Category Archives: Business

Apple and Web Services

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As good as Apple has been at making amazing hardware and stable well performing software, they have never done web services well.

This is why many people download chrome, use gmail, and many other google services on their apple devices. In comparison, Apple’s iCloud is a pale competitor. Despite all promises, many developers have abandoned their services for Amazon’s AWS or even Microsoft’s Azure.

Consumers don’t fare much better. Can you name one person giving out a .icloud or .me email address? And this is not Apple’s first crack. iCloud was a re-launch after MobileMe failed miserably, something Steve Jobs even acknowledged.

Shouldn’t Apple be better at this? One could argue that this is not their focus – they make Hardware and the software that runs on it. However, I would argue one critical trend should have made the light bulb go off and tell them they needed to focus on this.

Pre-iPod, Apple was an also-ran. Barely registering, they ceded 90% of PC sales to Windows. The reasons for this are many, but it hard to convince people to use your system without software applications. Quite simply, when 90% of the world used Windows, it was hard to make a piece of software for Apple. You got 10% of the world, and how many of those would actually need and buy your product? Grim.

However, the web changed much of that. Now many things run right in your browser. think about what you do on your computer all day. You scan social networks, you send emails, you read news, you listen to music. All of this can and is largely done in a web browser – accessible by anyone, independent of what type of computer they use. This was the great equalizer. No longer were you missing a critical feature because you owned an Apple.

So, why didn’t Apple see this trend and understand that more and more services would be provided online? Is it going to come back to bite them again? Google already makes cheap (and expensive) computers that are little more than just a browser in a box.

You could argue Apple is selling similar simple devices with their tablets, but they still lack the services side of the equation, seeming to prefer to let others handle that. I don’t think that serves their best interest in the long run.

Predicting The End of Patent Wars

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We all love a bit of “I told you so!”, even more when its not something criticizing someone else, but when you make a prediction that turns out to be right.

I remember when I was in my Mom’s car as a pre-teen driving home from the beach. We had the radio on, but with the windows down the wind drowned out the music. So we would turn it up. When we stopped at a light, the music was way too loud. I remember thinking “Someone should invent a way to have the radio adjust for this.” A few years later the new car we bought had a feature where the radio adjusted to your road speed and got louder or quieter. That kind of validation is a great feeling.

Back in February I pondered why there isn’t some sort of Patent insurance program where small startups could buy into some sort of protection against so called “Non Practicing Entities”.

While thinking about this, I thought of what I think to be a unique solution. What about some sort of patent litigation insurance. We spread risk out for many things, why not this. You could pay a certain amount every year, and if someone claims you are infringing their patent, the funds could be used to pay for your defense.

The real trick to why I think this would work is that the Patent Trolls don’t really want to go to trial. They are hoping you settle. Trials are expensive, which is against their purpose, and second, if they lose they lose their entire reason for being. They do not actually want their patent to go in front of a jury. If they know you won’t blink and will make them actually prove 1) their patent is valid and 2) you infringe it, they might just move along and not mess with you.

Low and behold, I recently ran across a new startup that sounds very familiar!

The startup plans to protect its members with a variety of strategies, one of which will be to use its smaller members as an early warning system for when patent trolls look to purchase their technology or threaten them with litigation.

Members will have the ability to protect one another against these trolls, or even purchase technology from a fellow member before a troll does. The company is also asking the U.S. Patent and Trademark Office to re-examine the patents currently in possession of patent trolls, which may lead to an increased number of patents being declared invalid.

I can feel the sun on my face and wind blowing as I smile in a weird satisfaction.

 

Still more to come from Aereo

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As always – these opinions are my own. I speak for no entities or organizations.

Many sources reported that Aereo was handed a winning decision this week its it case against many of the national broadcasters. You can read the opinion here.

Most sources reported this as victory for Aereo. While it was a win, the situation has not been fully settled yet. I’ll explain three reasons why it might be too soon to celebrate if you are Aereo.

First, what tends to get overlooked the most is that this was an appeal to a decision in a request for preliminary injunction. That means the broadcasters were asking the court to stop Aereo while the case was on going. To allow this, the party asking has to prove four things. Most important is the first factor: that they will almost assuredly win (“likelihood of success on the merits”).

The trial court did not find that they would absolutely win, because there are hairy copyright questions. The appeal court confirmed this and hence why they confirmed the trial court’s opinion and sided with Aereo. You can see this in the opinion:

The district court (Nathan, J.) denied the motion, concluding that the plaintiffs were unlikely to prevail on the merits in light of our prior decision in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (“Cablevision”). We agree and affirm the order of the district court denying the motion for a preliminary injunction.

What this means is that if the broadcasters want to, they can still go through and have a full on trial. While it is discouraging that the court states they were “unlikely to prevail”, this is before any real trial has taken place. The reason we have trials is to fully examine issues in detail. Perhaps the court could be persuaded differently.

Second, this decision was made by an appeals board of 3 judges. And it was a split decision, where 2 voted for Aereo and 1 for the broadcasters. The broadcasters can request the entire bench of appeals judges look a the issue. This is know as an en banc review. The court would have to agree to take it, but since it was not a full decision, they might choose to do so.

Let’s stick with the idea of divided opinions. The third and final point to consider about this decision is the location.  This appeal came from the 2nd federal circuit. The country is divided into various circuits, each having jurisdiction over their own territory of states.

So, this decision holds for the 2nd circuit. Often, if a similar issue hasn’t been settled in other circuits, and they agree, they will just let that decision hold (“persuasive but not mandatory”). So, for most of the country this will probably be good law.

However, in the 9th Circuit, there was a decision on a similar case already. A service that was exactly like Aereo called (ironically) Aereokiller operated in California. A similar lawsuit was brought and a decision was made that found it infringing. So, while the 2nd found it didn’t the 9th found this type of service does infringe copyright. This has a few implications.

First, check out the map of Aereo’s operating and expanding cities:
Screen Shot 2013-04-06 at 6.43.58 PMNotice how it lines up with the federal district map above. Aereo won’t risk going into the 9th circuit, because there they could be found infringing and be forced to shut down.

Second, there is a conflict of decisions! We tend to not like that because it means things operate differently and people can’t operate smoothly across the country. So, likely, an appeal will be made to the Supreme Court to make a final decision and tell us who is right. Decisions from the Supreme Court would supercede any federal district court opinion. So, if the Supreme Court likes the 9th circuit’s rationale better than the 2nd, Aereo will still be in hot water.

As an aside: how is it that two courts came to two different decisions? It comes down to my favorite area of fuzzy law – the “Public Performance“. As a reminder the Copyright Act defines a “public performance” as:

“To perform or display a work “publicly” means—

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times. ”

The 2nd court interprets shows recorded independently and sent to a specific device over the internet to not be a public performance because an individual is setting the recording, no one else accesses it, and it is sent to specific user. This piggyback’s on the circuit’s previous Cablevision decision.

The 9th circuit on the other hand focuses on the second clause and see the internet as accessible by the public, no matter whether the people watch the performance at the same or different place or time.

In my opinion, this issue is still contentious and could easily go either way. I’ll be eagerly anticipating a decision in this area in the future!

Coming Netflix Backlash?

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Netflix has been making great strides setting itself up as a content distributor. The famous quote is that it wants to “be HBO before HBO becomes Netflix”. They seem to be following this model pretty well, offering movies and tv shows to their subscribers online.

However, while they are making some original content (see: House of Cards), most of their TV content is acquired from other sources. The potential problem that stems from this is what happens if the content providers get jealous of how much you are profiting off their works?

In an ideal situation, Netflix is paying enough for the content that the content owner (let’s say AMC) is happy to let Netflix deal with the bandwidth, customer service, etc. But, what happens if so many customers start cutting cable that they stop paying for AMC because they know they can just watch the episodes of “The Walking Dead” later on AMC?

This might be creeping up on Nickelodeon. There are reports that more people are watching Nickelodeon’s kid-centric shows on Netflix – where you can stream them without commercials and back-to-back-to-back – than on the cable channel.

Nickelodeon might get worried that it will become simply a producer/studio instead of a network. And that brings big changes to their business strategy.

I am going to predict that eventually Nick gets weary of Netflix’s power here. I’d bet to compliment (and potentially replace in the future) their cable channel, Nickelodeon launches their own web service/application that streams their content to consumers for a fee or with ad support.

The Customer is Always Right, Except When They Aren’t

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Once in a while someone comes along and makes a passionate argument justifying that they have to illegally download content because it is the only way they can get it. Except that very often, it isn’t. They provide a false argument where they don’t want to pay for the way they could get it, because it is slightly more expensive than they want it. Or, it comes to them in a method that is not the medium they would prefer it be delivered to them.

So, they push the “bad behavior” off of themselves and on to the very entity that is providing the content that they claim to love and desire so desperately they have to steal to obtain it. This is bullshit, plain and simple.

Giving the consumer what they want is great, and obviously the key to any great business. But it only works for rational demands.

After that point a company simply can’t grant everyone’s greatest wishes. Its a business, it costs money. Shows cost money to make, and they have to make money back. Many businesses have determined that certain methods of delivery, like over cable distribution systems where the overhead, distribution, and customer service is handled instead of an expense.

There are lots of things I want that I can’t have because I lack the resources like a Viking range, a BMW X5 and washboard abs. Doesn’t mean I’m allowed to go out and steal them. Same goes for music, movies and video games. Just because I want the content and it’s convenient to steal doesn’t mean I should.

There’s right, and there’s wrong. Stealing stuff is just plain wrong. We learn this as children, yet somehow we make elaborate excuses for it as we get older, like “Well, I’m just copying bits. I’m not really stealing.” Or “If it weren’t so hard for me to get legitimately, I wouldn’t have to steal it instead.”

When the studios make it hard for you to have content you want, you should just live without it, or reward other content providers who make it easier for you to do business with them.

Consumers have to stop expecting to have everyone kiss their ass just because they want something. This is the warped, misguided reason why “Six Strikes” policies are created to begin with.

-LoopInsight

Certainly, there can be arguments for better methods. At some point if someone provides a product closer to what customers want, then they deserve to win, but I would argue that if no one is coming in to serve the demand, it is not sustainable. If it is sustainable, someone will come along and take away their customers. That is how the free market works. Players adapt or die.

But the sense of entitlement to product is just staggering. As Andy Ihnatko put it:

The world does not OWE you Season 1 of “Game Of Thrones” in the form you want it at the moment you want it at the price you want to pay for it. If it’s not available under 100% your terms, you have the free-and-clear option of not having it.

It has even gotten to the point where when a company does ship something that is available anywhere you want it, for the lowest possible cost, at any time, as much as you want – people still complain that there are credits. That’s right. God forbid we acknowledge the people took time to make the product you are marathon watching because its-just-that-good to devote 13 straight hours to over a weekend.

I love this argument – “Give us what we want, when we want it, how we want it, and for the price we’re willing to pay for it and we’ll happily hand over our money for it.”

This doesn’t sound ”comically selfish” – it is selfish. First, the problem was not being able to get the content we wanted when we wanted it. Then, came the laments about pricing. How dare seasons of television cost anything more than [INSERT ARBITRARY NUMBER I REMOVED FROM MY RECTUM]!

Now, people are getting their panties in a twist over having to sit through opening credits? Where does it end? At what point does this blatant selfishness turn into, “I hate this actor/these mushy love scenes/this director. If you remove all of that, I’ll be beating down your door to give you money, then complaining some more.”

-CuriousRat

Electric Car Expansion to Apartments

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Electric cars are making more and more in roads. One of the most visible brands of these new electric-only vehicles is Tesla. Electric only cars run solely on an electric motor, no gasoline. This makes them very cost efficient to run, but limits their use because you a) need to plan road trips carefully to make sure you can charge, b) for daily use need to have a charger available at home or work to recharge when necessary.

To alleviate the first concern about road trips, Tesla has been installing quick charge stations along major highways in parts of the country.

That second point is critical because for many in urban environments, there simply isn’t a personal garage where you can install one of the charger machines. This means electric cars simply aren’t an option for apartment dwellers. So, my thought is, in order to open up more potential customers, Tesla should partner with a few national apartment management corporations and install charger stations.

The benefits would work for both sides. Tesla gets more charging stations across the country, and potentially more customers looking at them as a realistic option. The apartments have a selling point for people who are looking to rent, but want an electric car – they would practically have no other choice.

Apple iWatch

There has been an undercurrent of talk about Apple making a watch. It hasn’t gotten as much attention, probably because there is more hype/hope for a “real” Apple Television.

Lately, this discussion has been getting more steam. See TechCrunch and The Verge.

However, this makes a ton of sense. A couple of years ago, Apple re-made its iPod mini from what was essentially a shrunken iPod classic to a simple square (this was the 6th generation of the iPod mini).

Because it was obvious to a lot of people based on the shape and size, third parties started making watch straps for the iPod mini.

Recently, Apple changed the shape of its iPod mini (7th Generation) back into a more traditional iPod shape.

Why would they do this? Why would they go from traditional, to watchshape, back to traditional shape?? Especially since as part of a revision to the iPod mini 6th, they unveiled “watch faces”, indicating the saw the potential for this mode of device?

I think they noticed that people were using the devices as complimentary secondary options. Further, they noticed the interest in things like Kickstarter’s Pebble watch. These watch devices were similar form factors to their own iPod mini with a noticeable exception. The iPod mini doesn’t interact with an iPhone!

So, I think the obvious path is to keep the ipod mini as a distinct iPod, but create a companion device – an iWatch that will interact with an iPhone. That way they don’t cannabalize their entry-level iPod, and still sell a device that fills that watch form that people are craving.

Broadband Markets

Wireless data speed have been increasing at breakneck speeds over the last few years. Largely because it, along with price and coverage, is one of the differentiators the wireless service providers can use with customers. How effectively they are doing this is another matter. Ask your friends what “4G” means.

Anyway. Today an article I ran across discussed how LTE (the current newest fastest tech available currently) is already being updated to LTE-Advanced. Tests are showing speeds of over 200 Mb/s. To put that in perspective, I’ve gotten in the high 20s. I’ve heard of friends getting near 50 – but that’s a small miracle. And on the iphone 4/4s which didn’t have LTE I could never dream of getting over 7. Those phones are just a couple years old!

This is good news, because as several analysts and news outlets are pointing out- our traditional cable service providers, who offer hardline data to our homes, are not interested in increasing our speeds any time soon.

Bernstein Research analyst Craig Moffet tells Technology Review that the two biggest cable companies are posting 97% margins for their Internet services, a rate that Moffet describes as “almost comically profitable.”“If you are making that kind of margin, it’s hard to improve it,” Levin tells Technology Review. In other words, unless Google starts rolling its fiber service out nationwide, we shouldn’t expect the incumbent carriers to build fiber networks of their own.

The cable companies laid down the copper cable throughout towns years ago back for cable TV. The infrastructure is largely all paid for. So now, the costs of maintaining that network are pretty small. But, we have also tapped the full extent of its capability. To increase speeds would require switching the hardware to fiber optic cabling. Which costs large amounts of money. I’ve read numbers that it costs Verizon $4,000 per customer to lay down its FiOS network.

However, the cable companies are granted small monopolies for their towns. They were given these back in the 60s and 70s because they argued they needed to ensure they could make the money back for their investment of laying all that expensive cable down. This is why you can only get one cable company choice.

So, your options for high speed internet are also limited. And since there is no competition, there is no incentive for the cable companies to upgrade. My long-running argument is to take away the cable companies’ monopolies, and force them to lease out their networks – like we did with AT&T/MaBell back in the 70s/80s. This lead to more smaller competitors and lower prices for phone calls.

But, I digress.

So, a new alternative in wireless only providers seems increasingly plausible with these increasing speed capabilities. However, there are two big, big hurdles. Data caps and Net Neutrality.

First, Data Caps. My home DSL service taps out at about 9mbps. Like I said, I regularly get into the 20s on LTE on AT&T. I would switch in a heartbeat. However, AT&T to protect their network from being overwhelmed, puts limits on how much data a customer can use. A 2, 3, 5 or heck even 50mb limit is just too small for the average home user. Think about how many youtube videos you watch, online xbox games, and skyping one does and you could blow through those limits in a day.

But, thats an issue easily solved with more capacity. Its a technology issue. I think the larger problem is a policy problem, which makes it much harder to solve. Net Neutrality is a kind of fuzzy, nebulous concept. But, in mind it basically is the idea that you don’t treat some data different from any other data coming over your internet connection. So, if I go to Facebook, it should be preferred over YouTube. One should not come faster.

That might sound silly, but it is more important when you realize many cable companies have ties to content companies. So, perhaps Hulu gets sent to you at a higher rate than Netflix, to encourage you to use Hulu. Its a dark road.

The FCC put forth guidelines regulating Net Neutrality, and while they are still being fought over, one point is clear. The wireless companies don’t have to follow them.

The U.S. Federal Communications Commission, in a historic vote Tuesday, approved network neutrality rules prohibiting broadband providers from blocking customer access to legal Web content, but many consumer groups decried the new regulations as weak and full of loopholes.

The new rules provide fewer protections for mobile broadband subscribers and may lead to a fractured Internet, critics said. The new rules, a compromise championed by FCC Chairman Julius Genachowski, would bar wireline-based broadband providers—but not mobile broadband providers—from “unreasonable discrimination” against Web traffic, prompting some consumer groups to call the rules “fake” net neutrality.

Therefore, if one did switch to a completely wireless solution, you would always have to worry that when you tried to load YouTube, you would get a vastly slower connection than if you went to V-Cast. Or, you wouldn’t be permitted to access Amazon to rent a video, but if you rent on ATT’s video store, it would be ok.

Until this problem is solved, we are going to be stuck with pathetically slow home connections. Slowing productivity and handicapping innovations and developments that newer, faster tech can allow.

Binging on Netflix

I wrote a post recently about how Netflix is launching a couple of original new series, and while they are keeping the short serialized format of TV, they are going against the grain in that they are utilizing their medium to allow people to watch the entire seasons of their new shows immediately.

My point there was that Netflix is trying a different option, and I wonder what challenges that will bring compared to the old system. I wasn’t alone in my concerns.

GQ has an interview with Netflix CEO Reed Hastings, where it is quite apparently where he hopes the company will go. He wants to be the new HBO. And that means in addition to movies, they want to produce quality original content that they have an exclusive on. In the article he discusses the move to immediately available content as giving the consumer what they want:

The strategy may gut some media conglomerates along the way and could prove too costly for even a cash-rich company like Netflix to sustain, but one thing is certain: It will make a lot of viewers—bingeing on brand-new shows made by the hottest writers, directors, and producers—deliriously happy. “This is the direction that storytelling is evolving, where you’re going to have the most interesting story lines, the most interesting characters,” says Spacey, who is also an executive producer of House of Cards. “What a company like Netflix is doing is the ultimate expression of individual control, proof of what people’s attention span really is.” The heady rhetoric, of course, masks a few nagging questions: Once waiting is history, will “quality” television still pack the same cultural punch? Would Tony Soprano be Tony Soprano if we had been able to gorge on his life in a single weekend? How important are episode recaps and live-tweeting and the shared experience of everyone watching together?

But the writer examines my same concerns-

Netflix hasn’t been able to add subscribers at the swift pace it promised shareholders lately, a trend that could make it much harder to establish the “virtuous cycle” it’s chasing—that is, subscription fees enabling Netflix to acquire content that in turn attracts new subscribers, which will pay for more content. Profit margins, which are nearly 50 percent on the declining DVD side of the business, are only about 17 percent on the streaming side of the ledger.

But Hastings continues to tow the line in an interview with tech site The Verge. I think his vision is that if enough people buy into the idea of premium quality content, they will pay. And that will make up for the costs of creating this content. This is very similar to the idea of paying for HBO back in the early days of cable.

“We believe that February 1st will be a defining moment in the development of Internet TV,” Hastings writes. Full stop. Paragraph break. In less than two weeks, Netflix will release every episode of its big-budget drama House of Cards simultaneously. No dragging of the calendar like HBO to make sure you’re rung up for at least four months of The Sopranos. Netflix is betting its future on this. Netflix is reluctant to definitively predict a subscriber boost for either House of Cards in the first quarter of 2013 or Arrested Development in the second. “Some of us are optimistic that it may be substantial, but we really don’t know,” said Hastings. But when he’s less guarded, Hastings seems to be predicting big things. “Is Arrested Development a content expense or a marketing expense?” he mused, explaining how Netflix doesn’t need to make a big traditional advertising buy. “The huge benefit is we don’t have to advertise ’8PM on a Thursday night, tune in’,” for a series unfixed from any date and time, Hastings said. “This lets us be much more efficient in our marketing.”

However, the difference (again) is that unlike HBO, there is no schedule. Everything is available at once. So, I could in theory sign up for a free 30 day trial, watch the entirety of House of Cards, and Arrested Development, and a couple movies, quit and never pay Netflix a dime.

And don’t make any mistake. This is a big gamble for Netflix. Deadline Hollywood reports that Netflix is taking out huge loans to pay for this original programming up front.

with Netflix‘s new original series, House Of Cards, making its debut on February 1, some investors wonder whether the company needs the remainder to help it handle its steep content payment commitments.

And Variety points out almost my exactly argument from the article I wrote that I mentioned at the top. If I can zip through content super quickly, what is compelling me to stick around? They also go on to point out a few other upcoming hurdles like data caps.

But let’s not forget that the whole point of Netflix embarking on an original programming strategy is to bring in new subs by offering a different value proposition. These are consumers who didn’t feel compelled to sign on to binge on library programming, but they’re interested in seeing a buzzed-about new show like “Cards,” and other originals still to come.

So when new subs polish off “Cards” in less time than the month they paid for, they’ll quickly have to confront the issue of whether they are getting their money’s worth. Netflix is betting to work its algorithmic magic on these subs by getting them hooked on other programs from its library. But that’s a risk because that’s not primarily why these customers signed onto Netflix.

I (along with most of Hollywood I’d imagine) will be watching what happens to Netflix over the next few months very very closely. In the best case scenario, Netflix produces a string of great hits that compel customers to stay signed on from one show to the next.

Starbucks Reusable Cups

Starbucks has unveiled a program where they are selling plastic reusable cups to their customers. Starbucks has always encouraged a greener business model. They would always use any mugs or cups customers bring in on their own to use instead of the traditional paper cup. When customers did this, they would discount the purchase by 10 cents.

When they first launched this program, they had an ambitious goal of 25% of their orders being served in reusable cups. However, they never came close. Now they are re-focusing on a goal of 5% of orders by 2015. In order to do this, the company is trying to boost this by selling a $1 reusable cup in their stores to focus on the program.

I believe this is smart because as much as people want to be green and help waste less, there is also a certain status of being seen with that cup with the visible green mermaid on it. Now customers can do both.

IMG_2769This cup is just a touch thicker than a big gulp 7-11 cup. It does not insulate like a real thermos style travel mug. However, I think that might be the point. These are supposed to be replacements for the traditional paper cup. I like the paper cups because they tend to cool off the very hot coffee in a timely manner after it is served to me. A co-worker who prefers to slowly sip his coffee over an hour or two was not happy with how quickly the heat dissipated. So, your preferences in temperature and drinking manner may affect how you like this cup.

Also, the cup is Grande (medium) size. Those of you who order Ventis (or god help you, Trentas) are out of luck.

Which brings me to my last point. As benevolent as this program sounds, I think the real cause is that I imagine Starbucks spends a TON on paper cups every year. By encouraging customers to reuse cups, they can spend a lot less. Especially when you as a customer are helping to defray this cost up front. However, it is still nice to know you are wasting a little less with your morning coffee.

The mug is $1. However, you get .10c off your order with a reusable cup. They will wash the cup for you if you ask.