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August 1, 2010
ChangeWaves And Human Nature
By Tobin Smith
So let's shift our focus from the market and instead expand your understanding of handicapping ChangeWaves.
Transformational Change ... can you recognize it, and do you know what to do when you see it? Let Toby guide you through the myriad changes taking place in our world today. Click here to find out how you can ride the next ChangeWave to profit.
Making money (and avoiding losses) on the great technological shifts of our times is in many ways counterintuitive. Most investors assume the logical outcome is indeed the most-likely outcome.
Wrong. Especially for consumer electronics ChangeWaves. Innate human behavior rules the logic jungle, and innate human behavior drives how human beings will adapt or use a new killer consumer product or service.
Twenty years ago, the consensus wisdom on VHS tapes was they would kill the movie theater -- who would want to see a movie for $10 a couple (now $20, of course) when you could rent a movie for less than half that amount and not leave home?
Well, they were partially right -- it did kill the XXX movie houses. But they were only in business because there wasn't a home-based alternative.
When it comes to movies, people go see them as a way to get out of the house or to share time with someone. The videotape -- and the DVD soon after -- obviously did not address those issues.
The same is true with CD burners -- people thought they were going to kill the record business because people could copy CDs and share them with their friends.
That viral marketing, however, has launched a hundred new bands that never would have seen the light of day, and downloading songs versus buying CDs has only created more demand for music.
UNDERSTANDING HUMAN BEHAVIOR
Now we come to the TiVo, along with the digital video recorders (DVRs) embedded in most DirecTV boxes. (Not for much longer I might add, but that's another story.)
The word TiVo now means "to tape a show." And when it first hit the market, the common wisdom was that most people would use it to tape cable shows without commercials. Common wisdom was that most people would click through ads on their TiVo'd shows.
And time-shifting (taping a program to watch at another time) was going to wreck the broadcast networks' prime-time schedule. But it did not work that way, friends. New studies just in on millions of DVR users show:
1) 77% of shows recorded on DVRs are broadcast shows.
2) Only 7% (including me) skip past ads.
3) 61% of DVR users watch their shows on the same day they air.
4) 84% of DVR users watch their primetime shows live.
So much for the death of network TV -- so far the DVR is preserving the mass TV audience. Common wisdom was wrong again.
And although this makes no sense to me, obviously there are cultural and behavioral issues that drive TV-watching that the experts fail to recognize. (I record my favorite cable shows like "Rescue Me" or "Entourage" and watch them during the week when, to my taste, there is nothing good on TV.)
One cultural issue I think is how people behave versus how they say they behave. I love when you first meet a person and they make a point to tell you they don't watch TV, and then make a reference to a first-year "Seinfeld" show later in the conversation.
People say they hate ads, but holding the remote and buzzing through the ads is sort of a hassle.
Bottom line: When you make investment decisions about how people are going to radically change their behavior or preferences based on a new consumer product or service, don't fall in the trap of failing to understand how entrenched current user behavior is.
When the new Microsoft Vista operating system finally arrives, watch out. The ability to download HDTV shows and show them anywhere in your house on any screen is going to be a big part of the home video server market that will finally get some traction.
Watch for more on this ChangeWave soon.
Toby
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Tobin Smith is the founder of ChangeWave Research, the editor of ChangeWave Investing and ChangeWave Microcap Investor and a contributing market analyst for Fox News Channel. His market commentary can be found twice weekly in the ChangeWave WaveWire and he provides more specific recommendations and advice through his ChangeWave Investing service. Earn a decade's worth of wealth in two years! Don't miss out on the next ChangeWave. Click here to learn how you can keep up with today's changes and which ones will earn you a profit.
