Can the iPhone Lead the Handheld Media Revolution?
The handheld media revolution has arrived full force...
The next week (and truly the next few years) is going to test my main media thesis and in the end we will see how accepting consumers are of change and how portable they want their media. It doesn't need repeating, but Friday's launch of the iPhone may go down as one of the biggest duds in Apple's (AAPL) history. I love Apple, but any device that needs a 20 minute tutorial video on the home page of the web site, is going to be a niche product at best. Sexy, but niche nonetheless.
But the launch of the iPhone signals a new dawn in media. It's the true dawn of the Handheld Media Revolution.
Through the advent of many media, we have never seen the convergence of devices like we'll see in the years to come. We always had the radio, TV, phone and newspaper/magazines. And each was distinct with unique visceral characteristics that made each its own industry. That's changed!
From this point forward, you will get the kind of information and entertainment the way you want it, when and where you want it on any kind of device. This begs the question for investors: who do I bet on in a race that is very hard to handicap?
There are four areas to explore when investing in the media space and they are:
1) Content: What type of content will be delivered across the media spectrum? Think audio, images, text and video.
2) Infrastructure: Which companies are best positioned to deliver it? Think Comcast (CMCSA), Verizon (VZ), AT&T (T), etc.
3) Channels: At what destinations will people find the content? Think Yahoo! (YHOO), Google (GOOG), NBC Universal, AOL, Newscorp (NWS), etc.
4) Devices: Who will make the best devices for consumers to get the stuff? Think Apple, Motorola (MOT), Sony (SNE).
You can break the entire media landscape into these four buckets.
The hottest areas are Infrastructure and Devices at the moment. The dissection of this segment is relatively simple. It comes down to which companies have the best resources and product to monetize their businesses fast.
Today, everything is data. Data includes text, image, video and audio. There isn't anything else. Someone has to make it. Someone has to deliver it and you need something to read, hear, look or watch it on. Finally and most important, someone has to pay for it!
This is the media game.
The game has been very siloed for years. This means we had unique and distinct industries since the advent of modern media. This advent can be linked back to 1609 with the first regularly published newspaper. Jump to 1909 with the first radio broadcast, and 1939 with the first TV broadcast and in 1973 we have the first cell phone call. Print, radio, TV and phone have been very distinct and separate businesses with distinct and separate business models until the internet, which can be linked back to 1983 and when it became a more mass-channel with AOL in 1985.
The idea that channels would/will/have converged and lines have blurred between industries has been a long held proposition, on Friday it we take a step closer to the reality with the introduction of Apple's iPhone. The handheld media revolution has arrived full force.
This will be the first true test of the convergence theory. Simply put, Apple's iPhone is a rock (not a pebble) that's just been tossed into the middle of a giant lake. The ripple effects are already being heard. There are a number of companies that truly stand to benefit from the waves.
So here's the bottom line:
1) A Bruised Apple: Short term, Apple will do very well when and if they get this phone out the door! SHORT TERM. I for one am an iPhone skeptic. It's not a good sign when you have to have a 20 minute video on the home page of your web site to explain how something works. Come on…the Mac was plug it in and use it. This, good sir, is no Mac!
2) Ma Bell is back! (With a vengeance!): AT&T just made the cellular game a two horse race. While it may have actual market share by footprint, Verizon has been the leader in innovation. It has a sexy brand and rapidly changing perception from a phone company to a media company. Thanks to Apple, AT&T just entered the same race. The iPhone will get people in the stores. How the company converts those people (who are primarily coming in to "check it out" not actually buy the iPhone) remains to be seen. AT&T is on a path to be a media company as well. T and VZ are going to be solid media companies.
3) Good Bye Moto!: Motorola should be scared. Unless they pump out a great product – a la Razor version 2.0 with killer apps, they'll be relegated to the bottom feeder phone business and upstarts like Apple (yes, it's a phone upstart!) and Helio who will start to own a space only Motorola once owned – high end phones.
4) Off the RIMM - Research in Motion (RIMM) has been THE media device company for the past two years (with its Blackberry), but it seems it still doesn't know it. Browsing capabilities…yes! (Albeit not that great!) Audio, video? Yes! It's gone from 65 to 160 in one year, but its true potential lies in owning the handheld media revolution. The company needs to keep the loyalists before Apple or any other company creates something better.
It's an exciting time for media. There are opportunities that will show in the next year based on handheld media revolution under foot...I meant hand. I stay away from the term "paradigm shift" because it's probably the most overused in recent history, but the iPhone presents the greatest opportunity for a paradigm shift in media consumption since the advent of television. AT&T will benefit more than Apple from this partnership even if the iPhone is a dud. Apple's been great at starting revolutions, but it doesn't guarantee that it'll win the war.
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