Having closed out on another year, it is time to pull out the old crystal ball and try to figure out what the coming 12 months will look like. Let’s first take a look at the dominant platforms and how they may fare over the next year; once we’ve done so, we’ll investigate the impact these have on the mobile world and living room world (with a small aside on video games); and finally, we’ll look at how investments in those markets might be affected by all those changes.
Windows 8 integration strategy will fail: The first big news of the 2013 tech year will be the failure of Microsoft’s strategy to merge PC, tablets, and mobile devices on top of a single platform. While the idea is valid and most companies, including Apple and Google, will evolve toward similar strategy, the approach will fail to move the needle for Microsoft, which will continue to see its efforts to be heard in the mobile and tablet market thwarted by Apple’s iOS protection halo, and Google’s free OS message.
Rise of the contextual OS: While Microsoft’s strategy will fail but many of its innovations will make their way into other platforms. Google has already started incorporating the concept Microsoft pushed forth with its Live Tiles, bringing information closer to the first screen users see through Google Now. Google Now has added contextual elements based on local sensors, such as GPS data and traffic information. Expect those components to make their way through most operating systems over the next year, with Apple starting to incorporate those elements in iOS 7 and OSX 10.9.
Merging operating systems: Once again, Microsoft has taken the lead on the approach here but will not get the credit for doing so. By moving to a single core operating system, platforms make it easier for developers to develop for their whole ecosystem instead of a small section of it. Expect Apple to introduce more components showing integration across iOS and OSX.
Closer cloud embrace: As the battle across multiple screens expands, each companies will continue to put heavier focus on cloud support, with synchronization between all devices remaining one of the more complex and least talked about investment each company is making in their respective platform. Microsoft will more heavily push its SmartGlass technology as a key advantage of the platform and both Apple and Google will introduce similar types of technologies in their respective platforms: for Apple, this will continue on the path of Airplay and Google will introduce something new on the back of DLNA. By end of year, it will be common place to use one device such as a smartphone or tablet to control another one such as a television or computer, with different but complementary experiments on each.
While 2013 will not see a major iPhone release (this is an in-between year for Apple, which will probably release the iPhone 5s or some similarly named moderate upgrade to their existing device, which will not introduce too many features but will still sell better than any previous iPhone model)
Amazon, Microsoft, Google, will all introduce branded mobile phones: While Google has been pursuing a strategy of offering their Nexus line through partners (HTC, Samsung, and LG have all produced phones in the Nexus line), the company will leverage its acquisition of Motorola to produce its first fully in-sourced mobile device. In a similar fashion, Microsoft will introduce a smartphone to complete the Surface line (possibly under the same moniker) and displaying deep integration with the new Xbox and other Windows features. Not to be left out, Amazon may introduce an inexpensive Kindle phone, priced a between $0 and $99 with carrier contract. One of the possible innovations it will bring to the market could include a cut-rate price on service, possibly through an MVNO partnership with a carrier.
A resurgent T-mobile: With the failed acquisition from AT&T now behind it, Deutsche Telecom seems to be putting new wind in T-mobile’s sails, investing in the company to continue battling as the value provider in the market. As the company completes its acquisitions of Metro PCS, it will also continue a massive upgrade to bring its network up to date. Along the way, many in the telecom industry will look at T-mobile’s move to drop carrier subsidies on all phones it carries, bringing greater transparency in the pricing of mobile devices and opening the door for the company to support a greater number of new phones (yes, it will also get the iPhone this year).
New positioning for Sprint: Another reinvigorated player in the mobile telecom market will be Sprint, which is being acquired by Softbank. Masayoshi Son, Softbank’s CEO is an aggressive player in Japan and will bring new life to the market, first through the acquisition and integration of Clearwire into the Sprint brand and later through the introduction of new service plans. The net result is that the American mobile communication market will get substantially more competitive, with Sprint and T-mobile re-igniting competitive pressures and forcing Verizon and AT&T to get involved.
4G mobile device speeds will become the new standard: Along the way, this year will see the growth of fourth generation telecom networks (branded as either 4G, LTE, WiMax or HSPA+). The devices offer substantially faster data speed than previous technologies, often matching what consumers have come to expect from WiFi signals. Expect the carriers to each provide heavy emphasis on the size of their respective 4G networks. As competition move to that end, 3G will become the low-cost option and other networks will be slowly phased out throughout the year.
Cross-channel and cross-device marketing will become essential: On the marketing end, the ability to target ads across multiple device types (not just iPhones but any smartphones, as well as tablets, TV screens, and computers) will be a subject of much discussion as advertisers and marketers will be looking for solution providing end-to-end visibility into analytics across all channels (though mobile will be an emergent one with large brands switching substantial portions of their marketing budgets to tablets and smartphones).
Nokia abandons the mobile business: The biggest shocker (and what I suspect will be my most controversial prediction), though, will be the departure of Nokia from the phone business as the company sells its mobile operation and infrastructure divisions to Huawei in order to focus on software and services. With the company’s bet on Windows 8 having failed in the marketplace, it will see Microsoft and Huawei competing for the mobile device division and will eventually sell its smartphone group to Microsoft and the rest of its telecom interests to Huawei.
While 2012 was the year of mobile, 2013 is going to be the year of the living room, with tablets, TV screens, and e-readers becoming a big part of the new battlefield.
New TV screens from Apple: Rumors of an Apple TV have been rampant for years now and 2013 will be the year the company finally extends its offering into the living room. As I predicted earlier, the company will unveil a 50-60” line of TVs in the $1,999-2,999 price range. I suspect the new offering will run on iOS and include distribution of movies and TV shows through iTunes as well as a series of subscription programs to certain TV channels.
Netflix will see explosive growth: Netflix’s heavy investment in content in 2012 will pay off as it sees substantially customer growth in both the US and internationally. The company will see several million customers rush to get access to some of its exclusive streaming content. However, the DVD side of its business will continue degrading, furthering the company’s transition to streaming only.
Amazon gets more aggressive on TV: The spoiler in many fights, Amazon will continue its aggressive move to become the only stop for any online purchase with a renewed focus on the living room. 2013 will mark substantial investments in original content by the company, putting it in a head-to-head fight with Netflix. The company will also start evolving its prime membership program to offer streaming only options, or allow customers to trade slower shipping on physical goods in exchange for coupons to stream online content.
Amazon will start offering Kindle e-reader for free: Another move that will solidify Amazon’s hold into households will be further drops in price on its Kindle e-reader product line, which will have a free-with-subscription magazine or newspaper offering in 2013. To Amazon, the devices are just delivery channels for more content and the e-reader push towards lower and lower price will allow the company to throw e-readers in with the delivery of a book or a large enough commitment to a content subscription.
Google pushes new TV offering, Google glasses: While it has recently sold its Motorola’s TV set top division, Google will try to go after the living room through its GoogleTV offering, based on the Android operating system. However, the approach will be seen as overly complex and Google will still be a marginal player by the end of the year.
Connected TV applications get real: Samsung, Panasonic, and Visio have all been experimenting for a few years with connected TV applications but those efforts have largely been hobbies to date. In 2013, we will see them trying (and failing) to establish platforms for distributing content into the living room via connected TV sets. The main challenge they will encounter is the availability of content and they will work on striking partnership with the different content aggregators and even directly with some studios to get exclusivity.
Roku, Boxee either fold or get acquired: The smaller players in the set top market will continue to fight an up-hill battle for acceptance in the living room but their effort in terms of providing a complete solution will pan out as larger companies will look for strategic acquisition to add internet capabilities to TV set or other existing consumer electronic device.
Microsoft, Sony, Nintendo delve deeper into content: The big gaming stations already in the living, along with the next generation of such devices, will morph to go much beyond gaming and offer end-to-end solution to content distribution in the living room. This could take the form of integration with cable boxes and satellite TV boxes, providing one-stop-access for all the needs of a large TV screen.
Last gaming stations from Microsoft, Sony: The biggest news this year will be the introduction of the PS4 from Sony and the Xbox 720 from Microsoft. However, much like the Wii-U, those new consoles will come out to much hype and see lower than stellar sales numbers as consumers increasingly shift to mobile and tablet offerings. As a result, much will be said about this generation of gaming stations being the end of the line for the concept.
Alternative game boxes see indie developer interest: Last year, the OUYA box raised a large amount of cash on Kickstarter; this year, it will deliver the first in a series of alternative game stations to hit the market in 2013. Meanwhile, Valve, the makers of Steam, have confirmed that they, too, will be entering the hardware business with the Steam box, bringing its popular online store approach to the living and possibly expanding into on-demand TV and movie delivery. Another intriguing development is the Oculus Rift, a virtual reality headset that may finally deliver on the promise of fully immersive gaming. All those developments will translate into strong interest from independent developers who may be looking for alternatives to the big three platforms in the living room.
End of the traditional game controller: Nintendo has already shown that a new form factor (basically a tablet) should be part of the next generation of consoles. Microsoft has done away with the controller by introducing the Kinect a couple of years ago. All signs point to radical changes in the way games will be controlled in the next generation of boxes. The traditional model of joystick and a few buttons will be replaced by new form factors that appeal to both core gamers and the wider public.
Tablet development will see substantial growth: If 2012 was the year for mobile video games, 2013 will be the year of tablet-based games, with many company targeting the iPad Mini and iPad as the next generation gaming platform. We will see tremendous growth in both casual and core gaming on those platforms (first-person shooters, in particular, taking advantage of the motion sensors on tablets, will come out as strong core gaming titles). Amazon, never one to shy away from a new market, will spend more time growing its gaming studio to offer more titles on KindleHD tablets but will not develop titles for the iPad. Meanwhile, all major studios will start offering titles that stretch the GPU on tablets.
Second screen gaming: In parallel to the trend of tablet gaming becoming more popular, we will see the rise of second screen gaming, similar to what Microsoft already offers with smartglass and what the Wii-U offers with its controller. Expect Apple‘s new televisions and Apple’s existing AppleTV offering to take advantage of a similar mode, providing a gaming experience that goes back and forth between the small and larger screen. As tablets and mobile phones become controllers for TV-based games, we will see a lot of innovation in gaming mechanics that use both.
Gambling will not be legalized nationally in the US: While there has been a lot of discussions about the move to RMT games, an effort Zynga is spearheading as it tries to move beyond its core Facebook offering (incidentally, the company will lay of 10-25% of its workforce as it goes through that move), no legislation will pass at the Federal level allowing for such thing to happen. Some states (Nevada and New Jersey) will make it easier for companies to offer gambling to their constituent but no action will be completed at the national level. Lottery games, which are mostly controlled by the states, will be legalized, giving that industry a boost as it start moving from being a paper-ticket only business to one where mobile applications will allow players to spend real money.
Visual novel games get big: From a genre perspective, we will see a rebirth of adventure games and visual novels. Because of the success of “The Walking Dead” series on iOS in 2012, many TV and movie properties will run episodic visual novels as games this year. Business models will run the gamut, with some free to play games to boost the visibility of new properties to pay-per-episode models, where each new episode will cost either $.99 or $1.99
Margins get tighter: The gaming industry will continue the switch to Free to play games, decimating margins for bigger players like EA, Activision Blizzard, as well as for small independent studios. The net result is that we will see consolidation in the social/mobile gaming space as smaller studios either close, get acquired, or merge as the larger players try to get a better foot-hold in the mobile, tablet and social gaming space. New titles on PC and game boxes will start feeling some of the price pressure and we will see diverging paths emerge, with strong intelectual properties will be able to charge a premium (eg. the eagerly awaited Grand Theft Auto 5) while newer properties may have to come in at a lower price to break through. By the end of the year, we will have seen major consolidation and a substantial downturn in investments in gaming companies.
Videogames as a spectator sport: This is a phenomenon that is already big in Korea and has been increasing among core gamers in Europe and North America: the idea of watching top players battle each others in a particular videogame. Expect this phenomenon to start breaking into the mainstream, with increasing coverage of videogame championships on cable televisions this year.
Of course, I’ll be following developments in the industry and, should any of those predictions be correct, will be diving in on the specifics of what happens next. Stay tuned!