Weekly Wireless Report WEEK ENDING September 4, 2015

INSIDE THIS ISSUE:

THIS WEEK’S STORIES This Week’s Stories Ad Blocking In Apple’s iOS 9 Highlights Rift Over Ads With Ad Blocking In Apple’s iOS 9 Highlights Rift Over Ads With App Publishers App Publishers September 4, 2015

More Than 225,000 Apple Apple has warned developers that, in the name of privacy and user preference, it is adding ad-blocking iPhone Accounts Hacked capability in its upcoming release of iOS 9 software, which is expected to arrive with new as early as Sept. 9. And that’s creating some tension with , mobile marketing companies, and PRODUCTS & SERVICES publishers alike.

A New App That Lets Users’ If iOS 9 and the ad blockers are widely adopted, it could mean significant disruption to the $70 billion Friends ‘Virtually Walk Them mobile marketing business. More ad blocking means that many users simply won’t see as many ads in Home At Night’ Is Exploding In their games or apps. Publishers, ad networks, and marketing tech companies will get less revenue. Popularity Mobile game companies don’t need to panic , but they’d better pay attention.

Sprint Revises Free Service The battle over the legality of ad-blocking software is still playing out on the Web, where online ads are Deal For DirecTV Customers, a $141 billion business. In May, a German court ruled that ad blocking is not illegal. In mobile, Apple Adds Data Options has added the ability to block ads via a change in its platform that allows third-party companies to create ad-blocking apps. Consumers will have to install these apps themselves, however. EMERGING TECHNOLOGY What’s confusing here is that there are actually two separate things happening that can affect ads. Ad Apple, Google Bring blocking is a serious matter from a developer standpoint, but a security change that improves overall Smartphone Functions To Car safety isn’t that big a deal — although it can be if developers are asleep. Dashboards Ad blocking is definitely the more contentious issue, but it’s also limited to the browser for now. Releases First Public Why is Apple implementing the ad blocking? Apple chief executive Tim Cook has made it clear the For iOS Preview company’s focus is on privacy and protecting user information. But others see it as a stab at Google’s main source of revenue — advertising. MERGERS & ACQUISITIONS Apple has made some comments about its position. BlackBerry Acquires Mobile Security Company Good “We have been building these features with a focus on providing better control over privacy,” wrote Technology For $425M, Benjamin Poulain, an Apple engineer. “We wanted to enable better privacy filters, and that is what has Despite Their Thorny Past been driving the feature set that exists today.”

Amazon Acquires Elemental He also said that ad blockers “let users decide what should load and not load, who can track them, what Technologies For A Reported should be visible on pages, etc.” Users can also begin to install “blacklist” apps that can block certain $500 Million In Cash from ever activating.

INDUSTRY REPORTS Apple is expected to launch iOS 9 as soon as Sept. 9, when new iPhones are expected to arrive. Though Apple is not creating the ad-blocking software, it has allowed third-party developers to create Android Market Share Stays programs that work with the Safari browser in iOS 9. Steady In US But Sinks

Deeper In Europe One game publisher, who asked not to be identified, noted that mobile web on Safari is a limited part of

the market. But ad blocking there could result in a decrease in the available ad inventory, which will Hulu Offers Ad-Free Streaming raise the cost of advertising. This game publisher estimated it could raise the cost of iOS ads by 10 Option For $11.99 A Month percent.

“We’ve seen ad revenue account for up to 20 percent to 50 percent of monthly earnings for, especially, smaller mobile game devs,” said Joost van Dreunen, analyst and CEO of Super Data Research. “While it may hurt these companies on the short-term — I suspect they will argue that it will hinder innovative game design that has no other way to monetize — it will prove worthwhile on the long run by providing a less-cluttered mobile experience for consumers.”

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He added, “From what I can tell, Apple is placing restrictions around what it wants on its platform, just like it’s done with free-to-play and kids-focused games. It’s merely a step in the maturation of mobile as a primary platform. Ultimately, it will force mobile advertising to evolve as it can no longer purely rely on a model that emulates advertising around web, TV or internet browsing.”

Separate from the ad blocking, Apple is making a security change that could lead to some hiccups for developers and ad companies. It is introducing a separate security change in iOS 9 called App Transport Security (ATS). The ATS will be enabled by default, which means that an app ad that links to a web service must go through a secure transport protocol ( instead of http) or the link will fail.

This secure transport prevents hackers from having a field day or nefarious developers from grabbing a user’s private data. But it also stops a lot of legitimate ads from functioning — if the developers and ad companies are asleep at the switch. Apple has noted that developers and ad companies have to modify their apps to prevent the link failures. Google drew some criticism when it suggested that developers could try to disable the secure transport, but after complaints arose, Google made clear that it was only recommending that move if no other options were available. Apple itself had made similar suggestions, so the ATS issue did not expose a rift between Apple and Google.

Rob Weber, chief executive of Native X, is concerned about the impact on “native ads,” or mobile ads that are embedded inside apps and feel as if they are part of the app itself. Those native ads can be tapped by the user, and they typically take the user to something like a purchase screen for virtual goods inside the game or app. Many developers implement ad networks that redirect users to the Apple App Store after viewing an app ad. App publishers also redirect ad traffic through their own servers for tracking and other reasons.

If developers don’t amend their code, the ads may no longer work because the linking won’t happen. Weber’s company has already released updates to its software development kit so developers can update their apps — before revenue is lost.

“Although this change will help protect iOS users, app publishers and mobile advertisers have the potential to lose millions of dollars in advertising revenue if they do not update their apps,” said Weber, in an interview with GamesBeat. “The links trigger ads, but the links can now be blocked. This affects every ad network or app maker who is not running ad serving through secure transport. We adopted secure transport in the last 30 days because we saw it coming.”

In fact, one of the problems is that ad networks will need to make changes, but they typically don’t have a ton of engineering resources. That could cause hiccups.

Google recommended in a post that new app developers use https exclusively, and that makers of existing apps use https as much as possible and migrate toward compliance. But it also said, as we discussed earlier, that to ensure ads continue to serve on iOS 9 devices, the short-term fix was to disable the secure transport and enable non-secure content to load successfully.

After that post, Google added: “We’ve received important feedback about this post and wanted to clarify a few points. We wrote this because developers asked us about resources available to them for the upcoming iOS 9 release, and we wanted to outline some options. To be clear, developers should only consider disabling ATS if other approaches to comply with ATS standards are unsuccessful. Apple has provided a tech note describing different approaches, including the ability to selectively enable ATS for a list of provided HTTPS sites.”

venturebeat.com

More Than 225,000 Apple iPhone Accounts Hacked September 1, 2015

Hackers have stolen more than 225,000 Apple accounts from iPhone customers.

Security company Palo Alto Networks is calling the attack "the largest known Apple account theft caused by malware." Palo Alto Networks (PANW) discovered the hack along with Chinese tech group WeipTech.

The good news for most iPhone customers is that the malware, nicknamed KeyRaider, only targets "jailbroken" iPhones.

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Jail-breaking allows iPhone owners to access parts of a phone's file systems that are otherwise restricted for security reasons.

KeyRaider is mostly found in Chinese websites and apps that provide software for jailbroken iPhones. But the malware has spread far beyond China, showing up in 18 countries, including the United States.

Once infected with the KeyRaider malware, a jailbroken iPhone will give up all of its owner's iTunes App Store information to the hackers, including the Apple (AAPL, Tech30) account username, password and the iPhone's unique ID. It also steals all the information about the owner's App Store purchases and prevents people from recovering their phones once they've been hijacked.

The hackers aren't keeping all that for themselves: They have allowed other people to take advantage of the stolen account information.

The hackers have uploaded software that lets other people purchase iTunes apps for "free," using the victims' accounts. About 20,000 people have downloaded the software that lets them steal from the 225,000 affected iPhone owners.

Palo Alto Networks said victims have reported that their Apple account purchase history has displayed apps they never bought. Others say their phones have been locked, and the hackers are demanding a ransom to return access to the owners.

Jailbreaking phones can be a useful way for technologically savvy iPhone owners to customize their devices to their liking and install apps that don't appear on the iTunes App Store. But it also bypasses some important barriers Apple puts in place to prevent these kind of attacks from happening.

"Users ... need to consider carefully if the additional functionality is worth the additional risk," said Nicko Van Someren, chief technology officer of mobile security company Good Technology.

cnn.com

Products & Services A New App That Lets Users’ Friends ‘Virtually Walk Them Home At Night’ Is Exploding In Popularity September 3, 2015

Tens of thousands of people around the world are now using a free personal-safety mobile app that “The Companion app, created allows friends to virtually walk you home at night. by five students from the The Companion app, created by five students from the University of Michigan, enables users to request University of Michigan, a friend or family member to keep them company virtually and track their journey home via GPS on an enables users to request a online map. friend or family member to Although they can do so, the friend or family member does not need to have installed the Companion keep them company virtually app, which is available for both Android and iOS. and track their journey home via GPS on an online map.” The user can send out several requests to different phone contacts in case people are not available to be a companion or not with their phones at the time.

Those contacted then receive an SMS text message with a hyperlink in it that sends them to a web page with an interactive map showing the user walking to their destination. If the user strays off their path, falls, is pushed, starts running, or has their headphones yanked out of their phone, the app detects these changes in movement and asks the user if they're OK.

If the user is fine, they press a button on the app to confirm within 15 seconds. If they do not press the button, or a real emergency is occurring, the Companion app transforms the user's phone into a personal alarm system that projects loud noises to scare criminals from the scene, and gives you the option to instantly call the police.

businessinsider.com

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Sprint Revises Free Service Deal For DirecTV Customers, Adds Data Options September 3, 2015

In response to customer demand, Sprint announced Thursday that it is revising its free year of service offer to DirecTV customers to include more data options for an ultra-low cost.

Beginning tomorrow and running through Sept. 30, DirecTV customers who switch to Sprint or existing Sprint customers adding a new line of service will be able to choose from three data-level options.

As before, eligible customers will be able to receive unlimited talk, text and 2 GB of data per line for free for one full year. But now, customers will also be able to choose to accept the offer with 4GB or 6GB of data for $10 or $20 per month, per line, respectively.

“DIRECTV customers switching to Sprint told us they want additional data options,” said Sprint’s chief marketing officer Kevin Crull. “We heard them loud and clear and are giving them what they want – the ability to add more data to the DIRECTV offer. We are giving our customers the ability to stay connected worry-free.”

In order to take advantage of the promotion, DirecTV customers must provide proof of service and either purchase a new device or sign up for one of Sprint’s iPhone Forever, Easy Pay or leasing programs.

DirecTV customers who have already made the switch can choose one of the new data options by calling Sprint customer care.

The only fees associated with the offer will be a $36 activation fee as well as monthly taxes and surcharges, depending on the state since Sprint has also offered to pay off the old phone and plans of customers who make the switch. For those not on traditional contract plans, the company has offered to buy back customers’ current working smartphones for up to $300 per line.

Following the year of free service, customers will pay $50 per month for one line of unlimited talk and text and 2 GB of data on one line of service, $90 per month for two lines or $120 per month for three lines.

wirelessweek.com

Emerging Technology Apple, Google Bring Smartphone Functions To Car Dashboards September 3, 2015

Playing deejay with voice commands will get easier for more Americans this fall as some best-selling cars get updated with software that integrates smartphones into the dashboard.

With the 2016 model year, Apple's CarPlay and Google's Android Auto will turn cars as affordable as a base model Chevy Spark into rolling robotic assistants that give directions to nearby restaurants or play the latest hits with commands as simple as "Play Ellie Goulding."

The Associated Press recently tried out both systems on a 2016 Honda Accord. As with phones, voice- activated car technologies don't always work as intended, bringing up inaccurate directions or failing to open an app, for example. But overall the two systems are convenient and incredibly intuitive.

Both CarPlay and Android Auto should give drivers more time to keep their eyes on the road compared with the automakers' own voice systems, which can require multiple steps and looking at on-screen menus. Still, as with any system that requires driver input, there are concerns about distraction.

"Anything that takes your attention away from the task of driving is not something you want to engage in," said Kathy Lane, a spokeswoman for the National Safety Council, a nonprofit organization created by Congress to promote safety.

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Neither system has been tested yet by the Insurance Institute for Highway Safety, says spokesman Russ Rader. The institute studies both human and mechanical factors in trying to reduce the number of vehicle crashes.

Consumers increasingly want to use their smartphone while driving — without running afoul of the law. For the last few years, drivers of most new cars have been able to speak to their phones and have audio stream through a car's speakers using the nearly ubiquitous Bluetooth wireless standard. However, doing so can require fiddling with the phone, like holding down the home button first.

Both CarPlay and Android Auto allow voice commands to be turned on with a touch of a steering wheel button. Phones need to be plugged into the USB port, where the phone is kept charging and powering the in-car entertainment. You can access maps, voicemail, phone contacts and music apps using a touch screen embedded in the dashboard — no need to grab your phone.

One wrinkle is that Apple reserves voice commands for its proprietary apps — phone, maps, texts and Apple Music. That means the magical ability for iPhone users to ask the digital voice assistant such complicated tasks as "play the top song from 2011" will only work if you're paying $10 a month for Apple Music. (It's Gotye's "Somebody That I Used to Know," if you were wondering.)

The less restrictive Android Auto will allow you to use apps like Spotify as long as you specifically tell it to "play Aerosmith on Spotify," or set Spotify as the default music app. A Spotify subscription also costs $10 a month.

The systems themselves can cost users a lot more.

The 2016 Honda Accord EX with manual transmission is the lowest trim on which Honda is offering CarPlay and Android Auto support. At $25,480, the EX is $1,315 pricier than the Sport trim, and includes things like a moon roof, keyless remote and a better touch-screen display. Volkswagen's entry level 2016 Jetta 1.4T at $17,680 offers CarPlay and Android Auto as part of a $995 technology upgrade that includes a larger touch screen and rearview camera.

Some automakers believe that such features could motivate buyers to move up the trim level, rather than to more expensive models. "It's going to provide a good benefit to the Accord shopper," says Jay Guzowski, manager of product planning for mid-size cars at American Honda Motor Co.

General Motors stands alone in offering CarPlay and Android Auto as standard equipment on cars as inexpensive as the Spark — the 2015 version retails for upward of $12,170 — and as high-volume as its Chevrolet Cruze and Malibu sedans and Silverado trucks. Chevrolet marketing director Steve Majoros calls the decision "revolutionary," and one the automaker hopes will improve its market share.

"CarPlay and Android Auto are about to really hit the mainstream," says Kelly Blue Book senior analyst Karl Brauer. "We're talking about some 40 to 50 models that'll have it in probably the next 12 months or less, which is maybe about 20 percent of the entire car market."

IHS analyst Colin Bird predicts that automakers in the U.S. and Canada will sell a modest 497,000 cars with CarPlay, Android Auto or both this year. The number should jump to 5 million in 2018 and nearly 10 million in 2020.

As smart and helpful as the CarPlay and Android Auto are, they aren't perfect.

On a quick demo of a fully-loaded, coffee-colored 2016 Accord Touring, the Android Auto voice assistant helped me play songs from artists like Adele, Sting and Ellie Goulding but would not recognize "U2" as anything other than "YouTube." It also failed to open the iHeart Radio app despite being told to (a later check showed the app hadn't been set up to recognize its location, which may have thrown a wrench into things).

CarPlay users won't be able to use the superior Google Maps through the interface, even if the app is on their phone. In the demo, Apple's notoriously quirky maps app directed me to drive to Honda's American headquarters in Torrance through the research and development back way, bypassing the front driveway and visitor parking lot even though it was a more direct route.

There's still work to be done on making the integration better.

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One problem is that when phones must be plugged in — rather than left in a or purse — usage of Internet-connected apps goes way down, says Pandora's vice president of automotive business development, Geoff Snyder. "When it's required for use of the system, utilization falls off pretty dramatically." So for now, certain automaker-made infotainment systems with apps will be more convenient for people who just want to get in their cars and go.

Apple software engineering executive Craig Federighi said in June that the iOS 9 mobile update coming this fall will make CarPlay work without taking out your iPhone. But according to Apple, that may require another hardware update from automakers: support for Wi-Fi.

wirelessweek.com

Mozilla Releases First Public Firefox For iOS Preview September 3, 2015

The company has begun testing a preview version in New Zealand.

Mozilla hopes to have its version of Firefox for iOS devices out by year’s end as part of its push to grow its share of mobile traffic.

Mozilla already offers Firefox on Android, but the OS makes up just a sliver of total Web traffic on mobile, easily surpassed by Google’s Chrome browser and Apple’s Safari, according to data from StatCounter.

Overall usage of Firefox across desktop and mobile has fallen in recent years, according to Web analytics company W3Counter.

Creating a version of Firefox for iOS has required Mozilla to retool its back end because Apple’s App Store only allows browsers that are built atop Apple’s rendering and JavaScript engines.

But Mozilla appears to be making progress. On Thursday, the company said it was rolling out the first public preview version of the browser for iOS in New Zealand. It plans to extend availability to a few more countries soon.

Feedback from the preview release will help Mozilla build new features and launch Firefox for iOS in the rest of the world later this year, the company said in a blog post on Thursday.

For the iOS release, one of the features Mozilla is testing is Firefox Accounts. It will let users take their Firefox browser history, passwords and tabs from the desktop to iOS devices.

pcworld.com

Mergers and Acquisitions BlackBerry Acquires Mobile Security Company Good Technology For $425M, Despite Their Thorny Past September 4, 2015

“Though BlackBerry caters for BlackBerry has acquired mobile security company Good Technology in a $425 cash transaction. all common mobile operating However, the deal may surprise some given the two companies have often come to (verbal) blows in the past. systems in terms of security, Good Technology says that With BlackBerry struggling in the consumer realm for a while, it has been focusing more on enterprise from its current customer mobile security in recent times with offerings such as BES12, and this is an area that Good Technology also operates in. base, 64 percent of activations come from iOS — However, the gloves have often come off in a very public way in the past, with Good Technology publishing white papers comparing the two companies’ offerings — it goes without saying which and given the growing company was presented in the more favorable light. To see BlackBerry gobble Good Technology up presence of iOS in the may raise a few eyebrows, but given that they do operate in the same space, it does actually make enterprise, this was likely a sense. particularly appealing aspect of the acquisition.” Connect with Us www.ksrinc.com P a g e | 7

“Some people may not realize it, but BlackBerry and Good [Technology] have both been delivering secure mobility for more than a decade,” explains BlackBerry chief operating office Marty Beard in a BlackBerry-instigated Q&A. “Our industry is very competitive and is constantly evolving, so it’s not surprising that we’ve each taken some aggressive positions over the years. But when you look more closely, you see that we share a common heritage in security and our strengths complement each other incredibly well.”

While it’s no secret where BlackBerry sees its future, this deal is a clear sign that it’s doubling-down on the mobile security market. Indeed, Good Technology claims more than 6,000 clients, across banks, aerospace, healthcare, defense firms, and more.

Off the back of this deal, BlackBerry says it will bolster its existing software and cloud portfolio to create the “most comprehensive secure mobility platform in the market.”

Though BlackBerry caters for all common mobile operating systems in terms of security, Good Technology says that from its current customer base, 64 percent of activations come from iOS — and given the growing presence of iOS in the enterprise, this was likely a particularly appealing aspect of the acquisition.

BlackBerry shares rose almost 5 percent in the wake of today’s announcement.

venturebeat.com

Amazon Acquires Elemental Technologies For A Reported $500 Million In Cash September 3, 2015

Amazon announced this afternoon that it’s acquiring Elemental Technologies, a backend mobile service.

It’s paying around $500 million in cash for the company, according to a new report from The Information.

Amazon didn’t immediately return a phone call or email request for comment about that figure.

The deal was orchestrated by Amazon’s highly profitable Amazon Web Services unit, which will incorporate Elemental’s technology into its cloud infrastructure services mobile video offering, says The Information.

Elemental, which makes high-speed video encoding and transcoding software to enable multiscreen content delivery across different screens and devices, was founded nine years ago in Portland, Ore., and counts among its many customers ABC, BBC, Comcast, Ericsson, and ESPN.

According to Crunchbase, it raised roughly $44 million from investors over the years, including venture firms General Catalyst Partners, Voyager Capital, Steamboat Ventures, and Norwest Venture Partners. Others of its investors include the Australian telco , the European pay TV giant Sky, and the angel investor groups Oregon Angel Fund and Alliance of Angels.

Elemental, which will retain its brand, is led by CEO Sam Blackman, who’d earlier architected products as an integrated circuit design manager for Pixelworks.

The deal is expected to close in the fourth quarter of this year, say both companies.

At $500 million, Elemental would represent one of Amazon’s five biggest acquisitions to date. The others include Zappos, acquired in 2009 for $1.2 billion; , acquired last year for $970 million; Kiva Systems, acquired in 2012 for $775 million; and Quidsi, acquired for $545 million in 2010.

techcrunch.com

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Industry Reports Android Market Share Stays Steady In US But Sinks Deeper In Europe September 2, 2015

More than a quarter of smartphone buyers across Europe jumped ship from Android to iOS, which saw solid gains across most of the continent, says research frim Kantar Worldpanel ComTech.

Android remains by far the top mobile OS throughout the world, but its market share continues to lose ground except in the US.

For the three months ended July, Android's slice of the smartphone market for the top five European nations (France, Germany, Italy, Spain and the UK) dropped by 4.1 percentage points to 71 percent from 75.1 percent for the same period a year ago, Kantar reported on Wednesday. The changes in market share varied across the board. Android's share tumbled by 8.7 points in Germany and 5.4 points in France but inched down just 1.5 points in Italy and actually gained almost a point in Spain.

But in the US, Android's market share grew by 1.7 points to 65.6 percent from 63.9 percent during the same three months in 2014.

The situation was the reverse for Apple's iOS. The iPhone's market share for the three months ended July grew by 2.5 points across Europe's top five countries to reach 17 percent. Apple's smartphone market share declined by 1.3 percent in the US, though was lower than the 2.3 percent drop for the prior three months.

Why is Android losing ground in Europe but staying steady in the US, while Apple's iOS is doing the opposite? There are several reasons, Carolina Milanesi, chief of research at Kantar Worldpanel ComTech, told CNET.

The smartphone market in Europe is facing challenging conditions. Certain flagship phones, such as Samsung's Galaxy S6, have received a muted response from buyers. Also, Samsung and other Android players are facing increased competition from local vendors, especially those in China.

Another reason is the maturity of the European market as evidenced by fewer first-time smartphone buyers, according to Kantar. That type of maturity increases the churn rate, meaning the rate at which existing smartphone buyers switch to a different mobile operating system. And in Europe, that hit Android harder than it did Apple.

"This type of market maturity increases the impact of churn on overall performance as we have seen with Android this time around -- 27 percent of smartphone buyers across Europe left Android for iOS versus 9 percent in the US," Dominic Sunnebo, business unit director at Kantar Worldpanel ComTech Europe, said in a press release.

Switching to a different carrier typically occurs less in the US than in Europe. That's because more people in the US are on contract or installment plans, while many of those in Europe are on prepaid plans, which lead to longer replacement cycles.

"I also feel that the 'I am an Apple' and 'I am an Android' groups are more clearly defined [in the US] than in Europe," Milanese added.

In the United States, Apple's Android rivals provided a tougher fight than they did in Europe. Apple and Samsung still reign supreme in the US. But other vendors such as LG have gained market share due to the impact of new mobile data plans on mid-range phones, Milanesi told CNET in August. Early demand for the iPhone in the US was strong, so sales would naturally be leveling off by this point, especially with Apple due to unveil its next iPhone lineup on September 9.

This is expected to be an off-year for the iPhone in which Apple introduces interim models -- the iPhone 6S and iPhone 6S Plus -- with perhaps one or two major new features but mostly minor upgrades in processor speed and a few other factors. But that doesn't mean iPhone sales will suffer, especially if Apple lowers the price on the current iPhone 6 lineup.

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"While all eyes will be on Apple's new products, I would suggest people pay close attention to the current iPhone 6 and 6 Plus market performance, should the accustomed price drop occur after the September 9 product announcement," Milanese said. "In the U.S., 32 percent of the overall sales of the iPhone 5s were generated after the launch of the iPhone 6."

And how did Android and Apple fare across other regions of the world?

In China, Android's smartphone share dropped by 5.5 points, while the iPhone's slice rose by 5.9 points. China's smartphone market has weakened as of late due to oversaturation, but the iPhone is still a hot device. For the quarter ended June 30, Apple reported that sales in Greater China more than doubled to $13.2 billion.

In Australia, Android's share plummeted by 10.5 points to 56.1 percent, while Apple's cut rose by 7.9 percent to 34.9 percent. And in Japan, Android's slice of the market dropped by 7 points, while Apple's increased by 6.3 points.

Kantar Worldpanel ComTech derives its data from consumer panels in 12 countries: the U.K., France, Italy, Germany, Spain, the U.S., China, Japan, Australia, Argentina, Brazil and Mexico.

cnet.com

Hulu Offers Ad-Free Streaming Option For $11.99 A Month September 2, 2015

Hulu is offering subscribers the option to stream TV shows and movies with no advertising for $11.99 a “The advertising-free option month, in a bid to lure a new set of consumers and ramp up profits to invest in more content. puts the Web video company The advertising-free option puts the Web video company on an even more direct collision course with on an even more direct rivals Netflix and Amazon. Both tech companies offer streaming products that don’t include advertising, collision course with rivals which has made them increasingly attractive to consumers. Plus, more premium networks like Netflix and Amazon. Both Showtime and HBO are making their commercial-free programming available directly to consumers outside the cable bundle. tech companies offer streaming products that don’t “There’s a whole set of customers that we saw in the research and in the metrics that aren’t interested if include advertising, which has we have advertising,” said Mike Hopkins, chief executive of Hulu. “It’s definitely something we’re doing to be more competitive in the marketplace, and the only way to do that is to make your product better.” made them increasingly attractive to consumers.” The challenge will be to bring in new customers for the ad-free model without cannibalizing the current premium subscription service, which costs $7.99 a month but still requires users to sit through commercials. Mr. Hopkins emphasized that Hulu isn’t abandoning the ad-supported model, and he said the company’s research shows that both plans will be able to grow subscribers.

“The whole intent is to really target a new consumer who has tried us before and churned out because of the advertising or who just hadn’t considered us before,” Mr. Hopkins said. “We think this is going to give people choice.”

Hulu’s plan to offer an ad-free subscription product were first reported in July by the Wall Street Journal.

Both Netflix’s $8.99-a-month price tag and Amazon’s yearly $99 Prime membership, which includes access to its Instant Video streaming offering, represent bargains compared to the new Hulu deal (which will add up to about $144 a year). However, Hulu not only boasts of a growing slate of original series and blockbuster movies courtesy of a recent deal with the pay TV channel Epix, but in-season episodes of mega-hits like Fox’s “Empire.”

The $11.99-a-month price point was designed to help make up for lost advertising revenue but also to make sure the $7.99-a-month ad-supported option still looked like a value to consumers, Mr. Hopkins said. While he expects some existing subscribers to switch plans, ultimately he expects both plans to grow, increasing its overall subscriber base and profits.

That was key to securing the rights to show content without commercials, a process that “wasn’t easy,” he said.

“We’re really confident that the ad business is going to continue to grow, and that’s in part how the content owners got confident with our plan,” Mr. Hopkins said.

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Hulu was able to secure the rights for almost all of its programming to run ad-free, aside from seven shows: “New Girl,” “Scandal,” “How to Get Away with Murder,” “Grey’s Anatomy,” “Once Upon a Time,” “Agents of Shield” and “Grimm.” These shows will carry a 15-second commercial before they start and a 30-second ad at the end.

While the new ad-free option could prove attractive to a significant number of consumers, Hulu has to toe a fine line to avoid irking its content owners, its broadcast network partners and advertisers. Hulu is a joint venture owned by 21st Century Fox, Walt Disney Co. and Comcast Corp. (Fox and Wall Street Journal-owner News Corp were part of the same company until 2013.)

Since its launch, Hulu has lured a steady stream of growing ad revenue, while providing advertisers with a well-lit environment for their TV ads to run in a digital environment.

If enough of Hulu’s 9 million subscribers opt to spend $4 more a month to enjoy the service with no ads, that could put a dent in its ad business. The question is whether Hulu’s overall revenue will rise enough to help win increasingly more competitive content licensing deals.

wsj.com

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