The Dirty Little Secret Hollywood Does NOT Want You to Figure Out…until we are all metered to death.

So you think piracy is primarily taking place on BitTorrent, eMule and Gnutella? Think again. There is a whole parallel universe out there with people trading huge amounts of DVDs, TV shows, warez and porn. Five terabytes of new content every single day, to be precise. Welcome to Usenet, the original piracy hotbed. And especially this time of year with the Hollywood screeners out for the Academy members, its especially busy (True Grit showed up just yesterday).

 

 

 

Usenet is a little bit like P2P’s estranged uncle. People started trading files over newsgroups around the time when Napster founder Shawn Fanning attended kindergarden. The face of Usenet has changed dramatically in recent years, though. It has become big business for some. It has been under legal scrutiny, but escaped major lawsuits. Will the next step be Hollywood-friendly commercialization?

 

Usenet has been around since the early eighties as a kind of decentralized publishing and discussion platform. It consists of thousands of newsgroups, most of which are somewhat of a mix between a mailing list and a public bulletin board. Newsgroups can be accessed with specialized newsreader applications or though web gateways. Then simply find a divx newsgroup among the 63,000 or so groups and you are off to the races.

The technical infrastructure of Usenet is a loose worldwide network of servers that exchange messages on a regular basis.  Its not too much different than a public library. In fact, it IS the internets public library.  Users can subscribe to one of these groups and automatically download new messages. Sounds familiar? Exactly: Newsgroups are in many ways similar to RSS feeds. And newsgroups, just like feeds, can be used for much more than just distributing text.

People started to trade dirty pictures over Usenet early on (BBS). Warez has also always been a part of the medium, and some of the first MP3s actually found their way online in newsgroups. Nowadays video makes up for most of Usenet’s traffic. Some news servers clock up to three terabytes of traffic per day.

Usenet provider Giganews.com announced it offers access to nearly three billion messages. The most popular content is still porn, but mainstream entertainment is catching up quickly: Groups like alt.binaries.movies.divx cause up to 15 percent of all non-text Usenet data.

Many universities have simply stopped carrying these binary newsgroups to reduce their traffic bill. Some ISPs have instead opted to meter Usenet-related bandwidth, restricting access to one or two gigabytes per month — not enough for hardcore users. Third-party Usenet providers fill the gap with more generous plans that cost between 10 and 25 dollars per month.  This is one of the reasons why all of us will eventually get ‘metered’ by our ISP (Comcast and some Time-Warner systems are testing the waters with this now).

The Usenet industry has boomed since entertainment companies started to go after file sharers. From 2002 through 2003, a number of BitTorrent services were established, including Suprnova.org, isoHunt, TorrentSpy, and The Pirate Bay. In 2002, the RIAA was filing lawsuits against Kazaa users. As a result of such lawsuits, many universities added file sharing regulations in their school administrative codes (though some students managed to circumvent them during after school hours). With the shut down of eDonkey in 2005, eMule became the dominant client of the eDonkey network. In 2006, police raids took down the Razorback2 eDonkey server and temporarily took down The Pirate Bay. Pro-piracy demonstrations took place in Sweden in response to the Pirate Bay raid. In 2009, the Pirate Bay trial ended in a guilty verdict for the primary founders of the tracker. The decision was appealed, leading to a second guilty verdict in November 2010.  Usenet providers tend to keep no logs about downloaders, and you only need one uploader to facilitate tens of thousands of downloads. Some Usenet providers have been targeting file sharing users with aggressive advertising campaigns on torrent websites and P2P forums that promise encryption and anonymity. The dirty little secret of the industry is that some of these self-proclaimed bad-boys also power the Usenet services of major ISPs.

 

Entertainment companies have been somewhat helpless in their reactions to the Usenet surge. The MPAA has previously sued websites that indexed movies in newsgroups, but has stayed shy of going after Usenet server operators themselves. The reason for this is that most Usenet companies are protected by the safe harbor provisions of the DMCA, and any legal precedence could endanger other piracy cases. Rights holders in other countries have been more aggressive, but haven’t been able to put a dent into Usenet usage either.

Former Usenet provider GUBA has tried to go a different route, revamping its platform to offer paid movie downloads next to user-generated content and a small section of filtered Usenet content.  There also was a large Japanese and Korean audience on Guba — something that doesn’t really translate too well to US-only movie sales.

An argument MIGHT be able to be made for some of the independent titles that never ever see the light of day as to use usenet as a way to get word-of-mouth, but for the most part it never works. Usenet is primarily used by those who know how to use it as a tool to grab software and TV episodes and movies for free. Of course it does come with some dangers. A lot of software uploaded by some people contain malicious viruses and .exe’s. You need to have a well protected PC and a lot of experience with how to look out for these traps. However, one day, this will come to an end once the Comcasts of the world ‘meter’ us all. Its one thing to buy a $10.00 a month account to giganews, quite another to pay $25.00 a month for 5 gigs of downloadable content – especially when the movies are now being uploaded in High Def. One regular movie download now is 700 megs, the High-Def one is more like 3 gigs. This will push more users of this kind of service to the Netflix of the world to ‘stream’ the content for a fee far less than buying 25 gigs from Comcast or another ISP.

Enhanced by Zemanta
Advertisements

Look Ma, No Wires: Browsing at the Speed of Sound

Imagine opening your laptop or your hand-held anywhere you happen to be and instantly showing five full bars of muscular Wi-Fi service? Nirvana.

There would be no need to find a Starbucks, or a McDonalds, or any other place with a Wi-Fi hotspot. You’d be in a Wi-Fi hot-zone.

Current Wi-Fi technology is designed for very short-range use such as in your home, office or at the local coffee shop. Signals at the lower-end of the “white space” spectrum, or 700 megahertz, can travel long distances, muscle their way through walls and create a much larger Wi-Fi-type hot spot. It’s like bringing Wi-Fi over an entire community or city. You can skip the expensive cabling and go wireless.

A proposed Order implementing open access to the vacant TV channels in every media market nationwide will be voted on at the Federal Communication Commission’s September 23 Open Meeting. It will address the next step in its plans for unlicensed use of the TV whitespace (the portions of the TV band that are not used in a particular location to carry TV signals). It has been called ‘wi-fi on steroids’.

The regulatory move, generally supported by all five commissioners, could help alleviate pressure on mobile networks that have frustrated some smartphone users who deal with dropped calls and slow Web connections. Think AT & T in NYC.

Ironically, it was the switch from analog to digital signals by television that freed up the extra “white space.”

“TV white spaces“– the radio spectrum vacated when analog television broadcasting ceased last year operates at lower frequencies and higher power than Wi-Fi, so the signals reach much wider areas than your typical wireless Internet router.
  New devices would be capable of transmitting the Wi-Fi signal over a potential range of several miles, rather than just hundreds of feet, would not be interrupted by walls and other obstructions, and would be as fast as today’s broadband and DSL connections.

Some benefits will provide dynamic management of the air interface, adaptations for vehicular use, computing mesh operation, inter-working with cellular systems, and peer-to-peer link establishment.

Calling the communications technology “super WiFi,” FCC Chairman Julius Genachowski said that private carriers are increasingly relying on WiFi hot spots in urban areas to pick up data traffic where their own networks are overburdened.

Genachowski’s proposal would reserve two television channels in each local market for wireless microphones. This is not sitting well with some high-tech companies that argue that priority for wireless microphones subtracts from precious airwaves that could be used for a new wave of mobile broadband devices and uses.

And the new the move faces some opposition from broadcasters, Broadway performers and ministers. Huh? What did you say?? Those critics, who have filed suit against the FCC to prevent the release of white spaces, say users of that spectrum could interfere with television channels and would throw off wireless microphones that operate on those frequencies. News and sports broadcasters, church ministers and singer Dolly Parton have argued to the FCC that they need some spectrum reserved for their wireless microphones. (Dolly, say it ain’t so?)

Operators are likely to experiment with different pricing models as they try to better manage the use of their networks. And some are doing that already with AT&T — often criticized for struggling to keep up with the demands of iPhone users — were one of the first to do away with an unlimited data plan.

“Bandwidth as an end-user service is hard to sell; it’s hard to monetize,” said Wim Sweldens, president of Alcatel-Lucent‘s wireless division. “If you go to a person and say, ‘I’ll sell you a megabyte of mobile bandwidth, how much are you willing to pay?’ nobody can answer that.”

Instead, if users are asked to buy a book or game or sporting experience on their mobile phone or an app for the iPhone or android, they understand the value, he said.

Google, Microsoft and Dell have long lobbied to use white spaces. They want to use the waves to connect entire universities to the Web with wireless links that use fewer bay stations.  And my hunch is that Google would love to have use of this for when they release the Chrome OS licensed to many builders of a portable tablet, due up shortly to compete with the iPad.

Dell envisions that white spaces will spawn innovations for the home. Consumers could rely on refrigerators that automatically signal the home tablet computer when food is running low, and place an order with the neighborhood grocery. Microsoft hopes to connect more of its devices to information stored on its clusters of data centers – known as cloud computing – to allow access from anywhere to applications such as its Office suite of software.

Currently,  we have over 1 billion WiFi chips in every laptop in circulation, chipmakers need to develop chips that are compatible with the spectrum qualities. Then, device makers have to update their iPhones and Kindles to allow users to switch to white-space networks.

I simply want faster wireless speeds anywhere I go. I am tired of being ‘tethered’ to a broadband cable. I say, let it happen.

Enhanced by Zemanta

Is Pandora’s Box About to be Opened? TV of The Present and Near Future – 4 Possible Scenarios

1.  Slingbox + iPad or gPad (this is the quickest way to get your TV experience at home with ALL your channels – a ‘bridge’ solution at best as it omits the web

2.  gPad or PC Tablets running android (and Googles upcoming OS, Chrome) with a receiver chip built in for wireless broadcasts (including youtube for movies , via PPV) – this can be any number of announced tablets ( Dell, etc.)

3. AppleTV + iPads with special chips + iTunes for movies and TV shows (this assumes an updated iPad version).

4.  3rd party hardware/software boxes: Logitechs Revue box (coming soon), Roku (here now), Boxee Box (coming soon), and others require you to connect these to your TV (and whatever else is there, like a DVR, cable TV box, etc). The average person will have some reluctance to doing this. And that’s most of us. They don’t call TV BROADcast for nothing – its for the masses, not just the technophiles.

All of the above solutions or alternatives will give you ABC, CBS, NBC and Fox + movies on an on-demand basis. Some will let you access Netflix or Hulu if you have an account and subscribe (read: an additional cost).

WHAT’S MISSING: your very own DVR Cloud for shows you watch and want to keep which you have purchased.

Despite Steve Jobs stating that consumers “don’t want a computer on their TV,” consumers DO want TV on their computers or more specifically on their mobile and wireless connected devices (iPads,  tablets, etc.) and especially on the go.  Business customers, more than consumers, especially need any of their purchases to do double-duty to make fiscal sense.

Some GPad TV reasons to exist:

Google has released an informational guide for would-be developers to create more applications specifically for Google TV. While many apps will probably be useless or purely for entertainment, there will likely be some useful programs for business consumers in the near future.

Some things worth noting are Google’s forthcoming Chrome OS: Android will be picking up Street View services in Google Maps, as well as voice-powered search so users can speak search queries rather than typing them into a keyboard or using a mouse.

Google TV will be built right in to new TVs from Sony, available on separate set-top boxes from Logitech (Revue), and those are just launch partners, with many more to come. Google has announced plans to roll out Google TV in the United States this fall, with a worldwide launch following in 2011. Google TV aims to fuse traditional television programming with Internet browsing and interactive capabilities.

Google TV will run on Intel’s Atom processor – the same chip powering virtually every netbook on the market. This enables it the additional horsepower to pump up full 1080p video, rather than 720p as the Apple TV maxes out at, it should leave room for additional upgrades, and maybe even the possibility of hacking the software to run other desktop apps (umm, now we shall see ‘jailbreaking your Google TV or gPads, I can virtually guarantee that one).

Google, meanwhile, has said nothing of opening a store for content. Every source will either come for free through the Web, from a cable box, or third-party providers. This might make the selection of popular shows smaller out of the box, but providers like Amazon on Demand, Vudu and Hulu Plus will line up to jump aboard Google TV, and it means that Google TV will be providing more content than what Apple alone can deliver- although it doesn’t mean that those same providers won’t want into the iTunes storefront as well.

To Googles point and possible advantage, Movies and TV isn’t everything.  Sometimes, you want to see photos from Picasa. Sometimes, you want to give directions to a friend using Google Maps. Maybe you want to want to read your favorite site without squinting on a mobile device or watch a YouTube video.  Google TV will integrate a browser based on Chrome to do all the above.

Google claims that existing Android apps should eventually be able to run on Google TV, as long as they don’t use smartphone-only features. Meaning it will be damn difficult to tilt your TV to play skillball or bowling using an app.

Dell is releasing later this year a Dell ‘Looking Glass tablet’. With larger screen Android phones and tablets coming to market in the second half of the year it only makes sense that content services will be supplying the increasing demand to watch content on these new screens and devices.

The Looking Glass is actually the big brother of the Dell Streak 5 and it comes with a 7 inch WVGA display. The tablet will run Android 2.1 on a 1 GHz nVidia T20 processor. The nVidia Tegra 2 is impressive because it is based on an ARM Cortex-A9 multicore processor design. Other spec highlights include 1.3 megapixel front-facing camera, 512 MB ROM and 512 MB RAM, and 802.11n WiFi. Optional accessories for the Looking Glass include a 3G modem (mini card type) and a digital TV module. Expect the Looking Glass to launch in Q4 2010 on AT&T. Early renders for the device show U-Verse integration, which is AT&T’s fiber optic network.

Apple TV Reasons:

Apple recently redesigned the Apple TV to run on the same A4 processor powering the iPhone and iPad. Essentially, it’s a smartphone, without a screen, in a box.

Apple TV conveniently puts its storefront for iTunes in the middle of your living room, allowing you to buy Apple content from Apple. And hey, you can watch Netflix this year, too, YouTube and Flickr.  Apple has proven to make this closed shopping experience feel cozy and convenient as in the past it has done with all of its devices and media offerings. Being a proven solution is a BIG advantage here.  And Apple is so far the only ones that can say this.

Apple has got it down and has sold millions of iPhones, iTouch’s, iPads and other connected devices AND content for years now. This is not an easy trick – as it not only requires the hardware to be stupidly simple and easy to use for the masses, but its software must be self-healing and not require the ‘patches’ and the many problems we have all had with things like syncing your Outlook to a Palm or Crackberry and maintaining ALL of your information. How many of us have had problems doing this because we were running one of the many Microsoft operating system versions or incompatible updates for our MS Outlook or office.

Apple is also easing restrictions on the use of third-party development tools to create iOS app—a move that might clear the way for developers to create apps for the iPhone using Adobe Flash CS5. (Note this is not the same as letting Flash run on the iPhone.)

When Apple debuted iOS4 back in April (then called iPhone OS 4), it unveiled restrictive terms in its developer program license that prohibited developers from using third-party application development tools or middleware to create iOS applications. In an open letter later that month, Apple CEO Steve Jobs said Apple did not want the iOS platform to be “at the mercy” of third party development tools. Apple has not changed those provisions to permit the use of third-party development tools, so long as the applications do not download code to iOS devices. “This should give developers the flexibility they want, while preserving the security we need,” Apple wrote.

Slingbox Reasons:

For the uninitiated, Slingbox is a “places shifting device.” Connect it to a video source (cable or satellite box, DVR, TV antenna, and so forth), and the Slingbox digitizes the video output for access on a wide variety of PCs and smartphones and iPhones–essentially allowing access to your home TV anywhere you can access the Internet. People prefer the benefit of mobility and they will accept just about anything – even frequently dropped calls – for the ability to have a media session (voice call, video chat, whatever) while they are wherever they are.

If you can watch whatever is on your home DVR, TV or better yet live HDTV on your iPad, wherever you are, then the broadcasting companies have lost total control of advertising as it relates to geography. This is an interesting notion (Nielsen please take note).  This has huge implications. One example is sports blackouts. Often local TV stations will not carry a local team game to force local people to go to the game to see it, or a particular company owns the rights to the broadcasting and will not allow it to be shown in that area. The entire concept of locality is gone.

There are buckets of content that come through cable still unavailable from the Web. Google TV and third party hardware/software boxes connecting to cable boxes and other hardware can and does cause setup nightmares that negate all of its potential capabilities and benefits. After all – a home theater PC can already do pretty much everything Google TV will – but how many people do you know with computers under their TV sets?

All in all, its going to get very interesting in the very near future. For now, I’ll take my simple basic cable set-up, throw a slingbox in my house, download the iPhone app on my iPhone or iPad and I’m good to go anywhere. Keep it simple.



Enhanced by Zemanta

Can cable TV keep its ‘teflon’ coat afloat?

Cable TV. Its been resilient during the recession. Almost like Teflon. Will online video providers emerge as direct competitors or complements to the $69.8 billion U.S. TV subscription market?  If over 88% of all the full-length TV program episodes available in the $10/mo subscription service are already freely accessible on Hulu.com. For clips, it’s almost 98%, then why would I buy a subscription to Hulu +?  “Online video is not a substitute” for multichannel video programming, Comcast recently wrote in a filing to the FCC responding to complaints from competitors this month. “In addition, several impediments – technological, pricing related, and rights related – make it highly unlikely that online video will become a substitute” for such service “in the foreseeable future,” it continued.

So is cable really safe? Today, Google announced that it will jump into the pay-per-view market, via YouTube. Newer film titles would cost about $5–a bit more than the $.99 to $3.99 YouTube charges for the older films currently available in its fledgling pay-per-view catalog. Presumably, there will be some sort of integration with Google’s forthcoming Google TV platform, though details are scant.  If the company does manage to roll such a service out, we’ll soon see YouTube going head-to-head with Apple’s (AAPL) iTunes, Netflix (NFLX) and Hulu–and in a big way.

Yes, Google’s got reach and numbers. Yes, they could market this probably better than most. But the cable TV business has been in this market for years. And they are terrible at marketing the service and always have been. Part of the problem has been a rights issue with Hollywood (the old ‘day and date’ issue with DVD releases). Day and date issue won’t go away either, in part because Red Box is putting too much $$ into the studios pockets and it a hedge against Netflix. However, Netflix is also putting a lot of $$ in the same pockets. And, most of us still prefer the large flat screen TV over a laptop screen any day. But one of the most fervent and least discussed impediments happens to be pay TV. The likes of HBO and they swing a very big stick. HBO gets rights to movies, and BIG titles, for many, many years. Its the ‘pay-tv’ window that keeps coming back and back and back. You see HBO has 41+ million, HBO and Cinemax U.S. subscribers (as of December 31, 2009).  At an average subscription fee of $12.00 per month, that $492,000,000 million dollars PER MONTH in subscription fees. Yes, part of that goes to the cable ops for carriage, but thats still a BIG number. So, when HBO goes shopping for films and locks up movies, it does so for years. AND, those rights prevent many forms of PPV exposure, both online and terrestrial.

Which bring me back to cable TV as a whole.  I recently disconnected 3 out of 4 HD boxes in my home and got rid of my last ‘extra’ tier. I have kids in the home, so luckily Nick Jr. and Disney for Kids is carried on plain the old basic tier (are you listening cable operators?). Had those two channels been on a tier that I would have to pay for, guess what? I would be buying that tier. Other than that, ABC, NBC, CBS and Fox are the most valuable channels to me. Why? I can’t rent tonight’s Network Television programs. I might be able to see some of them online but I’m back to my computer screen for that.  The Emmy’s, Football, Baseball, The Academy Awards, local news and network news and other programs of this sort we all get for free – today. And its all delivered over cable TV.

Until I am able to transmit an online URL to my flat screen TV, Hulu +, Netflix, Google TV,  Apple TV and the rest are not compelling enough to pay…$5.00 a movie or $ 10.00 a month on top of my basic cable subscription.  So, yes, cable TV is fairly resistant to the recession and ‘online’ competition today. My guess is that Steve Jobs will announce a ‘rental’ service for Apple TV. And yes, others will come. But for today, cable is king.

And please don’t move Disney for Kids and Nick Jr. to another tier!

Enhanced by Zemanta

Apple and the War for the Mobile Market..its all about the carriers who hold the distribution key.

The short history of the computer industry is dominated by two well-known stories of business triumph and defeat. The first is the story of how mainframe makers failed to take the personal computer seriously until it was too late. Most of them faded away, and those that didn’t still failed to dominate the PC industry.

The second is the story of how Apple Computer refused to license its innovative new operating system to other hardware makers in the early days of the PC revolution and ended up ceding the market to Microsoft, which licensed its operating system far and wide.

The temptation to fit every new computer industry business conflict into one of these two molds is strong, and frequently surrendered to. For a modern example, look no further than the current battle for the mobile market between Apple, Google, RIM, and others. The first story may end up applying in the case of RIM, which might have waited a bit too long to recognize the primacy of the touchscreen and the mobile application marketplace. Or perhaps it applies to Microsoft, which refused to let go of the idea of shoehorning Windows onto a phone until very recently (or not).

But I want to talk about the second story, the one about the company deciding not to license its operating system to third-party hardware makers. In the mobile-market version of this story, Google is Microsoft, Android is Windows, iOS is the Macintosh operating system, and Apple is, well, Apple. The pieces match up so well, it’s barely even an analogy. The lesson seems clear: unless Apple learns from its past mistakes and opens up its mobile platform, it’s going to end up with a Macintosh-like minority market share while Google licenses its mobile OS to all comers and the Android phone becomes the Windows PC of the new mobile computing era.

Maybe you’ve heard this sentiment expressed before, and maybe you’ve read the inevitable reactions to it from ardent Apple supporters explaining why the current situation is very different and how Apple will succeed this time around—or perhaps how it has already succeeded. I’m on board with the first part; I think the mobile market is very different from the PC market of old. On the second part, Apple’s prospects for success, I’m less sure.

But first things first.

To understand the differences between the war for the PC market and today’s mobile battlefront, consider the specifics of Apple’s historic failure against Microsoft. According to the story, Apple’s refusal to license its OS led to several insurmountable disadvantages.

First and foremost, Apple had to make and sell all the hardware that would run its OS. Microsoft, meanwhile, had an entire industry working to make hardware for its OS. PC makers fought for every last scrap of the market, building hardware to suit all sorts of customers: PCs for home use, education, gaming, point-of-sale, data centers, businesses, industrial use, you name it. In the heat of this competition, PC hardware prices were driven down and margins were cut to the bone; PC hardware was commoditized.

Even when its catalog of Mac products was at its most sprawling, Apple made a comparatively narrow range of products, with just a few half-hearted excursions into less-mainstream niches. It was clear that a single company couldn’t make and support enough different kinds of hardware to serve the entire PC market.

Since the margins on hardware are a lot lower than the margins on software, Apple was at a distinct profit disadvantage versus a software vendor like Microsoft. To compensate for this, Apple tried to stick to the sweet spot of profitability in the hardware market, avoiding the tiny margins of the very low end and the low volumes of the very high end. This further lowered the glass ceiling of Apple’s maximum potential PC market share.

To add insult to injury, Apple wasn’t even on equal footing when it came to hardware costs. While the IBM PC and its eventual clones used Intel CPUs, Apple chose Motorola—twice. The battle between x86-compatible CPU vendors pushed performance higher and prices lower, but Apple was left out of that virtuous cycle, making its Mac hardware more expensive and often slower than its PC competition.

The result was that Microsoft dominated the PC industry, achieving a bona fide monopoly and reaping huge profits, while Apple nearly went out of business.

Pattern recognition gone awry

Now let’s compare this to the contemporary mobile world, starting with the idea that a single company can’t profitably produce a wide enough range of hardware to serve an entire market. While that may have been true for the PC, I don’t think it’s true in the mobile space.

Consider the iPod. Apple started with just one, Mac-only iPod model, refined it for a while, expanded beyond the Mac market by making a Windows version, re-calibrated its aim for the mainstream and released the smaller iPod mini, then iterated confidently while also branching out into less profitable segments. The end result: Apple completely dominated the digital music player market.

Next up is pricing. By allowing hardware vendors to slit each other’s throats, Microsoft ensured that customers would have access to cheap PC hardware while not hurting Microsoft’s own (software-based) profits. At the height of the war for the desktop, PCs weren’t cheaper than Macs by a few dollars; they were cheaper by hundreds, sometimes thousands of dollars. That was a crushing blow to Apple’s sales prospects, and one that a company that made its profits from hardware sales had no way to retaliate against.

iPhone X-Wing

What does mobile phone pricing look like today? Well, the iPhone isn’t much more expensive than comparable phones. And since phones cost a lot less today than PCs did in the ’80s and ’90s, both adjusted for inflation and in absolute values, the differences are even smaller: tens of dollars, not hundreds or thousands. That kind of pricing differential is eminently surmountable with product features and design—an advantage Apple definitely enjoyed back in 2007 and arguably still has some of today.

A big reason for this price parity is that most of the cost of a phone isn’t in the phone itself, but in the contract with the carrier. An iPhone 4 may cost you $200 to buy, but the contract will cost you thousands of dollars.

This doesn’t mean that there’s no room for handset pricing to affect sales, but it does mean that those price wars will take place at a scale and in a realm where Apple has already proven itself able to win: portable consumer electronics that cost a few hundred dollars at most, dropping down to two-digit prices at the low end.

As for hardware costs and performance, Apple’s component suppliers are the market leaders. Even its “unique” ARM-based CPU uses the same instruction set as the CPUs in its competitor’s phones. For now, at least, Apple is on the right hardware train. And if the time ever comes to make a change, Apple is uniquely experienced in switching CPU architectures in a way that’s mostly transparent to customers.

All of this is to say that the situation in the mobile space today is not analogous in a straightforward way to last millennium’s battle for the PC desktop. Now, without using history as a crutch, let’s reconsider Apple’s mobile prospects. Is the iPhone destined to be a minority player in this market, or will it come to dominate? If, as I propose, a single vendor can provide enough hardware diversity to cover most of the market, and if every player has similar hardware costs and roadmaps, what does it take to win this war for our palms? Where’s the edge, and who’s got it?

An idealist might say that having the better product will make the difference. As much as I’d like that to be true, I don’t think any company has a product that is so much better than its competition in the eyes of so many people that quality alone will decide things.

Critical mass is another factor. Are customers buying iPhones because their friends and relatives have iPhones and they want to video chat with them, use some of the applications they’ve seen, or just be part of the in-crowd? In other words, has Apple’s 2007 launch of the iPhone given it insurmountable lead? Again, I have to say no. Apple had a head start, for sure, but Google has closed the gap quickly with Android in terms of both product quality and sales.

Speaking of which, what explains Android’s recent rapid sales growth? Android is a good OS, but then, so was webOS, and look what happened to Palm. Quality is not enough. Android is available on a wide variety of hardware, but a menagerie of form factors has not stopped RIM’s market share slide. Handset variety also poses challenges to application developers who must target a fragmented platform. Hardware is not going to make the difference. So what will?

Carriers, carriers, carriers

Let’s revisit the Mac/PC analogy, with a twist. In the desktop era, distribution wasn’t much of a factor. Everyone had access to the same retailers, and, eventually, the same Internet. Retail margins were all very similar, and exclusive distribution deals were rare and usually inconsequential. Product features and pricing were the most important differentiators, and both were controlled by the hardware manufacturers.

Today’s mobile market is the polar opposite. Distribution is almost completely controlled by the carriers—albeit sometimes indirectly. A lack of decent coverage in a particular geographic area can eliminate a phone from consideration, regardless of how great the hardware is or how much it costs.

Carriers are also running the show on pricing. Carrying the vast majority of the cost of the phone in their contracts means that the carriers have the most leeway to move the market by, for example, lowering monthly bills, lowering or eliminating bandwidth caps, increasing subsidies (thus making phones appear “cheaper” to consumers), and negotiating how much of this money will be shared with phone manufacturers.

And, of course, the carriers decide whether to allow a phone on their network at all.

Distribution isn’t important when all competitors have the same access, but it’s incredibly important when the market is fenced-off into independent kingdoms, the choice of which can make or break a sale before the merits of the actual product are even considered. The way customers have been buying cell phones for the past few decades further minimizes the importance of the phone itself. Most (non-geek) people take a trip down to “the cell phone store,” choose a contract that fits in the budget and maybe includes some discount plan for friends and family, and then pick the handset that looks the best (or the one that’s suggested by the store clerk). Maybe things like ease of use and application availability are considered in that final step, but at that point, they’re not going to make or break the (contract) sale; the customer is walking out of that store with one of the phones that it sells.

Android sales are surging because there’s a pretty good Android phone—probably several, in fact—for sale in nearly every place that sells mobile phones. And as hard as it may be for some of the people reading this to believe, the Apple store is not where most people go to buy a new cell phone. All those Verizon, AT&T, and T-Mobile kiosks in the mall exist for a reason. Apple has 229 retail stores and a big marketing budget, but both are dwarfed by the combined retail presence and advertising spending of the carriers. And yes, I’m including AT&T in all this; AT&T sells Android phones too! It’s Apple on one side and an entire industry on the other…starting to sound familiar?

Leveling the playing field

Apple doesn’t need to license iOS to other handset makers. Yes, Android is starting to look a lot like the Windows of the mobile era, but not because it’s licensed to third parties. The contexts and uses for handheld devices like music players and cell phones are far more limited than for PCs; hardware diversity is not driving Android sales. The magic formula is simple: quality + availability. Android is ascending in the market because it’s good, it’s available where people want to buy it, and it runs on the networks people want to use.

Droid TIEs

The current carrier situation may end up being a transient aberration in the long run, an inefficient market created by the huge fixed costs of building and running a wireless data network. But if the comparatively more mature (wired) telephone, cable television, and Internet service provider markets have taught us anything, it’s that the road to a more competitive marketplace for infrastructure services is a long and hard one. Carrier segmentation will be a fact of life for Apple for the foreseeable future.

There’s only one thing for it. Apple needs to get the iPhone on more carriers as soon as possible. Nowhere is this more important than in the US, where the iPhone is available on just a single carrier—one that’s decidedly not the market leader. The only way for Apple to eliminate the distribution and marketing advantage currently enjoyed by Android is to make sure that everywhere an Android phone is for sale, there’s an iPhone sitting right next to it that will work on the same network. Only then will Apple get a fair shot at selling based on the things it can actually control: the hardware and software of the phone itself. At that point, it can—and should—diversify its iPhone product line just like it did with the iPod in the last decade.

Epilogue: market share matters

On a recent podcast, John Gruber spent some time musing about the inherent worth and actual relevance of market share, noting that “you can’t cash checks with it” and suggesting that it might just be a convenient way for industry observers to “keep score.” It’s true that Apple only needs some reasonable share of the market to sustain its platform. The Mac has had a market share well below 10 percent for decades, and that’s been enough to ensure that developers will still write Mac applications and customers will pay enough for Mac hardware to fund the development of future models.

Furthermore, in the mobile market as in the PC market, Apple’s share of the profits is considerably ahead of its share of the revenues. Analogies to luxury car makers inevitably follow. “Hey, BMW has only 7 percent market share, right?” The idea is that Apple either can be or should be happy with just “the most profitable portion of the market.”

Well, rest assured, BMW is not content with its current share of the automotive market, and Steve Jobs’ Apple will not be satisfied with anything less than the biggest piece of the pie that it can possibly take, in terms of profits, revenues, and unit sales. With the iPod, Apple has proven that all of those numbers can be well above 50 percent—without compromising product quality.

In the mobile market, the goal is the same. Apple is playing to win

Guest Post by John Siracusa. Thanks John!

Enhanced by Zemanta

What’s to come in 2010

Some thoughts and predictions for 2010:

Computers/OS:

Google’s OS and Google’s Browser Chrome will further erode Microsoft’s OS dominance.

Phones:

Google’s Nexus One is not an iPhone killer but what would be much more powerful and meaningful would be for Google to offer a ‘subsidized’ cell phone service through a carrier in exchange for watching ads – no more cell bills. That MIGHT make me give-up my iPhone habit.

TV/Cable:

TV Everywhere will dominate as cable subscribers will WANT to get what they see at home on their PC’s, phones, etc. They will want this because its only a matter of time before Hulu (and other online content aggregators) lose their premium content or require a subscription fee. (Smell Comcast here?). Boxee, Roku, Sezmi and Zillion TV will have tough sledding IF Apple TV hopefully syncs a (rumored) TV subscription service with their upcoming iTablet/iSlate.  Apple MIGHT offer consumers an a-la-carte menu of the best of cable and network TV on their televisions through the AppleTV box, iphones and the iTablet  (along with several newspaper/magazine subscriptions) for a single monthly fee. Their version of  a cable ‘triple-play’ subscription. Do you remember when cable TV was “sold” as a way to escape the ads on free, OTA broadcast TV? Those were the days…

Movies/Music/Web:

iTunes will announce an iTunes web service, thanks to the Lala acquisition. Disney will move forward with their Keychest initiative and so will the Digital Entertainment Content Ecosystem, or DECE. However, only one system will survive this year to avoid consumer confusion.

‘Live’ streaming video and UGV will replace the jpg /gif as the dominant content format of visual sharing online.

Facebook, Hulu, YouTube , Twitter, and other ‘weapons of mass distraction’ these days will be increasingly ‘filtered’ out from the workplace due to too much time by employees during work hours spent on ‘social media’ causing a huge traffic shift in several social networks most notably, Facebook.

Facebook will go public and the IPO will be a huge financial success until Facebook becomes the Borg unless it allows data portability. Its number of users will continue to climb until the network is as large as Google and people will confuse Facebook with “the Internet” like days of old when the internet was ‘AOL’ to many people.

And then one day…

A new social network will rise to join the big ones. It may offer the privacy that Facebook is moving away from; it may be mobile and location-centric; it may focus on personal content recommendations, but it will come and the minnows will swim like fishes to the next ‘big’ new network to be seen and heard on.

We are all ‘Paparazzi’s’ and ‘Jimmy Olsen’s’ now…with the Advent of ‘live’ broadcasting apps on the iphone and android makes paparazzi’s and Jimmy Olsen’s (instant news ‘scoops’) out of us all further diluting the worth of major news org’s that can’t be expected to be everywhere at all times.

Cloud computing heats up. AWS, Google, Microsoft and others begin price wars to compete for customers.

MySpace will try to become as important to online viewers as MTV was to cable subscribers in the 80’s.

MOG and Spotify will invade the US and give iTunes(lala) and MySpace a run for their money.

And hopefully:

Data portability will become more real, standard, expected and viable. Why isnt’ there a way for me to make 1 Avatar, use 1 password and login to store all this info in a central location that my ‘social networks’ and other internet related service use and fetch each time I access these services?  Here is where I’d place all my photos and videos and then simply choose which services get access to which photos and videos. So, when I leave a social network, my ID and photos and videos LEAVE too.  Go ahead and just try moving or populating another social network again with all of your pictures, comments and videos that you’ve uploaded at one time or another. Hard to do and time consuming beyond belief. It would be nice to able to take MY STUFF (and data preferences) with ME with 1 click.

Comments welcome.

Reblog this post [with Zemanta]

Interesting bitsandbytes – celebrity data, new search engines, Disney’s views on content

Interesting bitsandbytes:

Celebrity Data:

images
*Ken Sonenclar, managing director of DeSilva+Phillips, opened the media investment bank’s Future of Celebrity Media conference, by pointing out that entertainment mags are down 18 percent, not as bad as magazines in general. And as more bloggers create their one celeb-focused sites and media stars like Ashton Kutcher and Martha Stewart are reaching to fans directly via Twitter, bypassing the traditional avenues. It’s getting so bad, Sonenclar said, “Even paparazzi aren’t being paid well anymore. They’re competing with too many so-called amateurs.”

As for online, Yahoo’s OMG leads by far when it comes to uniques, Sonenclar said, showing a bar chart of celeb sites. OMG is distantly followed by TMZ and People, and Microsoft’s Wonderwall, which has come out of nowhere. However, 90 percent of Wonderwall’s traffic comes from people clicking on the “celebrity” channel on MSN’s homepage. The same is true for OMG’s success. While that may skew those sites popularity, versus celeb mag sites run by People and Entertainment Weekly, advertisers don’t really care, Sonenclar said. Still, whether those sites can create brands as well known as People and EW, remains a very open question. Ultimately, the power of celebrity brands still make it possible for established media to hold their own in terms of attracting users and sponsors.

A Studio head that gets it:

disney
*Less than a week after the announcement that Disney (NYSE: DIS) was taking an equity stake in the News Corp-NBC Universal (NYSE: GE) joint venture.  Iger told analysts: “We believe that broader distribution of our content makes sense given the growth in online viewing,” adding, “New media isn’t going away.

“We absolutely must be where our consumers are going.”  One reason: if Disney and others don’t make programming available on a well-timed, well-priced basis, consumers will find it anyway. Iger said going with a service like Hulu helps fight piracy by offering better alternatives.

But avoiding piracy isn’t the only rationale. Iger wants to be where the audience is and, so far, the demographics for Hulu are younger than those for broadcast television. Just as he has with iTunes sales and ABC.com VOD, Iger stressed that cannibalization isn’t a concern. Instead, Disney sees a way to expand its reach to views.

Search Engines –2  NEW TYPES:

# 1- Systemic Knowledge – meaning its not searching but computing the answer (think Spock from Star Trek). Visit : http://www.wolframalpha.com/  wolfram
# 2-  And Real-Time search – is the second. They are: one from OneRiot  oneriot_logo.new and one from  Tweetmeme tweetmeme. Real-time search also can be found here: Twitter Search, , FriendFeed and the recently launched Scoopler. But for the most part, oneriot, tweetmeme and scoopler all are designed from the get-go as ‘real-time’ engines.

*Wolfram Alpha is a search engine that you can use to compute systematic knowledge immediately. You can put in anything you would like to know and you can compare multiple results with each other. There is no need to know how to search; just type in what you want to know.

This is significant in that real-time search s now becoming more important from a ‘social’ perspective than before. First and foremost what emerges out of this is a new metaphor — think streams vs. pages. John Bothwick describes it like this:

“In the initial design of the web reading and writing (editing) were given equal consideration – yet for fifteen years the primary metaphor of the web has been pages and reading. The metaphors we used to circumscribe this possibility set were mostly drawn from books and architecture (pages, browser, sites etc.). Most of these metaphors were static and one way. The steam metaphor is fundamentally different. It’s dynamic, it doesn’t live very well within a page and still very much evolving.

A stream. A real time, flowing, dynamic stream of information — that we as users and participants can dip in and out of and whether we participate in them or simply observe we are a part of this flow. “

Chrome’s tricks and ‘eggs’ of strength revealed!

Chrome is a very nice little new broswer. Not sure the world needed another one, but its still pretty cool. A few tricks that you can try are below. Google placed a few ‘easter’ eggs into the code. So, if you paste some of these commands into the broswer address bar, you’ll have some fun. Try some of these:

about:internets – makes your browser a MS screen saver

  • about:memory
  • about:stats
  • about:network
  • about:internets
  • about:histograms
  • about:dns
  • about:cache
  • about:plugins
  • about:version

Enjoy!

‘clouds’ and ‘context’ and web 3.0

Web 1.0 can be seen as embracing the ‘Commerce‘ on the web (amazon, ebay, netflix, etoys +) and a whole bunch of failed dot.com’s that went bust during the March 2000 meltdown. Web 2.0 can be viewed in terms of embracing ‘Community‘ as myspace, youtube, friendster, linkedin and facebook. Niche communities to be part of online. So what is web 3.0? It’s ‘Context and Clouds‘. With Web 3.0, the internet will act as my personal shopper through increased personalization, a built in recommendation engine through your peers in online communities and in the ‘clouds’ – whatever software and media you need will live in a ‘cloud’ (like DropBox) or (set of them) for you to tap into anytime just using a browser. webtonic.jpg

In order for the web to really become a ‘personal’ shopper and recommendation tool it has the potential to become, it needs to get my data. The enormous amount of data that is being collected by various services will over time be used to deliver specific and personal media to me. And its not just media that will be suggested. Everything from what interests me personally – clothing to household appliances will be ‘personalized’ just for me. And frankly, some call this an invasion of privacy. To me, it’s finally a tune-up of how advertising should work. If TV advertising worked this way, we’d all be happier to sit through some ads on TV. But it doesn’t. And the internet will be able to ‘perfect’ what TV has been unable to do since the 1940’s. old-tv-set.jpg Let’s take a quick look at TV.

On TV, advertisements run on certain programs based on the demographic and audience measurement data gathered by Nielsen. Nielsen operates in over 100 countries. Nielsen was founded in 1923. Nielsen conducts these tests by calling the locals and asking them what they are watching at the moment.

The system has been updated and modified extensively since it was developed in the early 1940s. It has since been the primary source of audience measurement information in the television industry around the world. Since television as a business makes money by selling audiences to advertisers ($65 billion spent on TV in 2006, Ad Age), the Nielsen Television Ratings are the single most important element in determining advertising rates, schedules, and program content.

Nielsen Television Ratings are gathered by one of two ways; by extensive use of surveys, where viewers of various demographics are asked to keep a written record (called a diary) nielsendiary.jpg of the television programming they watch throughout the day and evening, or by the use of Set Meters, which are small devices connected to every television in selected homes. These devices gather the viewing habits of the home and transmit the information nightly to Nielsen through a “Home Unit” connected to a phone line.

OK, so its 2008. Doesn’t the above sound a little ‘tired’ already?

Now switch to the internet. While some people are irked by ‘cookies’ and other’s by giving away information on forms or saving a ‘preference’ on a website or which websites are in ‘my favorites’ or ‘bookmarks’, these actions eventually will all allow advertisers to better target each of us and offer a service/goods or media that I’d really consider owning. And it’s the web services that mine this info through my interaction with them that are the best. Google being the first and best at it, is now a ‘brand’ name. And it’s the only brand name that doesn’t advertise and never has (think about it). It engages. Its very core looks to help and through its offering of great services to us, allows it to gather information about us and tailor its ads and services accordingly. I use many services offered by Google. In exchange for this, I’ve given some of my personal info to Google.

New ‘vertical’ search efforts like sidestep (travel), icerocket (blogs) imedix (medical) and other ‘niche’ search products will further help advertisers deliver specific services for each of us that are helpful and useful. Google has done a great job in a broad sense but now it appears that there are many new ‘vertical’ search engines that specialize in searching very specific ‘ niche’ subjects and categories. Drilling down where Google is not. Over the course of the next several years I think we will see several ‘vertical’ search engines giving Google a run for its money.

But that’s another post for a different day.

Google will buy Apple by 2011, Part 2

Many of you had some interesting reactions and comments to this prior post. Thanks for your comments. Let me try and explain why I believe this will happen in one form or another in the next 3-4 years. Many of you have stated that Google can’t afford Apple as the market cap is too big for them to swallow today. True. But it’s not today I am talking about. 3 years on the web is like 21 years on the planet (web years and dog years are nearly equivalent). First, as you know things change rapidly on the net faster than anywhere else. Google MAY be able to grab the rest or nearly 100% of the market share in search over the next 3 years – and that share will increase their value (and market cap) tremendously. To do this, they will not need any hardware, nor will they need to introduce any gadgets/phones, what not. Its 100% software driven. And, given that the web will have an increasing percentage of ‘vertical’ search (vs. the Wal-Mart Google engine of today), Google will also begin to focus its sights on those verticals as well with its huge pile of cash. Google will buy their way into any search vertical they might miss. And that doesn’t take into account non-web advertising like billboards, radio, newspapers and traditional TV +. Now, let’s look at Apple. The market for cell phones is in a state of flux. How many iPhones can one buy? Saturation will occur and sales will eventually have to slow. Competition will appear and market share will s-l-o-w down and decrease over time. When Jobs makes the iPhone carrier-neutral, the walls all come down. So, how do you ‘sell’ more cell phones to people that they don’t need? One possibility is to give them away with advertising. Second, while ‘Goople’ may seem far-fetched to us today, lacing cell phones with ads (think Android) AND perhaps computers with ads or instead of buying an office suite from MS, using GoogleDocs with ads instead to help increase market share over the PC doesn’t seem so far-fetched anymore. Would I choose to use a cell service that gave me a free handset combined with no monthly charges in exchange for watching a few ads? Could I and would I use that combination to replace my land-line eventually thereby sneaking this combination right into everyone homes? Would I choose to get a free laptop that does the same type of thing? I might. Would developing countries whose cultures don’t have the money to buy computers and cell communications use such a computer or cell phone? I bet they would.

The same way Apple introduced their new thin laptop without the traditional bells and whistles of all other laptops sounds so much like what Google did when they introduced Search and Adwords, then slowly but surely introduced itself into other traditional media, while their competitors just scramble around to keep up, and can’t so far. And finally, a merger or some combination of the two is not unthinkable. Both company cultures are similar in so many ways. So, think a new form or type of combination or new venture between the two. Maybe not an outright purchase NOW, but its not impossible in the future.

cloudsss.jpgpie.jpg