From Heaven: iTV

November 6, 2011 – 9:14 pm | Edited by Jean-Louis Gassée

Search for the word ‘‘cracked’’ in Walt Isaacson’s biography of Steve Jobs (or flip to page 555 if you have the bricks-and-mortar version). The second hit yields the following:

It will have the simplest user interface you could imagine. I finally cracked it.

“It” is the mythical Apple iTV. Even though Walt’s report of the July 2011 conversation didn’t hint at Steve’s solution, the eleventh hour revelation has rekindled old rumors and set the blogosphere on fire. “If Steve said he ‘cracked’ the problem, it must be true!”

At first, I had impure thoughts: I imagined Dear Leader, taking a moment away from redesigning Saint Peter’s abode, had foisted a prank upon us abandoned mortals: “That’ll keep ‘em busy…and will take their attention away from embarrassing topics such as the incompatibility between iOS and Mac file formats.”

A few days later, however, I read two posts that made me rethink my dismissive views.

First, in “Apps Are the New Channels”, John Gruber floats the idea of channels-as-apps (powered by iOS, of course):

Imagine watching a baseball game on a TV where ESPN is a smart app, not a dumb channel. When you’re watching a game, you could tell the TV to show you the career statistics for the current batter. You could ask the HBO app which other movies this actress has been in.

Second, in his good-natured pout post “Fine. I will talk about Apple Television or iTV or whatever it will be or will not be called.”, Brian Hall led me to a Nielsen Wire article that contains this graph:

40% and 42% of smartphone and tablet users, respectively, use their devices while watching TV — on a daily basis. The statistics themselves are hardly surprising, particularly to parents who have watched their multimedia-tasking children grow into young adults. But as I looked at the charts, a retroactively-obvious connection, a compatibility, struck me: Smartphones, tablets, and the iTV all use apps. [I’ve given up using the precautionary “putative” when speaking of iTV, and I use the present tense with license.]

With this in mind, what will the iTV look like?

As discussed in a previous Monday Note, if the iTV is an integrated device, the computer inside will become outdated long before the monitor does. Once you’ve graduated to Full HD (1920 by 1080 pixels) any other “improvements” –“240 Hz” display frequency and the like — are markitecture gimmicks that are invisible to most users. In other words, you won’t want to upgrade your TV after 18 months the way many of us do with laptops, tablets, and smartphones. (One could imagine a replaceable iOS computer module inside the iTV, but it sounds clunky, a source of problems.) Even more important, an integrated iTV would orphan the millions of HDTV sets already in place.

Furthermore, I still don’t see a 50” TV set walking out of an Apple Store. It’s hard enough to carry a 27” iMac out — or back in when trouble strikes. And I don’t see battalions of Apple field service people coming to our homes to fix these things.

If there’s no integrated iTV, let’s consider the iTV as a separate module, the next-generation Apple TV. In order to really work in the marketplace and achieve an iPod-like status, the module would have to “swallow” the set-top box, DVR included. If it didn’t, we’d still have to fight the multiple device/multiple remote battle: The set-top box, the primary source of TV fodder, has to be connected to the Input 1 HDMI connector, relegating iTV to Input 2. Certainly not the elegant solution Steve had in mind.

However, swallowing the set-top box and its DVR would entail making agreements with cable operators, business that are more numerous, less sophisticated, and more afraid of Apple than are the wireless carriers. While the wireless carriers have seen how smartphones can increase their ARPU, cable operators know only too well what would happen to their barely legal and definitely distasteful program bundling schemes once Apple gets in the game. (Try adding a single channel to your existing Comcast bundle: in Palo Alto, with Comcast, you must fill and email a form. It can’t be done on the phone, even if you manage to get to a human after a 20 minute wait.)

Ah, but maybe there is a way: Connect the set-top box to the HDMI input on the iTV, then connect the iTV to your HDTV’s prized Input 1. That gets us partway there, but it still doesn’t solve the multiple remote problem.

That’s where apps come in for the first but not last time: Download Apple’s iRemote application to your iOS, Android, or Windows Phone smartphone or tablet and you’re done.

Smartdevice-as-remote has been attempted before, of course. One example is the Xfinity iPad/iPhone app. You prep each set-top box in your home, download the program guide to your iDevice, and you’re good to go. When you issue a channel-change command from your smartphone, it’s sent through the Net to the Comcast cloud, and is routed back to your set-top box via Comcast’s cable:

Why the detour through Comcast? Because your smartphone/tablet and your set-top box don’t understand each other. The former speaks WiFi and Bluetooth; the latter only understands infrared.

Unfortunately, in my case, it worked once and never worked again.

Judging from the comments in the App Store, I’m not alone.

Furthermore, counting on the cable operator – and there are more than 25 in the US — to let the smartphone/tablet app control a multitude of set-top box models via the circuitous route described above probably isn’t the type of elegant solution Jobs had in mind.

How about translating between the smartphone/tablet and the set-top box by inserting a mediating device, a WiFi or Bluetooth-to-I/R converter? With the iTV connected to the set-top box and TV via HDMI, you still end up with a complicated arrangement: Your home WiFi base station provides a Net connection to your smartphone and iTV, and the WiFi-to-I/R converter listens to your smartphone and speaks I/R to your TV and set-top box:

This looks ugly, and it gets uglier: Since there’s no two-way connection between the TV/set-top box and the “remote,” the remote has no idea whether the TV is on or off, which input it’s using, which channel it’s tuned to. As a result, it’s easy to have a system in an unknown state, frustrating most mortals and forcing ‘‘harmonizing remote” makers such as Logitech to use complicated workarounds.

For most users, chances are slim that the set-up I just described will work and keep working.

Now let’s consider channels as apps. Why should TV on an iTV be like the TV we get through a set-top box? Newspapers and magazines on tablets (and smartphones for some publications such as the NY Times) aren’t mere replicas of the paper-based product. The adaptation to the new medium isn’t always pretty, but there are some great examples: See Bloomberg Businessweek or The New Yorker Magazine on a tablet.

The same will apply to TV. Not all channels will adapt equally well or equally quickly, but as “channel apps” evolve, we’ll see new ways of using the medium. As Mr. Gruber pointed out, imagine a football game as an app on an HDTV screen with the on-demand stats he mentioned plus the Twitter and Facebook streams we’ve grown to expect. (Personally, I’m not crazy about having too much “other” content on the screen as I watch a game, but I might be in a minority.)

Delivering channels as apps liberates our “viewing experience” in two ways: It breaks today’s narrow channel delivery format and it bypasses the set-top box. Today, I can watch the “straight” version of 60 Minutes on my TV (in real time or from my DVR), or I can go to my computer and watch a recent episode plus the additional “60 Overtime” content…or I can buy the $4.99 iPad app and get all of that through a much better UI that includes great navigation to the vast library of past episodes. Port that iPad app to the iTV device and you’re done. With channels as apps, all you need is a net connection (sometimes provided by the cable operator). You can throw the set-top box away.

Will consumers pay for iTV apps/content as I did for 60 Minutes? Probably, and we won’t have to pay for everything, just as with today’s TV with its combination of free and pay-per-view programs.

Of course, there’s the notorious “simple matter of implementation,” here: Someone has to write the apps that encapsulate the channels. But once the movement gains strength and tools become widespread and understood, it will be easier than you might think. 500,000 iOS apps attest to the availability of institutional knowledge.

In the meantime, if you don’t have an iPad, borrow one, spend $4.99 for the 60 Minutes app, and imagine the experience on an HDTV. Is this the TV future Jobs had in mind?

—JLG@mondaynote.com

[In a future Monday Note and/or in comments on our site, I’ll cover variants to the approach described above, infrastructure issues, and also potential reactions from carriers/operators and competitors.]

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Proof by Mask

October 30, 2011 – 9:19 pm | Edited by Frédéric Filloux

Web design is in bad shape. In the applications boom, news-related web sites end up as collateral damage. For graphic designers, the graphics tools and the computer languages used to design apps for tablets and smartphones have unleashed a great deal of creativity. The transformation took longer than expected, but great designs begin to appear in iPad applications (in previous Monday Notes, we already discussed Business Week+ and the new Guardian app). The best applications get rid of the print layout; they start from a blank slate in which a basic set of rules (typefaces, general structure of a page, color codes) are adapted to the digital format. Happily, we just stand at the very beginning of a major evolution in news-related graphic design for apps. And this new world proves to be a killer for the traditional web which, in turn, seems to age fast.

The graphic evolution of the web must deal with two negative forces: its language framework doesn’t evolve fast enough, and it faces the burden of messy advertising.

Less than a year ago, the potential in the latest iteration of the HyperText Markup Language a.k.a. HTML5 thrilled everyone: it was seen as the decisive, if not definitive, upgrade of the web, both functionally and visually. Fact is, it didn’t take-off — yet. Reasons are many: backward compatibility (not everyone uses the latest web browser), poor documentation making development uncertain, stability and performances issues. There are are interesting initiatives but nothing compelling so far. None of the large digital media have made the jump.

For advertising, the equation is straightforward. The exponential rise of inventories coupled to fragile economic conditions have pushed ad agencies to ask more (space) for less money. And, for the creativity, the encephalogram remains desperately flat.

The result is this:

This is the first screen of the French website 20 minutes’ home page. A good site indeed, doing quite well audience-wise, but which yields too much to advertising. In its case, the page carries an “arch” that frames the content; and, for good measure, a huge banner is inserted below the main header. If you mask the ad, it looks like this:

The weird thing is this: On the one hand, web designers seem to work on increasingly large monitors; on the other, the displays used by readers tend to shrink as more people browse the web on notebooks, tablets or smartphones.

The result is a appalling when you try to isolate content directly related to the news. In the series of screenshots below, I selected the first scrolls of pages as they render on my laptop’s 15” display. Then, I overlaid a red mask on everything but the news contents: ads, all sorts of promotions, large white spaces, headers and sections lists are all hidden away. Read More »

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Steve’s Bio: A Personal Perspective

October 30, 2011 – 9:19 pm | Edited by Jean-Louis Gassée

Let me jump to the conclusion: This is an extraordinary book on many levels: informative, entertaining often, insightful, sympathetic but not indulgent; it rises to its unusual subject and manages to render its complexity in a straightforward manner that attests to the biographer’s talent.
Get thee to a physical bookstore, if you can find one, or to Amazon’s or Apple’s online dispensers, you won’t regret it. And if you don’t have the time or patience, start with Chapter Thirty-Six: The iPhone, Revolutionary Products in One (page 465 on paper, easily searched on electrons).

Last year, Walt Isaacson called to talk about the bio Steve had asked him to write. No surprise there, Dear Leader always wanted the best, and Isaacson had written world-class biographies of Ben Franklin, Einstein, and Henry Kissinger.

I told Isaacson how sad this felt, how I perceived Steve’s decision as ‘‘putting his affairs in order’’ before leaving this Earth. Walt didn’t answer directly, but he did say something shocking: Steve had relinquished all control over the book, all decisions were Walt’s. I didn’t believe it. I couldn’t see Steve giving up control on anything. His fanatical attention to detail is, sorry, was a key ingredient of his success. But Steve’s editorial grip on the book went no further than his picture on the cover. In Isaacson’s words:

“He had never, in two years, asked anything about what I was putting in the book or what conclusions I had drawn. But now he looked at me and said, “I know there will be a lot in your book I won’t like.” It was more a question than a statement, and when he stared at me for a response, I nodded, smiled, and said I was sure that would be true. “That’s good,” he said. “Then it won’t seem like an in-house book. I won’t read it for a while, because I don’t want to get mad. Maybe I will read it in a year—if I’m still around.” By then, his eyes were closed and his energy gone, so I quietly took my leave.”

To be sure, this isn’t your typical CEO encomium where the slightest achievements are remembered as world-changing deeds, and unseemly details are airbrushed into endearing idiosyncrasies.

The arc of Steve’s life is the stuff of legends: Abandoned at birth; raised in Silicon Valley; an acid-dropping, ashram-dwelling college drop-out, hacker, and co-founder of the most iconic of personal computer companies; fired at age thirty; re-inventor of animated movies at Pixar; the struggle to create the NeXT big thing; the return to Apple in the most stunning turnaround the industry had ever seen; reshaping the music industry; building a world-class retail network in his own image; re-inventing the smartphone industry and grabbing half of its profits; and, finally, after thirty years of false starts, making tablets a reality and grabbing iPod-like market and profit share as a result. An arc that saw the unmanageable hippie become the head of one of the world’s best-managed companies. And he died just as he reached the pinnacle.

This could tempt both subject and his biographer to produce a statuesque book, a North Korean monument to Dear Leader’s achievements. But instead of The Life and Miracles of Saint Steve, we get the gift of truth. We are forced to stare at the reality, or realities of the actual man. Thinking of his children, for whom Steve said the book was, so they got to better know him, this book is a great present. Judging oneself only by comparison to the better side of a parent is a terrible burden. Walt’s book gives them an independent look into the incredibly luminous Steve as well as into his sometimes repulsive dark side. Steve’s must have hoped to free them from his legend.

On the one hand, Isaacson shows the man who thrilled us with his (almost) unerring taste, with his sense that computers of various sizes and forms were more than merely utilitarian, that they were the objects, the vehicles of an evolving culture. Visionary, artist, leader, innovator… the list of meliorative words goes on, and rightly so: Steve was all these.
On the other hand, Isaacson manages the feat of being, by turns, empathetic, even affectionate and, in the next sentence, unblinkingly factual. The book will confirm everything you’ve heard about Steve’s unpleasant sides, and then some. When learning of his truly pathological eating habits, for example, you’ll wonder about his sanity. I don’t use the word pathological lightly: you’ll see how delusional Steve was when, for eight months, he refused surgery for his diagnosed pancreatic cancer, choosing instead a strict vegan diet, acupuncture and “herbal remedies, and occasionally a few other treatments he found on the Internet or by consulting people around the country, including a psychic”.

In a similar vein, you’ll read what Jony Ive, Apple’s Sr. VP of Design, Steve’s soulmate had to say about his dark side:

“… his way to achieve catharsis is to hurt somebody. And I think he feels he has a liberty and a license to do that. The normal rules of social engagement, he feels, don’t apply to him. Because of how very sensitive he is, he knows exactly how to efficiently and effectively hurt someone.”

Yes, that’s also the way Steve was. With everyone, family included.

Knowing or having known many of the characters in the book, I can vouch for its accuracy. But, even more important, I can vouch for its voice. Walt Isaacson got Steve right. He didn’t get intimidated, he wasn’t seduced into being a groupie, he didn’t get nauseated or angry. Instead, he delivered the truest rendition I’ve read of one of the most complicated people I’ve known.

His subject’s complexity didn’t rob Isaacson of his dry wit, such as this when observing Jobs after his liver transplant:

“As Jobs got better, much of his feisty personality returned. He still had his bile ducts.”

Or from recording memorable Bill Gates quotes such a this one:

“I’ve been predicting a tablet with a stylus for many years,” he told me. “I will eventually turn out to be right or be dead.”

(Not so fast, Bill, we love to have you and Ballmer around.)

In my view, the only way to keep one’s sanity when dealing with Steve was to stay ambivalent, to force oneself to harbor contradictory feelings about him. Easier said than done. In my case, over time, feelings of admiration and affection have taken over when watching the feats and the struggle. Reading Walt’s book was a helpful and, at times, painful reminder of who Jobs actually was.

—JLG@mondaynote.com

[For a small compendium of Walt’s best-selling Steve Jobs bio reviews, look here.]

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Apple’s Newsstand: Wait for 2.0

October 24, 2011 – 3:30 am | Edited by Frédéric Filloux

Can Apple crack the digital news market the way it did with music? The comparison might not be relevant. Here is why:
– Today, in the new business, imperfect as it is, the transition from print to digital is much more advanced than the music industry’s similar transformation was when, in 2001, Apple launched the iPod. There are thousands of web sites now. They come in all shapes, from powerful pure players to paid-for legacy media. Many already make serious money, showing evidence of strong strategic thought.
– The two industries are structured in different ways. In the news business, there is plenty of players; the market is more scattered than ever, unlike the music business in which securing one of the few key distributors is the only way to a sizable market share.
– Technically, when compared to the news business, the music market was easy to standardize: very few digital formats as opposed to many and complex web sites and applications.
– The foray in the music business was driven by Steve Jobs himself. From the outset, he was really fond of music. By and large, he was not a news freak (nor did he liked journalists very much). For Apple, digital news was meant to be a second class business.

For all of these reasons, Apple had no hope to succeed organizing the news business the way it did with music. That’s why it came up with an ultra-simplistic approach for its Newsstand: aggregating pre-existing news applications while taking advantage of its control of the server side (iTunes) and on the device side (iOS).

In its first iteration, Apple Newsstand is no more than a super-shortcut for news related applications. Once a publisher offers subscriptions in iTunes and selects to go for the Newsstand, its app automatically migrates to there. First you get a  push message such as this one….

…Then the publication is displayed on the store’s wooden shelf…

… where it shows up with a clever updated icon reproducing the publication’s most recent cover or front page.

But the Newsstand’s real killer feature is background downloading. Once you’re subscribed, your issue is automatically downloaded on your iPhone and iPad. This feature was actually sought for by all developers working on news application: everyone dreamed about the iOS device being able to wake up following a request from the iTunes Store and download the latest issue of a newspaper or magazine. At the time, no one knew Apple intended to keep this functionality for itself. As expected, its works fine and proved to be extremely useful.

How did the service perform since its October 12th launch? Magazines are doing well, but newspapers are still absent from the platform. I was expecting to get all the English-speaking publications I’m subscribing to or reading on a regular basis. But the Newsstand is mostly filled with leisure magazines — for now.
Take UK’s Future Publishing: with no less than 50 titles, it went full steam ahead to the Newsstand. Future said it logged two million downloads in four days — but we don’t know how many actual in-app copies purchases it generates. Still, that’s an impressive result for a company that sells 3.2 million magazines every month.

Again for the magazine industry, other data seem similarly compelling. According to Paid Content:

Exact Editions, [an US aggregator of paid-for PDF versions] which says it made about 10 percent of the Newsstand app titles on iTunes Store, says downloads of freemium sample editions jumped by 14x in just a few days, whilst some titles’ actual sales have more than doubled.

And Poynter.org reports the following (emphasis mine):

The week Newsstand launched, the NYTimes for iPad app saw 189,000 new user downloads, up seven times from only 27,000 the week before.

That’s impressive, but it’s nothing compared to the NYTimes iPhone app, which saw 1.8 million new downloads that week, 85 times more than the 21,000 downloads the week before. Nearly one-fifth of the 9.1 million people who have ever downloaded the NYTimes iPhone app did so last week, with the launch of Newsstand.

The NYT’s performance is truly amazing given its subscription system’s weird price structure. It is also surprising considering its iPad application isn’t the best in its class.

Why do magazines take the lion’s share of the Newsstand? Two main reasons. First, when it comes to subscriptions, magazines are extremely inexpensive; for a full year subscription, single issue prices can fall to a symbolic level of 50 cents or less. Second, magazines are best suited to the PDF format that still plagues most of the e-publishing industry. Therefore, without redesign expense, publishers can shovel magazines by the bulk into any newsstand. It limits the reader’s engagement, but no one really seems to care yet. Copies are counted as sold.

By contrast, subscriptions to dailies remain quite expensive since they are expected to contribute a great deal to the bottom line. As for the format, most newspapers can’t be reduced to a zoomable PDF to be read on a tablet (let alone a smartphone).

In order to really take off, daily publications’ digital editions will have to morph into dedicated applications designed for tablets (or smartphones). That is exactly what The Guardian did with is brand new iPad, iOS5-only applications that is by far the best on the market.

This app scores well on many items: navigation is reduced to the basic 10 sections of the newspapers; story layout and readability are optimal; photographs are spectacular (although Apple doesn’t allow The Guardian app to be linked to its photojournalism’s Eyewitness app); pricing is right (£9.99 – $13.99), plus there is a huge incentive with 82 free issues (!!); the app is not autistic as it is tied to the brand’s website and to the social media sphere; finally, it downloads fast (which is appreciable but less of an issue now with background downloading).

From a reader’s perspective, the Apple Newsstand is a first step. There is no decisive momentum — yet.  The real transformation will occur when newspapers and magazines will move to applications really designed for tablets as opposed to unimaginative adaptations of their print editions. This means: approaching the market with new interfaces (such as the Guardian’s or Bloomberg BusinessWeek — our story here); moving to ARPU measurement instead of old-fashioned auditing; and setting up new productions schemes. That’ll be version 2.0. not just for Apple, but for the entire industry.

—frederic.filloux@mondaynote.com

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Mobile + Cloud + Social

October 24, 2011 – 3:28 am | Edited by Jean-Louis Gassée

These are the three interdependent forces that power the biggest wave of growth, change, and destruction I’ve seen since I have been allowed to take part in the high-tech industry.

In the beginning (or mine, anyway), back in 1968 when I was, miraculously, offered a salary to be part of HP France there was the mainframe. IBM – “The Company” — reigned supreme, a dynasty that seemed unassailable. The IBMer wore a suit and tie when approaching the punch card feeder. Big Blue’s competitors, the BUNCH, were also called the Seven Dwarfs because their combined market share couldn’t compare to IBM’s dominance.

A few years later, the dress code relaxed a bit and Digital Equipment Corporation’s minicomputer displaced mainframes. IBM still exists, of course, although under a different guise, but DEC is no more. They were acquired by Compaq in 1998, killed by the Personal Computer.

The PC era lasted longest of all, more than 30 years, partly due to Moore’s Law: “The microprocessor shall double its power every 18 months”, and then repurposed as a transmission medium with the advent of the Internet. Thanks to the standardization enforced by the Wintel duopoly, the industry manufactured hundreds of millions of PCs, giving rise to an inexpensive clone organ bank that largely displaced higher lifeforms such as Sun servers (the company that once claimed to ‘put the dot in dot.com’). As an example, the five million servers deployed by Google use a combination of such parts — and private versions of Linux.

Referring to the PC era in the past tense is contentious. In a now famous post, Frank Shaw, the literate head of Microsoft’s Corporate Communications, contends that  ‘the 30-year-old PC isn’t even middle aged yet, and about to take up snowboarding’. I’m writing this on an Intel-powered personal computer and don’t feel particularly necrophiliac. But the marketplace has spoken: The PC is, at best, stalled. Looking at last quarter’s Microsoft numbers, shipments to business customers are still growing, about 5% year-to-year, while the consumer market is flat. (From Gartner, more details on the PC sales slowdown here.)

Contrast this with the rise of Google’s Android smartphones, Facebook, Twitter, Apple’s iOS devices (iPhone, iPad, iPod Touch), Zynga, LinkedIn… And the fate of the incumbents, Nokia, Palm, RIM, Microsoft… They’ve all been displaced, ‘‘flummoxed” in Steve Jobs’ words.

We just got the latest Mary Meeker presentation, now on the Kleiner Perkins web site as she joined the grand Valley venture capital firm, a great combination of PR and talent acquisition. Mary Meeker’s opus is 66 slides long and covers so much ground it could become overwhelming, but it’s worth your time. The range of topics is impressive: e-commerce, the global race to adopt mobile devices and apps, on-line payments, social networking as a pervasive wave of opportunity spanning the online experience. She ‘posits that the mobile revolution is still in its infancy and poised for tremendous growth’.
Regarding the changing of the guard:

She then points to the new entrants clobbering the smartphone incumbents:

But, there’s more than clobbering, there’s location. When it comes to operating systems, ‘Made in USA’ – and, more specifically, Silicon Valley, the Detroit of computing – still means something:

As much as I like and admire her presentations, I’d take a slightly different angle.

First, as Horace Dediu meticulously points out in his Asymco blog, I’d emphasize the startling creation and destruction of value that has taken place in the past four years, since Apple and Google have entered the field. (For a slightly less analytical and more animated take, there is also Brian Hall’s Smartphone Wars, occasionally NSFW, never dull.)
Calling what’s taking place “the biggest wave of growth, change and destruction” is no hyperbole: One company, Apple, went from zero to $70B in mobile revenue in 4 years; another, Google, propelled its Android platform to the top of the smartphone class; Samsung ships more phones than anyone else; Nokia lost its crown, it sales went down 13% year-to-year last quarter; Palm is no more; and Microsoft Windows Mobile sales are so small the company omits them in its latest quarter release, merely mentioning ‘favorable reviews’, confirming Ballmer’s earlier statement: “In a year, we’ve gone from very small to … very small.” This from the man who once predicted Windows Phone would get a 40% market share in 2012. When Nokia finally starts shipping Windows Phone 7 devices, we’ll see how Microsoft manages in the unusual role of being number three in a race.

Second, the combination. While both mobile revenue displacement and growth are impressive, the real revolution is in the Mobile + Cloud + Social explosion.
Why does Google ‘‘give away’’ Android, both the OS and applications? Android is a Trojan Horse that protects Google’s one and only business model, advertising, on mobile devices: Cloud + Mobile.

Facebook, an interesting challenge to Google, isn’t just a Social company, it could only reach its current 800 million registered users by deploying a scalable Cloud infrastructure.

Apple, rightly described as focused on great devices (read “hardware”), could only succeed with the iPod because of its iTunes service in the Cloud. This is the same iTunes that gave birth to the iPhone App Store, the great game changer, the Cloud service that morphed smartphones into app phones. Apple’s Cloud maneuvers haven’t always been felicitous — the company struggled with MobileMe — but they never gave up. We’ll soon see if the newly available iCloud, with its original approach to local caching and synchronization finally ‘‘Just Works”.

Lastly, emphasizing Meeker’s point about geography, inside a tiny circle, ten miles in diameter, we have three cities: Mountain View, Palo Alto and Cupertino. Google, Facebook, and Apple. Three companies redefining the future of computing, the new Mobile + Cloud + Social wave.
In the history of computing, there’s never been so much power concentrated in such a small area.

—JLG@mondaynote.com

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You Cheat. We Cut Prices

October 16, 2011 – 11:27 pm | Edited by Frédéric Filloux

Surprise: To boost its circulation, Rupert Murdoch’s Wall Street Journal Europe engaged in massive channel stuffing. No kidding. It sounds like everyone discovers, all of a sudden, how medias (old and new) actually work. Granted, when it comes to cheating, News Corp is in a class all by itself. The phone hacking scandal pushed the practice of checkbook journalism to the pinnacle of massive corruption. As for the circulation scheme unveiled last week by the Guardian, WSJ Europe has pushed the envelope of bogus circulation numbers much farther than any other newspaper in the world.

From May 2009 to April 2011, the WSJE had a deal with a Dutch company called Executive Learning Partnership by which ELP purchased thousands of copies of the Journal for a price as low as 0.01€. If such deal is not uncommon, the scale was: 41% of the WSJE’s total audited circulation was inflated via this little scheme. The deal also involved a positive coverage of ELP. On Tuesday October 11th, Andrew Langhoff, the publisher of the Wall Street Journal Europe handed his resignation out.

The next episode is likely to unfold inside the soundproof walls of News Corp’s boardroom. While the phone hacking scandal might still hold more juicy bits in reserve (Guardian’s full coverage here), the circulation scandal involving the Murdoch empire’s most prestigious asset could be the one transgression too far. The board could be tempted to demote the aging boss. The rationale behind their putative decision would point to the rigid, top-down News Corp chain of command. In such an environment, practices such as this amazing circulation scheme must have been directed or, at the very least, tolerated by top management.

More broadly, this scandal raises another question: What is the real value of an audience, print or digital, when it is artificially bought — instead of naturally sold?

In the newspaper business, inflating circulation is hardly new. In fact, it is standard practice. The way copies are counted is a soft encouragement to blur the line between loyal and occasional readers. Officially, audit organizations across the world make subtle distinctions between distribution channels. They break down paid/unpaid circulation, mass subscriptions, types of deliveries, etc. On most Western markets, roughly 20% to 35% of the circulation for supposed paid-for newspaper is actually free.
Beyond that, we have what I’d call “near-free” circulation, i.e, copies that are paid a fraction of the cover price, usually just above the minimum rate imposed by audit organizations to be counted as paid distribution. This includes copies made available in airline lounges and hotels. In the end, this circulation is free. First of all, end users won’t disburse a dime for their newspaper (it is part of the service). Second, the price paid by the corporate distributor will likely be offset by side arrangements such as logistics fees charged by airlines or hotel chains (let alone advertising deals that could also be part of the package). Taking in account such arrangements, the share of free distribution can rise well above 50%. Read More »

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Premature Evaluation: The iPhone 5 Introduction

October 16, 2011 – 11:08 pm | Edited by Jean-Louis Gassée

On October 4th, after months of speculation, Apple finally introduces the iPhone 5. The kommentariat are ecstatic and approvingly list the new smartphone’s strongest points: Twice the processor speed; seven times the graphics oomph; a new camera with an Apple-designed lens, 8 megapixels and improved image processing; the power of the new iOS 5; iCloud integration and synchronization with all your iDevices; a new smart antenna; Siri, the innovative intelligent assistant. And, courageously resisting the temptation of capricious cosmetic changes, the iPhone 5 stays with Jony Ive’s elegant, timeless design that was unveiled only last year.

The preternaturally modest Apple execs cringe at the gushing praise, but what can they do? It’s their cross to bear.

That’s what we expected. Now let’s consider the reality: Same phone, same features, same design, but it’s now called 4S instead of 5. This changes everything. The pundits are indignant: The iPhone 4S is a lame, evolutionary product; management’s presentation (video here) is flat, uninspiring. This dog won’t sell. Apple has lost its mojo.
(Regarding the “flat” presentation, Apple execs knew Steve Jobs was just a few breaths away from his last, but they got on stage and delivered anyway. When news of Steve’s demise came out the following day, many critics, such as blogger Robert Scobble, had the good grace to apologize to Cook & Co. for railing about their subdued performance.)

Despite these lamentations, strong pre-order numbers start circulating (more than 1 million on day one), followed by the first batch of reviews. Apple 2.0’s Philip Elmer-DeWitte obligingly provides a neat compendium of these first impressions, which range from “fair and balanced” to unabashedly enthusiastic. Read More »

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The Teacher

October 9, 2011 – 7:51 pm | Edited by Frédéric Filloux

Steve Jobs taught us so many things… To us whose professional life strides tech, ads and media, his way of fostering innovation, of creating an obsessive culture of perfection remains both inspirational and enigmatic. For those who like design and engineering, there isn’t a single field Apple hasn’t entered — or at least influenced. When I fumble with the appalling multi-function display of my Prius, when I struggle with the remote control of my office A/C, or when I wonder why in hell the $2000 battery-assisted bicycle I consider buying doesn’t have an programmable memory chip to upgrade software that looks forever stuck in version 1.0, I wonder how the Cupertino guys would have handled it. Needless to say, I do the same when I look at media applications or newspapers/magazines designs, many of which seem to have succumbed to a sad mélange of sloppy execution and a lack of decisiveness in design.

For years, I have been reading everything I could about Apple from the management/innovation perspective. As a business journalist, I find Apple being the most frustrating company to follow. Very little comes out. The culture (and the cult) of secrecy extents way beyond any employee tenure; even the usually profligate academic literature is rather bare when it comes to Apple.

Front page of Liberation

However, over a span of fourteen years, as it impacted so many sectors, Apple’s unprecedented turnaround yielded a few clues. I tried to isolate some with potential applications outside the tech world. What interests me in Apple ranges from their choice of frosted-glass for my MacBookPro’s trackpad (instead of cheaper plastic), to the use of its immense cash hoard, to the way the company prepared itself for the post-Steve Jobs era. Read More »

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Too soon…

October 9, 2011 – 7:48 pm | Edited by Jean-Louis Gassée

‘Humor is the politeness of despair’, an approximate, googlish translation of l’humour est la politesse du désespoir, a saying attributed to noted post-WWII Left Bank jazzman, writer, and engineer, Boris Vian, So, let’s start with the reverent, despairing humor of Chris Calloway in Wired Magazine’s memorial to Steve Jobs:

“Heaven got a major upgrade today…”

Yes, I can see Dear Leader in his new abode. Having climbed his last mountain, he summons Saint Peter and utters the words that he has heard throughout his life: “You’re doing it all wrong.”

“Look at the name above the door, the typeface sucks, the kerning is off. The furniture is out of style — get something cleaner, fresher. And the stairs… We need something airier…I don’t know, glass? Come to think of it, one of the founding partners of the architecture firm that designed the Apple Store moved in here a few months ago. Bernard Cywinski; look him up get to work.”

…and then it’s Saint Peter’s turn to mourn Steve’s untimely demise, and his own lost tranquility.

[Update: I just found this picture of the New Yorker’s upcoming October 17th cover. Obviously, this is before Steve starts to take matters into his own hands.]

Back in our Valley of Tears, this Onion article provides just the right amount of serious thought wrapped in knowing derision. I can’t resist but quote the entire piece, it’s too good and, in a way, it’s a consolation:

“Last American Who Knew What The Fuck He Was Doing Dies

Steve Jobs, the visionary co-founder of Apple Computers and the only American in the country who had any clue what the fuck he was doing, died Wednesday at the age of 56. “We haven’t just lost a great innovator, leader, and businessman, we’ve literally lost the only person in this country who actually had his shit together and knew what the hell was going on,” a statement from President Barack Obama read in part, adding that Jobs will be remembered both for the life-changing products he created and for the fact that he was able to sit down, think clearly, and execute his ideas—attributes he shared with no other U.S. citizen. “This is a dark time for our country, because the reality is none of the 300 million or so Americans who remain can actually get anything done or make things happen. Those days are over.” Obama added that if anyone could fill the void left by Jobs it would probably be himself, but said that at this point he honestly doesn’t have the slightest notion what he’s doing anymore.” Read More »

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Dreaming at the Kindle Potential

October 2, 2011 – 10:01 pm | Edited by Frédéric Filloux

With each introduction of a new reading device publishers around the world are overcome with the same recurring same fantasy: What if it worked, this time around? Could a reliable business model emerge for news publishing companies?

Last week’s launch of new Kindles is no exception to the cyclic fantasy. For those who where on Mars last Wednesday, here is a look at the revamped family:

To sum up: the new lineup features the widely expected Kindle Fire (full color display, multimedia capabilities and the clever, cloud-accelerated Silk browser — see Jean-Louis’ column). In addition, Amazon redesigned its e-Ink based Kindle with two models, including a small 6 inches version that fits in a pocket. All of them priced aggressively, below their production cost.

A lot has been written comparing Apple’s iPad and Amazon Kindle devices. Exciting but not relevant. The two companies’ strategies can’t be more diametrically opposite. Apple is in the hardware business and all other product lines — software, media offerings — exist for the sole purpose of raising perceived value and units volume. Then, great product execution and streamlined operations help maximize margins. Apple’s gross margin on iPads is about 30%.
By contrast, Amazon is a digital retail company in which all forms of media — books, videos, music, games –  account for about 40% of its sales. Its hardware strategy is designed to funnel customers to its retail business.

This explains why Amazon doesn’t care much about Kindle hardware margins, and is much keener to strike deals with content providers than Apple is. In parallel to the launch of its news Kindles, Amazon has harvested a large set of deals with media companies. Its Kindle Fire Newsstand is already impressive and features a 3-months free trial for a selection of magazines. Symmetrically, a growing number of publishers keep complaining about Apple harsh terms; as a result, in the coming months, we’ll see many prominent publishers exit the Apple ecosystem and switch instead to web-based apps (a move that is actually more complicated than it appears). Read More »

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