Four Tech Flops to Watch in 2011

Imitation is as old as innovation, and sometimes it can yield positive results.

When Microsoft (NASDAQ:MSFT) released the original Xbox video game console 10 years ago, the device looked like a hollow attempt to pick at scraps left in the wake of Sony (NYSE:SNE) Playstation 2, but the start of the Xbox Live premium online gaming service allowed Microsoft to become a market leader. Imitation gave them a foothold in a new market.

Of course, imitation also led Microsoft to create the Zune.

It’s in the spirit of Microsoft’s ill-fated iPod competitor that we take a look at four me-too contenders in entertainment technology that are sure to fail in 2011. Of course, the possibility exists that these imitators could rise up and challenge the profitable services and products they emulate, but the odds are low.

Here are this year’s flops:

Alphaline Entertainment

Three days after Christmas, Sears (NASDAQ:SHLD) announced it was partnering with Sonic Solutions (NASDAQ:SNIC) to launch Alphaline Entertainment, a new digital movie download service. As the home entertainment industry scrambles to accommodate an audience that is abandoning both physical media like DVDs as well as broadcast and cable television, digital-streaming video options are the last bastion of hope for businesses that relied heavily on physical sales of home entertainment products.

Sears is hardly the first — Best Buy (NYSE:BBY), Wal-Mart (NYSE:WMT), and Amazon.com (NASDAQ:AMZN) have all launched online movie rental and purchase services, hoping to cash in on the massive success of Netflix’s (NASDAQ: NFLX) streaming rental service. Sears’ service, however, is programmed to fail — Alphaline’s pricing includes $3.99 rentals and $19.99 purchases for new movies, $5 more, on average, than on Best Buy’s service. Second, Sonic’s streaming platform won’t work on Apple’s (NASDAQ:AAPL) Mac computers — not exactly a recipe for success.

Sony Music Unlimited

Sony’s new iTunes competitor opened for business on Dec. 23. The subscription-based service marks the Japanese tech giant’s latest attempt to recapture its competitive place in the music industry that was lost to Apple and iTunes over the past decade. Instead of having customers purchase downloadable MP3/MP4 files, Music Unlimited lets them subscribe to a cloud-based music archive of 6 million songs they can then access through the Web — or through Sony devices like Bravia HDTVs of Playstation 3 video game consoles.

But just days before Music Unlimited opened, research firm NPD announced that Apple’s iTunes now controlled a 66% share of the digital music market. You don’t take down iTunes by telling customers they can’t keep their music when they stop paying for it. That’s not to mention all of the resources now accessible through connected devices like Pandora Radio and YouTube that offer free access to the same sort of content offered by Sony’s service. Don’t expect Sony Music Unlimited to survive into 2012, at least in its current form.

Windows Phone 7

It’s still early days for Microsoft’s new smartphone operating system. Google’s (NASDAQ:GOOG) Android took most of a year to gain real momentum in its competition with Apple’s iPhone and Research In Motion’s (NASDAQ:RIMM) BlackBerry line. Of course, 4.5 million Android phones were sold between the platform’s release in October 2008 and the end of that year. Just an estimated 40,000 Windows Phone 7 phones were sold during their first month available. That is not a promising start.

Microsoft also will have trouble keeping its scant few Windows Phone 7 customers using the platform. As of right now, the Windows Phone Marketplace only has around 4,000 applications available for download — slim pickings in comparison to the hundreds of thousands of apps available for download on Apple and Google’s platforms. Unless Microsoft can capture the public’s attention with a must-have phone this year, they’ll go back to the drawing board with their smartphone platform for the second time in the past five years.

iBookstore

Apple is one of the best stock picks according to most investors. Given Apple’s success with its App Store and iTunes, you’d think the company’s e-bookstore would be a guaranteed success. That hasn’t been the case. Since it opened last April, the iBookstore has lagged behind e-book competitors like Amazon’s Kindle store and Barnes & Noble’s (NYSE:BKS) Nook store. Selection is a huge problem for Apple’s service. The iBookstore has between 46,000 and 60,000 books available for download, but 30,000 of these are free public domain titles available on any platform. A big part of why the iBookstore has failed so far, and what will be the nail in its coffin in 2011, is that Apple has yet to come to an agreement with Random House to bring the publisher’s titles to the store. When everybody (who still reads) is reading The Girl With the Dragon Tattoo, you should probably have it in your bookstore. Unless you’re Apple.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.


Article printed from InvestorPlace Media, https://investorplace.com/2011/01/four-tech-flops-to-watch-in-2011/.

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