Analyst Report: Connected Consumer Q4: SOPA and the future of digital content


Despite a still-sagging economy, American consumers made a comeback in the latter part of 2011, leading to solid gains in retail spending in the fourth quarter. Nowhere was the surge felt more strongly than in online sales, which increased more than 12 percent over the same period in 2010. Driving the surge in online sales was a sharp increase in the use of mobile devices for shopping, suggesting that retailers have an opportunity to leverage increasing consumer connectivity to boost sales.

The digital living room was also the scene of a lot of activity in the fourth quarter. Microsoft rolled out a major upgrade to its Xbox Live platform, adding dozens of new music and over-the-top video services. It also added enhanced voice and gesture control to Xbox Live for those with the Kinect add-on for the Xbox 360. In addition  to adding new OTT video content, Microsoft also took the first steps toward integrating live, linear television with the Xbox platform, adding support for Verizon FiOS and Comcast Xfinity to the Xbox 360.

While Microsoft was integrating pay-TV services into Xbox, the pay-TV industry itself was facing challenges on multiple fronts. While cord cutting grabbed most of the headlines, the fourth quarter saw new tensions arise over the cost of programming, particularly live sports. A record-shattering new nine-year deal for NFL broadcast rights could lead to epic showdowns between the broadcasters and cable operators; the three NFL networks, Fox, NBC and CBS, seek to pass along the cost of the deal to operators in the form of higher retransmission consent fees.

Content rights were also the focus of efforts to launch consumer media cloud services in the fourth quarter. Both Apple and Google managed to hammer out new agreements with the record labels to sell music on their cloud platforms, but there were important differences in the deals they struck.

Finally, government policy and politics played an unusually prominent role in the consumer technology sector in the fourth quarter. Radical antipiracy bills introduced in the U.S. House and Senate triggered fierce opposition from many technology companies and users, leading to an unusual level of cooperation among normally fractious competitors in an ultimately successful effort to block their passage. The new level of engagement has led to talk of forging a more coherent and comprehensive strategy to make sure the concerns of the technology industry are heard in Washington and other capitals.

In 2012, the digital living room battle will be fully joined, with Google TV–enabled devices reaching stores, perhaps the addition of the App Store to Apple TV, and connected TVs with more-advanced CPUs. But Microsoft currently has the pole position, thanks to Xbox Live and Kinect.

The licensing of content in the cloud will also be a major story in 2012 as content owners gradually loosen the strings and service providers and retailers vie to become the consumers’ main cloud storage and management provider.

Table of Contents

  1. Summary
  2. Connected consumer spending spree
  3. Microsoft makes its move on the living room
  4. Breaking up the TV bundle
  5. Licensing the cloud
  6. SOPA bubbles
  7. Near-term outlook (Trends to watch)
    1. Companies to watch
  8. Key takeaways
  9. About Paul Sweeting
  10. About GigaOM Pro
  11. Further reading

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