The Week in Geek – Sept. 15, 2006
“Showtime” for Apple
Apple’s recent product launch (video) saw the introduction of a brighter video iPod with better battery life. Thinner, aluminum nanos in multiple colors (including an 8 gig model). A new clip-on iPod shuffle (which Jobs called the world’s smallest MP3 player) about the size of a matchbook. A new version of iTunes that adds album art to your non-iTunes song library and that offers ~$5 game downloads for 5th gen iPods. A quad-fold increase in iTunes video resolution (to ‘near DVD’ quality 640×480). And a digital video service with titles releasd concurrently on DVD sales dates, with films priced at $12.99 for week-before release pre-orders, $14.99 for new DVD releases, and $9.99 for older movies. But the most radical step for Apple was pre-announcing a product, something the firm NEVER does (save for the necessary ‘move to Intel’ announcement in ’05). The pre-announced product is coming in Q1 ’07 & is code-named iTV. Priced at $299, the tiny aluminum device will bring Apple’s super-slick FrontRow six-button remote to the living room, allowing consumers to stream movies, music, photo albums, and web media. Anyone who uses FrontRow comes away impressed by the jaw-dropping elegance. I think the real first-gen value play for this device is audio. If you’ve got a decent sound system connected to your TV, then this may be enough reason to buy the fairly-priced iTV. Downsides? Mostly on the video side: You can’t burn DVDs from iTunes movies; cost is high compared to ‘real’ DVDs, which offer better quality & ‘extras; it’s unclear how the device will integrate with the network/cable TV experience (you still need a DVR); most studios (save for Disney) are absent from the iTunes movies store (ouch!); and the real big-market video play is likely rental – something that iTunes doesn’t yet offer. All of these issues can be addressed, but when? And why the pre-announcement when Apple’s secrecy around MacWorld events yields a press frenzy that’s worth an estimated $30 million+ in free promotion? Well, preannouncements are a tool best used by established players to thwart new entrants. Microsoft’s Zune, coupled with the Windows MediaCenter PC and Xbox 360’s PC serving capabilities is a clear rival, albeit with no play in the lucrative audio space. Looks like a little FUD from Apple against the FUD-masters from Redmond.
Amazon Launches Video Downlaod Service
Apple wasn’t the only one with video announcements this week. Amazon Unbox will offer thousands of television shows, movies and other videos from more than 30 studios and networks – way more than the iTunes Video Store. TV shows will cost $1.99, movies from $7.99-$14.99. All pretty-much in line with Apple, but Amazon movies can be rented for $3.99. Bezos’ effort offers DVD-quality downloads, trumping iTunes moves above. The videos also can be viewed starting in as little as five minutes after the start of download, while the rest of the movie loads in the background. And unlike with other services, Amazon’s products can be downloaded to multiple personal computers. The geek-favorite Star Trek is offered for the first time online via Amazon, but unsurprising Disney isn’t in Amazon’s effort (Jobs sits on Disney’s board & iTunes is clearly a competitor). The first-gen service requires a proprietary, Window Media-based player that has received brutal early reviews from CNet and ArsTechnia. But the biggest limitation is TV playback. Amazon’s service, like others, allows a backup DVD of the digital files to be made, but that backup won’t play in regular DVD players thanks to digital rights restrictions. A Windows Media Center PC can be cabled to a TV, but only through a relatively low-resolution S-video line. NetFlix looks safe, for now, but the battle is fascinating. Amazon thwarting Apple (King Media) and Microsoft (PC’s monopoly). It remains to be seen what we’ll see from the NetFlix TiVo alliance. Remember, although I write this from one of the US’s few Fiber-to-the-curb towns, most of the US doesn’t sport bandwidth enough for an HD experience. As consumers migrate to HD sets over the next few years, a BlueRay DVD NetFlix service, and physical HD-DVD sales from Amazon & WalMart may still be the preferred channel for home viewing. Unless HD OnDemand expands its library.
NetFlix Presents
All this digital video news comes the week we cover the NetFlix case in class. What fun! NetFlix founder Reed Hastings may have built the most valuable data property in Hollywood. And before he gets smoked by video-on-demand he’s fighting back, getting into the distribution biz. The firm has a database of 5 million users and sends out 7 million DVDs a week. It can tell if you liked “The Godfather” because you like family immigrant pics or because you like gangster movies – and will suggest Avalon or Scarface based on the result. NetFlix’s data is richer than Amazon’s. Wired suggests the average NetFlix user will rent (and even better, rate) 12 products for each customer sale on Amazon. That’s a billion ratings at an average of 200 per person. Now, just two-clicks from the NetFlix home page, is a link where anyone can submit a film to NetFlix for possible distribution. The firm’s already handling rights for 100+ titles. Consider the indie movie “The Puffy Chair”. It received raves at festivals all around the country, but studio execs passed, claiming they couldn’t find an audience. NetFlix helped the film get a non-exclusive DVD deal that will get it into other chains, and helped the film get a box-office release. Or take the 2000 film “Nice Guys Sleep Alone”. NetFlix doubled, then quadrupled its orders of the film’s DVDs. With no marketing, NetFlix found the film an audience and it was eventually picked up by HBO. NetFlix also snagged the film “Born into Brothels” six months before it won the Oscar for best documentary. And now it’s a producer. Last year NetFlix bought 4 Sundance films, this year they’re in talks with 15. Says one NetFlix exec “Eventually we’ll be coming to Sundance and saying ‘We’ll buy everything!’ There’s a deal for every film.”
Microsoft Brings The Works Online
Think Microsoft isn’t worried about online Office competitors? Redmond’s latest 10K filing lists ThinkFree, an outfit with 60,000 subscription users to its web-based word processing & spreadsheet programs, as a rival to Microsoft’s own $11.8 billion a year Office empire. BusinessWeek leaks news that Microsoft plans to take elements of Microsoft Works – an integrated word processing, spreadsheet, and database package – and move it online as part of its Live.com suite. It’s not a done deal, but Redmond is taking the online software market seriously. Is this really a threat to Office, even in the medium term? No one knows. But with SalesForce.com growing like gangbusters, online software is legit and will be adopted by large, mainstream corporate customers. And with Google Office backed by a parent with $10 billion in cash, GatesCo is keeping its eye on a potential disruptor, even if it means a bit of sales cannibalization.
HP Ethics Saga Far From Over
The HP board dustup is a sad tale that points out a critical fact for all business students (and practitioners) – smart, well intentioned people can often do terribly dumb things by not reflecting on the consequences of their actions. The silence of office decision-making easily becomes the province of page one headlines if you miscalculate. Former HP Chairwoman, Patty Dunn, learned this the hard way. Consider one of the Most Powerful Women in Business, Dunn authorized a corporate spy agency to investigate board members to find who was leaking info to the press. She’s there to protect shareholders, right? On the surface it seems like it’s not a bad idea. But the goons Dunn hired broke the law – impersonating others to gain access to phone records. Tom Perkins, one of the most respected venture capitalists in Silicon Valley, resigned HP’s board in protest. And now Dunn’s out as Chair and is an industry laughing stock, while HP may be investigated for criminal wrong-doing. Patty Dunn’s getting beat up for having made a terrible mistake simply by not thinking through the boarders in a gray area. She’s a brilliant and accomplished professional who hadn’t thought through the ‘newspaper test’, meaning ‘what would the reaction be if this ends up on the front page?’ Learn now to be a reflective manager.
Facebook’s Foulup
The average Facebook user spends over 30 minutes on the site each day. With an estimated 8-12 million users (accounts vary), that makes them a major league media play, even if the firm hasn’t nailed the business model yet. Much of that time is spent by college students checking out their peers. But when the online network created a feature allowing automatic ‘feeds’ of activity from friends, thousands protested overnight. Leery of creepy cyberstalkers getting imediate updates on who’s dating, split up, or posted a note or photo, the media’s ‘generation uninhibited’ turns out to be a bit more shy than expected. And good for them! 284,000 members joined the Facebook group “Students Against Facebook News Feed”. Facebook founder Zuckerberg posted a mea culpa “We screwed up” after a failed plea for users to “calm down”.
Dogster Raises $1 million in the First Round
Speaking of wackiness in the social networking world, Dogster, that crazy social networking site for pets (and their owners), nabbed $1 million in VC coin this week – a clear sign that the apocalypse is at hand. The founders (which also run Catster) have quietly amassed 250,000 registerd users, have built a profitable company, and will generate $1 million in advertising this year. Copycats (no pun intended) abound. Have you seen Hamsterster?
Best Places to Launch a Career
Entry level hiring is expected to surge 17% in 2007, the fourth consecutive year of double-digit growth. So which firms should new grads consider when choosing a job offer? BusinessWeek offers up a must-read article for business students, listing important characteristics to look for in the first post-college job. Five of the top 9 firms are regular recruiters at BC (Deloitte, Goldman, Raytheon, GE, and JPMorgan. Many of the others are making pilgrimages to the Heights. A note to WiG readers looking to hire Eagles – get on campus early! Many of our best and brightest already have offers.