Wednesday, September 08, 2004

5 Industry Leaders (for now) has a story on 5 industry leaders that may be facing massive inflection points in their businesses.  Here they are with my comments:

  1. Netflix.  netflix offers a monthly service that allows to rent DVDs through an online interface, have them directly delivered to your home, mail them back after you are done viewing them, and receive more movies.  Big movers such as Walmart and Blockbuster are sure to continue to heavily compete, but Netflix is looking to redefine the movie rental industry again by partnering with TiVo to provide video on demand services to TiVo users.  Are there enough TiVo users or will the service be enough to cause people to want to sign up for TiVo?  Certainly TiVo has recently been pursuing an aggressive pricing scheme for their hardware, but long-time partner DirecTV and other cable providers are looking to provide their own TiVo-type services and presumably video on demand services.  From the article, Lynn Briton had this to say:  "Our service is innovative and intuitive in a way that we don't expect Blockbuster to be able to replicate," Brinton said. "More than 99 percent of our 25,000 titles have been rented and we're uniquely able to connect our customers to our catalog. We can introduce people to more movies they love."
  2. PalmSource.  PalmSource is the new organization formed through the fusion of Palm and Handspring.  Their biggest single contribution has most certainly been the Treo 600 telephone and data device, soon to be trumped with a new and improved Treo 650.  However, Microsoft is pushing hard into the smartphone market and Sony has recently announced that they will stop producing PDAs that run Palm software.  Additionally, forthcoming Microsoft-based smartphones such as the Motorola MPX220 and MPX will run Blackberry software, allowing corporate users whose companies have invested in the Blackberry server solution to receive the same Blackberry information the currently receive now on a single, elegant device; although there have been rumors about a Blackberry client, Palm has yet to release anything for Treo users.  However, Microsoft continues to provide better and better Outlook Web Access, IMAP, and POP access with their Microsoft Exchange servers, which leads to not only a potentially brighter future for non-Blackberry devices, but also to number 3 below.  From the article:  "We want to bring the same elegance that we brought to handhelds over to smart phones," said Gabi Schindler, senior vice president of worldwide marketing at PalmSource. "Microsoft cannot make an easy solution. They have proven they can't do it."
  3. Research In Motion (Blackberry).  RIM has set itself up as the de facto standard for push-based corporate e-mail, with very few competitors (Good Technology being a competitor).  Up until recently, RIM Blackberry software only worked with RIM-produced hardware devices.  As mentioned above, RIM has been licensing their Blackberry software to many phone manufacturers such as Motorola, Nokia, and Sony.  Many corporations have already invested serious dollars into the Blackberry Enterprise Server solution, so it is likely that as long as RIM continues to license their technology and move more from a hardware provider to a software and service provider that they may be able to maintain their edge.  However, as mentioned above, Microsoft is offering better security options and easier use of both open standards such as POP and IMAP and web-based access (Outlook Web Access) with their newer versions of Exchange Server.  Additionally, Microsoft, as their operating system continues to penetrate the smartphone market, is offering Mobile Information Server that not only provides e-mail, contacts, and calendar, but also allows mobile employees access to mission-critical information systems.  Chances are that Microsoft will offer major incentives to Blackberry Enterprise Server users whenever they decide to really push Mobile Information Server.  Until such time as Microsoft makes a big push, if they can even gain a toehold, RIM is dominating the market.  The big downside?  RIM is involved in a patent infringement case that is causing some delay in adoption of the Blackberry software by companies like Motorola and Nokia.  Case-in-point in relation to my comments above, from the article:  "(CEO) Todd Bradley at PalmOne said he d didn't want anything to do with RIM until the NTP case is settled, that's indicative of the sentiment in the industry," said Jason Tsai, an analyst with equity research firm ThinkEquity Partners.  However, analysts are saying that should the plaintiff in the case win, the overall effect of paying royalties for the patent in dispute will only have a 2% impact on revenues.
  4. TiVo.  TiVo provides a monthly service that allows consumers to record television directly to a hard drive with features such as commercial skipping and pausing live TV.  As mentioned in number 1, TiVo and NetFlix have partnered to provide video on demand services to TiVo network-connected boxes.  However, as also mentioned previously, there are many generic competitors started by cable and satellite providers that may threaten the hold TiVo has on the market.  Beyond its partnership with NetFlix, TiVo also acquired a company called Strangeberry that is owned by a genius software programmer that creates software which allows integration between various recording devices; imagine audio recorded on a TiVo box wirelessly updating to your next generation iPod, video wirelessly updating to your personal video recorder, and being able to access content between various TiVo boxes and other devices wirelessly throughout your home.  Details about Strangeberry are closely held, but could be the ace in the hole that causes TiVo to come out the clear winner.  All of that about Strangeberry being said, Microsoft is actively pursuing the TiVo market with its Windows Media Center software and there are rumors that the new XBox and the new Sony Playstation will contain media center hardware and software to act as a digital entertainment hub.  Although TiVo is projecting 3 million subscribers by January of 2005 (according to the article), it certainly has not won the hot (and getting hotter) digital media center market.
  5. Vonage.  Voice Over IP (VOIP) is the hot new topic in the telecomm industry and vonage is certainly the brand name for VOIP.  With Vonage, for about $15 a month, you can plug a black box into your high-speed connection, choose a number with an area code anywhere in the country (no matter where you live), and receive phone service on top of your high-speed connection for much cheaper than a traditional phone line.  All of the big telecomm providers, such as AT&T, are jumping on the bandwagon and another service called Skype is hot on the heels on Vonage.  Skype was developed by the developers of the original Napster P2P software and allows free VOIP calls to other Skype software users along with a service called Skype-out that allows calls outside the skype network for $12.95 a month; the Skype software is available as a free download.  Although the competition is starting and will get much worse, Vonage has formed partnerships with home network equipment makers Linksys and Netgear to provide support for Vonage service in their new routers.  Additionally, Vonage hardware and service is available for sale at Circuit City.  The biggest challenge for Vonage is the fact that they do not own the infrastructure for their service (like an AT&T does), so they have no control over outages, which have occurred several times in the past few months.  Investors seem to believe in Vonage, as they have recently, according to the article, received a $105 million infusion of capital.

All of the companies are currently in market leader positions, but in the technology field, market leaders can be replaced in relatively quickly periods of time.  From the article:

While every field faces its shakeouts . . . consolidation in the tech sector can be shockingly rapid, and even companies with the best of ideas and a decent head start can be swamped by imitators.

Apple Computer, for example, owned the PC market 20 or so years ago but market share for the Mac operating system is now below 5 percent. About 10 years ago, if you used a PC to write you probably used WordPerfect but today you use Microsoft's Word. And Netscape once held a similar lead in the Web browser market but has fallen by a similar degree.

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