8 January 2018 (Las Vegas, Nevada) -- So roughly 200,000 exhibitors, buyers, and members of the media have descended on Las Vegas for the annual Consumer Electronics Show, or CES. Yes, lots of 5G talk, autonomous vehicles, smart devices, robots, and many, many, many, many gadgets. 

This is my 14th CES so some reflection on what CES is and what it is not. 

CES is:

• A chance to see where big tech companies are placing their bets in terms of new categories and features. 
• An opportunity to see non-tech companies spending boatloads of money to convince the world they are actually significant players in consumer electronics.
• A great place to see absurd and quirky tech products that may or may not come to market.

CES is not:

• Where the most consequential product introductions of the year happen. Typically those are done by the largest companies in the world. At one time companies not named Apple would try to launch flagship products at CES, but most now follow Apple's lead and hold their own press events, where they aim for a captive audience and a full news cycle all to themselves. 
• A good place to get lots of sleep, eat well or drink decent tap water. For CES newbies, be sure to eat and sleep beforehand and drink bottled water.

CES is a time to celebrate our technological advances and dream of the future, but this year it will be difficult to ignore the present. And l ooming largest is a company that doesn't even attend CES: Apple. But it really is here. Apple has a message for Amazon and Google and it's plastered on the side of my hotel:

But Apple is even "more here", and it is why so many people do not "get" what is happening in the TMT (technology, media, and telecommunications) ecosystem. Such examples as these at CES:

• Apple and Samsung just announced a deal that only recently would have seemed unthinkable: the iPhone maker will begin offering iTunes movies and TV shows on its arch rival's TV sets. 
• There are scores of gadgets and gizmos for Apple products. For example, if you were to ask iPhone users for their biggest gripes with Apple phones over the past few years, you'd hear a lot of complaints about battery life and the lack of a headphone jack. Thankfully, wired headphone users who want a battery boost have a stealth champion in Mophie. The smartphone-accessory maker is releasing a new iPhone battery case, the Juice Pack Access, that leaves the lightning port available for users to plug their headphones into. 

This is a change from previous Juice Pack cases that worked by plugging into the Lightning port to charge the iPhone, covering up access to it. Instead, the new case is charged wirelessly or through the USB-C port on the back of the case.
 

I will have a CES wrap-up after the show but herein just a few comments on Apple, plus issues of "entertainment" privacy.

APPLE

I have been an Apple developer for 12+ years so the following is partly my thoughts as an "insider" so to speak, plus an industry analyst. Apple stunned markets last week by slashing the revenue outlook for its crucial holiday quarter, sending its stock plummeting. Since shares peaked in October, Apple has lost more than $400 billion in market capitalization.

CONTEXT: that $400 billion is roughly one Facebook. 

Technology will remain the world's growth engine. It creates efficiencies, makes the world more accessible, and makes the once impossible possible. But now Apple is facing harsh questions about its ability to innovate and grow. 

However, folks are missing a lot of things. I will have a longer post on Apple in about two weeks so here are just a few main bullet points from that piece:

• Maturing or mature markets are not dead markets. The world did not change overnight even with this announcement.
• Smartphones are the first product that penetrated nearly the entire world from essentially two vendors ("Google" and Apple). That itself is shocking. It means dynamics at play are new to everyone. Predictions about future are tricky when one runs out of untapped customers.
• So you need to look at growth numbers in iPhone units which everybody knew was slowing (to shrinking by some measures) and other Apple revenue streams (see notes below). That led to stopping the reporting of units from Apple "certainly a sign" as many noted.
• But this was going to happen - with certainty. Perhaps apparent suddenness to some is a shocking thing, but honestly tech should be least surprised by the suddenness. 
• Yes, Apple has long known it is missing the boat on providing low priced phones-strategic mistake to cede "low end" to Android. Or raised prices too much/soon. 
• Then it must be an easy answer to just lower prices or make low priced phones. Uh ... no. That is harder than it looks. Pricing is much more sophisticated than this. Pricing not only says who can afford your product but also establishes a brand, determines channel, and more.
• This is how business always does premium + low priced offers, e.g. clothing, and even e-discovery. My partner (Greg Bufithis, the founder of The Project Counsel Group) did a long analysis which many of you have read that shows where fashion brands and even e-discovery brands stand for "luxury" but aspire to mass market. Brands like Calvin Klein, Ralph Lauren, Armani with top-tier labels (like Purple) at select channels or direct. But also have mass market/discount. The same applies in e-discovery when one looks at Catalyst, CloudNine, Logikcull, Relativity, etc.  
• Many say Apple is a luxury brand; certainly they focused on that. Clearly more recently prices have gone up in real terms.
• And PC v Mac really showed the weakness in appealing to luxury brand in a volume driven market. High prices were the undoing of the Mac from the very early days. Going back to 1990, height of Apple, PCs sold at 10X the Mac run rate. But Macs had much higher margins per device.
• And while available software was a big part of that 10X, reality was that a Mac computer also cost substantially more than a PC, and depending on configuration was often 2X the price.
• PC strategy was low everyday prices for PCs. But there was a catch or three-really important to think about relative to iPhones pricing. PCs were made up of hardware, OS, chips. To have low prices Intel and Microsoft benefited from an ecosystem that "raced to the bottom".
• The reality was that the business changed around 2000 to focus on customers buying the right product at the right time. For context and perspective read Geoffrey Moore's "Crossing the Chasm" (a book that came out in the early 1990s) which predicted that Office and Windows "would mature and would need change product strategies".
• CONTEXT: which is why Microsoft, long seen as tech's "sleeping giant, took a stealth approach to changing strategy which is now paying off in spades.
• Which, bringing me back to Apple, is why its transition to service revenue is not some accounting headfake unique to Apple. One can't be critical of Apple for this if one isn't also critical of all other tech companies with existing businesses. Everyone has changed how they sell and account the business. In my estimation, Apple has found powerful "under-the-radar" ways to reach new heights

I will finish there. Much more Apple analysis to come.

The progenitor of a new form of surveillance - one that invades our privacy while wearing the cloak of entertainment

In my travel bag this trip is Shoshana Zuboff's latest book The Age of Surveillance Capitalism which has been reviewed as "groundbreaking, magisterial, alarming, alarmist, preposterous". One review will do: unmissable.

CONTEXT: if Shoshana Zuboff has not been on your reading list the past 20+ years then you know know nothing about understanding and conceptualizing our transition to an information civilization.

In this book she shines a searing light on how this latest revolution is transforming our economy, politics, society - and lives. As the inventor of the concept of "surveillance capitalism", Zuboff fulfils a persuasive role in explaining the ways in which this "voracious and utterly novel commercial project" is radically rewriting the rules of the economic game, creating extraordinary new asymmetries of knowledge and power. Especially via advertisers and entertainment.

Which brings me to "Black Mirror", the TV series that appears to routinely predict and dramatize world news and policies. But instead of merely predicting the future, the newly released "Bandersnatch" could be creating it. Netflix has a huge presence here this year.

If you did not know, on December 28th Netflix released "Bandersnatch" which chartered new territory. Yes, it's one of the first mainstream attempts at narrative-driven gameplay on a streaming platform. But it's also potentially the progenitor of a new form of surveillance - one that invades our privacy while wearing the cloak of entertainment.

Instead of just passively watching a movie, the viewers (or players) get to choose what the main character does next. Some choices are seemingly innocent-what music to play, what to eat for breakfast-but then quickly moves on to questions about career decisions, mental-health issues, and even whether to kill other characters.

Alice Thwaite, who is here at CES, noted in a blog post:

All this data is collected by Netflix and stored in a secure database. (Though with so many recent hacks of other companies, it can be hard to feel assured.) Your choices are used to improve the gameplay; those seemingly innocent early decisions (like whether you chose Sugar Puffs or Frosties) impact the narrative much later in the story. Without collecting this information, it can't send you down your personalized journey choose-your-own-adventure journey.

But what happens to your decision data after the credits roll?

Netflix acquires a lot of data about its users. This includes information about your viewing habits on the platform, like the programs you choose to watch and how long you watch them for. It uses this data to recommend new shows it thinks you'll enjoy, as well as to improve its customer service and for marketing purposes.

But what if instead of logging how many times you watched Love Actually this past holiday season, it's remembering whether you opted to kill your father in cold blood, or save him? What could Netflix do with that highly sensitive emotional information? Oh, no worries. A  Netflix press release:

The privacy of Netflix members is a priority for us. Documenting choices improves the experience and interactive functionality of "Black Mirror: "Bandersnatch." All interactions with the film and uses of that information are in compliance with our privacy statement.

Except as Alice pointed out "when reading through Netflix's privacy statement (and also the statement about its recommendation algorithm), it isn't clear whether the data of the viewers' choices will be used outside of the actual game. Privacy policies like these are vague and undetailed because the algorithms change so regularly that it's impossible to include every single data point in the document."

But should data on the shows you choose to binge watch be treated the same as more serious behavioral choices, such as whether commit murder or leap off the edge of a building? And for you "GDPR Police" who actually think GDPR will do something about privacy, and that it has value, a note from a GDPR attorney (yes, a new breed) here at CES:

If the gameplay data is considered different to the data that Netflix already collects, under the GDPR Netflix would have to notify its EU users about the change in data collection. But the Netflix privacy policy is so broadly written as regards GDPR consent my view is Netflix doesn't have to.

Given how we know tech companies operate, it's not hard to imagine that that this information will be shared with other companies, and even political agents. You have all read how data from personality quizzes has caused huge ramifications for political elections - so what about interactive gameplay? It offers a new way of understanding users' personalities, and what they are likely to respond to.

Or the most "Black Mirror" of them all: the government getting hold of your data. It could think you're someone worthy of future surveillance. As we reported last year, studies from the Oxford Internet Institute show that there is little evidence to say that playing violent video games lead to violent real-life behavior. However, there are still politicians that peddle this narrative. Could Netflix data be used to identify future terrorists or restrict your access to airports? It's not dissimilar to China's "social credit system," where individuals can be judged and punished for not paying bills or jaywalking.

The erosion of your own real-life privacy. Instead of choosing your own adventure, what if Netflix is choosing for you?

Have a good week. Time to get back to the CES show.