Tuesday, September 24, 2013
So how much would you pay for a tablet, or would you rather have a Phablet, or just a good smartphone? Does size matter? Do you have to be been seen with a 10”, 8”, 7” or a 5.5” device?
We find ourselves constantly asking what we want and what is the best fit for us? What is clear is that the only word that matters is ‘convergence’ and tablets may be just a stepping stone and far from the answer.
We have seen the emergence of eink readers and also their decline. Yes they may still sell and yes they may be good reading devices, but you don’t find many calculators around today as the functionality is absorbed into other more functional devices. The eInk readers are long past their sell by date and although the technogy still has legs the ereaders don’t.
We have seen many try to establish a tablet position on the back of the iPad. The reality is that many have failed and for a host of reasons. What is interesting is that the likes of the Kindle Fire and Nook which were aligned to retail brands and services have fared relatively well and driven down the price for many. Samsung and the Google offers have put in a respectable delivery but many more technology driven companies have failed.
Microsoft were determined to recapture the market with the Surface but it so far has lacked that something that it should have clearly had – the same OS and functionality as the laptop. The company is now writing off $1bn after missing sales targets, but isn't giving up and is unveiling two new Surface tablets.
Enter that supermarket Tesco with its Hudl tablet. Will it like the Amazon Fire appeal to Tesco’s customer base and offer a cheap but high quality alternative, or will it die a thousand cuts and have little style or designer appeal in a designer label world? It not just about delivering the cheapest, it’s also about creating something to be seen with. You don’t go to a black tie event clutching an Aldi bag. You may not want to be seen huddling up with a Hudl in public.
Having just upgraded to a Samsung Phablet, the Note 2, we don’t want to be carrying a luggable tablet around that has the same functionality, but is merely bigger. We don’t want to trying to manipulate spreadsheets and word documents on a smartphone that demands thin and nimble fingers and thumbs. The Samsung pen is a clear bonus and is truly amazing, but it’s the fact that Microsoft have given us a free Office app with our Office 365 licence so making all documents truly accessible and editable on the move. All our contacts, social networks, outlook email, gmail accounts, Skype and many more applications are now with us at all times. We can even watch our home security CCTV cameras and be alerted to disturbance and much more.
So it’s not just about, price, size, functionality and design but about lifestyle and that’s what make it easy to see today’s winners and hard to guess tommorrw’s.
Thursday, September 19, 2013
We are all aware that the EU VAT rules will change at the beginning of 2015 and that this will effectively end the offshore tax loophole operations of the ebook operators. This EU rule change will not impact the corporation tax loophole and so we will not see a mass migration from those countries who offer low corporation tax today, but it demonstrates that the EU as a block has the ability when pushed to change the rules.
The EU official statement is available on their taxation and customs site. http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/
What it mean is that EU operators have to pay VAT at the point of consumption not at the point of dispatch and operations. They also no longer have to any VAT on consumption outside the EU which may be advantageous, but doesn’t not mean that the non EU country will not charge their own tax on digital services. Those supplying from outside the EU will be charged at point of consumption. A long overdue level playing field even though it is some 15 months away.
All operators will now have to amend their systems to operate and levy tax accordingly, which is not in itself a simple task.
This is going to be an interesting change to watch as those with a large customer base in a high VAT country will have to either pass on the hike in tax, absorb it or negotiate tighter supplier costs. We often automatically expect the cost increase to be passed onto the consumer but with digital ebooks this may not be as simple as that. As prices of ebooks continue to fall, we are clearly seeing the emergence of price points and once these start to be accepted by consumers, merely adding say 20% may not be palatable and it could trigger of a further hike in the price wars. Those with deeper pockets may elect to start to force a visible price difference and hurt the margins of others who don’t have the flexibility to part absorb this drop in profit, or the clout to get tighter cost prices.
Far from damaging Amazon this could damage others and in fact strengthen Amazon’s grip on suppliers and appeal to consumers.
Tuesday, September 17, 2013
Most retail products have price points. These are either know price points which the consumers expects; can of beans, pint of milk, loaf of bread, or are more industry accepted price points which the consumer doesn’t always know. When at B&Q we had some 50,000 plus SKUs (stocked units), we discovered only a couple of hundred had consumer know price points and it was only these you often had to focus on in a price war.
Book publishing has always enjoyed price point freedom, where the RRP (Recommended Retail Price) is often anybody’s guess and some would suggest as fictitious as some of the content. It is also one of the few consumer products to still carry the RRP on the product itself. When being discounted this is a great indicator of value to the consumer. Although it has often been a bone of contention to retailers who feel it can limit their options.
Buying a physical book is often a process of selecting a title and then flipping it over to discover the price expected. Many titles sit spine out and negate the use of POS shelf stickers so demanding that each individual title is either stickered or pre-printed and discounted. It can often be like a lottery with prices often all over the place and all sitting alongside each other. The obvious exceptions are when the book is in a discounted section, dump bin, end of gondola, or is discount stickered. Although some publishers and formats did come close to establishing price points, they often find themselves sitting next to others that undermined the action.
Remember when music had little price points and the impact that iTunes and others had and now we find pricing is being established by market forces and discounting and also is very low compared to only a few years ago.
Today we live in the price comparison world where anyone can find the cheapest offer at a click of a button and even via their smartphone. This has had a significant impact on many sectors where pricing was a challenge. Insurance, big ticket items, travel and many other sectors are now down to a beauty contest where the winner is often the cheapest, or the cheapest known source.
So how much would you pay for an A, or B format paperback, hardback biography, softback reference work, academic monograph, etc? Does the RRP price reflect the cost of production plus margin, what the publisher thinks people will pay or some vague recognition of a market price and price sensitivity?
As discount wars exploded, some would suggest that many publishers merely raised their RRP to compensate for the heavy discounts given and those with a price point policy often found their hands tied by a policy that the consumer didn’t recognise. We had rendition format pricing with those big paperbacks at airports aimed at adding an extra return for larger paper. We have the hardback versus paperback price which is now confused further by the digital edition. All contain the same content merely held within a different container, or container priced.
Can effective RRP price points be established , or is it now one way discount traffic and down to the retailers to establish their own price points? Remember when Amazon introduced the $9.99 ebook concept and the ensuing responses and agency debacle?
Amazon’s latest Matchbox offer may be a success, or it may fail, but the one thing it will do is drive down the price of ebooks even further and faster. The bundling concept doesn’t drive up the price of the physical merely devalues the secondary sale and although some will state this is good and new revenues, there is a cautionary saying – beware of what you wish for.
Amazon’s marketplace is the new book price comparison destination for many and their mix of physical and digital offer is one few can even start to compete with. They may not be the discovery channel but they will be the price comparison one.
The other interesting aspect of the price pointing of books is how publishers will position themselves against their channels as they explore direct to consumer sales.
Finally, the digital ebook market has already thrown up some interesting insights on price points. Which of the following price points will attract the most activity, the next highest activity, next highest level from; free, 0.99, 1.99, 2.99, 2.99 plus? The challenge is to then understand the logic behind the attractiveness of the offers and their potential logic.
The industry has taken too long to establish and work with price points and it’s the market that will start to establish them and maybe not just for digital product.
Sunday, September 08, 2013
As far as the consumer is concerned is it the device, or the functionality it enables, or is it the content it can render that is ultimately the decider? Is it in fact cyclical and does the technology always come first, closely followed by the features and functions and the actual content come last, or are we now at a point of change?
Who today would buy, or even want the pre iPhone mobile? Was it purely down to the iconic design and presentation of the iPhone, or the apps it unleashed and app store? Would the device have been enough without the digital content?
We then have the drivers behind the major offers.
Apple’s iPod enabled iTunes to go mobile and was a phenomenal success like the Sony Walkman before it. But the iPod was nothing more than a mobile jukebox and when smartphones started to compete they needed to do more and the iconic iPhone was introduced. This masterpiece of design was king and spawned the lucrative world of apps and multimedia mobile. But again as Android replicated Apple’s offer they had to once again find something different - enter the iPad. The iPad was another winner and the true multi media player of choice but it wasn’t a phone and it wasn’t small enough to put in your pocket. Apart from the telephony the only real difference between the iPhone and iPad was size and in a mobile world the smaller size does matter too many. So when others started to introduce smaller tablets and larger smartphones the world started to change again.
Interestingly, the only real difference between many of today’s offers is the content and how well it renders of the device.
Some suggest that books are different and needed eInk dedicated readers. The reality is there are not and don’t. Amazon, Nook, Kobo have all adopted an increasingly agnostic device and operating system approach. This ‘platform’ approach is not dissimilar to all the major content services across all digital media. Today you can now play music, watch films and TV, play games, deal with emails, perform full office functions, access all media, community services and the internet on a device agnostic basis.
So devices are basically today’s fashion and quickly becoming tomorrow’s scrap. The apps are being developed for all operating platforms of significance, browsers are fully agnostic and content is available from all with everyone trying to mirror each other’s offer across all platforms. We now have the emergence of the super toys in the form of mobile watches, external snap on lenses and glasses, but is there no reason to believe that these will decide who wins and who losses? Some would suggest that they are a mere distraction and that, like so many before them, they do not offer sustainable advantage.
Maybe we are now entering the world where even the availability of media is not enough and it is the commercial package that will decide the winners. Perhaps the winners will not be the tin manufacturers, who as we have seen, now play on an increasingly level playing field, but the content packagers and community hubs who are becoming the ‘must haves’. Perhaps it’s those who have multi-faceted information on their community. This is where Amazon is scoring day in day out and where those who can design a place in their side lines can also survive. Amazon announced when it launched Amazon Matchbox that it had data on every book purchased since 1995 and I bet every search, basket and much more.
The latest rumour is that Amazon is about to launch a smartphone and give it away free within their service community. It isn’t such a farfetched idea and would certainly fire a shot across of the bows of the mobile technology companies who rely on selling units, be it to network providers, or direct. The shift would be from a device centric world where people watch the sales of smartphones to a service centric world where the consumer is attracted to who offers them the most convenience at the best price on whatever device.
As John Lennon once said, ‘ I may be a dreamer but iam not the only one.’
Thursday, September 05, 2013
So we have the introduction of wearable mobile devices; watches from Samsung and also Google Glass. Both providing ‘accessories to be seen wearing’, but which will probably date and be superseded very quickly. The Samsung watch is far from sleek and has as much design cache as those first ‘brick’ mobile phones. To make matters worse it doesn’t replace the mobile but ‘compliments it’.
It’s as if the manufactures can’t decide how big our physical pockets are, or just how many gadgets we actually want to carry around with us. Will tomorrow’s commuter really be wearing Google’s Glass, have a Samsung watch on their wrist, carry a smartphone and have a tablet tucked away in their bag? They could be soon joined by other devices to track our health and dismisses the eink readers as an evolutionary step we have already taken..
The challenge is that they all have to have significant feature and functionality overlap and the common denominator is actually very high which make accessories either very specialist or prone to be pure fashion statements and subject to the swings and moods of the market.
However, just when we thought we had seen it all up steps Sony with its supersized lenses which connect to smartphones by wi-fi, allowing them to take higher-quality photos. They are compatible with Android and iOS handsets and were announced alongside a new Sony smartphone which features a 20.7 megapixel camera and a larger-than-normal image sensor. The QX10 lens offers a 10x optical zoom and 18.2MP resolution which Sony says makes it ideal for taking shots of distant landmarks or close-ups of people. It will cost about £170.
There would appear to be two flaws in Sony’s strategy. You either want to give more megapixels to the camera within the phone and compete head to head with the pack, or you step to the side and develop the accessory lens. To do both effectively creates two competing products, adds costs and confuses the consumer. We are living in a YouTube age where convenience out strips quality and ask how many video cameras you see today. For those wanting top-quality photographs, the experience of having a DSLR [digital single lens reflex] offers a better experience than a Sony add-on camera. Sony itself has even acknowledged that it did not know how strong demand would be.
So what does this tell us about the developing market. It is clear that peripheral devices will evolve and that leads one to ask whether they will then shrink the smartphone to a network hub or compete with it as a standalone. It is like the laptop, tablet smartphone battles, we have to establish the optimum form factor and what differentiates one from another.
This is very important for all content, media producers and services who want to be device agnostic.
Google is known for calling its release of its Android software after sweet treats and also naming them alphabetically. We have Cupcake, Donut, Eclair, Froyo (frozen yoghurt), Gingerbread, Honeycomb, Ice Cream Sandwich, Jelly Bean and the next was expected to be Key Lime Pie.
Today the news is that they have doubled up with the chocolate giant, Nestle to name version 4.4 KitKat.
It is hoped that the global recognition of the KitKat brand will give Android a positive association and Nestle now plans to deliver over 50 million chocolate bars featuring the Android mascot to shops in 19 markets, including the UK, US, Brazil, India, Japan and Russia.
So we hope the slogan, ‘have a break have a KitKat’ doesn’t relate to the new Android version and expect that Mars bars and Penguins are on the horizon.
Tuesday, September 03, 2013
If you buy a print book and get an ebook thrown in you would call it a bundle. It’s like the old ‘buy 1 get 1 free’ offer. You may pay a little extra at the time you buy it, but you may want to read the hardcopy at home and the digital in the version on the train. You may just be a hoarder and intent on owning everything, in every media.
But is physical and digital book bundling mere hype dreamt up by the digital advisors, or a new marketing ‘must have’ and is there a real consumer demand that needs to be fulfilled, or are we merely striking matches in the dark?
Well Amazon have once again gone where others often teeter and have announced Amazon Matchbox. Perhaps it will set the market on fire, or perhaps it will just be another potential attractive offer that keeps the others playing catch-up.
Matchbox offers to let you have a digital copy of those books you bought from Amazon since it started in 1995. Some will cost up to 2.99 others may be free. Once the publisher enrolls and the title is in the programme consumers can complete the bundle. HarperCollins are reported to be the first in Matchbox and Amazon claim some 10,000 titles are already eligible.
If we forget all the big names and titles that litter the press release, we have to ask ourselves whether this is feeding a latent consumer demand, creating a ‘must have’ bundled environment, or just a Matchbox with wet matches?
It is relatively easy to understand those that would subscribe to a MP3 and vinyl bundle, but has this been such a huge success that we all have to have a musical bundle? Books don’t get reread like music can be replayed, or suffer the reduced quality issues of MP3, so why would you buy a book bundle?
Perhaps the answer is in the second hand market of used books, which Amazon just happens to also sell. Perhaps it is to further differentiate Amazon from the pack who don’t sell physical books and probably ever will? Perhaps Amazon know something we don’t?
So you can now sell your old copy if it was bought from Amazon and buy a new digital one which takes up no space, but is yours barring any DRM issues. You can even replace those books you threw out, or previously gave away, or sold. But the point is you could do these things anyway and didn’t need matchbox to achieve it. Matchbox today is retrospective bundling and involves effectively two separate transactions and it will be interesting to see how HRMC in the UK and other tax authorities judge the ‘bundle’ when a tax variation exists between the physical and digital formats.
We presume the offer is purely for the Amazon fulfilled product and doesn’t extend to their other booksellers, ABE and The Book Depository.
Retrospective bundling also introduces issues if the rights have reverted, changed hands or are not world-wide. The question of how these ‘net receipts’ will be accounted and itemised to authors is yet another potential digital ‘honesty box.’
So we are no better off understanding this new ‘bundle’ than we were when we started and Amazon’s intentions may appear to offer even more perceived added value to keep the distance between them and the pretenders.
Yesterday was the day of the big spenders. Gareth Bale became the world’s most expensive footballer and joined Real Madrid for £85 million, Vodaphone announced the selling off of its huge stake in Verizon for a mere £84bn and Microsoft has agreed a deal to buy Nokia's mobile-phone business for 5.4bn euro ($7.2bn; £4.6bn).
Tottenham have already spent the cash and replaced Bale with half a team of international talent. Vodaphone are planning on giving their shareholders a huge dividend of some £54bn to sweeten the windfall and true to their nature will avoid paying any tax on the deal. But what of Microsoft and is the deal going to reverse their fortunes under its new leadership?
Only some ten years ago Nokia ruled the mobile world and was the device of choice for the majority. However, Nokia made some fatal errors of judgement around its operating system and also failed miserably to compete with its new competitors from the Far East and Apple. Today it finds itself with saes falling at the rate of 24% in the last year. Microsoft, like a giant tanker spent 10 years trying to change course in changing seas and took too long in doing so.
So will a marriage of two of yesterday’s men make any difference to their fortune moving forward?
Microsoft will now license Nokia’s patents and mapping services and take on some 32,000 Nokia employees but will it win the consumers over? Microsoft will also licence the Nokia brand for the next ten years which may sound a good move but may also not appeal to the consumer.
Mobile is the area of tremendous potential but it has been one of weakness for Microsoft. There attempts to fix their OS offer have had the hype but delivered little. Microsoft’s Surface tablet should have been a winner but turned out a loser and its weakness was down once again to the OS and its offer.
Nokia greatest weakness has been their inability to adapt and sort out its OS. So will Windows OS mobile be the new must have or will it merely burn a deeper hole in Microsoft’s purse?
The new Lumia phones, which run a Microsoft operating system, may offer a small rest bite and the potential for greater integration, but will the marriage also drive other mobile manufacturers away from Windows offers and yet closer to Android?
Real Madrid have already covered their expenditure with the sales of Kaka and Ozil and in shirt sales. Vodaphone believe they can survive as a smaller global player and have a wedge of cash to soften the move and we now have three clear mobile offers; Apple, Android and Windows/Lumia/Nokia/whatever brand they finally choose?