Category Archives: Business
How Apple TV Should Work
The rumor mill has been pulling overtime shifts with reports that Apple is really focusing on making Apple TV a priority. Many suggest this to be a brand new TV. However, I think that is misguided, mainly for the reasons Gruber and others have pointed out. Namely that people don’t replace their TVs very often. And an Apple TV wouldn’t be cheap. People who are nerds and would be interested in paying the premium for an Apple branded TV probably have already spent good money on decent flat panel TVs recently and aren’t looking to upgrade any time soon.
I think Apple should instead relaunch Apple TV the service. Just like the iTunes store and music, it is far more effective to provide a good solution for distributing material and just collect fees. This is how I envision Apple TV should work.
Instead of launching a cable network or a hardware TV, Apple needs to address the problems people have with their current cable company. Chief of those complaints is paying for channels no one watches.
Apple should launch a rebranded “Video Store”. Much like their Newsstand app, it will focus on specific content that is delivered automatically and presented in a central location. Content providers can then make Video Store compatible apps that users open and stream their “channel”. So, in Newsstand, I subscribe to GQ. Every month the latest GQ issue is downloaded to my iPad. I’m notified and the cover changes in the Newsstand. Whenever I’m ready, I open the GQ app and read it. I’m able to pay my subscription through iTunes using the same account I use to buy apps. Simple.
The Video Store would be similar. I could have the HBO app downloaded. I pay a set amount per month for the subscription and open the app when I’m ready to watch. Let’s say I don’t want to pay for all of AMC. I could simply buy the “Mad Men” subscription, and every week when the latest episode comes out, it shows up available to stream on my device.
This doesn’t sound groundbreaking, but it gets to two issues. First, is the universal cord cutter wish of “a la carte” cable choices in subscriptions. Second, it gets around the storage issue of buying episodes in iTunes and having to sync your device to download them. These video files take up huge amounts of space, so it is far easier to put all that server space Apple bought in NC to use and just stream on demand to subscribers. We can see Apple is already doing this with the current version of Apple TV, allowing you to stream episodes you have previously downloaded.
It also allows users who complain about live sports and news to get that content as well. The CNN app streams live CNN and you can subscribe to MLB at bat or NBA Season Pass. The content providers could still get paid – and get it directly from users instead of charging fees to cable operators.
Obviously, it is also necessary to get the content on television screens. Apple should utilize the standard that they already put right in front of our noses – Airplay. So, for those who only want to use Apple for TV – buy an Apple TV plug it in your screen of choice, and subscribe. For those on iPads and iPhones, you can subscribe on your device and “push” to your device the shows you want to watch. This is a key point, because suddenly your television and video content becomes truly mobile. No longer do you have to be home scrolling through your DVR to watch last week’s episode of Community. Now you can catch Boardwalk Empire at the gym and then How I Met Your Mother when you get home on the big screen.
This appeases complaints that content is too locked down in current offerings like Hulu with “PC only” restrictions. No longer do you have to hope that the episode you missed three weeks ago is still on Hulu, or that the one you missed last night is available on Fox.com only after a week has passed.
Will this work? If anyone can do it, it is Apple. They were the only company that could push the music companies into online distribution. Now with even more clout, they might be ready to gently guide the video content companies toward the future.
Choice Paralysis
I tend to not read much fiction. Girls hate when I tell them this because it makes me sound boring and unromantic. I can almost always see their eyes roll when I say I prefer reading non-fiction. For me, if I am looking for entertainment or pleasure, I tend to want something that lets me kind of zone out and turn off. Reading is too active for me. I can’t just glaze over and read a pleasure book. That is not to say I don’t get pleasure from reading, but it is a pleasure of learning something new.
I am particularly interested in Behavioral Economics. Why we make certain decisions. One of the notions that always sticks with me is “Choice Paralysis“. When asked, a person will always state that they prefer more choices. “I want the product that suits me perfectly” they think. However, in practice, this is often not the case. When presented with too many choices, we get overwhelmed with a fear that we will pick the wrong product – my choice wasn’t as good in the end as another, or with this much customization this product should have been perfect – and in many cases choose to just avoid the decision entirely.
An interview with a Columbia Business School professor sums it up well:
So when I was a PhD student at Stanford University I used to frequent this grocery store called Draeger’s and you know it was… you had a little bit of that same feeling because this was a store that offered you so many varieties, things you’d never contemplated before, you know like 250 mustards and vinegars and over 500 different kinds of fruits and vegetables, or over 2 dozen different types of water and this is at a time when you know most of us drank tap water, so I used to go to this store and examine all the varieties and we used to marvel at all the choices out there, but I found that I rarely bought anything and I kind of thought that was kind of curious. I mean, they had things that the other grocery stores didn’t have and yet I never bought anything.
And so one day I went to the manager and I asked him whether his model was working and he said, “Well, haven’t you seen how many customers we have in this store?” And yes indeed I had. I mean it was definitely attracting a lot of customers, even attracting tourist buses that would land up at this store and people would go through the store and marvel at all the options, even sometimes take photographs of the various aisles.
So the manager agreed to let me do a little experiment where we put out a little tasting booth next to the entry. We either put out 6 different flavors of jam or 24 different flavors of jam and we looked at 2 things. First, in what case were people more likely to buy a jar of jam? The first thing we looked at, in what case were people more likely to be attracted to the jar or jam, so in which case are people more likely to stop when they saw the display of jams and what we found was that more people stopped when there were 24 jams. About 60% of the people stopped when we had 24 jams on display and then at the times when we had 6 different flavors of jam out on display only 40% of the people actually stopped, so more people were clearly attracted to the larger varieties of options, but then when it came down to buying, so the second thing we looked at is in what case were people more likely to buy a jar of jam. What we found was that of the people who stopped when there were 24 different flavors of jam out on display only 3% of them actually bought a jar of jam whereas of the people who stopped when there were 6 different flavors of jam 30% of them actually bought a jar of jam. So, if you do the math, people were actually 6 times more likely to buy a jar of jam if they had encountered 6 than if they encountered 24, so what we learned from this study was that while people were more attracted to having more options, that’s what sort of got them in the door or got them to think about jam, when it came to choosing time they were actually less likely to make a choice if they had more to choose from than if they had fewer to choose from.
And a large part of that has to do with the fact that when people have a lot of options to choose from they don’t know how to tell them apart. They don’t know how to keep track of them. They start asking themselves “Well which one is the best? Which one would be good for me?” And all those questions are much easier to ask if you’re choosing from six than when you’re choosing from 24 and if you look at the marketplace today most often we have a lot more than 24 of things to choose from.
A great TED talk on this same topic here. He discusses how this choice paralysis is making society as a whole unhappy.:
Think about your own life. Are there things were you are avoiding making a decision on? Is it because you have too many choices? What can you do to par these down and stop the paralysis?
Pure Google Experience
Google is in the midst of releasing the 4.0 version of their mobile OS, Android. As with all of their releases, many of their older legacy devices that have come out even in the last few months won’t be upgraded to the latest version. This means you could be stuck with a phone your purchased in July that you will have for 2 years on contract that will be stuck with an older outdated OS that can’t take advantage of new features, and likely won’t be able to run some apps that need the new 4.0 code.
This is largely because Google makes the OS software, but not the phone hardware. It licenses it out to third party manufacturers like Samsung, HTC and Motorola to put on phones. However, each manufacturer likes to add special code on top of Google’s. While they aren’t explicit in explaining this, they likely do this to differentiate their products from competitors. How else does Samsung make their 4.3 inch 16GB 4G smartphone different from Motorola’s? This takes time, money, and effort to code, and in many cases it doesn’t make business sense to do so. (See Sony’s explanation of the process and you get an idea of the onerous task)
Google has made a habit of releasing a clean version of its operating system on one phone with each new release. They call these the “Nexus” devices. They convince one manufacturer to release a non-messed-with version of the new phone in exchange for getting early access to the Operating System code. Tech savvy users who refuse to go to Apple flock to these devices because they are guaranteed to get upgrades first and are the best user experience in the Android world. (I find it funny that these devices are the most Apple like with Google operating with the most control of putting out a unified hardware and software experience)
The question is why more manufacturers don’t just put out clean pure Google Android versions of phones? What should stop Motorola from simply releasing a no add ons version of one of their phones? I think they fear the same thing that is happening to the Android Tablet market – with just specs to compete on, its a price war to the bottom, destroying profits. In fact, it is the Amazon Kindle fire Tablet – which uses a heavily customized version of Android – which is winning in that market.
But, this shouldn’t stop a small second tier manufacturer from releasing “pure” phones. It would save them a lot in programming to not need software coders, so they could operate on a leaner budget. These smaller OEM manufacturers simply make cheap phones that are re-branded anyway. HTC started off this way, making windows smartphones branded as “Verizon” phones, before establishing themselves as a brand upon themselves. Huawei is in the process of following that same path now.
Apple’s New Check Yourself Out Approach
Apple stores always frustrated me just a bit. Yes, they are shiny and clean and very aesthetically appealing. However, when you first walk in to an Apple store in any decently populated city, finding someone to help you is a bit of a cluster.
Every guy in those blue shirts is busy talking to someone else. Ok, I just want to buy a case for my phone. Do I have to wait in a certain area? There isn’t really a line. How do I know if that person was here before me? Wait, I KNOW that person got here after me, but they are already being checked out?
Oh thank goodness, an employee who is free. Oh, but he doesn’t have one of the little check out devices on him. See, in Apple stores, there is no register to check out at. The employees carry around little ipods and check you out on those.
Very frustrating experience.
Apple just updated their Apple Store App. (not to be confused with the App Store App, which is what you use to buy apps for your iOS device). This app previously let you examine products and find store locations, as well as set up appointments with the Genius Bar if your Apple product was not in tip top shape.
This week Apple added a very cool feature, seemingly inspired by your favorite local grocery market. You can now check yourself out at an Apple Store. You simply pick up an item, scan it using the app, enter your iTunes password, and it bills your account. Thats it! Walk out and you didn’t have to interact with a single person.
This is great because as anyone who has walked by these stores can attest – they are packed almost all hours of the day. This is a far more efficient method of purchasing something at an Apple store.
You can check out how this works in this video:
But the guy in the video makes a great point. What is to stop you from just pretending to enter your password and walking out with your chosen item? From what reviewers can tell, there is no notification to the store that you have paid. There is no magnet on the device being de-magnetized like at many clothing stores. Is Apple just trusting their customers?
One of my friends suggested it will likely be just like the grocery store where there is one employee just kind of milling around the self-check out area in case you need help, and that would discourage people from being tempted to steal.
Either way, a great way to get in and out quickly when you know what you want and don’t want to wade through 100 people checking their email in the Apple store to buy a pair of headphones.
Android Adoption Misleading
There has been a headline thrown around a bit about statistics involving Android adoption in new smartphone users. Basically, the headline says that “Twice as many consumers in the U.S. purchased Android smartphones compared to Apple’s iPhone over the past three months“. They want you to infer that people are picking Androids over iPhones en masse.
This is just simply misleading. The reason? iPhone 5. The next headline, on the same website: “41% of mobile users in North America plan to purchase the iPhone 5. 50% of those planning to purchase the phone will buy it within the first six months after it is launched“.
Obviously, people who want the iPhone know it is coming, and are just waiting for it to launch. So, yes, of people buying smartphones now – who are probably not technologically savvy enough to know the iPhone release cycle – are buying Androids. People who want iPhones are simply waiting. Why sign a two year contract for outdated technology? When half of a market is waiting to buy a certain product, of course the percentages of the entire market are going to skew to the competitor’s products. Consumers buying iPhones largely buy at one point in the year, following the release cycle. Androids, coming from many different manufacturers at different times, fluctuate less and are more steady over the calendar.
Next month, when the iPhone 5 launches, the headline is going to read 20 times as many consumers bought iPhones as Androids in the month of October.
Netflix Splits In Two, Hello Qwikster
Netflix CEO Reed Hastings just posted a blog post. He announced that Netflix is going to split into two companies. One will focus on streaming only. The other will continue delivering only DVDs by mail. This second company will have a separate brand – Qwikster.
Largely, users don’t have to do anything. If you just subscribe to DVDs, you will be moved to a Qwikster account. If you only pay for streaming, you will remain a Netflix user. However, for users who subscribe to both are bound to be a little annoyed. Instead of being able to search one site, you will now have two separate accounts, two separate bills, and most annoyingly – two separate websites to handle. That means two queues to edit and keep track of. Oh did you already watch that on streaming? Sorry, you didn’t take it off your DVD que on qwikster.com. We’re still sending it to you. Sorry you forgot to remove it from both of your queues.
This seems like yet another bungled step in the current odd track of moves Netflix has taken as of late. Luckily, Netflix doesn’t have serious competition, but it almost seems like they are willingly creating an opportunity for one to step up.
I had a feeling this is exactly what Netflix was trying to do when it announced it was separating DVDs from Streaming plans. They realize DVDs are old media. Expensive to ship compared to just moving data, and far less convenient.
Got To Be A Hit
These days, big technology companies — particularly those in the hypercompetitive smartphone and tablet industries — are starting to resemble Hollywood film studios. Every release needs to be a blockbuster, and the only measure of success is the opening-weekend gross. There is little to no room for the sleeper indie hit that builds good word of mouth to become a solid performer over time.
HP giving up on PCs and Consumer Devices
HP has announced they are looking to sell off their PC and mobile devices components of their company. This is big news.
HP arguably is the PC leader. They were PCs through the 1990s. However, lately the PC market is too commoditized. You have to compete on prices vs specs. Since everyone runs windows, its hard to differentiate yourself. Consumers just pick the cheapest PC with the power they want. In this race to the bottom price war, profits are too thin to be desired. (apple gets out of this because they own the software OS too, so they can focus on the overall experience, and don’t have to compete with other Mac OS manufacturers)
Bigger picture, this shows you there is little innovation left in hardware. Most of the innovation will come from the software side, because the profits aren’t in hardware to motivate sales.
A few thoughts:
- WebOS
HP bought Palm last year. They had the WebOS phone operating system. And they are hardware experts. They could have been the PC version of Apple, controlling both the software and hardware side of a phone and tablet system. But they are choosing to give that up. Interesting. Is android and open systems the only way to compete? Is there no room for a second proprietary system?
- Printers
By giving up PCs and mobile devices, all that they have left is software and printers. HP is going to be a printer company in most consumers minds in 10 years. Is that working for Lexmark? Canon?
- IBM
What they are really doing is getting away from hardware, and into Business optimization and software. This is exactly what IBM did in the 1990s. Now, no one can tell you what IBM does, but they are far more successful and profitable after letting lenovo take their PC manufacturing side. Will HP profit in the same manner?
Analyzing Netflix’s Price Increase
Netflix recently announced an upcoming price change for their DVD delivery rental service. Their old plan stood at 9.99 per month for 1 dvd out at a time, along with unlimited streaming. You had the option of going streaming only for 7.99. Netflix is now splitting apart the dvd and streaming plans, making the DVD only plan also 7.99. While this means if all you use is DVDs, you will be paying slightly less, but for those who want to keep their old DVD and streaming plan, they are now paying 60% more.
The question is why the sudden drastic increase? As they are still making a lot of profit, it is hard to say it is greed alone. Instead, I think there are a few reasonable theories.
Development
One theory is that Netflix is going to shift from simply being a content deliverer, to a content producer. In fact, they are already doing this, as they recently bought their first show that will be produced by them alone, and distributed only on Netflix. Alternatively, they might want to buy content to distribute exclusively on Netflix, eliminating competition from Hulu, iTunes, YouTube and others.
You can see evidence of this already. See this and this.
With other content distributors seeing them more and more as real competition, it makes sense to produce your own content in case a movie studio chooses to not give you a deal. Further, if the content is compelling, Netflix could be the next HBO, convincing people to pay just to watch the original content.
And they just recently added Mad Men streaming. This all costs money to purchase rights for.
Kill DVDs
Another theory making the rounds is that Netflix is looking ahead to the future. In a very Apple like move, they realize that physical media is dead, so they are making it less desirable to receive it.
It costs more each year for Netflix to ship those discs to your house. They also have to buy the physical copies. Streaming on the other hand, costs little in physical media after the rights are acquired. Netflix has done a great job getting their software and brand on blu-ray players, TVs, cell phones, and video game consoles everywhere. They are invested in having you be able to access their movies on almost any device. Now, they want to focus on that shift.
The CEO even admitted as such:
The reason we felt confident about doing it now is the strength of streaming-only. We got convinced can that we can thrive on streaming-only, the best timing was now.
I believe the company also realizes that they if they want growth outside of the US, streaming is the way to go. Cheap, reliable, expedient mail isn’t available everywhere. But if you can get internet access, you are a potential customer.
Accounting
Finally, there is a theory floating that is a little more interesting. Netflix has to make deals for each film they put on Netflix. While the terms of these contracts aren’t known, it can be speculated based on how these deals are made in other media that studios are charging per potential viewer. Therefore, the more Netflix streaming users, the more Netflix has to pay per film.
Under the old plan, everyone who got a DVD got streaming in addition. I am positive many people who watch the DVDs rarely, if ever, stream. Many people use the DVDs and aren’t even aware of the streaming option. But, Netflix is paying for their potential eyeballs. By offering an option to switch to just DVDs, they can make sure they are only counting real streaming users.
In my opinion, Hollywood should be mighty grateful for Netflix. I believe that easy access to content discourages piracy. iTunes gave an easy alternative to searching for MP3s that might have viruses, be incorrect links, etc. Netflix is a great tool in the fight against illegal downloads.
Hopefully, the studios have taken notes of what happened to the music industry and aren’t destined to make the same mistakes. Even if they charge a little less per viewer, that is income that won’t be there if you drive users to illicit methods. The problem of course is that the value of the media is being lowered. Again, using an iTunes analogy, everyone now would never pay more than .99c for a song. You have reduced the value of a song tremendously. Hollywood is scared to death movies will go down this path when people are used to paying 9.99 a month for unlimited movies. Will be interesting to see where this lands.
