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2015 Global Trend Forecast (Technology, Media & Telecoms)
The document provides predictions for technology, media and telecom investment themes over the next 12 months. For hardware, it predicts wearable technology and mobile payments will benefit Apple and Google due to their mobile operating systems. Samsung looks risky, while Lenovo is a long-term favorite. Software defined networking threatens Cisco and Ericsson, while EMC is a long-term play. Google is positioned to gain from numerous concurrent consumer electronics cycles. For software, applications focused on big data like Nuance and Tableau are favored. Amazon may lose cloud dominance as prices fall. For internet and media, Google leads in e-commerce and mobile. Content owners could benefit from multiple internet TV platforms. Voice revenues are declining for telecoms who
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2015 Global Trend Forecast (Technology, Media & Telecoms)
- 1. SYNC. Global investment themes:Telecoms, media and technology Global Trend Forecast Technology, Media & Telecoms 16 July 2014 Cyrus Mewawalla Director of Research [email protected] +44 (0) 20 3393 3866 CM Research 56 Broadwick Street, London W1F 7AJ www.researchcm.com Authorised and regulated by the Financial Conduct Authority Elgen Strait Director of Sales [email protected] +44 (0) 20 3744 0105
- 2. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 2 Contents EXECUTIVE SUMMARY 3 HARDWARE 5 Connected devices 7 Servers, storage & networking equipment 8 Consumer electronics 9 Component makers 10 SOFTWARE 11 Application software 13 Infrastructure software and the cloud 14 Security software 15 Video gaming software 16 IT Services 17 INTERNET & MEDIA 18 E-commerce 20 Social Media 21 Advertising 22 Music, film & television 23 Publishing 24 TELECOMS 25 Telecom operators 27 Cable & satellite operators 28 ABOUT US 29
- 3. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 3 Executive Summary Which technology investment themes will dominate the next 12 months? Who will be the winners and losers? Hardware In consumer electronics, the biggest product cycles – Wearable Tech, the Internet of Things, Internet TV – will be built around a particular mobile operating system. Profits will flow disproportionately to Apple and Google. Microsoft, Alibaba and Amazon are the wild cards. Samsung looks high risk. Lenovo is our long term favourite. In the telecom equipment sector, software defined networking (SDN) technology represents a big threat: Cisco has the most to lose; Google the most to gain. EMC is one of our favourite long term plays. Software Applications software has become the technology sector’s innovation engine. Nuance, Splunk, Qlik and Tableau – all linked to the Big Data theme – are our favourites. In the cloud infrastructure software market, a price war has just begun. Amazon may no longer remain the dominant force. Google and Microsoft – possibly IBM – are likely to gain market share in 2015. Rackspace and Telecity may lose market share. In cyber-security “unified threat management” is the buzz word. Check Point Software, Trend Micro, FireEye and Fortinet are our favourites. In gaming, ecosystems like Facebook and Tencent are the safest bets. In IT services, where Big Data is the underlying theme, we like Informatica above the larger players. Internet & Media As e-commerce goes mobile, domination of messaging, maps, mobile payments and mobile operating systems becomes critical. Google is the clear leader. Apple, Amazon and Alibaba are close behind. Niche e-commerce plays like ASOS had better beware. In social media, the “sharing economy”, “crowd-funding” and crypto-currencies” are the next fads. In ad-tech, the latest invention is the cross-media exchange, a one-stop-shop for buying ads across multiple media, from the web to mobile to TV. Everyone from AOL to Facebook to WPP is in the race to develop one. Criteo, Rocket Fuel and WPP are our favourite long term plays. Internet TV threatens to disrupt content owners’ business models. If a single internet TV platform dominates, content prices will fall. But If several competing TV platforms emerge (more likely), content prices will be bid up. Time Warner, Disney and ITV should benefit. Telecoms Voice and messaging revenues are in terminal decline. Big Data, the Internet of Things and Software Defined Networking provide new revenue opportunities, but telcos are likely to miss the boat. Conversely, net neutrality – if it collapses in the US – could send telecom operator share prices up globally. Meanwhile, heavy bandwidth users like Netflix could see costs spiral.
- 4. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 4 Introduction In this report, the fourth edition of our Global TMT Trend Forecast series, we identify the major disruptive technologies that we will see in 2014/15 and predict how they will impact the world’s largest technology, media and telecom (TMT) companies. To put things into perspective, let’s first take a look at how the component parts of the global TMT sector performed in share price terms against the S&P 500 index since the 2007/2008 financial crisis. As the chart below illustrates, the best performers of the last six years have been e-commerce and software companies. The worst performers have been telecom operators, publishers and consumer electronics companies. Since the beginning of 2008, e-commerce and software companies have outperformed the S&P 500 index Global TMT sector: Cumulative 6½ year share price performance Hardware Software Internet & Media Telecoms Source: Company data, FT, S&P Capital IQ, CM Research. Bars show the cumulative sector performance from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012, 2013 and 14 July 2104 of a selection of stocks that we believe are bellwethers for each sector aggregated on an equal weighting basis. Note: Whilst the performance of every sector is shown over a 6½ year period, the performance of social media is shown over a 2½ year period as most social media companies were not listed 6 years ago. -100% 0% 100% 200% 300% 400% 500% 2008 2009 2010 2011 2012 2013 2014
- 5. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 5 Hardware
- 6. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 6 HARDWARE Trend Summary Here is a summary of our dominant themes for the hardware sector over the next 12 months: Connected Devices Wearable technology, mobile payments and second screens (to control TV sets) will provide new revenue opportunities for the connected device industry. Profits will flow predominantly to the most popular mobile operating systems: Apple and Google. Microsoft is the wild card. Samsung looks high risk. Lenovo is our longer term favourite. Servers, Storage and Networking Software defined networking (SDN) technology represents the biggest risk to the server, storage and networking equipment markets. Cisco has the most to lose. Ericsson is also under threat. Both have sensible long term strategies to embrace SDN, but neither can move fast enough to avoid profit warnings in the medium term. HP looks more and more like a turnaround success story. EMC is one of our favourite long term plays. Consumer Electronics Never have we seen such a cluster of concurrent consumer electronics product cycles on the cusp of launch: Internet TV, wearable technology, med tech, robotics, artificial intelligence, automated cars, connected homes and the Internet of Things. Yet, never has it been so easy to pick the overall winner. Google is likely to gain a disproportionate share of the profits from most of these technology cycles. Component Makers 3D printing, robotics and software defined networking are the most disruptive threats to the electronics components industry. These disruptions, coupled with the increasing dominance of Apple and Google’s software in more and more consumer electronics devices, will make profitability in the components sector particularly volatile over the next 12 months.
- 7. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 7 Connected devices Theme What’s happening? Our predictions Leaders Laggards Wearable technology Smartwatches, fitness bands and med tech devices are coming fast. Many are powered by Android Wear, a tweaked version of Google’s mobile operating system designed for wearable tech. Wearable devices create more opportunity to collect personal data, benefitting the apps that run it and the mobile operating system that powers it. Google, GoPro, FitBit, Jawbone Apple, Baidu, Facebook, HTC, LG, Microsoft, Samsung Second screen Smartphones, tablets and now smartwatches are gradually being used as a second screen for the primary screen in a connected home – the television. The aim of the second screen is to replace the remote control as the main gateway to the TV. Apple and Google’s second screens use Airplay or Chromecast to connect to the TV wirelessly; Sony and Microsoft use their gaming consoles as their TV gateway; Amazon, Alibaba and others are working on tailor-made devices. Alibaba, Amazon, Apple, Google Baidu, BSkyB, Comcast, Facebook, Microsoft, Netflix, Pace, Roku, Sony, Tencent, Twitter Mobile payments Mobile phones are not yet widely used as iwallets because the technology is not yet ready. NFC is the contactless payment standard backed by Google and most others, but Apple may soon announce its own standard based on iBeacon Square, Alibaba Apple, Baidu, Bitcoin, eBay, Facebook, Google, HTC, ISIS, LG, Stripe, Samsung, Unbundling of Android Google is shifting critical functions out of Android Open Source Project (AOSP) into Google Mobile Services (GMS). For example, stand-alone camera apps may soon be available only in the Play store rather than as an integral part of Android OS. This gives Google more control of the user data on Android devices whilst limiting the ability of Android vendors to build any kind of meaningful customer relationship. All very reminiscent of what Microsoft Windows OS did to PC vendors. Google Alibaba, Amazon, Apple, Asus, Baidu, Blackberry, Facebook, LG, Microsoft, Sony, Samsung, Tencent New mobile ecosystem entrants New entrants continue to attempt to break the Apple / Google duopoly in mobile operating systems. COS, for example, is a Linux based operating system backed by the Chinese government. Aside from operating systems, other entry points into mobile ecosystems include web browsers, messaging apps, mobile payments or search platforms. Chinese players are very active here. Alibaba, Amazon, Baidu, Easou, Jolla, Huawei, Mozilla, Opera, Qihoo, UCweb Apple, Google Cheaper smartphones China accounted for 40% of the 281m smartphones shipped in Q1 2014, according to IDC. As Indian smartphone penetration also rises from under 10%, prices will fall. By virtue of the size of the domestic market, Chinese smartphone makers will gain global share, especially if COS, its home-grown software, proliferates. Coolpad, Huawei, Lenovo, OnePlus, Xiaomi, Yota, ZTE Apple, Blackberry, Microsoft, Nokia, HTC, LG, Samsung
- 8. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 8 Servers, storage & networking equipment Theme What’s happening? Our predictions Leaders Laggards Software defined networks (SDN) SDN is a new architecture for data networks in which the emphasis shifts from hardware to software. It will be hugely disruptive because it fundamentally changes who controls the telecom network. SDN’s open hardware standards threaten to commoditize networking hardware, which is still largely based on proprietary systems. SDN allows industry outsiders to program the network. Alibaba, Amazon, Apple, Facebook, Google, Huawei, IBM, Netflix, Twitter, VMware Cisco, Dell, Ericsson, F5 Networks, HP, Juniper Networks, Nokia WAN optimization Data centers are becoming increasingly fragmented “wide area networks”, slowing down data response times. Companies that specialize in WAN optimization technology (i.e. making data flow faster) will address this bottleneck. Brocade, Fusion- io, Riverbed Tech, SGI Cloud storage Demand for storage is shifting from local storage drives to network storage in the cloud. As a result, value is shifting from “storage drive products” to “unified storage services” EMC, NetApp, Dropbox, Box, Nimble Storage Seagate, Western Digital SSD Within the physical storage market solid state drives (SSD) are displacing hard disk drives (HDD). SSDs are silent, faster and more reliable than HDDs. The leading HDD players – Seagate and Western Digital – argue they have mitigating strategies, but the speed of the technology shift could catch them out. Intel, Sandisk, Toshiba Seagate, Western Digital Mobile moves to IP 4G is the first mobile standard to be all-IP. Whereas 3G technology involved proprietary standards, 4G is more open. As mobile moves to IP, fixed IP networking giants like Cisco and Juniper will find it easier to challenge 4G leaders like Ericsson. Cisco, Huawei, ZTE, Juniper Networks Alcatel Lucent, Ericsson, Nokia Trade wars The NSA spying revelations publicized by Edward Snowden have escalated the trade war in telecom equipment. Over the last five years, Huawei and ZTE were banned from bidding for major telecom equipment contracts in the US and elsewhere on national security grounds. Now the situation has turned and Cisco is likely to lose sales as a result of the NSA scandal. Alcatel Lucent, Ericsson, Huawei, Nokia, ZTE Cisco Bluetooth low- energy (BLE) BLE is a new wireless standard that improves communication between mobile devices. BLE can be used by high street retailers to send their customers personalized, location-based offers via an app as they walk into the store. Apple’s iBeacon is on trial at Macy’s while Qualcomm’s Gimbal is trialing at the Miami Dolphins’ home stadium. BLE-powered systems might even displace NFC as the de facto wireless standard for mobile payments. Apple, Qualcomm
- 9. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 9 Consumer electronics Theme What’s happening? Our predictions Leaders Laggards Internet TV Successive attempts by technology companies to conquer the TV industry have failed because new entrants couldn’t quite piece together the 3 components needed to take on the incumbents: software, content and distribution. But the TV sector is about to fall. In software, the mobile operating systems are now good enough. In content: the big internet companies are all commissioning original programming and rapidly acquiring content rights. In distribution, Google’s Chromecast and Apple’s AirPlay disintermediate traditional channels. Alibaba, Apple, Google, Microsoft LG, Netflix, Nintendo, Roku, Sony, Samsung, LG, Nintendo Wearable technology Whether it’s the T-shirt that tracks your heartbeat or the bra that tells you to eat less, the value in wearable tech is all in the internet ecosystem that collects the data. That explains why Nike gave up on its FuelBand just as Amazon launched its Wearable Technology Store. Wearable tech is fast becoming a bolt-on accessory for the big internet ecosystems. Once- great electronics brands are being reduced to low margin subcontractors for the likes of Apple, Alibaba, Baidu, Google and Facebook. Amazon, Alibaba, Apple, Facebook, Google, Microsoft, Tencent Acer, Asus, Canon, GoPro, HTC, LG, Nintendo, Panasonic, Philips, Samsung, Sharp, Sony Robotics Consumer robots which care for the elderly or perform household chores will become more common. Google is throwing billions of dollars at robotics and artificial intelligence. Our guess is that it will launch a series of consumer and industrial robots running on a tweaked Android operating system. iRobot, Google, Honda, Rethink Robotics ABB, Fanuc, Kawasaki, Kuka Internet of Things The connected home of the future will have fridges, heating systems and washing machines that are controlled and monitored remotely via the internet. Home appliance makers should be worried. They do not have the ecosystems or the Big Data analytics to optimize performance and energy efficiency. Apple, Google Electrolux, Samsung, Whirlpool Automated cars Car makers are using less metal and more silicon. In-car entertainment and information systems that include music, navigation, social media, apps and other services may soon become the norm. Audi is reported to be developing such a system based on Android software while Apple has revealed some of the features of its CarPlay software. Ultimately Google is aiming for driverless cars which use artificial intelligence. Apple, Google BMW, Ford, General Motors, Mercedes Benz, VW Audi
- 10. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 10 Component makers Theme What’s happening? Our predictions Leaders Laggards Slaves to the ecosystem As industry profits move from hardware to software, component makers need to position themselves accordingly. Increasingly Apple, Google – and perhaps of Alibaba – will be the most sought after supply chains, rather than, say, Samsung. Apple, Google Most component makers 3D printing Until recently, 3D printing was used for prototyping. Today it is used to directly print component parts. The printing materials can be plastics, metals or ceramics. In 2013, the market for 3D printing worldwide grew from $2.2bn to $2.9bn, according to Wohlers Associates. 3D printing is not suited to mass production, but for small production runs it can often print parts that are stronger and cheaper than traditional moulding or casting processes. Component makers who fail to embrace 3D printing early on may find it hard to catch up later. 3D Systems, Stratasys, Voxeljet, Exone Too early to say Robotics As Chinese labor costs rise and industrial unrest grows, more Asian component makers will look to industrial robots to control costs. Hon Hai (Foxconn) leads the charge with its plan to roll out 1m Foxbots. Hon Hai Pegatron Software defined networking (SDN) “IP networking” technology is giving way to “software defined networking”. SDN is a new architecture for telecom networks in which the emphasis shifts from hardware to software. We are in the very early stages of the SDN technology cycle, but it could commoditize a number of components in the server, storage and networking equipment sector. Alibaba, Amazon, Apple, Citrix, Facebook, Google, Huawei, IBM, Red Hat, VMware Too early to say Flexible displays New display technologies will soon give us screens that have rigid curves built into them or that are bendable by the user. So far Samsung appears to be the clear leader, but others are catching up. Samsung LG Display, Universal Display Server interconnect cabling Higher data transfer speeds between servers increases the efficiency of a data network. Most servers are connected using cables with 12-24 fibers in which each fiber enables transfer speeds of 10Gbps. Intel has combined its silicon photonics knowledge with Corning’s optical fiber knowledge to develop MXC cables with 64 fibers which each carry data at speeds of 25 Gbps. This will increase data speeds. Corning, Intel Finisar, Mellanox Internet of Things (IoT) More and more everyday objects like cars, fridges and heating systems are getting connected to the internet. Makers of motion sensors and embedded processors and other critical IoT components will benefit. InvenSense, FreeScale
- 11. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 11 Software
- 12. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 12 SOFTWARE Trend Summary Here is a summary of our dominant themes for the Software and IT Services sectors over the next 12 months: Applications software Since February 2014, the application software sector saw the brunt of the technology sell-off, with some down 30%. But applications software has become the technology sector’s innovation engine. Going forward, expect a period of creative destruction where the sector rallies on a continued M&A boom. Nuance, Splunk, Qlik and Tableau are our favourites. Internet infrastructure software and the cloud A vicious price war in the cloud infrastructure market has just begun. Amazon may no longer remain the dominant force in cloud infrastructure. Google and Microsoft – possibly IBM – are likely to gain market share in 2014. Rackspace and Telecity may lose market share. Security software The move to the cloud increases cyber-security risk. At the same time, zero day exploits are rising, making traditional security products a liability. A new wave of artificial-intelligence-based security products – commonly referred to as unified threat management – is likely to sell particularly well over the next 12 months. Check Point Software, Trend Micro, FireEye and Fortinet offer the best earnings prospects, but only the first two are trading at sane valuations. Video game software Gaming is now a critical part of digital life, based on time spent. But earnings visibility for many video games developers is poor. Many, like King Digital, remain one-hit wonders. Others, like Activision Blizzard, are in transition from high margin console games business to the online equivalent. Safer, in our view, to invest in the emerging technology platforms: Facebook and Tencent. IT services Big Data and cyber-security are likely to be the two big revenue spinners for IT services firms over the next 12 months. Informatica is our preferred play on the first and the “unified threat management” companies mentioned above our preferred way to play the second. Longer term, the IT services sector risks becoming irrelevant as cloud services companies cut out the middle man and offer IT services directly via the cloud.
- 13. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 13 Application software Theme What’s happening? Our predictions Leaders Laggards Mobile-first, app-centric start-ups The next generation of multi-billion-dollar software companies is starting life today as mobile apps. Emerging categories include fitness tracking apps, sharing apps and payments. The sharing economy – where people rent out underused assets – will see most growth over the next 12 months. Examples include room-sharing apps like Airbnb or car sharing ones like Lyft and Uber. Airbnb, Didi (Tencent), Kuaidi (Alibaba), Lyft, ParkJockey, Square, Uber Amazon, Apple, Baidu, Facebook, Google, Tencent Big Data The bottleneck in the Big Data value chain is real-time analytics. Two types of analytics firms are emerging: business intelligence and data resellers. The new breed of business intelligence companies (e.g. Splunk) take in any kind of unstructured data and churn out real-time analysis. By contrast, the new data resellers try to corner the market for certain types of data. (e.g. Experian in credit) Acxiom, Experian, Equifax, Qlik, Splunk, Tableau Apple, Microsoft, Oracle, SAP Artificial intelligence (AI) Rapid advances in machine learning and natural language processing (NLP) are threatening the jobs of middle-class, educated professionals. Large sums will be invested in “cognitive computing” projects such as IBM’s supercomputer Watson. “AI” will become the “mother of all software” and those that own the leading AI platforms will have tremendous competitive advantage Google, IBM, Nuance, Verint Systems Cloud The success of Adobe’s “Creative Cloud” subscription model makes it more likely that software will move from a licensing model to a cloud-subscription model. During the transition to a cloud business model, many traditional software companies may be forced to issue profit warnings as, initially, revenues may fall. Citrix, Facebook, Google, NetSuite, Red Hat, Salesforce, VMware, Workday IBM, Microsoft, Oracle, SAP Computer aided design software Automation of more processes – 3D printing, robotics and AI – increase the importance of CAD software and product life cycle management (PLM) software. More industries will require CAD and PLM software. These products are complex and the established players will see their competitive position strengthened. Ansys, Autodesk, Dassault Systemes, PTC Software ecosystems Three industry shifts are making life uncomfortable for traditional software companies: the move to app platforms, to the cloud and to mobile. Large software groups, unable to innovate fast enough, are responding to these shifts by acquiring applications they are unable to develop themselves. The M&A boom will continue. Targets: small & medium sized application software companies Acquirers: Alibaba, Amazon, Apple, Baidu, Facebook, Google, Microsoft, IBM, Oracle, Tencent
- 14. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 14 Infrastructure software and the cloud Theme What’s happening? Our predictions Leaders Laggards Cloud infrastructure price wars In March 2014, Google Cloud started a price war, slashing the cost of its cloud storage to $0.026/GB, well below Amazon Web Services’ standard rate of $0.36/GB. Amazon and Google are both going for market share at the expense of profits. This may push smaller, more commercially minded rivals – like Rackspace – into losses. Amazon, Google, IBM, Microsoft BT, CenturyLink, Cisco, Dropbox, Fujitsu, Dell, HP, Oracle, Rackspace, Verizon, VMware, Software defined networks IP networking technology – the hardware standard for data networks – is being replaced by software defined networking (SDN). Networking hardware will be commoditized. Value will move to the software controller. SDN will speed up the transition to the cloud by making cloud services work faster and more efficiently. Amazon, Google, Salesforce and other cloud infrastructure providers may soon be able to programme data networks to enhance their web services. Amazon, Facebook, Google, IBM, Microsoft, Netflix, VMware Akamai, Cisco, F5 Networks Virtualization As IT infrastructure moves into the cloud, virtualization products act as the gateway. VMware, the market leader, is losing market share to big-pocketed latecomers like Microsoft, Google and Oracle. Citrix, VMware Microsoft, Oracle, Red Hat Open source OpenStack is the most popular open cloud computing standard. It competes with proprietary cloud platforms such as Amazon Web Services, Microsoft Azure, Google Cloud, Citrix CloudStack and VMware vCloud. With big names like Dell, HP, IBM, Oracle and Rackspace now using OpenStack, there is a risk that niche players like VMware and Citrix may be squeezed between the big proprietary players (Amazon and Google) on one side and OpenStack on the other. Amazon, Google Citrix, VMware, Microsoft, Rackspace Security concerns The NSA Prism scandal has raised security fears over US-hosted cloud services to a new level. Many companies are considering deferring a move to the cloud, especially to the public cloud – where Amazon, Google and Microsoft primarily operate. Cloud companies may lose billions in revenues, especially in the public cloud space. Cyber-security companies will benefit from the proliferation of these fears and should see a ballooning demand for their products, particularly in “unified threat management”. Check Point, FireEye, Fortinet, Nice Systems, Palo Alto, ProofPoint, Trend Verint Systems Internet of Things Clothes, fridges, cars and many other “things” will soon be connected to the internet, enabling the automated economy. Who will run the “control room” for the automated home, the driverless car and wearable technology? Apple and Google lead so far. Apple, Google Car manufacturers Home appliance manufacturers Electronics makers
- 15. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 15 Security software Theme What’s happening? Our predictions Leaders Laggards Zero day exploits There is a rise in zero day attacks (i.e. hacking of new vulnerabilities that the target has zero days to prepare for). Traditional security software does not address this risk. Threat management software, which contains complex algorithms to help contain targeted attacks (a.k.a. APTs), is becoming the new must-have security product. Check Point, FireEye, Fortinet, HP, IBM, Splunk, Trend Micro EMC, Symantec, Tibco Software Artificial intelligence Natural language processing (NLP) and artificial intelligence (AI) technologies can help cyber-analysts “deep scan” highly complex text, audio and video files more comprehensively. These “deep data exploration” techniques will soon become a vital part of the cyber-security sector. Companies with NLP and AI products will benefit. Apple, Facebook, IBM, Google, Microsoft, Twitter, Nuance, Verint Systems Alibaba, Baidu, Tencent Corporate awareness levels Target, a US retailer, suffered a cyber-attack in December 2013 in which 40m payment card numbers were stolen. This month, its CEO took full responsibility and resigned. Board awareness is rising and will translate soon into higher corporate spending on cyber- security products, benefitting most cyber- security stocks. Barracuda, Check Point, FireEye, Fortinet, Imperva, Palo Alto, Qualys, Trend Micro Qihoo 360, NQ Mobile, ProofPoint, Symantec Software ecosystems The big four enterprise software companies – IBM, SAP, Oracle and Microsoft – are busy building cloud software ecosystems. Their weakness is cyber-security. We see continued M&A in the sector with the big software houses strengthening their cyber- security capability, especially in network security and enterprise firewalls. Targets: Check Point, Fortinet, Palo Alto, Qualys, Proofpoint Acquirers: Apple, EMC, HP, IBM, Microsoft, SAP, Oracle, Salesforce Mobile device management (MDM) As employees access more corporate data from their smartphones and tablets, IT managers must manage data flows between more clouds, more operating systems and handle data in different formats. Blackberry was once the king of MDM. But managing multiple platforms is more difficult. The new leaders are private companies like MobileIron, Good Technology and AirWatch – recently acquired by VMware. Citrix, IBM, Trend Micro, MobileIron, Good Tech, AirWatch (VMware) Blackberry, Intel, Symantec NSA scandal Details of US intelligence agencies’ surveillance operations leaked by Edward Snowden have hit sales of US telecom equipment companies, like Cisco. An escalation of trade wars in the networking equipment market – and possibly cloud software – is likely. Alcatel-Lucent, Ericsson, Huawei, Lenovo Samsung, ZTE Cisco, Google, IBM, Juniper Networks Credit fraud Financial fraud is on the rise. Criminal gangs are targeting banks to access credit or loans on the back of stolen online identities. As online personal data balloons, credit checks will involve more complex Big Data algorithms. Niche credit profilers will benefit. Experian, Equifax
- 16. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 16 Video gaming software Theme What’s happening? Our predictions Leaders Laggards Home hub Measured by time spent, video games are the most important digital activity. And gamers often play using the TV screen. So technology companies, eager to enter the lucrative internet TV market, are using games consoles as a potential entry point. Microsoft and Sony already lead with their PS4 and Xbox consoles respectively. Nintendo’s Wii U has been an abject failure. In China, Alibaba and Huawei are copying this strategy. But Apple and Google are launching home automation software products controlled by their smartphones. Apple, Google, Microsoft, Sony Alibaba, Amazon, Baidu, Facebook, Huawei, NetEase, Nintendo, Tencent Cross- platform games Native apps offer a better user experience, but are expensive to maintain across multiple platforms. HTML5 technology allows developers to build web-based apps that run on any smart device using a standard web browser. But this is clumsy. Cross-platform platforms could become the new norm that allows games to run on iOS, Android, Windows, etc. In the West, Facebook leads the cross- platform games trend with their new AppLinks platform. In China it is Tencent. If cross- platform games take off, the implication is that games-based traffic – including lucrative user profile data – will flow through Facebook’s and Tencent’s ecosystem rather than Apple’s and Google’s. Facebook, Tencent Alibaba, Amazon, Apple, Baidu, Google, Microsoft, Sony Gaming consoles in China Just as the world shifts from expensive console games to cheaper online games, China is doing the reverse. China’s 14-year ban on games consoles was lifted in January 2014. But all foreign-created games will still be subject to regulatory review before release. Microsoft Xbox is expected to be the first games console made by a foreign company on sale in China by September 2014. Sony and Nintendo will likely follow. This could be the biggest disruption China’s gaming industry has ever seen. Microsoft, Sony, Nintendo Too early to say Artificial intelligence Facebook’s $2bn acquisition of Oculus, heralds a new era in virtual reality gaming. Artificial intelligence technology will transform the next generation of gaming platforms. Facebook’s Oculus headset and Google Glass look like early leaders. Facebook, Google Apple, Alibaba, Amazon, Apple, Baidu, Microsoft, Nintendo, Sony, Tencent
- 17. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 17 IT Services Theme What’s happening? Our predictions Leaders Laggards Distributed computing Traditional relational databases have typically coped with expanding data flows by scaling up vertically (i.e. by adding more CPUs or more memory to the database). But that approach has limits. It is more efficient to scale out horizontally (by adding more nodes to the database network). Distributed computing is associated with two technology standards called NoSQL and Hadoop (which is open source). Amazon, Yahoo and Google invented these technologies. IBM, SAP, Oracle and Microsoft are belatedly adopting them. The transition will be painful for their legacy database units. Informatica, Red Hat IBM, Oracle, SAP, Microsoft Cloud business model Businesses are cutting IT costs by renting IT infrastructure, platforms, and applications in the cloud. On-premise IT installations are going out of fashion. This threatens companies that sell hardware or implement large-scale IT integration projects. ERP database systems are likely to be the first to fall. IBM, SAP and Oracle are embracing the cloud (by acquisition), but cloud revenues are unlikely to increase as fast as legacy ERP system sales fall, resulting in profit warnings. Amazon, EMC, Google, Workday, Red Hat, NetSuite, Microsoft, Salesforce, Cornerstone IBM, Oracle, SAP Big Data Across every industry, every CEO knows that tomorrow’s most successful companies will be those who make best use of Big Data to increase sales and reduce costs. So demand for Big Data products will rise. IT services companies are exposed. Internet companies like Amazon and Google – who currently use their Big Data knowhow internally – may soon offer stand-alone Big Data product offerings. Alibaba, Baidu, Amazon, IBM, Google, Facebook, Twitter, Splunk, Tableau Accenture, Atos, Cap Gemini, Dell, HP, Infosys, Microsoft, Oracle, SAP, TCS Mobile device management (MDM) The scale of the BYOD (bring your own device) trend has made MDM a bottleneck in IT management. As employees access more corporate data from their smartphones and tablets, IT managers must manage data flows between more clouds, more operating systems and handle data in different formats. Blackberry used to be the leader in MDM. Today the leaders are MobileIron, Good Technology and AirWatch (acquired by VMware). It is possible that a new group of companies – called cross platform platforms – will emerge to combat the MDM problem. Facebook’s AppLinks is an example. Citrix, IBM, Trend Micro, MobileIron, Good Tech, AirWatch (VMware) Microsoft , Oracle, SAP Digital marketing Increasingly, it is the marketing executives of multinationals rather than IT executives that are becoming the key accounts of IT services companies. IT services companies risk being disintermediated by a host of new ad-tech companies that are intent on cutting out the middleman. Acxiom, Criteo, Rocket Fuel, Rubicon Project Accenture, Atos, Cap Gemini, Tieto
- 18. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 18 Internet & Media
- 19. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 19 INTERNET & MEDIA Trend Summary Here is a summary of our dominant themes for the Internet and Media sectors over the next 12 months: E-commerce E-commerce is going mobile. Success will come to those who dominate the four pillars of mobile: messaging, maps, mobile payments and mobile operating systems. Google is the clear leader. Apple, Amazon and Alibaba are close behind. Niche e-commerce plays like ASOS had better beware. Social media The current social media fad is “messaging apps”. The next one could be the “sharing economy” or “crowd-funding” or crypto-currencies”. As with messaging, the big social networks will have to go on an acquisition spree. Smart investors will put their money in sharing apps, crowd-funding sites and crypto-currencies. Many of these companies, such as Uber, are unlisted. Advertising The latest ad-tech invention is the cross-media exchange, a one-stop-shop for buying ads across multiple media, from the web to mobile to TV. Such an automated exchange does not exist yet, but everyone from AOL to Facebook to WPP is in the race to develop one. Mobile and TV are the growth areas for ad-tech. Acxiom, Criteo, Rocket Fuel and WPP are our favourite long term plays. Film, television and music Internet TV is the game changer for this sector. Tech is fighting content owners. The tech giants are trying to acquire more content. Content owners are trying to develop their own software platforms. But what happens to content prices if the tech sector wins? If a single internet TV platform dominates, content prices will fall. If several competing TV platforms emerge, content prices will be bid up. Time Warner and ITV should benefit. Inside, we also explain why the outlook for Netflix and Pandora media is negative. Publishing The publishing sector suffers from a total lack of leadership in response to the disruptive threats they are facing. Yet market sentiment towards this sector appears to be looking more optimistic. Nonetheless, we do not see any reason to invest without a clear growth catalyst. For now, there isn’t one.
- 20. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 20 E-commerce Theme What’s happening? Our predictions Leaders Laggards Mobile payments Mobile payment apps own the customer billing relationship, so they will become the gateway to mobile commerce. There is no clear winner yet. Cloud-based solutions will probably displace Near Field Communications (NFC) as the global standard for contactless payments. Alibaba, Square, Stripe, Monitise Amazon, Apple, Facebook, Google, Groupon, eBay, Tencent, VeriFone MasterCard, Visa OS wars Operating systems (and web browsers) have control over customer profile data, putting them in the driving seat for demanding a bigger slice of digital advertising revenues. Expect several new OS launches, especially from China. Some (e.g. Amazon) will build on Android. Others (e.g. Samsung’s Tizen) will build their own. Apple, Google Alibaba, Amazon, Baidu, Facebook, Jolla, Microsoft, Mozilla, Qihoo, Samsung, Twitter, Tencent Maps Knowing where someone is and where they want to go is something many businesses will pay for handsomely. Google is the market leader in mapping software. Expect Nokia’s Here and TomTom to become bid targets. Apple, Baidu, Google, Nokia, TomTom Alibaba, Amazon, eBay, Facebook, Rakuten, Tencent Samsung, Yahoo Internet of Things Clothes, fridges, watches, cars and many other “things” will soon be connected to the internet, enabling the automated economy. Who will run the “control room” for the automated home, the driverless car and wearable technology? Apple and Google lead so far. Apple, Google Car manufacturers Home appliance manufacturers Electronics makers Net neutrality Under net neutrality rules, US internet companies have underpaid the true cost of internet bandwidth for the last 25 years. The FCC is considering changing net neutrality rules in Q3 2014. If the FCC allows telcos to charge more for “fast lane access”, heavy bandwidth users may face much higher charges. European and Asian regulators may copy, allowing telcos to charge more. AT&T, Comcast, Verizon (maybe Asian & European telcos too) Netflix, Google, Facebook, Tencent Tax avoidance Internet companies tend to pay less local taxes than their peers in other industries. The political will to address this anomaly is strengthening. The OECD is making good progress on this. Effective tax rates for many internet companies are likely to rise in 2014/15. Alibaba, Amazon, Apple, eBay, Google, Facebook, Rakuten, Tencent
- 21. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 21 Social Media Theme What’s happening? Our predictions Leaders Laggards Messaging Messaging has long been the growth driver for social media businesses. But Facebook’s $19bn acquisition of WhatsApp highlighted the investor’s dilemma: WhatsApp’s success was due to its “No ads, no games, no gimmicks” motto. Translated: “no revenue potential”. Yet Facebook requires profits. If success is measured by size of user base, Tencent’s WeChat and Facebook’s WhatsApp are leaders. But if profitability is the measure, Naver’s Line and Daum Kakao win. Line’s profits come from games and sponsored “stickers”. The big question is whether the Asian messaging model will work elsewhere. Naver’s Line, Daum Kakao, Blackberry BBM, Google+, Apple’s Facetime, Rakuten’s Viber, Microsoft Skype, Alibaba Tango, Weibo, Snapchat, Facebook WhatsApp Tencent WeChat, Twitter Sharing economy People share underused assets like bedrooms and cars by renting them out on the internet. In this model, everyone wins: I help you; you help me; we help others; and the sharing app makes a profit. The most valuable “sharing apps” are Airbnb (for rented accommodation) and Lyft or Uber (for car sharing). The big losers in this case are hotel chains and taxi companies. Airbnb, Uber, Lyft Tencent (Didi Dache) Alibaba (Kuaidi Dache) Amazon, Baidu, Apple, Google, Facebook, Twitter Crowd- funding Crowd-funding and peer-to-peer loans offer traditionally uncreditworthy businesses alternative sources of finance. Growth potential for this market is almost limitless as it expands into corporate loans, mortgages and credit cards. Crowdcube, Indiegogo, Lending Club, Seedrs, Wonga Banks, credit card and insurance companies Crypto- currencies Despite legality issues, crypto-currencies look set to become a serious investment theme. More institutions are starting to accept Bitcoin as a method of payment. Social networks are developing their own virtual currencies as well as investing in mobile payments technology. But crypto- currencies present a threat. Bitcoin, Litecoin, Namecoin, Peercoin, Ripple, WorldCoin, Anoncoin MasterCard, Visa, Apple, Alibaba, Amazon, eBay, Facebook, Google, Monitise, Tencent Data privacy Ever since Snapchat’s erasable messages were invented, social networks have differentiated themselves by offering better privacy-protection features. Facebook’s “anonymous login” button is an example. But, in May 2014, data privacy became a serious legal issue when the EU courts sanctioned the “right to be forgotten”. As a result, social networks may see costs rise as they struggle to comply with EU laws. Snapchat Apple, Google, Facebook, Twitter, Microsoft, LinkedIn Big Data The focus of user profiles is shifting from content (i.e. our messages and photos) to metadata (i.e. data about the content). Algorithms can analyse this metadata to reveal patterns and correlations, making it more valuable than content itself. This metadata is held by two types of companies: the industry specific data collectors (e.g. Experian for credit profiles) and the internet ecosystems (e.g. Amazon or Google) that monitor and analyse in real-time what we do, say and feel online. Alibaba, Apple, Facebook, Google, Tencent, Twitter Baidu, Microsoft, Sina, Weibo, Yahoo
- 22. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 22 Advertising Theme What’s happening? Our predictions Leaders Laggards Cross- media ad- tech Until recently, marketers had to go to different ad exchanges to buy ads on different media – TV, web, social media and mobile. They would use one system to buy online display ads, another for digital video ads and a third for TV, etc. A new wave of ad-tech companies will soon give marketers a “one-stop shop” for buying ads across television, the web, mobile and social media. AOL aims to be the first of this new breed of cross-media ad exchanges. AOL, Acxiom, The Rubicon Project Apple, Facebook, Google, Microsoft, Twitter Cross- platform ad-tech Digital ad exchanges like Google’s DoubleClick, Facebook, Twitter and Yahoo use real-time algorithms to sell digital ad space at the highest price, with customers bidding for eyeballs on new sites. But their objective is to maximize profits on their own platform. By contrast, a cross-platform ad-tech firm, like Criteo or Rocket Fuel, does the same thing; only its objective is to maximize value for the customer. Their bidding technology is based on artificial intelligence techniques that produce a result within 200 milliseconds. Criteo, Rocket Fuel, The Rubicon Project, WPP Omnicom, Havas, Interpublic, JC Decaux, Publicis, Telefonica Axonix Mobile ad-tech A few years ago Apple, Google, Facebook had little idea how to sell ads on mobile. The future of mobile ad-tech firms like Millennial Media looked bright. But that’s all changed. In 2013, Google and Facebook accounted for two thirds of the $18bn global mobile ad market, according to eMarketer. Niche mobile ad tech firms will find life tough in 2014. Google (AdMob), Apple (iAd), Twitter (MoPub), Facebook (Audience Network) InMobi, Rubicon Project, Millennial Media, Yelp Internet TV TV advertising still accounts for over 33% of the $550bn global advertising market. It remains the last traditional medium able to stand up to the digital ad titans. Every tech giant has its eyes on the digital TV market. If Apple or Google release an internet TV product that catches on fast, the biggest losers will be the traditional advertising giants. Alibaba, Apple, Facebook, Google, Microsoft, Roku, Sony Dentsu, Havas, Interpublic, Omnicom, Publicis, WPP, Blinkx, Tremor Video Ambient commerce The Internet of Things is creating a world full of sensors, data and algorithms that can anticipate consumer needs. For example, when a customer enters a shop, she can be offered a range of products based on her past spending patterns and profile. Clearly consumers have to trust the brand providing the ambient commerce service. But once a consumer agrees to set up a profile, the process can be automated. The gateway into ambient commerce is likely to be the mobile operating system on smartphones. Apple, Google Amazon, Alibaba, Microsoft, Tencent
- 23. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 23 Music, film & television Theme What’s happening? Our predictions Leaders Laggards Internet TV software The great and the good of tech have not managed to disrupt the TV industry yet. The tech giants have too little by way of content rights. The content owners are unable to develop their own software platforms. Tech will likely win. The outcome for content owners will depend on the extent of competition in the market for internet TV software. If a single TV operating system (say, Apple) dominates internet TV (in the way that iTunes has dominated digital music downloads since 2001), content prices may fall. If, however, the emerging market for internet TV software is highly competitive, the price of content is likely to be bid up, at least for the first few years. The latter is more likely. If content prices bid up, winners will be: BSkyB, CBS, Comcast, Disney, Discovery, Lions Gate, 21st Century Fox, Time Warner, Viacom, Zee Streaming services For music and video, the download model is being replaced by streaming services. Apple pioneered the former, but Netflix pioneered the latter. Tech companies have been buying up streaming services. For content owners, streaming services tend to be less prone to piracy than downloads. For streaming services, content rights tend to be their largest cost. But streaming services are also bandwidth hungry. With the FCC reviewing net neutrality rules, they may also see bandwidth costs rise substantially, making many streaming services unviable. Google, Hulu, Netflix, Spotify, Pandora Media, Vevo, Vimeo Second screens New wireless technologies – like Google’s Chromecast or Apple’s iBeacon – are turning smartphones and tablets into remote control devices for the TV. These technologies may later be used to convert the TV into a control hub for the automated home. By replacing the TV remote control device with a second screen (on a smartphone or tablet), competitive power is shifting from broadcasters to the owners of that second screen and the operating system that runs it. Apple and Google are the frontrunners. Apple, Google, Roku, BSkyB, Comcast Alibaba, Amazon, Baidu, Cisco, Ericsson, Intel, Microsoft, LG Electronics, Netflix, Pace, Samsung, Sony, TiVo, Tencent In-house programming Content owners are refusing to license their best content – live sports or hit TV series – to the likes of Apple or Netflix for fear of losing control. So the tech giants are commissioning their own in-house programming. Netflix’s $100m investment in House of Cards was the first. Many tech giants are following its lead. Film studios will benefit from the renewed demand for high quality content. China’s Alibaba and Tencent are also in the midst of a content-buying spree. Netflix, CBS, Comcast, Disney, Discovery, Lions Gate, 21st Century Fox, Sony, Time Warner, Viacom Alibaba, Amazon, AOL, Apple, Baidu, Microsoft, Samsung, Tencent, Yahoo
- 24. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 24 Publishing Theme What’s happening? Our predictions Leaders Laggards Native ads When newspapers were profitable, they could afford to keep news separate from ads. Readers always knew the difference. But as advertising and circulation revenues fall, the line between editorial and advertising has become blurred. Newspapers – even prestigious brands such as the Wall Street Journal – are selling native ads online. These refer to articles (and videos) that appear to be created by independent journalists, but are instead simply adverts. The trend towards native ads originally took off because marketers found that consumers were ignoring standard digital banner ads, especially on mobile. The big beneficiaries will be the technology companies that create such content, (e.g. Demand Media) and the social media sites that display it, (e.g. Facebook). Newspapers who lend their credibility to such native ads may find this strategy backfires on them as customers get confused and angry over what is real news and what is advertising. Demand Media, Facebook DMGT, Gannett, News Corp, New York Times, Pearson, Reed Elsevier, SCMP, Trinity Mirror, Wolters Kluwer The Andreesson Horowitz theory In a seminal article entitled “The future of the news business”, Marc Andreesson argues that over the next 20 years, the news industry will grow 10x to 100x from where it is today. He argues that whilst business models and leadership will play a part, the real growth driver is exponentially higher digital readership figures. Whilst the news industry will inevitably grow, not all traditional publishers will ride that wave. Two beneficiaries will emerge: First, the newspapers that with innovative online strategies, like DMGT. Second, the information businesses like S&P who corner the data for a certain market and charge high subscriptions for access. DMGT, McGraw-Hill, Pearson Gannett, News Corp, New York Times, Reed Elsevier, SCMP, Trinity Mirror, Wolters Kluwer Books Book publishers have lost several battles against the tech sector. First, they were found guilty of colluding with Apple to raise the book prices. Second, they were forced by Amazon to lower book prices and punished for non-compliance. Third, Google’s digital books library project seems to be blatantly infringing copyright. Like lambs to the slaughter, book publishers appear powerless in the face of a relentless assault on their profitability by the tech sector. No book publisher has a viable strategy to combat the threats they face. Barring any regulatory changes in their favor, the future for book publishers remains bleak for now. Amazon, Google Hachette (Lagardere), HarperCollins (News Corp), Macmillan (Holtzbrinck), Simon & Schuster (CBS), Penguin (Pearson) Massive open online courses MOOCs offers students free college-level classes on the internet. Universities and educational book publishers will need to devise online sales models. Coursera, edX, Open2Study, SoundviewPro Pearson
- 25. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 25 Telecoms
- 26. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 26 TELECOMS Trend Summary Here is a summary of our dominant themes for the Telecom Services sector over the next 12 months: Telecom operators About $386bn will be wiped off mobile operator revenues globally by 2018 as more customers use voice calls and messaging services provided for free over data networks, according to Ovum. To stay relevant, telecom operators need to invest in emerging technology cycles such as Software Defined Networks, Big Data and the Internet of Things. To do that, they need to transform themselves into software companies. So far, the only big step they have taken is to open data centres. Their future is tied to over-the-top services such as internet TV, mobile payments, Big Data and cloud services. But, as with many technology cycles before them, they are likely to mess up. The one bright spot for telecom operators is the regulatory U-turn performed by America’s FCC on net neutrality. If US broadband service providers are allowed to sell “fast lane internet access” to internet companies like Netflix, telecom operators like Comcast, AT&T and Verizon could get a significant earnings boost (in September) that could ripple around the world. Elsewhere, our favourite plays are northern Europe and India. Deutsche Telekom, Orange and Telefonica should benefit from a Juncker- led European Commission which is more likely to be protectionist against US internet companies. Also, Bharti Airtel, Idea Cellular and Tata Comms should benefit from a more business-friendly political leader in India who is likely to see votes in a booming telecom sector. Cable & satellite operators Both cable and satellite operators face disruptive threats: cable from internet TV and satellite from smaller nimbler satellite operators like Google’s Skybox. Within the next year, Apple, Google and others are likely to launch a credible internet TV platform that finally shifts pay TV customers en masse from broadcast viewing to narrowcasting. In order to combat this threat, the pay TV operators are consolidating. What they should be doing is developing their own in-house internet TV software platforms to compete with Apple, and Google. The only winners (in the medium term) will be content owners. A new wave of efficient satellite technology is likely to disrupt the commercial satellite imaging sector, where the market leaders – DigitalGlobe and Airbus – may lose market share from 2016. A few years later it could be the communications and broadcasting satellite operators – like Eutelsat, Inmarsat and SES – whose models start to look obsolete. They can avoid too much carnage later on by embracing the “Skybox” business model now. But that will involve a root and branch restructuring of their supply chain.
- 27. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 27 Telecom operators Theme What’s happening? Our predictions Leaders Laggards Net neutrality Under net neutrality rules, US internet companies have underpaid the true cost of internet bandwidth for the last 25 years. The FCC is considering changing net neutrality rules in Q3 2014. If the FCC allows telcos to charge more for “fast lane access”, heavy bandwidth users may face much higher charges. European and Asian regulators may copy, allowing telcos to charge more. AT&T, Comcast, Verizon (later this may spread to Asian & European telcos too) Netflix, Google, Facebook, Tencent Software defined networks (SDNs) SDN is a new architecture for data networks in which the emphasis shifts from hardware to software. It will be hugely disruptive because it fundamentally changes who controls the telecom network. Today SDN accounts for less than 1% of the $68bn global network equipment market. Telcos are evaluating SDN technology carefully: it could enhance network services whilst simultaneously lowering costs. But who benefits largely depends on whether or not regulators will force telcos to open up their SDNs to third parties like Netflix or Google who can then progamme them directly. Too early to say Internet of Things (IOT) The automated home, connected cars and wearable tech: all are examples of how “things” will be connected to the internet in order to make our lives easier. Operators have an opportunity not just to make money from carrying machine-to-machine (M2M) traffic but by creating a set of cloud- based enterprise software services and data centers built around the IOT. AT&T, NTT, KT, CenturyLink, China Mobile, KPN, SK Telecom, Telefonica, Verizon, Vodafone Big Data The two bottlenecks in the Big Data value chain are within “analytics” and “security”. If telcos are to avoid turning into dumb pipes, they need to invest heavily into analytics software. So far that’s not happening. Splunk, Google, Apple, IBM Telecom operators Mobile payments Operators failed to profit from the first round of the mobile internet. Many see mobile payments as their second chance to ride the mobile commerce wave. Operators are grouping together regionally (e.g. ISIS in the US and Weve in the UK). But they are competing with more nimble technology companies and are losing. Apple, Alibaba, eBay, Google, Square, Tencent Most telecom operators Data centers Telecom operators are investing heavily into the data center market, providing enterprise cloud services that compete with market leaders Rackspace and Telecity. Google and Amazon have already started a price war in the cloud infrastructure market. Margins are likely to be squeezed. Some telcos may be forced to exit. Amazon, Equinix, Microsoft, Google, IBM, Rackspace, Telecity BT, CenturyLink, China Telecom, Deutsche Telekom, Orange, Telefonica, Verizon
- 28. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 28 Cable & satellite operators Theme What’s happening? Our predictions Leaders Laggards Internet TV A successful internet TV platform requires software, content and distribution. The missing bit within most cable ecosystems is software. The missing bit for most tech companies is content. Content rights can be acquired. But without an in-house software platform, the game is over for the pay TV companies. Over the next year we expect Apple or Google to launch another wave of internet TV products. Pay TV investors beware. Alibaba, Amazon, Apple, Google, Roku BSkyB, Comcast, Cablevision, DirecTV, Time Warner Cable Second screens New wireless technologies – like Google’s Chromecast or Apple’s iBeacon – are turning smartphones and tablets into remote control devices for the TV. These technologies may later be used to convert the TV into a control hub for the automated home. By replacing the TV remote control device with a second screen (on a smartphone or tablet), competitive power is shifting from broadcasters to the owners of that second screen and the operating system that runs it. Apple and Google are the frontrunners. Apple, Google, Roku BSkyB, Comcast, Cablevision, DirecTV, Time Warner Cable Satellite technology A new generation of satellite operators – like Google’s Skybox – is completely changing the economics of space imagery. The Skybox satellite design is much smaller, nimbler and cheaper than current designs. The immediate threat from this new compact satellite technology is to commercial imaging businesses like Airbus’s space division and DigitalGlobe. But soon even the big communications satellite companies will be forced to rethink their pricing and supply chain in order to stay relevant. Google Airbus, DigitalGlobe, Eutelsat, Inmarsat, SES Net neutrality Under net neutrality rules, US internet companies have underpaid the true cost of internet bandwidth for the last 25 years. The FCC is considering changing net neutrality rules in Q3 2014. If the FCC allows ISPs to charge more for “fast lane access”, heavy bandwidth users may face much higher charges. Cable operators will be able to generate a new revenue stream. BSkyB, Comcast, Time Warner Cable, Cablevision Netflix, Google, Facebook, Tencent In-house programming TV networks are refusing to license their best content – live sports or hit TV series – to the likes of Apple or Netflix for fear of losing control of the customer. So the tech giants are commissioning their own in- house programming. Netflix’s $100m investment in House of Cards was the first. Many tech giants are following its lead. Film studios should benefit from the renewed demand for high quality content. China’s Alibaba and Tencent are also in the midst of a content-buying spree. BSkyB, CBS, Comcast, Disney, 21st Century Fox, Viacom, Zee Alibaba, Amazon, AOL, Apple, Baidu, Microsoft, Samsung, Tencent, Yahoo
- 29. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 29 About us Our research service CM Research provides a subscription research service covering the global technology, media and telecom (TMT) industries. We identify the big technology trends and then delve deep into them. Our focus is on disruptive technologies. How will they unfold? Which industries will be impacted? And who will be the ultimate winners and losers? Our technology research is: Independent Thematic Global Our clients We help our clients to see the big picture trends and highlight companies that might be impacted by them across the world. Investor clients For our investor clients, we convert big picture trends into global investment themes, highlighting local stocks that might be impacted. We help CIOs formulate a TMT investment strategy that is global, thematic, timely and coherent. We help TMT specialists spot emerging technology trends and disruptive threats early. Corporate clients For our corporate clients, we provide industry analysis and market intelligence, predicting how technology markets will evolve and which business models will win. Our aim is to help CEOs and Strategy Directors stay one step ahead of the technology trends that are shaping their industry. “We help Chief Investment Officers and Chief Executive Officers predict the future.”
- 30. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 30 Our 2015 themes These are the main technology investment themes we will be researching over the next 12 months. Social - Crowd funding - Virtual currencies - Sharing economy - Music, video, games Cloud - Enterprise software - Internet of things - Automated home - Cyber security Mobile - operating systems - maps - mobile payments - messaging Big Data - Artificial intelligence - Ad-tech - Software analytics - Wearable tech Ecosystems - Ecommerce - Enterprise software - Automated home - Mobile internet Internet of Things - Automated home - Artificial intelligence - Ambient commerce - Cyber security Adv. Manufacturing - 3D printing - Artificial intelligence - Robotics - Driverless cars Software Defined Networks - Internet of things - M2M - Cost reduction Wearable Tech - Google Glass - Smart watches - Med-tech - Internet of Things Internet TV - Video streaming platform - Second/third screens - 16k / flexible screens - Ad-tech China - Alibaba IPO - Telecom equip trade wars - Variable Interest Entities - Accounting risk Regulation - Net neutrality - Data privacy - Patent litigation - Anti-competition law
- 31. Global Trend Forecast:Technology, Media and Telecoms 2014/15 16 July 2014 www.researchcm.com 31 About CM Research CM Research is an independent research provider with a blue chip list of institutional clients. We analyse emerging trends in the technology, media and telecom sectors and develop them into global investment themes, highlighting the winners and losers. At a time when many of our competitors have had their reputations mired by conflicts of interest, we fiercely guard our independence. Our business model is based on independence, exclusivity and experience. CM Research is a member of the European Association of Independent Research Providers (EuroIRP). CM Research is authorised and regulated by the Financial Conduct Authority (FRN: 579360). 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