Will the Apple Tablet Supplant the Mac?

Bill Snyder’s bizarre troll of an article in PC World contained this nugget:

What’s more, building a computer based on a mobile OS throws out one of the biggest advances Apple has made in recent years: the ability to run Windows programs natively. And that means that none of your Windows software will work. For that matter, your Mac apps won’t run, either.

The battle between MacOS and Windows reminds me of watching partisans debate the merits of the latest American and Russian fighter planes. The Cold War is over, and the drones now rule the skies. I’ve often found myself in the thick of OS arguments, and they are real and important to people like me who care about the utility and functionality of the computers we use daily. But these conflicts are products of an era that is on its way out. Over the next few years Apple will face a far different struggle, as it races to define how everyday people will use cloud computing. Google, Microsoft, and Amazon won’t be sitting on their asses either.

Apple is already moving fast. Look at the iPod and the iPhone. The primary job of the OS in both devices is to get out of the way. The real stars of the show are iTunes and the App Store. While iTunes is a good piece of client software, its real mojo derives from its ability to get the content you want from the cloud to your device. And the direct integration between the App Store and the iPod/iPhone shows that the iTunes middleman won’t be around forever.

Apple has shown a willingness to set fire to its ships in order to conquer new territories. The iPod mini was a runaway success when Apple killed it in favor of the nano. The company has successfully pushed to make laptops the center of gravity for the Macintosh lineup, and the MacBook has been a huge hit. But it wouldn’t surprise me if Apple put the hatchet to its baseline notebook, bringing in the tablet as its replacement.

Yes, there will be plenty of users who need raw CPU power for apps like Aperture, Final Cut, Photoshop, and so on. Yes, some business apps also require a lot of juice. Apple has plenty of spiffy Macs to sell you if you need to run Mac and Windows apps. But if you use email, a web browser, and MS Office to get your news, communicate with people, work on documents, crunch numbers, and manage your multimedia library, increasingly the real heavy lifting for all of those activities takes place in the cloud. As for MS Office, the bullseye on Microsoft’s bag is big and red. Google and other players have shown that for many if not most documents, the bloated Office pig is unnecessary. Apple has been honing iWork for years. It’s not a stretch to envision MobileMe-synchable versions of Pages, Numbers, and Keynote running on the tablet.

Now imagine purchasing these and other apps from the Tablet Store. The iPhone App Store has been a staggering success as a software distribution platform, and controlling software distribution has been a big part of Apple’s success in the 2000s. Why wouldn’t Apple leverage the distribution power of an App Store for the tablet? And as more and more apps rely on the cloud, why wouldn’t developers continue to follow the money? Apple receives over 10,000 App Store submissions per week. There are a lot of iPhone developers out there, no matter how you slice the numbers. If Apple makes developing for the tablet only a minor adjustment for iPhone developers, the number of iPhone/tablet developers could soon dwarf the number of Mac developers.

As the hardware power of the tablet increases and Apple’s integration of device and cloud continues, the Mac may come to be seen as something of a relic, powerful but dated, a muscle car in an electric car era. Will it be 5 years from now when the last Mac rolls off the assembly line? Will it be 10 years? Whenever it comes, I expect the Mac’s demise will come at the hands of its maker, not at the hands of competitors.

Fan Film – The Carlos Pedraza Interview, Pt. 3

This is part 3 of a three-part interview with fan film writer and producer Carlos Pedraza. In part 1 we discussed how he became involved in fan film and how that world differs from Hollywood. In part 2 we talked about keeping hard core fans happy, and about the mainstream potential of fan film. Now Carlos turns his attentions to creating a new industry around independently produced films for the Web.

The Interview, Continued

There’s a vacuum in Hollywood. There are stories that are not being made in Hollywood because the Hollywood model makes them so expensive to produce that they can’t be produced. Our model is, let’s find a way to make these stories, because we know there are people out there who will watch them. And if you can figure out how to make them more cost-effectively, less expensively, and distribute them to people less expensively through advertising support, through $2.99 purchase versus a $10 movie ticket, if you can provide your DVD extra features digitally instead of having to do it on a physical medium, you have ways to create added value for people and all those possibilies are out there now.

We have to figure out a way to figure out a way to turn that into an industry that has rules, that has some order, that has venues. Basically, we’re at a point where anybody can produce whatever they want today, but you still have the challenge of getting it to an audience. If we can figure out different ways to do that, if we can create online networks that people trust, that people can go to to seek out this other content that’s not Hollywood content, then we’re moving into a new era.

It sounds like you’re saying that there’s potentially a role for a vetting mechanism, for some intermediary who, like you said, is sort of either filtering or somehow collecting together the best of what’s out there.

The reality is we’re always going to have that. Human beings rely on filters. Whether it’s other people, or computer-assisted filters. Take Netflix for example. Netflix doesn’t make their money from just providing people with DVDs to all the latest and greatest movies. You’ll run out of them. There’s only so many of those. But there are so many movies made that Netflix has an algorithm for recommending them to you. If you liked this movie, chances are you’re gonna like this movie, too.

So we have these engines out there that are exposing people, in a very targeted way, to content they would never have found through any of the traditional means, because they’re not movies that would have come to their hometown theaters. They’re not movies that are being shown on cable, or if they are, they’re showing at 2 o’clock in the morning. It’s just a title to you. You want to know what they are. This algorithm that Netflix uses does that work for you.

You can click on it and see a trailer, see a synopsis of it, see who is in it. All the things that trailers in regular movie theaters used to do for you, but only in a very general way, now it’s gonna be in a way that’s completely targeted to your particular tastes in film. That is a great opportunity.

That subsititutes for traditional advertising, traditional trailers. That doesn’t mean you don’t need to make a trailer; you still need to make a trailer. You still need to produce the content, but the way it’s being delivered and connected to your audience is much more efficient now, or can be much more efficient now than it traditionally was. So we need a way to hook this new content that’s being produced by people like us into that infrastructure, that recommendation infrastructure that places like Netflix are bringing.

One of the interesting possibilities that raises is, if there were some sort of consistent format for metatagging content that is being produced in this way that could raise some really interesting possibilities, not only for finding it, but for reviewing it, plugging it into other things. There are some interesting things there. The fascinating aspect of that too is that the studios so rarely cooperate with each other, and the distribution players seldom cooperate with each other, because they’re all in competition with each other, but indies are still in a phase where they’re all trying to figure out what works, and they don’t have themselves in those established positions.

Right, and what we’re finding is that there are some online networks supported by major studios, actually. Sony has an online network called Crackle that produces Web series that frankly hasn’t been terribly successful yet, but I think they’re sticking with it, because they’re trying to figure it out for the long haul. They understand, or at least they’re willing so far to put enough money into it to keep it going while it finds it footing, finds its voice, finds infrastructure, establishes an infrastructure that is going to have the product meet its market in the most profitable way. They’re still looking for that.

We secured the Internet, DVD and other rights for Buck Rogers, which is kind of a languishing brand, but it’s still well-known. So what we’re doing then is taking our production infrastructure that we built for Star Trek, and turning it now to a known brand that is ready to be re-imagined, revitalized, and bringing this same kind of approach and quality that now we know we can make.

I wasn’t at the meeting, but two of my colleagues where in a meeting yesterday with folks from Sony, where they would put up the money for us to produce this and then it would be distributed through Crackle. It’s an upside for them because it is an established brand. It’s gotten some buzz.

But it is something that a studio wouldn’t necessarily want to spend the time and energy on, because they couldn’t do it at the cost you can do it at.

Right. Universal has the motion picture rights, and that’s supposed to be moving forward with, at this point Frank Miller has been identified as the director for it. And it’s gonna be its own thing. The only rules we’re operating under is that as long as ours isn’t the same thing, they’re fine with it. What they also understand is that part of the reason we were able to get the rights was because we can cross-market, having a theatrical version and a Web version of the same property.

And so when you’re writing the episodes that you’re writing, are you hewing to that?

Yes, we are. Partly because we’re modeling it on a television show from the 60s, so that means we maintain the same act structure that they did. Not religiously. We’ve gone longer thay would have in a couple of instances, but in general, yeah, we have a teaser, four acts, and a tag. Syndicated shows, even today, have upwards of seven or eight acts, because of the way that they package their show for syndication. So you may still have the same total amount of minutes – 42 to 44 minutes, but the commercial breaks come more often. So you have to write the story so that it proceeds that way.

So what we’re seeing now on the Web is that effective web series keep to about 12 to 15 minutes in their episodes. Because ultimately if you want to monetize this, and you want to do it via advertising, that means you want as many eyes on your product for as long as you can, so that every opportunity for advertising is being greeted by the largest number of eyes that you can provide.

That means then that we have to adjust the way that we’re creating content that respects the way we know human beings are consuming that content on the Web. Rather than just putting on a traditional TV show on the Web, we need to be more respectful of the way that the audience on the Web wants to consume their media.

That’s how you can increase your viewership and get them to stay. And get them to come back. Ultimately when advertisers finally wake up to the reality that this is where they need to be spending their advertising dollars – that’s the missing link in terms of monetizing it.

For a product we’re working on at productOps, I was looking at the numbers for online advertising versus television advertising, and the amount that advertisers are willing to pay for online video is still substantially lower. The amount they’re spending on Hulu, for example, nobody knows how much Hulu is making, but everybody knows that advertisers are paying. The funny thing is that when I’m watching Hulu, I actually watch the ads.

They only do one per commercial break. As long as it’s not the same one, as a consumer, I’m fine with that. Because it’s done in 15 seconds and I’m back to the show.

So less is more. You mentioned there are different business models people are going to find around this. You also mentioned that advertising is the elephant in the room; advertising is what people are going to be trying first and foremost. Have you seen any business models that make sense to you that are built around, for example, sponsored content, or a single advertiser buying all the advertising rights around a particular show or episode and doing it in a different way, almost like the sponsorship model that NPR has? Have you seen any of those that seem to be working?

I think it’s still all too new.

I think there are some people who are doing that. There’s a Web series called The Guild. They’ve got a sponsorship deal from Microsoft. It might be exclusively Microsoft. So now they’re not on YouTube any more. They have their own website, sponsored by Microsoft, that pays for this to be presented. Microsoft gets their viewers, and they get their production money and make a living. And that’s great, but there’s not a lot of Microsofts out there.

But there may be. Eventually they’re gonna have metrics for this, and eventually maybe other companies will do the same thing. Again, as long as they’re targeting the right market and the numbers are right. But what we don’t have is an infrastructure to support the way that advertising is sold.

Microsoft found The Guild easily because it’s Microsoft. I mean, probably the same people who work at Microsoft are watching The Guild. They know that’s their target audience, geeks who like watching The Guild. So it was a pretty easy leap for them to make.

It’s a bit tougher if you’re Hoover vacuum cleaners.

What show am I gonna sponsor if I’m Hoover? If I’m GE, who do I choose? I don’t know! For TV I know who to ask. I have agencies I can go to. They can provide me with data that helps me decide. OK, I want to sponsort this show. There is none of that yet, in any coordinated way, for advertisers. Until there is, we’re not going to have a model that works.

But the more experimental models that happen, like Microsoft and The Guild, the more companies are going to be willing to do that. But they don’t want a hundred million independent video producers on YouTube knocking on the door and asking them to sponsor their show. So there are still going to be gatekeepers.

Someone at Microsoft or someone at the agency that helped put together the deal with The Guild, or someone who works for the website that runs The Guild, or one of the producers of The Guild is going to realize, “Hey, I’ve learned how to do this. I know what needs to be done. I’ve got the contacts. That’s the business I’m going to go into now.” And they’ll split off on their own.

So it will happen organically. But I don’t know how soon and I don’t know how well, but I’m certain that it will.

I was reading an article recently, in which the author wrote that television had been around for something like 17 years before the idea of paying to watch television came around. He was basically saying, “Look, we’re still early in the Popular Web era. Don’t write off the idea of people paying for content on the Web.” What do you think about that?

I haven’t written it off. But it’s got to be clear what it is you’re buying. I was reading an article the other day about the impending death of newspapers and how newspapers are scrambling to find out if there is some way they can make micropayments the answer. The problem is that when people buy something, they’re usually buying it to keep it in some way. Why should I buy the Washington Post’s version of the Secretary of State’s visit to China?

It’s an account of something that is happening out there in the world.

Someone is going to find a cheaper way of getting the information than you are.

The repeat value of that news is…

Once it’s gone, it’s gone. I’m not going to keep it. Unless you’re selling me the ability to in perpetuity be able to retrieve it from your archive, maybe, but probably not. News is so ephemeral. That’s why it’s news. So I just don’t know that that’s necessarily what people are going to pay for. So you need to be clear about what it is you’re going to have people pay for.

In the case of fan fiction, for example, in the case of the Buck Rogers work you’re embarking on, let’s say you were providing it on the iTunes Store at 99 cents an episode. And they’re 10-15 minute long episodes that people can download. Assuming you had stellar acting and stellar writing, is that something you think people would pay for? Or is there still a feeling that people only want to pay for things that are produced by the big media machine?

No, I think Joss Whedon proved in Dr. Horrible, and he gave it away for free for first. For the first 48 hours it was free. That was super smart. It’s what’s powering the App Store for the iPhone. When people put out a new piece of software, they give it away for a week or two days or whatever, so that early adopters go in, they get it for free, and then they tell everybody else about it. By the time everybody else gets to find it, then they’re charging 99 cents or $1.99, and they’re willing to pay it, because someone they trust has spoken up for it.

Joss Whedon giving away Dr. Horrible for that first weekend for free was great. And then he followed it up by selling it up by selling it on iTunes, and it sold like gangbusters on iTunes. Then when he made a DVD available, it had the original plus an entire commentary track, called “Commentary, The Musical,” plus behind the scenes stuff, photos, interviews, different commentary tracks by different members of the cast. All these added things so that at each stage, you can buy in but you’re getting more each time. You’re not just getting the DVD version of the Web version of the online download version. And people will pay for each of them, even though at its heart it’s the same content, even though it’s not. These layers of content are building upon the core product. People are willing to buy, then.

For anybody who is in science fiction fandom, Joss Whedon is right up there in the pantheon. So people are going to be paying attention and following what he’s doing. But what I thought was interesting about Dr. Horrible was that he had these cast members who were world-class talents and well-known. It seems that they did it on the strength of Joss Whedon and his reputation and the idea itself.

His finanical backing was some dude in Silicon Valley. He did not go through the traditional channels. The story behind it was that it was during the writer’s strike, and Whedon wasn’t allowed to work as a writer for a studio. He said his two inspirations for doing Dr. Horrible was The Guild and Star Trek: Phase II. He said, people will watch this stuff on line, so I why don’t I make it for them? And he did.

One of the things he said in a Rolling Stone interview this month was, I’m not even a Trekkie, but I was really enjoying this fan-made Star Trek episode. So that was his inspiration to do this. The money guy gave him backing for the production. They rented some space on one of the studio lots, and they made it. The rest is history.

They pushed it through in a very short time and put it out there. So, yeah, it can be done. The fact that he’s Joss Whedon may have opened a door, but now that the door has been opened, anybody can look and see that if you make it right, market it right, distribute it right, and do it in a way that respects your audience, that makes your actors creative partners in the process, and business partners in the process, there is money that can be made.

They won’t be Hollywood blockbusters, but they don’t have to be. We’ll still have Hollywood for the blockbusters, but for other stories that want to be told, and other people that want to hear these stories, there’s a potential outlet for it. So let’s try to take what we’re learning on an ad hoc basis, whether it’s through Star Trek, through Buck Rogers, through Dr. Horrible, through The Guild, let’s create a system out of that. Let’s systematize what people are learning from that.

Let’s create new avenues for talented people to be a part of that system. Don’t come in with the Hollywood mindset that says we need a lot of money to produce something good. Instead say, what we need is some money and a lot of talent, and let’s open the doors to that talent and make stuff that people will buy.

In 2012, Carlos Pedraza is doing what? And this nascent industry of independent video producers is where in relation to that?

That’s a good question (laughs). These days I’m living sort of week-to-week on the way some things are developing, but I do feel like the reality is that there is a lot of potential energy and a lot of potential talent sitting out across North America with people who want a chance to make a film. Who want a chance to have their work out there. I would like by 2012 to have figured out at least one avenue for that talent to be harnessed, and to have done that successfully one or two times, so that people say, “Here’s a system. Let’s buy into it. Let’s refine it.” Let’s have some examples of how that’s being done effectively, and share that knowledge, because it shouldn’t be secret. Once someone figures out a system that works, it helps all of us to expand that system.

We may never make the kind of money that people in Hollywood make. But do you need to? There are plenty of people who are willing to earn the same amount of money they work for now, but doing something that’s a lot more fun. The thing that’s great about Hollyood is that because it’s mass market, if someone’s going to make that much money from a mass market vehicle, then yeah, that wealth should be shared amongst the people who helped to create it. So yeah, they deserve their big salaries. Great. But if that’s the only way, the stakes get so high that that’s the only way that creative content gets produced and distributed, then we have a problem.

Even today in 2009, we know there are other ways to get things out there to an appreciative audience. So let’s create a business model that will support that. I think by the time we do, we’ll have learned a lot more than we know now. We’ll have a lot more examples of successes under our belts. Hopefully some of those will be ones I’ve been involved in, and I’ll be earning money (laughs).

Fan Film – The Carlos Pedraza Interview, Pt. 2

This is part 2 of a three-part interview with fan film writer and producer Carlos Pedraza. In part 1 we discussed how he became involved in fan film and how that world differs from Hollywood.

In part 2 Carlos covers the variety of ways the canon (internal consistency in fictional worlds) can be handled, and I ask whether fan film will ever go mainstream.

The Interview (Continued)

Q: One of the qualities of science fiction in particular that has risen up over the past 20 or 30 years is the canon – the idea of the continuity of the particular universe in which the characters operate. There have been countless quarrels about who is violating the canon and whose canon really is the canon. That’s kind of fascinating trying to watch, because when the original Star Trek was written, they were not concerned with that.

They were making it up as they were going!

It was an era where there were no VCRs. After one rerun, it was never going to be seen again. So they didn’t worry about it! Now we live an era where people collect DVDs and they can actually say, “Whoa! Season 3 you did this, but Season 1 you did that!”

The canon is still important to people. They want a certain internal consistency to their fictional worlds or universes, but at the same time, I think we’ve seen that the market will bear multiple canons of things. We’ve seen it repeatedly. The Dark Knight is a different Batman canon than the Batman of the 80s. And everyone seems to be OK with that, because it’s made a billion dollars.

Q: It seems like maybe the owners of these creations are starting to come around to that idea that maybe it’s possible to iterate on these things faster, too. Batman is an excellent example of that. It’s been continuously revamped and redone, and everybody seems to be fine with that.

Alternate Batman realities

Yes. Ideas are still being generated at the original source, which is DC Comics. But there’s been a whole wide range of different iterations of Batman, for kids in cartoons after cartoons, some of which have been truly excellent, some of which I’ve hated, some of which I think have been truly inventive and have attracted major talent in terms of voice talent and writing talent.

X-Men has been like that too. But it exists also as a film series that’s its own canon, that violates the canon of the cartoons, that violates the canon of the comic books. In fact, Marvel Comics even has an entirely separate new canon for some of their major characters.

Their Ultimate series is a whole different set of X-Men. They’re the same characters, but they have stories that have gone in different directions from the X-Men that we’ve been reading, that became the new X-Men back in 1980. So I think people’s brains are large enough to understand that you can have multiple canons. It’s only a problem when you try to force them to fit into one. I think the smart people have figured out that as long as each one maintains its own internal consistency, you can have multiple versions of the same property.

That’s what we’re hoping for with Buck Rogers [ed: more on this in part 3]. People want to have fun with these things. They want to have their thinking provoked. That’s one of the things that makes science fiction so great. So that’s the niche we’re going to fill that won’t interfere with the film rights in any way whatsoever. In fact, it can aid in that marketing. It will hopefully generate interest.

Q: All of the things we’ve been talking about have been science fiction and fantasy. The first stories, the first fiction were essentially what we would now call science fiction and fantasy. Legends, Beowulf, all these things have been with us since the very beginnings of human storytelling. But somehow these days things that are fantastical, things that are conjectural, are not afforded the same level of respect as literary artistic works. Take, for example, the Academy Awards. Everybody who paid any attention thought the most recent Batman was a superlative movie. But everybody also knew there was no way in hell that was going to get best picture. Why do you think that this new method of storytelling with the tools that are available now has been pioneered by people who are interested in science fiction and fantasy?

They tend to be forward thinkers. The New York Times the other day ran a really interesting article that basically said, except in the occasional case, the Academy has always been out of step with what popular culture has preferred. Paul Blart Mall Cop makes more money than The Reader. I mean, clearly we’re talking about different definitions of what success is.

My whole thing is, we don’t need to make the Academy happy. That’s not the objective. It’s one of those things that if it happens to go in that direction, fantastic. But the fact of the matter is, look at Dark Knight and it is successful where success matters. It’s made a billion dollars. The fact that it’s made a billion dollars means that other Batman movies and other movies like it, other movies that appeal to this same audience, are going to continue to be made. Ultimately the respect that you get from the Academy, that’s gonna change too. It’s all demographics. We’re in a transitional period demographically, where the people who are the maturing voters at the Academy level are older, and they prefer certain kinds of movies that focus on certain kinds of themes. Those are the ones that tend to get more attention from them.

My response to that is, fine. Let them. It’s who they are. It’s who they want to recognize. Why not? I thought we had a really great crop of movies in Best Picture this year, and I enjoyed them all. I didn’t see Doubt, I think. I don’t remember. Anyway, my point is that it’s not the only definition of what success is. Anyone who makes a film has to decide how they’re going to define the success of that film.

Q: Let’s say someone wants to make a fan fiction piece – not a fan fiction piece, but something from a wholly new cloth. Or maybe they want to re-imagine some movie that they really liked from years ago that has nothing to do with science fiction or fantasy or any of that stuff and has no special effects. And they manage to find enough people who are going to work with them on it. Is that something, when you talked about broadening earlier, is that something that you see happening, a sort of broadening of interest?

I think you’re going to see more different memes, because it’s a different medium. If you look at webisodes, the pacing of how a story is told is defined by the medium. There’s, if you look literally at the viewing metrics behind how people consume a streaming webisode, and you graph it, you have a drop off in your audience. For a half-hour long episode, about half way through the episode you have lost about half of your audience, and that’s considered pretty good. That’s considered success for a thirty-minute episode.

But if you keep it at 12 to 15 minutes, you can retain about 75% to 80% of your audience. So you have 50% more people watching your entire shorter episode than you would if you had tried to package it as a 30 minute episode.

Q: So the medium really is the message.

The medium is the message. People want their stories shorter. And that’s fine. That’s the way TV works. A movie has three acts. A regular TV show has four to seven acts that are determined by commercial breaks. That means that the way you have to write the story has to respect the fact that every 12 to 15 minutes you have to have some kind of a cliffhanger.

Part 3: Creating an Industry

Fan Film – The Carlos Pedraza Interview, Part 1

As with so many other pursuits, the relentless march of digital technology has transformed fan fiction. Originally the fan-produced stories that took over where books, TV shows, and movies left off were distributed in an almost samizdat-like fashion. I vividly remember the thrill of encountering photocopied Star Trek stories at a science fiction convention in the late ’70s. Fast forward 30 years, and fan fiction has gone video, gone digital, and gone global.

Star Trek: Phase II (originally known as Star Trek: New Voyages) is the latest of several increasingly sophisticated fan film shows being distributed solely online. Written, acted, directed, and produced on a purely volunteer basis, STP2 and its kin are labors of love. They are also profoundly altering the media landscape by creating new relationships between the goliath traditional media players and consumers. As consumers become co-producers of content, how will content creation, distribution, and monetization change?

A few weeks ago I sat down and chatted with Carlos Pedraza, who in addition to being a close friend, co-produced and wrote many episodes for the long-running Star Trek: Hidden Frontier show. This is the first of three posts stemming from that interview.

The Interview

Q: How did you first get involved in fan film?

I started almost seven years ago now. I read an article about this fan film that had been created by these two brothers from Minnesota. It had taken them probably seven years to create this one hour episode that was set in the same frame as the original series of Star Trek, and on a different ship and a different cast. And apart from a couple of very cheesy things that they admitted were just technical obstacles they weren’t able to overcome, it was a really well done recreation of the original series, in terms of tone and mood and such.

So I watched it and thought it was pretty good. And the article made mention of the fact that there were other Star Trek fan films out there, and that there was this one based in Southern California that was set in the Next Generation era, in the 24th Century. I looked it up on the Web. They were at that point in their third season of making the show. They were at that point making nine episodes a year. So they had created close to 30 episodes at that point, which was pretty impressive.

Writer/Producer Carlos Pedraza

Its first two seasons weren’t terribly good, but they were clearly making it with a lot of heart, and they were learning a lot and they were improving. I checked out their user forums, which were very active. They had a pretty rabid fan base that liked to talk to one another and liked the fact that they could interact with the creators of the show and some of the actors and so forth. So it really became more than just a show. It was really a community of people.

I noticed, back then they were taking submissions for story ideas from fans. So I lurked for a while, just getting a sense of who these people were, and how they interacted, and what the process was for submitting, and who the right person was to submit to and so forth. Then when I felt like I understood that well enough, I worked on the story I wanted to pitch. I came up with this story idea that was based on the war crimes trials from Bosnia. So I did sort of a Star Trek version of that and pitched the idea and they really liked it.

It was called Grave Matters and it was about the discovery of a mass grave of Bajorans who had been put there by Cardassians. The main character, the villain, was based on a Bosnian woman who was completely unapologetic about the fact that she had been involved in this genocide.

At that point they were writing their scripts a full year in advance of production. So I thought it would be a year before it would get made. It turned out that, because of one of the story elements that I’d created, they moved it up in the production cue. I think I submitted it in March, and we ended up producing it in September of 2002, and it was released in early 2003. I just thought it would be kind of a one off thing, but it turned out to be probably one of the most popular episodes up until that point.

The producer of the show, who had written a lot of the scripts, asked me if I’d be interested in writing the teleplay from treatments he’d already written. Some of them were more detailed, some of them were just really story outlines. I basically fleshed them out and wrote them into teleplays. The episodes were running about 25 minutes, and I began pushing for longer episodes. We made it up to about 30 minutes an episode, with an occasional one that went 35-37. One of the last episodes we did at 42 minutes long, which is basically the same length as a network episode. We were able to produce a network hour’s worth of an episode in the same time frame it used to take us to do a 20-25 minute episode.

Q: Was that improvement primarily due to technology or to improvements in your production process?

It was both. Technology is obviously the thing that makes this possible. The fact that you can, with only a small financial stretch, afford a camera and software that can produce this, is revolutionary. I think we’re really just at the beginning of that revolution. We’re seeing it spread now. So if you look at it in terms of a direction, it’s moving forward, but right now it’s also more moving out than moving forward. We’re at a place right now where nobody knows where it’s going to go, other than they know it’s forward, and out. More people are going to do it and its going to keep gaining momentum.

Q: So by “out” you mean broadening the scope of offerings.

Right. There are more people out there doing it. You have venues like YouTube where people can actually display their products, and where you’ve already had some people do it well enough that they’re making a good living just on the advertising revenue from YouTube.

We’re still a long way though, from knowing how to properly monetize all of this. And that’s a real challenge. We’re in a position that because we’re making fan productions that the informal agreement we have with the copyright owner is that we aren’t going to make any money on it. So that has the upside of giving us an instant fan base and a platform for promotion that a lot of independent video producers who are trying to get things on the Web don’t necessarily have in terms of getting an audience. But we also can’t earn a living from it.

So one of the things we’ve been trying to do is to look at what is it we’re learning about this process, both in terms of the technology we need to be cost-efficient about it, but also about the people that we need to find at every level, from actors to editors to CGI artists to set construction people and writers. Everything you need for a production you still need. So we have one foot in the old style, the traditional style of doing things, and the other foot in a very fast-moving, technologically-driven style that creates a dynamic for us that is very educational but also very challenging.

I look at the creative challenges as a good thing. The fact is, when it comes to dramatic video productions on the Web, we’re still in the Wild West. We’re still staking out claims and understanding how to apply technology in new situations. So it’s a very exciting time, but the fact that it’s still an uncertain time makes it difficult to come up with a business model that will cause us to say, “Oh, great! We’ve got a way to earn at least enough to cover the costs.” We don’t yet, but I think we’re getting to that point.

Q: Fan fiction creators such as yourself are starting to develop your own fan bases. Initially you are piggybacking off the success of Star Trek, but as you move into things that are no longer derivative, do you think you might be able to have a bit more leverage?

For me it’s a career shift from what I used to do, so part of it is about building the skills that you need in order to be an effective producer, because one of the things we’ve found is that for independent productions that need to be cost-effective with the Web as their venue, you can’t afford to stratify your crew. You can’t have people who are “just” writers, or “just” producers, or “just” directors. Obviously you want skilled people filling those shoes, but you you also want people who are willing to pick up a hammer if you need to finish a set because it’s running behind schedule, who if the water main breaks, are going to help. We’ve actually had that happen. You have to have a flexibility that frankly Hollywood doesn’t have.

We’ve worked with Hollywood people who come out, and they flounder a bit in the production situations that we have, because it’s not a perfect production situation. We don’t have a sound stage that’s literally sound-proof.

Q: There’s no catering truck.

There’s no catering truck. We have a studio that, when it rains, you hear the rain! But we also have an incredibly skilled sound designer. Unless it’s a huge hail storm, he can handle it. I could go through some of the episodes we’ve produced, and you’d be amazed how many scenes I could point you to and I can tell you there was a huge rain storm going on. You could hear the pounding on roof, because it’s a tin roof! We’ve added some insulation so it’s not as bad as it used to be, but it’s still quite audible.

And he can salvage audio that would make Hollywood sound designers cringe. And this guy does happen to work in Hollywood, but that’s what he does. Everyone has to put up with situations that are more difficult than you would ever have to deal with in Hollywood.

Q: From the beginning you’ve had people involved, particularly in special effects and things where people can work remotely, who are are professionals.

We have had professionals who have helped us. Where the professional connections that we’ve had through Star Trek have been really helpful is for people on my level. We’re not trying to break into Hollywood. We’re trying to make a new market for video productions. But obviously I have a lot to learn. There’s a lot I’ve needed to learn about production, direction, art direction, set construction, sound design. I’ve been able to do it watching the Hollywood professionals who’ve contributed their time and their effort and some of their resources in the production of our show.

So I’ve been able to interact with professional Hollywood writers who need to do on-set rewrites and I’ve seen how that works. I’ve worked with professional script supervisors and learned how to do script supervision from professionals who’ve come out and contributed their time to us. Same with sound design. Same with cinematography. Every production aspect has had some of that; we’ve had more Oscar and Emmy-winning people on one of our productions than probably any science fiction show Hollywood has ever had, working on a single episode.

Q: And the motivation for a lot of these folks is…

They love Star Trek!

Q: And that’s why you got into it in the first place.

Exactly.

Q: Do you feel there’s sort of a nascent core of people who have been involved in the most serious forms of fan fiction video production who are developing what might be called a new set of skills that are derived from those original Hollywood skills?

I think they are. It’s really, truly independent. Independent studios today aren’t really that independent. They know that they have avenues through the traditional studios and their distribution capacity to have a venue for their work. We’re not in that position. We have to create our own venue. We talk to each other. We haven’t done a lot of work hand in hand yet, but we’re seeing more of that happen internationally.

There are a couple of people who have made some phenomenal Star Wars fan films whom I’ve met at conventions and sat on panels with and stay in touch with who are moving into more professional aspects of their work. And I think one of the tensions in this field is that there are some people there who want it as a stepping stone to a career in Hollywood, which is fine.

Personally, I’m not going to say no to a Hollywood opportunity, but I really feel like the excitement for me is about creating this new venue, this new way of distributing these materials. What I want to do is see how we create a way for talented people who are not connected to Hollywood but are are out there. There are so many film schools in North America alone, not even talking about the UK, France, and other places, that are churning out film students who are skilled and know how to do these things, but don’t have a big chance of making it being in Hollywood. But they’re out there, and to me, if there’s a vacuum, let’s fill it.

Part 2: Will Fan Film Ever Go Mainstream?

Another Windows Media Music Service Dies

SpiralFrog just died. What’s a SpiralFrog, you ask? SpiralFrog is, or was, an ad-supported online music service that never really caught on. It had a limited selection of music and relied on Windows Media DRM. SpiralFrog joins Ruckus on the scrapheap of history. Ruckus relied on… wait for it… Windows Media DRM.

Back in November, 2007 I wrote a post for TechLaw Forum, examining the state of online music innovation and DRM. At the time, Ruckus and SpiralFrog were upstarts. Yahoo Music (yet another user of Windows Media DRM) hadn’t gone dark yet, but was preparing to do so. Napster was suffering from declining membership numbers. Apple’s iTunes was shedding DRM, albeit slowly. Amazon’s DRM-free MP3 store was just gathering steam.

Since then Ruckus, SpiralFrog, and Yahoo Music all bit the dust. Napster had been using Windows Media DRM, but they switched to a DRM-free approach. Apple has excised DRM from its massive music catalog, Amazon’s MP3 store continues to do well, and Napster is still in the game.

What many pundits missed during all this was that all DRM is not created equal. Windows Media DRM was always a bad choice, given that the iPod, the global favorite for portable music playback, wasn’t supported by the technology. Amazingly enough, the biggest competitor to the iPod, Microsoft’s own Zune, wasn’t supported either. People were willing to put up with Apple’s FairPlay DRM because the limitations it imposed were long-term, but they did not interfere with the ability to seamlessly move music from computer to iPod.

This is an execution thing. Apple recognized that in order to get record labels on board with iTunes, it would need to use DRM. So it created a form of DRM that stayed out of your face. For the vast majority of customers, the DRM never made an appearance as music moved from computer to iPod. This was not the case with Windows Media DRM. Review after review of the now defunct services powered by that technology showed that the implementation was nowhere near as seamless as Apple’s implementation.

Microsoft built its DRM for all possible business models, but without support for the number one and number two portable music devices. Obviously portability matters. Microsoft gambled that it could get by without support for the iPod, and the online music services that relied on Windows Media DRM paid the price for that decision.

Image Credit: XPRS CATO! by Steve Jurvetson. Creative Commons Attribution 2.0 License. What a shot!

Design for the Bottom Line

ESPN.com gets monster traffic. Huge traffic. Zillions of daily pageviews. That’s wonderful, but ESPN is interested in making money. So they’re redesigning the site.

Here’s an interesting exercise: Take a look at both of these images and think about which one is likely the existing site (no fair if you’re an ESPN.com junkie), and which is the redesign. Why is one better than the other? Why would advertisers prefer one over the other? Which one provide better revenue opportunities for ESPN? Millions of dollars in ad revenue are riding on this decision.

An interesting NY Times article about the ESPN.com redesign reveals the answer, but if you need immediate validation, the top image is the new ESPN.com home page. Is simpler truly better, or would you have done it differently?

The iPhone is a Platform

In April I wrote a rather lengthy piece about Apple’s distribution strategy. My central thesis was that Apple’s success over the last few years stems as much from the company’s creation of new distribution channels as from excellent product development. I also wondered whether Apple’s tight requirements for third-party iPhone app development would hamper growth of the iPhone as a distribution channel.

I expected to have to wait longer than nine months for the answer. But it is already clear that the App Store is a winner. Over 10,000 applications have been added to the iPhone in that short interval. A staggering 300 million instances of apps have been downloaded. That’s roughly the population of the United States. The iPhone itself already accounts for 16.6% of the global smartphone market and is breathing hard on the heels of RIM, the folks behind the BlackBerry.

Various observers bashed the iPhone for a variety of reasons, from design to price to carrier choice to general disbelief that Apple could navigate the treacherous waters of mobile telephony. But they’re still waiting for an “iPhone Killer” that can cut the iPhone down to size. In fact, there’s even an iPhone Killer website, which features all kinds of information about various devices: Nokia’s N97, the BlackBerry Storm, and so on. The fascinating thing about this site is that it sticks completely to hardware and the software that comes with it.

That would be more than adequate if we you believe that the iPhone is just a device, divorced from the App Store. But just as the iPod can’t be properly evaluated without looking at iTunes, the iPhone and the App Store constitute a platform. If you were buying a personal computer, you would look at the applications available for the operating system; why wouldn’t you examine a smartphone the same way?

There are over 15,000 Windows Mobile applications in the wild. There are over 9,000 Symbian applications. Symbian OS 6 rolled out in 2001. If we’re generous to Microsoft and count back only to the first use of the term Windows Mobile (formerly PocketPC), that OS was rolled out in 2003. So Apple caught up to Symbian’s seven-year lead and Windows Mobile’s five-year lead in less than six months.

Of course, quantity does not equal quality, and more apps doesn’t mean your platform will thrive. Just ask Palm. There are over 50,000 PalmOS apps, but that wasn’t enough. Palm sold off its own OS and is struggling to survive.

But here’s the kicker: Apple has been so successful with iTunes, its earlier distribution Trojan Horse, that when you read a story about iPhone applications in Time Magazine, the article includes and inline link that opens up iTunes to show you Apple’s app rankings. Even if you don’t have an iPhone, you probably have iTunes. So Apple has a convenient tool for showing off the most successful third-party apps and whetting your appetite for an iPhone.

That’s what I call leveraging all of your distribution channels.

Apple’s Success = Design + Distribution

I’m not sure what it is that makes so many business pundits and investment managers continuously underestimate Apple. I think it boils down to a belief that regardless of whatever success Apple has recently pulled off, Apple’s fate was already sealed years ago when it decided to sell an integrated hardware/software product.

Pray for Apple

Because Microsoft was able to control the market for desktop operating systems and force hardware OEMs to do its bidding, the company became staggeringly successful. It also handily trounced Apple, turning the company that kick-started personal computing into an also-ran. By 1997, Wired Magazine’s June cover story was titled “101 Ways to Save Apple.”

Of course, in 1997 there was plenty of reason to believe that Apple was on its way down the toilet bowl. The hardware/software integration that Apple steadfastly followed was an approach doomed to failure, as the success of Microsoft had shown. Michael Dell declared that if he were running Apple, he’d “shut it down and give the money back to the shareholders.”

Microsoft leveraged an operating system that ran on a common hardware specification, which gave it the power to reap monopoly rents. Dell’s innovative build-to-order distribution system allowed it to grab the lion’s share of the PC hardware market. Meanwhile Apple, with its all-in-one approach, continued to innovate but couldn’t grow its user base.

Eleven years later Microsoft is still the big dog, with a market cap of around $270B. But the Colossus of Redmond is losing dominance. Vista took years to develop and has been roundly panned as an underachiever. Google has built a tremendous lead on the Web. The LAMP stack has thwarted Microsoft’s pursuit of IT dominance.

Even Apple is a serious threat now. The company’s market cap of around $160B is four times that of Dell. Macs are flying off the shelves in greater numbers than ever before. Developer mindshare has shifted radically in Apple’s favor, and Microsoft’s grip on consumer and business customers is weakening.

Reaching Past the Faithful

How did this come to pass? First, Steve Jobs returned to the company he co-founded. At the time, analyst Charles Wolf echoed the prevailing sentiment when he said of Apple, “They have a dramatically loyal installed-base and that’s the one asset they have.” Jobs tore down the confusing and duplicative Mac product structure (remember Centris, Classic, Quadra, and Performa?) and nixed the Newton.

He was able to keep faithful customers happy by trimming the product line while introducing a groundbreaking machine called the iMac that tempted more than a few Windows users. A series of head-turning hardware releases followed, as Jonathan Ive and his design team moved from translucent plastics to titanium to aluminum. Apple’s software underpinnings took a huge leap forward with Mac OS X. The company rolled out the iPod and iTunes, and shipped the iLife application suite with every Mac. Consumers responded, turning the iPod into a runaway success, and making iTunes the first viable legitimate online music store. Apple’s share price slowly moved up, but some analysts still damned Apple with faint praise.

In April of 2004, shortly before APPL began its vertical ascent of the stock charts, Transamerica portfolio manager Chris Bonavico told CNN Money’s Stephen Gandel, “Apple will remain a company that is neat from a product and consumer standpoint but crap from an investor standpoint.” Gandel’s article was essentially a hit piece, painting the iPod and iTunes as side ventures that weren’t doing enough to push Macintosh sales. He also questioned the viability of Apple’s retail stores.

Distribution is the New Black

Gandel inadvertently touched on perhaps the most important aspect of Apple’s stunning success. Design is certainly a huge part of the appeal of Apple’s products. The hardware and software work very well together. The devices are sturdy, well-designed, and aren’t just targeted at 15-30 year old male geeks. Generally speaking, Apple products do what you expect them to, without fuss. Just as importantly, they don’t get in your way. But Gandel didn’t focus on design. Instead he poked holes in Apple’s new distribution framework.

The retail stores he thought were a waste of money, the iPods that didn’t convert enough consumers to Macs, and the iTunes Store that pulled in paltry revenue became the distribution framework that allowed Apple to create a completely new relationship with consumers. Apple lost the War for the Desktop, but they learned many lessons from that defeat.

Pulling the Middleman Out of the Driver’s Seat

I remember the days before the Apple retail stores arrived. While there were a few noteworthy exceptions, as a rule buying a Mac and having it serviced was always something of a roll of the dice. Apple took a lot of heat and fought off a lawsuit from disgruntled retailers when Apple launched the retail stores. But the truth is that many of those retailers were damaging Apple’s relationship with its customers, at a time when the company was being relentlessly pressured by Dell’s direct distribution model. Dell was able to control its relationship with customers far better than Apple, until Apple got serious about managing its retail presence.

Of course, when the Apple retail stores were introduced, there were plenty of experts who thought it was a colossal blunder, second only to Napoleon’s march on Russia. David Goldstein, president of Channel Marketing Corp. told MacWorld Magazine, “It makes absolutely no sense whatsoever for them to open retail stores. Apple will turn the lights off within two years and will have a very bad and expensive experience.” Ouch.

Cliff Edwards of Business Week harped on conflicts with existing retailers such as CompUSA and Sears, quoting CompUSA’s Lawrence N. Mondry, who declared, “When you choose to compete with your retailers, clearly that’s not a comfortable situation.” Mondry could have been describing the experience Mac buyers had when they stepped into most CompUSA stores. It was even worse at Sears. Realizing that they were being held over a barrel by big retailers that were used to calling the shots with computer OEMs and frequently provided a horrible purchasing environment for Apple products, the company did what it had to and took control of distribution.

While Edwards and Goldstein scratched their heads, other analysts were giving Apple a thumbs up. George Rosenbaum, chairman of the market research firm Leo J. Shapiro & Associates, called it a “brilliant idea,” pointing out that Apple retail stores would give the company the opportunity to “leapfrog” past dependence on other retailers. Daniel T. Niles of Lehman Brothers also saw the possibilities, telling MacWorld, “Apple has the ability to start attracting new customers with the launch of their higher-end retail store strategy.”

Niles and Rosenbaum obviously read the tea leaves more accurately than Edwards and Goldstein. Apple hauled in $1.45B from 208 stores in Q2 2008 and plans to have opened a total of 45 new stores during this fiscal year. Consistently the Apple retail stores have been a magnet for customers new to the Mac. Apple claims that half of all Apple store customers are new to the Mac. The combination of Apple’s retail stores and well-implemented online store have helped boost Macintosh sales to record levels. Apple sold 51% more Macs in Q2 than the same quarter last year.

No Wireless. Less Space Than a Nomad. Lame.

You can’t mention the surge in Mac sales without touching on the “Halo Effect” of the iPod. When the iPod was introduced in 2001, many observers thought it wouldn’t fly. I’d been using Macs for years, and while I thought it looked like an exciting device, I couldn’t imagine that Apple would make much of a dent in the MP3 player market. Stephen Baker, an analyst at NPD Intelect, shared my view. He opined that the iPod would likely stand out for its large storage capacity but predicted that the device might have trouble digging out a niche in the market. Others were less kind. Slashdot’s Rob Malda trashed the iPod with this now infamous statement: “No wireless. Less space than a Nomad. Lame.”

Perhaps had Apple simply delivered the initial 5Gb, Mac-only iPod and left it at that, we’d have been right. But before long Apple made the iTunes/iPod combination available for Windows users. That move created several new distribution opportunities for Apple.

First, it gave Windows users the opportunity to try Apple products without having to take the frightening plunge into the world of Macintosh. Apple finally had access to a vast pool of Windows users it had previously been unable to touch.

Second, it opened up a secondary market for iPod accessories and tie-ins. Had the iPod only been available for Macintosh users, a secondary market would have developed, but it would have been much, much smaller. Apple would never have been able to strike deals with auto manufacturers, for example. The connector on the bottom of every iPod (except the shuffle) became the point of entry to an incredible array of third-party products, and as that market grew, the iPod rapidly became the de facto standard portable multimedia device.

Third, it gave the iTunes Store a tremendous head start. While a digital music store is handy in itself, none of the previously-existing stores had made much of a dent in consumer behavior. They didn’t operate particularly well with Windows-based MP3 players, and they didn’t offer broad enough music libraries. Apple struck deals with all the major labels and created a store that provided an easy, addictingly-convenient interface and seamless integration with the iPod. As the universe of purchased iPods grew, so did the market for the iTunes Store.

The integration of iPod and iTunes also created a gestalt effect as Apple moved beyond music. Just as the Apple retail stores bypassed middlemen, the iTunes/iPod combination created a direct link between Apple and its customers. When Apple rolled out movie sales through the iTunes Store in 2006, there was no need to create an entirely new distribution channel. It was already in place. While the iPod helped bring in iTunes Store users who wanted to quickly buy music, the iTunes Store prompted existing iPod users to upgrade to the latest and greatest video-capable iPods. It worked on me, that’s for sure.

As Apple adds more capabilities to the iTunes Store, and does the same with the iPod, the two should continue to energize each other, provided Apple rolls out the right kinds of features. So far the company’s track record is impressive, but competitors are slowly starting to catch up, and Big Media is even getting its act together. The synergistic effect of the iPod and iTunes Store may be losing its power as the competition rolls out viable alternatives, but I think Apple has already seen the writing on the wall and is already creating the successor to the iPod/iTunes channel.

There’s Something in the Air

Apple recognized the potential of wireless networks early in the development of 802.11 (WiFi) technology, and capitalized on it by marrying easy to use wireless routers with built-in wireless capability across the Mac lineup. Apple also realized that the future of computing was mobile. For years Apple has been selling more laptops than desktop machines. So in retrospect Apple’s move into the mobile market was a logical step toward integrating the two trends.

While the iPod was something of a surprise, the iPhone was long-awaited. There were plenty of skeptics who felt that Apple wouldn’t be able to produce a viable mobile phone because companies like Motorola and Nokia had years of expertise in the market, while Apple had none. The subsidizing of mobile phones by carriers was seen by many as a particular problem for Apple. Why would anyone pay for an iPhone when carriers offer cheap or free phones? Bill Ray summed up this line of reasoning in a December, 2006 article in The Register. He wrote, “As customers start to realise that the competition offers better functionality at a lower price, by negotiating a better subsidy, sales will stagnate. After a year a new version will be launched, but it will lack the innovation of the first and quickly vanish.”

Software usability maven David Platt castigated the iPhone development team, writing, “the iPhone is going to fail because its design is fundamentally flawed.” Later in the same post he stated that the market would “severely punish” Apple for its missteps with the iPhone. Consumers, however, have had a different reaction to the device, and Apple says it is confident it will sell 10 million of them this year. Whether they hit the mark remains to be seen. As a point of comparison, Motorola sold over 20 million RAZRs in that product’s first full calendar year of sales (2005).

While Platt focused on perceived design issues, Ray’s analysis was a solid restatement of the prevailing attitude among observers of the mobile market, and it displayed a common underestimation of Apple’s ability to move into new markets. The ghosts of the War for the Desktop still remained, causing may analysts to buy into the myth that Apple was good at making products, but bad at capturing marketshare and blinding them to the reality that for several years Apple has been executing new product launches with nearly flawless precision.

Ray also had no way of knowing that the iPhone would be so innovative. Apple didn’t create another mobile phone. It created a PID (Portable Internet Device), a handheld built around Internet use. The touchscreen interface was just the most obvious new technology; with over 200 patents it is obvious that Apple intends to put up a strong barrier to competitors who seek to mimic the iPhone. Whether software patents are good for society as a whole is debatable, but they’re obviously good for Apple at the moment.

There are all kinds of rumors right now about a new iPhone that may be due in late June, potentially with a subsidy from AT&T that would cut its price by as much as $200. My guess is that Apple will unveil not one new iPhone, but two. One will offer more capabilities for the same price as the existing model, while the second will offer fewer capabilities and will come in a smaller form factor, similar to the mini/nano approach Apple used with the iPod. Of course, we all know about the dangers of punditry. My guess will almost certainly be wildly off the mark.

But if you want to see where Apple’s newest distribution channel is headed, the iPhone is only half of the picture. Sales figures for the iPod touch are not broken out from the rest of iPhone sales, and I think that is for good reason. Apple is covering its bases. If its relationship with AT&T sours, the iPod touch routes completely around mobile networks and runs the same apps as the iPhone. The App Store will carry applications for both devices. Apple would love nothing more than to be rid of its reliance on AT&T. For now it has to go with AT&T, but the iPod touch is Apple’s testing ground for the future. If WiMax or some as-yet-defined successor ever takes off, the collage of WiFi networks that dot urban America will be replaced by much more capable broadband wireless with far better reach, and I believe Apple will be one of the first OEMs to provide an easy way to access it.

If that happens, Apple’s latest distribution channel will be quite impressive. Mobile carriers, despite running the networks, have been unable to do much more than sell ringtones and data transfer at absurdly high prices. Equity Private, the pseudonym for the author of the blog Going Private, takes them to task for their pricing:

$0.10 per SMS at 160 characters per message works out to around $1,000 per megabyte. This is easily 100x the revenue extracted from shipping TCP/IP data over “cellular networks,” with the most expensive providers, and yet, functionally, SMS is vastly inferior to TCP/IP instant messaging services on almost all counts.

Once Apple can get past the annoyance of having to deal with AT&T (and other carriers in foreign markets), the door is open for Apple to provide absurdly cheap access to any and all digital content. Internet and data transfer are already huge draws for iPhone/iPod touch users. If it’s packetized, you’ll be able to access it from an iPod touch. When the App Store launches, iPod touch users will have the ability to buy music, TV shows, movies, audiobooks, and a wide variety of applications. The applications are a very important part of this equation, because as everyone knows from reading about the War for the Desktop, if your wonderful device doesn’t have enough developers creating spiffy applications for it, you won’t gain the benefits of network effect, and you’ll be relegated to second tier status.

There’s been quite an uproar about Apple’s approach to third party application development for the iPhone/iPod touch. In particular there’s been much made of the prohibition against running processes in the background. The success or failure of Apple’s locked-down approach to development of officially sanctioned iPhone apps could be the determining factor in whether Apple’s plan to open up this new distribution channel gains sufficient momentum.Techdirt’s Timothy Lee raises the specter of an overbearing Apple keeping developers from exercising their creativity:

The problem here goes beyond the mere possibility that Apple might block apps that some users would find useful. The more serious problem is the effect that the approval process will have on developers. Given how vague the rules are (what counts as bandwidth-hogging?) and that Apple is free to change them at any time anyway, it’s going to be risky for a developer to start developing an iPhone app that Apple might reject.

Creative developers have also inadvertently given rise to all manner of vulnerabilities and other defects in the world of desktop software, and some observers believe Apple’s model will resonate with consumers who are tired of dealing with insufficiently vetted software. Michael Mace points out that while “Apple takes responsibility for ensuring that iPhones remain secure and do not abuse the network,” no carriers or device manufacturers have been willing to step up to that challenge.

Maybe Building the Whole Widget Isn’t Such a Bad Idea After All

It seems that while Microsoft and Dell had the right model for the 1990s, they may not have the right model for the 2Ks and beyond. Dell is struggling to find a new approach, and Michael Dell has stepped in to take up the reins again. Microsoft tried for years to make it’s software work with a wide variety of third-party MP3 players, then gave up in disgust and created the Zune. The XBox, the only new Microsoft product in recent years to open a new market for the company, is an integrated hardware/software device. Surface, perhaps the most exciting technology to come out of Microsoft’s labs in years, is also an integrated device.

Making the whole widget isn’t the only way to go, obviously. But Apple has done an excellent job of leveraging tight integration to create and expand new distribution channels. The jury is still out on the company’s mobile strategy, but this isn’t the Apple of old. I expect we’ll be seeing more surprises from Apple as it pushes further into wireless distribution of apps and content.

Image Credits

iPod family by Yukinobu Zengame – http://www.flickr.com/photos/zengame/42914278/ – Creative Commons Attribution 2.0 Generic license
Apple Store Ginza by Shunsuke Kobayashi – http://www.flickr.com/photos/bizmac/1401611508/ – Creative Commons Attribution 2.0 Generic license
iPhone – Germany by Rudolf Schuba – http://www.flickr.com/photos/rudolf_schuba/1947181341/ – Creative Commons Attribution 2.0 Generic license