable, now that it can be accessed through Yahoo! video or via ScanDisk’s USBTV thumb-drive that moves video from the PC to the TV set?
Of course, seasoned cynicism is tempered with sheer awe at the proliferation and progress on display. Last year’s much-hyped SED (Surface-conduction Electron-emitter Display) monitors from Toshiba and Canon, which were supposed to be the next great flat-panel technology, were completely absent last week. But Sony brought forth a 27-inch prototype Organic Light Emitting Diode monitor, far larger than the handheld-device OLED screens (less than five inches) that Kodak and Sanyo demonstrated two years ago.
Against that context of innovation uncertainty, it’s foolhardy to handicap product success. Moreover, the increasing significance of “outside” factors was deliberately in the face of the hardware makers and marketers who are at CES’s core. Hollywood moguls, such as Disney’s Bob Iger and CBS’s Leslie Moonves were making nice in their keynote remarks, with great visions of converging, cross-platform delivery. But their very presence was a reminder that they control much of the content that will make or break many of the devices (economically, if not tangibly).
And regulatory issues were always looming as the Consumer Electronics Association (which runs CES) continued to showcase policy makers on copy protection, access (including network neutrality), security and more. Although the Congressional turnout (merely three Republican members of the House of Representatives) was sparse compared to the dozens in previous years, Washington was heard from in many quarters.
FCC Chairman Kevin Martin reiterated his dismay with the harsh Network Neutrality limits that the FCC put onto the AT&T/BellSouth merger. He cited the “non-discrimination” wording in the decision and convolutedly cautioned that, “‘not non-discriminatory’ has come to mean something different than the FCC’s intent.”
Martin also said that the FCC “shouldn’t get into” the issues of muni-broadband, calling such government-owned networks “mostly a local decision.” But he acknowledged that the FCC might become involved in some situations, stopping short of specifying the situations that will attract federal attention.
The Chairman’s widely reported pronouncement that Comcast and other large cable companies will not be granted blanket waivers to postpone distribution of CableCARD downloadable security was greeted with predictable glee by consumer electronics makers.
“The Commission has to find a way [so that] by Christmas 2008 consumers are able to take advantage of what we’re seeing on the floor,” he said, referring to the digital-ready TV monitors that were on display in the CES exhibit halls.
Immediately, the cable TV spinmeisters in the conference room complained about the cost to the cable industry and consumers of that decision.
Martin also reiterated his views about a la carte TV programming, calling it “problematic” that customers have to buy bundles of channels. He cited his year-old FCC report favoring unbundling — again sending the cable executives seething.
Despite several questions about rumored mergers in the satellite radio (XM + Sirius) and satellite TV (DirecTV + EchoStar), Martin steadfastly deferred comment until such deals are actually presented to the FCC. He acknowledged that “obviously telco entry into TV changes the marketplace dramatically,” thus suggesting that the DBS deal might receive a favorable hearing.
Martin also opined on the “white spaces” issue that if of such concern to broadcasters. As TV channels are shuffled during the DTV transition, and as unused local spectrum is allotted to unlicensed devices, broadcasters fear that these new gizmos will emit signals that impede local TV reception.
“We can’t do it in a way that will interfere with broadcasters while they’re in the midst of transition,” Martin said. Again, he stopped short of describing the FCC’s steps toward field testing or other actions to avoid interference.
CEA President Gary Shapiro, who interviewed Martin on stage for an hour, took audience questions in writing — and the first query (which happened to be one of the questions I sent up) asked about Martin’s own personal favorite consumer electronics device.
The chairman immediately said it was his cell phone, citing its value in keeping in touch with his family and the progress of his 13-month old child.
Martin’s focus on verbal access suggests that he is not hustling to sign up for the multitude of mobile content services that were arrayed throughout Las Vegas. Motorola Chairman Ed Zander, in his keynote session, focused on the entertainment options available via mobile devices.
And Verizon Wireless notched up its VCast promotion, unveiling a relationship with Qualcomm’s offshoot MediaFLO to carry specially packaged network TV programming (from CBS, NBC, MTV Networks and others) to handsets. The Verizon pitch also integrated the expansion of the company’s FiOS fiber-to-the-home video service, which is rolling out in selected markets. Verizon executives stressed the consumer value in getting voice, video, data and wireless entertainment and communications service from a single supplier.
When I asked them about what will happen in the vast regions of the U.S. where Verizon is not the legacy incumbent wireline carrier (and hence, the bundle will not be easily available), their only reply was that they’re looking at ways to handle it. When I pressed, asking if they were making deals with AT&T or Qwest in their regions (unlikely alliances), Verizon’s executives benignly smiled and said they couldn’t talk about details yet.
Their reluctance to predict their own business deals reinforced a constant concern I faced throughout CES. There are so many good ideas and so many, many choices for consumers. Yet there is so much conflicting information and so little understanding about what these gizmos and policies will do.
At a session (which I moderated) about the Digital TV transition, the questions from the audience during the Q&A segment plus the individual queries after the formal program were stark reminders about consumer confusion. If the very smart industry executives and managers in the room did not understand the implications of the analog TV cut-off, how will tens of millions of merely mortal consumers comprehend that most fundamental of changes to their TV reception and the dramatic change looming.
Separately, as I watched the incredible big screen TV images (including Sharp’s new 108-inch LCD monitor) and tiny pictures on portable media players (including mobile phones), I wondered what the Hollywood contingent at CES was pondering. Should they be producing separate versions of their movies for the big home screen and the small handheld screen? What are the costs — and more significantly, how soon will the markets grow to justify customized productions for each platform?
And all of this doesn’t include the continuing march of “alternative” content suppliers, such as MediaZone (a “social TV” service) or the revamped Zodiac Interactive (formerly Zodiac Games, a cable set-top box gaming supplier), into the CES arena.
So many choices. So many things to remember. Or to forget.
Such as that Internet door bell (you can download variable ring chimes via an IP connection). It was an “Innovation” award winner, although who knows why anyone will buy the gizmo?
We’ll check it out next year.
Posted by Gary Arlen at 5:31 PM | Print | Comments (0)The New York Times’ Brad Stone fell prey to a common occurrence at this year’s CES show: vendor pitch intoxication. He drank in the impressive demos by set-top tech suppliers Motorola, Scientifc Atlanta, Tivo and Digeo and the more he drank, the better all their products looked to him.
Stone has this piece today about how boring old cable set-top boxes are going to have to give way to newer, glitzier models that come equipped with all kinds of bells and whistles such as high-speed modems, big hard drives and advanced picture-in-picture capabilities. Consumers just aren’t going to accept the crappy boxes with crappy software that cable operators fob off onto them, all the vendors told Stone, because Tivo’s got a new HD box and Apple’s iTV unit, Apple TV, will make them all hunger for the best stuff, blah, blah, blah.
“Set-top boxes are becoming the central piece of equipment in the home for accessing entertainment and information,” said Joshua Goldman, chief executive of Akimbo, a Silicon Valley start-up trying to bring programming to the TV over the Internet. “Consumers will buy their own device if they feel like they are not getting the services they want from their television operators.”
Oh how I wish I had a buck for every time I heard this pitch, for every time I sat through yet another eye-popping demonstration by yet another vendor who had a better set-top technology for cable operators — and that was in the 1990s. And yet today, consumers still have cheap boxes with bad functionality.
Why? Because great set-top boxes are expensive, and worse, they represent capital costs for cable companies, which eat into an important financial metric called free cash flow. Moreover, although consumers like high-end boxes, these costly devices don’t deliver services that generate enough additional revenue to justify their expense. It’s hard to charge for a better interactive program guide, it’s hard to charge for picture-in-picture.
Stone cites a recent FCC decision that forces cable operators to make their set-tops work with any manufacturers’ devices, even those not made by the industry’s top two vendors, no later than July 1 of this year. That mandate, which has its origins in the 1996 Telecom Act, forces cable companies to offer set-tops to new customers which have separable conditional access, or security, technology in the form of cards, CableCards, to be precise.
Although a step in the right direction toward allowing any consumer electronics makers to sell cable set-tops — with the operator in control of only the security technology, in essence — don’t look for consumers to rush out and buy new boxes after July 1. Any set-tops that aren’t picked by cable operators won’t work that well for a variety of reasons, and how many consumers, really, yearn to buy cable set-tops?
So cable operators know that they’ve got plenty of time to upgrade their boxes and they’re not going to rush around spending scads of capital on new set-tops or new set-top technology any time soon. But, if they were so inclined, those cool demos by Motorola, Cisco, Diego, etc., would surely turn their heads.
Posted by Cynthia Brumfield at 9:30 AM | Print | Comments (0)
No sooner had I finished posting this item about the reliance of the Obama campaign on Internet video pioneer Brightcove than I had received a message from Brightcove CEO Jeremy Allaire alerting me to some big news about his company: Brightcove just raised $59.5 million in a strategic funding round.
Led by AllianceBernstein L.P., Brookside Capital LLC, Maverick Capital, Ltd., the round also raised funds from The New York Times Company and Transcosmos Investments & Business Development. Also participating were existing investors Accel Partners, Allen & Company LLC, AOL, General Catalyst Partners, The Hearst Corporation, and IAC/InterActiveCorp.
This is Brightcove’s second big funding announcement. In November 2005, the company landed $16.2 million in funding from Accel, Allen & Company, etc., and snagged media mogul Barry Diller, head of IAC/InterActiveCorp, as a board member.
The series C round will go toward continued development of Brightcove’s platform, but is also aimed at helping the hot IP video pioneer expand internationally. Two of the new investors are particularly noteworthy — the New York Times Company, already a Brightcove customer, could propel Brightcove ahead even faster by greater translation of news into video across its industry leading web properties and Transcomos gives Brightcove access to the Japanese market.
In his blog, Allaire says that 2007 will be a big year for Internet video, but also a big year for consolidation in the gajillion Internet video start-ups. Based on this big vote of confidence, Brightcove will probably end this year as an acquirer not an acquiree.
Posted by Cynthia Brumfield at 8:39 AM | Print | Comments (0)Beet.TV’s Andy Plesser has this item today about rising Democratic presidential hopeful Barack Obama and his campaign’s embrace of Internet video. The Obama campaign kicked off his exploratory committee yesterday with a three-minute video powered by Cambridge, MA-based Brightcove.
Plesser says that Brightcove’s support of the campaign will be “multi-faceted,” going beyond simply the support of the Brightcove player and system, but extending to the creation of an Obama “channel” on Brightcove and setting up a mechanism by which the campaign can publish videos automatically to blogger and other web sites.
The 2008 presidential campaign is still in its infancy, and yet, as we can see with this development, the role of the Internet in the election is already ramping up to surpass even the potent impact of the web during the mid-term congressional elections.
Update: Rachel Sklar at the Huffington Post offers her take on Obama’s announcement, which bypassed the traditional broadcast media and went straight to voters via the web. She says it was pretty savvy move, one that has quietly captured the attention that a big traditional media splash might not have.
Pretty savvy move, actually, on Obama’s part, with the obvious bounty of media coverage to come (never mind in the lead up), to say nothing of the suddern traffic possibilities on his website (if he slaps Google ads up there quick he can totally rake it in!). That’s why it’s savvy— Obama knows that he’s been the object of scrutiny and fascination, obviously, and this is a great way to sow he’s not courting it (even though the citizen journalism touch will provide additional play).Posted by Cynthia Brumfield at 8:13 AM | Print | Comments (0)
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