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The Not-Too-Distant Future Of Television

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The business and consumption of television as we know it is going to change forever. From digital living rooms to newsrooms, stay tuned for a personalized, multi-screen experience.

We live in a world of constant disruption. Technological advancements have turned everything on its head. Companies like Uber, Airbnb, YouTube and Facebook have shaken the incumbents in their respective industry, paving the way for new business models that value efficiency and instant gratification. Fintechs are the next group of relatively new startups to disrupt one of the world’s largest sectors – banking and finance. And while every industry in the world is impacted by these technological enhancements and changes in consumption, media has probably changed the most.

Before we get into the changes impacting the evolution of television news, it’s important to take stock of the market. In sub-Saharan Africa, the pay-TV landscape is dominated by DStv. Hybrid services that bundle over-the-top (OTT; content delivered over the internet) services with digital terrestrial and IP TV like Kwese and Wananchi Groups’ Zuku are smaller in terms of subscribers, but are making inroads across the continent.

The deadline for the switch-over to Digital Terrestrial Television (DTT) has passed in most markets in Africa, but remains an opportunity for growth and channel development. Netflix and Amazon Prime have been globally available since 2016 and are growing subscriber numbers in emerging markets, competing directly with pay-TV providers, while Facebook, Instagram and Snapchat are investing in scripted short-form programming. With the abundance of choice, for both free and paid content, the share of screen-time is getting increasingly more fragmented.

READ MORE: MultiChoice, Africa’s Biggest TV Operator, To Be Listed By Naspers, Africa’s Largest Public Company

PwC, a professional services firm, publishes a report, Entertainment and Media Outlook: An African Perspective, each year. The report does a good job of measuring the pulse of media across the continent. PwC predicts that the total TV market in South Africa, which is the largest TV market on the continent, is going to exhibit reasonably strong growth. They predict that the pay-TV sector will add 1.5 million households by 2022, contrary to the decline in pay-TV viewing predicted by media pundits as a result of the availability of OTT alternatives like Netflix in South Africa. TV advertising remains an important part of the overall TV market, but accounts for just under a quarter of the sector’s total revenue.

In West Africa, Nigeria’s TV market grew year over year by 17.1%, despite a challenging economic climate. Again, pay-TV dominates revenues in the sector, commanding 75% of total revenues while advertising accounts for just 19%. Poor broadband penetration and availability has delayed the onset of the internet video segment, extending the life of linear TV in Nigeria.

How is content creation changing?
Industry leaders like Netflix have brought in data analytics for better content creation and acquisition. The Economist published a cover story on Netflixonomics in June where it reported Netflix has identified some 2,000 “taste clusters” by watching its watchers. An analysis of how well a program will reach, draw and retain customers in specific clusters lets Netflix calculate what sort of acquisition costs can be justified for it. Historically, the calculus of whether a show or film is worth making was based on relatively subjective criteria, and, on the intuition of people experienced in content creation. Data will become increasingly important in determining what to produce.
Advancements in Artificial Intelligence (AI) and machine learning are going to play an important role in augmenting the abilities of content producers, particularly journalists. AI-driven computer vision tools, speech recognition and natural language processing, when combined with a real-time content feed can help a content producer with creating enhanced visualization and representations of data, fact-checking, and guest identification cataloguing.

AI is enhancing the newsroom in many other ways. From streamlining media workflows to automating mundane tasks, enabling journalists to focus on what they do best – reporting. AI is also being used to improve turnaround times by allowing content creators to crunching more data. Research can be performed much faster, information can be correlated quickly and efficiently. Facebook is using AI to detect word patterns that may indicate a fake news story.

One of the largest cost components within a television news station was the cost of connectivity. Historically, connectivity for a TV channel was largely based on expensive satellites. Reliability was also an issue; bad weather could impact the quality of the signal. Portable cellular backpack solutions like LiveU, which uses the internet through mobile cellular networks, bound with other networks, like wireless internet have rendered legacy satellite uplink systems redundant and obsolete. Robotic cameras used within news studios take up less space and don’t require dedicated personnel to operate them. Integrated hardware solutions that incorporate all the elements of live TV in a single box have reduced the cost to operate a TV channel.

What are the transmission protocols of the future going to look like?
How people receive content is becoming just as important. IP-delivered content opens new doors in how advertisers can target consumers. As TV becomes more digitalized and smarter, the line between TV and OTT is blurring. Advertisers and ad agencies will eventually merge their TV ad digital planning and measurement.
It’s no secret that video on demand and other internet video services lag pay-TV across Africa. This is largely due to the availability and affordability of broadband internet. While this remains a challenge in the short-to-medium term, providers of telecommunication services are entering the content distribution space.

How will consumption patterns change in the future?
We’ve covered how data informs decisions around content production. Data is also used in the consumption side of the equation, particularly when it comes to delivering personalized content recommendations. Netflix does this particularly well with its content recommendation algorithms. This becomes important when dealing with massive amounts of content, like for example, user-generated content from social media sites. On any given day, over a billion hours of video are watched on YouTube. 70% of this content is recommended by YouTube’s algorithms. Going down the rabbit hole of YouTube is something most of us are familiar with; your well-intentioned first click to a video someone sent you leads to a three-hour binge from videos about political conspiracy theories to a clip on the antics of various house cats.

The recommendations are personalized, and they’re the first thing you see when you sign onto the site or YouTube app. They help you find the needle in the haystack of the millions of videos on YouTube that you actually want to watch.

The shift to second screen viewing has already taken place, with viewers often multi-tasking, watching Netflix and engaging with their friends on social media. There has been a lot of buzz around augmented reality and virtual reality. If you look past the gimmickry and hype, there hasn’t been a tectonic shift with either technology.
Wherever the future of television takes us, you cannot understate the importance of quality content, whether user-generated or scripted, free, paid or ad-supported. Almost all content will move towards a multi-screen environment with a highly personalized stream of content, rendering channels obsolete. The television will be just one of the many screens available to audiences. News production will become more efficient to produce, insightful when consumed and ubiquitous in its availability.

– The writer is the Managing Director of CMA Investment Holdings.

Focus

Software Pirates Use Apple Tech To Put Hacked Apps On iPhones

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Software pirates have hijacked technology designed by Apple Inc to distribute hacked versions of Spotify, Angry Birds, Pokemon Go, Minecraft and other popular apps on iPhones.

Illicit software distributors such as TutuApp, Panda Helper, AppValley and TweakBox have found ways to use digital certificates to get access to a program Apple introduced to let corporations distribute business apps to their employees without going through Apple’s tightly controlled App Store.

Using so-called enterprise developer certificates, these pirate operations are providing modified versions of popular apps to consumers, enabling them to stream music without ads and to circumvent fees and rules in games, depriving Apple and legitimate app makers of revenue.

By doing so, the pirate app distributors are violating the rules of Apple’s developer programs, which only allow apps to be distributed to the general public through the App Store. Downloading modified versions violates the terms of service of almost all major apps.

TutuApp, Panda Helper, AppValley and TweakBox did not respond to multiple requests for comment.

Apple has no way of tracking the real-time distribution of these certificates, or the spread of improperly modified apps on its phones, but it can cancel the certificates if it finds misuse.

“Developers that abuse our enterprise certificates are in violation of the Apple Developer Enterprise Program Agreement and will have their certificates terminated, and if appropriate, they will be removed from our Developer Program completely,” an Apple spokesperson told Reuters. “We are continuously evaluating the cases of misuse and are prepared to take immediate action.”

After Reuters initially contacted Apple for comment last week, some of the pirates were banned from the system, but within days they were using different certificates and were operational again.

“There’s nothing stopping these companies from doing this again from another team, another developer account,” said Amine Hambaba, head of security at software firm Shape Security.

Apple confirmed a media report on Wednesday that it would require two-factor authentication – using a code sent to a phone as well as a password – to log into all developer accounts by the end of this month, which could help prevent certificate misuse.

Major app makers Spotify Technology SA, Rovio Entertainment Oyj and Niantic Inc have begun to fight back.

Spotify declined to comment on the matter of modified apps, but the streaming music provider did say earlier this month that its new terms of service would crack down on users who are “creating or distributing tools designed to block advertisements” on its service.

Rovio, the maker of Angry Birds mobile games, said it actively works with partners to address infringement “for the benefit of both our player community and Rovio as a business.”

Niantic, which makes Pokemon Go, said players who use pirated apps that enable cheating on its game are regularly banned for violating its terms of service. Microsoft Corp, which owns the creative building game Minecraft, declined to comment.

SIPHONING OFF REVENUE

It is unclear how much revenue the pirate distributors are siphoning away from Apple and legitimate app makers.

TutuApp offers a free version of Minecraft, which costs $6.99 in Apple’s App Store. AppValley offers a version of Spotify’s free streaming music service with the advertisements stripped away.

The distributors make money by charging $13 or more per year for subscriptions to what they calls “VIP” versions of their services, which they say are more stable than the free versions. It is impossible to know how many users buy such subscriptions, but the pirate distributors combined have more than 600,000 followers on Twitter.

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Security researchers have long warned about the misuse of enterprise developer certificates, which act as digital keys that tell an iPhone a piece of software downloaded from the internet can be trusted and opened. They are the centerpiece of Apple’s program for corporate apps and enable consumers to install apps onto iPhones without Apple’s knowledge.

Apple last month briefly banned Facebook Inc and Alphabet Inc from using enterprise certificates after they used them to distribute data-gathering apps to consumers.

The distributors of pirated apps seen by Reuters are using certificates obtained in the name of legitimate businesses, although it is unclear how. Several pirates have impersonated a subsidiary of China Mobile Ltd. China Mobile did not respond to requests for comment.

Tech news website TechCrunch earlier this week reported that certificate abuse also enabled the distribution of apps for pornography and gambling, both of which are banned from the App Store.

Since the App Store debuted in 2008, Apple has sought to portray the iPhone as safer than rival Android devices because Apple reviews and approves all apps distributed to the devices.

Early on, hackers “jailbroke” iPhones by modifying their software to evade Apple’s controls, but that process voided the iPhone’s warranty and scared off many casual users. The misuse of the enterprise certificates seen by Reuters does not rely on jailbreaking and can be used on unmodified iPhones. -Reuters

-Stephen Nellis and Paresh Dave

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Economy

Fintech Companies Raised a Record $39.6 Billion in 2018: Research

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Venture capital-backed financial technology companies raised a record $39.57 billion from investors globally in 2018, up 120 percent from the previous year, according to research by data provider CB Insights published on Tuesday.

Funding was raised through 1,707 deals, up from 1,480 in 2017, the research said.

The surge in funding was due in large part to 52 mega-rounds, or investments larger than $100 million, which were worth $24.88 billion combined, the research said.

A $14 billion investment in Ant Financial, the payment affiliate of Chinese e-commerce giant Alibaba Group Holding Ltd, accounted for 35 percent of total fintech funding alone last year, the research said.

In the last three months of the year, five companies joined the coveted ranks of fintech “unicorns”, or companies valued at more than $1 billion. These include credit card provider Brex, digital bank Monzo and data aggregator Plaid.

Venture capital investors have been pouring billions of dollars into fintech companies, in the hopes that they can gain market share from incumbent financial institutions by offering easier to use and cheaper digital financial services.

Fintechs have emerged globally across all sectors of finance, including lending, banking and wealth management.

While the large rounds minted new unicorns and led funding to hit a record high in 2018, CB Insights estimates these will likely delay initial public offerings.

“IPO activity is likely to remain lackluster in 2019,” the research reads.

Asia saw the biggest jump in number of deals in 2018, growing 38 percent from the previous year and accounting for a record $22.65 billion, according to the study.

In the United States, fintechs raised a record $11.89 billion through 659 investments, while the number of deals dropped in Europe, but funding reached a record $3.53 billion. -Reuters

-Anna Irrera

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Bet Everything on Electric: Inside Volkswagen’s Radical Strategy Shift

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If Volkswagen realizes its ambition of becoming the global leader in electric cars, it will be thanks to a radical and risky bet born out of the biggest calamity in its history.

The German giant has staked its future, to the tune of 80 billion euros ($91 billion), on being able to profitably mass-produce electric vehicles – a feat no carmaker has come close to achieving.

So far mainstream automakers’ electric plans have had one main goal: to protect profits gleaned from high-margin conventional cars by adding enough zero-emission vehicles to their fleet to meet clean-air rules.

Customers have meanwhile largely shunned electric vehicles because they are too expensive, can be inconvenient to charge and lack range.

The biggest strategy shift in Volkswagen’s 80 years has its roots in a weekend crisis meeting at the Rothehof guesthouse in Wolfsburg on October 10, 2015, senior executives told Reuters.

At the meeting hosted by then VW brand chief Herbert Diess, nine top managers gathered on a cloudy Saturday afternoon to discuss the way forward after regulators blew the whistle on the company’s emissions cheating, a scandal that cost it more than 27 billion euros in fines and tainted its name.

“It was an intense discussion, so was the realization that this could be an opportunity, if we jump far enough,” said Juergen Stackmann, VW brand’s board member for sales.

“It was an initial planning session to do more than just play with the idea of electric cars,” he told Reuters. “We asked ourselves: what is our vision for the future of the brand? Everything that you see today is connected to this.”

Just three days after the Rothehof meeting of the VW brand’s management board, Volkswagen announced plans to develop an electric vehicle platform, codenamed MEB, paving the way for mass production of an affordable electric car.

For months after the Volkswagen scandal blew up in 2015, rival carmakers treated diesel-cheating as a “VW issue”, according to industry experts. But regulators have since uncovered excessive emissions across the sector and unleashed a clampdown that undermines the business case for combustion engines, forcing a sector-wide rethink.

Now the “villain” of dieselgate is likely to become the largest producer of electric cars in the world in coming years, analysts say, putting it in pole position to flood the market – should the demand materialize.

“Decisions to convert the Emden factory (in Lower Saxony) to build electric cars, would never have happened without this Saturday meeting,” said Stackmann, one of five senior VW executives who spoke to Reuters.

However the full scale of VW’s ambitions were only revealed two months ago when it took the industry by surprise by pledging to spend 80 billion euros to develop electric vehicles and buy batteries, dwarfing the investment of rivals.

It plans to raise annual production of electric cars to 3 million by 2025, from 40,000 in 2018.

STRATEGIC PERILS

It’s a risky bet.

With regulators and lawmakers, rather than customers, dictating what kind of vehicles can hit the road, analysts at Deloitte say the industry could produce 14 million electric cars for which there is no consumer demand.

It’s also an all-or-nothing bet in the long run.

VW, whose ID electric car will hit showrooms in 2020, has set a deadline for ending mass production of combustion engines. The final generation of gasoline and diesel engines will be developed by 2026.

Arndt Ellinghorst, analyst at Evercore ISI, said betting on electric vehicles (EVs) could be risky because customers did not want to own cars dependent on street-charging facilities.

“What if people are still not ready to own EVs? Will adoption be the same in the U.S., Europe and China?” he said.

But he added that EU and Chinese emissions regulations made electric vehicle adoption inevitable and that being an early industry mover in that direction offered a “positive risk-reward”.

Another by-product of dieselgate that quickened VW’s electric drive, according to the senior executives, was a purge of the company’s old guard, who became the focus of public and political anger.

This empowered Diess, a newcomer who had joined as VW brand boss shortly before U.S. regulators exposed the carmaker’s emission test cheating.

Diess, who joined from BMW where he helped pioneer a ground-breaking electric vehicle, has since been appointed CEO of Volkswagen Group, a multi-brand empire that includes Audi, Porsche, Bentley, Seat, Skoda, Lamborghini and Ducati.Slideshow (3 Images)

Carmakers have failed to mass-produce electric cars profitably largely because of the prohibitive cost of battery packs which make up between 30 percent and 50 percent of the cost of an electric vehicle.

A 500 km-range battery costs around $20,000, compared with a gasoline engine that costs around $5,000. Add to that another $2,000 for the electric motor and inverter, and the gap is even wider.

Even electric start-up Tesla’s cheapest car, the Model 3, is on sale in Germany at 55,400 euros, priced just below a base model Porsche Macan, a compact SUV. In the United States, Model 3 prices start at $35,950.

VW believes its scale will give it an edge to build an electric vehicle costing no more than its current Golf model, about 20,000 euros, using its procurement clout as the world’s largest car and truck maker to drive down the cost.

“We are Volkswagen, a brand for the people. For electric cars we need economies of scale. And VW, more than any other carmaker, can take advantage of this,” a senior Volkswagen executive told Reuters, declining to be named.

The carmaker’s electric-vehicle budget outstrips that of its closest competitor, Germany’s Daimler, which has committed $42 billion. General Motors, the No.1 U.S. automaker, has said it plans to spend a combined $8 billion on electric and self-driving vehicles.

Renault-Nissan-Mitsubishi said in late 2017 they would spend 10 billion euros by 2022 on developing electric and autonomous cars.

“On a 2025 view, we expect Volkswagen to be the number one electric vehicles producer globally,” UBS analyst Patrick Hummel said. “Tesla is likely to remain a niche player.”

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STRICTER TESTING

VW’s test cheating using engine management software – “defeat devices” – resulted in the introduction of tougher pollution tests which revealed in 2016 and 2017 that emissions readings across the industry were up to 20 percent higher under real-world driving conditions compared with lab conditions.

This has raised the bar on the auto sector’s efforts to cut emissions of carbon dioxide, blamed for causing global warming.

EU lawmakers in December agreed a cut in carbon dioxide emissions from cars of 37.5 percent by 2030 compared with 2021 levels. This was after the European Union forced a 40 percent cut in emissions between 2007 and 2021.

“This goal is no longer reachable using combustion engines alone,” Volkmar Denner, chief executive of Bosch, the world’s biggest auto supplier, said about the 2030 proposals.

Every gram of excessive carbon dioxide pollution will be penalized with a 95 euros fine from this year onwards.

Strategy firm PA Consulting forecasts VW will face a 1.4-billion-euro penalty for overstepping average limits in Europe by 2021, while Ford and Fiat-Chrysler face fines of 430 million euros and 700 million euros respectively.

Daimler, BMW, PSA, Mazda and Hyundai will miss their 2021 average emissions targets, PA Consulting forecasts. Toyota, Renault-Nissan-Mitsubishi, Volvo, Honda and Jaguar Land Rover are on track to meet their goals.

PA Consulting’s forecasts were extrapolated using 2017 registration data for each powertrain type and consumer buying trends, but do not include more recent sales trends.

Ford, VW and BMW said they would meet their targets because of a push to sell more hybrid and electric cars in 2018. Daimler said it aimed to meet the targets, PSA said it would respect the targets while Fiat-Chrysler declined to comment. Mazda had no immediate comment, while Hyundai did not respond to a request for comment.

Carmakers have struggled to lower their average fleet emissions because of a shift in customer taste toward heavier, bigger SUVs (sports utility vehicles), which make it harder to maintain the same levels of acceleration and comfort without increasing fuel consumption and pollution.

SUVs are now the most popular vehicle category in Europe, commanding a market share of 34.6 percent, according to JATO Dynamics. Even Porsche, which makes lightweight sportscars, relies on sports utility vehicles for 61 percent of sales.

As the industry-wide scale of excessive emissions prompted Brussels to push through tougher laws late last year, VW executives concluded that purely electric cars were the most efficient way to meet carbon dioxide goals across its fleet.

This was the point of no return, according to executives, when the company made the final electric investment decisions and committed to staying the course it had plotted after dieselgate.

“After evaluating alternatives, we opted for electromobility,” chief operating officer Ralf Brandstaetter told Reuters about VW’s deliberations in November. -Reuters

-Ilona Wissenbach and Agnieszka Flak

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