mip's scan

Could "This" Be the Real iPod Killer?

What is "this" that I am talking about? 

Money.

That is something that Microsoft has a lot of.  A couple of weeks ago someone sent me an email that alluded to the fact that Microsoft's Zune might not knock the iPod from its market dominant position, but that future versions of it could.  The argument went like this: remember when the Xbox came out, and Sony's PS2 continued to dominate.  But Microsoft sold the Xbox at a loss, never turning a profit on it and then rapidly came out with the next version of it before Sony could deliver the PS3.  If Microsoft can do that with the xBox, is the Zune destined to take the same strategic path?  Microsoft could sell the device at a loss and continue to evolve it until it bested the iPod.  Apple on the other hand does not have the luxury of selling the devices at a loss.

I thought about that approach, and then let it go.  Then I read another opinion piece on another very good blog, Blackfriars' Marketing and they drove the point home even more.  What if Microsoft decided to simply give the Zune away, say sell it for $99?  Now they'd have pushed the price down so far that it could be an impulse buy.  Something people could/would buy and figure, "hey, if it sucks, who cares....I only spent $99."   In this give-it-away-for-nothing scenario it could indeed cause Apple to falter and stumble in the same way that Sony did.  The reason would be, because Apple can't afford to give the iPod away at a loss.  Microsoft has deep pockets and has often given products away by subsidizing them with dollars from their cash cow products, like Windows XP and Microsoft Office. 

Now I still stand by my belief that end users want a complete and robust end-to-end user experience and not necessarily a less expensive device.  If it was cost, then there have been many devices that have already come and gone that cost less than the iPod.  But what if Microsoft delivers an experience that is not as good, but pretty good and virtually free?  Give the device away and make money on subscription fees.  That's what they are doing with the Xbox 360 right?  Losing money on the hardware and making it up on games and Xbox Live?  This pressure that is created by not having to be concerned with what a product launch does to the bottom line is exactly what has caused Sony to become utterly incapacitated by Microsoft.  The same could happen to Apple and we could see the iPod lose marketshare. 

Is all this good for the consumer?  Sadly it isn't.  Microsoft did it with Internet Explorer to kill off Netscape and what did it leave us?  Years where nothing was ever done to advance the web browser.  As soon as Microsoft manages to drive a stake into the heart of Sony, do you think that we'll see revolutionary things being done with the next Xbox?  Not a chance.  Once the competition has been eliminated then it is time to stay the course and begin to make back the money that you lost in the early years.  The same I'm afraid would be true with the iPod.  Once Microsoft could gain a toehold on the market and eventually dominate, they would limit choice and simply make money from the current basket of Zune-products at hand. 

So will it be a single device that comes along to kill the iPod?  No.  It'll be slow death grip that Microsoft applies to slowly try and chock the air supply (cash flow) of Apple's world class product.  What Apple needs to do to ensure that they don't become roadkill like Sony's  next generation game machine is to move quickly and outpace Microsoft.  They need to continue to differentiate the total user experience.  By doing so they can refuse to play Microsoft's price game and force Microsoft to come play their game of innovation.  I was disappointed that Apple didn't launch the next-gen iPod that we thought they did, but perhaps they were bidding their time? Perhaps they want Microsoft to release the Zune and then, once the market sees what it is and what it is priced at, Apple will effectively say "That's nice...but so last year...here is the new standard in portable entertainment."  Then no matter what price Microsoft sets the Zune at, be it $99 or $9, Apple can stay out of arms length.

It is a constant cycle of innovation and not allowing the "other" guy to catch up.  In the scenario of Apple vs. Microsoft however, it isn't just innovation that Apple needs to worry about, its the deep pockets and patience of the Redmond giant.

iTunes Movie Sales - 125,000 in Less Than A Week

Apple launched movie sales as we know last week in their "Showtime" press conference.  Today I read that in less than a week they've sold $1,000,000 worth of movies in less than a week.  I'd say that is pretty impressive.  They are targeting $50 million in a years time and based on the initial week they could be poised to do that easily.  I'm sure the sales figures will make the other studios take notice and get on board. 

But how good is it really?  What does it mean?  It sounds like a "big number" but is it?  Well, in relation to DVD sales in 2004, for instance, it is small.  DVD sales in 2004 accounted for over $9 billion dollars in sales.  Yes...that is billions!  You can see from the chart that DVD sales had grown to make up about 47% of the total revenues for the movie industry.  Set against that, the iTunes forecasts of $50M are trivial by comparison.  Does that mean that the movie industry should ignore it then?  Not on your life.  The mix is going to change, the chart will look very different in the future.  You can see that DVD success came on the back of the rental market.  I think you'll see the iTunes sales take a further chunk out of that.  Further to that, the industry will be trying to canabilize their own DVD products with Bluray and HD, thus further fragmenting the mix and making space for online / download video entrants.  You see, year over year growth of the total dollar being spent on movies isn't growing dramatically.  That means that people aren't spending more when new video content formats are made available...they are simply shifting their dollars from one format to another.  That is why I think the winner of the "format wars" will be the company that gives people the easiest way to enjoy their content in multiple places. I think Apple is trying to do this; download content...watch it on your Mac, move it to your iPod, stream it to your TV using the yet to be launch iTV. 

It is about the total end-to-end user experience in consuming the content.  Movie Industry, take notice....$1M in sales in less than a week may not look huge, but neither does a tsunami while it is still out at sea.

It Is Do or Die Time for Apple and Video

What will the Apple conference bring today?  I don't know.  I hate speculating.  I knew that Apple would launch new Macs based on the Core2Duo, but those were launched by surprise last week.  Hmmm...video iPod?  I won't speculate, but I will say this:  if Apple doesn't launch a full on video-download store with a new larger format iPod, it can kiss that marketplace good-bye.  Think I'm being too extreme.  I don't think so. The competition continues to heat up. For example, Amazon just launched their UnBox Video. I think this was a pre-emptive strike against iTunes.  If Apple does launch today a video store, I think offerings like UnBox are going to simply become UnPlugged (or Re-Boxed...take your pick).  The reason is because Apple will/should deliver the one-two punch with the iTunes movie store and an ultra-sleek, intuitive, beautiful and larger format device that will integrate seamlessly with the online store.  I've know doubt that is what Apple will do.  Will it be today?  If not today, then later might be too late, because eventually, the Amazon's or Microsoft's of the world are going to get some part of it right.  Apple should launch now and put distance between themselves and the rest of the market....just like the did with the original iPod.

GUBA - Online Movies Arriving....Kind Of....

I really thought that Apple would have been the first serious mover on getting videos/films available but it looks like GUBA.com has done it in partnership with Warner Bros.  All kinds of good television content and movies and an interesting pricing model.  You can use a video-on-demand type service that ranges in price from $1.79 to $2.99.  This is like a rental.  You watch it once and then you're done, a day later you don't have the content for viewing.  Given the price I think this is competitive and has potential.  Then there is the download-to-own which ranges from $9.99 to $19.99 and again, I think it is competitively priced, just as long as they aren't all at the $19.99 end of the spectrum. 

Here's the rub though, and damn, I get just ticked off when I see this!  I figured I'd try this out, given a little spin and see what the quality of the video is like.  So I choose Syriana since I wanted to see this anyway.  It is $19.99, I can download it and view it on 2 computers and 1 portable device as well as burn a backup DVD.  Sounds fair to me. I like the flexibility that has been given to me while at the same time ensuring that content is protected.  I can deal with that.  So I put the movie in my cart, sign-up for the service and get the lovely message below.

With our sincerest apologies to non-United States, non-Windows and non-Internet Explorer users, in order to enjoy the GUBA Premium service, you must be located in the United States, and use Windows 2000 or XP with Windows Media Player 9.0 or higher, which support the Windows Media Digital Rights Management System as required by our premium content providers.

I just had to shake my head.  Talk about totally limiting me.  It's like "Sorry, you're one of those crazy Mac-loving, Firefox-using, Quicktime-playing, 'eh-saying' Canadians.....NO MOVIE FOR YOU."

I know, I know...I'm venting.  I know that Apple is doing the same thing when it comes to geography.  When oh when will we be able to buy video content online in Canada, eh?  I mean seriously.  How long do we have to wait? 

iPod Format Movies on BluRay Discs?

Now this is what I was talking about.  This is about freeing content.  Yesterday I shared my thoughts around the it being a dumb bad limiting idea to create films in 3D with the main driver being a way to force people to only watch movies in movie theaters. 

I was worried that people in Hollywood would revert back to their skittish stance on digital movies.  Now I hear that perhaps future movies on BluRay discs may contain a copy of the movie in iPod-rady format as well. 

This is awesome, this is progressive.  This sets content free.  What better way to combat illegal downloads than to give people high quality, readily available versions on discs they already bought.  Now I know that this is still just a rumor, but it wouldn't surprise me that this is what Apple is trying to do.  It's like what I said Sony should have done - bundled a PSP-ready disc in every DVD case.  They missed the boat, hopefully Apple (and Hollywood) will not. 

The Future of Movies

I read an interesting article that covered a speech that James Cameron gave recently at the National Association of Broadcasters' (NAB) Digital Cinema Summit.  The key focus of his speech was that digital cinema was a good thing because it enabled the production and delivery of 3D films, which would be the saviour of movies. 

"...Digital 3-D is a revolutionary form of showmanship that is within our grasp. It can get people off their butts and away from their portable devices and get people back in the theaters where they belong."

I scrunched my face up a bit puzzled. Why on earth would a company that makes a product (i.e., Hollywood and their product is movies) want to make it so that they would intentionally limit the use and/or enjoyment of that product.  The movies that people buy and view on their portable devices makes up a huge amount of the industries revenue.  And that is growing...

By 2009, our forecast model predicts a worldwide retail value of  US$ 50 Billion, with a Compound Annual Growth Rate of 5.4% for annual sales value of Hollywood Video Content sold at retail. 

Why would you want to cut into that?  If you want to pack movie theaters you don't do it by pissing customers off that something they've seen in theater can't be watched at home on their home entertainment system, or a laptop or iPod or whatever else becomes available.  That alienates people. 

The second point of his speech carries a fundamental flaw as well.

"...one of the strongest reasons I've been pushing 3-D for the past few years because it offers a powerful experience which you can only have in the movie theater."

No matter what kind of experience you deliver via 3D in a theater, given time, it will become available for the home theater.  Look at the home theaters today - they rival what you get in a movie theater in terms of sound and quality of the visuals (and the popcorn is cheaper).  I find it sad that he finds the strongest reason to make 3D film is a scheme to lock customers in.  Wouldn't the strongest reason be because it delivers unique, entertaining, breathtaking and enjoyable content?  It always gets back to that eh?  The content.  Good content will drive people to consume the product.  Good content will get consumed in theaters, at home and on portable devices.  Hopefully Hollywood will understand that and explain it to Mr. Cameron.

To read the entire article I was referencing just click here.

Popcorn 2

I've been using a piece of software called Popcorn for a while now. I use Popcorn to create backups of our DVD movies.  With children it wasn't uncommon to hear the often shouted statement "Dad!  The movie is starting and stopping."  That meant the DVD disc was dirty or often scratched.  I want my kids to learn to use their technology so I don't mind them popping their DVDs into the DVD player.  But ruined movies is a drag and expensive.  So what I do now is buy them movies and make a copy.  The orginal gets put into our DVD cabinet on the high shelf.  The copy gets put on the low shelf and the kids use them as they like.  When they get scratched or damaged I chuck them in the garbage and make another copy.  In short - I love Popcorn.

So of course, I'm thrilled to see an update to this already excellent piece of software.  The upgrade cost me $30 but the fact that it'll take a DVD and convert it to PSP and iPod and other formats is awesome.  It's also a unviersal binary which makes it perfect for my new Macs.

Get details and purchase here.

Download Movies Coming - Another Flop Waiting to Happen

I don't get it.  I just don't get it.
I think that providing movies for download the day the DVD's are released is an awesome idea.  But why charge more for it?  I read in two places this morning, here and here, that indeed we will be able to download these flicks but I wonder if the movie business wants this to fail!

Prices range from $19.99 to $26.99, some $10 more than in-store DVD purchases.

You see what happened to Sony and their UMD's because they priced the small discs at exactly the same price and in some cases even higher than their DVD equivalents.  Nobody bought them and now major studio are dropping the format entirely.  What do they think will happen if they charge more for a movie download?  I say the business model will flop.  But it gets even worse, not only do they cost more....

But movie fans will pay for the convenience: Downloadable flicks such as "Brokeback Mountain," "King Kong" and "Pride and Prejudice" may cost as much as twice what the DVD versions do and play only on a personal computer. New releases can't be rented online, just purchased.

Nice to see that they are moving to download....hopefully they'll lower the pricing and open up the content.  If they do, it'll be great.  If they don't....we'll, I'm sure Apple iTunes isn't too far off from bringing us movie downloads that will be priced right.

Right But Maybe Too Late!

I was so happy when not too long ago I posted a blog about being right on the strategy Sony should take with regard to their Universal Media Discs.  I wasn't happy about being right so much as I was happy about Sony finally getting it, you know.  They are going to start offering a DVD+UMD bundled product so people don't have to choose between a DVD or UMD when buying a movei.  Under the new model they could pay a little extra and get them both.  I've said all along that this is the right approach.  And now I have a bad feeling that Sony might be doing the right thing but doing it all a little too late.

Based on last year’s numbers, it seemed that the sale of UMD movies for the Sony PlayStation Portable were still doing pretty well, but studios this year are releasing fewer, or even no new movies in the UMD format.

They should start this bundling immediately.  Hell they should have done it months ago, but now that they realized it, they should go full out and get these things out.  That way PSP owners would be able to buy them.  When will large companies like Sony learn to listen to their users.  Sigh. 

To read all the details on the sluggish UMD sales just click here.

DVD+UMD=mip was right

What did I say 11 months ago?  Huh?  If you need a refresher you can check out my post from March of 2005 here.  In that post you'll see I had said that Sony needed to sell DVDs at one price, UMDs at a similar price and a DVD plus UMD combo at an alternate price that wasn't double the UMD or DVD price.  It's the only way to get real uptake on the UMD format. 

Now I'm not the usually the kind of guy who says "I told you so", but in this case...well...I told you so.  But I'm happy about it no doubt.  Happy to read

Starting March 28, consumers can buy DVD-UMD combo packs of "The Grudge," "Resident Evil," "Underworld," "Crouching Tiger, Hidden Dragon" and MGM's "The Terminator" for just pennies more than Sony typically charges for a new DVD.

A second batch of DVD-UMD combos--"Ghostbusters," "Mad Max," "The Fifth Element" and "Snatch"--arrives April 25, with a third wave slated to come on the market in May.

Each combo is priced at $28.95. Sony typically charges $24.96 to $26.96 for new DVD releases, while titles new to UMD generally list for $19.95.

You can read the entire article here - the UMD comb stuff begins in the 9th paragraph but the whole article is a good one.  It would seem that the big movie business is starting to finally get it.
Way to go Sony!