We’ve been big fans of Skype since the service was launched. We were pleasantly surprised when eBay acquired the company several years ago thinking they could make hay with Skype’s technology. We subsequently became dismayed many months later when eBay failed to capitalize on what we viewed as a golden opportunity with Skype. We were delighted to see a group of seasoned private investors last year acquire a majority of Skype shares from eBay. Under the right ownership and management, we continue to believe there is plenty of upside ahead for Skype.
Skype has over 500 million users currently. The company employs a freemium business model. Skype-to-Skype calls are free no matter where you are located. The company derives revenue by charging competitive rates for people to call regular phone numbers and for add-on services like voice mail. Increasingly, Skype has been used for video calls. The company says video chats account for 34 percent of calls on the service today.
Skype has been thus far confined to computers, smartphones and iPods, but the application will be moving into family rooms in the near future. Two major manufacturers of TVs – Panasonic and LG Electronics – recently announced they are integrating Skype into their Internet-connected TVs (so called NeTVs). According to the folks at Insight Media, over a million NeTVs were sold last year. That’s just a trickle compared to what we are likely to see in the years ahead.
Skype’s CTO Jonathan Rosenberg notes that 2010 is the year when NeTVs will start to take off. He believes every TV that ships in the near future will have built in Wi-Fi, webcams and microphones. NeTVs will be equipped with web browsers, and widgets will used by TV networks to integrate their delivery models with NeTVs. Put simply, TVs will become part of the network in the home.
According to Skype, the service on a TV will work much as it does on a PC, but with some limitations. A TV program will stop playing once a Skype call is made or answered. Apparently, the processors in TVs are not yet powerful enough to allow people to chat while they watch a show. We expect this situation to change in the future with the development of more powerful processors.
It may take a while for NeTVs to penetrate family rooms in a significant way. That said, there is no doubt in our mind that NeTVs will become the norm in the future. We think Skype’s strategy makes a lot of sense. It will be fun to watch how this space evolves.
In terms of the bigger picture, we see NeTVs playing a growing role in the evolution of the RealVR Cloud. NeTVs will be a gateway to deliver more immersive, 3-D viewing experiences in the home. This will open the door to more technological innovation and new products and services in the years ahead.
We are hearing that Skype may file for an IPO this year. If that’s true, we’ll be taking a close look at the deal. We believe it could be a great investment opportunity at the right valuation.
