How the EU’s recent USB-C standardisation regulation impacts Apple
13
October
2022
5/5 (2)
On October 4, 2022, The European Parliament voted in an overwhelming majority in favour of forcing USB-C as the universal charging port across a broad range of consumer electronics, including Apple’s iPhone which still uses its own Lightning connector technology apart from other smartphones. According to the European Union, the legislation is part of the wider European Union’s efforts to make products within the EU more environmentally friendly, to reduce electronics waste, and to simplify consumers lives (Guarascio, 2022).
By 2024, all devices covered by the legislation and sold in the 27 European countries will be required to use the universal USB-C port to enable charging over a cable. Under the new rules, manufacturers will be forced to include USB-C ports in all smartphones, laptops, tablets, headphones, and other electronics. The charging speeds are also being harmonised for devices with faster charging capabilities, which would enable users to charge their devices with the same speeds using any compatible charger (Guarascio, 2022).
Apple and USB-C
Currently, only the newer generation Apple MacBooks (2015 or newer), iMacs (2016 or newer), and iPad Pros and Airs (2018 or newer) have USB-C ports. Other Apple products, such as the AirPods, Apple Watch, and Mac accessories like the Magic Mouse and Magic Keyboard do not have a USB-C port and still rely on the Lightning connector. The new EU regulation will require newer generations of these products to be changed as well.
Prediction
While the EU’s new laws would apply only in European countries, the latest changes would only force Apple to move towards USB-C worldwide, as it would be illogical for Apple to solely sell iPhones with a USB-C connector in Europe. However, many analysts think that Apple will temporarily switch to USB-C in its iPhone line-up for one year before going all wireless, and thus, ditch the wired charging connector at all (Gurman, 2022). This would be a risky and crucial decision, since quite some electronic devices still require a wired connection to phones to transfer data, such as many basic car infotainment systems which only support a wired version of Apple CarPlay and/or Android Auto.
References
Guarascio, F., 2022. Apple forced to change charger in Europe as EU approves overhaul. [online] Reuters. Available at: <https://www.reuters.com/technology/eu-parliament-adopts-rules-common-charger-electronic-devices-2022-10-04/> [Accessed 12 October 2022].
Gurman, M., 2022. Apple’s Move to USB-C Is Just a Stopgap Before Its Wireless Future. [online] Bloomberg. Available at: <https://www.bloomberg.com/news/newsletters/2022-10-09/will-the-iphone-15-get-usb-c-port-will-apple-aapl-release-a-wireless-iphone-l91edtxt>
Apple’s Anti-Tracking Disruption
11
October
2022
No ratings yet.
“Privacy. That’s Apple. Privacy is a fundamental human right. It’s also one of our core values. Which is why we design our products and services to protect it. That’s the kind of innovation we believe in.” (Apple Inc., 2022). Every Apple user has probably heard something in line with this before and it is not necessarily a lie: with the release of iOS 14.5 in April 2021, Apple launched a new privacy feature called “App Tracking Transparency”. With this feature, Apple forces app developers to ask users for permission to “track” them, that is share your data with third parties for ad-targeting purposes. Since the release of this feature, it has proven to be a major disruptor on the global ad market – in May 2022 only 25% of users agreed with apps tracking them (Lukovitz, 2022). This disruption is causing a major impact on revenue for big players: it is estimated that in 2022 Apple’s App Tracking Transparency (ATT) feature will cost Facebook $16 billion, YouTube $2.2 billion, Snap $546 million, and Twitter $323 million (O’Flaherty, 2022). In addition, the disruption is also impacting smaller businesses and start-ups that rely on personalized marketing to acquire new customers. Because of ATT, they have seen the cost of acquiring new customers rise and have had to cut back on marketing spending (McGee, 2022). This disruption caused by Apple has required big organizations like Google (owner of YouTube) and Meta (owner of Facebook) to reevaluate their business model and find a way to get the lost revenue back and keep their shareholders happy.
Disruptive innovations are known to displace current market leaders, Google and Meta, and to see one or more new market-leading firms arise. Apple will say that the one benefitting from its anti-tracking crusade is you, the user, and, as we mentioned something similar before: this is not necessarily a lie. However, one with a business mindset and a critical view has probably seen it coming from miles away: the major benefiter is Apple itself. Appsumer reports that between the second quarter of 2021 (after the release of ATT) and the second quarter of 2022, Apple Search Ads (ASA) – Apple’s platform for selling advertisement space to advertisers – has experienced a major boost. Advertisers’ adoption of ASA grew by 4% to 94.8%, while that of Meta and Google decreased by respectively 3% and 1.7% to 82.8% and 94.8% (McCartney, 2022). Perhaps more interesting, are the changes that occurred in advertisers’ share-of-wallet (SOW). ASA’s SOW increased by 5% to 15%, while Meta’s SOW dropped by 4% to 28% and Google’s stayed the same at 34% (McCartney, 2022).
Apple has used the ATT feature very cleverly as a first hit in challenging the duopoly Google and Meta in the advertising market. While Apple is expected to make an almost negligible $5 billion in ad revenue in 2022 compared to Google ($209 billion) and Meta ($115 billion) (Kachalova, 2022), this difference is most definitely to slink in the coming years. Google and Meta are slowly adjusting to the reality because they know: Apple wants a share and will go to extreme measures to get it and with Apple’s strong ecosystem and large userbase, there is very little they can do about it.
Apple Inc. (2022). Privacy. Accessed on October 2022, van Apple.com: https://www.apple.com/privacy/
Kachalova, E. (2022, October 3). Big Tech owes you money. Find out how much. Accessed on October 2022, van AdGuard: https://adguard.com/en/blog/personal-data-cost-money.html
Lukovitz, K. (2022, May 5). Privacy Update: ATT IDFA Opt-In Rate At 25% Overall, But Varies By Vertical. Accessed on October 11, 2022, van Mediapost: https://www.mediapost.com/publications/article/373613/privacy-update-att-idfa-opt-in-rate-at-25-overal.html
McCartney, J. (2022, September 6). Appsumer Report: Apple Privacy Measures Provides a Boost for Apple Search Ads and Favors Large Advertisers. Accessed on October 2022, van Business Wire: https://www.businesswire.com/news/home/20220906005427/en/Appsumer-Report-Apple-Privacy-Measures-Provides-a-Boost-for-Apple-Search-Ads-and-Favors-Large-Advertisers
McGee, P. (2022, August 9). Small businesses count cost of Apple’s privacy changes. Accessed on October 2022, van Ars Technica: https://arstechnica.com/gadgets/2022/08/small-businesses-count-cost-of-apples-privacy-changes/
O’Flaherty, K. (2022, April 23). Apple’s Privacy Features Will Cost Facebook $12 Billion. Accessed on October 2022, van Forbes: https://www.forbes.com/sites/kateoflahertyuk/2022/04/23/apple-just-issued-stunning-12-billion-blow-to-facebook/?sh=58eb37031907
Planned obsolescence in the digital age and the Coase Conjecture
2
October
2022
5/5 (1)
Is the idea of planned obsolescence still relevant in the digital age?Does the Coase Conjecture cause firms to engage in planned obsolescence?
During the time at Erasmus University, students of BIM were introduced to the Coase conjecture in the context of Information Strategy and pricing in monopolies. How firms decide the price for their digital information goods, what factors influence upward and downward pricing pressure and how are information goods substantially different than physical products were topics that were confronted during the course.
The Coase Conjecture
In economic theory, the Coase Conjecture is an argument that states that a monopolist firm selling a durable (digital, in this context) good that can not be re-sold is competing against its future self by having to price their good lower than they would wish for. This is possible because the customers anticipate that the firm will eventually have to lower the price of the product.
The mechanism works as follows: first, having sold the monopoly quantity at the monopoly price, the seller would like to sell a bit more, since she does not need to cut prices on the units she already sold. Second, consumers will rationally anticipates such price cuts, and thus will hold on buying until the future, lower, price is implemented by the monopolist. Lastly, provided that the seller can change prices sufficiently fast, the price must lean towards marginal cost rather quickly, that is, the price will be the marginal cost (Coase, 1972). Due to the nature of digital goods, the marginal costs tend to be zero: the digital goods have high fixed costs for development, very low marginal costs for distribution.
This argument has implications for firms in the digital goods market that behave almost like monopolists.
What are some ways companies deal with this effect in order to generate more value for their shareholders? Are these methods unethical?
Planned obsolescence
A common mechanism firms adopt to moderating the Coase Conjecture effect is Planned Obsolescence. Planned Obsolescence is defined by Merriam-Webster dictionary as “the practice of making or designing something (such as a car) in such a way that it will only be usable for a short time so that people will have to buy another one”. Such practice has often been seen as highly unethical and sometimes illegal, to the point at which governments are considering enforcing stronger policy against it (Moore, 2021).
The idea of “planned obsolescence” has been around for about 100 years. It is said to have begun in the automobile industry, when GM decided that, to increase flagging sales, the company would make new models every year. Another example is in the fashion industry, where designers decide what people wear each year, and new designs tempt people to buy clothes they don’t need. This concept has spread to many industries, especially consumer goods, and most notably computing devices (McElhearn & Long, 2022).
Planned obsolescence in the digital world
In a digital context, planned obsolescence refers to, for example, firms deliberately releasing updates into their devices, think about Apple and its iOS, or Microsoft with Window, which over time make the devices much slower and provide virtually no benefit or features to end users. The users are then virtually coerced into buying new devices from the firms that can handle the new operating systems more efficiently. The issue with planned obsolescence in digital goods is closely connected to the technological advancements. Faster chips, new protocols, novel technologies are valid reasons for upgrading new devices, but to whom is it beneficial to release a new iPhone every year that is fairly similar to the previous year’s one?
Over time, firms like Apple or Microsoft discontinue supporting older operating systems and remove compatibility for new software on devices which are not very old, opening the company to criticism. The meme shared via Instagram by Steve Jobs’ daughter following Apple’s release of the new iPhone 14 says it all. On one hand, the company makes very small upgrades to sell new devices, and on the other quickly renders older devices obsolete. Tech giants like Apple were not spared several lawsuits, complaints and investigations about planned obsolescence, particularly over iPhones (McElhearn & Long, 2022).
Is there anything wrong with a company making a better device than the old one frequently?
Is it different if this is done deliberately or for the sake of offering a better product?
Should firms be encouraged to design products with a strong life cycle?
Are there more ethical choices than planned obsolescence a firm can make when it comes to countering the Coase Conjecture effect?
Let me know the answer in the comments!
References
Coase, R.H. (1972) “Durability and monopoly,” The Journal of Law and Economics, 15(1), pp. 143–149. Available at: https://doi.org/10.1086/466731.
Fabbrocino, R. (2022) Planned obsolescence – the obsolescence of a product is planned, designed, and built into it by its manufacturer, Lampoon Magazine. Available at: https://www.lampoonmagazine.com/article/2022/03/17/planned-obsolescence/ (Accessed: October 2, 2022).
McElhearn, K. and Long, J. (2022) Apple’s planned obsolescence: IOS 16, macos Ventura drop support for many models, The Mac Security Blog. Available at: https://www.intego.com/mac-security-blog/apples-planned-obsolescence/ (Accessed: October 2, 2022).
Moore, D. (2021) UK government to tackle planned obsolescence with ‘tough new rules’, Circular Online. Circular Online. Available at: https://www.circularonline.co.uk/news/uk-government-to-tackle-planned-obsolescence-with-tough-new-rules/ (Accessed: October 2, 2022).
Is Apple Allowed To Scan Its ‘Rotten’ Part?
9
October
2021
No ratings yet.
At what point does it become acceptable to violate someone’s privacy? For some people, the answer may be never. They will argue that privacy is a human right and point to article 12 of the universal declaration of human rights. Here It is stated that no person should have their privacy arbitrarily interfered with (United Nations, n.d.). Most people, however, will agree that it is ok to breach someone’s privacy if they are a big enough threat to society. This would explain why there is no public outcry every time the police listen to phone calls of suspected criminals or terrorists. But would it still be ok if everybody’s privacy would be violated to increase safety and stop criminals?
For Apple, the biggest company in the world, the answer to this question is yes. Their reasoning: to make their products safer for children. In August, they revealed plans to scan the files in everybody’s iCloud storage to detect child sexual abuse material (CSAM) (Whittaker, 2021).
This decision led to a lot of backlash against Apple. Everyone agrees that this is a serious topic and companies should make their products and services safe for children. But some experts see this decision as a pandora’s box and are scared that governments will use this technology one day as a surveillance tool. Other people are afraid of the possibility of false positives, where innocent people will be flagged as predators (Barrett & Hay Newman, 2021).
In September, Apple came with the announcement that the project was being paused. They will take the coming months to improve the system but are not abandoning it (Barrett & Hay Newman, 2021). I would love to hear what you think about this topic in the comments! Should Apple be able scan everybody’s files to detect CSAM or is this violation of privacy too big? Is the threat of this being used as a surveillance tool a real threat, given Apple’s track record of not cooperating with governments?
References
Barrett, B., & Hay Newman, L. (2021, September 3). Apple Backs Down on Its Controversial Photo-Scanning Plans. Wired. https://www.wired.com/story/apple-icloud-photo-scan-csam-pause-backlash/
United Nations. (n.d.). Universal Declaration of Human Rights. United Nations; United Nations. Retrieved October 9, 2021, from https://www.un.org/en/about-us/universal-declaration-of-human-rights
Whittaker, Z. (2021, August 5). Apple confirms it will begin scanning iCloud Photos for child abuse images. TechCrunch. https://techcrunch.com/2021/08/05/apple-icloud-photos-scanning/
Epic Games vs. Apple – the court has spoken
15
September
2021
No ratings yet.
A little over a year ago, Fortnite uploaded a video to YouTube making their ‘fight’ against Apple known to the public (Fortnite, 2020). In short, the developer of Fortnite, Epic Games, does not agree with the 30% cut that Apple takes from in-app purchases, claiming that it is unnecessarily high. Secretly, Epic Games implemented an option to make in-app purchases directly via Epic instead of Apple, offering customers a reduced price for using this option. Since this violated the App Store’s guidelines, Apple removed Fortnite from its App Store (Leswing, 2021).
As you can guess, lawsuits followed, and on the 10th of September 2021, a verdict was reached.
Epic Games, who sued Apple for monopolistic behavior and breach of antitrust laws, were judged to be mostly in the wrong. Apple owns a market share of 55% in the mobile gaming market, and though that is high, it does not make you a monopoly, it simply makes you successful, is essentially what the judge ruled (Leswing, 2021).
Apple, who sued Epic Games for violating the App store’s guidelines, was judged to be in the right. Epic Games had been able to earn revenue through its direct purchasing system in Fortnite, even after Apple had removed the game from their App store, because customers could still play the game if it was already installed. The judge ruled that Epic Games needed to pay Apple the 30% commission over those earnings, which amounted to about 6 million dollars (Clover, 2021).
Epic Games’ CEO making public that they paid Apple the ordered amount.
The only small victory for App developers comes in the form of a ruling that implies that Apple should allow App developers to be able to link to an external ‘storefront’, for example the company’s website, for purchases. However, direct in-app purchases will still not be allowed (Leswing, 2021).
Understandably, Epic Games disagrees with the court’s ruling, and has appealed the decision.
I can’t say I can pick a side. The platform that Apple has created with the App store brings tremendous value to developers, with millions of users getting immediate access to your product once you put it in the App store, allowing you to create revenue. It is only fair that Apple takes a cut of that revenue.
However, for small developers, 30% does seem like a lot, and could make it difficult to become profitable. Fortunately for them, Apple decided to cut the commission rate to 15% for developers that do not have annual sales of more than 1 million dollars on the App store (Leswing, 2020).
See, that’s the thing for me. Epic Games earns billions with Fortnite over all the different platforms on which it is offered (Gilbert, 2021). Its removal from the App store likely only caused a very small dent in its profitability. This ‘fight’ that Epic Games is picking with Apple, even insinuating that Apple’s practices are ‘1984’-like in the earlier referenced video, just sounds greedy to me.
What do you think? Is Epic Games’ fight justified, or is it a case of gold fever?
No ratings yet.The American house of representatives has concluded that big tech companies such as Facebook, Apple, Google, and Amazon have misused their dominant position on a big scale. Hence, that is the reason that the American commission advocated for the split of Big Tech companies alike. However, what exactly did these tech giants do wrong?
The digital business model of tech giants
With regard to digital business models, the observation can be made that these big tech companies (Apple, Google, Amazon, and Facebook) are ecosystem drivers as they provide a platform to conduct business (Weil & Woerner, 2020). Furthermore, they have complete knowledge about their customer by the amounts of data they generated about their customers. It is interesting to see that certain of these technology companies (such as Amazon) gained significance by disrupting the market while pursuing a long-tail strategy (Hillesund, 2007).
The problem
The commission deems to prove that Google (regarding search engines) and Facebook (concerning Social Media) became monopolists through unauthorized practices. Furthermore, researchers claim that Amazon and Apple have “lasting and significant market power” that they partly forced by locking out competition through their platforms (De Tijd, 2020). The logical consequence is that competitors are discouraged to innovate. Thereafter, the privacy position of consumers is jeopardized by the dominant position of a handful of tech companies. It also becomes more difficult to find truthful news if only a few big companies are the spreaders of it.
Examples of wrongdoings
The report claims that Amazon frequently uses third-party sellers to assist in improving and selling their own products. Apple uses its presiding market position to benefit its own applications and hamper those made by rivals. Facebook preserved its monopoly through a chain of anti-competitive business practices. Specifically, it bought up potential rivals such as Instagram. The report states that Google had demanded smartphone manufacturers using its Android operating system should install Google’s chrome as its standard web browser (www.ft.com, 2020).
It can be concluded that Big tech companies did not always use the right means to obtain their market position. Obviously, the big tech companies have responded in a disapproving manner (RTL Nieuws, 2020). This raises some questions for me to you, the reader.
Do you think the report was fair and just? Do you think it is beneficial to society that these tech companies have so much market power? If sanctions are imposed, do you think these tech companies should be split up or do you think other sanctions must come into place? Which other sanctions should come into place?
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De Tijd. (2020). Amerikaanse commissie pleit voor opsplitsing Big Tech. [online] Available at: https://www.tijd.be/ondernemen/technologie/amerikaanse-commissie-pleit-voor-opsplitsing-big-tech/10256341.html [Accessed 10 Oct. 2020].
Hillesund, T. (2007). Reading Books in the Digital Age subsequent to Amazon, Google and the long tail. First Monday. [online] Available at: http://hdl.handle.net/11250/184283 [Accessed 10 Oct. 2020].
RTL Nieuws. (2020). Commissie VS wil techreuzen opsplitsen: Big Tech is te machtig. [online] Available at: https://www.rtlnieuws.nl/tech/artikel/5188715/commissie-vs-pleit-voor-opsplitsen-big-tech [Accessed 10 Oct. 2020].
Weil, P. Woerner, S.L. (2015). Thriving in an Increasingly Digital Ecosystem. [online] MIT Sloan Management Review. Available at: http://mitsmr.com/1BkdvAq [Accessed 10 Oct. 2020].
www.ft.com. (2020). Subscribe to read | Financial Times. [online] Available at: https://www.ft.com/content/ccf00858-30a2-49d3-9ae9-7db3f58773b0 [Accessed 10 Oct. 2020].
Epic Games vs. Apple’s App Store – Round 2
26
September
2020
No ratings yet.A few weeks ago the dispute between Epic Games, the developer of the famous game Fortnite, and Apple surfaced. Put shore, Epic Games accused Apple to charge an excessive commission for developers and to hinder their users in their freedom to choose where and from whom to download apps, clearly protecting its own products and services on the platform while discriminating external developers. After Epic Games changed its payment processor within Fortnite, cutting Apple off to maintain the contractually agreed commission, Apple decided to delist all Epic Games apps from the Apple App-Store, leaving millions of users without access to the Epic Games applications on their iPhones (t3n, 2020).
While Apple declared the dispute with Epic Games as resolved, terminating the contract with Epic Games, and also suing Epic Games for a breach of contract, further app developers joined Epic Games’ protest, complaining about Apple’s App-Store regulations (t3n, 2020).
By now, nearly 3 months after the beginning of the dispute between Epic Games and Apple, Apple is facing the next round of its App-Store dispute. A coalition has formed, to force Apple and other operators to change their App-Store regulations (Coalition of App Fairness, 2020).
The coalition is called Coalition for App Fairness and is supported by several well-known companies. Next to Epic Games, there are Spotify, Deezer, Matchgroup, Tinder, OkCupid, and many more. Whilst it is clear that their claims are mostly targeting Apple and its App-Store regulations, the requests of the coalition are formulated in a general manner to make them applicable to all App-Store operators (Coalition of App Fairness, 2020).
In total, the Coalition states ten requests for how App-Stores should be regulated, with three of the requests being directly targeted at Apple (Coalition of App Fairness, 2020):
Apple’s App-Store is subject to anti-competitive guidelines Apple claims to review all apps carefully before making them available through the app store. Using that process, Apple wants to ensure quality and security for their consumers. However, the Coalition argues, that the heavy regulation by Apple gives Apple the advantage to support its own applications and reduces fairness for external app developers.
Apple retains 30 percent of app sales As already mentioned, Apple is accused to charge a high commission. The Coalition sees a competitive disadvantage if two apps with similar services, one from Apple and one from an external provider, are competing against each other in the Apple App-Store since Apple can offer better prices for their services as they don’t have to pay the 30% commission.
The App-Store is supposed to restrict consumer freedom Other than with other App-Stores, the only way a user of an iOS device can access and download an app is through the Apple App-Store. Customers have no freedom of choice about where or from whom they can obtain their apps. The Coalitions claim it to be a huge disadvantage forcing customers to use the Apple App-Store to being able to download apps.
While I see the point of the Coalition asking for more fairness, it also seems a lot like an attempt to shift profits away from Apple back to the app developers. While we discussed the network effects that large communities/networks can have on a product or service, the Apple App-Store is a great example. The benefits that Apple offers to app developers through the Apple App-Store ecosystem are (1) access to millions of users, (2) security, and (3) ensured quality. At the same time, Apple users can benefit from (1) security and (2) quality. Since no one is forcing the app developers to offer their apps through Apple’s App-Store, it is clear that they want to benefit from the quality network and processes that Apple created with its customers, since they promise increased profitability.
With no doubt, these benefits are crucial for the app developers, since they provide the possibility for increased demand and sales. If Apple would respond to all requests stated by the Coalition, opening up its platform, waiving the app approval process, and giving people the chance to download their apps wherever Apple would pose its iOS as well as its customers to the risk of becoming a victim of fraudulent activities. With a lowered level of quality and security, there’s a possibility of long-term negative impacts on user numbers, quality, security, and in the end profits being made.
What’s your take on this? Should Apple give in and reduce its power within the App-Store?
At your service: Taking a bite at Apple’s transformation into a service company
23
September
2020
No ratings yet.It is quite hard to imagine the world of Apple and it’s iconic iPhone and MacBook to turn the page and set sail in a new direction. Yet, with every public outing or announcement, they reinforce the shift towards their service offerings.
Clearly, with each new generation of Apple’s hardware’ we have seen less dramatic changes and in turn shrunken product revenues. Starting already in 2019, at one of Apple events they showcased no tangible products but in turn debuted Apple TV+, the company’s long-awaited Netflix competitor; Apple News+, a digital newsstand subscription; Apple Arcade, a game subscription service for mobile games; and the Apple Card, which is something in between a credit card and a rewards card.
Apple would not be the first business to go into selling services as a way to counteract slow sales in the physical front. Let’s take Microsoft, for example. The reason Microsoft experienced a turn-around was the dramatic shift to the cloud which put the company back into the high-growth business and continue it’s journey safely into reaching the $1 trillion mark. Another benchmark example of the $1 Trillion clubs is Amazon, which after it’s debut as a book-seller ventured into AWS which now makes up for half of the companies revenues.
However, as with everything, timing matters and many have doubts about the potential success of these new services as they don’t necessarily bring anything new to the table. Despite this, the company says it expects paid subscribers to surpass half a billion within 2020.
Apple will still continue to sell it’s almighty hardware nonetheless. Nonetheless, it’s time for them to reinvent themselves.
Could Google, Apple, Facebook or Amazon make you knock on a stranger’s door?
3
October
2019
No ratings yet.Big surprise… Yes! They can. They already made millions of people doing this. But what is really happening here?
When I was watching a video of Roger McNamee (former mentor of Mark Zuckerberg) and Edward Roussel (Dow Jones Chief Innovation Officer) at the Digital Marketing Exposition and Conference they pointed out that Pokemon Go was basically the first indirect test of Google trying to manipulate and steer human behavior in an utterly new way. People that were/are using the Pokemon Go app were indeed knocking on doors of strangers, since they really badly wanted that very special Pokemon that was located in the garden of their neighbors. Next to that, the makers of this app could even make you go into a school or a Starbucks etc. You see the point.
Every hour, big companies receive tonnes of data about us and our behavior. But still I hear people say: “I don’t care what companies do with my data”, and that made me think. It is of course really convenient to have apps in your life that support you in the best way possible, like Google maps that knows exactly where your home and work address is and therefore this app can help you to quickly navigate to those places. Or even one step further, Google tracks your location and sees exactly where you are at any time, but for you as a user it’s also great to see where you have been.. This information is not new, but it keeps me thinking of how much data big established companies actually receive, for example, Walmart collects more than 2.5 petabytes of data every hour from its customer transactions (McAfee et al, 2012), and probably that has more than doubled as of today.
But what actually got my attention was the fact that big established firms can go one step further: they can make you move in a physical way! This could really be a very effective means for digital marketing right? So by gamifying processes (like the Pokemon Go app) you can actually manipulate human behavior. But if that’s possible, what will happen in the long run?
There are roughly four companies in the world that control most of our data, but just imagine what they can do with all of that information. For example, the Oxfort Internet Institute (2019) found out that manipulation on social media has got worse – “rising numbers of governments and political parties making cynical use of social media algorithms, automation and big data to manipulate public opinion at scale.” Striking facts, and we also haven’t forgotten the Cambridge Analytica scandal in recent history. Hub firms are big enough, they don’t need others (Iansiti & Lakhani, 2017), they can make you do a lot in the future… like moving you to a special location with an exclusive ceremony to get your iPhone one day earlier than the official release date as part of you being loyal to brand. Just a random idea, but there are endless possibilities.
I think we should be way more careful in how we share our data across platforms, since it can be of real monetary value for such companies, confirmed by the fact that companies pay a lot for valuable data. And as Roger McNamee (video) pointed out, “we shouldn’t view data as an asset and we shouldn’t be able to buy and sell your own data, it is part of your bodily organ.”
What do you think about these risks of big firms going steps further in terms of what they do with your data and what should we do to get our customer power back?
If you have some spare time, here is the video:
References:
McAfee, A., Brynjolfsson, E., Davenport, T. H., Patil, D. J., & Barton, D. (2012). Big data: the management revolution. Harvard business review, 90(10), 60-68.
Iansiti, M., & Lakhani, K. R. 2018. Managing our hub economy. Harvard Business Review, 96(1), 17-17.
TechCrunch. (2019). Voter manipulation on social media now a global problem, report finds – TechCrunch. [online] Available at: https://techcrunch.com/2019/09/26/voter-manipulation-on-social-media-now-a-global-problem-report-finds/ [Accessed 22 Sep. 2019].
YouTube. (2019). Big tech under observation – after years of watching us, is now being watched | 2019. [online] Available at: https://www.youtube.com/watch?v=6aM55qkIt14 [Accessed 14 Sep. 2019].
The Streaming Wars: when streaming services become a more expensive cable
20
September
2019
Netflix is more than just an online digital platform; it has become a cultural phenomenon. Three years ago, Netflix became this one channel to watch virtually anything: from Jurassic Park to Breaking Bad to Toy Story. Many people take their first-month-free subscription because they don’t want to miss out on the latest season of Stranger Things, and never left since. It introduced a trend of binge-watching shows, finishing hours of series in one go until the screen blacks out and asks “Are you still watching?” Television became a device that streams Netflix instead of being its own thing. It lost its meaning so much that many people become cord-cutters – ditching their expensive cable TV subscriptions for a mere $9.99 per month Netflix accounts. It seems that the development of internet goods has yet again made life much cheaper and simpler.
Or so we think.
Direct-to-consumer distribution model
As Netflix’s popularity and valuation grow, linear (traditional) TV suffer. It is not long when media companies such as WarnerMedia, NBC Universal, and Disney start to launch their own streaming platforms, too. These networks apply a direct-to-consumer distribution model (Sherman & Evans, 2019); instead of selling the licensing rights of their shows to Netflix, they use their brands to make their own platform. These so-called streaming wars prompt TV networks to spend millions of dollars to buy the rights to their most popular shows – such as The Office, Friends, and every Disney movie – back from Netflix to be streamed in their own online platforms NBC’s streamer, HBO Max, and Disney+, respectively (Steinberg, 2019).
Just like most industries, giant tech companies also plans to infiltrate the entertainment industry. Following Netflix’s path of bringing more on-demand consumer base by introducing original content, Amazon Prime Video and Apple TV+ are also in the game with their exclusive contents. For streaming services, the ability to deliver quality content for their platforms is crucial. Take Disney+ as an example: people most probably already have the physical form of their movies, so they need to add value to this new channel (Horner, 2019).
Pricing plans
Netflix’s current monthly subscription fee of $9-16 is one of the highest among competitors, Amazon Prime Video ($13), and Hulu ($6-12). However, newcomers’ subscription prices are way lower; with Disney+’s $7 per month and Apple TV+’s mere $5 per month, these prices will definitely damage Netflix’s subscriber count. Other platforms also continue to respond by cutting their subscription prices, like NBCU’s free for cable or satellite subscribers ($12 for non-subscribers). Rao et al. (2000) mentioned that cutting prices may not always be a good retaliation move on their parts as it reduces the overall pie of the market. The other route that each player can take to win is to maximise their platform’s value. Disney, with its extensive collection of movies and series, definitely has the upper hand on this matter. Everything Disney, Pixar, Marvel, Star Wars, National Geographic, 21st Century Fox will be on its platform, which will launch in November this year. Not only that, Disney+ also has a subscription bundling plan with other streaming platforms Hulu and ESPN+; both of which are owned by Disney Corporation as well.
Streaming platforms are, in general, a great innovation because it decouples watching TV and watching advertisements (Texeira & Jamieson, 2014). Nonetheless, it seems that the losing party in this war are the consumers. Taking all the pricing plans mentioned above (plus HBO Max’s rumoured subscription price of $16-20 per month), subscribing to all of these platforms would cost – if not more – the same as cable TV subscriptions. The only difference is that giant tech companies have now also entered the battlefield.
Although we have more choice in what to purchase, more options often mean that we might (reluctantly) spend more money than we should have. “Unbundling” Netflix would only create a fragmented market, which will generally increase prices for content (Steinberg, 2019), and induces the need to – yet again – have a platform that bundles everything together again. So, how many loops will it take before the system breaks?
References
Horner, A. (2019, July 3). Streaming wars: Why Disney and Apple rivalling Netflix is good news for fans of great TV. Retrieved September 17, 2019, from Independent: https://www.independent.co.uk/
Rao, A., Bergen, M., & Davis, S. (2000). How to Fight a Price War. Harvard Business Review, pp. 107-116.
Sherman, A., & Evans, D. (2019, August 10). How the streaming wars between Disney, Netflix, Apple and everybody else will change TV forever. Retrieved September 17, 2019, from CNBC: https://www.cnbc.com/
Steinberg, B. (2019, July 18). Why Consumers Are Already Losing in the Streaming Wars. Retrieved September 18, 2019, from Variety: https://variety.com/
Teixeira, T., & Jamieson, P. (2014, October 28). Disruption Starts with Unhappy Customers, Not Technology. Harvard Business Review. 5/5 (1)
