by Scott Wharton, CEO of Vidtel
One of the things that’s been bugging me for a long time is the lack of aggressiveness among the big three video conferencing players (e.g., Cisco, Polycom, LifeSize) in their product offerings and especially their pricing. While most other technology industries come up with new products each year (some each quarter) the big guys in the video space have essentially not come up with anything meaningfully new in the past 4-5 years. For example, some of the products that could be very interesting to the SME market (like the Cisco E20 phone or Polycom VVX1500) are now more than 4 years old with no obvious replacements coming to market.
Another example is the product announcement from LifeSize today on their new “Unity” product line. Unity because it’s bundled with an LCD monitor. The Unity 50 comes with a 720 Passport (in itself nearly 2 ½ years old launched in late 2009) and a built-in 20-inch monitor. So the Passport is normally $2500 MSRP and the Unity 50 is $3999. So why is the addition of the 20-inch monitor a $1500 markup? A quick check on Amazon.com shows a high quality 720p monitor retails for ~ $150 (surely an OEM price would be under $100).
But it gets worse.
LifeSize announced their “Unity 500” with a MSRP of $20k. So what do you get for the extra $16k? Well, for starters you get a 1080p camera. And also you get a 1080p 24-inch LCD screen. Amazon shows that a 24-inch 1080p LCD costs approx. $300 with a range of $200-400. Ok, so an extra $150 for the 1080p monitor retail. That leaves nearly $15,850 extra for the camera. Why the super premium for these upgrades? The answer you typically get from execs in the video space is “because we can get it”.
But increasingly, the numbers show a different story. The big guys all reported flat revenue year over year from 2011 to 2012. And it’s not that people are shying away from video conferencing. They are using a ton of it, growing by leaps and bounds. It’s just that increasingly, I believe most business people are looking hard at the difference between these very high quality but massively overpriced and complicated devices and saying that the alternatives on a PC or tablet are just good enough.
All of this reminds me of the first Motorola phone done with Apple called the ROKR back in 2005. Before Apple launched the iPhone, they partnered with market leader Motorola on the ROKR for a phone that had an iPod bundled in. It had 512mb of memory but limited the firmware to only support 100 songs. 100 songs! Why? Because they could. Frustrated with their too-conservative partner, Apple came out with iPhone 18 months later that supported thousands of songs and the rest is history.
What do Motorola and the video conferencing leaders have in common? They are too conservative; too obsessed with charging what the market will bear today vs. creating the market of tomorrow. What if the LifeSize Unity line was not $4k and $20k but $995 and $1995 respectively? Do you think these would not fly off the shelves given the great quality and price performance?
Many a great company has been mowed down by the forces of Moore’s law and inability or unwillingness to cannibalize their existing product lines. The big video players have all been warned by the market: Get serious about embracing Moore’s law and be willing to make your current product lines obsolete. If not, your competition is already doing it to you. Not with like for like products but at the lower end with good enough quality at a fraction of the price.
It’s unquestionable that video conferencing will be and is becoming the de facto way that people communicate. Whether the pioneers will be around to reap the benefits of creating this market remains to be seen but it’s not looking good. So what’s it going to be, guys? Are you going to be the next Motorola or the next Apple?