Technology of the week – HBO versus Netflix

26

September

2016

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In this blog we describe the business models of Netflix and HBO, use Porter’s five forces analysis to analyze the video entertainment industry, critically compare the strengths and weaknesses of both companies and make predictions for the video entertainment industry.

 

Netflix uses the business model of video on demand via the internet. The high quality and easily accessible content, available from many different devices anytime and anywhere at low prices has already attracted more than 75 million subscribers worldwide. HBO is the largest pay-TV cable channel in the USA with a subscriber base of 46 million. The company uses a service business model in both the cable television industry and the video on demand industry, which is scalable with a recurring subscription-based revenue model.

 

The video entertainment industry is very competitive with a large number of firms. The switching costs are low which intensifies the competition. Low levels of product differentiation also increase the rivalry. The threat of new entrants is moderately low because of the high cost of capital required to acquire the needed platforms and products. The threat of substitutes is high and therefore costs must be kept low in order to be competitive. The bargaining power of buyers is medium because buyers can easily switch between services and there are little to no switching costs, but buyers don’t have the power or ability to influence the products or prices. The bargaining power of suppliers is moderately high as companies like Netflix have to make sure they can secure and keep contracts with the most popular networks and studios to keep its customer happy.

Porter's five forces model

 

The SWOT tables below list the strengths, weaknesses, opportunities and threats of respectively HBO & Netflix.

SWOT HBO

SWOT Netflix

 

The main differences between HBO and Netflix are:

  • The monthly subscription fee of HBO is almost twice as expensive as Netflix;
  • HBO offers more recent movies but has less content than Netflix;
  • HBO provides online streaming via a subscription to cable providers (and now also independently via HBO now) and Netflix only provides online streaming via the use of the internet;
  • Netflix and HBO got different original series and movies. But where HBO offers fewer than 350 films, Netflix offers around 5.000 films;
  • HBO Now initially can only be streamed on Apple devices as a 3-month exclusive. Netflix is available on almost all streaming platforms.

Our predictions of the video entertainment industry are that:

  • The industry for online streaming will continue to grow worldwide and be innovative over time;
  • Netflix and HBO are in prime positions to pounce on a new generation of movie fans;
  • In the future Netflix will focus more and more on children to secure their loyalty for life;
  • Netflix will increase the prices towards HBO’s fees, thereby reaching a higher adjusted operating income (bottom line);
  • Targeted advertising: with big data and audience analytics there will be streamlined and targeted advertisements for specific subscribers of the TV industry.

 

References:

http://www.cinema.nl/artikelen/12132512/titanenstrijd-hbo-vs-netflix

http://www.cass.city.ac.uk/__data/assets/pdf_file/0017/220517/Netflix.pdf

http://www.slideshare.net/MintyThomas/netflix-1-51317848

https://www.linkedin.com/pulse/state-future-netflix-v-hbo-2015-jason-hirschhorn

https://www.washingtonpost.com/news/the-switch/wp/2016/03/28/netflix-is-coming-for-your-kids/

https://www.statista.com/chart/4254/netflix-subscriber-growth/

 

Group 51: Daniëlle de Jong, Mitchel Riemen, Siobhan Heale & Tom Kuil

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Should you go for Google Allo?

25

September

2016

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What is Google Allo?

On September 21st 2016 Google Inc. launched its chat app Google Allo. Just like WhatsApp, Google Allo uses your phone number to connect with their app and send messages to contact persons in your phonebook. The app is available for both Android and iOS. Allo has a few features that make it unique: Google Assistant, incognito mode and Smart reply (automatic responses via learning over time). The downside to Smart reply that bothers people is the automatic storage of all your chat messages on the Google servers.

 

What makes Google Allo different from other chat apps?

The first feature that makes Google Allo different from other chat apps is Google Assistant. This virtual assistant can answer questions privately or within chats with your friends, can give suggested follow up questions as shortcuts to manually typing, can pull information from the internet and it has a machine learning component. This self-learning assistant is a precursor of an advanced Artificial Intelligence (AI) virtual assistant. Secondly, there is an incognito mode in which your chats are end-to-end encrypted and can only be seen by the participants. In this mode Google can’t read any of your messages which means you can’t use the Smart reply or Assistant features. The last unique feature is the Smart reply which makes replying to conversations easier and faster. It recalls typical responses of the user and gives the applicable ones as reply options to a photo or a message. Smart reply adjusts itself to the user’s writing style and improves through time.

 

What are the privacy implications of Google Allo?

If you decide not to use incognito mode then your chat logs are stored on Google’s servers indefinitely until you actively decide to delete them. These chats aren’t encrypted and can be requested by US government authorities through a search warrant. That is why Edward Snowden, ex-CIA employee and whistleblower, advises against using Allo. Another criticism is that the app may tempt people to prefer the AI assistant over the privacy of an end-to-end encrypted chat. This design choice seems to be a step backward for people who are concerned about the continuously challenged legal status of end-to-end encryption.

 

Should you go for Google Allo?

At this point in time my answer is: no. The Google Assistant feature is promising and works well but isn’t groundbreaking enough for me to switch from WhatsApp to Google Allo. If you want to use end-to-end encryption for protecting your privacy, you have to enable the incognito mode. In this mode the most important additional features, Google Assistant and Smart reply, don’t work.

 

References:

Everything You Need to Know About Google Allo’s Privacy Backlash

http://www.ibtimes.com/google-allo-messaging-app-features-smart-reply-incognito-mode-google-assistant-2419942

https://support.google.com/allo/answer/6383724?hl=en

http://www.telegraph.co.uk/technology/2016/09/21/google-allo-can-the-new-chat-app-outsmart-whatsapp-and-imessage/

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Uber driverless cars: the replacement of human drivers

18

September

2016

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Uber is an American internet company which since 2010 mediates between consumers and private drivers of cars. Via the Uber app consumers can submit a trip request on their mobile phone whereupon the Uber software sends a message to the nearest available Uber driver. Uber is currently active in 66 countries and has a revenue of 1.5 billion USD. The company has disrupted the taxi industry with its app, as one of the effects of Uber is increased competition for taxi drivers which resulted in plunging taxi medallion prices.

Uber is now experimenting with their next step: executing trips with driverless cars. The company has started a self-driving pilot program in Pittsburgh with selected app users. The self-driving cars are fitted with sensor cameras, radar, lasers and GPS receivers. For the next few months the driverless trips will be supervised by company technicians to make sure everything goes right and to monitor the car’s behavior. During test drives the car collects data of the surroundings and compares it with preexisting maps to identify for example pedestrians and cyclists. With the move of using self-driving cars for the general public, Uber is ahead of the rest of the car industry and companies like Google and Tesla. The goal is to replace Uber’s human driven cars by self-driving cars, as quickly as possible.

While Uber thinks the launch of the self-driving car program is a step forward in transportation, Uber drivers are not so sure. The drivers fear that in the future they will be entirely replaced by software and sensors, although they do not expect it would replace them soon. An spokesperson of Uber says he expects human drivers to remain part of the equation, even after Uber works out self-driving issues like dealing with bad weather. The company believes ride-sharing will be a mix between drivers and self-driving Ubers because of the limitations of software and the need to have drivers deal with unique consumer issues. It also states that the program will create additional jobs in maintenance as the cars will be on the road 24 hours per day.

 

 

References:

https://en.wikipedia.org/wiki/Uber_(company)

http://www.bloomberg.com/news/features/2016-08-18/uber-s-first-self-driving-fleet-arrives-in-pittsburgh-this-month-is06r7on

http://www.telegraph.co.uk/business/2016/09/14/watch-uber-launches-driverless-car-service/

http://www.marketwatch.com/story/uber-drivers-wont-accept-autonomous-cars-without-a-fight-2016-09-15

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