Some Thoughts on 5G

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The promise of 5G wireless connectivity as the backbone of the “4th Industrial Revolution” has brought predictions of how the global economy will be changed both positively and negativity. Social impact aside here are some quick thoughts on how I think some tech leaders today will evolve.

Apple

Remember when everyone was touting the revolution of wearables with Google Glass, etc.? Well, Apple is the clear winner so far with AirPods and Watches. 5G will make it imperative that they continue to iterate on these two categories as the iPhone will become less important, unless you are streaming video. More apps will integrate Siri in a meaningful way “Siri get me a Lyft”, “Siri order a salmon bowl from Digg Inn”, etc. Siri can also be used in China, which isn’t the case for Google Assistant.

It would be interesting for them to create some sort of TV SDK beyond an app store for Apple TV, similar to what they have done with HomeKit or CarPlay for 3rd party hardware partners to make it easier to stream video to all of your TVs without buying Apple TV hardware for every set in the house. Roku has done a fantastic job with this strategy to extend reach beyond hardware. Maybe this will come for Apple with whatever they are developing in the TV streaming space.

Amazon

Alexa will be the cornerstone of their connection to the consumer in the 5G era. How they extend the primary consumer engagement point beyond speakers into wearables will be interesting to watch as they are totally dependent on 3rd party hardware manufacturers for headphones, etc. that haven’t broken through in a big way. They are rumored to have a plethora of Alexa connected devices coming out this year – including a microwave and car specific device. Their early lead in speakers has been challenged by recently by Google’s aggressive pricing in the US market so they will need to find new platforms to connect the consumer with Alexa.

Google

Their first foray into hardware wearables, Google Glass, didn’t gain widespread consumer acceptance and Android partners like Samsung haven’t been able to crack the space to compete with Apple as they have in the phone category. I think the current iteration of Google Assistant is superior to Alexa or Siri so it will be imperative that they get the gear side of the business fixed. They are showing promise in connected speakers by taking share from Amazon with aggressive pricing.

Facebook

Facebook is late to the voice computing but they were also late to mobile when 4G rolled out and they thrived. Things have changed mightily for them over the last two years with consumer trust at an all time low and the intimacy of voice controlled experiences could put them at a big competitive disadvantage. They are developing speech recognition under the name Aloha and have a smart speaker in the works.

They also could win in cloud powered VR that eliminates the need for the cumbersome hardware with Oculus which has been a bust since being acquired in 2014.

Netflix/Disney

Netflix has a huge lead in direct to consumer SVOD but with Disney’s marketing capability and best in industry library and IP I predict that they will have a US subscriber base as large as Netflix in 24 months following launch in 2019 (a big caveat will be getting the UX right which is why they acquired BAMTech). The battle for new subscribers will then shift to preventing churn in the US market and global expansion with China being the golden goose where Disney currently has a competitive advantage.

Comcast/Verizon/AT&T

Hi-speed internet, cable and wireless packages will finally blur and merge enabling true cord cutting and they will need differentiate with gated offerings of exclusive content to stream directly to TVs and phones. This imperative has been the driving force behind the M&A frenzy to build scale and a library of valuable IP along with the data that comes with the direct connection to the audience.

Is the PBS model next for Netflix?

Netflix has done an incredible job over the last two years of establishing itself as a creative powerhouse akin to HBO in their glory days. However, original content like House of Cards and Orange is the New Black doesn’t come cheap and it is already having a negative impact on profit margins, even with 50 million paying subscribers globally.

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The marketplace for other content is also going to increase in cost  driven by competition from all fronts including Amazon, there is only so much watchable stuff in the marketplace. With more than $8 billion in short and long term content cost obligations on their books it might make sense to move to a PBS model where certain programming is underwritten by a brand sponsor in order to keep their per monthly subscription cost below $10. I don’t think they would ever try to sell traditional :30 interruptions during a program. The caveat for Netflix would be having to share how many people stream each program which they now closely guard as a negotiating tactic with content suppliers. I think there would be a huge market to advertise on their platform and the market will eventually make this a no brainer option for them to offset the coming tidal wave of content costs.

What is Vice’s next move?

Vice now has $500 million to build the next iteration of their business. It will be interesting to see where they go beyond expanding their footprint by covering different subjects and opening up new audience targets. Their core business is selling ads around video and delivering branded content targeting under 40 year old males, which is a valuable demographic (just look at NFL TV rights), how does this model scale beyond their current $2.5 billion valuation? From the previous investment by A&E and failed negotiations with Turner it was rumored they want to run a cable TV channel. My question is why? The shift towards on demand programming is moving at a rapid pace and the revenue model where cable providers pay high carriage fees is on the way out. There is also the high cost of creating enough TV quality content to fill a network schedule, their margins would unquestionably suffer. As eyeballs shift towards mobile devices (especially phones) it would make sense for them to focus on what has been delivering staggering growth at high margins in the near term. Regardless of how they move forward it will be one of the most interesting things to watch in the media and advertising space.