Facebook’s Oculus today held its fourth developer event, Oculus Connect, and the biggest announcements revolved around standalone headsets. First, Oculus will launch the Oculus Go, a mobile-grade standalone VR unit, at $199 early next year; secondly, the company has made significant progress on its Santa Cruz project, which will result in a standalone PC-grade headset at a later date. The Oculus Go is a pretty compelling new entrant in the market, a competitor of sorts to Samsung’s Oculus-based Gear VR but without requiring a compatible smartphone, and with some feature benefits too. It’s more expensive than Gear VR and Google’s Daydream View, but still fairly reasonably priced. Santa Cruz will offer inside-out tracking and six degrees of freedom, meaning that it will allow a full range of motion and room and object detection without requiring external sensors to be installed in a room as the HTC Vive does. There’s no detail on pricing or exact availability for that product, but it sounds like it’ll be at least late next year before that’s out. With both products, Oculus reduces its dependence on partners – Samsung in mobile and PC for the Rift – over the long term, which is likely to push them further into the arms of other VR platforms, including Daydream in the case of Samsung and Microsoft’s Windows-based Mixed Reality VR platform in the case of PC OEMs.
On that latter point, though, another big announcement Oculus made today was making permanent the temporary $399 summer price point for the Oculus Rift bundle including controllers, something that’s seemed increasingly inevitable as Oculus extended the price promotion. As I pointed out in this piece I wrote for Techpinions a while back, that price point and similar pricing moves from HTC and Sony are making the opportunity Microsoft originally targeted for its VR partners disappear. It’s going to be very tough to sell a basic PC VR headset against the Oculus Rift bundle at the same price point.
The other announcements made largely relate to different bundles and new software. Oculus is updating its platform for the Rift, introducing some new experiences including a virtual desktop environment along the same lines as Microsoft’s recent announcements – something I’m still not convinced most people want from VR – as well as more social and entertainment experiences. It’s also creating a business bundle for Oculus designed for companies that want to deploy Rift and Rift-based experiences, which will come with a premium tier of support over and above a set of hardware.
The big new goal Facebook and Oculus announced at today’s event is getting 1 billion people into VR, something that’s miles away from today’s numbers, which are likely closer to one hundredth of that number. Certainly, bringing the price points down is part of getting there, as is creating experiences beyond hardcore gaming, but it really doesn’t feel like there’s much there yet, which may be OK because Facebook doesn’t seem to have put a timeline on that goal, which therefore remains more aspirational than concrete.
Microsoft Exec Debunks OEM Rumors About Killing Off Surface (Oct 10, 2017)
A bizarre story did the rounds last week based on executives from several Windows OEMs saying that Microsoft would likely kill off its Surface line at some point in the near future. It should have been obvious on the face of it that (a) these OEMs compete directly with Surface and likely rather resent the way it’s quickly gained lots of positive attention in the premium segment, and (b) Microsoft has just this year expanded and updated the Surface line, an odd thing to do if it’s thinking of killing it off. And yet the rumors persisted to the point where Panos Panay, who runs hardware at Microsoft, felt the need to specifically address and debunk them. One of the reasons the OEM execs gave for Microsoft’s likely exit from the space was poor margin performance, but of course low margins characterize almost the entire consumer electronics industry and PC vendors are no exception. Microsoft hasn’t commented on Surface margins for a while now, but did say on an earnings call in January this year that its Surface gross margin dollars had grown, and it had said previously that the business was gross margin profitable. Now, none of that it to say that this is a scale business or that it’s an enormous contributor to Microsoft’s business overall – it’s just 5% of revenue and likely a tiny fraction of profits – but it’s clearly strategically important to Microsoft and performing well enough financially to be worth the continued investment.
via Business Insider
★ Google Announces Pixel 2 Smartphones (Oct 4, 2017)
I’m breaking up Google’s announcements today into several chunks, starting with the Pixel smartphones it revealed here. Much was already known about these new devices, starting with external images and some of the features, but there were some details such as pricing and availability, as well as one or two additional features which were more of a surprise, as well as the marketing and positioning, which is always one of the most important parts of these launches but which doesn’t leak ahead of time. What we got from Google was a pretty confident launch, building on last year’s decent start, and emphasizing even more than last year the software and AI capabilities behind what the phone can do, while de-emphasizing the hardware itself, which got fairly short shrift. That reflects Google’s relative strengths and weaknesses in this space, but it forces it to ignore the big hardware advancements being made in things like dual cameras, 3D depth perception, wireless charging, and so on, which have been themes in other flagship phone launches this year.
Last year’s Pixels suffered from four big challenges: firstly, the phones were competitive but not notably better than other phones on the market in any key ways; secondly, Google’s marketing was handicapped by targeting the iPhone whereas the most likely buyers are existing Android owners; thirdly, devices were in short supply; and lastly, distribution was limited, with just Verizon as a US carrier partner. This year’s phone looks a little stronger relative to the competition, but not enormously so given the big advances from the other major players. From a marketing perspective, we’ll have to wait and see what Google does as the time of launch approaches, but I’m not holding my breath for anything dramatically better or different relative to last year. There was at least one reference to short supply by Google hardware exec Rick Osterloh at today’s event and so I’m guessing it’ll fix that this year. But distribution remains limited to Verizon in the US, which is a baffling choice given how much Google is pouring into this hardware effort – why go to all that fuss and expense in making hardware that three quarters of US smartphone buyers won’t even consider?
All told, I’d expect this year’s phones to sell better than last year’s, but not nearly as much as if they’d launched on all four carriers as they should have. That should leave other premium Android OEMs breathing a big sigh of relief, because it means Pixel 2 won’t even be a consideration for most of their buyers. This marks two straight years of Google making somewhat puzzling strategic choices with regard to the Pixel launch, something I wrote in depth about last year.
Sony has announced somewhat out of the blue that it has new PlayStation VR hardware coming, at the same price as its current hardware, but with better support for HDR and with integrated headphones, both of which features overcome annoyances with the current hardware. In some ways I’m surprised that the price isn’t going back up a bit – the recent price drops had seemed to be possible evidence that new hardware was coming, and therefore that Sony was clearing inventory, but it appears the price cuts we’ve seen essentially across the industry lately are here to stay. That, in turn, means that this is going to continue to be a crowded and price-pressured market, with little margin available in the early running as companies look to expand the addressable market beyond merely hardcore gamers, something that’s still proving tough.
Amazon Runs Big Kindle Sale on Rival Alibaba’s Site in China (Sep 22, 2017)
Amazon is running a big sale of its Kindle hardware on rival Alibaba’s site in China, a concession that it’s way behind its domestic competitors and needs to leverage their platforms in the country to achieve meaningful hardware sales. It’s a useful reminder that, for all Amazon’s dominance in e-commerce in the US and a handful of other markets around the world, it’s largely failed to break into China in a meaningful way. One big reason is the same of localization that’s plagued other big US tech companies in China, something that Apple has recently been trying to fix. Amazon has arguably done much better with localization in India, which this Recode piece suggests is going rather better for Amazon at this point than its foray into China. It certainly isn’t giving up on China just yet, but does seem to be more willing to acknowledge its failures there and pursue other strategies to achieve at least some of its objectives there.
Snap Cuts Jobs, Changes Management for Hardware Unit (Sep 21, 2017)
Snap Inc has apparently cut about a dozen jobs and shuffled management in its hardware unit in recent weeks, according to Bloomberg. The only hardware this group has shipped so far are the Spectacles camera-glasses launched late last year, which had sold less than 150,000 units as of the end of June by my estimates, and accounted for less than 5% of revenue during that time. Hardware may still end up being an important future revenue stream for the company, but that future certainly isn’t here yet, even though there have been reports about drones and other hardware in the works. Eliminating marketing people from the group suggests either that Snap was unhappy with their work or that it won’t have new hardware to market anytime soon (or both), which reinforces the sense that a meaningful hardware revenue stream is still way off. To put the job cuts in context, though, 12 people represent a tiny fraction of Snap’s overall employee base, which sat at 2600 at the end of June and has likely risen significantly since then (it was under 2000 at the beginning of the year). I argued at the time of the launch that the vending-machine-based scarcity marketing for Spectacles was a very clever way to get far more attention than raw demand itself would warrant, but it never led to much more actual demand.
The Financial Times reports that Amazon is working on two new hardware categories: Alexa voice assistant-enabled glasses, and home security cameras which would integrate with Alexa hardware in various ways. The home security camera seems by far the less surprising of the two, given that it’s one of the bigger existing smart home market segments and a logical extension of what Amazon is doing with its Echo line (including the Echo Look, which already incorporates a camera). But it’s the voice-enabled glasses that are both surprising and somewhat baffling as a concept, especially because there’s no ostensible connection between glasses – a primarily vision-oriented product – and Alexa, a product centered on the ears. It sounds like the glasses are a way to hide bone-conduction audio in a less nerdy way than a bluetooth headset would, but for those who don’t normally wear glasses, aren’t they at least as nerdy, not to mention conspicuous? There’s arguably some logic to using bone conduction as a technology because it doesn’t block the ear in the same way as earbuds and headphones, but I’m really not convinced that glasses are the best way to deliver that experience. It’s also worth noting by way of context that Amazon has arguably never had a successful personal consumer device. Its one earlier attempt – the Fire Phone – was a huge failure, and all of its other devices are arguably less personal and more shared devices, often with fairly uninspiring industrial design which makes me skeptical that Amazon knows how to create appealing personal products. Given that the FT says both of these products could launch by the end of the year, I guess we’ll see the details soon enough, but I’m enormously skeptical on the glasses though the cameras seem like they’ll sell well, albeit now with stronger competition from Nest.
via Financial Times
Nest held a press conference in San Francisco today and introduced three new products including its first really new product categories since its 2014 acquisition of Dropcam (this chart I put together a while ago presents the picture prior to today). The theme of the event was progress towards Nest’s ultimate goal – creating “a home that takes care of the people inside it and the world around it.” That mission combines Apple’s tendency to reinvent familiar products in ways that makes them vastly easier and more pleasant to use (unsurprising given the Nest founders’ Apple heritage) with more of an environmental message, largely tied to the smart thermostats. The first product announced today was a new outdoor version of the Nest Cam IQ indoor camera announced recently which added smarts including facial recognition to reduce false alarms among other things. The second was the Nest Hello, a smart doorbell very much along the lines of others already in the market but again with some clever technology borrowed from the camera line, and is the only product announced today that won’t be available until next year. The third was Nest’s big new category, home security, in the form of the Nest Secure system, which combines a hub and sensors to monitor movement inside a home as well as doors and windows.
The Nest product line now feels a lot more comprehensive than it did a couple of years ago, with smart thermostats, smoke/CO detectors, and indoor cameras for inside the home, outdoor cameras and the doorbell for outside it, and a security system to keep it all secure, plus integrations with various third parties for lighting and other device categories. But it’s very much still an off-the-shelf, DIY, pay-upfront approach to the smart home, which continues to limit the addressable market to people willing to tinker, take risks, and self-manage with their home gear. When new CEO Marwan Fawaz came on board, I had thought he might lead the company through a transformation to more of a services company, which would put it much more in line with the telcos, cable companies, and others already offering that model and thereby reaching a much broader market. But there’s little sign of that yet – the only service component announced today is provided through a partnership with a third party monitoring company, and the prices for the new gear remain high: Nest Cam IQ outdoor is $349 for one, the starter pack for Nest Secure is $499 but only comes with two sensors, with most homes likely requiring several more, with pricing for Hello yet to be announced.
As such, Nest continues to largely target people with higher disposable incomes and a willingness to self-install and self-manage. My Nest thermostats frequently disconnect randomly from the strong WiFi signal in my home and suffer from other glitches, so unless Nest has improved things dramatically in these new products they’re likely to require quite a bit of management. It’s also worth noting that there continues to be minimal integration with the rest of Alphabet – I’d hope that some of the clever detection stuff has leant on Alphabet’s broader AI and machine learning capabilities, and Google Assistant integration is coming to the Nest Cam IQ devices in a software update. But Nest feels like it’s still being run very much at arm’s length from Google, for better or worse.
Droid Life appears to have obtained images and pricing for three of the hardware products Google is expected to unveil at its October 4th hardware event. It has four separate posts on the Pixel 2 and Pixel 2 XL, a Chromebook called the Pixelbook, and the Google Home Mini, which is exactly what it sounds like. The Pixel 2 models seem to lean heavily on the design of the first versions from a hardware design perspective, with some minor changes and some new color options, with the smaller one being made again by HTC and the larger one by LG, as reported earlier. It looks like Google will embrace this year’s super premium pricing for larger flagships, too, with an $849 starting price on the XL, although it’ll offer monthly financing (whether directly or through a partner is not clear) as well. The Pixelbook is the predicted successor to the original Pixel, a high-end Chromebook, though this time with a screen that folds over the keyboard to become a clunky tablet, and an optional pen, while it retains the premium pricing. So that’s more or less in the Surface ballpark and a more expensive and laptop-like alternative to Apple’s iPad Pro line. Lastly, the Google Home Mini is exactly what you’d expect, borrowing from the Google Home’s slightly softer design relative to Amazon’s fairly industrial looking speakers in a smaller and cheaper form factor.
We’ll have to wait for the event itself to see all the software and feature details – these leaks are pretty much exclusively about external features and pricing – but I half wonder whether Google has allowed some of these details to leak out ahead of Friday’s iPhone 8 launch to give at least some potential buyers pause before jumping into a new iPhone. Given the breadth of the leaks, though, I suspect it’s more likely a rogue employee looking for some attention and/or notoriety. As with the iPhone leaks, I think this kind of thing benefits all of us very little while trampling on the hard work of many who’ve been prepping these devices for launch.
Roku today made public its S-1 filing with the SEC as the first step towards a long-awaited IPO. I’ve been tweeting charts and nuggets from the filing for the last couple of hours in this thread, but I’ll provide a brief summary here. The long and the short of it is that Roku is growing at a decent clip, is currently unprofitable with little sign of that changing, and is in the midst of a big shift in its business model. Whereas for most of its history selling its streaming boxes has been its core revenue stream, it’s recently added a platform licensing business, but that’s not actually where its new revenue streams are coming from. Rather, it licenses its platform very cheaply and monetizes usage by taking a cut of certain subscriptions sold through its platform and serving up ads. It’s the latter which is a surprisingly important part of its business model (though there have been signs of this shift) and which is a major focus of much of the text in the S-1 filing. Last year, this advertising and subscription revenue share was nearly $50 million out of its $400 million in total revenue, and half of its platform revenue, and that accounted for essentially all of its growth in 2016. In that sense, though Roku on paper looks like principally a hardware company, it’s in some ways more like a Facebook or a Google – a company that collects millions of data points on its customers (18TB of uncompressed data per day) and will use that to target advertising. In that sense, Roku is an unusual player in the streaming space, given how many modern streaming services eschew advertising, but sees itself as a key beneficiary of the move of TV advertising dollars from traditional channels to streaming. This is going to be a fascinating IPO to watch and I’ll have plenty more analysis on Roku in the next few days.
AT&T Launches Own-Brand Tablet with DirecTV Front and Center (Aug 21, 2017)
AT&T today announced Primetime, an own-brand LTE-enabled tablet which it will sell under an installment model and allow customers to add on to their shared data plans. The device puts the DirecTV services AT&T also sells front and center, meaning that this is not just an opportunity to sell more connected tablets but also another push to connect its wireless and entertainment offerings in bundles. History here throws up some worries: Sprint and Verizon have seen terrible tablet subscriber growth in the past year because they’re passing the two-year anniversary of when they gave away lots of free tablets on two-year contracts, and customers are now churning in big numbers. This tablet from AT&T carries its own brand, and it’s not clear from AT&T’s press release what sort of specs the device has, but there’s a risk that AT&T sees the same churn in 20-24 months when customers have paid these things off. Overall, I’d also argue that AT&T’s bundling of wireless and entertainment hasn’t worked all that well either for its TV business or its wireless business, both of which continue to bleed subscribers, while Verizon bounced back in a big way in Q2 thanks to its big push around unlimited. That, and not TV/wireless bundles, seems to be what’s selling in the US wireless industry at the moment, and AT&T is the odd one out among the major carriers in not promoting the unlimited offerings it re-introduced earlier this year. I’m not sure this tablet changes any of that, and it feels like another attempt to shoehorn DirecTV into a wireless proposition rather than simply leading with what customers are looking for.