Understanding iTunes LP and iTunes Extras

For the near future, Apple’s dominance in the mobile entertainment market will remain uncontested. Entering its 8th year, the iPod has successfully morphed from an interesting new player in a small category into an all-purpose platform spanning the breadth of the audio consumer electronic landscape, portions of the mobile phone business, and while its AppleTV business is still lagging, the introduction of iTunes LP can easily be seen as part of a revamp for that platform.

The company talked a fair amount about the ability to add extra content to music tracks, forming an experience that is much more akin to that of a music LP. But let’s stop for a second and think of what a stereotypical Apple customer might look like? Somehow, the immediate image that pops in my mind is not someone who was born prior to the late 70s.

Sure, now that the iPod line has established itself as the dominant line in the portable entertainment consumer electronics world, one can see a lot of people over 40 sporting the devices but truth be told, most of Apple customers are probably younger and, to them, LPs are either something that belongs in a museum or falls in the category of music snobs. The sit-back experience and add-ons that came with most LPs is not how they have ever experienced music and it is highly probable that they will not change their behavior because Apple believes that retro is cool.

The music experience is more of an ambient one, where the track itself is the thing and where even music videos have mostly fallen by the wayside (YouTube killed the video star?) In today’s short attention span world, extra attachments to media exists in two places: on DVD and on BluRay disks, technologies best experienced when dealing with a TV screen.

In fact, when delving into the details of the iTunes LP specification,developer Jay Robinson discovered the following:

The LP frame seems to have a width and height of 1280×720. This is nice, but means I get ugly scrollbars all over my 13″ MacBook screen.

The resolution seemed interesting as I remembered it from somewhere but had to think about it for a few minutes (I’ll get into that in a the next paragraph) but it was fascinating to me that one would experience ugly scrollbars on a MacBook. Say what you want about Apple products, ugly is not something that generally comes to mind. In find, the fact that things were ugly on a computer monitor immediately gives us clues into where Apple may be going next. Since we can safely assume that Apple would not push something ugly out the door, we can also assume that the 1280×720 resolution is no fluke. And since it looks ugly on a MacBook, we may think of where else this type of media can be consumed.

720p?

1280 x 720 is the kind of 16:9 ratio that is found in a 720p high definition video mode. That mode has become more or less the default low end mode for high definition and is how most television broadcasts in the US and Western Europe are handled. It is also a format that most plasma or LCD TV can handle. But also of note is that it is the highest resolution format offered in terms of movies and TV shows sold through the iTunes store, and the highest resolution HD video resolution now supported by AppleTV players.

So we now have a clear sign that the iTunes LP content seems specifically formatted to be best experienced on a TV screen and it seems that Apple’s recommendation would be to use an AppleTV to do so.

And then, this week, Apple retired its low-end AppleTV and dropped the price of its mid-range (now entry level) offering by one third. Such a move is not just based on the idea of moving units but appears to represent a potential need for disk space and anyone who looked at the size of a DVD or Blu-Ray disk can attest to the fact that such video offerings can chew up space relatively quickly. And extras tend to add a fair amount too, which seems to increase the need for space if you are intent on renting or selling DVD or Blu-Ray like content via the Internet.

Add to this the general reluctance Apple has had to supporting Blu-Ray in their computer hardware platform (the main advantage of Blu-Ray, according to its advocates, is the ability to display video at a higher resolution format than 720p) and it seems Apple is gearing up for an assault on that category (especially since the problem of extras is now solved by iTunes Extras).

720p Recording

Meanwhile, on the Mac, the new operating system came out with a version of Quicktime that removed ability to support plugins for extensibility. While Apple is already a strong player in the video editing world, offering both professional (Final Cut Pro) and consumer (iMovie) tools, it is also interesting to note that they are starting to introduce light editing video capabilities directly into the operating system.

We already know that the iPhone 3G S can record video, a key feature of the offering, and we’ve just witnessed the introduction of video recording capabilities within the iPod Nano (and we can assume that it’s only a matter of time before the iPod Touch gets its own video recording capabilities) but here’s where it gets interesting: the iPhone 3G S could theoretically shoot 720p video as all the hardware to do so is there.

The rise of YouTube and the success of Flip cameras have shown Apple that a portion of the consumer market is interested in recording and viewing video. While the YouTube offerings tend to be generally of a lower video quality, the introduction of 720p as a default recording chipset in Apple’s offerings appears consistent with the company’s attempt to cater to a higher end whatever market it enters.

So it would seem to be a normal progression for Apple to eventually move its product lines to producing 720p content that can then be redistributed.

Today, that exporting can happen via synchronizing one’s iPhone’s GS or exporting content to iTunes, YouTube, or MobileMe from Quicktime X. MobileMe and YouTube appeared to make sense but why export to iTunes?

A user generated marketplace

The success of the iPhone as a development platform has surprised many, myself included. In the short span of a few years, Apple has created a marketplace that is rumored to be selling US$200 million a month’s worth of application software in increments of about a dollar. If you’re making 30 percent of that revenue by hosting the apps and handling the distribution, you might notice.

I would venture that there are now a number of discussions around Apple as to how to reproduce this phenomenon across other categories. With the rise of YouTube, Last.fm, MySpace, and other, Apple is now also witnessing the rise of the independent and while the company has had some success in bringing video content to the iTunes store, it has not been able to get the rich margins it is getting from the music industry (something the music industry now appears to regret) and from iPhone developers (who, for the most part, are not large companies) from TV and movie producers.

True, the company now offers rentals and sales of video content but what if it could open up a marketplace where every independent content creator could distribute content? What if independent movie-makers or musicians could sell directly through the iTunes store and provide content on all the apple platforms (TV, iPod, phone, computer) with a single click. I suspect that many would be willing to give up 30 percent of their revenue in order to get to that public.

The components all seem to be there and it seems to me that it won’t be long before Apple starts pushing the idea that we are all content producers (an old idea at Apple, which was at the source of their creating the iLife suite) and we can all make some money at producing that content. Having done so, Apple would not only have control of the music industry but could also assert itself in the TV and movie space.

The Valley: Detroit for Technology

The claim center around the fact that New York is not keeping up with technology because the technology industry in New York is not moving as fast as it is in the silicon valley. And so, I’d fully grant that it’s true. In fact, New York is also not keeping up with the car industry because Detroit seems to be doing a better job of that and has been since the 1940s. Sure, it has a tower named the Chrysler building but let’s face it, Detroit is producing many more cars than New York. In fact, Detroit’s impact on the car industry is much larger than that of New York.

Reading the previous paragraph, you might be thinking that it’s a very silly analogy. And it is there not only for effect but also to point out that any comparison of New York to the Valley is based on a flawed assumption. The assumption is that such comparison can have merit. For the last 40 years, Silicon Valley has been a single industry area: the technology industry. Most major technology innovations have come from the valley (with the exception of software licensing, which came from a place a bit north of that: Seattle).

So, as New York is not and will never be the leader in the car industry, nor will it ever be a leader in the technology field. I’m just hoping that the valley will never suffer the same fate as the epicenter of the car industry is feeling right now. Being based on a single industry, in the long, is a pretty scary concept and the lack of diversity can sometimes be fatal.

New York: Diverse by choice?

Interestingly, it is New York’s diversity is part of what has made it more resilient than most cities in the United States and the increase of one industry over another is what generally hurts it. The rise of the financial world as a substantial employer in New York has hurt the tax base and lowered the employment opportunities in the city. The bubble and subsequent explosion of the real estate market in the late 1980s and early 1990s did the same thing to the city, lowering property values to the point where real estate was cheap enough for 20somethings like myself and others to think about starting new companies, giving rise to what came to be known as Silicon Alley.

Embedded in New York’s success is the abandonment of industries: New York could have been the nation’s capital but Madison, a quintessential New Yorker sent the US government further south in exchange for control of the economy. New York could have been the center of the movie industry (most of the early movies were made in New York) but that title went to Los Angeles, where real estate was cheap. New York was, for a few decade, the center of the advertising world but the title ended up getting shared with Chicago and London.

The truth is that New York creates industries, takes a portion of them, and lets others become single industry towns:

• US Government: Started in New York, now in DC
• Oil: Consolidated in New York (Rockefeller), now centered around Houston
• Steel: Consolidated in New York (Carnegie), now centered around Pittsburgh
• Media: Started in New York, Movies (and some TV) now in Los Angeles, Radio diffused, print
• Advertising: Started in New York, now shared with Chicago and others

The result is that each brings something new, including new tensions and conflicts as one industry tries to dominate the others or establish a place of prominence for the heart of New Yorkers. However, in each case, they end up being put back in their place and shown that diversity is what makes New York what it is and that rule from a single industry would hurt the very fabric of what made it one of the truly global centers.

The exception: Money

But New York understands that two things make the world go round: Money and influence. Ever since the political leadership was taken out of town, New York has defined itself as a city based on commerce (one could argue that even before the revolution, New York was always about commerce, something that becomes evident when you realize that the dutch sided with the British when they realized that it could hurt their economic interest to not do so and did so again during the revolutionary war when it became clear that war could be profitable business).

Due to both geographical advantage and the foresight of its administrators, New York became the first port in the country and, in the process, became the place where trading and financial management were done. The country came to New York for money and New York dispensed its money to the country. During the robber barons era, this lead to New York helping consolidate industries and create monopolies. When those were dismantled, New York held on to the financing aspects of those industries, even if the other portions went away. Through that, it gained control.

So while the valley is leading in tech, the financial aspects relating to financing all those technology efforts are still based in New York. Yes, most of the tech VCs are sitting on Sand Hills but the truth is that their funds are generally funded outside the valley. Of course, it makes no more sense to argue that the valley is behind New York on funding technology than it does to argue that New York is behind the valley on tech innovation. Each has developed a long history and set of capabilities around one area so such comparisons are moot.

The crash and what next?

With the rise of increasingly complex financial instruments in the last few years, it is true that a lot of programmers ended up being hired by Wall Street. However, the other thing that is true is that such phenomenon has been a hallmark of Wall Street since the 1980s. Yet, a portion of the Internet industry did grow in New York in the 1990s. And to be honest, a similar phenomenon happened in the most current (aka Web 2.0) cycle.

The big difference is in the way Internet people in New York and Silicon Valley comport themselves. Because New York is so diverse, our local media is not as focused on what happens in the tech scene as the local media is when it comes to the valley. And because our tech scene is generally quieter, it also tends to be more insular than the valley scene: people who innovate on financial applications in the Internet space may not necessarily rub shoulders with people who innovate in the media space relating to the internet or people who innovate in the commercial space on the Internet.

In fact, the closest thing to a center, as far as the Internet crowd is concerned in New York, is the New York Tech Meetup, which meets once a month, as it has done for many years now. Each month, 5-10 local start-ups get  a chance to showcase their wares. Small companies like Etsy, delicious, fotolog, kickapps, or thumbplay (and many others) have all demoed at an event organized using technology provided by local company Meetup.

But truth be told, none of them really advertises their affiliation with New York that much because, to a large extent, that affiliation is insignificant. They do not define themselves based on WHERE they are but rather based on WHAT they do.

And, almost more importantly, none of those companies were created by people from the financial industry. The techies in the financial world are happy in their sphere and few actually cross path with those in the internet space. Different groups, different industries, different people.

So will the collapse of many Wall street firms mean the beginning of an exodus from the financial tech community towards startups? I doubt it: there is little cultural fit, and there are still ample opportunities on either side. People who are naturally drawn to finance-related type of computing will find positions in that field, even if its remains more competitive; and people who are looking to launch start ups will continue to do so.

New York will continue to have a tech community that is smaller than Silicon Valley’s and, truth be told, that’s just fine. Because each have advantages and disadvantages but ultimately, each can serve as the host to the next big thing, no matter whether they are based on El Camino Real or on the L line.

It has a relatively low but highly dedicated audience and is garnering good press both in the blogging community and the mainstream media.

The service is suffering from growth related issues which force it to be down at unexpected times but users put up with it because of its supposed transformational nature.

The service allows people to build things on top of it, offering external parties a greater chance to generate revenue than the company providing the service.

And, establishing further proof that service is going to be important in the future, a lot of mainstream stars are establishing presence quickly, only to slowly abandon those points of presence after a while.

But those stars are no different from most of the service’s users, which tend to abandon it only a month of two after trying it out.

What is that service called?

If you said Twitter, you are clearly reading this in 2009. But, only two years ago, the answer would have been Second Life (something I learned first hand, having been part of the hype around it back then).

of course, I have no doubt that this post will probably receive a high amount of flames because supporters will tell me how Twitter is different. But is it?

The Coral Reef

I’ve always had an affinity for Dave Winer’s Coral Reef analogy. However, even the coral reef analogy seems to eventually break down, leaving people like Winer to think of ways to move out (in a way, Winer fell into the same trap with Twitter as Scoble did with Friendfeed).

The issue here is that a lot of energy gets poured by developers into supporting an ultimately closed system. While artificial coral reefs exists, they are generally part of the larger ocean and tend to be pushed into creation by sinking boats or subway trains. But an important distinction is that the creator of an artificial reef is generally present at the creation but then lets the ecosystem take over and doesn’t try to control anything.

In the tech field, the best analogy for an artificial coral reef would be opening sourcing an important source of code (for example, the apache web server) or making a set of protocols or ideas open to all (eg. HTML or RSS) without requiring that the implementor cede any control to the party which made the code or idea available. Today, you can fok the httpd server if you feel like it or you can adapt parts of HTML or RSS to your heart’s content.

Fauxpenness

But there’s a different set of ecosystems out there that becomes more of a venus flytrap of technology. I would describe this as fauxpenness:

Fauxpenness: Calling a system or platform open while it is, when more closely scrutinized, under the tight control of its provider.

Fauxpen system (or fauxpen platform): a system or platform that claims to be open but, upon closer examination, isn’t.

It’s the kind of approach that pretends to be open but provides some level of lock-in.

In 2006-2007, we saw that happen with SecondLife, as many developers (myself included) built software code that could run within the SecondLife world but was ultimately stuck there because you could not run it outside that world and/or run SecondLife servers on your own machines.

in 2007-2008, we saw that happen with the F8 Facebook platform, which locks your applications inside of Facebook and, while many developers have pushed to force the company to open up, tends to stay there. In 2007-today, we’re seeing the same thing with Twitter, which allows you to build whatever you want on top of it but doesn’t decentralize their approach, leaving developers potential slaves to the whims of the company. The same is true of the iPhone, which provides unusual access to the phone operating system and allows to develop interesting software on top of it but still keep developers away from being able to access basic things like calendar information via an SDK.

The endless cycle

Interestingly enough, it’s not an unusual phenomenon in the technology world. It works like this:

It happened with SecondLife; it happened with F8; it will happen with Twitter and it will happen with the iPhone at some point. It appears that the natural course of locked API is to get to a point where the developers get so annoyed that they decide to go look somewhere else.

But there’s hope.

Breaking Free of Fauxpenness

Because of the lock-in, it is possible for companies to break free of the cycle. In order to do so, two things need to happen:

• First, the company needs to find a way to establish a business model that does not require lock-in
• Then, the company needs to start removing the lock-in components it offers.

I’m not saying that either of those step is an easy one. In fact, few companies have successfully managed them and, even when they do, the developer community will keep asking for more.

For example, Microsoft’s history is one of establishing initial lock-ins, weeding out the competition and, when its lead is established enough, relaxing the choke-hold it has on the developer community and playing a little nicer until it tries to enter another market. That was the case with Windows; it was the case with Office; and it is the case with IE today.

IBM also took the same approach, initially being a provider of proprietary systems and slowly, over the last 15-20 years, moving to become one of the largest supporters of the open source movement.

So let’s delve into the list:

Text (SMS Messages)

The main challenge to the “Text” application was due, in large part to the fact that it was initially submitted as “SMS Messages”.

For every application that goes through the rigorous approval process at Apple, the first thing that is done is reviewing whether the functionality of the application is provided by an application that was previously approved. In the case of “SMS and MMS Messages”, the word “Messages” triggered all kinds of alerts as Mail had previously been approved. It was thus decided that any messages could be sent via email.

The developer resubmitted the application after removing MMS functionality, pointing out that this application would not be able to send pictures, thus not replicating mail functionality. The argument failed the appeal and the application was rejected again.

The approval only came when the developer resubmitted the application as “Text” describing it as an application that allowed a user to take notes, as long as he/she didn’t have to cut or paste anything. This was considered OK and the application got to green light.

Calendar

Calendar was another application that had multiple difficulties in getting approved. Initially called “Rendez-Vous” to evoke the French’s aesthetic design sometimes appreciated in certain corners of the Apple world, the application was rejected when it was discovered that Rendez-Vous had once been another Apple trademark.

The developer proceeded to resubmit that application as “Calendar”, figuring that the Microsoft-sounding name might pass some of the constraint of the fascist-like approval board. At that point, the application passed two thousands levels of sign-offs but, as it was about to get its last needed signature for approval, someone pointed out that a calendar could be used to schedule illicit behavior. This led to an immediate rejection.

It is unclear as to how the application was reinstated but the names Schmidt and Bohner appeared to have something to do with it. Our assumption is that those are top secret projects related to devices we have yet to hear about.

Camera and Photos

The Camera and Photos application ended up being submitted as part of the same package. Internal notes point to the fact that they are one and the same.

When first submitted as “iPhoto”, the application was quickly rejected because it reproduced functionality available in the Apple product line and infringed on an Apple trademark.

In order to increase his chances, the developer decided to cut the application in two and offer them as separate ones that would hopefully go to different app-rovers. Little did he know that all applications are treated equally in the world of Apple approvals and denials.

In the case of Camera, the application was initially rejected because it could be used to take pictures of future Apple products. After code was changed to ensure that the iPhone was explode if such pictures were taken, the Application was approved.

Photos was a little trickier. It was thought that “naughty pictures” could be stored using it, which make endanger the fragile nature of some iPod and iPhone customers. But after the developer explained that the limited space available on an iPod or iPhone would primarily be taken by illegally copied music, leaving little space to such naughty content, the application was approved.

YouTube

The primary product of YouTube is to show user generated content. But few people know that the initial YouTube application allowed users to upload videos of their cats to YouTube. Because that “upload” feature was included into the application, it was initially decided that it would endanger AT&T’s network, end the world as we know it, and probably destroy the very fiber of society. As a result, it is only natural that such application would initially be rejected.

Apple’s legal department stepped into the fray to help rescue this application based on the little known legal statute establishing the tattle doctrine. The legal department assumed that if the RIAA or MPAA were to come after them for the amount of illegal content they’ve enabled users to use without controls, they could always point out to YouTube as being even worse, therefore driving the RIAA or MPAA lawyers away for a long period of time (or at least until everyone in the world had bought an iPod and subsequently upgraded to an iPhone.)

Maps

Due to Apple’s close relationship with Google (at least, at the time), Maps was seen as an easy thing to implement. Not only would it demonstrate the greatness of the iPhone but it would also show developers that there were two classes of citizens in the Apple development community: those who have a market capitalization still north of Apple’s and are not named Microsoft, and everybody else. Members of the first class could initially have applications available on the device. Smelly developers (aka everyone else) could develop web applications. This only worked for the first release and eventually, Apple had to relent to offer the App store we’ve all come to know and love, freeing the Apple development from the shackles of… oh nevermind.

So back to the Maps. They were initially rejected because certain towns had names that cannot be repeated in polite conversation. After Austria and Pennsylvania were removed from the maps, the application was approved.

Stocks

This application was considered dangerous to many users as it might lead them to invest in companies other than Apple. Submitting the application, the developer figured that he would default choices to Apple and Google. The choice of Apple helped internal discussion but the application was initially rejected on other grounds, as can be attested by the following rejection letter:

We’ve reviewed your application Stocks. Because the stock market has been on a downward cycle and tends to make our users cry, we have determined that this application is of limited utility to the broad iPhone and iPod touch user community, and will not be published on the iPhone.
If you choose to provide additional features that utilize iPhone functionality while tending to the mental well-being of our customers, your application can be reconsidered for reinclusion on the iPhone deck after you resubmit a new binary to us.

After agreeing that the only stocks that can be listed in the application are stocks that go up, the application was approved.

Weather

Sometimes, the weather can get you into trouble. When the developer of this application submitted it, it was assumed that few things could be consider as plain and boring as the weather. The rejection came in less than an hour after the application was submitted. Here’s the text in full, with attributions being removed:

Thank you for submitting weather to the iPhone approval process. We’ve reviewed your application and determined that we cannot include this version of your iPhone application at this time because it contains objectionable content which is in violation of Section 3.3.12 from the iPhone SDK Agreement which states:

“Applications must not contain any obscene, pornographic, offensive or defamatory content or materials of any kind (text, graphics, images, photographs, etc.), or other content or materials that in Apple’s reasonable judgement may be found objectionable by iPhone or iPod touch users.”

The objectionable content referenced in this email is the use of the words “Hot and Wet”. These words tend to appear in many salacious sites on the internet so we suspect that your application would fit into that cesspool. Since the app is already available on any iPhone, please make the necessary changes to the application as soon as possible, and resubmit your binary to us. Thank you

After many emails going back and forth, it was agreed that weather could be hot or humid but never at the same time.

Clock

Apple’s unfortunate history of collusion with terrorist was responsible for the rejection of the clock, because the timer function was felt to look too much like the timer on bombs in many Hollywood movies.

After ticking sound was removed from the application, it was approved.

Calculator

Deep in the heart of every iPod user is someone looking to hide collections of pictures you do not want to see. It has been documented that the iPod and iPhone calculators are really just secret doorways to Sodom and Gomorrah. Unbeknowst to the developer who initially submitted the innocuous (or is it?) calculator, the approver assumed that nothing as boring as a calculator would be included on an iPhone and that, therefore, it must be an application that nefariously hid its true intent. Since such intent was not specified, it could only be bad so the approver rejected the application.

As was the case for Calendar, it is unclear how Calculator ended up approved. Through what appears to be purely coincidences, any witnesses we tried to discuss this with died within seconds of agreeing to talk with us.

Notes

This one was caught into the unfortunate Snafu that allowed Text to be approved. As approvers assumed that Text was a notes taking application, due to the fiendish way in which its developer had managed approval, they just assumed that Notes was providing duplicate functionality and rejected it.

The application developer then resubmitted it, claiming it was a tool for making shopping list. That was enough to get it approved.

Settings

When this application was submitted, the iPod shuffle was a great success. It was thus decided that providing settings was “of limited use to iPod and iPhone users.”

However, when someone pointed out that this could be used to sell users ringtones from the iTunes store (and allow them to change them), it was approved.

iTunes and the App Store

Nah, just kidding on those two. They were always part of the phone and always approved. However, it is interesting to note that iTunes came first, followed by the App Store later. The initial application called “Send more money to Apple” was judged to have to lengthy a name.

Following is the first part of a list of the first 18 applications to have been initially banned on the iPhone, along with relevant information related to the rejections. Those bans were eventually reversed, allowing applications to make their ways into the phone. In this first part, we will look at the big 4: Phone, Mail, Safari, and the iPod (the next entry will examine the other ones).

Phone

It comes as a little known fact that the approval process almost killed phone functionality on the iPhone. The original developers had a hard time getting the application approved, as can be seen in this initial rejection letter:

Thank you for submitting Phone to the iPhone approval process. We’ve reviewed your application and determined that we cannot include this version of your iPhone application at this time because it contains objectionable content which is in violation of Section 3.3.12 from the iPhone SDK Agreement which states:

“Applications must not contain any obscene, pornographic, offensive or defamatory content or materials of any kind (text, graphics, images, photographs, etc.), or other content or materials that in Apple’s reasonable judgement may be found objectionable by iPhone or iPod touch users.”

We have heard that so called “phones” can be used in a number of ways including communicating secrets related to the internal working of large Cupertino-based companies located on Infinite Loop to people outside said companies. Please make the necessary changes to the application as soon as possible, and resubmit your binary to us. Thank you

After many emails going back and forth, it was agreed that any mention of words picked from a still secret list of product names and companies names would result in the phone immediately losing signal and the call being dropped. A secret message would also be sent to an undisclosed location identifying the people involved with that call.

Mail

The second rejected iPhone application was a little more understandable. After all, Apple is known for its simplicity and the fact that the company tends to remove redundant functionality from its devices in order to ensure the best user experience. While little visibility is given into the decision process around defining what what gets approved or banned, TNL.net got hold of internal transcripts of the discussion that led to eventual ban of the Mail application. Here is the abridged version, as we wanted to protect sensitive information:

Reviewer 1: Hey, we’ve got this mail application here, looks like it does (shuffle of paperwork to review what information has been submitted)… uh e-mail.

Reviewer 2: I’ve heard of that. I understand you can contact your friends with that and write them notes.

Reviewer 1: Why would you want to do something like that.

Reviewer 2: (pauses) uh.. well, let’s say you wanted to tell a friend a joke

Reviewer 1: You mean like call them on the phone and tell them a joke, looks like it’s reproducing existing functionality.

Reviewer 2: Hmmmm. Maybe but you could also use it to communicate information to a lot of people in one shot. For example, if you were a Nigerian prince looking for someone to help you move money out of your country…

Reviewer 1: Why wouldn’t you use a phone for that?

Reviewer 2: Well, long distance costs, for starter. And then, it would take a lot of time to call people individually.

Reviewer 1: (looks up list of countries in which the iPhone is slated to be sold) Well, Nigeria doesn’t appear on the list so let’s reject this.

Reviewer 2: Oh, I didn’t realize Nigeria was not on the list. Definitely reject then.

After several phone conversations, three international meetings and sign-off from half of the company, it was agreed that mail should be allowed because pictures of lolcat just don’t seem as good when recounted over the telephone.

Safari

At this point in the iPhone’s development cycle, getting applications approved was still getting tough but Safari, slated to be the third icon on the device also had its own uphill battle. The submission of this application came to established the short-lived record of being denied in under 10 minutes. The denial did not even come by email but was delivered in the form of a message on the developer’s voice mail system:

Reviewer’s Manager: Thank you for submitting Safari, your “web browser” for inclusion on the iPhone. After researching this web thing via our macs, we have come to the conclusion that it is too obscene, offensive, riddled with pornographic and other useless material to warrant use by iPod and iPhone users. Furthermore, we have discovered that some of the content seen there is replicated content that can be bought in the iTunes store and stored on iPods. Should you make changes to the application that would ensure this internet thing is sectioned off, we would be happy to re-review after you submit a binary to us.

In this particular case, Steve Jobs himself intervened, providing a note in an internal memo (and reiterating the point when the device was released):

We have been trying to come up with a solution to expand the capabilities of the iPhone so developers can write great apps for it, but keep the iPhone secure. And we’ve come up with a very. Sweet. Solution. Let me tell you about it. An innovative new way to create applications for mobile devices… it’s all based on the fact that we have the full Safari engine in the iPhone.  You can write amazing Web 2.0 and AJAX apps that look and behave exactly like apps on the iPhone, and these apps can integrate perfectly with iPhone services. They can make a call, check email, look up a location on Gmaps… don’t worry about distribution, just put ‘em on an internet server. They’re easy to update, just update it on your server. They’re secure, and they run securely sandboxed on the iPhone. And guess what, there’s no SDK you need! You’ve got everything you need if you can write modern web apps…”

With Steve’s seal of approval, the app was approved.

iPod

The last of the big 4 to be issued such rejection was unsurprisingly the iPod functionality. It has long been rumored that the reason for such rejection was largely due to the head of the iPod division sending out a company-wide voicemail to express his frustration at the inclusion of iPod functionality. However, due to the offensive nature of the language used in that message, few have been willing to provide any information about it. An iPod-compliant file was provided to TNL.net and, after spending several months trying to clean up the language, we are providing the cleanest excerpt we could, blanking out offensive words (reader’s discretion is advised):

iPod division head: Why you #### ##### ##### ##### ######## ######### ###### ####### ####### ######### cannibalize the iPod market #### ###### ############### ####### ###### hurt margins ######## ####### ###### kill the company ####### ####### Steve will hear about this.

While we do not traffic in rumors, some people sayhat, after his meeting with Steve Jobs, the manager was never heard of again.

In the next entry, we will review some of the other applications that felt the sharp edge of the reviewer’s pen, providing even further visibility into the otherwise opaque approach.

Update: Part 2 is now available.

The Kindle Lawsuit

In my last entry, I pointed to the case of Justin Gawronski, who was mentioned almost as an aside in the New York Times article about Amazon deleting legally purchased and downloaded content from their users’ Kindle devices. At the time, I suspected that the deletion of annotations could eventually lead to lawsuits:

Beyond the irony of Amazon throwing a book like Nineteen Eighty Four down the memory hole (a large incinerator in that book), Amazon’s action raise troubling questions as to the ability of online providers to remove content they have not created. I leave it to legal scholar to assess whether Amazon could actually be considered to have infringed on the intellectual property rights of people whose annotations were removed along with the books.

Today, news comes out that this student is one of the plaintiffs in a lawsuit against Amazon, making this the first legal case to test what a cloud-based provider can and cannot do with legitimately purchased content. The complaint uses language similar to what I talked about:

2. With an uncanny knack for irony, Amazon recently remotely deleted any traces of
certain electronic copies of George Orwell’s “1984” and “Animal Farm” from customers’
Kindles and iPhones, thereby sending these books down Orwell’s so-called “memory hole.”

[...]

16. On or about July 16 and 17, 2009, Amazon withdrew from sale certain e-books,
including George Orwell’s “1984” and “Animal Farm.” Amazon then remotely deleted these ebooks
from purchasers’ Kindles and iPhones. In doing so, Amazon not only deleted the e-books,
but also rendered useless any electronic notes and annotations that consumers had made within
these e-books because the notes were no longer tied to the referenced or highlighted text.

While I had initially thought that the content was deleted, it turns out that the annotations are still available on the device, albeit without any context to them, which is what the lawsuit is now testing:

54. Plaintiff Gawronski and the Big Brother Work-Product Subclass suffered
damages because they created content on their Kindles within the purchased content that
Amazon deleted.

Most surprising is that the lawsuit did not look at Amazon’s infringement of its customer’s rights under the first sale doctrine. The first sale doctrine, which has been in place since the beginning of the 20th century, basically states that purchases can transfer a lawfully acquired copy of a copyrighted work without requiring permission from the copyright holder. Many people interpret this to mean that:

the copyright holder’s rights to control the change of ownership of a particular copy end once that copy is sold, as long as no additional copies are made. This doctrine is also referred to as the “first sale rule” or “exhaustion rule.”

It could be argued that, by taking the book away from its users, Amazon has controlled the ownership of a particular copy that had already been sold, even though no additional copy was made. It was surprising to not see the lawsuit also incorporating this point as it is probably one of the larger legal infrigements Amazon could be charged with when it comes to that incident.

The Apple Store and iPhone community

Meanwhile, while there are no legal rumblings yet around Apple’s treatment of its development community. With every incident of an app being denied access, it appears that a few more developers decide that, while the platform is exciting to use, developing for the iPhone is not worth the trouble. If it were one case, that could be considered a disgruntled developer; if it were two, that could also be ignored; but with every new incident, it appears another developer or group of developer decides that they’d rather not develop for the platform.

When I was in journalism school, we were told that when there is a high similarity between three different events in a very short time, we ought to pay closer attention as it could be a trend. When that similarity pops over and over again, as in the case of the iPhone development community, it seems like a slow grumble is turning into something more potent.

But of course, one could argue that such grumbles are really nothing to worry about, as long as Apple can continue growing its user base. After all, the company makes more money selling devices that it does from the revenue generated by the app store.

True to some extent but that particular issue starts falling on its face when one considers two important facts:

1. Selling applications through the App Store is probably a more profitable business (as costs associated to the sale, as represented by a percentage of the revenue is probably lower than it would be on hardware).
2. Prominent users are starting to complain loudly.

Of course, none of this is going to single handedly stop the growth of the iPhone but what is increasingly appearing is that Apple is having a potential communication challenge on its hands. A single disgruntled developer or disgruntled user cannot bring the product down but a continuous stream of complaints starts creating the appearance of wrong-doing, potentially undermining the long term success of the offering.

Apple is still thought of by the majority of the people as a cool company (as Google and Microsoft once were), a shinning beacon highlighting the power of innovation and capitalism. As it grows marketshare, what was once considered OK as a way to help the company compete against larger players (the aforementioned Microsoft) is increasingly being considered as arrogant and evil.

What does it all mean?

Of course, at this point, if you’re still reading, you’re probably wondering how this is an example of a new hope. The new hope is arising out of the fact that a largely quiet population is now starting to fight back against the over-reach of large corporations into what level of controls such corporations will be able to excert. In the case of Amazon, the class action has the potential of redefining what a company can and cannot do with a purchase device. Such decision could also establish some precedents as to the use of kill-switches in electronic devices (or invertly, give large corporations more power and legally codify the level of control they have been afforded).

In the public arena, the push-back Apple is encountering from both its developer and early adopter communities could help establish new boundaries as to what is and isn’t accepted in terms of controlling access through online gateways (in the case of Apple, that gateway is the App store but one could argue that the social rules established around the App store could eventually extend to the kind of perception around what is and isn’t acceptable in terms of consumer ISPs blocking internet sites).

With each event, the online community is also establishing some precedent as to what will be considered acceptable in an environment where all data is stored not a user’s machine but on some remote corporate server.

In each of these individual cases, awareness is raised and with every other skirmish, more people become aware of the issues at stake. It is my belief that, as more people become aware, more people will require less corporate control and more individual control. And that gives me hope.

Update: The government is now looking into Apple’s removal of Google Voice related apps from their App store. This is getting interesting.

The Kindle Incident

For readers who may not know this, Amazon unveiled an interesting electronic reader called the Kindle, allowing people who bought it to legally purchase electronic copies of books. Along the way, Amazon also opened up a program allowing small publishers to publish books directly into their marketplace.

However, it appears that Amazon’s own quality control seemed to fail when it came to establishing ownership of the intellectual property uploaded to its site when two titles by George Orwell, Nineteen Eighty Four and Animal Farm, were uploaded and sold by a rogue bookaneer.

Subsequently discovering that it had sold e-books for which the publisher did not have rights, Amazon issued refunds to its customers and removed the books from the user’s device. Where it gets a little gray in terms of what they did is that, along with the removal of the books, they also removed any annotation users already had made, thus erasing content that was created ON the device if not FOR the device. The New York Times story on the deletion listed the following:

Justin Gawronski, a 17-year-old from the Detroit area, was reading “1984” on his Kindle for a summer assignment and lost all his notes and annotations when the file vanished. “They didn’t just take a book back, they stole my work,” he said.

Beyond the irony of Amazon throwing a book like Nineteen Eighty Four down the memory hole (a large incinerator in that book), Amazon’s action raise troubling questions as to the ability of online providers to remove content they have not created. I leave it to legal scholar to assess whether Amazon could actually be considered to have infringed on the intellectual property rights of people whose annotations were removed along with the books.

Amazon was justified in protecting the copyright holders for the infringing books but where it went wrong is when it over-reached by deleting content that was created by its customers. In that particular case, one could argue that Amazon was responsible for censorship. The company will need to change its systems and policies to ensure that it does not impede the customer’s experience. While it currently has only removed a couple of titles along with annotations, the company should ensure that it keep annotations separate so that any further title removal does not destroy user generated content. An extra nice move would be if the company were to replace the titles with their legal equivalent. The common should also be a lot more thorough in verifying intellectual property claims before offering titles, especially since they control every piece of the delivery chain from the intellectual property holder to the reader.

AT&T and 4chan.org

In a somewhat related incident, AT&T had a recent run-in with one of the most influential (and that does not necessarily mean good) entity on the internet: the 4chan.org community. 4chan is primarily and image and discussion board and word started to spread that AT&T customers had lost accesses to its images over the weekend. After a substantial amount of noise in several online forums, AT&T claimed that it had blocked the site because it was suffering from a denial of service attack from it.

What is interesting here is that AT&T acted without prior notice and blocked a site without providing any information upfront as to the reason for blocking the site. While AT&T stopped blocking the site as the result of a concerted effort by its fans, the founder of 4chan hit the nail on the head when he said (emphasis is mine):

In the end, this wasn’t a sinister act of censorship, but rather a bit of a mistake and a poorly executed, disproportionate response on AT&T’s part. Whoever pulled the trigger on blackholing the site probably didn’t anticipate [nor intend] the consequences of doing so. We’re glad to see this short-lived debacle has prompted renewed interest and debate over net neutrality and internet censorship—two very important issues that don’t get nearly enough attention—so perhaps this was all just a blessing in disguise.

Net Neutrality is the basic idea that any broadband provider should offer access to the internet without any limitations as to what kind of content can be accessed and here we have an example of an ISP selectively blocking a site. While the AT&T example is only the most recent one to come to light, it appears that this is a phenomenon that could become more common as internet service providers decide what kind of content takes too much bandwidth or for other reasons.

In the past, such censorship would have meant that a provider censoring access were to be considered as a publisher. In 1995, with Stratton Oakmont vs. Prodigy, the supreme court of the United States held that online services which were removing content from their online forums could be considered as publishers and therefore held liable for any content they gave users access to. Since then, Lobbyists in the telecom industry have ensured that such decision would no longer be applicable by getting the US Congress to amend the US code and reverse the Supreme Court decision.

The Urge to kill(switch)

About a year ago, a storm arose around rumors that Apple’s iPhone devices were sporting code that could disable applications running on them. The existence of such code, also known as a kill switch, was later confirmed by Steve Jobs:

Jobs confirmed that iPhones routinely check an Apple Web site that could, in theory, trigger the removal of the undesirable software from the devices.

He told the paper that Apple needed the capability in case it inadvertently allowed a malicious program to be distributed to iPhones through the App Store.

Once again, we see here a company with the best of intentions (protecting people from malicious programs) with its finger on a button that could be very scary if misuse. It is worth noting that Apple is not uniquely in this position as Google fessed up to having similar code embedded in Android-based phones:

Google may discover a product that violates the developer distribution agreement … in such an instance, Google retains the right to remotely remove those applications from your device at its sole discretion

And while one may think that such devices are limited to high end cell phones catering to a limited community, it appears that such devices are now becoming more common in children computers, cheap laptops, and even cars. And while many will claim that the solution to this is to open up source code, the Mozilla foundation itself has admitted to the appearance of such kill switch in the popular Firefox browser.

So kill switches are there for the best of intentions but how does one define those?

Apple and the App Store

The same kind of issue arises out of the treatment of applications to enter the Apple Application Store. A month doesn’t seem to pass by without another example of a developer seeing Apple remove his/her programs from their store.

The latest example is that of a developer who apparently committed the crime of offering an application that allowed iPhone users to use Google Voice, a Voice over IP program. And apparently, similar applications were subsequently removed from the Apple App Store.

While no official word has been given as to whether the fact that application were potentially representing a threat to the business model of Apple’s exclusive partners in the telecom industry, it doesn’t seem to be too much of a stretch to think so.

Can such intention be considered in the best interest of the end user? or in the best interest of the device manufacturer? And can such intention be changed retroactively, leveraging the presence of an existing kill switch?

Questions about the future?

In a previous entry, I’ve argued that we were moving to an economy where goods tended to be rented rather than bought. Embedded in what I was trying to communicate there was the question around what ownership actually means.

If an external party can control when or how you can use a device or decide on what you can or cannot see, or select what programs you can install on it, are you still owning it?

And while today’s corporate interventions are based on the best of intentions, what about tomorrow’s? or the next day’s? Will those intentions still sync up with yours?

A bit of history

In order to understand the importance of the current shift, one needs to study a bit of history. Since the dawn of the personal computer era, applications have been written and running largely on the user’s desktop. In the mid-90s, Sun Microsystems co-founder John Gage started claiming that “the network is the computer.” Marc Andreessen, co-founder of Netscape, the leading browser company at the time, was claiming that Netscape would “reduce Windows to a set of poorly debugged device drivers.”

However, due to limitation in terms of bandwidth and computer power, this vision didn’t come to be until well into our current decade. Today, individuals still mostly use Windows, even if most use it primarily to launch their web browser.

In more recent times, the availability of always-on, higher speed internet access, has allowed companies like Google to start offering more powerful websites, which took on features of full-fledged software applications. Leveraging technology that first saw the light of day in the 1990s (Flash was born in 1995 and XMLhttp, which powers AJAX applications was created by Microsoft in 1999), those applications started offering compelling competitors to existing products.

One the leader in that revolution has been Google. First with the release of Gmail and then with the release of Google Apps, the company has been working on offering online version of tools like email, word processing, spreadsheets, and presentation software. Leveraging its establish power in the advertising space, Google has figured that, by offering document and email management features to its users for free, it could create extra advertising inventory that it could then resell.

So Gmail, Google Docs, and Google Apps were born. Since they were consumer focused products, presenting them as products “in progress”, complete with a beta stamp and an advertising-based model. Jeff Jarvis warrants that such act was not only bourne out of humility but also as a  call to collaborate. This week, however, the company decided to shed the beta logo for most of its applications.

With its direct language to IT manager and its message emerging from the enterprise group, Google is making it clear that this announcement is not targeted at the consumer space. In a sign of growing business maturity (most software company attempt to appeal to the enterprise space as they get older and need to develop more predictable financial groundings), the company is now trying to appeal to the enterprise space, aiming its offerings towards a space that has traditionally been controlled by Microsoft (with its Office Suite) and, to a lesser extent, IBM (with its Lotus division offerings).

Poorly debugged device drivers?

But Google realizes that much of what it does is dependent on the continued goodwill of the different operating system providers and browser suppliers. Were it not for web browsers or operating systems, Google could not exist. Last year, the company started reducing that dependency by introducing its own web browser, named Chrome. Chrome was actually quite interesting in terms of browser development as it was the first browser to treat each window session as a separate application, ensuring that if one web page failed, the other tabs would not. This could be seen as something not completely unlike the way an operating system (or kernel, etc) doles out memory and CPU power to each of the applications it deals with and orchestrate who gets what.

The unstated strategic goal of the Chrome browser is to help reduce the dominance of Internet Explorer in the online space while providing Google with more of a say in terms of where web standards were heading (I’m sure some people will try to debate that point but, if Chrome is not intended as an Internet Explorer competitor, why is the only “official” version of the browser a Windows one, with no such offering on OSX or Linux?)

Chrome is not only an attack on Microsoft’s browser dominance in the web space but also an attempt at ensuring that neither Microsoft NOR Adobe get control of the future of web applications. Google’s CEO Eric Schmidt knows how trying to fight Microsoft can distract a company from very real threats by other unexpected contenders: he did come from Sun Microsystems and Novell before joining Google and saw, first-hand, how those two companies saw their focus on unseating Microsoft’s dominance in their respective areas blinded them to the threat that Linux came to be to both of them, ultimately dooming each of the companies’ efforts without Microsoft having to do too much.

So, as a veteran of the OS wars, Schmidt is now being careful in balancing its entry in the space. On one hand, he doesn’t want to offend existing partners like Apple and the open source community. On the other hand, he needs to ensure that his company’s offerings are actually going to appeal to hardware vendors. The OS will ultimately be little more than the minimum required to make the Chrome browser run. That means it will include an IP stack, some basic drivers to interact with the keyboard and screen (or a way for companies to offer those) and a UI that will be a full screen version of the Chrome web browser.

The description of the OS, as stated in the press release, describe it as such:

Google Chrome OS is being created for people who spend most of their time on the web… without wasting time waiting for their computers to boot and browsers to start up. They want their computers to always run as fast as when they first bought them. They want their data to be accessible to them wherever they are and not have to worry about losing their computer or forgetting to back up files… Even more importantly, they don’t want to spend hours configuring their computers to work with every new piece of hardware, or have to worry about constant software updates.

Put quite simply, this is a web browser with the basics to make it run online and offline (the offline components probably being based on Google Gears (already built into the Chrome browser) or some HTML 5 offline approach). Users will not really store much on their computer but everything will be sitting on Google’s servers, accessible from anywhere. Operating system upgrades will happen automatically in the background and everything will run in the browser. For those people expecting to run Firefox (or any other application) on this thing, sorry… it won’t happen.

Google’s view is that everything will run online and all data will be stored online. In technical terms, this is called sending information into “the cloud.”

However, there’s the question of how to plug components in there. I suspect that Google will lean heavily on its partners to release any device related drivers through the equivalent of an online application store, similar to the app store on the iphone, where Google controls the experience in terms of what gets installed on the user’s desktop and can recall or upgrade an install if needs be. The idea being that the hardware device does not need much power as most everything is coming from the web.

Developers will not be allowed to develop anything that runs on the machine itself:

For application developers, the web is the platform. All web-based applications will automatically work and new applications can be written using your favorite web technologies. And of course, these apps will run not only on Google Chrome OS, but on any standards-based browser

With these few words, Google is taking the same approach as Apple first did when itintroduced the iPhone: don’t look to us to provide you with any SDK, the web is the platform. Build your application using HTML 5 and all will be OK. This basically means that right now, Google either has no intention to provide an SDK or will keep it accessible only to select partners who want to integrate with their OS. They will first provide access to the device makers and then, over time, will create an SDK and an app store that they may even be willing to share with partners by white-labeling that store to sweeten the deal for any partner willing to install the OS.

The reason I suspect this would be part of the strategy is that pricing will not be a heavy deciding factor in whether partners will adopt the new OS and Google desperately needs the new OS to be implemented as widely as possible.

Many have said that cost was a large part of their strategy but I suspect it cannot be: Consumers have already been trained to consider the operating system as a freebie or low cost tool. On the windows side, consumers see the OS as something that comes with their machine, not something they buy separately. This effectively brings the price to 0. Even Mac users, who generally tend to be more willing to pay for products offered by Apple, were grousing at pricing on OSX, forcing the company to take a deeply discounted approach when offering the next version of its operating system for about the price of dinner and a movie. And pricing has proven to be a contrarian indicator in the netbook market, as consumers decided to pay extra for the Windows XP version of devices that also offered the same hardware at a lower price point with Linux.

Interesting timing

Having established that the company is looking to get more control of its end to end experience, one big question is why do it now? Why not do this, for example, at their developer conference, as they did for Google Wave? Why announce something that will not be available in the near term?

My suspicion here is that part of the reason for this vaporwave release is that Microsoft is about to unveil a series of cloud focused initiatives at its WorldWide Partner Conference next week: those offerings will include a major push for their cloud platform, Microsoft Azure, along with announcements regarding the Gazelle project (their own browser as an OS offering), and Office 2010, a substantially revamped version of the popular suite that will move collaboration and synchronization front and center. At its core, the revamped Office suite will not only include the existing components and features of older version but its guts will have been rebuilt with some DNA acquired as part of the acquisition of Ray Ozzie’s Groove Networks and its offerings.

I suspect that Groove and Ozzie have Google shaking in its boots. Much of Google’s strategic message is that it is more collaboration friendly than Office and, by leaving one’s documents on Google’s servers, one doesn’t have to worry so much about revisions and versioning. With Office 2010, Microsoft is fixing these problems and telling corporations that while Google’s message is nice, your proprietary information will be sitting on Google’s server. How about getting the same type of functionality but keep the documents on your own servers. Because most corporate IT department tend to be paranoid when it comes to their corporate data, the Microsoft message will resonate better.

So Google is not starting to position itself in the consumer market, hoping that applications which can run in the consumer world will eventually help tear down the corporate walls (to date, few corporations have adopted Google Apps and, if Microsoft offers a competitive product, I suspect it could remain that way for at least a decade). Having to do something, they have now decided to attack a core tenet of the Microsoft empire: its windows OS division.

The battle lines are now drawing:

• Google is asserting that the world runs solely within a browser and all application logic is in the cloud; Microsoft will assert that substantial amounts of complex tasks require the power of the desktop and the cloud is there primarily as a tool for collaboration and synchronization.
• Google is asserting that desktop PCs are merely thin clients; Microsoft is asserting that desktops are still the center of the computing experience.
• Google is asserting that the net is safe enough a place to leave all your information; Microsoft is asserting its not.
• Google is asserting that developers don’t want to run applications natively on a machine; Microsoft is asserting that the tightest integration happens at the OS level.

Each company is presenting a different vision of the cloud. I can’t say which is right as both offering compelling advantages and substantial flaws but I can highlight one important feature: in the future the software you are running will be connected to the internet most of the time and still be able to work when offline. And in that future, I suspect that the notion of software as a product you buy will probably disappear, with software as a rental model becoming the emerging approach. And I also believe that this is the beginning of the cloud OS wars.

Update: As expected, Microsoft sends out its reply.

Traditionally, the model or rent vs. own has been one that most consumers and companies have mostly considered when it came to real estate (and traditionally, people have looked at renting real estate as more normal than owning, with the possible exception of the last couple of decades, during which real estate ownership appeared more attractive). But today, that concept seems to be increasingly extending to other arenas.

Netflix

For example, Netflix has build a very solid model around renting movies over the Internet. True enough, many people will mention that rental of media dates back to the early days of the video store and were a substantial component in the rise of companies like Blockbuster (born Blockbuster Video). True also that said companies have been falling on hard times lately. But the substantial difference between what Netflix offers and the traditional rental model is focused on convenience: one could argue that Netflix’s original business model was largely centered around the distribution of physical media (the DVDs themselves) but I would argue that the true success of Netflix will be due largely to its digital distribution model, allowing for instant distribution of movies and TV shows with the click of a few buttons. The instant (and the emphasis here needs to be put on instant) access to a large media collection can easily call into question the concept of owning similar content in a physical form: What is the advantage of having a physical copy of a movie sitting on your shelf, collecting dust most of the time, when the same movie is available at the touch of a remote control button from the Internet?

However, the challenge in such concept is that once someone stops paying Netflix, the access to said collection disappears. An owned movie is paid for upfront and can be watched time and time again by a consumer but a rented one can only be watched as long as one keeps paying the owner renting party.

Apple

With Apple’s recent move to sell music tracks without any digital rights management features on it, one could safely assume that Apple is not in the rental business. Apple’s move was largely a response to Amazon’s own marketing around selling DRM-Free music but it is interesting to note that, while the restrictions on music went away, the same was not true of similar restrictions around music videos, movies, and TV shows. The lock-in that appears here is similar to that which exist with Netflix in that if you decide to end your relationship with Apple, the media you bought will stop working. Under such restricted mode, can one really assume that he/she owns the media he/she purchased?

Similarly, Apple is renting out, in partnership with telecommunication vendors like AT&T, an ingenious device called the iPhone. The reason I would call it a rental model is that use of the device is limited by the partners to people who have paid the initial fee and continue to pay a fee to the telecommunication provider on a regular basis. It is a model that exists for most phone providers, as devices tend to be tied to a specific vendor. Once again, people will highlight that it is possible to get rid of that lock-in with software but I will counter that doing so is a violation of the contract terms of the device, voiding warranty and your agreement with Apple. To claim otherwise would be similar to saying that everyone has access to as much money as they want, as long as they are willing to rob banks. (In the interest of disclosure, I should highlight here that I own an iPhone which is not connected to the “authorized provider”.)

Going a little further, Apple gets to lock-in who can and cannot play on an iPhone, only allowing developers who submit themselves to Apple’s whim and offering what is sometimes only temporary access to the userbase as release of every update to a product still has to go through Apple’s review. In other words, Apple gives developers temporary access to the iPhone user base, an access it can choose to revoke at any time.

The Amazon Kindle

All this conversation bring us to Amazon and a couple of its products, starting with the Kindle, which serves as the incentive for writing this lenghthy post. The Kindle, much like the iPhone is a pretty impressive device, bringing several technologies (always on device, e-ink) out of the labs and into more mainstream consumption. And like the iPhone, it has both fans and detractors. And once again, the Kindle offers an interesting kind of lock-in, allowing you to read titles purchased on the kindle (or through the iPhone kindle software) but allowing you access for only as long as you keep a relationship with Amazon. Where the model moves to rental is around magazines and newspapers: you may purchase subscriptions but, should your Kindle be completely full as a result of your subscription, you may loose access to the back issues you “own”.

But Amazon’s move to a rental model is not just around the kindle device. On the consumer end, Amazon now play in the same spaces as Apple and Netflix, renting out or selling digital versions of movies, TV shows, and music.

Renting at the Enterprise Level

In other example of the evolving trend moving from the consumer to the enterprise space, Amazon is now renting itself, or rather portions of its own operating capacity, to anyone willing to pay a fee. Its infrastructure (storage, computing, and databases ) are all available to organizations who are willing to put their application on top of Amazon’s own servers. Amazon offers similar solutions for payment services, and goes as far as providing space in their warehouses along with complete pick, pack and ship capabilities.

The infrastructure component is part of a trend in which enterprise vendors are now providing data center capabilities on a per data transaction costing model. For many Chief Technical or Chief Information Officer, it changes the basic questions around data center from a “Build vs. Buy” to “Build vs. Buy vs. Rent”.

In the process, it also changes the dynamics of how a business can be built as a substantial portion of a company’s activities can now be outsourced to outside players (I’ll go into more details around the enterprise related issues in my next post)

Is it all bad?

If you read this far, you might assume that, by this point, I’m going to claim that this is all about the over-reach of DRM and that it is all a horrible thing.

I’m not.

What I am trying to highlight here is that the experience around internet driven goods is changing. As connectivity speeds increase, the ability to access any movie/TV show/video/ music clip/ books / magazines / etc is going to have a substantial impact on our relationship to said goods (in a fashion similar to the type of relationship kids now have to music, assuming that music on the Internet ought to be free of restrictions, while at the same time assuming that mobile phone ringtones are something one ought to pay for).

The change in our relationship to media forces us to reassess the value of the physical good. In the case of our household, we have made a leap of faith, assuming that the content of certain DVDs will always be available online from one rental provider or another. The reason for that approach is that the experience of watching such thing on our TV using an internet connected video player is not diminished by the lack of a physical medium. Living in a more constrained space (in Manhattan, space is always at a premium), the physicality of a DVD box is actually an impediment to the experience of the medium. As a result, the internet connectivity, and the rental model, appears to make much more sense than the physical ownership of DVD boxes.

In the same way, the value of a CD collection is in what’s on the CD rather than the plastic container it’s in. Much of the value of the physical container of music has decreased: in the past, LPs were designed and the wraping of the LP was almost has important to the experience as the music itself. However, as CDs reduced the size of the cases, and music production companies spend less time on designing custom boxes, physical CDs became more of a commodity, with the music on them being the only thing that truly distinguished one CD from another.

But what about books, magazines, and newspapers?

To a large extent, I would venture that the relationship we have with magazines or newspapers is different from that of a book. When I first saw the Kindle, I was not attracted to it because I could read books on it but rather because I might be able to subscribe to newspapers or magazines. The clear line falls in the arena of experience: with a few exceptions, magazines and newspapers are read and then discarded. The ephemeral nature of that experience archetype seems to make such relationship a prime candidate for digitization: Once again, the convenience of something like a Kindle seems to trump the experience of having to fold a newspaper in a crowded subway or the guilt associated with recycling large amount of newsprint or magazines on a regular basis: because the intrisic value of newspapers or magazines is as conveyors of temporal information that now appears to be archivable and retrieveable online, the need for ownership of that data appears to be lowered.

Books, on the other hand, are a different issue. Reference books may lend themselves to a good digitizable model (O’Reilly, for example, has had success with its Safari offering, as have encyclopedias like Brittanica and the OED) but fiction books may be in a different class. The book as object may be falling into the same class as those ancient LPs, being designed as a full object rather than just its content and rental of such good (though people will mention that books have been something you can borrow from a library for a long time) may take longer to break through as the advantage of reading such a book on a Kindle is not necessarily higher than that of a physical good. I may be romantic in my thinking, attaching to books not only the content and the packaging but its experience in a greater space, as each book I own has, in itself, a number of memories attached, in the form of sand from a beach where it was read, or wrinkles from being carried on a trip or fold marking and writings from a particular era. In those rare cases, the books serve as containers for more than the stories they held when first presented on a bookshelf or through the online presentation they had: they are containers of a full experience and that, at this point, is not yet something that any digital device (whether it is a kindle or other) has yet been able to reproduce.

Televisions: Connected and Flat

It’s been 15 years since the Internet revolution started to take hold and about 3 since video on the Internet has become a more viable option. With the rise of devices connecting portions of the Internet video space to your television (for example, allowing to buy movies or TV shows from the iTunes store or download video streams from Netflix), we’re seeing more ways to connect the Internet to television without requiring a computer. I suspect this trend will only continue and expect this year to mark a turning point with some of the first ethernet-enabled televisions appearing. This type of connection will be available first from Samsung and LG, who have already built such connectivity into their BluRay players so I would expect them to port those capabilities to TV sets shortly.

The other improvements in the TV space will include the introduction of more OLED screens on the high end, providing a third option in the flat screen space ( LCD and Plasma being the other two.)

The economy will pressure many of the companies in the space to drop their margins on televisions and I wouldn’t be surprised if flat screens start dropping under $500 by year end. This will force some of the last CRTs off the market, leaving Plasma as the cheap choice, LCD as the average one, and OLED as the high end one.

BluRay: Losing to Downloads

2009 ought to have been a good year for BluRay. Having killed its main competitor in the next generation physical disk format (HD-DVD), BluRay appeared to have the field open to itself.

But through both blunders on the part of people in the media and consumer electronics space, BluRay has succeeded at painting itself in a corner: having priced disks at a premium, executives have to justify the advantage. The approach they took was that BluRay was a higher video and audio quality experience than regular DVD. But this has represented a major hurdle for them as most consumers are fairly happy with the quality they are getting from their existing DVDs.

The other issue is that the war for a next generation format was not about a physical medium, as they had expected. Sure, Sony and Toshiba tried hard to make it about that, because royalties on selling rights to such formats can go in the billions of dollars over several years, but truth be told, the market bypassed physical as a medium almost half a decade ago.

With the rise of the iPod, people have grown more comfortable with the idea that they could buy a media asset (a song, a TV show, or a movie) electronically without having to deal with the piece of plastic that carries it. The revolution started with music because those files were smaller but, as bandwith availability increases, the amount of time required to download a TV show or movie is dropping. Along with the availability of streaming video, this has changed the level of expectations when it comes to media consumption in such a way that, increasingly, people want access to their media without having to deal with a physical component to carry it (one could argue that the on-demand shows provided first in hotel rooms in the 90s and on most cable boxes in the last few years fall in the same space.)

So downloads are going to be the thing that undoes BluRay. As a result, I expect Sony to start touting downloadable media more heavily than BluRay in its PS3 marketing. I also expect most BluRay players to offer some way to access internet media either through direct partnerships with the providers (Netflix, for example) or through the creation of an open format content providers could leverage.

Mobile Phones: Smart is in but so is Simple

The recent success of the iPhone has gotten every phone providers to focus on developing more smarts for their phones, essentially turning them into multi-use devices. This trend is hardly new (I’ve owned a smartphone since around 2000, starting with the first Treo) but its acceptance by the general public is.

What I expect to happen in the space this year is a continued drop in prices as new contenders enter the space. Palm will make a play at the space with a new net-centric phone and operating system that will come with a under $100 price-tag to follow the recent success of their Centro offering. This will, in turn, force Windows-mobile and Google Android-based phones to come down to the same price range, with some of them even being offered by carriers for free with 2 years contracts. Apple, on the other hand, will keep its $199 price tag and may offer a software upgrade that would turn on video recording on the iPhone. RIMM, with its Blackberry offering, will continue to be the darling of the business world but most of its efforts in the consumer space will be rebuffed.

Meanwhile, on the other end of the spectrum, we might see the rise of phones that have a single feature: making phone calls. Those phones will be marketed to two different segments of the market: elderly people, who barely use computers and want something that has as little complexity as possible and the first grade set, with some level of parental control being available on the devices.

Computers: Smaller, Cheaper, and More Wireless

Netbooks started making the news last year. Sporting a web-browser and generally less power than traditional computers, PC makers have discovered that there is a large audience for such devices. This is a problem with chip makers like Intel and AMD who have relied on Moore’s Law to get faster and beefier processors out the door at heavier costs to consumer. The problem they are faced with today is that most processors are good enough for what people want to do (ie. read email, go on the web, and maybe edit a few documents). So I expect netbooks to be the only real growth sector for PC makers. This represents quite a challenge as margins on such devices are low and the business model around them is a volume one.

The market is now fragmenting into 4 segments:

• Netbooks, which are probably good enough for most people.
• Powerhouse machines, which are used primarily by computer gamers.
• Office machines, which will demand more security features (eg. Lenovo)
• Luxury machines, which are more in line with the fashion space than the electronics one (eg. Apple MacBooks)

I expect a slowdown in the number of machines sold in the computer games market and a flattening in the office market. This leaves netbooks as the growth area and I would put a question mark on the luxury machine market as I’m not sure it could see more growth if the economic climate continues turning sour.