Does 'ecosystem' mean gadgets are dead?At CES 2012, CNET talks to Google's Eric Schmidt, Samsung's Tim Baxter, and other industry insiders about the "ecosystem" trend toward devices backed by content, services, and the cloud. Who wins, and who loses? It's the Next Big Thing.
What's the next big thing? Who's the next big thing? What's the next big thing? What's the next big thing? Higher technology. The next wow. The next OMG. The next, seriously? I don't know. I don't know. I don't know. CNET knows. Find out at The Next Big Thing. Welcome to the Consumer Electronic Show. Welcome to CNET's Next Big Thing super session. Wow, that was really good. Yeah, that was all right, wasn't it? As the biggest trade show in the world, that's just more than 120,000 people in Las Vegas for this event and for, you know, hookers and blow. Awesome. The first previews of the new technology will be available to you. Today the highlights over the year have been here, the VCR, the camcoder, the DVD's, the HD TV's, tablets. The (hail?), the... the Abacus. What are you talking about here? Yeah, the Abacus was originally introduced at this event over 5,000 years ago. That's true. And it did wowed them floor. It did. It wowed on the floor. Everyone in Vegas was like "Urrgghh", much as they are now. Everyone is very excited this year about 3D TV, the new xBox system and now please welcome our host from CNET, Molly Wood. That's her real name, Molly Wood. That's a great name. Yes. Like, Molly... Molly Wood, but it's Molly Wood. Good day from Molly Wood. Molly Wood. I bet she's never heard that before. Definitely not. No. No. No. Molly Wood and then Brian Cooley. The (hill?)? Molly Wood and Brian Cooley, everybody. What's up? Hi, everyone. Hello and good afternoon. We'll see you at our CNET stage later for the unedited version of that song. Right. You wanna see the (artics?)? That's for a monologue. That's the next big thing. Welcome to CNET Presents The Next Big Thing. It's our annual CES Supersession where the CNET team lays out the hottest trend in consumer electronics technology. These are about technologies and trends and layers of both of them that are gonna define consumer electronics and media and advertising for many years ahead. And in this case, this year, the next big thing is the Ecosystem and I am fairly certain that if you've been here longer than a few hours you've heard that term at least 100,000 times which means we feel pretty good about this decision. We're talking about that essential... essential connections between the actual consumer electronics, the hardware that you see all over the show floor. The content on it whether it's books or video or television or games, the apps, the operating system and the connectivity. And the ecosystem is this dream that in some ways all combines to get us closer to the vision that we're always on, always connected do it all device. Right. How long have we been heading toward that one? Those devices alone just don't cut it anymore. That's the big story here. The Consumer Electronic Show is very much about electronics, but now we can get those devices to sort of leave the ground a little bit, to transcend where they come from as tangible devices. And today, we're going to try and figure out this Ecosystem era by talking to some key players. One of them is the biggest names in technology, really none of which will need introduction for you. And what this trend and what this era going forward very deeply means for consumers, established companies and also upstarts that are on the make. Please join the conversation by tweeting your thoughts about this panel. Let everybody know that you're here as we dive a little bit deeper and explore at least how see this concept of the Ecosystem. Four gigabytes of Brand. Terabyte Hard Drive, 4.3 inch QAC touch screen, 8 gigabytes of flash memory. Consumer electronics used to be almost solely about the electronics, but that's changing fast. After months of rumors, Facebook's new app for the iPad. Now, the syncing of media content is the sleekest part. What is the line between what's on the device and what's in the Cloud? And it integrates with your Gmail and your Android. Now, specs are basically the price of admission and winners are built on the shoulders of what you can't touch, they're Ecosystem. That refers to the combination of device, services, apps, content and operating system. When consumers buy a device today, they're really buying into a way of using it. Smartphones and tablets that are gateways to media, games, social networks, video chat and more. TV sets, set top boxes and blue ray players that talks to the cloud. Your mobile devices and each other. It's media that is in place and in sync wherever you go, whatever you're using. But when consumers buy into an Ecosystem, they're investing in much more than just a device and a few apps to put on it. Hardware, operating system, apps, content, and provider form a complicated matrix. Consumers first need to be able to understand it, then decide which one they'll use, if one. Apple arguably started the modern ecosystem trend with iPhone or iPad that makes you part of iTunes, an Apps Store, and now iCloud. Amazon built a media empire first, then devices on its shoulders. Most recently, the Kindle Fire. Microsoft has all the pieces led by xBox, but so far struggles to put them all together. And traditionally hardware centric makers like Samsung must figure out how to create ecosystems out of collections of services and partners and surface those to consumers. Then of course, there's Google, the company that has created an ecosystem that is closest in weight to the Apple juggernaut, but distributed across many makers, devices and interface interpretations, yet keeping Google services and software at the center of this federation of experience. But before any of us can pick a winning company, we must first spot winning strategies. How to do that is why we're here today. Ladies and gentlemen, please welcome Google Executive Chairman, Eric Schmidt. Thank you. Thank you all. Thank you. Thank you so much for joining us today. It seems only appropriate now that we've given our long vision of what we think of as the ecosystem for you to, I guess, tell us what ecosystem means to Google? Well, hopefully it means scalable network platforms that really provides tremendous customer value. It's funny that I would say the same thing by saying when I look at my... in this case Android phone, I don't see one phone, I see a super computer of at least a million computers that are out there in the cloud somewhere connected by very high speed networks, tremendous amount of content in algorithms which are conveniently accessible to me on my 4-inch device. So when you talk about devices, I think in traditional language, really are missing the fact that these are simply portals for... to use an old word into literally all the world's information. Right. That hardware is nothing without software or in this case services and information. And what's happened, of course, now is that all hardware strategies involved some kind of a software strategy and vice versa. I think in the Android case, we are particularly fortunate that we are able to make the Android operating system free and so hardware manufacturers could sort of buy in at essentially the right price which is zero and get something this functional. And of course there is value from having everybody in the same ecosystem. That seems to us to be the see-change though, this idea that the stand alone device is maybe even less useful than it ever was without those contents inserted to this thing. But you know... It had to be powered by a... But computers that are... But competing devices that are not on our network are lonely, right? It makes no sense to have anything now that's not on some sort of WiFi net. One of the more shocking things is that WiFi now is used to control the lights in your house. Yeah, nobody designed WiFi for that. Remember, there were all these specialized networks and so forth and so on but in fact there's a new generation of devices which are being premiered here at CES which just get under your WiFi Network or they talk to the other devices and off they go. Right. So, is it just about network to you? Is it... because you've talked, obviously, the Smartphone is maybe the center of it all probably. But we do seem to see universal which all devices speak to each other maybe more than they ever have and Android seems to power an awful lot of those devices. Well that's, of course, our goal but our real strategy is actually somewhat different from that. We wanna sort of move from talking about devices which we love to talk about to other talking about how it solves problems which we really wanna be able to do is walk into your house and have, as you're arriving your house with your Android device, all the things that have computers in it sort of adjust as necessary. And so when you go in to the family room, the television knows it's you because your Android device authenticates you as opposed to the other family members. A text message comes to you and it goes to the television 'cause that's your preference or not, right? And it all syncs together and all of the previous sorts of discussions about this have assumed some over-home server, some central master. They would watch in what was going on in the house, all the different devices. They think that is completely wrong. The right models would think of this as pure devices that talk to each other and they understand roughly what their function is and what people want. They can be configured and mopped in way obviously and it becomes seamless. The trick to consumer products is to make them work, right? It is remarkable to me that we spent... and I've been coming here for 20 years building products that are very good, right? The products that require enormous amount of technical knowledge to keep them running, right? So we've now seen in the last few years the number of vendors Google obviously did won where the product is so simple, it just works. And underlying that simplicity is extraordinarily difficult and expensive engineering which is what's happening in this large platform companies as you see. So as Android your vehicle for getting to that and product or, you know, is it your goal to... we've seen Android TV's announced here, obviously tablets and obviously Smartphones, is it your goal to have Android in refrigerators to, you know, is that the vehicle for Google to get there? Well, refrigerators do need some automation, all right? If you think about it, they need to actually deal with their energy clause, there has been a lot of surveys about getting our energy bills down and so forth and indeed, there are companies that are putting Android in refrigerator. So there. Now, are these... I knew it. Are these because they're brilliant and they've done a full evaluation of other choices or did they simply choose Android 'cause it was free, you know, you never know. And one of the key things about the Android platform and our licenses is often, these are things that we don't know until they get announced. And so when we say open source, we mean take it and have a good time and that's, I think, one of the sort of core strategies which differentiates us from the other vendors. To that end actually, it match... in a different fashion from Apple or even Microsoft. Let's talk about... Let's start with Smartphones. The carriers, the manufacturers have a great deal of influence over Android. Is that a positive, do you think, all the time? You know there's always a balance between what the carrier wants, what the consumer wants, what the vendor wants, what the advertiser wants and so forth and so on. We've taken the position that you can take the Android operating system and you can do whatever you want to it. If you want to use our certification, you have to essentially be conformant to the principles of the Android market and our reasoning which I think ultimately, I wish people have invented this many years ago, I think the first company to really do is that what people really care about in your language is that there's an inoperable ecosystem of application. So there's more than 300,000. Remember when Apple was busy talking about they have this many, this many, this many, now we have it more than 300,000 applications on top of the Android ecosystem, so there. A scalable model really means that you can start building these things quickly and it benefits the whole to have an application that runs on every device. I asked our users what they were interested in hearing from you to that point and the single most common question especially on Google Plus was whether you would ever offer a stock vanilla option for every Android phone, maybe a second (round?) that users... So that fragmentation does appear to be maybe hampering... You wanna be careful with the word fragmentation. Okay. When I use the word fragmentation... Differentiation? Yeah, differentiation is different from fragmentation. Differentiation is positive. Fragmentation is negative. So differentiation for the sake of the room. Thank you. Differentiation means that you have a choice and the people who are making, let's use phones as an example, people who are making phones, they are gonna compete based on their view of innovation and they're gonna try to convince you that theirs is better than somebody else. Fragmentation means that you have some application that you care about and it only runs on one and not the other and you don't have a choice. This is an important... important (settle?) there. Sure. But isn't some of that happening to some extent in Android? No, it's not. What's happening is our core strategy is to get everybody under the Ice Cream Sandwich which is the new release which is on this phone and we'll... we absolutely allow, as part of our normal standard business, our partners to add or change the user interfaces and so forth as long as they don't break the application's compatibility. We see this as a plus. It's an area for differentiation, they can adapt their software to the necessary hardware changes that they want and it's given you far far more choices than any other (things?) you could imagine. Do you think that Ice Cream Sandwich is an opportunity for maybe a little greater control or do you feel like that's necessary. Well the... At least over... for the skinning with some of the differentiation. When you say control, it's absolutely an opportunity to standardize the API's and the basic level of services that Android phones offer. It is not a requirement that when used, exactly the same user interfaces and so forth, we certainly hope everybody will use the standard user interface. People are free to make the necessary changes as they see that. And what's great about it is if you don't like it, you don't have to buy that phone, you can buy it from somebody else, you actually have a choice. Competition provides value, drives cost down, etc etc. Let's talk about the living room a little bit, that seems to be a bigger and bigger part of the ecosystem. Certainly relevant to this show here. How do you get there and we've seen now Google TV, a bigger part of LG is lined up this year. Yeah. Also Android on TV, is there a crossover, you know, is Android the road? How do you get in the living room? Well, of course, Google TV is doing very well with LG just announced. Samsung has announced that they are working on some stuff. We have a whole bunch of additional partners coming. We released Google TV in, roughly, September. It's the only offering I know of that fully integrates the television experience and the browsing experience. All the ones that have been debuted previously have had limitations. This is a full-function browser, a full-function platform for combining internet capabilities, internet viewing, as well as traditional television viewing. We've argued quite strongly that people will watch more television because of Google Television because they don't need to go somewhere else, they don't have to go to their other screen, it's all there, they can go back and forth and integrate and cross-integrate them. Google TV is an example of the pointers (made?) earlier which is that if more and more of the devices that you have in the home, the more they can talk to each other and they could figure around your needs. So if your TV is running Android, your phone is running Android, they can talk to each other. How important is content in that scenario? Well, of course, content is what drives everything. We've been fortunate that we've now... and I think it's quite a... it took us a long time to complete the necessary pieces we needed. We were able to launch a couple months ago, Google Music. If you haven't tried it, I encourage you to do it. Three of the 4 major label (rolls?), more than a thousand of the independent labels, there's lots and lots of music and the partnership that you can purchase. There's also a mechanism for people who are truly independent and don't want to be labels themselves to publish their information into the ecosystem and it's available on all the new devices. We have previously done books and movies. So I think we have a full offer now. So, you obviously have a long list of products. How important is integration? We have a lot of users saying "Can I get a dashboard, a unified dashboard, for GPlus, for GMail, for... but also through convergence between GTalk and Voice." This has been Larry, you know, Larry as CEO decided to much much more focus on solving this problem than I did. And since essentially April or May, has been leading an internal effort to completely standardize both the UI and the expression across this for precisely the reason of that. Historically, Google has been a set of not systems but sort of reasonably independent (??) of creativity, it serviced very well but it drove this slightly different feeling to everything and we made a decision to cross integrate it. So from the consumer perspective, how much of a concern is lock in, media lock in to some extent if you buy... In fact, there was an Apple legal representative quoted in court in Australia saying that the Galaxy Tab versus iPad, lawsuit was primarily about ecosystem that it was about, you know, they didn't wanna create Android costumers who would buy a bunch of media that wouldn't work on an iPad, convoluted I know but... This... This reasoning is only the reasoning that a lawyer who was paid for by Apple could have come up with. Apple... I don't know if everybody buys a bunch of stuff from Google... Apple worked very hard to block choice in Germany by trying to prevent Samsung tablets to become available. Right. All right, that's called prevention of choice. Consumers should want choices. I don't mind if you actually prefer the other guys' product. I'd like you to evaluate mine fairly and make an appropriate decision as a consumer. It's called competition. Right. Well, and you... the media that you sell is primarily open formats, right? They can be transferred to other devices. That, I think, is the... where customers worry about lock in due to they have to buy all Samsung forever. Well... For everything to work. Well, certainly with Android, the Android platform is media-inoperable. And so, all the products that I was talking about, the movies and the music and so forth worked on non-Samsung, as well as Samsung devices and that's part of the promise. If you're asking what does the consumer think about media lock in, the consumer's pretty straight forward, it's pretty well understood. They wanna be able to purchase and I hope legally copyright an information, they wanna be able to re-purpose it on every device in their home and their office without any hassle. And why is it so hard for all of us to understand it is beyond means. And a lot of them are unwilling to do things which are illegal, various forms of copying and so forth because they are prevented legally to pay for it. It would be much better... much better for the industry as a whole to organize themselves to allow that to occur and to get an appropriate fee for doing so. All right. Last question, if you had to pick one element of what we're calling at least the ecosystem, hardware, content, services or software, what do you think it would be? Well, they work together. The thing that... I'll answer a different question which is what was the most surprising thing in 2011? Okay. And I think that... That was also my question. But I think it will also answer that. It's framed differently. Absolutely. That... Sorry... Doing what? The power of the ecosystem that you're describing, it's always a surprise to people when they discover how powerful these ecosystems are which I think is the point of your panel and your whole meeting today and it's even for me, I've done this for 20 years. I was surprised again at the power of the ecosystems that had been built and I say this with respect to the Amazon ecosystem, to the Apple ecosystem, even to the Facebook ecosystem which have similar characteristics in this regard, as well as obviously as the Google one and the reason they are so powerful and the reason the argument is so right is that it's the fact that everyone is working against this sort of cloud model, platform model, means everybody is a winner. And because everybody is a winner, you get enormous essentially growth effects, you get this person helping you and get this person helping you and you get this application helping you and all these people are gonna operate without your knowledge and control. The secret is computing in these platforms is to make them open enough and we would argue as open as possible so that you can enable for creative people whether it's the content people, the apps developers, the software developers or the consumers to use them, to love them, to extend them and so forth. Not only do you build tremendous value, you build tremendous loyalty, they are economically very very valuable to all of the players, right? We haven't talked very much about the other component which is to be able to bring in money. Right. To be able to pay for all these infrastructure which is not cheap. So it's the sum of all that underrated which should as occurred that I think has been the biggest surprise. Great. Thank you very much. Thank you. Thank you all. Thank you Molly. Good question. Very good. Thank you. Thank you. Stay here for this event (??). Thank you so much to Eric Schmidt. Now, that is of course the Google vision of the ecosystem. Now though, as you walk the halls of this show obviously, you see consumer electronics manufacturers everywhere. People who have built their brands and made all their money on electronics. So that brings us to a slightly different take on the ecosystem. We've seen how ecosystems proceed when they're service centric, offering search, videos, social and more on a largely hardware agnostic basis but what if you're a leader in televisions or Smartphones or both and more? How do you keep wielding that advantage while offering an operating system you didn't developed, apps you don't write and content you don't own and still come out on top and stay unique? Hardware takes on a different role in the ecosystem era but never assume it doesn't matter. Samsung is behind a lot of the bestselling Smartphones and TV's with computers and even connected refrigerators rounding up the mix, all available with one flavor of ecosystem or another. But integrating outside the platforms on your hardware while maintaining your edge through it and creating a unique proposition as another flavor of the ecosystem challenge and on the minds of many in the industry with deep roots in the device. All right. Now, if you'll join me now in taking the ecosystem coin as we've seen it and if not, turning it completely over, turning it largely to a different site and join me in welcoming Tim Baxter, President of Sales, Marketing and Operations for Samsung Electronics America. Thanks. Nice to see you. Have a seat Sir. Great. Let me grab a... And he brought coins. I was gonna say he brought (crack?). We've got the note. That's... We've got... We've got what? Have a seat. We want that to get the headlines. That's right. Anyway, I couldn't get the... That's right. I can't believe he brought (crack?) to CES. I could not get the 75-inch TV in my pocket. So... Yeah, I have met him and go where is the 55-inch all LED. We'll bring a few goodies out. All right. Now, Tim, we've heard one... Just to pull them out... Still, you're like a cop, you're got a belt full of goodies there. You brought out... I am surprised you didn't wear your imperial emerging crown because you are... non-blown smoke, you guys are emerging pretty quickly as the king of CES in presence, in breath, in scope and in ecosystem across the widest product category as Molly was mentioning from connected white goods all the way to the all LED televisions, laptops, tablets, Smartphones, connected camera you announced here as well. Tell me, right off the back, your first reaction as you're watching and listening to Eric's vision of how they see the ecosystem. I know that the definitions vary. You guys are in a very different space. You make and live and die on hardware. That's your game. How can you be even in the same mindset as with Google? I know you guys are touching in the same place in the industry but it seems like these companies would be so completely desperate in how they get there. I think what ties things together in terms of the thinking is the consumer orientation and it really starts in my mind with the reality that, you know, the average consumer has about 30 consumer electronics devices in their home. And when I think about all the devices you have there but very few of them are connected to each other. So really the opportunity and the expectation consumers have is to bring that together in seamless and relative ways. So I think that guides all of the participants in the value chain associated with this. So I see those committed to that picture absolutely and most people in this room are probably gonna think yes, Samsung is gonna do a piece of that and maybe they're going to bring in the WiFi, the bluetooth, the (beaming?), the (??), the infrastructure, tell us why you have a birth right to be in the software, the media, the content and this kind of (gossamer?) that ties that together, the experience as we call. Yeah, you know, I think what guides us is the continual passion and desire to enhance the value of the products and you start there and coupled with what the consumers are looking for, right? So you really need to have that as really the starting point on it by... and then trying to add value. That value comes across in being able to share across devices, we believe, and recognizing that everything isn't built in a common way, right? Technologies are evolving at different paces and we're bringing in a lot of desperate categories with (??) categories and refrigerator and a television. And what is the glue that starts bringing that together? It's the thing that really motivates us and it's really, again, driven by those expectations from a consumers sampling. Which brings up the comment, you know, when we talked a couple of weeks ago in preparing for this and you said right now, companies paraphrasing walking a tight rope between universal and proprietary, build your own value and not just be bringing Google on your platform like your competitors might be. You talked a lot about being nimble. Is that another way of saying we don't have all the answers either right now. I don't think anybody really has all the answers, right? I mean the pace of change in our industry is pretty remarkable. Even though we have been talking about these same things for decades and I've been coming to this show for several decades and... but it's really happening now but it's happening in so many different ways and the level and the amount of innovation creates new possibilities and new challenges. So you have to be nimble in being able to seize those opportunities and that is what we focus on. So I wanna... I wanna get back to this idea of you building in... you, Samsung, building in the technology largely from Android, we know that so well, and your products, Smartphones and tablets of course and then there's Samsung apps. You see something missing in Android or you wouldn't have launched that platform, what is missing? Well, I don't think it's a case of it's missing. As Eric said, we have a great partnership with many people in this "ecosystem" that we're talking about here. We have a great partnership with Google in phones. We're partnering with them and developing things in the Google TV space and that's where we're recognizing that this is continuing to evolve. We partnered with them and we are one of the launch partners with Chrome OS and the Chrome PC. So we see that as a big part of this but remember, we've been in the Smart TV categories since 2008. So we are really... been in it quite a while. We have a leading position in it, we have about 1400 apps available. Now, that's not 300,000 but that's... This is a television, all right? So you need to make the apps relevant to the entertainment experience and that's what we focused on. And so, we have continued to develop our strategy in some more televisions and we'll continue to do that but we're looking for new ways and always looking for new innovative to further develop that. I think you just crossed the 20 million download milestone on Samsung Apps. Yes. So let me put it this way, what are consumers finding that is missing somewhere else by going to that app space? I don't know if it's a case of missing, I think the consumers are continuing... Or better or different? Yeah, I think consumers are just continuing to learn and the phrase... the term that best describes it is discover, right? They wanna discover things and they're discovering ways to use the television in a multitasking society, right? We are bombarded. I mean, just look at, you know, the CNN or the ESPN window and you have lots of different contents or find different stories going on. Consumers have adapted to that and other kids have adapted to that faster than we have and we are embracing that discovery and letting consumers discover new ways to add value to that experience but we think it has to be related to the entertainment experience. It's not a productivity experience per say, it's not a pure web surfing, I want something that relates to the experience that I have or I wanna discover new ways to be entertained. Across device categories, is that the mission for Samsung apps and discovery in general or is that just a television statement? I think if you think about our strategy and our sort of view of the ecosystem and as I describe it this way, you know, if you imagine a house in one of the rooms, we have a content room, right? And that content is what a content the consumers are comfortable in dealing with, whether it's Google or Net Flicks or Amazon or our own media hub that offers library of 500 movies and shows but that is one room, right? There's also another room that we're focusing on and we call it our signature services which are unique services that we're developing specific to our cross category strategy and underpinning all of that is this glue or this tissue and we focus there on how do we make it seamless for consumers to move from content, from device to device or get content from the Cloud, whether it's a Cloud service that Net Flicks manages or some service that we might offer and so our job really is... The middle ware statement I am hearing here. Yeah, it is and we are, you know, we are not a Cloud infrastructure company, right? We are an entertainment company, we are a company that is focused on adding value in hardware and recognizing the industry and the market and the consumer expectations have dramatically shifted, you know, from these discreet devices to connected devices and all that innovation is happening in a lot of great places. Our job is to try to bring it together for consumers in a seamless way and take out some of the angst and frustration in that process and thereby let them discovering the experiences. Some of the angst and frustration, I think, comes from going to your specialty and hardware device chop. If you look at Apple and their road map for products, they're at a watershed high for a number of phones. They have three right now actively in the market. I would imagine aggregate, the Android manufacturers in general released three a week through the year. Right. Where do you detect a risk of device chop or the consumers have a hard time saying I don't know which Samsung device I want. Maybe I can be distracted by that confusion. Is there a risk to that? I think it's a case of choice and I think consumers want more than a couple of choices and you look at it in the car industry or look at it in the electronics industry, you look at it in the clothing industry, people want choices and we're about giving them choices. So I have here my new Galaxy S2 which is an Android-based product that has Ice Cream Sandwich and I love it and I've activated it and that works and I really enjoy it, right? Samsung announced yesterday this Galaxy note, right, which is actually really a... really unique concept. 5.3 inch... 5.3, you can do this very... Smartphone, remarkable, a bit (of stretch?) category but then again, always have to be careful as you talk about the tight rope of not creating... there is too much choice, right? I don't know if it's too much choice, I think it is really... But this is, but there could be. Yeah, but there's many choices that exist out there. It's our job to be able to articulate the applications and be able to communicate to the consumer relative to their needs. I want a device maybe that is a phone and truly use a tablet and let's create something new. So we just created and seen the growth in the tablet industry, right, which morphed as a in-between a tablet or like a Smartphone and a PC. Now, we've introduced something that's actually in between a tablet and the Smartphone and it's about choice and how many different devices do one wanna use and when do I wanna use those devices and that's where a product like this fits. Choice and hardware happens far less frequently than choice in content of course. I mean, choose a phone every 2 years and laptop every 3, a tablet every 3 or 4 but I am choosing content maybe several times a day on a weekend. Where do you get in to unlocking the Hollywood treasure chest? Can you be a role player in that? Many people are looking at Apple to say they can crack the code to get instead of the few titles, the many; instead of the biz and teen pricing plans, the simple. Can you and do you wanna play the role in cracking that code? Do you wanna beat them at that game? I think our focus really is to work with the content providers and facilitate the delivery of the content to consumer's wants on the devices they want. So that's really our mission. We're not a content company. We don't aspire to be a content company. But as you mentioned, kind of middle ware, a (gossiper?) layer in there, can you be the one that brokers, the relationship perhaps from Hollywood to Android... Right... by having some kind of a leadership role, I mean your presence is even far greater than it was 3 years ago in this business. And I think we can and I think we can do that really under the premise that I believe the content community wants choices in there, providers we're distributing their content and so we provide that, I think, opportunity for them. The Google 20 Samsung TV is coming out when again? I tried. I don't know... I... I tried twice. You even tried. Let's talk about the role of, you mentioned earlier, the idea of sync and seamless relationship between devices. Right now, that's something of a simple model, the idea that I could pause a movie on my tablet and then when I go in the house, devices know that I wanna pick up the movie on the TV. Clever, right now, not even that well done if doable but feasible. Yeah. What's more sophisticated is to (sum?) and to pause and experience on one device and when I move to a different user or place, the networks and devices and services that I have will figure out something different that I wanna do on that device because I am not just gonna say okay, I am navigating in the car. I don't wanna carry that to the house. Watching a movie on a tablet, maybe when I move to a different room, I am not in that mode anywhere. Is there a place within Samsung Apps that you wanna be that layer of the next most sophisticated sort of sync or what I think of is intimacy, transparency and intuition? Yeah, I think if you, you know, thew evolution of what is occurring here is such that we've gone through a process of simply making content available in a stream fashion for the consumer. And then that was one shift that took place. We announced several applications in the last 24 hours around being able to move the content from device to device or buy it once and use it in multiple places and we think that is the next evolution. Yesterday, we announced an application with techicolor, M Go, that allows me access to content on the television but I also get relevant bonus content, right? I deleted scenes and games that may relate to that experience available simultaneously on my other devices. So you're starting to see that transition and yes, I think the expectation is... and we've worked with them as we go on this and can continue to do and then I can stop and pause and take it up on from the TV in to the car on my mobile device. So that is an area where we're putting a great deal of energy and we're working with content companies and distribution companies to bring that experience alive. Again, it's one we think that is natural in terms of the expectation for... of consumers. You recently took on additional duties with Samsung with (??) America, you've added enterprise to what was previously (road?) consumer role. Yes. Congratulations. Thank you. I am very sure you're very busy. Yes, a little bit. The enterprise role is not one that is irrelevant to this crowd anymore. We look at your ability to take market share. It's now a BYOD world in the enterprise to some degree. More and more IT folks I speak to here at the show, yes, bring your own device within parameters but parameters seem to be (loosening?) with enterprises. Is that perhaps the most right there you can take share in the mobile space as opposed to going head on after, let's say, an Apple share or maybe it's a rim share that you wanna see as low hanging fruit for your mobile devices, certainly in Smartphones, there's not much of a battle than tablets. Is that a cross, an enterprise consumer cross play that can look at? Say, we're gonna be the first to really get in there and work with enterprise and be their next Blackberry or next device that they really trust and work with but also that delights in the individual employee as an individual? Yeah, I think the biggest shift that I've seen and I've been managing the enterprise for, you know, about 5 days and so put that in content... And your length of experience... In my length of experience. No, but clearly having been in this industry for, you know, nearly 30 years, I think the biggest shift that I've seen is the technology used to begin in the enterprise phase. You know... Yeah... Nearing technology and you think about it in the video is interesting. Anything interest there? Exactly, right? Yeah. And now the... it's consumerism that is driving the enterprise phase and it is that where consumers are coming in who are also in the enterprise in the business world like we all are here and saying I wanna use this device, you know, in my network, how do I do that and the CIO is trying to figure that out. So I think there's a big shift that has occurred there and having that consumer orientation, we think is a valuable component in understanding the opportunities that exist for us in the enterprise phase because we've historically been a consumer company but we think there are huge opportunities for Samsung, a company that is doing about a 150 billion dollars a year and we see significant growth opportunities in the enterprise phase and a lot of that enterprise phase, we believe, is gonna be connected devices and so, having that understanding and learnings that we are getting right now in the consumers phase, we think will help as consumers look for fitness devices or other devices to use new technology and we think the enterprise area is one of those. Let's talk about some of your children and how they may squabble if we look at Ultrabooks and tablets, there's been a lot said about how the tablet maybe has a lower ceiling in terms of market acceptance than was first thought. We've gone through the iPad 1 hype cycle. There is large market share. I considered to be a major minority, a large niche, however you wanna term it for tablets. That seems to be what's happening especially as Ultrabooks are coming out and giving you kind of the tablet experience with the file system, the human machine interface, the more powerful operating system in processor base. Is there an uneasy battle between tablet and Ultrabook in terms of your spend on developing the tablet. No, we look at it as a opportunities and anytime you have the fast growing category like tablets and just the same way like PC's over the past few years, you know, there's gonna be a lot of segmentation that goes on and you know, that's what we're seeing here. You know, maybe we over defined it in terms of whether if this device is a tablet or PC, what do I wanna get out of this device? All right. And I wanna be able to get in and out of the device and tablets have provided that. We are just introducing, get to show off a new Samsung device. This is our new Series 9 Notebook Computer and if you just look how thin this is and light, and what it also offers is a boot up time of less than 10 seconds. Our consumers responding to the no compromises here where the tablet has some comprises as a large mobile device. And it's a function though of what I am using it for, right? My kids are using it and I often use my tablet as an entertainment device with some easy in and out access on productivity. I generally use my notebook as a productivity device with a times for me, occasional needs from an entertainment's phase. So I like the ability to get in and out of the PC and if I am gonna write a long e-mail, I like that capability. I enjoy waking up and grabbing, and not so enjoy but I have to, get the e-mails and get in and out and get a few done very quickly and a tablet or a Smartphone provides that. So again, we're giving consumers choices and a very fast growing space but we think products like this provide new opportunities and new experiences for consumers that are gonna give them choices in terms of what they're doing. All right. There's a story from Hardware. Please, let's thank Tim Baxter who is President of Sales, Marketing and Operations of Samsung Electronics America. All right folks. We've now heard from two very influential movers on very different sides of the ecosystem argument largely on the supply side if you wanna look at it that way but there are other facets to this. You can even call it sides 'cause there are so many, consumers, retailers, wholesalers and a third sort of a blended group of entrepreneurs and capital. The list of big names in the Ecosystem is long but our next panel will try to help the even longer list of new players and innovators grab a seat before the music stops. Blake Krikorian is our inventor and entrepreneur. He has been described as a veteran of the convergence (wars?), an inventor, investor and Amazon board member. Under his belt, Slings Box, a mobile operating system, telecom and consumer electronics consulting, one of the earliest hand held PC's and a history of growing technologies from Embryo to Acquisition. Bill Gurley is the money man. He is a general partner at Benchmark Capital and his investment resume includes Clicker, Open Table, Second Life, Ooger, (Bhudu?), and Shopping.com. He has engineered multiprocessor servers, analyzed the IPO of no less than Amazon and picks the winners for Wall Street during the Tech Boom years. These are the guys who make it happen. So whether you're a brand new company or an old established brand, listen up. Let's figure out how to make it all work. All right everyone. Please welcome Blake Krikorian, co-founder of Sling Media and CEO and ID8. And Bill Gurley, General Partner at Benchmark Capital. (Enough already?) Yeah, whatever, it's fun. What's up? (??). Okay. Thank you. Good to see you. Thanks guys. Nice to see you. Nice to see you. Thanks for joining us. Do you like how we kinda address? They do every... That's good. I mean they got a lot on here. But we're gonna do the... He's gonna be Dr. Evil and I will be Mini Me. I was gonna come out on a baby (??) but he hurt his back last night. I know a controversy, I am just saying like we missed this previous time. Yeah, there are a lot of photographers here, so maybe we could try that later in the show. We could that. Yeah. Now, we'll do it later. So first of all, you guys have been backstage hearing from people you know well but hearing the latest view points of where they're coming from. Top line reactions, right off the back, what made you stroke your chin and say yeah, it's very good or what the hell was that? Anything out of those guys? I like that the (??) comment by Eric. Someday I'll be able to get away with that. No, gosh, you know, I think the way you guys have framed the overall sort of session is exactly right. You know, what I just couldn't help doing was shaking my head the total time that it's finally... this is finally happening and for guys like, I mean Eric... Eric was on the board of a company that I worked at back in the early 90's called General Magic and General Magic had an operating system for intelligent devices, Sony and Motorola have both built products, physical products based on them but they also had a networking, programming language that the whole vision of an electronic marketplace, (free?) internet which is gonna happen in like AT&T and (friends?) telecom are gonna build and we always have this saying of sort of it was... the ecosystem was framed in a different way which was vehicles, highways and destinations and it was pitched as a 10-year road map. Just realizing it's like how... we... the vision was right. It just wasn't a 10-year road map, it was like a 25-year road map. And it's just finally there and it's just amazing to see it all, you know, come to (apparition?). And would you say that... I mean there's certainly the premise of this session is that we're there and everybody is hoping to be there in terms of connecting all the different dots, do you think we're there and how did you find that? I think it's interesting, you know, I think from having a connected device in your home over there, right, so I worked with (Bhudu?) there and like 40 million devices now, installed devices and so almost everyone of you has some type of device that allows you to get to You Tube and almost everyone has ethernet in the back of their television. So from that perspective, we're there. I think there are two things people expected to happen and (??) you mentioned this. One is everyone expected Hollywood to get ran over and that would be a sign that it happened and that didn't happen. Yup. Hollywood won round one of this digital, you know, they didn't get their distribution models torn up, they didn't get ala carte pricing, they were able to maintain their power and they are very adapted on how they did that. And then the second thing is I think we all kinda hoped that some startup would emerge as the UI of the tech in television, that didn't happen either. And the one thing I take away from the earlier sessions is just listening to Eric talk about Android, you know, I'll go out and say that I actually think Google's Android execution may be the most aggressive, strategic, initiative in the history of business like... not the history of tech but the history of business. What are they protecting? Search. Yeah, I mean look, search is a fabulous business and if you look at Search on the PC, you know, there were threats to it. So Firefox, right, had that little bar and Google had to pay FireFox to protect that bar and if it weren't for the consent degree, IE would have been much more integrated with Bing than it has been. And so there is this opportunity to be above Search in the layer and take Google away from this incredible goldmine that it has called Search. So when they saw a new platform coming, they decided, hey, we're gonna come up with a way to make sure that there's no one standing around us and getting in the way of that search and... And protecting Search beyond just the Search we know, the box we're talking about, but to a higher level of discovery, right? Sure. Sure. I mean, that's the evolution of Search which might include discovery and content, certainly includes maps where they probably invested another several hundred millions dollars... Easily... But it's just amazing, you know, the momentum that they have. So what are they doing wrong? They seem to be in a best position to pull it off although there is a growing... there is a growing course despite what Eric says from users about what they term fragmentation. Well, fragmentation and I don't think that Eric would deny it that fragmentation of the platform is a challenge. It most certainly is and I didn't hear him say anything different to that. You know, and of course, one person's open is another person's close from a standpoint of I want everything to be open so long as it's my API's and everything else, right? So there's probably a little bit of that from Eric but that's, you know, that's to be expected. You know, I think that the fragmentation will continue to be the challenge, as well as the strength of the platform and you just kinda see how those things play out. I mean it was always amazing to me, I remember as a kid growing up in Mountainview, you know, very close to where Apple was born and I could never understand why anybody would buy a PC just because I would say those products did not work. And why wouldn't everyone buy an Apple? Well, you know, we saw what happened there. And so, from that standpoint look at history, you think Android can be and will be hugely successful. That's not to say it won't be without its sort of growing pace. Well, that leads to another question. Actually, I am hoping that you'll talk to us a little bit about Amazon. Oh grace. Do you need all of these devices or can you do a really strong, sort of contents... Does Amazon need a phone or is it okay for them to power sort of a killer experience on a couple of devices. Well, I mean, first of I am on the board and I am not so... I am not as liberating to comment on behalf of Amazon. Oh, I know. Yeah. But I am a customer and I also... I think, look, I mean from Amazon's perspective, I bought my last Android phone on Amazon and it wasn't from Amazon. So who really cares? I think, you know, Amazon's vision of being the most consumer-centric company in the world remains true and I think they'll pick certain places where perhaps the experience they were trying to provide did not exist. In fact, here's an interest thing. I remember he was telling our folks at Sling when new people would come in and try to talk about the approach here 'cause everyone goes is it hardware, is it software, is it services, right? Right. And I remember even trying to raise money, fortunately I didn't get rejected by Bill. We got rejected by a lot of guys but you know, first off, when you're going raising money, people like are you hardware company, are you software company? And you know, I would say like, okay, we're both high board experienced company, but look, if I have to try to put it in buckets, we're a software company who is now selling our software in a box of silicon and what we tell... What I tell people at Sling is the approach is always, look, you first focus on what's the experience you wanna provide and then off of that, you then say, okay, well, what software needs to be developed in order to deliver that experience and then off of that is is there a hardware that exists today that can develop and deliver that experience. If there's not, you then go build the hardware. And I think there's cases like the Kindle E-reader where they talked about the reading experience and the buying experience and the software and then said, look, no one else is making products with a battery life invisibility and so we need to go solve that problem. Right. Besides that, I mean, they're very much (??) as well. It's like as long as other people are providing fantastic experiences, they'll be happy to sum them. Well, I think one of the good point which is this major ecosystems do overlap. So, you know, Amazon has historically sold analog media, books, records and so, if they wanna be in that in the future, they have to find a way to do something that Apple's doing, right? Right. Facebook gets revenue from Zynga. They take 30% of that game. Apple takes revenue as a distributor of game. So Apple and Facebook and I think that's one of the reasons why Facebook has struggled to get their Apple products out on time. Now, I think Apple made one mistake and I think Apple doesn't... hasn't made many mistakes but I think they made one crucial mistake and that they got greedy on the rate. So I think the 30% rate alienated Amazon and Facebook and they shouldn't have done that. With Android coming, they should have made Facebook and Amazon their bestfriends, had them deeply integrated in the IOS the way Twitter is and that should have happened and that would have helped Apple and they got greedy on the rate. And now, we've got a multifaceted war with lots of big guys out there pounding the room. What does Samsung have to worry about or defend against? We've heard a lot about how they're hitting a lot of cylinders or... I think the few things, I mean first off, Samsung has came from being potentially out of business back in, I remember, the late 90's and to being the power house they are today. So they deserve a ton of kudos there. I think Samsung just like any of these other consumer electronics companies besides Apple, back to my comment about experience in software and then hardware, all those, you know, most of the companies here, they have as backwards. They start with the hardware and kinda build up and that's continuing to be a challenge, like you know, just a maybe point out one little tiny nit in the product that Samsung created to the point that Eric was making about, you don't just deliver the product with the spec sheet and the check boxes, it's got to work. So somehow, there should some rule where maybe people can vote and it's like if a product has a feature and enough people vote and say the feature doesn't work, they have to remove it from the list of things but you know, so like take the Samsung television and again, I just bought 3 Samsung televisions and I thought it was the best TV out there. With that being said, I am really in to some control and multiscreen sort of things and I got all excited at first 'cause I said wow, the Samsung TV comes with this iPhone interface or iPhone app that let's you control your television set and I thought, okay wow, that's great, you know, that really is forward thinking and so forth. And then I went to go use it and I realized it all... it did do all the things except it was missing one very very important command. Probably the most important command of anything from controlling your TV. What you think that command was? Turning it on actually. You couldn't turn it on because guess what? The ethernet... the ethernet chip was asleep when the TV was off. So therefore, I had to go grab my other darn remote, my R remote, hit the button and then I could go control it. So it's just... it's understanding that those details are so critical. It's not just about getting the feature and saying hey, I now have it. It's like the other guy does but do I have it, it just sounds so basic, do I have it and does it work. And I think that Samsung understands that they need to keep improving just like all these other companies. The Samsung and HTC are probably the two that have shows the most progress there. But that's still a huge challenge for these guys. Well, Samsung and (??) seals for them. As an instructive lesson for a variety of companies that have their general structure. I think they benefited by almost by not being overly caught up in their own way of viewing of things, you know, contrasted with Sony who has all these visions of their own software stock and all these kind of things where by they can't kinda get their arms around the open standards that are out there or you know, in this case Android. And so, being there first, I think that's been helpful to them. I think in the long run, they'll face the same challenges that Dell faced in the PC world and I think it's a very similar... and I think it's a great analogy for what's going on here which is based on what I see, Android's just getting started. It's gonna become very dominant in every home and car and all these kind of things and once that happens, you know, then a whole new set of challenges will arise for how you differentiate it. Well, it almost seems like you're arguing for, you know, inadvertently arguing for Android as a plug and play solution for these hardware manufacturers. So it's not their core competency. I think yeah, absolutely. I was just gonna (say?) it's too late. I think the cat is out of the bag. I mean, you look at how things become self reinforcing, the one... as I walked around the show today, the one thing that just really really blew me away was, you know, looking at the synergy between (Arm?) and Android and so you go look at, you know, in the Marvel booth at what we're doing with the (Arm?) processor, they've got these little demo boxes for connecting TV and their kits are like 20 bucks but the point is there's all these ecosystem that is building around that and you know, Snap Dragon and you know, like QualComm. So QualComm, Marvel, you know, all these semiconductor companies are doing these (Arm?) course that are 99 cents and you know, they're all doing it on Android 'cause the Windows 8 thing just gotten out last night and (does exist?) and that's just monstrous amounts of effort and that all leads to experimentation, it leads to cross production and it's just a tsunami. Well, and the point... I mean, Eric... Yeah, Eric said something else that I think is absolutely dead on which is they have delivered the openness from the standpoint of letting people actually fragment or differentiate. Right. You'd rather see the differentiation but they're allowing the fragmentation. Frankly, fragmentation as bad, it also equates to innovation and to allow the innovation to happen. I mean a perfect little project I've been working on the past couple of years was I was trying to do a bunch home automation and controlling my house and the first thing I was gonna use, IOS devices as an in-control point, and you know what? When it came down to like using that iPad as a remote control or something or putting the iPad in the wall, it was a horrible experience because I didn't wanna have to whack up to the damn thing and swipe to unlock it. It's like the damn thing should like just have the proper sensor and turn on and I even know the guys in Cupertino's who I am calling to see if they could let me kinda work around that, no, no, no. You know, it brought me over just as a developer, brought me over into that Android platform 'cause then I can just go ahead and just tweak these UI's much as I want and.... And Google is investing in developer relations the way Microsoft is... 25 years ago. That's actually... that's a very good point. Which by the way, the guy who runs Android and started Android who is Andrew Rubin, used to work at General Magic 20 years ago. So it's kinda interesting. So if you go to the Android developer operations team, first of all, they're just so happy to see you, what can we do for you, you know, just like Microsoft used to do it. Yeah, tail is wagging. But when you say hey, I want a device that auto starts or I want a device that's locked down. They go here's 3 OEM's they're developing hardware, like here. And so, you're right in calling them out for the fragmentation but it won't be a failure, it would be a benefit. I was in an AT&T store over Christmas and just looking at the layouts, there were 3 iPhone stations and 20 Android stations. And withing there, there's one of the big screens and one of the little screen, one of the keyboard this way and one of the keyboard this way and you know, people are walking around and looking at them and trying to think about what they want. And so, the real reason we wanna get you guys on stage is because you're entrepreneurs and/or the money guys, what do you do if you're a new player, right, in this new world where it feels like you may be ought to have a hardware solution, a content... a lot of content deals, some maps, is it possible to break in or are you pretty much as an app developer? What would come across your desk tomorrow that you would get really excited about? Yeah. No, it's your desk, not my desk. I build the money. Sorry, Bill. It's your desk. So it's Bill's desk. You know, it's tough. I've worked with 2 incredible teams, the (Bhudu?) team and the Clicker team and we had good outcomes but they weren't blow-away outcomes and there's a lot of power players. I mean with what Google is doing with Android, it's gonna destroy a so much market cap, you know, it's already happened around in Nokia and you know, (??) and I think Garments got a lot, you know, with it. And so, with that big of force out there, it's hard to find a high ground and then Hollywood, you know, has played this game extremely well. So you know, (Hulu?) took 200 million dollars in a ton of proprietary content to get off the ground and that full exist now, it looks like they're gonna have to spend a billion dollars in content. So, I think you're gonna have to... I'll give you an example of someone who has done it and I've been blown away as the Go Pro guys. So it was off the beaten path, they weren't trying to take over an old world or one who was highly choreographed, they went to a new market and really blew it away, really nailed it, built a product that is differentiated around that news case, but it was a new news case and they got out in front of a huge waive and they've done an amazing job. They started at the experience. They started at the experience and the lifestyle and worked they way down and you can bet, they probably don't have much in the way in DSP Engineers doing image sensing technology and that's not what it's about. Yeah. You know, and so I think that there's... I continue to believe that there is a huge opportunity for entrance in all view of places in the ecosystem. I happen to love gadgets and love the hardware element and I think that on one hand, it's certainly a tough business and you have to have your act together all the way through and it's not just about oops, you kinda mess on a DRAM chip and you know, you can just hit the reset button and start over. It's you just bought, you know, 100,000 units of inventory and you're screwed. Yeah. So you gotta really have your act together and there's huge barriers but there's still such an opportunity for companies who understand all those pieces that actually and understand how to approach it again from the experience on down because I think it's gonna take a long time for this traditional hardware companies to really really reinvent how they approach things, you know, besides that, you know, the start is hard. It is getting harder and harder and harder, there's no question. You know, the other thing from startup companies, it's about, you know, obviously being disruptive, right, if you can find out where you can just wrap in a particular area, maybe there's an established player who's got a huge market share and they see something, some of the evolution that's gonna happen and it's just hard for them to move, you know, that's... I think there's still gonna be opportunities but they are becoming tougher and tougher. Yeah. Right. Great guys. Ladies and gentleman, please thank... join us in thanking our two panelists here at the Next Big Thing, Blake Krikorian and Bill Gurley.