Netly: The Third Screen

Archive for the ‘apple’ Category

I’m not buying the argument put forward yesterday on PaidContent, that Amazon was the winner in its recent dustup with book publisher Macmillan. Like his neighbor Bill Gates, Jeff Bezos is an awesome games player, but for reasons that I can’t yet understand, he’s been making some bad moves lately.

Forrester Research Analyst James McQuivey argued yesterday that Amazon “is secretly pinching itself right now” because, by capitulating to Macmillan, it actually gets the better side of the deal. How? Under the previous terms, Amazon sold the publishers’ e-books at $9.99 and would frequently lose money on each transaction. But now, with Macmillan setting its own prices as high as it wants, no one loses money on any sale. So even though Amazon’s cut is only a third of the price, versus two-thirds before Macmillan rebelled, Amazon won’t lose a dime. In other words, it’s better to take a third of something than two-thirds of nothing.

While I am innumerate, even I can’t fault that math.

But I do know my history (my undergrad degree!) and I can tell you that this particular event had nothing to do with who’s making money now. It has everything to do with Amazon’s long-term vision of the Kindle as the dominant platform for reading digital texts. Bezos plays the long game, not the day-to-day game, and for his long game to work here, books have to be cheaper on the Kindle than they are anywhere else. Period. Full stop.

Remember when analysts used to lambaste Amazon, quarter after quarter, because it was losing money on every sale? Amazon would never be profitable, we were told, because it offered free shipping and was taking a bath by also charging the lowest prices for goods.

Amazon is trying to do the same thing now, with e-books: It wants to guarantee the lowest possible price to consumers, and will happily take a loss on each transaction for the moment, while it builds up good will over time. Customer loyalty is what Bezos was banking on. It’s worked splendidly so far, right?

The problem is, right now you’ve got two companies that customers love to an almost cultish degree—Apple versus Amazon—engaged in a massive stare down. And Amazon blinked.

That said, this battle for the hearts and minds of customers is far from over.

Digitimes has a credible-looking report that the anxiously awaited iThing won’t be available until the second half of 2010. This is not good news and the otherwise dependable Apple-beat writer Dan Frommer, is mistaken when he writes:

The only people upset by a later launch now—if it’s really true—are gadget nerds and maybe a few executives in Cupertino.

I guess by “people” he’s referring to Wall Street. But I can guarantee you that the people who run the publishing industry collectively plotzed this morning when they contemplated how the rescue ship USS Apple could be delayed yet again. And they’re floating around in the frozen Atlantic, turning an aortic shade of blue…

I am a hyperbolic guy, not to mention a purple writer, but I think it’s conservative to say that in the miserable publishing business, there is no greater hope for salvation that the iThing. With visions of giant iPhones dancing in our heads, all of us are working on prototypes of magazines and newspapers that will work on 9.7-inch, multi-touch screens linked wirelessly to stores. (See, for instance, Peter Kafka’s report yesterday on Wired Magazine’s demo.) And, while there are at least a dozen manufacturers heatedly working on their own iterations, we all await the iThing because history has shown us that Steve Jobs leads the parade. Chaos will ensue, with many idiotic and competing platforms drawing precious resources from content makers who have to try just about everything until a frontrunner emerges.

The iThing will be the inflection point and the sooner it gets here, the better for publishers.

Of course, there was a rumor over the summer that Jobs was planning to unveil the iThing in January but not ship it until June. So maybe we’re still on track? In the meantime, anyone have a cig? It’s cold in here.

flashReading some of yesterdays coverage of news out of Adobe, you’d think the Cupertino Wall had come down.

In reality, all Adobe really announced was a new, simple way for Flash developers to make stand-alone, downloadable iPhone apps. This is not native Flash however. Flash continues to be a browser-based runtime—accent on the BROWSER—and you can’t experience Flash sites via your iPhone browser. I’d be shocked if Apple ever permitted Flash to work with the iPhone browser for a variety of reasons, the most compelling of which is, it would wreck the App Store model. (Who needs Apps if you can run games and other programs directly off Flash-based Web sites?) But it was a smart move for Adobe to help all those Flash developers make iPhone apps more easily. It ought to further increase the number of apps heading this way.

500x_apple-tablet-natgeoA lot of people have been emailing me to ask about the story on Gizmodo this morning, which I feel obliged to shoot down.

Gizmodo is my favorite gadget blog and its editor, Brian Lam, is one of the best reporter/editors in Techland. But in regards to his story today, according to my sources, his sources are flat-out wrong. Apple has not been meeting with publishers to prepare them for, well, whatever it is they’re doing next.

Have people at Apple been talking to people from the NY Times? I’d be surprised if they haven’t. They always talk. Apple has excellent relationships with plenty of big media companies. But I’m told Brian incorrectly characterized the conversations that the NYT and other unnamed media have had with Apple.

In fact, I think Apple has not yet discussed the much-rumored iTablet, or whatever it is, with anyone yet—at least, not in a way that would cause a media company to act. Hell, just yesterday, in what looks like the most credible unsourced (meaning no one is speaking on the record) story yet, iLounge said Jobs hadn’t even signed off on the next device.

Of course, if indeed Apple launches something in late January, I’d be just as shocked if it didn’t have some cool app on it from the NYT or other Big Media Co. But those preparations haven’t been discussed yet.

911_call_center_2I’ve been thinking a lot about why Apple rejects apps on seemingly spurious grounds, then suddenly reverses itself. What could explain some of the odd, inconsistent behavior we’ve seen? Friends who know more about this than me say that fully half of the well-publicized apps that are rejected are reversed. Usually, the reason for the rejection was a bizarre interpretation of Apple’s regs, a silly technicality, or utterly inexplicable. Why does this happen?

Here is my theory, which is total speculation, but it’s a slow day. Buyer beware:

Apple must be outsourcing/offshoring a lot of its apps review work.

All the inconsistencies suddenly make sense when viewed this way.

Plus, do the math: well over 200,000 apps have been submitted since June 30, 2008—that means Apple must well review over 650 apps A DAY, assuming five working days a week. In its FCC filing, Apple claimed it had only 40 full-time reviewers examining apps. Think of how long it takes to review every app. You must download it, put it through its paces, review the paper work, etc. Can one person really do more than 10 a day?

My theory is that there’s an A Team in Cupertino and a B Team in some other English-speaking part of the world. The A Team handles hot stuff from Fortune 500 companies and the big, branded stuff that Apple wants to get onto the platform ASAP. And the B Team handles Other. But what do I know?


Follow

Get every new post delivered to your Inbox.