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Will Hollywood Look to Apple to Lead them out of the Amazon?

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After last week’s tremendous public outcry over the SOPA and PIPA bills forced the TV and movie industry and their hired hands in Washington DC to retreat, Paul Graham announced that he was interested in funding startups that might have what it takes to “kill hollywood.”

Graham is a successful software developer and entrepreneur who started YCombinator to take advantage of the mismatch between the traditional venture capital business model and the realities of post-dotcom boom Internet startups. He concluded that SOPA and PIPA were symptoms of a large but dying industry that could do “a lot of damage to civil liberties and the world economy on [its] way down.” Hastening their demise would be both a broad public good, and a good business.

Graham stated the problem broadly, asking entrepreneurs to think about what people are going to do for fun in 20 years, instead of what they do now. Graham sees the potential for continued growth in games, and other types of sites, but also sees alternatives to the ways movies and shows are currently produced and distrubuted.

A few days later, on Hacker News, YCombinator’s social news community, someone posted a link to Amazon Studios. Amazon Studios is at least a few months old, but if I’d heard about it before, I’d forgotten it. Amazon Studios says :

We believe 21st-century technology creates ways to make and share movies and scripts more easily than ever.

  • Get noticed. Your work will be shared with a global community of filmmakers and fans, who can offer revisions and advice.
  • Get your movie made. The goal of Amazon Studios is to work with Hollywood to turn the best projects into major feature films.

They run monthly contests with cash prizes for writers and film-makers.

Amazon Studios positions itself as a partner to Hollywood, but in thinking about it, I realized that Amazon already has Hollywood pretty much surrounded. Over the last 20-30 years, the overall importance of revenue from first-run TV, and movie box office has declined as a growing number of broadcast and cable TV channels created demand for TV show reruns, and revenues from movie rentals and DVD sales grew. Lately though, DVD sales have been declining, and BlueRay sales haven’t compensated, because more and more people are turning to digital distribution and streaming through Netflx, iTunes, and Amazon.

In other words, the makers of TV shows and movies have long depended on Amazon for a significant amount of their revenue, first from DVD sales, and now, increasingly from digital downloads. The Kindle Fire was aimed squarely at enhancing Amazon’s position in this market. It’s also worth considering that Amazon uses free digital downloads as an incentive to get people to subscribe to Amazon Prime.

On the other side, we have Amazon Studios, gets Amazon involved in the creation of new movies. They may be working with Hollywood, but part of their appeal is clearly to creative people who were, in one way or another, shut out of Hollywood.

This is similar to how Amazon approached the eBook market. They did deals with publishers to get the rights to distribute books on the Kindle. To secure those deals, they surely used their position as a major sales channel for traditional books. Once the Kindle was off to a good start, they started enabling independent authors and small publishers to sell their own eBooks through Amazon. Now they are starting to do deals directly with authors, taking over the role of publishers for both vetting and editing books, and underwriting their creation with cash advances.

So, how long before Amazon starts funding some of the movies themselves?  It might take longer, because movies are more complicated to make than books. Also, theatrical release is still an important part of the movie business; box office receipts are an important revenue, and it helps generate the awareness needed to drive the sale of the digital downloads.  Its also worth keeping in mind, that Amazon owns IMDB, which helps moviemakers find the collaborators they need to get movies made, and helps consumers find out about movies worth watching.

All of this puts Amazon in a strong position vs Hollywood, but its even stronger if you step back and consider how important the book industry is to the movie industry. One of the most valuable film franchises in the last few decades has been the Harry Potter films, which, if it isn’t obvious, owes its success to the Harry Potter books. The same is true for many other films. The movie industry reduces its risk by drawing on successful books.  Doing so gives them added confidence in the underlying story, and provides them with a built in audience, and built in cultural relevance. Unfortunately for Hollywood, Amazon seems likely to gain a favorable position for the film-rights for more and more books.

This is good for Amazon, but also, I think, for Apple. Apple doesn’t encircle Hollywood in quite the same way Amazon does, but iTunes is an important distribution channel for movies and TV shows. Another thing Apple has is cash, lots of it. Movies are often financed, in part, by distribution rights. Wariness over Amazon’s position is going to drive the movie studios towards Apple (just as of fear of Apple’s power drove the record labels towards Amazon), Apple’s ability to help fund new movies and shows, in exchange for favorable distribution rights, seems like it will draw them even closer to Apple.

We shall see soon enough, I guess…

The Pettiness of Apple’s iBook Author License Agreement

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Today Apple held an education-focused event where they announced a major upgrade to iBooks and iTunes U, the launch of a textbook initiative and a free OS X-only tool for creating rich, interactive iBooks called iBook Author. Apple has received both praise, and criticism for their efforts, but one criticism stands out.

Dan Weinman called attention to a clause in the iBooks EULA which prohibits creators from selling anything they generate with iBooks Author anywhere but Apple’s iBookstore (they can give the books away wherever they’d like).  This has made a lot of people upset, and brought some people to Apple’s defense.  Apple’s defenders argue that it is perfectly reasonable that their Apple’s free software not be used to make a competitor money.

That may be true, but it is hard to see this as anything but a small and petty move on Apple’s part.

My perspective is this: without this restriction in place, how likely is it that someone would use iBook Author to produce an ebook for commercial sale and NOT offer it through iBookstore, considering:

  1. Apple makes the best device for viewing such publications
  2. Apple sells more of them than everyone who makes anything remotely similar, combined
  3. Apple offers the best ecommerce options for selling them?

Further, and for the same reasons, how likely is it that the sales through that alternate channel would be anything but a drop in the bucket compared to what flowed through iBookstore?

If, at some future date, Apple no longer makes the best device for viewing such content and/or, has serious competition for market share of iPad-class devices, and/or doesn’t have the best commerce system, then creators will have plenty of incentive to recreate their publications in order to get around this restriction anyway.

In the end, I think the ill-feelings this restriction creates is more costly than any additional value it might help Apple capture.

What I Want to Know About the iPad 3

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Rumors about the iPad 3 have been swirling around for months, but things kicked up again today after Blomberg reported that production has begun on the iPad 3 in preparation for a March launch. According to their three sources, the iPad 3 will have a double-resolution “retina” display, a new quad-core CPU, and the mobile data capability will be upgraded from 3G to LTE.

If the report is accurate, these will be welcome, but unsurprising improvements. The retina display debuted on the iPhone 4, a few months after the first iPad shipped. Some hoped it would be a feature of the iPad 2, but there were good reasons it was impractical then.  A higher resolution display is much more practical now and will provide a decisive improvement in the user experience.

I’m not persuaded that a quad-core CPU is essential for a tablet at this date, but it does provide an avenue for improving performance. A faster dual-core CPU would probably provide a greater overall performance improvement, but I don’t know how practical that is. There is a new generation of ARM cores on the horizon that should deliver a big performance boost over the Cortex-A9 cores used in the iPad 2’s A5 CPU, but people don’t expect them to reach mass production until late this year. A big clock-speed improvement with the existing core design could provide a nice boost, and should be practical given the expectation that the new chip will be built on a 28nm process, compared to the 40nm process used for the A5. The long-shot in all of this is that Apple will release their own core design. An iPad with a retina display will demand a faster GPU, but whether this will come from a new design, or be achieved through higher clock-speed and improved memory bandwidth, remains to be seen.

A bump from 3G to LTE is also a logical improvement, as carriers, led by Verizon, seek to recoup their investments in upgrading their networks to LTE. Apple avoided LTE in the iPhone 4s because available chipsets have horrible power consumption, but in the intervening 6 months, bring opportunities for new chips, and, perhaps more importantly, the power consumed by the cellular radio is much less significant on a 10″ tablet like the iPad, where the power consumption of the displays dominate.

What I’m most interested in, though, is something that probably won’t have an answer until the iPad 3 actually ships:

Will customers with 3G/LTE iPad 3s will be able to move them among various mobile carriers?

The iPad 2 had different hardware depending on whether it is a Verizon or an AT&T model.  The iPhone 4s is sold with it locked to a carrier, but the underlying hardware can work with both AT&T’s GSM-based network and with Verizon’s CDMA network. I expect future iPads to be similar to the iPhone 4s, with a single hardware configuration that can work with different carriers, but the iPad is sold without a subsidy, and the GSM iPads have always been unlocked, allowing their use with other GSM carriers.

So, will carriers have to compete month-in-month-out to gain and retain iPad users?  I sincerely hope so.  I believe that the time will come where Apple has to pit the carriers against each other. For the iPhone, that time will likely come in a few generations, when the unsubsidized cost of the latest iPhone model drops to $300 or so. Is this the time for them to make that move with the iPad?

On The Kindle Fire

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I’ve been thinking a lot about the Kindle FIre since it was announced, and I’ve ended up writing a lot about it too, in the form of comments sprinkled here and there on sites like Hacker News.  I thought I’d take a little time to try and get them all down in one place.  So, here it goes.

Approach

This isn’t a review, it is a rumination on what the Kindle Fire “means” in the context of the larger technology and media landscape. My goal isn’t to reach conclusions, but rather to document and share my current thinking.

I’ll start by going over some basic details about the Kindle Fire, and my first impressions from using the device, before considering the device’s relationship to other aspects of the technology and media landscape.

Basic Facts

  • 7″ “widescreen” IPS LCD Screen (600×1024, 161ppi)
  • 1GHz Dual Core CPU
  • 8 GB Flash
  • 512 MB RAM
  • Heavily modified version of Android 2.3
  • $199
  • 8 hour battery life (with WiFi off)
  • No camera, no ports beyond USB
  • Sold by Amazon at or below cost
  • Part of Amazon’s longstanding line of ebook readers
  • Positioned as a more flexible/capable Kindle, with an emphasis on consumption of the web, purchased media (including Apps) and a shopping experience.
  • Positioning was well received by consumers and critics.
  • Actual device has been panned by many critics, but customer satisfaction seems to be high.
On paper, it is a reasonably capable device, the hardware is, in many ways, gives it simlar capability to the iPad 2, though the iPad 2 has a much better GPU with a screen that is physically larger and displays more pixels.

First-hand Impressions

I haven’t spent much time with a KindleFire, but a few things are clear from my limited use:
  • The screen is crisp and bright
  • The power button is awkwardly positioned
  • The placement of the stereo speakers don’t make any sense (they are both on the same side when watching a video wide screen)
  • The UI is smooth, except when it isn’t

vs eInk Kindle

Amazon notes the Kindle Fire’s abilities as an ebook reader, but doesn’t go so far as to suggest that it is an outright replacement for an eInk Kindle.  The eInk screens are better for reading books, particularly in full sunlight, and enable both lighter weight and longer battery life.  The eInk devices are also cheaper, and available with 3G to allow downloading of new content wherever there is cellular coverage.

I suspect that for many existing Kindle owners, the Fire won’t be a replacement device.

Amazon vs Apple

Before digging into the devices, its worth comparing Apple and Amazon as a whole.

Apple started out making relatively expensive stuff that other people sold for them at a relatively high margin. Over time, Apple has taken responsibility for selling more and more of the stuff they make. They have also become an important retail channel for people who make less tangible products, like music, movies, apps and, to a lesser extent, ebooks, and they have started offering services to end-users.

Amazon started out by retailing books that other people published and quickly added all sorts of stuff that other people (including Apple) made.  In recent years they’ve become an important seller of services that other people use to provide end-user services, they’ve become increasingly important retail channel for people who make less tangible products, like music, movies, apps and ebooks. Most recently, they’ve started making and selling stuff that with the consumption (and sale) of those less tangible products.  In all of this, Amazon has been comfortable with relatively slim margins.

Both companies have been willing to buck the trend of focusing on next quarters earnings.   In Apple’s case, one result has been healthy margins, healthy profits, and strong market share.  In Amazon’s case, one result has been strong market share and modest profits.

Kindle Fire vs iPad

Amazon didn’t explicitly position the Kindle Fire as an iPad competitor, but plenty of people have made the comparison for them.  I don’t see them as direct competitors, but I am curious about how the Kindle Fire will impact the iPad in the future, and vice versa.

There are obvious differences between the Kindle Fire and the iPad.  The Fire doesn’t have a camera, the iPad has two.  The Fire has a smaller display.  The Kindle is less than half the cost of the cheapest iPad 2.  The iPad is available with more storage, and with a cellular data connection.  What are the implications of these differences?

The cost difference is obvious, a family could buy two Kindle Fires for the cost of one iPad, and have $100 to spend on content. The size of the Kindle gives it an obvious advantage in portability. On the other hand, the iPad’s size makes typing on the touch-screen practical. It’s large enough to view PDFs formatted for letter-size paper, and for browsing and using layouts for digital “magazines.” It also makes it practical to create, populate and format a spreadsheet, or a document, or a presentation.  For many people with modest computing needs, it is a viable alternative to a desktop or notebook.

In the end, I think the Kindle Fire is probably a viable competitor to the iPad for listening to music, watching videos, reading ebooks, and playing certain classes of games (provided they are available).  I think it is inferior to the iPad for web browsing, writing email, creating and editing documents.  I think the iPad has an added advantage in these areas because with iCloud, plus Pages, Keynote and Numbers, Apple provides apps and services that help people who are using the iPad as both a replacement for a standard notebook, or to augment one.

It’s worth noting too, the way that content and hardware businesses fit together for Apple and Amazon.  For Amazon, hardware is something they sell close to cost in order to enable the sales of low-margin content. For Apple, they sell content at or close to cost in order to enable the sames of high-margin hardware.  In the past, Apple’s control of music sales drove music labels into Amazon’s embrace as they looked for ways of reducing Apple’s influence.  I wonder if Apple might be the beneficiary of similar concerns on the part of media companies, since Amazon seems interested in disinter-mediating them.

The differing business models also suggest different near-term futures for the different devices.  Advances in technology will shift the price and performance envelopes for both the iPad and the Kindle Fire.

My prediction is that Apple will put most of those advances into enhancing the capabilities of the iPad in order to drive upgrades and make the iPad a viable alternative to a full-blown laptop.  I would expect an “retina” display, as well as the more capable CPU and GPU required to drive it.  They may trim weight, but I’m not convinced that battery life or weight will see rapid improvement

Amazon, on the other hand, has much less incentive to improve device capabilities.  Video and ebook reading doesn’t require faster CPU or GPU.  Web browsing might benefit from upgrades, but they seem to think their cloud-services will help with some part of browsing performance.  If games become really important on the platform, then CPU and GPU advances might have a place.  Battery life and weight have room for improvement as well. Given Amazon’s business model though, the most obvious course of action is to lower costs, which will largely be put to reducing the sales price in order to increace market penetration and leverage over content producers.  In short, Amazon has more to gain from selling more devices than they do from selling more capable devices.

vs iPod Touch

Much has been made of how the Kindle Fire compares to the iPad as a media consumption device, which is fine, but ignores the fact that an iPad is capable of being more than a consumption device.

I agree though, the Kindle does seem strongest as a media consumption device, and from that perspective, I think it is worth comparing it to the iPod Touch, which is available at about the same price point.

For that price, the Fire gives you a larger screen for watching videos, playing games, browsing the web, and shopping.  It is also reasonably portable, particularly if you carry a purse.  It is, however, far less portable than an iPod touch, which fits in just about anyones pocket, and ads the capability of taking photos and videos.

It’s also worth noting that, while the iPod is in decline, Apple still sells millions of iPod Touch devices every quarter, so at least some of the people in the market for a Kindle Fire

vs Smartphones

I’m running out of steam here, but I think a lot of the points made above, about the iPod Touch, apply here as well.  Many people already have, or will soon be buying, capable, portable media consumption devices in the form of smartphones.  However, there is evidence so far is that Android users lag iPhone users in purchasing content and apps on their devices.  This consumption gap might create an opportunity for the Kindle Fire among android phone owners, but the larger opportunity might be some sort of Kindle Phone, whereby Amazon could drive an app and media purchase and consumption experience that rivals Apple’s.

vs Notebooks

I don’t think the Kindle Fire is a viable notebook alternative, while I think the iPad is.  Further, I think over the next few years, the iPad is likely to become a more viable notebook alternative, as its capabilities advance. On the other hand, I don’t think the Kindle Fire will become a more viable notebook alternative, because Amazon will put more focus on lowering costs than they will on enhancing capabilities, particularly since their non-hardware business are likely to see more benefit from selling twice as many devices than they are from selling devices that are twice as capable.

In Conclusion

I’m tired, but at least now I have something to expand on and/or refer to in future posts.  Possible topics:

  • A closer look at Amazon and Apple’s content distribution businesses
  • A closer look at Amazon and Apple’s entire user experience offerings.  For example, Apple’s web services, desktop apps, retail experience, consumer support.

 

Apple stiffs iPad owners on RAM

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New details of the iPhone 4 have me pretty pissed at Apple.

I’ve dismissed most of the criticisms leveled against the Apple iPad as clueless.  The few I’ve been sympathetic to are things that can and likely will be fixed with a software update.  There is, however, one thing that’s been bothering me, the iPad only has 256MB of RAM, like the iPhone 3 Gs.

Until I got my own iPad, the 256MB RAM limit was just an academic annoyance, but it quickly became clear that it was a chintzy move on Apple’s part. Mobile Safari on the iPad only lets you open 8 different “tabs” at once, but it often struggles to keep even a fraction of that number loaded.  Often if I switch between tabs, it ends up having to reload the pages, which is slow.  It’s even worse if I switch to another app and then back, then it often has to reload all the pages.

I put some of this down to the fact that it was the first release of iOS for the iPad, and assumed it would be improved any day by a software update (which has yet to materialize).  A software update could only go so far though, since the larger screen size on the iPad would likely drive up memory requirements.  And, of course, the eagerly awaited update of iOS 4 for the iPad would bring multitasking for third party apps, which would drive up memory requirements even more.

Well, now I learn that the iPhone 4 is confirmed to have 512MB of RAM, twice whats in the iPad (even though it has a smaller screen resolution).  This comes less than three months after shipping the first iPad, and less than two months after shipping the iPad WiFi-3G model I have.   I know that things move pretty fast in the tech industry, which is why I didn’t get bent out of shape when apple cut the price of the original iPhone by $200 only a few months after launch, but this really pisses me off.

The poor experience “multitasking” with Apple’s own apps on the iPad is the really my only big complaint with the device, and now its pretty clear that it’s likely that annoyance is going to extend to 3rd party apps when iOS 4 makes it to the iPad this fall.

The iPad, and Why the Original Mac Didn’t Have Arrow Keys

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Bruce Tognazzini, one of the main user interface guys on the Mac recently blogged about parallels between Steve Jobs’s approach to creating the Macintosh, and the iPad.

It’s all interesting, but I wanted to call particular attention to this passage:

Few will remember, but, when the Mac debuted in 1984, there were no arrow keys on the keyboard. That was a big deal. Almost every application then in existence depended on the arrow keys (then called cursor keys) for navigation. With that one stroke, Steve reduced the number of apps that could be easily ported to the Mac from tens of thousands to zero, ensuring that this new computer would have a long and painful childhood.

Steve’s button mania, which grew from his earlier parts-count mania, was already in full flower, and many have ascribed this crippling omission to some sort of self-destructive obsession. It was not. It was one of several strategies specifically designed to ensure that existing software would not run on this new machine because existing software, in Steve’s eyes, sucked (an opinion I share). The absence of those four keys ensured that any developer who wanted to have software appear on the Mac was going to have to start over and write software that conformed to the Mac interface, not the keyboard-oriented precursors to MS-DOS.

via Mac & the iPad.

He goes on to compare this to Jobs’s stance on Adobe Flash on the iPad.  It also goes to one of the key points I made in an earlier post about why people who thought the iPad should run standard Macintosh apps were “crazy”:

There are no apps for the Mac designed for the type of [multitouch] interaction the iPad supports.