IP continues to lead to cannibalisation, where incumbents lose revenues to newcomers, whether it’s in VoIP or IPTV. This is about services over the open internet, not managed services such as those offered by operators like KPN (InternetPlusBellen and Interactieve TV from KPN). Skype is blocking from the end of October its VoIP services on the Nimbuzz platform, after already blocking fring last July, while three major broadcasters in the US are blocking their web content for users of the Google TV platform. These are two stories that underline again the disruptive quality of IP.
We can only guess at its motivation, but for Skype it’s tempting to say its upcoming IPO may play a role. Skype had 560 million registered users at mid-2010, but only 8 million of those used its paid services. In the run up to an IPO, it’s good to show a healthy business model and strong growth, and Skype is doing everything can to give that image:
• New clients are added to the existing base: Skype for Android, Skype for Windows 5.0, etc. Innovations such as video calls, group calls and mobile are being introduced for new platforms.
• Alliances with a variety of partners: Facebook (consumer market), Avaya (business market), KDDI (mobile market Japan).
• With Skype Click-and-Call advertisers can include a link so interested customers can call place a free Skype call for more information. The businesses pay Skype a fee.
• The company had to abandon its plans to make Skype-to-Skype over 3G no longer free from 2011 following a storm of criticism (see our commentary ‘Skype takes risky step by charging for Skype-to-Skype').
At the same time, competition is heating up:
• New entrants: Pinger (mobile VoIP), Google (VoIP for Gmail users), fring (fringOut for Nokia users), Truphone (a client for PC/Mac).
• Skype was an early mover in video calls (which make up already 40 percent of Skype sessions), but new competitors are entering the field: Cisco (with the umi box for calls over a TV, see our commentary ‘Cisco's umi and Logitech’s Revue: two new connected devices’), Yahoo! (with a new Messenger client) and Apple (which is expanding the FaceTime service from the iPod/iPhone to the Mac).
• In some cases, competitors are embracing interoperability, such as the new Yahoo! Messenger with the iPhone and Android.
Skype apparently feels threatened and is shutting off its service on the Nimbuzz platform, possibly also because Nimbuzz is causing it damage with the competing NimbuzzOut service. Google TV is wrapped up in a whole other dynamic. ABC, CBS and NBC are blocking their web content when it’s accessed by Google TV software. The reason is that the software brings web content (which earns little through ads) to the TV set (where programmes generate much more ad income). This raises the threat of cannibalisation. In other words, the content owners, which have developed different sales models for web and TV, want to prevent device shifting. Web content is for the computer, and TV content is for the TV.
Skype is taking the same role against Nimbuzz as ABC, CBS and NBC versus Google TV. Nimbuzz and Google TV are the parties with a similar platform and business model, based on openness: Nimbuzz offers access to all kinds of e-mail, VoIP, IM and chat programmes, and Google TV wants to provide access to a large selection of TV programmes and other content. For Google, it will likely be easier to resolve the conflict, probably through sharing revenues (although that’s easier said than done). Eventually the content owners will embrace Google TV as a new distribution medium. For Nimbuzz, the situation is more difficult, although it’s trying to make up for the loss of Skype with a promotion on its own NimbuzzOut. Skype doesn’t seem to want to deal with the competition and wants users to come directly to its own services. Skype is without a doubt the market leader, and with an IPO on the horizon, would probably like to see a competitor pushed out of the market. It’s right to say then that Skype has earned the title of ‘incumbent’ on the VoIP market.
