Russ Pearlman's Blog

Recently, Capgemini commissioned a paper with In-Stat related to transformation in the digital space. This is part of our marketing around Digital Content Services (which I hope to post a link to our latest white-paper here soon). A portion of the research is pointing to a demographic area that In-Stat calls the ‘multi-taskers’: these are essentially digital natives who are so used to technology / entertainment that they normally do a number of things at once including emailing, text messaging, etc. while playing games and/or watching filmed entertainment. But, just how big are those groups?

In the range of 18-24 alone, there are 6.5 million males and 4.8 million females in the United States. Across all age ranges, there are about 38 million males and 28 million females. Wow… that’s pretty incredible.

So, what does that mean to my thinking about the iPad? Well, I still think there are some significant challenges to the iPad including a lack of camera, concerns about battery life and the ability for users to read on it for long periods of time. The fundamental problem in my mind, however, was that the iPad doesn’t really replace any existing devices nor does it fill in a gap. But, when thinking about these multitaskers, I starting thinking that perhaps the iPad is a perfect fit for this demographic. They will continue to use their HD TV for movies / television and their cell phone for texting, etc. But, they can also use the iPad simultaneously to play games, browse the web, etc. So, the iPad won’t be a primary device, but it will be a nice secondardy device for these multitaskers.

Given the demographics I’ve see for this group, I think that represents about 30 million potential buyers. If the update is about 15%, then I’d expect to see 4.5 million iPads ultimately sold. So, that’s my new predicition…

I’m probably the only person to blog about the launch of the iPad today. (Was that sarcastic enough?) Never the less, I’m going to add to the rash of dialog. Today, I’d like to talk to a very basic question – will it be a success?

It’s important, I think, to look back at the iPod and iPhone. Compared with other MP3 players, the iPod is extremely successful. Was it because the iPod had better sound quality? No. Was the form factor that much more amazing? No. Was the price really compelling? No. How about the iPhone? Is the calling capabilities better? No. Is the price great? No. Does it provide a better multimedia experience? Probably yes – but I don’t think that was the biggest success factor.

At the end of the day, I believe the real success of the iPod and the iPhone today comes down to a very simple idea: content matched with the device. iTunes and the songs available from Apple is what made the iPod the “killer app” that it is today. The iPhone was very attractive in terms of screen and interface – but what turned it from a toy into a phenomenon was how well it integrated into iTunes for music and video at first and now a huge wealth of applications. What just about every competitor was unable to do was marry content with devices – resulting in near monopoly for Apple at this point (at least in the music space).

So, where does that leave us with the iPad? Will the content be there? Absolutely. So, from a consistency perspective, you’d think I’d be predicting success. And, there is certainly some truth in that. I believe that the iPad is going to be more successful than just about anything in that category (including Kindles or Sony EBook readers or tablet PCs.) But, is it going to be another ‘killer app’ from Apple? I don’t think so. And, here’s why…

Who is the primary target for the iPad? For book enthusiasts, the battery life doesn’t work – only 10 hours of battery time (which is a marketing number anyhow) means you have to plug it in daily. Compared with a Kindle that’s terrible. For music enthusiasts, it isn’t nearly as portable as an iPod. For video enthusiasts, it’s an interesting option, but the storage costs for the device aren’t as attractive as external hard drives or media PCs. For folks looking for a lightweight PC replacement, it isn’t powerful enough to run real productivity software, and it’s lack of peripheral connectivity will frustrate most users in this camp. Since it doesn’t support making phone calls, it isn’t an iPhone replacement either.

Since the iPad doesn’t really attract a primary user type, it could still be successful as a ‘jack of all trades, master of none’. But, I highly doubt it. The one area where I could see it providing a unique capability is related to ’TV everywhere’ (i.e., where you can get live broadcasts of digital television such as sporting events on portable devices). Unfortunately, we are still years away from the content and distribution folks working out the business models for this capability.

At the end of the day, I’m predicting mediocre sales of the iPad with it eventually being just a ho-hum member of the Apple product line-up. It’s not a game changer, and it’s not going to cause any major device switching.

I’m a bit late in updating my blog from CES, but as they say, better late than never.

While at CES, I participated in a number of great panels including those from CESCA (the Consumer Electronic Supply Chain Academy) as well as Digital Hollywood. There was a lot of great participation from the industry, and I learned quite a bit. One of my favorite topics was about ‘TV Everywhere’ – about watching TV on all devices whenever and wherever you want. The technology guys in the discussion were convinced that this is just 3-5 years away from mainstream while the content guys all said 7-10 years. What an interesting difference – and it shows, like many situations, that it isn’t about the technology as much as it’s about how you use it.

The other big thing at CES this year was all the 3-D televisions. You may have already read a lot about this, especially if you followed CES at all. I know that I’ve heard a lot about how cool it is, how some people think it’s impractical, etc.

From my own point of view, just like the discussion about “TV Anywhere’, I think it comes back down to the content. Live sporting events in 3D? Adult content in 3D? Video gaming in 3D? Those are probably going to be the drivers. But, I think there might also be a brewing content war – each different TV maker has a slightly different technology for the glasses, and I think the compatibility issues are going to be a big problem. How do you invite 5 friends over to watch “the game” in 3D? You all have to be using your own glasses, and these aren’t going to be cheap – probably $30 each.

So, while 3D is making waves in the theater, and there might be some consumer demand, until the content is there and the standards are worked out, it’s going to be a long way off. Technology: 3-5 years, reality: 7-10…

Executives from several major media companies testified before the Federal Trade Commission about the need for fees, taxes or tax credits for content being spread or aggregated across the Internet. The basic problem is that in the rush to get professionally published (i.e., newspapers) content on the Web, these companies decided to start doing it for free, hoping that advertising on the web sites would keep pace with what they were seeing traditionally in the print forms. These publishers have now learned, however, that on-line advertizing is a lot less lucrative – and with the switch from most people getting their news from “traditional” media to “Web 2.0 media”.

So, what is a major media company to do? Implement subscription models like the Wall Street Journal to fuel your success? Create premium member areas like ESPN.com or RushLimbaugh.com? Charge syndication fees to aggregators? Enforce copyright?

How about ask the government to give you tax credits to help defray your costs under the guise that our country needs a “free professional press”?

Within Digital Content Services at Capgemini, we have a pillar around Digital Monetization that helps to address these types of issues. While it’s a pipe dream that the US Government is going to be the ultimate savior here, major media companies need to figure out how best to fit within the new world of Web 2.0 and digital content. It’s no surprise that digital content is seen as less valuable than it’s physical counter-part (we’ve seen this in music, video, games and books). But, I think the biggest mistake an organization can make is to take old process and old ways of doing business and just try to apply the Internet.

When I buy a digital book on my Kindle, it’s just a digital version of something I could buy on paper.  They charge me $9.99 instead of $25 – so I’m happy. But, if they were to make the experience better – for example augmenting it with animations, providing extra features, or automatically making updates to non-fiction materials, I’d be willing to pay a more. But, that would take a new mind set and would require a whole new set of digital supply chain processes. So, Amazon would need to figure out which model it wants – one where revnue (and probably costs) are lower or when where revenue (and probably costs) are higher.

Or, perhaps, we can ask the US Government to provide a tax credit for Amazon selling digital books.

I’m proud to introduce an excerpt from one of Capgemini’s most recent point of views: “Video Gaming: The Next Level”. If you are interested in downloading the whole paper, please go here. (Registration required.)

The video game industry in the U.S. grew nearly 65% from 2006-2008, driven primarily by the newest generation of gaming devices, including consoles and portables, and a proliferation of successful titles, particularly key franchises such as Grand Theft Auto, Mario and Halo.

During that span, the innovation of the Wii dominated mainstream news. Today, headlines hail the iPhone as the next growth platform in gaming. Lost, however, in the focus on game play, form factor and motion controllers is a fundamental technological transformation that will reshape the industry: the connected gaming device, which we define as a device with the ability to download and manage entertainment titles.

Today’s gaming devices all boast connectivity, from consoles that join existing home networks to portables that use Wi-Fi to Smartphones that leverage global cellular networks. The original Xbox and PlayStation 2 were the first connected consoles; their next-generation counterparts matured the offering by tapping into Web 2.0 interconnectivity similar to that of Facebook and Twitter, creating social networks of their own. Since their respective launches, Nintendo’s DS and Sony’s PSP brought Wi-Fi connectivity to the portable gaming market. Historically, games have played a minor role in the mobile phone industry. Now sophisticated games are a differentiator in Smartphones, with the iPhone leading the way while Blackberry, Android and Nokia’s N-Gage 2.0 jockey to compete. Today’s devices are at varying stages of both connectivity and monetizing from
this connectivity.

This technological transformation arrives at a time when consumer behavior has become increasingly complex due to the rise of personalization and participation. Today’s consumers are increasingly interested in personalizing their gaming experience via unique avatars and user profiles. Their desire to participate with games is twofold: 1) to augment content and 2) to interact with other players. Gaming consumers seek to enhance and contribute to titles with user-generated content (i.e., skins and level editing) and developer interaction that influences the product itself. Consumers also desire to interact with each other via online gaming communities.

Maturing the connected technology will allow firms to meet the needs of this increasingly sophisticated consumer. Our View: Connectivity Changes the Game The proliferation of connected devices fundamentally changes the gaming  landscape. Traditionally, consumers have purchased video games via retail outlets in boxed format. While this remains the case today for AAA titles on consoles, connectivity threatens this model. 

John Marmaduke’s post about Redbox is a good one.

For those of you not keeping up, Redbox is a company that went out and bought a bunch of old vending machines and started putting DVDs in them for rental at grocery stores, department stores, hospitals, etc. The automated rental machine just takes a credit card, and charges a very nominal fee for rental.

Marmaduke argues that ‘giving away’ DVD’s at a $1 rental price for products that take hundreds of millions of dollars to produce is an unsustainable business model. Of course, he’s right! As he points out, newspapers have been giving away content on-line for years now, and they are dealing with the consequences – declining revenue and even bankruptcy.

There is a similar parallel in the video gaming industry. The cost of making games is going up, but there is a downward pressure on sales price. Along side the fact that many games are now going digital, there is additional pressure to lower price since consumers don’t value ‘virtual’ product the same as ‘physical’ product.

Personally, I think putting your head in the sand isn’t the right answer. Consumers will likely make trade offs when considering a $30 BluRay purchase vs. a $1/day rental. Perhaps they won’t get AAA content, but they will settle for lower quality (in terms of product and viewing quality). And, if Redbox isn’t the company behind a $1/day rental, someone else is certainly going to jump in and offer something as well.

The industry needs to attack the problem from both ends – finding ways to lower production costs, finding ways to be more efficient in supply chains (both physical and digital) and formulating new monetary models (i.e., micro transactions, subscriptions, etc.)

Earlier this week, Adobe announced that they are acquiring Omniture for $1.8b. For those of you unaware of the broad suite of solutions available from Adobe, it’s probably worth looking at their suite of offerings. At the highest level, Adobe provides a number of products for the creation of media & content from their suite of photo & video editing tools as well as their document creation and management tools. Additionally, Adobe plays heavily in the rich media presentation space with Flash and Acrobat. They have also made plays into the middleware space with Adobe Lifecycle, a fairly robust workflow management suite of tools.

Adding Omniture to their stack is actually a pretty natural fit. As the graphic from their web site (and reproduced on this blog) shows, there is a major opportunity to tracking and ‘understanding’ consumer behavior. Traditionally, this has been accomplished by logging user actions against typical HTML objects and trying to understand usage scenarios. But, with the advent of AJAX, Flash and richer delivery platforms, it’s become more complex. By incorporating Omniture side-by-side with Adobe’s Flash technology, there is an opportunity to make this simpler.

Of course, this all sounds great on paper. I think the biggest challenge is going to be organizational. Omniture works and thinks very differently from Adobe. And, the creative types (i.e., Flex / Flash) and analytical types tend to think about problems quite differently.

With last night’s game the official kick-off of the NFL season for 2009/2010, I can’t help but be excited. First, I’m excited because I’m an avid Dallas Cowboys fan. Second, I’ve made a new pledge to work-out during the games (trying to get healthy) – so I have no excuses. And, third, because Fantasy Football is just so darn fun!

There are very few iPhone apps that I’m willing to pay for, and even fewer that I’m willing to spend more than $0.99 on. But, the EPSN Fantasy Football application for $4.99 is on my list. So, not only is the NFL huge for national broadcasters but it’s also lucrative for DirectTV (NFL Sunday Ticket) and fantasy sites such as ESPN.

So, go out and enjoy – afterall, that’s what M&E is all about.

Nice article from Dean Takahashi from GamesBeat following a speech from Rich Hilleman, Chief Creative Officer for Electronic Arts. One part to really focus on: “… Hilleman talked about the changes he has seen in more than 25 years at EA, which he joined as employee No. 39 in 1983. The audience is moving beyond males. The platforms are becoming mobile, social and online-connected. And the play style is moving from hardcore to casual. The business models are in flux as well.” (Emphasis is mine.)

It’s no surprise to anyone who has been engaged in the video game business that change is afoot, but I think the difference between “change” and “flux” is that change is directed, flux isn’t.

Interactive entertainment is quite different than non-interactive – watching a movie on a small screen, on a large screen, etc. is still fundamentally the same experience – it’s just different levels of quality. Not to belittle that, but playing a video game on a small device vs. a large device is fundamentally different. I think the same thing holds true for the connected entertainment device – playing a game against the computer vs. others is a very different experience. Additionally, the opportunity to dynamically add in more content is different – while you can download additional episodes of a TV show, it’s still a serial experience. Interactive is user driven – so adding in new content is more fundamental to enhancing the experience (or completely changing it).

So, while I see “change” in the industry related to video, music and books, I see “flux” in the video gaming space. I see a dramatic opportunity over the next few years to totally transform the experience from the 1983 video game idea (albeit higher quality graphics, physics and audio) of today towards a more immerse, connected, dynamic and growing experience for tomorrow. Just like the Internet opening opportunities for emergent companies to take hold (think Amazon, EBay and others) it also opens up a lot of competition and ways to expand revenue.

I can’t wait…

• First In First Out (FIFO) – the idea here is that items get processed in order – the first request is the first to get processed; this is exactly like the line at McDonald’s or just about anywhere else you go. The problem with this approach is that it doesn’t take priority into account.
• Round Robin – this approach works when there are multiple queues, you pull one item from one queue, one from the next queue, etc. For priority, you can use this approach by having a ‘high priority’ queue and a ‘low priority’ queue; this way, both will get serviced over time. Since I travel a lot, I know of a good example of this one: the ‘first class’ line at the airport. Agents typically service someone from the regular line then someone from the first class line then regular then first class and on and on. This approach works fairly well in helping to assign priority, but it’s still doesn’t discriminate between levels of priority, and it can cause a backlog of priority jobs that don’t get serviced in time.
• Priority based – this is an ‘enhanced’ round robin approach. In this case, you assign a priority amount to each work item. Each item in the queue is then sorted based on priority so that the ‘most’ urgent requests get serviced first. Again, using the airport example, this is how airline employees are treated – they get to move to the front of the ‘first class’ line when going through security – ahead of the elite travelers.
• Shorted Job First – this approach sorts jobs based on what can be completed the quickest. It ignores priority, but it does tend to optimize the system so that you can get the most jobs completed over a period of time. By way of analogy, think about standing in line for a copy machine. If 10 people have 1 page to copy and 1 person has 100 pages to copy, it’s most efficient to let the 10 people go first. The problem with this approach, though, is that as more work items come onto the queue, it’s possible that long running processes get pushed back so far that they never get done – essentially aging out.
• Multi-Level Feedback Queues – this approach uses a number of queues which take into account both processing time as well as priority. It can also take aging into account to make sure that a low priority, large job eventually does get completed as its age eventually makes it high enough priority.

As I’ve continued to approach various digital supply chain problems, I’ve been continuously reminded that most of these problems have been seen before in various other contexts. It’s a good idea to make sure that you don’t re-invent the wheel – if there is a good algorithm or approach already being used, leverage it…