The Smooth DJ

When we talk about portable media players, we almost always use the iPod as our point of reference. But many don't realize that PMPs have actually been around for a over a quarter century! It's true. The Sony Walkman made it's debut way back in 1979.

The Walkman was by all measures a huge success and a cultural phenomenon to boot. With such a huge head start, one can be forgiven for thinking Sony, not Apple, would be the company setting trends in how we consume media today.

Sony had the goods: PCs, laptops, memory sticks, playstations, stereos, cellphones, you name it. But they never brought it all together into a cohesive ecosystem. And that has cost them.

Is there a way to predict the outcome of a standards war? In this series of postings, I hope to give it a try. The past is prologue, and standards wars are not new. We all remember Beta vs VHS, and more recently the browser wars.

I will apply lessons learned from past standards wars to the current HD DVD vs Blu-Ray battle. Everyone has their hunches, but let's try and back up our pick with some sound reasoning. In Part 1, we'll start with the Railroad Wars - differences in railroad track sizes between the North and the Southern United States.

Despite the WSJ giving it a bad review, the new BlackBerry 8800 is evidence that the Waterloo crew is applying some deft strategic thinking to their product lineup. RIM is keeping it simple by focusing on their core customer segment. They know that their popularity springs from corporate clientele, not teeny boppers. They also know that most companies will never shell out $500 for employee phones. And in a deceivingly brilliant move, they knew not including a camera on the 8800 would be an advantage - a solution for the dozens of companies so concerned about espionage and IP leak that they ban camera phones.

RIM realized that it would take over a year and untold millions to produce a fancy phone like Apple's. In contrast, small, shrewd improvements to the BlackBerry would be relatively quick and cost effective (slimmer, better battery, GPS, trackball).

RIM is making a statement - they want to be the enterprise phone of choice. Of course, consumers who enjoy email and superior phone call clarity for 1/5th the price of an iPhone will also gravitate over. The new BlackBerry even sports GPS - a technology accessory that business travelers will embrace. All in all, a great play by RIM to cement their corporate popularity while defending their competitive space.

Despite the WSJ giving it a bad review, the new BlackBerry 8800 is evidence that the Waterloo crew is applying some deft strategic thinking to their product lineup. RIM is keeping it simple by focusing on their core customer segment. They know that their popularity springs from corporate clientele, not teeny boppers. They also know that most companies will never shell out $500 for employee phones. And in a deceivingly brilliant move, they knew not including a camera on the 8800 would be an advantage - a solution for the dozens of companies so concerned about espionage and IP leak that they ban camera phones.

RIM realized that it would take over a year and untold millions to produce a fancy phone like Apple's. In contrast, small, shrewd improvements to the BlackBerry would be relatively quick and cost effective (slimmer, better battery, GPS, trackball).

RIM is making a statement - they want to be the enterprise phone of choice. Of course, consumers who enjoy email and superior phone call clarity for 1/5th the price of an iPhone will also gravitate over. The new BlackBerry even sports GPS - a technology accessory that business travelers will embrace. All in all, a great play by RIM to cement their corporate popularity while defending their competitive space.

What to make of yesterday's EMI + Apple move to offer DRM-free music? After a 24hr digestion period, some aren't so impressed. Ryan Block of Engadget says it's confusing and not good enough. Paul Resnikoff at Digital Music News points out many flaws.

Most of the criticism stems from the differential price and bit-rate bump to 256Kbps. EMI will also continue to sell DRMed tracks at the traditional 99 cent price. Having one track at two different prices strays from the simple iPod+iTunes experience, an Apple hallmark.

As for the higher bit-rate, it's seen as an attempt to create perceived value justifying the 30% price premium. It may also be a helpful way to track the songs as they get pirated through cyberspace (showing up as more bloated files). Would they be that sneaky? Well, those MBA types who dream these things up do get trained to measure performance as much as possible.

My questions for Apple and EMI:

1. Why the 30% premium? The higher bit-rate does not make a practical difference for most. The difference is not discernable on little ear phones, in your car, or in the clubs. If consumers already think 99 cents is too much for a song (25 illegal downloads per paid download), isn't the $1.29 price change in the wrong direction?

2. Why purposely confuse iTunes customers with two prices for the same track? Those who live happily in the Apple universe, or just don't understand DRM, will choose the cheaper track. Those who despise DRM will save themselves 30 cents and just strip a 99 cent track (or download illegally). The latter group tend not to be heavy users of iTunes to begin with. The higher pricing isn't likely to boost their patronage.

Via Andrew Sullivan - This is genius. A simple yet elegant solution that presents text in columns speeding up reading times.

This reinforces the notion that design is everything. And in most cases, it's more to do with application and not technology itself.

Take a look:

So proclaims Fast Company magazine in an article by Saabira Chaudhuri. Why?

1) Partnering with Cingular limits the customer base to 60 million, and according to survey data, the majority of people are happy with their existing carriers (not likely to switch)

2) Price. Is $500-$600 beyond the sweet spot for mass adoption?

3) The socio-technical and market landscape is completely different. The mobile phone market is relatively mature when compared to the 2001 MP3 player market where the iPod debuted. The iPod had major social influence - a key to its success. In contrast, just about everyone is comfortable with cell phones, that is, the demand to make a call on the go is not increased by the existence of the iPhone. The iPod on the other hand spurred social preferences and hence demand for portable digital music - a kind of self feeding momentum that the iPhone may not enjoy. An analogy (by no means perfect) I can think of: the iPod is closer to the model-T (groundbreaking) while the iPhone is closer to a stylish, 2008 hybrid that parks itself and gets 50 mpg.

The key to the iPhone's ability to revolutionalize mobile communications lies in its user-interface. Will it be compelling enough to make web-surfing-on-the-go as "normal" as making phone calls?

Lots of news today from the folks at 1 Infinite Loop in Cupertino. For the complete rundown, check out Engadget's Live Blog of the Steve Jobs' Special Event.

Quick Summary:
- Apple cuts 8GB iPhone to $399 (a $200 drop!)
- Discontinues 4GB iPhone
- Introduces new iPod Touch (an iPhone without the Phone) for $399/16GB and $299/8GB
- Unveils the 3rd gen Nano with a notably different form-factor + video
- Revamps the flagship iPod, now called iPod Classic with a new cover-flow interface and whopping 80GB/160GB of storage, and an all metal casing.

There's a lot to digest here. A few months ago, I wrote that the iPhone's UI was a disruptor. As far as smartphones go, Apple's touchscreen interface removed a critical constraint to consumption: complexity. And according to the latest sales figures, the iPhone indeed became the best selling smartphone. But constraints still existed: high price, and access (AT&T only). Today, however, Apple dropped the price a bold 33%. That's great for consumers, but it also increases the barrier to would-be competitors.

So is this the tipping point, that is, the moment where smartphone sales overtake traditional mobile phones? Not quite. There's still a significant access constraint because iPhones aren't on sale in Europe or Asia, and not available in North American unless you're with AT&T. Also, cheap phones are "good enough" for most. The conditions will be ripe for smartphone takeover when the sophisticated UI, price, and access hit that sweet spot. We're not there just yet.

Next, what to make of the iPod Touch? I had suspected that all iPods would eventually move to
the new touchscreen interface, and I still stand by that prediction. It will happen eventually. What Apple is doing here is interesting, however. First, notice that the Touch is only available with flash memory limiting it to a modest 8/16GB capacity. Why the lack of mini-hard drives? It's simple product segmentation and what the disruption crowd calls "competing-against-nonconsumption".

Giving the iPod Touch hard drive storage levels would have essentially forced Apple to discontinue the "classic" flagship iPod, something Apple doesn't want to do (just yet). By boosting the iPod Classic to super-storage capacities, and improving the aesthetics with a cool metallic finish, Apple serves their customers who care about having extensive music and movie collections on-the-go, while carving out a clear segment for the Touch, which has a distinctly different, order-of-magnitude(!) less storage. The Touch also gives customers in Asia, Europe, and non AT&T Americans (all locked out of the iPhone) a chance to use and fall in love with Apple's disruptive UI.

The "competing-against-nonconsumption" strategy of the Touch is premised on there being a significant number of consumers who don't use MP3 players at all because of perceived complexity. Sure, iPods are simple to use. But the Touch UI is even simpler. You don't even have to be able to read to use it, as it's all icon and album-art driven. And for those not focused on music and movies, the ability to surf the internet with WiFi in the palm of your hand with an elegant interface is an attraction as well.

So what's next for Apple? I'm suspect the iPod Classic will not last more than 18 months, perhaps not even a year. Why? The Touch interface is just that much of a disruptor that consumers will clamor for it in the flagship iPod. Remember, Apple yanked the iPod Mini after less than two years replacing it with the sexy iPod Nano. And I look for them to do it again here.

Question: Why is classmates.com still around?

According to wiki,

Classmates.com has more than 40 million[3] active members in the United States and Canada, and an Alexa Internet traffic ranking of 499.

And they've been profitable since 2001, apparently.

Marc Andreessen has a thought provoking post about Hollywood's latest power struggle and the potentially drastic changes it could lead to. As you've probably heard by now, the writer's guild is on strike, bringing with it the scourge of re-runs and even more reality TV. Andreessen theorizes about the effects of a long strike: an Industry wide shake-up, where fed-up consumers are driven to other forms of entertainment. Made-for-YouTube webisodes like Chad Vader will increase in popularity, as will video games, and online forms of socializing. This shift in taste will kick-start an entrepreneurial push into independent comedy and drama for new media. The creators (artists, actors) will become the content owners for a change. In other words, they have more control and an equity stake. This is not unlike Silicon Valley, Andreessen argues, where programmers develop IP, take ownership, and reap the high rewards upon success.

Patrick Ftizgerald at the LA Times picks up on this theme and challenges the writers to become hyphenated writer-entrepreneurs. Private equity in Hollywood is not a new thing, however. Entrepreneurial filmmakers exist: Lucas; Peter Jackson; actors with stakes in their own production companies like George Clooney and Brad Pitt . Tony Gilroy wrote and directed Michael Clayton after being bankrolled by a real estate developer. But all these examples are movie based, where more freedom exists with respect to owning your own content. Television has a very different framework. It's monopolized by the big networks who act as gatekeepers of the airwaves. If you are a production house, you work on contract, taking orders for a sitcom or drama. You don't necessarily own the copyright of your production, they buy the rights. The royalty and residual system may pay the bills for some of the creatives, but in general, it's not lucrative. This, and the exclusiveness of the TV "biz", are barriers to entry for entrepreneurs. The internet, however, represents a more level playing ground.

The internet has its disadvantages. First and foremost, watching TV in your living room is a very different experience than watching YouTube clips. The living room experience is hi-def, hi-fidelity, easily enjoyed with friends and a cultural tradition. Web-TV, by contrast, is low-res and low-fi. It's usually enjoyed alone on small screens. Bridging that divide between the web and the living room experience is a big deal, and the race for a dominant solution is well under way. But as we've seen with AppleTV, nothing has really caught on yet. And while I think Andreessen is certainly right about entertainment-entrepreneurship, until the web-TV experience can equal that of our living room experience, old Hollywood models of production will hang around, for better or worse. It'll be interesting to see it play out.

So what are the economics of episodic TV? I was curious and did a little digging.

Last week, United Online canceled it's IPO of Classmates.com. Apparently, I wasn't the only one who questioned the logic and growth prospects of their subscriber model. Investor skepticism seems to have doomed United's intentions for good.

I wrote back in October that Classmates was headed toward oblivion - out of touch with the young social networkers of today, and competing with free.

I guess United Online deserves some credit for doing the right thing. The IPO would have been so much more embarrassing for them had it been carried out.

Netflix is partnering with LG to deliver movies straight to TVs via the Internet. Getting digital media off our PC screens and onto our living room TVs is the last obstacle for digital entertainment. While there have been several approaches, including the disappointing AppleTV, none have dominated.

Anything approaching the regular TV experience is going to win over many consumers.The Netflix-LG initiative, at first glance, seems to fit that bill. Let's hope, for Netflix's sake, that this delivery system won't be particular to LG TVs.

Just a few days after beating the street on the past year's financial performance, IBM cuts pay by 15% for a swath of US employees. This was IBM's response to a lawsuit filed by said employees claiming that they are entitled to overtime pay.

I've always regarded IBM as a well managed organization, but when your strength in IT services is your workforce, it's probably not a good idea to piss them off.

"In one swoop, everything I've worked for the last seven years is gone. All the extra time and hours ... have done nothing but give me a 15% pay cut," one employee wrote on a job board maintained by an IBM workers' group called Alliance At IBM.

Marc Andreessen has a remarkably thorough analysis of how the stalemate could end, and what a hostile takeover may look like. Very technical, but well worth the read.

So Ballmer backs off and Microsoft withdraws their offer for Yahoo!. Is this saga over? Not yet. Jerry Yang will be under immense pressure to show that Yahoo! is really worth what he thinks it is ($37/share), because the market certainly disagrees. And some pundits, like The Buzz's Paul R. La Monica think Yahoo! could come crawling back to MSFT eventually.

I think Steve Ballmer played this well. Most thought he would just pay more for Yahoo! to get the deal completed. But walking away turns up the heat on Yang and Co., and will certainly make shareholders less patient (some are already huffing mad).

Ballmer may be creating an opportunity to come back with his original offer that a more wary Yahoo! will accept (in lieu of shareholder lawsuits and Wall Street disgust). With such a significant strategic objective aired in public, Microsoft better have a good plan B to right their internet ship. More likely, however, they are hoping to make this deal happen at a later time.

By monitoring what they import - Via Fortune's Apple 2.0 Blog:

“Knowledge is power,” declares ImportGenius’ promotional material. “Whether you are looking to keep tabs on your competitors with Supply Spy, identify suppliers with ImportScan our easy to use online software makes it easy. You get access to records on nearly every container that entered the United States from 2006 to the present.”

Who knew?

The above quote from a post detailing ImportGenius' claim that a recent spike in shipping activity by Apple is evidence that the rumored 3G iPhone has reached our shores.

A presentation by Rolf Skyberg - 400 slides never seemed so captivating.

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Wow - creative move by the LA Times. An old media organization tapping Craigslist (the scourge of all newspapers) for inspiration. I C U is an LATimes.com feature where journalist Katy Newton breaths life into the mysterious postings on Craigslist's (LA) Missed Connections. A quirky idea to say the least, the result is brilliant and oddly addictive.

Even though there's been an unofficial deathwatches for the OS for at least 5 years (probably 10), the MSM has picked up the meme now that Google is proudly marching out their new Chrome browser.

Chrome is a smart play by Google. It's a natural extension of organizing information, which is what Google strives to do. And Chrome is getting raves for it's speediness and neat features like incognito mode.

So, are OSes really obsolete? I've been pondering this question for some time. In a sense, relinquishing our computing entirely to the clouds with a mix of surfing and rich internet applications isn't a technical leap. And for most of us, email-surf-post-IM-streaming are 95% of our activities anyway.

But that's personal computing. What about corporate or power computing? And privacy? There's quite a few situations that benefit greatly from having an OS controlled microprocessor on your desk - you need "oomph" to edit video, photos, play games, and if you're an engineer, to code, run simulations, etc. Let's not even talk about the bandwidth requirements of an all-cloud ecosystem. Yikes.

So sure, there will be a market for thin-clients that connect to the clouds with essentially just a browser on it, but microprocessors and the OSes that sit on them will be here to stay. And while Windows is a horrid OS that the world can do without, efficient, light, or highly vertical OSes (optimized for gaming, multimedia, etc) will likely stick around.

I predicted 18 months ago that gaming would be a part of Apple's competative strategy, and I was right. In fact, I called Apple "Sony 2.0" before the first iPhone was even announced.

Now I'm wondering if Apple will go full console like Sony, Microsoft, and Nintendo. If they are presenting the App store as a gaming marketplace, it would make sense to have console like experiences in the home through AppleTV.