A year ago, I looked at the availability of recent blockbuster hits in online stream and discovered some interesting patterns in online stream offerings. This year, I’m doing the same with the 2011 list of box office hits. The great news is that we appear to see some progress.

2011: Box Office Win­ners availability

For each movie of the top 100 movies at the box office, I pulled data on for streaming info on Netflix, Amazon on Demand, iTunes, and Vudu. I also pulled up availability of DVDs to use as a yardstick in terms of overall movie availability. The final chart looked like this:

But the information, in a raw form, doesn’t really tell us much. To get a better sense of where we are, we need to re-aggregate the info.

Aggregate rental data

Looking at the rental market, we can now see the aggregation providing us a clearer picture

The data shows that Netflix appears to be missing the Flix part of its name when it comes to streaming, as it offers only 5 of the top 100 box office winners of 2011. By comparison, pay-per-view seems to be doing a better job at making top hits available for streaming, with the numbers declining as you go deeper into the list. So top movies seem to be widely available this year (in fact, 64 percent of the top 25 movies were available for streaming only 9% short of what’s available on more traditional formats like DVD).

Another interesting thing to note here is that the data seems to be relatively consistent across online pay-per-view services with Amazon, iTunes, and Vudu apparently getting access to the same movies, leading one to think that there is little differentiation between those products (of note: Vudu has actually tried to differentiate on offering by providing 7.1 surround sound and 3D movies to available TV sets.) With prices across those services being roughly the same (movies are renting for $3.99 to $5.99 on average), there is a question as to how those services will be able to provide a differentiated experience in the future.

But the big advantage of doing this again this year is that we can compare the information against last year’s data and see if progress has been made:

The story here isn’t that pretty for Netflix, which has lost substantial ground from last year’s position, offering less than half of the hits it used to offer last year. If you think of their recent moves towards creating original content, it appears that Netflix is slowly moving away from its initial strategy of providing online streaming of movies on a subscription basis and moving more to a model more akin to that of a TV network.

Another interesting development here is that online streaming seems to be some losing ground compared to DVDs. One could assume that, as a new technology, online streaming would be gaining ground on DVDs but that doesn’t appear to be the case. Granted, we only have a couple of data points so next year’s data will provide us with a better understanding as to whether hollywood is trying to slow down the progress of online streaming.

Sales Data

If we are witnessing such a slow down, one of the reason may be that movie studios are looking to maximize revenue coming from sales.

The first interesting item to show up here is that we are now seeing remarkable consistency in availability of titles on streaming services. However, the availability of legal movie streams is still trailing the availability of movies on DVDs. This gap seems to be less pronounced when it comes to the top of the list than when ones goes further back into the box office records.

Once again, looking at how availability this year compared to last year’s availability provides some interesting information:

As opposed to online rentals, sales of streaming movies seem to be gaining on sales of DVDs, with an increasing parity in availability of movies as bits (streams) or plastic (DVDs). This appears to confirm the suspicion that movie studios are trying to protect their sales revenue at the expense of promoting pay-per-view.

Conclusion

The past year has seen an increasing alignment in the libraries of titles offered by online streamers in an on-demand basis. At the same time, we have seen Netflix apparently abandon its strategy of offering popular movies on a subscription basis. Next week, I will look at whether Netflix’s efforts are getting more focused on television streams or whether we are seeing them pull back across the board in terms of availability of more recent content.

We are also seeing Hollywood now treating online as more equivalent to DVD sales, offering titles for sale online at roughly the same rate as they do on DVD. Let’s hope that this trend continues to hold and that the industry sees the wisdom of providing online streams in an earlier release window. A few independent movies have done simultaneous releases online and in theaters this year and Hollywood has a potential to increase its revenues if it were to increasingly go in that direction.

Two sets of data only provide a small view into an overall trend but I promise I will continue growing the data set and revisit those numbers next year, giving us a better sense as to whether there is any changes in this segment of the media distribution puzzle.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Where the hits are streaming in 2011. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

With a new year kicking in, it’s time for a new batch of predictions.

Business

One of the easiest predictions to make is that Facebook will go public this year, and it will manage to do so in a very successful IPO. I suspect that this may actually be the high watermark for the current boom cycle as Facebook is the most successful of the companies that were born of the Web 2.0 cycle. In a fashion similar to what happened with the Netscape IPO in 1995, the Facebook IPO may create a small window of opportunity for many other companies to go public.

On the private end of the spectrum, I think we will see the following companies see some form of liquidity event via either acquisition or IPO: Twitter has a strong chance of being acquired by Apple, which will quickly merge the offering into all of its products; Another possibility is that Twitter and Tumblr merge to create a mico-blogging powerhouse spanning both ends of the country. Meanwhile, Foursquare will either IPO or be acquired by Facebook or GroupOn in a share-only deal. Meetup will go public, creating another great story for the New York technology scene.

When it comes to Google, we will see the company continue its integration of Google+ into everything it does, with the biggest impact being the move to migrate all Orkut users to the new service. This will create an outcry in countries like India and Brazil, where Orkut has been popular but will leave many in the American media to wonder what the big deal is as Us customers have mostly left already.

Meanwhile, a lot of the companies that went public in 2011 will meet some strong headwinds as the rigor of the public market make it much more difficult for them to maneuver. Expect some changes at GroupOn and Zynga, with many people questioning their business models and long term viability.

Media

For a couple of years, there’s been a slow ramp up to the integration of the Internet with television. The rise (and to some extent fall) of Netflix, along with the entrance of new players like Hulu and Amazon, have made video distribution on the big screen one of the areas where the Internet and television have already intersected.

However, other areas of interaction have, so far, not been quite as successful. Apple is still treating AppleTV as a hobby, Google has mostly failed so far with GoogleTV, and other players like Roku and Boxee have, to date, been only adopted on the fringe.

In 2012 all that changes as the TV screen takes center stage in a way that a new generation of smart phones arose after the 2007 iPhone announcement. First of all, we will see some increased standardization around how to deliver content to TV screens, with agreements from TV set manufacturers like Samsung, Panasonic, Sony, and Vizio agreeing to some level of standardization. Apple will also announce a large screen product it will position in the TV market: The set will have AppleTV’s technology built-in, be accessible over WiFi, and connect directly to the iTunes store as well as integrate with the iPhone and iPad and other Airplay compatible devices. The set will run iOS and will be managed by a remote that runs on iPod touch, iPhones and iPads.

Meanwhile, cable companies will start opening up their platforms with some software development kits allowing to access content on the set top boxes they use. Once the Motorola acquisition is completed, Google will start transitioning the Motorola set-top boxes, which are a large part of the cableTV market, to GoogleTV, increasing the footprint of the service in the marketplace. Along the way, we will also see GoogleTV become more streamlined and less ambitious, focusing on delivering Android apps to the big screen instead of trying to rebuild the whole TV industry.

The concept of cord-cutting will continue to gain support but will not yet jump into the mainstream consciousness. With shows now being available exclusively on the likes of Netflix, we might see some interesting positioning whereas some TV carrier will offer Netflix as a premium service.

Politics

Social media will dominate the political cycle in 2012, with Twitter, Facebook, YouTube, Tumblr, and Meetup becoming part of the political operative tool belt. However, traditional electoral models will continue to be disrupted by the rise of distributed networked organizations like Occupy Wall Street, Wikileaks, or Anonymous. Except those players and new ones built on a similar model to have a substantial impact in terms of registering new voters and getting those voters to the polls in elections in Europe, the Middle East, and the United States.

In the US, the 2012 electoral cycle will see Republicans select Mitt Romney, a candidate most of their electorate is not very excited about, to run against Barack Obama. With the unexpected support of Occupy Wall Street and its splinter organization, Obama will win re-election as issues around economic disparities and job creation continue to be big topics of discussion.

In Europe, expect to see incumbents toppled in many countries: with major elections coming up in France, Spain, Russia, and Finland, it is possible that we will see a major change in political alignments across most of Europe, along with an increase chance of protest in those different countries. In Russia, in particular, we may see the internet play a crucial role in organizing protest if there are questions regarding voting irregularities.

The continuing protests in the middle east region may also lead to substantial changes in governance in several countries including Bahrain, Syria, and Saudi Arabia. During the presidential elections in Iran, we will see increasing clampdowns on internet sites as the government tries to shut any means of communication available to large groups of protesters.

… and of course, the easiest prediction to make is that the media industry will continue to push for more restrictions on the Internet, leading to more activists pushing back.

Technology

2012 is going to be an explosive year for technology.

First of all, we will see HTML5 roaring back, as many companies realize that it is cheaper to build in HTML5 and that the gap between platform specific code and HTML5 is shrinking. The introduction of WebGL, and proper implementation of geolocation and caching within mobile devices will give developers the ability to develop applications in HTML5 that can rival some of the offerings of native code. This is a move that will be resisted by platform makers like Apple and Google as it will loosen their stranglehold on their respective platforms; however, the split side of this is that effort is that some large companies will look to free themselves from said control by creating HTML5 instances of their own products.

On the mobile end, the Microsoft/Nokia will get some real traction with Windows Phone becoming a strong third player in the mobile market. Apple and Android will continue dominating the market with Microsoft still being a distant third. RIM’s position in the market will substantially worsen and will either be sold or go into bankruptcy.

Enterprise cloud strategies will continue to grow, leading to a growing divide between companies that can get efficiencies through the use of cloud computing and companies that are kept by different regulatory frameworks from being able to realize the financial gains offered by such model.

3D will be a hot buzzword, with the introduction of consumer-oriented 3D scanners and 3D printers that will push the idea of scanning and printing your own plastic parts. This will lead to some controversy around the concept of 3D objects piracy popping up in the media, with little actual evidence to back those fears. On the 3D projection end, we will see the rise of designer 3D glasses and the first glasses-free 3D television hitting the market, as we as a few consumer-grade 3D cameras. At the same time, we will see more and more technology to upscale 2D to 3D, in an attempt to develop a larger consumer market for 3D technology.

On the PC end, netbooks will disappear as a category and the hot new trend will be to offer thinbooks that mirror much of what Apple is offering with the Macbook Air product line.  Solid State Drive will aso increasingly become standard on new computers and we will see Apple actually announce they are getting rid of traditional hard-drive in all their product offerings. This will lead to their being able to announce that all their hardware can now run for at least 7 hours on a single charge.

Any which way, we will be revisiting those predictions at the end of the year and see how well (or badly) I did. I wish you, dear reader, a very happy new year and look forward to a continued dialogue in 2012.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The 2012 Crystal ball. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Kinect and the gesture based world

Last year, Microsoft unveiled the Kinect, a revolutionary new device that allowed Xbox 360 users to use their bodies as the way to interact with computer games. With the Kinect, Microsoft solved a substantial interface problem that had been slowing down the success of any computing-intensive efforts on the TV screen: How does one increase functionality on a large screen without requiring more complex remote controls.

It was already a given that computer keyboards and mice were not the way to interface with a large screen, as the added complexity they added to a living room setup were making for a more annoying user experience than simple TV remotes. In a world of users being already annoyed by the proliferation of TV remotes.

By introducing a mode of interaction that allowed to get rid of contact with the screen, either through a remote control or by directly touching it (a mode that works for smaller screen like phones or tablets but gets more complex when the screen is larger and thus farther away from the user), Microsoft created a whole new interaction language for computing devices and has made it possible to grow substantially beyond the traditional mode of interfacing with a computer interface.

The kinect interface is something that was predicted as far back as the early 1990s, when AT&T ran its now famous “You Will” TV ad campaign in the United States, and was later popularized by Steven Spielberg’s 2002 Minority Report movie. The idea of gesturing in the air took substantial hold in the collective consciousness and when the iPhone and iPad were introduced, people looked at that multitouch model as the answer.

But there has long been a challenge as to how to deal with larger screen. It is difficult to consider users stepping up to a 42 inch (or larger) TV screen and touching the surface of the screen in order to get what they want. So the next challenge became how to get rid of that last piece that stopped the users from interfacing. Nintendo first advanced the idea by putting a sensor in the joystick to the Wii.

 But the Wii still required some component to interface with the system. The real genius of the Microsoft solution was that it did away with every interaction components. In returning to a basic approach using only our bodies, Microsoft created a model that will continue to impact computing for decades to come.

Siri and the voice-driven world

Meanwhile, Apple had also been considering how to get rid of direct touching of a device. Their research led to an innovative company that was doing interesting things in voice-related controls: Siri, Inc.

Upon seeing the company, Apple promptly acquired it, realizing that the approach Siri was taking to voice-enabled interfaces was one of the next components of the future of computing.

There has been many other efforts at doing voice-controlled interfaces, dating back to the 1990s and it has long been assumed by the mainstream that voice-controlled interfaces were the way computing was headed. In Stanley Kubrick’s “2001: A space odyssey”, we all met HAL, a computer that could handle conversations with human beings with some disastrous effects for the human. With the possible exception of Star Trek, the ability for a computer to carry on a conversation with a human being has generally been presented as a disastrous thing for humanity: a long strand of movies showed computers and robots (basically humanoid computers, as far as movies are concerned) have shown that the ability to carry a conversation with a human being is the first step to a computer deciding to rebel against his owner. Whether it is HAL in 2001 (1968), Delos Control in West World (1973), Master Control Program in Tron (1982), Edgar in Electric Dreams (1984), or Skynet in the Terminator franchise (1984, 1991, 2003), humanity always seems to be endangered by talking computers.

When technological fears are represented in media forms, they merely represent the farthest the imagination of a society can go when it comes to imagining the peak of what is possible with technology. So computers being able to carry on conversations have long been a holly grail of the computing world… and now Apple owns something that may point to the right approach.

A question as to whether this type of technology will become more than just something that can be found in Apple products is going to turn not on technical merits but on juridical points as Apple may have locked up most of the potential roads forwards by patenting substantial portions of the space. Unless they decide to make the technology available to others, it may find itself locked into the Apple ecosystem with no way to get out for a long period of time.

However, Apple’s competitors including Google and Microsoft will probably consider this an important enough space to attempt to go after it with all their might. As voice driven interfaces have long been seen as a high mark on the technological and technical advances scale, those companies will not want to be left out of what may be the next big thing.

Lessons in hidden complexity

What Siri and the Kinect have in common is that they have managed to package up a lot of complexity into what appears to be a very simple solution.

The Kinect includes infrared projectors, an infrared camera, a video camera, motion sensors, several microphones and motors to track individuals and enough processing power to handle audio and video recognitions into a sleek black bar that sends infrared light all over a room, records where the light is not showing and based on that makes some guesses where bodies are located while at the same time tracking audio and video cues to direct whatever program is being used with it.

Siri records what its user says to it, sends the recording to a server which turns that recording into text it translates it into actionable material before identifying the right information database to retrieve information from,  getting the necessary information, packaging it into a file that will be read back by the device and sending that file back to the phone (all this in a matter of a few seconds).

The big secret in the success of these offerings is that they do not scream about all the innovation and complexity. In fact, they go out of their ways to hide that complexity and there is a lesson here for most startups: it is not because things are complex that you should display them as such; quite the contrary, as new companies should address complex problems and go as far as possible to shield users away from that complexity.

Disappearing devices

The other important thing to pay attention to here is that we are seeing the increasing disappearance of the interface. In the early days of computing, the keyboard was the way to enter information into a machine (I know some will gripe that there were punch cards before that but I’m talking about the modern era of computing); that was eventually augmented by other devices like the mouse and touchpad, which remained the dominant form of interaction with computers over almost 3 decades; more recently, we have seen a more direct interaction with screens as touch interfaces have gained prominence on new form factors like mobile phones and tablets. Each step of the way, we are seeing the friction between a user’s input and the computer’s response slowly fritting away, with less and less being between the user and the device.

But in each case, the interaction was between the user and the computing device itself.

With whole-body and voice interfaces like the Kinect and Siri, that last amount of friction is disappearing and we may be entering a new era of ubiquitous computers, where the computing devices just disappears. I think the current direction of those technologies points to a potential future where we could see the iphone nano, a new screen-less version of iphone that would take the form factor of a simple pair of headphones with no extra wires. All interactions would be handled via voice command with hardly any need for a screen.

Meanwhile, in the living room, your TV will be both voice and motion aware, turning itself off when no one is in the room and completely controlled without requiring any physical remote control (something that will guarantee high acceptance as the proliferation of remote controls in the living room has become a modern annoyance).

That future is not too far away. As an eternal optimist, I would put its promise at somewhere around 5 years from now but as a realist, I also need to warn that it is likely this could take as much as a decade to reach the mainstream. So get ready for new interfaces and if you want to beta test the future, grab a Kinect or a new iPhone 4S: they are the first of many such devices that will populate our world within the next decade.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Beyond touch interfaces. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The end of an era. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Desktop and the Web as one

Much has been written already about how Microsoft is trying to be all things to all people by offering a single operating system for both tablets and computers. The company announced an operating system that marries a lot of the tablet experience as presented by the likes of the successful iPad, and the many other contenders for the crown currently on the market, with what has more traditionally been known as a windows PC.

Along the way, Microsoft has introduced Metro, a new way to interact with Windows that brings much of the tile-based experience they first unveiled with their Windows Phone 7 operating system. Like them or not, tiles are Microsoft’s attempt at getting a spot at the mobile table and they are now taking this mode of interaction from the phone to tablets and PCs. The Metro UI is probably the single largest change in the way Windows has looked since Microsoft unveiled Windows 1995, an operating system that was a significant user-interface departure from its predecessor.

Lost in the commentary has been the fact that tiles are programmable using HTML, CSS, and JavaScript, three core technologies used by millions of developers around the world. With this, Microsoft is basically saying that the languages that power most of the user interfaces for the web should be the languages that power most of the user interfaces for Windows. This is both a radical departure from mainstream thinking (although Palm tried to go down that route with WebOS) and a return to the source for Microsoft.

Looking back, looking forward

In 1997, I had the privilege of being among the people selected as launch partners for Internet Explorer 4. As such, I was able to see the product evolve from idea to release, seeing along the way many false starts and ideas that did not make it into the product. One of the most intriguing idea at the time was that of replacing the UI shell with a web browser one, essentially allowing for HTML  widgets to run directly on a user’s desktop.

I was smitten by the feature and heartbroken when I learned that it would not ship for reason that went beyond the technical. Around the same time, Microsoft was in a major war with Netscape and rumors of an anti-trust lawsuit being launched against the company were swirling. At hand was the idea that Microsoft’s ability to tie the web experience to its near-monopoly on operating systems gave it an unfair advantage in the marketplace.

While it is true that Microsoft had the leading position in the operating system, there was little evidence of the success that resulted from it tying other components to it: its web browser offering were poor and had made little headway in the marketplace, where the Netscape browser held a significant lead. So there was little evidence that just tying two products would help lift both. It wasn’t until Microsoft started matching features with other successful browser that their offering started gaining traction.

But none of this mattered in the fall of 1997 and the idea of integrating a user’s desktop with the web was either too ahead of its time or seen as too risky by the legal departments at Microsoft. The net result was that when Internet Explorer 4.0 came out, the feature to connect web and desktop had been reduced to a way to push content to the browser and potentially use it on screensaver, an offering that fell far short of the promise.

Moving forward almost 15 years, Microsoft is no longer seen as a threat on the technology market. The antitrust lawsuit has made the company tentative in its offering, often staying as far away from controversy as it can. The new darlings of the technology world have taken over most of the mindshare that was held by the Redmond giant and only a few faithful follow what the company is about. It is not a significant player in the mobile phone market at this time (this title is split between Apple, with its iPhone line, and Google, with its Android ecosystem) and many see the tablet market as one that is making the personal computer, the very arena where Microsoft is king, irrelevant.

So the house that Bill built had to do something dramatic to regain attention. It had to offer an operating system that would meet today’s users’ needs, an operating system that could compete, in terms of setting the agenda, with the much smaller iOS and OSX produced by Apple.

Along the way, I suspect that somewhere in Redmond, some of the people who had tied the web and the desktop in 1997 started talking about how this could be their time…

… and the result is the Metro UI:

OSX Xeroxing or not?

Many of the Apple zealots have pointed to the Metro UI and the fact that Microsoft can still run a more traditional Windows look in parallel as a showcase of why the company will “fail” in the market. They present this as a example of Microsoft being unable to make the tough decision of separate offerings for separate computing devices. They highlight that Apple is much smarter in its approach because it has decided to create two operating systems: OSX for traditional computers, iOS for everything else.

So I think it’s fair to assume that no one can say that Microsoft is looking to copy Apple here. I think it’s OK to point out that Apple fans have basically said that the idea of marrying a mobile experience with a PC experience is not terribly smart.

That being said, it’s also interesting that Microsoft and Apple seem to be sharing a view of the future. And that view seems to say that smaller, single purpose applications bought from an online store will take over your whole screen, scraping away any piece of the visible interface. For Apple, this is best manifested with the version of OSX they most recently released (Lion) which offers the experience I described above and tries to marry some of what the company has learned from iOS with what has traditionally been seen as their computer operating system.

So the idea of an App store is definitely something where Microsoft is following Apple; the idea of running apps in full screen with no vendor interface is also something where Apple had the lead; the idea of bringing tablet and phone-like behavior to an operating system is something Apple has claimed as its own.

So the only question remaining is really: should we have separate operating systems for separate devices or should we have a single operating system that can be used for multiple devices. For Microsoft, the answer is now the latter; for Apple, the answer to date has been that OSX is for computers and iOS is for everything else. My question to Cupertino might be about how long it will be before they decide that one OS is sufficient for both computers and all other devices.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Windows 8 is Microsoft’s bet on the future. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The tablet market

Today, the clear leader in the tablet market is Apple, with its iPad. According to a study by iSuppli, the device costs Apple between $230 and $346 (depending on configuration) to manufacture and is sold between $499 and $829.

Meanwhile, HP came out with its touchpad and, thanks to another isuppli study, we learned that it costs between $306 and $328 (depending on configuration) to manufacture it. Currently, the company has put those device in fire-sale mode, retailing them for $99 and $149, leading many to highlight that the company is losing large amounts of money.

Comparing the two, based on roughly the same feature sets, we get the following (for the sake of comparison, I used the non-3G version of the iPad since HP has only sold WiFi enabled tablets and doesn’t have a 3G product out):

Looking at this chart, it is clear that Apple is substantially more efficient in its supply chain, being able to build a tablet for about a third less than HP. But what also becomes clear is that the Cupertino company has been pricing the device to maximize profit and there seems to be a lot of room for selling tablets at a lower price without losing one’s shirt.

But how much would people be willing to pay?

Listening to the market

One of the most fascinating things I’ve noticed recently is that the price of ebay auctions, on most goods, tends to be relatively consistent as the auction comes closer to its conclusion. Take any given good and you will find that there is relatively little difference in the bids on several auctions for the same thing ending within minutes of each other.

Another interesting artifact is that the price of a second hand device on craigslist tends to be close to the price of the same device at the end of an ebay auction.

Those two facts seem to point to a natural equilibrium when it comes to pricing goods, where a majority of sellers and buyers cluster around a price point that seems to be what the market is agreeing to as a price point.

On its face, it’s interesting to see that iPad2, as a product, does not seem to loose much value on the resell market, with second-hand versions reselling for roughly the same price as the retail one.

However, there is an interesting phenomenon here with the HP Touchpad selling for over $100 more in the after-market than the suggested retail price. While this is partly due to scarcity, it is interesting to see that the price ceiling has actually sustained itself for the last couple of weeks, even as more supply has been made available.

The evidence seems to point to customers being interested in buying a 16Gb tablet for between $200 and $250 and paying up to $50 more for double the space. The challenge still remains that HP actually would continue losing money at those price points.

Looking at this, however, it seems the losses could get lower if HP priced the market closer to what the market currently seems to dictate. However, a loss is a loss and there would still be question as to how the company could actually make this a success.

Options for HP

Based on the above data, it looks like there could be a chance for HP to attack the marketplace and make WebOS the second most popular operating system in the tablet space, succeeding in establishing WebOS as an alternative to iOS and potentially besting Android in that arena. To do so, the company could look at a number of different approaches to subsidize the difference in price.

One of the first things HP might want to look at is the lifetime value of a customer. Is there a way they could recoup the $28 or $56 they are losing on that customers.

Could they, through the sales of apps, make that money back? Assuming a 30% cut, as most people seem to take these days, it would mean that they would need to sell $96 (for the 32Gb) or $186 (for the 16Gb) worth of app. Assuming apps are selling for $3 per app (which a cursory look at the recommended apps seem to point to as an average price point), they would need to sell an average of 32 apps per 32Gb Touchpad sold or 62 apps per 16Gb tablet sold.

What about movies? A downloadable app on the Touchpad is called the HP movie store. It appears movies rent for $3.99 and sell for $20. Assuming the same 30% split, they would make $6 on every movie sold or $1.20 on every movie rented. To recoup their cost, they would need to either sell 10 movies per 16Gb tablet or 5 movies for the 32Gb model. Alternately, they would need to rent 47 movies for the 16Gb model or 24 on the 32Gb one.

Assuming a two year life on the devices and its associated customers, it seems that recovery of cost could be realized.

But let’s not forget some of the other (potentially more lucrative options). As a successful alternative to iOS, the company could develop an ecosystem of components (keyboards, cases, etc…) that work with the device. They could charge a small fee for certification as “Made for HP Touchpad” and receive revenue from that source. Furthermore, with a strong position in the market for their offering, they could then potentially license out the operating system itself (as more and more devices enter the market, the chances that more developers will be attracted to the platform increase), generating enough revenue to more than subsidize the cost of the initial production run.

Looking at the production costs of Apple’s iPad, it also seems clear that there is much that can be done to optimize the supply chain and manufacturing of the Touchpad. HP could initially target their own internal efforts with a goal to get the Touchpad produced at a rate that was low enough that they could first offer them at cost and eventually make a small profit on the hardware itself.

As a long term play, though, it looks like the main goal of this slew of HP touchpad would be to establish WebOS (and thus HP) as a leader in the tablet market. To do so may allow the company to build some strong margins on OS licensing at some point in the future. However, it would require a willingness to take some short term losses (under 12 months) to establish a strong position in the market in the long term.

Options for tablet manufacturers

It seems the HP touchpad has given the industry an idea of what the market is willing to pay for a tablet not produced by Apple. While it is true that the WebOS operating system is very polished, I think that factored less in people’s interest in the device. The market wants an inexpensive tablet that works relatively decently and they’re willing to spend $250–300 for it.

There are now rumors that Amazon is considering entering the market with its own Android-flavored tablet, priced in that range. To do so, considering the fact that Amazon will generate revenue from alternate sources like the Kindle store, the app store, and streaming movies and TV shows, seems to be a natural evolution and it appears that a pricing strategy that would be the tablet in the sub-$300 range makes sense. If they do so, it will be interesting to see how their offering fares. A failure to take off could translate in trouble for Android as a lower price point Android offering ought to be successful and failure would mean a problem with the OS. If it takes off, Amazon could reignite the tablet market and cut off HP’s chances to establish their operating system as a strong contender in the tablet space.

Because technology costs continuously go down, it is clear that we will see a sub-$250 tablet within the next 24 months from someone other than Apple (Apple has a tendency to price rigidity and may drop some older generation iPad models to the $299 range but I doubt they would go much lower than that). Efficiencies in production and supply lines make that not just a possibility but pretty much a sure thing.

As to who will control the second most popular operating system (assuming Apple retains its lead) in the tablet business, it’s really up to HP to decide how it wants to play. It has a unique opportunity to take that spot right now but the window of opportunity may be closing extremely fast for them.

As a final note, realize that the observations I’m making above are only relating to the tablet market and do not affect the smartphone marketplace at this time: that ship has mostly sailed and it’s a two-player game at this time: iOS and Android.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Pricing a Tablet. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The landscape so far

To date, many technology companies have tried to go after the TV screen as a market to conquer and most have failed. For example, Microsoft has, for a long time, tried to create a Media Center edition of their popular Windows operating system but outside of a few computer geeks, that concept never really took off. On the hardware end, companies like Boxee, Roku, WD (with the WDTV), Apple (with the Apple TV) and Google (with Google TV), have tried to offer a system that would connect users to a variety of internet content. Roku and Apple have had some early successes in the market, largely due to their pricing strategy.

On the provisioning end, companies like Netflix, Hulu and Amazon have started working as aggregators of streaming content that is delivered straight to your TV, without the need of a computer. Their strategy has been to work with consumer electronic companies to embed their players into DVD players and televisions. Along the way they have solidified their position in this market, going beyond early adopters and far into the mainstream.

And yet, something may have been missing from the equation to make internet TV a business that is as viable as computer or mobile software.

But things could change very rapidly.

A second wave for the third screen

In today’s busy media attention environment, there are three fundamental screens: your computer, your mobile, your television. The technology sector has successfully navigated itself in a position of control over the first two but a grasp of the third one has remained elusive. Consumers were mostly not interested in adding new devices to their entertainment centers, leaving even Steve Jobs to consider his own company’s attempts in the space as nothing more than a hobby.

But if recent rumors are true, the war is about to heat up again. A couple of weeks ago, Google announced it would acquire Motorola mobility. At the time, most people viewed it as purely a patent play. However, buried inside Motorola is a little extra reward: the second largest player in the TV set-top box provider in the United States (the other is Cisco). So if a cable TV box has the name Jerrolds, General Instruments, or Motorola on the front, it will soon be a Google box. And right now, those brands represents almost a third of all cable boxes in the world, giving Google a very strong foothold in the living room. The challenge for the search and mobile giant will now be to find a way to upgrade all those boxes to support the Android Operating System.

Meanwhile, there have been rumors that Apple is going to start building its own television, embedded with the iOS and all it supports. The rumors seem to be corroborated by a few facts.

In a January investor call, then-COO and now CEO Tim Cook mentioned that the company had secured access to supplies that were “focused in an area that we feel is very strategic.” In February, Apple paid close to $4 billion to secure supply of LCD screens for the next two years: at the time, the general consensus was that it was to cover iPhone and iPad screens but why make that assumption? It seems that some of those LCD agreements could be linked to the development of a TV set line, long rumored by Apple watchers and I would venture than when it comes out, it will be called the iTV (for Internet TV), explaining why Apple’s current set-top box product does not carry that moniker.

The revenue opportunity

Interestingly enough, when you look at Apple vs. Google, and some of their moves towards the living room, you seen pieces of their DNA show up. In Apple’s case, it’s all about optimized supply chain management combined with a piece of hardware that they will probably sell at a premium compared to the rest of the market. For Google, it’s about a subsidized hardware that is given for free or almost free to its users but generating through another channel (probably advertising).

At the same time, in both cases, the attempts will be towards trying to integrate their other offerings (for Apple, the iOS ecosystem and for Google, the search engine and Android) with the TV screen. In order to do so, they will not only have to work on ensuring a smooth transition from one screen to the other but alos provide development platforms and tools for others to build on their offerings (Today, for example, Roku, which initially was focused on streaming media, is offering a box that can now support casual games). I suspect as soon as the AppleScreen and GoogleTV start getting more mindshares, we will see more videogame offerings pop up on those devices, eventually upsetting Microsoft (with its Xbox), Nintendo (Wii), and Sony (PS3).

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The third screen. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Many Questions

The mobile market is basically broken out in a 2 + 2 configuration: Android and iOS are the two contenders you can’t do without, while RIM and Microsoft are the two you might want to keep an eye on. Looking at this through the lens of limited resources, it makes for tough choices. If you only have resources for one platform, which should it be? If you have resources for more than 2, should you also try to reach a third platform (and if yes, which one) or should you pour more investments in the first two?

In order to better make those calls, one must assess the market position of each of the players and place some bets as to where those players will be in 12 months. While interesting from an intellectual challenge, it can be emotionally wrenching from a company standpoint as some of the bets you make today could help turn your company into a winner or loser.

App or web?

Mobile apps seem to be the largest trend here. While many new apps have come up over the last few years, there doesn’t seem to be much discussion of mobile web offerings. Curiously, the internet seems to be splintering into javascript-heavy apps running on users’ computers and mobile applications of the same apps running natively on mobile devices.

With HTML5, a lot of the benefits that mobile apps could offer seem to disappear: whether it is access to geo-location capabilities, local caching so the app can run when there is no signal, or even access to hardware capabilities like a camera (something Google is trying to bake into future versions of HTML), there appears to be an increasing array of possibilities that would ensure some parity between web-based offerings and apps-based ones.

However, the web has a few challenges to overcome. For starters, local notification, or the ability to throw some type of alert flag when the application is not running, is not available in web apps. One-click billing is not built-in by default. Access to local hardware devices is also limited. But ultimately, the problem web apps are going to encounter when compare to local apps have nothing to do with technology.

The main value of an iOS or Android app over a web app is largely a marketing issue. To a lot of thought leaders, the web is seen as yesterday’s invention and apps are seen as the current hot trend. To launch a web app in 2011 is seen as similar to trying to launch a CD-based offering in 1995: maybe interesting but probably not, and more likely outdated than up to the latest trend (or to put it in more brutal terms, it would be seen as “dead,” as per the criteria highlighted in Om Malik’s excellent post on the subject.)

Furthermore, the presence of an app in the respective app stores by Apple, Google (and now Amazon) represents marketing channels which cannot be matched in the open web. As restrictive as they are, those channels can represent a substantial advantage for new product offerings. The presence of your apps’ icon on a user’s phone is also another marketing marker that is hard to be matched by web application: yes, it true that bookmarks can be presented alongside applications but few users know how to do that and even fewer actually do make those links.

If an app is launched on a platform like iOS and Android, it gets more publicity than if it launches as a mobile web-based offering. This, by the way, is something I see as a reason for concerns in the long terms as it means that most of the debate is now centering not on a more open world but on one as to which walled garden is better: Apple’s or Google’s?

As a strong supporter for a more open web, I find myself conflicted: on the one hand, I see that getting into those walled gardens is bad for the web as a whole; on the other hand, in order to run a successful business, I have to be in those walled gardens. Almost a year ago, I covered this as Apple is the new China and things have gotten worse since, as Google is following a path similar to Apple. But in the end, one has to be realistic: the only way to influence this debate is to become successful enough that your voice gets amplified: so playing in the walled gardens is imperative for any new mobile company that wants to succeed.

iOS or Android first?

With apps as an obvious first step towards development, the next question in the decision tree is Android vs. iOS. Here, there are confusing signals in the marketplace: on the one hand, one can talk about market size and see that Android is becoming the most used operating system in the mobile world. On the other hand, one can see the fragmentation of the Android market as a developer’s nightmare.

Assuming the fact that most startups have limited resources, one could safely make the bet that a less fragmented market is easier to launch a successful product on and thus developing for iOS first would make the most sense. That is generally the rule that most developers follow and I want to challenge that rule.

According to Apple, there are over 350,000 apps in the app store. By comparison, the Android market has over 100,000 apps. So one can safely say that there are roughly 3 to 4 apps on iOS devices for every app on Android devices. Today, the path of most applications is to establish themselves on the iPhone, get the adulation of the Apple crowd and then move to migrate to Android devices.

This generally means that apps which were successful on the iPhone benefit from a lift when they finally make it to the Android marketplace as Android users are curious to see what all the hubbub was about. This situation has led to a situation whereas both top 10 lists are dominated by apps that first saw the light of day as iOS ones.

But what if one were to apply the amount of effort that goes into crafting a well-received app for iOS into developing a similar app for Android first? What if a company were to decide to prioritize its efforts on developing the best app for Android devices? All things being equal, a great app developed for iOS would have to be better than over 350,000 apps while a similar app being developed for Android would have to be better than 100,000 apps.

When looking at those numbers, combined with the fact that the Android marketplace is exploding, it seems that Android development makes more sense when first getting out the door but there is yet another catch.

Free or Paid?

Paid apps seem to fair better in the Apple world than in the Android world. I don’t know if it is due to the demographic profile of Apple users vs Android users (remember that Apple tends to market itself as a premium brand, probably creating a user community that is more affluent and more free-wheeling with its spending) but the fact of the matter is that if you are marketing a paid app, this is something you have to consider.

So if your monetization model is purely centered o selling apps, you may be better off using Apple’s offering (as long as you can figure out how to build a successful business 99 cents a time.)

On the other hand, few apps with hybrid strategies (social, web, mobile) are offered as paid ones. A few examples like Facebook, Twitter or LinkedIn all seem to show that app that also work as web-based platforms are generally free (as platforms though, they have created opportunities for others to market paid apps on top of their services). If your app is a social web app, the Android market seems to be a better place in the short run.

The key to this positioning will have to be around your company’s ability to present itself as breaking the mold. By going against the grain, you are likely to suffer the ire of Apple fan-boys but the ensuing controversy may get you marketing views you would not have gotten otherwise.

Danger to Android

Today, Android is indeed a fragmented market. So development for that platform is more complicated than development for iOS, where one only has to worry about 2 phones (iPhone 3GS and 4).

The challenge Google now has is balancing its openness while making it easier for developers to deal with the multitude of changes. Its recent efforts in trying to tighten up regulation of the platform can cut both ways. Developers on the Android platform should keep an eye on the impact of those efforts on carriers and device manufacturers support. If Google tightens the screws too much, it could lose some of the momentum it has built and give companies like Apple and Microsoft a chance to establish leadership in the space.

The second tier

Today, developers have to develop an offering for both the Android and iOS marketplace. Once they’ve done so, the next strategic question is whether to put any effort into RIM, HP (aka. Palm) or Microsoft’s offering.

If I were to follow the points above, logic might dictate that the smaller the platform, the better the way to shine out. However, at the current time, those platform look too small to cater to today. The recent announcement from Nokia may point to Microsoft becoming an emerging platform again but  the actual switch is not due for another couple of years. At that point, the marketplace may look radically different again.

So at the end of day, my recommendation (and what we’re betting on at Keepskor) is Android first, mobile web second, iOS third, and then figure out the next step.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title iOS, Android, and the mobile web. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The post-PC world

Since the early 1980s, the personal computer has been sitting at the core of people’s experience with technology. But several trends have chipped away at that dominance for the last few years, first with the rise of dedicated devices with computer-like attributes (eg. ereaders and MP3 players), then with reintegrated devices that brought several of those features back together in a more portable form factor (smartphones and tablets).

Along that curve, Microsoft and Intel found themselves in an increasingly difficult position, largely trying to hold on to the legacy platforms that sourced the largest portion of their revenues while unsuccessfully trying to find ways to play in the new world.

Along the way, the two companies grew farther apart. In late 2004, I had called for Apple to move to Intel chips, a call that was met with derision by most people at the time because they thought Intel would never do anything that could run counter to Microsoft’s worldview. A couple of years later, Apple and Intel did make the move, creating what was possibly the first wedge in the Wintel cartel.

Last month, Microsoft made an announcement that was probably similar in terms of overall strength, looking to ARM processors as the future, and moving to a space where their reliance on Intel processor was relegated to the back of the bus. It wasn’t entirely clear at the time but one could see that the Wintel alliance had been hobbled and could possibly die off soon (in related news, HP announced this week that it would consider running its webtop OS on PCs).

Meanwhile, it was only a year ago that Intel and Nokia announced a strategic partnership, where they would merge their OS platforms. The intent there, I suspect was for Intel to start pushing its own chips into Nokia devices, allowing them a play they had longed for in the mobile space.

Yesterday’s announcement from Nokia that it would abandon its own OS effort and focus on Windows Phone 7 probably infuriated some people at Nokia.

Why Winkia will work: Developers

Of course, there is a lot of doubts about the partnership. High level partnership have a tendency to fail (in fact, Horace Dediu has shown Microsoft’s particularly bad track record in the mobile space).

But I disagree. Earlier this year, I argued that Microsoft would acquire Nokia for its distribution footprint. At the time, I did not elaborate but here’s how I see things working.

For starters, let’s look at areas of strength and weaknesses. Microsoft still has a large development community used to developing with its toolset and aching to get into the mobile space. With Windows Phone 7, that crowd now can use the same skills, programming languages and development kits they have been used to for years to create for years.

But the challenge that was presented to date was that there were no users of Windows Phone 7. While the operating system has generally been well received by critics, there has been precious few apps developed on top of it to date. Part of the reason for this, I suspect, is that there isn’t really a built-in public for those apps yet so many developers are waiting on the sidelines. In fact, this is something that people at Microsoft were painfully aware of, as they are now starting to explain to developers that the deal will bring a larger public for their apps. In a recent blog entry, Matt Bencke, Microsoft’s General Manager for Developer and Marketplace in the mobile space, said:

In simplest terms, this alliance can dramatically increase the customer base for Windows Phones, and, by extension, your apps and games. […] For example, Nokia already has strong relationships with operators in more than 190 markets. Nokia also manages an application marketplace that delivers 4 million downloads per day; a channel that will complement the existing Windows Phone Marketplace experience to bring Windows Phone developers and Nokia customers together.

[…]

From a tools and platform perspective, we’re working to make it as easy as possible for developers to take advantage of this new opportunity.

So the message they send here is clear: more people to use your apps and you can use the same tools you know already. This is bound to help create a market where lots of new apps will end up being created in a Windows Phone 7 environment only.

Why Winkia will work: Footprint

So how big is the marketplace we’re talking about? Well, before we enter this arena, let’s make a few key assumptions: growth in the mobile space is largely coming from the smartphone category. In fact, the entry of sub-$100 android phones is basically going to kill the concept of smartphone altogether by just gobbling up the regular phones and pushing the trend to every phone becoming a smartphone. So the game here is for the whole pie instead of a smaller portion.

So how does Nokia do in that space? The Symbian operating system, the one the company is abandoning, was on 37.6 percent of smartphone devices in the last quarter but Nokia overall marketshare in the mobile space was 28.9 percent.

How does it compare to others?  In the OS game, Nokia has a 15.1 percent lead over Android, its next nearer competitor (Apple comes in 4th, behind RIM) and an 11.3 percent lead over Samsung in the overall mobile space.

Meanwhile, Microsoft was nowhere to really be seen, with a mere 4.2 percent of the OS market, coming in above “others” in the OS category.

If the tie-up had happened last quarter, the combined team would hold first place with above 40 percent of the smartphone market, almost double their nearest competitor (Android) and almost triple Apple’s own offerings.

With that large a footprint, any developer will have to think about supporting those devices.

Furthermore, Nokia has a long-established relationship with phone carriers around the world (while I have not checked the data, I would be ready to venture that there isn’t really a phone carrier out there not carrying some Nokia phones). That kind of network will be hard to defeat moving forward.

Why Winkia will work: Patents

When he unveiled the first iPhone, Steve Jobs made it clear that there was going to be a huge legal fight in the mobile space.  During the unveiling, he highlighted that oncoming fight in the following way (emphasis is mine):

We have invented a new technology called multi-touch. It works like magic, you don’t need a stylus, far more accurate than any interface ever shipped, it ignores touches, mutli-finger gestures, and BOY have we patented it!

[…]

We filed for over 200 patents for all the inventions in iPhone and we intend to protect them

Apple later sued HTC and Motorola over some of those patents.

Meanwhile, Microsoft has not been shy in suing some companies over patent infringement relating to Google Android. The operating system from Google continues to be challenged in court, the most recent lawsuit coming from Oracle over alleged infringement of Java related patents.

So all and all, the mobile game is one dominated by patent fights. In the lead-up to this week’s announcement, Nokia’s CEO was touting its patent portfolio as something to look at. A story on AllThingsD put it as such (emphasis is mine):

Friday’s investor meeting will also address other aspects of the company, including its services strategy, its plans for its Navteq navigation unit and its plans to leverage its huge patent portfolio.

Between Microsoft’s patents in the mobile space and Nokia’s, I suspect we are soon going to see some lawsuits emerging from the new partnership and going after different aspects of the iPhone and Android devices (though I suspect Google will be the first target, with the iPhone being left for later).

Conclusion

Between Microsoft’s strength in the development community, Nokia’s strength in the hardware and distribution realm, I would venture that we may be seeing the beginning of a major shift in the mobile landscape. Both of the partners are quite strong and I would not be completely surprised if they were to both be able to reverse their fortunes in the mobile space. I also would not be totally surprised if, at some point down the line, Microsoft were to announce that it is taking over Nokia and folding it in. An interesting thing is that the cut in the overall market capitalization of Nokia after the announcement has now left it in a position where Microsoft could buy it in cash if it felt like it.

However, there are still a few things to be ironed out. For starters, Microsoft has just tied its OS to one partner and may have difficulties convincing other players to build mobile phones. Expect Samsung, LG, and HTC to stop investing in Windows Phone 7. So if Nokia fails in regaining some momentum as a result of this partnership, it may take with it Microsoft’s hopes in the mobile space.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Winkia rising. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

User centric

One of the big news items in the technology world was the 5 minute tirade Steve Jobs recently unleashed against Google and its Android mobile operating system. The relevant part that is key to the whole discussion, in my view is the following;

We think the open vs. closed is just a smokescreen to try and hide the real issue, which is: What’s best for the customer? Fragmented vs. integrated. We think Android is very very fragmented and becoming more fragmented by the day.

To Jobs, the customer is key. So, in his view, and in the view of most people who support the approach Apple is taking, complete integration is the key to success.

This is a view that excuses any decision by the product makers as long as it keeps the customer happy. A few months ago, I alluded to Apple providing a Disney-fied version of the computing world:

… Steve Jobs, largest Disney share holder. The net result is that the Apple leader has now learned to turn his company into the new Disney, bringing safe products to the masses in a highly sterilized environment that may not appeal to all.

And a Disneyworld version of computing is OK for most people. Most people love the magic kingdom but, for a portion of the population, Disney world is a place you visit, not one you live in.

To Apple and its supporters, the end user of a product is the central point and the product creator (in this case, Apple and Steve Jobs) has all rights over the direction of the product as long as it benefits the customer. This leads to a million little decision that add or remove components and features of a product to create an all-encompassing offering.

Some of the decisions lead to truly amazing leaps forward while others get more controversial. And there is a high level of intelligence to most of the decisions that go into making Apple products but while Apple devices are intelligently designed, nature isn’t.

And that’s where differences start being highlighted.

Developer centric

The developer world takes a view that is almost biological when it comes to how software should evolve. From the very mention of ecosystems, to the way software ought to evolve, people who believe in the long term health of the industry as a whole argue that diversity always wins over integration.

In the developer-centric view, openness is an essential component because when everything can be seen, when transparency rules the land, then mistakes get corrected more quickly and the best code wins. The developers point to how evolution works in nature and to the works of Darwin on natural selection to highlight how the best code naturally gets selected from the wide diversity of offerings.

Open access to research seems to show that ideas that are not locked down end up being more successful. Open government data allows for more work to be done voluntarily and in a less expensive fashion that closed data. Open source points to systems becoming more secure and more stable. Open, in other words, seems to be the cure to all ailments.

In my view, open is great when a new system is introduced because it allows for anyone to look at any innovation, dissect it, and understand it. In other words, it levels the playing field by allowing any newcomer access to the same information as anyone else. There is a democratic element that is appealing when hearing about open.

An important proponent of the open view is Tim Berners-Lee, the inventor of the web (and thus, probably one of the most important figure alive in the computer world today). When he first came up with the web browser, he made a key decision that would accelerate the growth of the web: he created a menu item that allowed anyone to view the “source” code, or the actual innards of a web page, to be viewed by any user who desired to do so. It allowed for a generation of web developers to learn the tricks of anyone that built a page before them offered and fostered an explosion of creativity that has led us to the current web.

So which way?

But the open web also allowed for some pretty dreadful looking pages. However, with billions of pages now available, the argument is that the bad ones sink to the bottom while the best ones raise to the top. This would seem to justify the value of open over closed, the value of diversity of a more edited approach.

There is, however, a way to resolve both views and it is through a quote that has often been attributed to Charles Darwin, the father of evolution:

It is not the strongest of the species, nor the smartest of the species, but the most adaptable to change that survive.

Whether the quote itself is from Darwin or not, it represents a position that could start bridging the gap between the integrated and open world.

The answer thus must be that as long an integrated approach keeps adapting to the changes in the marketplace, it is OK to keep it closed. And vice-versa, it is OK to keep an ecosystem open as long as it ensures the highest amount of flexibility in terms of adapting market changes as quickly as possible across all its constituents.

That later piece is difficult to achieve for open systems and I can see some of the value in what Steve Jobs is saying in terms of fragmentation: while the iOS experience is a closed system that provides a single, centrally managed experience that users can either support or reject, Android has become a very different world, where defining what Android is about is increasingly difficult: Is the Android experience what’s available on an HTC Android device? A Samsung one? Or it is what’s available in the latest version of the OS?

Open, at the end of the day, favors the development world but integrated (and, as a result, often more closed) favors the end user. Where you stand ultimately defines how you would view either.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title On Ecosystems. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

This week’s announcements of pricing around the Google TV offerings, combined with some of the first deliveries of AppleTV boxes, have kicked off a new salvo in the war for the third screen.

TV and web pre-history

Before I go into more details as to why I think this is important, I need to give newer readers some background in the history of the many failed attempts to merge the web and television.

In the early 1990s, in an era that is considered mostly pre-internet (that is, before the internet became mainstream), then vice-presidential candidate Al Gore talked about the “information superhighway,” a concept that highlighted a universe where most interactive data would move to your television. The TV screen has always been the main screen in American household and, unless you were a computer geek, that was largely the case in the early 1990s.

As the 1990s moved on and the commercial internet moved to the center of public consciousness, there were several attempts to marry the internet and the web (12 years ago, I was even involved in a failed effort at creating a standard web model for bringing TV to the web). The basic idea, at the time, was to bring TV content to the web and enhance it with some extra juicy bits from the web. This meant, for example, being able to push web content that would provide more info on a broadcast (for example, related news stories). The concept wasn’t new in that it had been embedded in a lot of British television since the 1970s as teletext, passing extra content as part of a broadcast.

Set top boxes wars

At the time, a group of engineers and product managers who had worked for Apple left the company and started a new offering called WebTV. WebTV was a new type of set-top box allowing its users to surf the web on their television. The company also introduced a set of specialized tags that web developers could use to create pages that were formatted to fit this new TV paradigm.

Others looked to the same concepts and, in the late 1990s, the set-top boxes became a new competitive arena for distributing content in a digital form (In order to disclose my biases, I must point out that I worked on a consulting basis for Nokia’s set-top boxes group, an effort that ended up having an impact on some of the thinking behind podcasting)

WebTV networks was acquired by Microsoft and much of its technology ended up in the Media Center edition of Windows, which powered the next wave of TV/web marriage.

Starting with Windows XP, Microsoft offered a Media Center edition of their Windows platform. The idea was basically Windows, on your TV. Unfortunately, the assumption that the PC experience could translate to a large screen proved to be mostly wrong (this, by the way, is a mistake that Microsoft also made on mobile devices, assuming, until recently, that the windows metaphor could transport itself to other experiences).

As the dotcom boom led to a dotcom crash, much of the intentions to merge the web and TV disappeared. The concept of converged content moved from the web to gaming stations as a delivery mechanism  (in fact, around 2006–2007, I was considering the Sony Playstation as an attempt to get BluRay to defeat HD-DVD instead of an actual delivery device). In the midst of a 3-way war between Sony, Microsoft, and Nintendo for gaming supremacy, Appled announce its first foray into the TV space with iTV (later to be renamed AppleTV). While they didn’t look at games as a space at the time, their model of attaching a device to the TV was no different then than the model they have today: the set-top box as a way to buy content from Apple. In that sense, the fact that the company hasn’t changed direction points to their belief that this is the right model (though I personally think that, in the long run, they will end up opening the marketplace further, in a fashion similar to what they did with the iPhone).

Internet Everywhere: 5, 15, 50

Over the last few years, as more video content has become available, the internet has moved back to being discussed as a delivery mechanism for many types of devices.

I call that the 5, 15, 50 paradigm, since internet content is now being offered on devices that have 5 inches screens (mobile devices), 15 inches screens (computers), and 50 inches screens (televisions).

Netflix has had pretty good success with their strategy of getting their player integrated in a lot of devices, thus allowing their content to be streamed pretty much everywhere if a connection is available.

Apple vs. Google

But now that the war is moving to that new ground, two players in the computer and mobile space have decided to fight for that corner of our digital lives: Apple is re-tuning its AppleTV box to be more competitive on a price level and Google is gearing up for a larger attack on the living room. In this case, however, I think that Apple has an early lead with some critical flaws.

The reason I believe Apple has an advantage here is that their offering, from a product standpoint seems to balance the right feature vs. price compromise. The Netflix and YouTube offerings are no-brainers but the reliance on iTunes as the delivery mechanism for your pictures and movies is annoying: I think that’s a critical flaw in that most people do not want to have to turn their computer and iTunes on in order to have access to that content. Apple should offer a way to attach a network drive (maybe a modified version of their time capsule) on which a user could drop pictures and movies, leaving them there for use from the Apple TV (or mac, iPhone, and iPod) at any time.

Google, on the other hand, is introducing a product that is just a more modern version of WebTV. And I’d warrant that, at this time, the keyboard interface approach is the wrong metaphor for the big screen. The keyboard on the first devices (Logitech Revue and Sony Internet TV) to follow the Google strategy are just too big (as the owner of a Logitech DiNovo Mini, the keyboard that’s modified for logitech’s enhanced offering, I can tell you that most normal people get confused by such an offering). This, in itself, would not be a killer as Boxee has demonstrated, with the remote for their boxee box, that a remote can have two sides, allowing for the complexity to be simplified.

Keyboard aside, however, GoogleTV will have a problem the price point ($299 for the Revue), which is too high for most consumer. Considering that Apple is pricing the AppleTV at $99, consumers may question what they get for the extra $200. Geeks like myself may end up buying something like the GoogleTV box but I suspect that the vast majority of the public will not.

Meanwhile, the incumbents in that space (cable companies, as well as Microsoft, Sony, and Nintendo) are not sitting on their hands and smaller players (Roku, Boxee) are looking to get a share of the market too.

The next set of battles will be waged for your living room and they are gearing up to be interesting as, for the first time in a very long time, TV may become more about the consumer than it is about the advertisers.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The revolution will be televised. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Refiner: Apple

It’s always been fascinating to see the fight between geeks over the role of Apple as an innovator in the tech field. On one hand, people will argue that Apple pushes the envelope by introducing revolutionary new products; on the other hand, people can point out that what Apple does is just implement a different version of what already existed.

For example, there were MP3 players before the iPod, smartphones before the iPhone, and tablet computers before the iPad (in the same vein, there has been ways to get the internet on your TV from a variety of devices before the AppleTV). But in each cases, Apple came out with products that changed the public perception of those categories, leaving the mainstream feeling that Apple was introducing revolutionary products.

The truth is a little more complicated: both side of the argument are valid because what Apple does is not so much introduce new product categories as it simplifies them. One could argue that the model of Apple ought to be “innovation through improvements.” Whereas other companies look to throw new technology at a problem, Apple tends to look at solving the problem through reduction: less is more.

An example: Dialing on iPhone and Android phones

An example of this is the iPhone vs. Android discussion. As the owner of both types of devices, I can easily say that the iPhone is a more polished product.

A simple example is how either phones handles the quick dial feature on the phone. When presented with a list of callers you selected, you click on the name of the person and the phone dials. By contrast, on my Samsung Vibrant, a short click on the image of the person brings up a list of actions I can do (call, text message, send a picture, etc…), a short click on the name or start brings up the whole detailed information of the person. A long click brings another set of options. However, I’ve yet to find a single click that will dial the person.

It’s a simple distinction but it is hundreds of such little distinctions that make the iPhone a tighter experience. I know Android fans will tell me that I can customize the phone in a much better way and that is great if you’re a geek like me but, to the general public, such customization is an impediment, not a feature.

Don’t innovate, improve

So the offerings of companies that most look like Apple are not revolutionary in the sense of breaking new grounds but rather are following an ethic of improvement. Their focus is less on brand new features that have never been seen before and more on improving the user experience around a pre-existing approach.

Seen through that lens, Tumblr, Posterous, and Twitter can be seen as an evolution of the blogging models set previously by SixApart, Automattic, and Blogger.

It’s a really important model to follow if you want to reach a mass market and are attacking a marketplace with some established players.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Which company are you: the Refiner. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

• The attacher is generally a company with a successful product. The company then tries to attach everything it does to that product, eventually losing out as the market evolves.
• The pusher finds the edge, goes beyond it and, when the inevitable push-back happens, pulls back a little. Having pushed beyond the edge, it starts the cycle again.
• The tinkerer creates products through extensive user testing and trust the data religiously, tinkering with the product based on what the data says.
• The refiner looks at a product category and offers an improved product by cutting back instead of adding.

Each of these models provides value to the market but ultimately, the best companies might be the ones that are willing to take on all of those features depending on time and context. In the following entries, I will go into details as to each of those models, providing example of leaders and startups that follow them.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Which company are you?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The Cultural Impact Cycle

Most successful companies go through a 6 steps cycle where their cultural impact on society as a whole can be felt. For my purpose, I call it the mindset cycle and it works as shown in the figure below:

Alphaworld

In Alphaword, the first step, a few early adopters are aware of the company and its products and test them out. This is generally a stage most companies do not get out of.

There are many reason for companies not getting out of this space. Their product could be bad; their product could be targeted at the wrong market; their product could be too early in the market; the company might have failed to explain its relevance to users; etc…

Ultimately, the main reason a company gets out of this stage is that its team has done a very good job executing on the implementation of a product and company strategy, creating value for its investors, and delivering even more value to its users.

Those that make it out will be prosperous and those that don’t will die.

The Land of Mass Adoption

The land of mass adoption then represent a steep climb as a company starts getting noticed by people outside of the technology world and non-technologists start using the application.

The majority of companies that made it out of alphaworld spend a very long time in that area and can profit by targeting niches without having to move on to the next stage.

The land of mass adoption is an area where companies are forced to shed some of their more technical attributes (or hide them away) in order to appeal to a mass audience. The mass audience is not as forgiving as people in alphaworld so the company has to properly adapt to the market. It’s a great balancing act where the company has to show early adopters that it can continue delivering cutting edge for them while talking to the mainstream and figuring out the right timing and hand-holding to get mainstream users to start using some of those new attributes.

Mainstream Mountain

Mainstream mountain is where most companies want to be. At that point, a company achieves great economic success and is at close to the peak of its cultural relevance, impacting not only its own product but the industry it’s in. Very few companies achieve that stage and even fewer stay there for a long time. The great majority of people look to the company as the main provider of direction and believe it can do no wrong.

In the 80s, IBM was there with its personal computers. In the 90s, Microsoft was there with its Windows operating system and Office Suite. In the first decade of the 21st century, the spot was held by Google with its dominant search engine, online advertising model and YouTube video site.

Apple is currently at the apex of mainstream mountain, having redefined the PC industry (computers as consumption), the music industry (digital as default) and the telecom industry (phones as computers). Facebook, with its social network is currently climbing that mountain, having become the largest site in the world, built solely on the back of relationships.

Unfortunately, it is almost impossible to stay in that arena and the fall seems to eventually come for most companies.

Disgruntled Hills

In the disgruntled hills, the public perception of a company starts to turn. What was one seen as a benevolent force for good is now being questioned. People start questioning whether the company is holding too much power and the mention of anti-trust comes up more often. Early adopters start looking for alternative providers and any misstep by the company is seen as a major example of how flawed the company is. Over time, the mass start turning their back on the company, reluctantly using its products but no longer imbuing them with the kind of magic attributes they granted to the company.

At this point, it seems the company starts having problems pleasing customers. No matter what it does, the public looks to the company as only protecting its own interest and not those of its customers. The company can claim that it loves its customers but suspicion seeps in and people get cynical about such claims.

I would venture that Google is currently in that stage as people start worrying about its dominance in the search space while making fun of its attempt at trying to get more social so it can go back to mainstreaming mountain. Questions around its privacy practices, mentions of antitrust around search and advertising, and other negatives seem to be applied to it with increasing frequency.

Canyons of Cultural Irrelevance

Of course, Google doesn’t have to worry as much as Microsoft, a company now steeply going down the hill of cultural irrelevance. At that stage, a company’s product are no longer seen as relevant to large swath of people.

Companies that reach this stage were once seen as the most important companies in the world. Oftentimes, such companies also suffered legal setback as they were taken to court and found guilty of monopolistic practices. Such was the case for IBM in the 80s and Microsoft in the 90s.

To say that a company is in that space is not the same as saying the company cannot be profitable. In fact, Microsoft an IBM are still very large players with established customer bases and diversified product portfolios. But their impact on the industry is mainly felt when they acquire a company positioned in one of the earlier mindset stages. Their ability to deliver internally-created product to an audience that finds a particular attachment to such products seems hindered and the companies take a cautious approach, offering product that attempt to mirror features created by other players (eg. Zune v. iPod, Windows phones vs. iPhones, Microsoft Kinect vs. Wii).

This stage can last decades or even centuries but, at that point, the company is no longer having a significant impact on consumers’ mindsets.

Plains of Corporate Death

In some cases, a company can flash through a lot of the earlier stages, be seen as extremely relevant for a while and then disappear because their products and ideas are no longer valid in the marketplace at all.

This is a case where companies have cash or assets that are no longer valuable in any ways (eg. Buggy Whip manufacturers) and, in those cases, companies completely fold and return money to their shareholders, stopping to exist due to cultural irrelevance.

Few companies enter that stage as the previous one allows them to morph into something different (eg. Nokia comes to mind, changing from being a fishing boots manufacturer to a phone company; or WPP going from being a wire and plastics company to one of the largest advertising groups in the world).

Takeaway

There are many stages in the cultural impact of successful companies but ultimately, every large tech company has found itself displaced and replaced. Today, Apple sits at the apex of the tech industry, having achieved economic and cultural dominance, but the Antennagate brouhaha (around claimed issues that the iPhone 4 antenna fails when the phone is held without a bumper) and the gizmodo incident seems to point to some anxiety within the early adopter community. Perception of the company appears to be turning and, for the first time since Steve Jobs came back to Apple, there seems to be some level of unhappiness with its products. Will the release of free bumpers help the situation? Only time will tell.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 6 Stages of Cultural Impact. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Distribution Channels: More, more, more

Since the inception of the web, computers have been the best way to access it. Efforts around making the web accessible via mobile phones (WAP, HDML, etc…) or TV (web TV profiles, Microsoft WebTV) largely fell flat due to a combination of lack of bandwidth, lack of processing power on the devices, and costs of production for such device making them unaffordable to the masses.

With the introduction of the iPhone, Apple changed all that (and the subsequent entry of Google, with its Android operating system further validated the space.) For the first time, a new distribution channel for web-based application has become possible on phones.

With the iPad, Apple has struck again, breathing new life in a category (tablet PCs) that was considered dead by most people. And over the next few months, we will see a battle between Apple, Google, Microsoft, LG, and others  as to who will control access to the internet in your living room.

A few years ago, I wrote about what may happen when every signal we receive moved to an IP stack. Those predictions took longer than I expected to become reality but we are now moving to a world where everything is finally going through the Internet. This months, millions of people watched at least one world cup game over the net. As the largest event in the world, this is something that is being experienced by people outside of tech circles. Similarly, the explosion of smart-phones has moved the needle from access to the internet being a geeky thing to such thing becoming the norm.

While I do worry about the app stores (from any of the providers) potentially becoming chock-hold points of access to the internet, I do believe that the explosion of apps that are sitting on the device but getting information from the internet (something I’ve been waiting for a decade to happen) represents a substantial paradigm shift that will reinvigorate internet innovation.

Furthermore, the rise of the cloud and the availability of internet bandwidth at any time and from any place is making the desktop metaphors the computing industry has been used to since the mid-eighties irrelevant and, to some extent, moving the computing world back to where it was prior to the introduction of the PC, with applications running largely on remote servers. This phenomenon has two important impacts: first, it makes it possible for people to rent out applications and infrastructure instead of purchasing them outright, thus lowering costs in the short terms; second, it solidifies control of such applications in the hands of a few large players, making it difficult for new entrants to gain scales in those markets but creating potential acquirers for interesting features.

Tools: HTML5 and CSS3

For almost a decade, web standards were in the doldrums. There were a few pockets of innovation here and there but, for the most part, the internet industry spent the first decade of the 21st century digesting what had been created in the previous decade.

In 2009, HTML and CSS were finally updated, providing a new set of standards that keep up with modern applications. This may seem like an insignificant detail but the lack of new standard impeded the growth of the internet as it led to a browser market that was largely stagnant (with the dominant player of the time, Microsoft, introducing very little innovation in that space) and made it difficult to implement bleeding edge technologies because the browsers couldn’t follow.

The innovation in HTML5 in particular is astounding as HTML moves from being a largely representational language, great for static documents but not so good for interactive applications, and is now becoming a full-fledged programming language, allowing to simplify certain tasks that were, to date, only achievable through the implementation of substantial hacks.

Talent: Maturity in our industry

The internet industry is now over 15 years old. The net result of that is that we, as an industry, have grown substantial amounts of talent that has become increasingly specialized in particular areas. During the last boom, websites were designed with HTML and CSS (and, for the most extreme case, Javascript) but little attention was paid to things like user interaction, machine interaction, APIs, or channel targeting.

With the increased opportunities to target across different platforms and have web applications where the website is only a small part of the overall picture, the level of complexity has arisen and so has the level of sophistication of the experts working on such applications.

The great news is that experts from other fields can now join in and bring some of their expertise, hence enlarging our industry and its overall footprint on the economy.

The other great news is that many people in our industry now have well over a decade of experience, allowing them to have learned from mistakes made in the past and to establish some level of mentorship that didn’t exist in the early days of the industry.

This results in talent being fostered at a more rapid pace and innovation being increased as people can now learn a lot of the basics by following experts (either through blogs, twitter, or other online means or offline approaches like conferences, books, and magazines). Such talent can then turn around, having come up to speed at an accelerated rate, and innovate quickly, sharing their innovation with others at a speed that was not always possible before.

The economy: It sucks and that’s a good thing

From an economic standpoint, the times are also right for a number of reasons.

For starters, the state of the overall economy seems to mirror (or be even worse) than what we were experiencing in the early 1990s.

Let me roll the tape back a little for readers who didn’t experience this: Coming out of college in the early 1990s, the job market was horrible. Even prestigious programs had difficulties placing their students into jobs and the jobs that were offered were low-paying. This created a space for start-ups as there was little to loose financially by going into the internet space: in the worst case scenario, a new graduate may have forgone a chance at getting a job that paid in the low 5 figures for the opportunity to do something interesting and potentially rewarding.

I’d venture that the current unemployment rate is presenting this window again and many people are looking at the risk/reward of a startup in a more favorable light as a result.  I am not saying that all those new startups will succeed (in fact, I suspect that they will fit the normal economic model of a 8 or 9 out of 10 failing) but I am convinced that all this new energy will generate further innovation that can be mined by all.

This explosion of start-up also comes at a good time as the cost of launching a new company has dropped drastically. It used to be that one had to buy servers, memory, bandwidth, etc.. from different providers, creating substantial upfront costs. Today, one can rent that kind of infrastructure in a model that is purely based on the amount of traffic one receives. This means that bad ideas don’t cost quite as much. The net result of this is that, by the time an entrepreneur pitches investors, he or she can have real numbers to highlight the successful growth of his or her company.

Investments

The challenge for investors is that it also means that companies need a lot less in terms of investment (good for founders, not so good for investors as they don’t get as large an equity stake in companies; this also means that exit strategies leave more money to founders). On the flip side, the advantage for investors is that the ideas presented to them can be of higher quality than they were in the past and the startups that do get funding have a reasonable chance at good exits.

Speaking of exits, the investment exits scenario have changed. In the 1990s, the preferred way to return money to investors was to take your company public. The introduction of the Sarbanes-Oxley act in 2002 has made it almost impossible to successfully take a company to the public markets in the United States and many have called for its repeal.

This means that the primary way for an internet company to successfully exit has become through a merger or acquisition. Fortunately, the larger players in the market have been very acquisitive. Today, it is pretty routine to hear that companies have been acquired by Google, Apple, Facebook, Microsoft, Yahoo, or IAC. Players outside the industry have also been taking a little more of an interest, which results in further opportunities for acquisition (for example, companies like Disney and CBS often pick up startups for rich valuation)

Conclusion

All and all, the picture for internet startup creation is great. The last decade presented opportunities but I will go on the record now to say the teens will be a greater era of successful internet companies creation than the beginning of the last decade was.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The best time for start-ups — 5 Reasons. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

INTERNET — The open web, which allowed an explosion of creativity and befuddled many corporations and governments died at 12 a.m. on the morning of March 1, 2020. It was just short of its 30th anniversary.

The cause was cancer, according to open standards advocates. While it suffered from failing health since the introduction of the iPhone, and the success of closed systems like Facebook or Twitter.

The offspring of Tim Berners-Lee and Robert Cailliau, the open web showed early promise by simplifying how content on the internet could be accessed. Its birth heralded an explosion of creativity that democratized content distribution and allowed large amounts of people to share their knowledge and interest with like-minded individuals.

In the 1990s, the open web experiences a turn as rock star as it helped create millions of new jobs and generated new wealth for many individuals.

But two recessions took their toll. It was blamed for the first one and forced to go mostly into hiding for a large part of the first decade of the 21st century. During that time, the open web reformed itself, focusing on making itself even easier to use, and birthing blogging, podcasting, video and photo sharing. These concepts and sites related to them allowed millions of people to post content ranging from the inane to the highly intellectual.

The second recession, however, helped improved the open web’s reputation as people realized that speculators were the guilty parties in both recessions. With its reputation rehabilitated, the open web started flourishing again in the late 2010s.

Unbeknown to it, enemies of the open web were gathering strength and planning its demise.

In 2008, Apple introduced the iPhone app store, providing a sanitized sub-set of the content available on the internet. Through 2010, Apple would continue its attack on the open web, highlighting that iPhone apps were a better way to consume content on the internet, while keeping those apps under tight control through an opaque approval process. While many open web advocates screamed, the general public seemed perfectly content with the more restricted approach.

Meanwhile, companies like Twitter and Facebook created walled gardens on top of web technology, closing up access to content that was created or used on their services. Centralized on their own platforms, the services allowed to “simplify” user interaction with the internet, while requiring registration and tightening control as to what users could and couldn’t do with those services.

For the next decade, the number of walled gardens increased and the web became increasingly balkanized. By 2020, the open web was limited to a group of roughly 1,000 web sites that were not accessible to the majority of internet users.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The Open Web (1990–2020). You can follow him on twitter here or receive his weekly newsletter by subscribing here.

The closed environment

For years now, I have worried about Apple’s tendency to prefer closed environments to open ones when it came first to its iPod line of products, then its iPhone line, and now it’s iPad one. Each of the product are terrific consumption tools but that’s where they stop and my worry stems from the trend they create, one where Apple is creating an increasingly closed environment, more in line with the type of thinking that permeates the consumer electronics, movie, and telephone industry than the one that exists in the computer world. It seems that whenever Apple enters a new industry, it may have a small impact on that industry but the industry itself has a big impact on Apple.

Of course, one could see this as a natural evolution as the counter-culture 1970s Steve Jobs was booted out of Apple and, after a long exile, came back as Steve Jobs, founder of Pixar and eventually morphed into Steve Jobs, largest Disney shareholder. The net result is that the Apple leader has now learned to turn his company into the new Disney, bringing safe products to the masses in a highly sterilized environment that may not appeal to all.

And a Disneyworld version of computing is OK for most people. Most people love the magic kingdom but, for a portion of the population, Disneyworld is a place you visit, not one you live in. And that’s where conflict arises.

For people who have lived in the mostly free-for-all environment of the computing industry (and its cousin, the anything-goes world of the Internet), the idea of a Disneyified world is as close as you will get to their concept of hell. And those people tend to be the ones that develop applications.

Two Impulses

So developers now find themselves conflicted between two impulses:

• On one hand, Apple is created this Disney-like environment that increases the level of control Apple asserts in many spaces including the music, video, and mobile space.
• On the other hand, this type of environment attracts large crowds who really enjoy the safer experience. As an added bonus, the space actually looks very clean and the interface components are very slick.

The market size issue is one that larger technology companies are starting to grapple with in another arena: China. For example, Google has been trying to figure out the right balance between insisting that China stop censoring internet content and protecting its chances at getting into that market. Many of Google’s competitors, in the meantime, stood on the sideline, arguing that China is too large a market to ignore and that corporations should not get involved into politics, a position that is often at odds with their own actions in the US.

But back to Apple.

Apple vs. Adobe

For those who have not been following what’s happening between Apple and Adobe, here’s what’s happening. Adobe owns Flash, a product that allows for video or more interactive type of content  on the web. Thanks to the Flash technology, distributing video on the internet became a reality because the Flash player ran on most browsers and, thanks to strong marketing by Macromedia (the company that was managing Flash at the time and was acquired by Adobe), the Flash player became ubiquitous on computers.

When Apple first released the iPhone, it presented it as a different type of phone because it offered a browser that gave its users access to “the full Internet,” a statement that highlighted how poorly other mobile phones rendered web pages. This was a major advance  but there were a couple of things that were not included: in order to ensure that the browser ran quickly and reliably on the lower-CPU phones, Apple made a technical decision to remove Java and plugin support from its browser. For the most part, that was OK but many people started complaining that Flash was not included because a large amount of internet video was delivered using the flash player. Apple said, at the time, that its partnership with YouTube should offer with enough video content and that the other groups were pretty much fringe.

Over the years, the discussion continued in tech circles and Adobe, now owners of Flash, decided to reposition it as a tool that would allow for creating interactive content that could run on any platform. It was widely known in development circles that Adobe was working on a version of Flash that would help developers create iPhone applications with the Flash development tools. So Apple upped the stakes by banning its development community from leveraging such tools. Because of the tight control Apple has over what gets on the iPhone and iPad, it essentially killed any chances of using Flash to create programs for those platforms.

As one would expect, Adobe was very unhappy. They had made the ability to create iPhone applications with Flash a key feature of their new offering. So they huffed and puffed enough to get the tech community fired up.

The controversy has now gotten so strong that it got a response from Steve Jobs himself, which resulted in Adobe abandoning their strategy of distribution on Apple devices.

Apple: Standard bearer for openness?

Jobs’ note is interesting in many aspects. On the one hand, he does seem to address many of the issues that have been raised and explain why Apple’s position is the friendly one. On the other, people with enough knowledge of the underlying technologies can see some cracks in the arguments made:

First, there’s “Open”

That Apple would lead with the concept of openness is ironic at its best and deceiving at its worst. While it’s true that Adobe Flash is not open, Apple’s selective list of standards it is supporting reveals some of the politics surrounding web standards. Yes, HTML5 is completely open but the issue of video in HTML5 is a small developer skirmish in which Apple is backing a horse that is not necessarily the most open one.

H.264

It’s interesting that, in the paragraph about openness, Steve Jobs mentions HTML5, CSS, and JavaScript but leaves the issue of video codec for later in his note. That comes in the discussion of “the full web” where he mentions support for H.264.

That name represents a standard that is not an open one. In fact, it’s one that needs to be licensed in order to be used and, while many people use it (as Apple’s note demonstrate), it’s one that could generate royalties for many companies when the agreement to make this standard royalties-free for internet video ends in 2015. And one of the companies that would get some of those royalties is.…

(if you haven’t guessed, you must have skimmed throught the rest of the article)

surprise, it’s Apple Inc., a company that happens to own some proprietary intellectual property that is included in this standard.

And, surprisingly, the best tool for authoring content for the H.264 standard is Quicktime, a piece of software that is distributed by… Apple.

I’m not going to deny that the rest of the arguments (around security, performance, and battery life) may hold value. I’m also not going to claim that Jobs is wrong in saying that the “Touch” experience is not fundamentally different from the experience that Flash was initially created for.

But I am going to go out on a limb and say that this whole fight between Apple and Adobe comes down to a single thread: Who will control video on the web. Jobs is probably not thrilled that Flash has usurped Quicktime as the main contender on the web and is working on changing that.

Reasserting closed systems

While the war between Adobe and Apple is an amusing soap opera, the last reason Jobs gives for not supporting Flash ought to be the most chilling to the development community. I could paraphrase but I wouldn’t do it justice so here’s what he said (emphasis is mine):

We know from painful experience that letting a third party layer of software come between the platform and the developer ultimately results in sub-standard apps and hinders the enhancement and progress of the platform. If developers grow dependent on third party development libraries and tools, they can only take advantage of platform enhancements if and when the third party chooses to adopt the new features. We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers.

…

Our motivation is simple – we want to provide the most advanced and innovative platform to our developers, and we want them to stand directly on the shoulders of this platform and create the best apps the world has ever seen. We want to continually enhance the platform so developers can create even more amazing, powerful, fun and useful applications.

At first read, an innocuous set of statements but one that has potential implications for the future of computing. If the thinking in Cupertino is that third party development tools are bad, then what about the Mac and non-Apple development tools on OSX? Where would those stand. And, while the introduction of new features are great, what happens if Apple decides to remove old ones? That is question left unanswered by this note and one that may leave the door open for more concerns.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Apple is the new China. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

It’s an evolution in the world of computers and I would argue that it’s an evolution largely due to the fact that Apple particularly despises content creators. A long time ago, the company saw itself as the protector of the content creating class but when Adobe started to hedge it out of the professional tools marketplace, Apple decided that it would focus on protecting large scale publishers and other intermediaries that focused on distribution of content rather than creation.

First Base: The iTunes store and Music

It all started with the iTunes store. Heralded as the creator of a whole new industry and the savior of the music industry, the iTunes store focused on selling music to the masses as long as:

• The masses were using an iPod (or a computer using iTunes)
• The music came from one of the big five labels
• The purchaser agreed that they would use the purchased music only on Apple-provided devices
• The purchaser agreed that they would not use the purchased music on more than 5 approved devices.

True, over time, a few smaller labels were allowed access but we are yet to see any many artists selling their music directly, bypassing the labels altogether, through the iTunes store. Apple has decided that artists had to go through established distributors, therefore ensuring that the music business model remains as it has existed instead of leveraging the power of the internet to enable a new creator-powered marketplace.

New companies, like Tunecore, have risen to fill the distribution gap but this shows that Apple wants to deal with a few select large companies and not a multitude of creators.

Amazon saw the indie marketplace and the limitation on # of devices as an unexploited market and opened the MP3 store, which provided music in the MP3 format, allowing that music to be played on most music devices. Notice that I didn’t say they provided DRM-free music as they do encrypt an ID in the music to track it, thus ensuring that illegal copies could be tracked.

Interestingly, Apple decided to ignore the creative class but, now that Amazon is making good headways as the result of its effort, Apple is going on the offensive, against Amazon.

Second Base: Movies & TV shows

Following the same model as it did for music, Apple then introduced a model that allowed for TV shows and movies to be purchased through the iTunes store. Because of the stranglehold the company has gotten on the music industry and the amount of power the company now has in dictating its own terms to that industry, executives in the TV and movie industry have been more careful in releasing their content to Apple and the company’s offerings are still relatively limited.

Its rental business is an even smaller subset of offering and, once again, is limited to Apple devices: You can watch it using an iPod, iPhone, an AppleTV, or a computer using iTunes (and now iPad). In each case, this means using an Apple approved device. I can’t watch a movie I purchased from Apple on my network-connected DVD player because Apple won’t license access to its store. But that’s just consumption and one could say that it’s OK for them to only serve content on their own platform.

Except once again, the content is limited. Once again, Apple has decided that large established distributors are the only important players and thus has provided few solutions for indie film makers. This creates an opportunity for the likes of Netflix, Vudu (now part of Walmart), Amazon, or even Google (through YouTube) to create a marketplace for indie rentals.

Once again, Apple decided to give the cold shoulder to creators and focus on the largest distributors. There’s nothing wrong with this but it seems to be showing that the message of Apple as a supporter of the creating class is not in line with reality.

Third Base: the iPhone App Store

When the iPhone first came out, Apple claimed that the device didn’t need a software development kit because the web was the development platform. This caused some level of consternation among the pundit class. It also showed Apple’s disregard for the independent creators. Here was a new device that, by most measure, could be seen as pretty revolutionary and Apple basically told software developers that it would limit access to it.

Of course, Apple eventually relented and allowed software developers access to the device, as long as they were willing to register with Apple and pay $99 a year. This allowed software creators to create their own programs and then submit them to the Cupertino giant for approval.

Because, you seen, nothing goes onto an iPhone or iPad, without Apple express approval. The only way to get an application on there is through the iTunes store and the only way to get into the iTunes store is by going through an approval process that is, at best, obscure, and hope that you will be given the keys to the promised land.

One could take the purist approach and say that developers have a choice to not develop for the iPhone. But, in today’s mobile market, that may be equivalent to claiming that you can run a great software company in the 1990s without having software that runs on Windows. When a platform becomes as dominant a player as the iPhone is in the mobile market, ignoring the platform can have some potential negative impact.

Home Run: The iPad

Having gotten some level of control over the mobile application development space, Apple is now going for the whole software space, in an attempt to centralized all software distribution in its own hands.

The iPad works to that effect on two fronts: first, like the iPhone, applications that are loaded on the iPad have to go through Apple’s approval process before being made available. In other words, it is the position of “Apple knows best what is good for iPad customers” and application that do not meet the Apple seal of approval will not be available. How does one get that seal of approval? Well, that’s unclear. Apple’s policy appears to be able to change quickly, as was the case with “sexy apps” on the iPhone recently. But interestingly, while apps by small developers were banned, apps by larger providers with similar type of content were not, prompting John Gruber to remark:

I don’t see how it’s anything other than hypocrisy to say that Time Warner can have an app showing swimsuit models and others cannot. I totally understand Apple’s desire to keep the App Store free of flat-out or even borderline pornography. I do not think it’s wise to remove/ban R-rated content, though — isn’t that exactly what the 17+ rating is for?

But to allow Sports Illustrated and Playboy to publish it and others not? That’s bullshit.

Once again, though, this shows Apple’s disrespect for the independent creators and I suspect that the situation will not improve with the iPad.

More worrisome, however, is what the iPad represents to the future of independent creation.

Since the advent of the personal computer revolution, the tools of creation have been available on most computers. In the very early days (70s and 80s), this meant that computers even came with basic programming languages accessible to all computer users. As computers grew more complex but easier to use (moving away from the command line to windows and mouse driven interfaces), those programming languages became optional installs. However, along the way, computers gained some functionality around first writing tools (both the early versions of the mac operating system and windows included very basic word editors) and then later around photo, sound and video editing.

True, the tools were basic and somewhat limited but, to a large extent, they were good enough for most users to get some basic content creation and editing completed. Today, Apple still bundles the iLife product suite with every mac, allowing for picture, video, sound, and web editing.

On the web side, another convention was established in the early 1990s, when the first web browsers included “View Source”, allowing anyone to see how a web page was written, learn from it in the process, and either adapt or evolve the code.

The iPad breaks with that trend.

The iPad is a consumption tool.

Sure, you can buy iWork from the iTunes store (and it looks nice) but there is no iLife tools available (either bundled or as an available extra purchase). Why?

I would suspect the main reason is that Apple sees content created as the masses as mostly “dirty”, sullying the beautiful hardware they have made. And so it now is trying to push a new revolution that will put creation back in the hands of the professional creators and push the masses to that Safari browser icon and the Internet. To Apple, only the bright and the beautiful should be allowed on its hardware and, in the approval process to get things on there, along with the iTunes store (and iBooks store) as the only way to get content on there, it now has the level of control it wants to ensure that the masses are relegated to the internet.

To Apple, Google can have the Internet. Apple’s devices will have browsers on them because they need to from a competitive standpoint but, if it were up to Steve Jobs, I’m sure that would be the first app to go.

Update: Cory Doctorow chimes in.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Indies: Apple Hates You. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Let’s review: as far as Apple is concerned, as illustrated by the navigation in its homepage, there are three major lines of business: the Mac, the iPod, and the iPhone. And then, there’s the redheaded stepchild, AppleTV, which the company considers “a hobby.”

But while the company claims to not be interested in this market (even though the product was called out as a successful hobby on a recent analyst call), it seems odd that it would be working so hard to attempt to cater to the video-specific crowd: iTunes Extra, the rumored dealings with Disney and CBS, the increased partnerships to release movies on iTunes at the same time as DVDs (a move that Netflix consider too bold) all seem to point to greater ambitions to get some level of control over the third screen.

But what does that third screen really need? If you look at most the news coming out of the Consumer Electronic Show this week, it looks like the rise of web-based video being available either as an embedded option, or through a BluRay player, or a separate box, will soon be a given. NetFlix is one of the early winners in this but where would that leave Apple. It has strong relationship with the studios (its own CEO is the largest single shareholder in Disney) and a product that is about to become almost irrelevant.

“Send to TV”

But the function that most TV screen present still needs some form of remote control. That remote control could (and does) come as an iPhone app but what if there were a different way to experience content from the internet. Something like a “tablet” device that would allow someone to surf the internet on a smallish (maybe 10 inch) screen they could use when it comes to reading text. But, once a video component shows up, they could press a “Send to TV” button that would get the stream started on the big screen.

Attached to the TV would be a “simple” device with either an RF or bluetooth receiver, a network output (or built in Wifi over 802.11n), and an HDMI and power out. Inside that device would be electronics that would have a small internet stack, a web server or a bonjour bridge (for any form of administration), and enough video power to stream movies from a variety of format. The “receiving” end of the software could also be added to existing AppleTV software to ensure that the new tablet could talk to them.

Technology is there already

Those technologies are mostly there, by the way. Apple has another small component called Airport Express that currently can receive music from iTunes (and can be hacked to received sound from other sources). Adapting it to receive video doesn’t sound too farfetched.

And Apple just released a software update to AppleTV to improve connectivity between iTunes and the device over Bonjour. Could Bonjour be used as the mean of instructing from the tablet to the device?

Clouds

So it’s not totally improbable that the AppleTV would play an important part of the tablet’s future. It could be one of three major features: cloud computer, e-reader, and TV on steroids.

The cloud part would include web-based version of Apple’s iWork suite, along with a new iTunes focused around the offerings of lala.com, and the me.com offering for other basic services. It would also include instant on version of currently available for rent movies, leveraging the new large data center for streaming purpose. This portion of the offering would counter much of the discussion about netbooks and their effect on the device.

The option of sending video straight to the TV would also “simplify” the device in that it may not necessarily need to include enough power itself for processing the video. This, in turn could help the company lower the price-point of the tablet device (shifting the cost of video processing to the “add-on” everyone who doesn’t have an AppleTV will want to purchase).

So what do you think, is this a totally crazy idea? Chime in in the comments…

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Apple: Of Tablets and TVs. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

5. MySpace acquired by News Corp

In the age before the rise of Facebook, MySpace was the new behemoth in the social network space. Earlier players (sixdegrees.com, friendster) had appeared and faded but MySpace seemed to be on a never-ending growth trend. When NewsCorp offered US$580 million for the company in 2005, it looked like an outrageous amount of money and a few people claimed that the founders could have received more money if they had held out.

It is possible that MySpace could have grown into something even bigger but, under NewsCorp’s umbrella, the company seems to have had a hard time keeping up with the competition. The rise and multi-billion dollar valuation of Facebook seems to illustrate what could have been, had MySpace remained independent but, on the other hand, the fall of friendster might also have served as a potential scenario.

Either way, the deal established the concept of social network sites as here to stay.

4. YouTube acquired by Google

It was a deal that brought back many fond memories of the bygone dotcom era: a small company with no revenue and no business plan in place getting acquired for US1.65 billion. Google’s acquisition of YouTube in 2006, the largest in its history, ended up being an outlier in terms of outsized deals in the Web 2.0 space.

But it did establish consumer-created content, and online videos as two important trend in the internet space. In one felt swoop, the deal put on a spark to the online video space and, while the company has had to contend with issues around illegal videos being posted to its site, forced video content producers to start thinking about online distribution strategies.

That deal can be seen as the grandfather of Hulu, iTunes and Amazon’s video offering, as well as Netflix on demand.

3. Apple and AT&T partnership

Sometimes, a partnership is more important than an acquisition. In the case of this deal, having AT&T, one of the most traditional telco vendors, agree to major concessions in order to get its hand on a coveted new phone was revolutionary: in a world where carriers traditionally decided what software was running on the phone and what sites could be accessed with it, AT&T let Apple make all the design decisions, open up the deck to external developers, under some levels of control, and provide access to any site on the internet.

From the moment the iPhone was announced, it looked like a winner. It helped move more people to GSM-based networks, allowing for more interesting phones to enter the market. The 2007 partnership heralded a new age of competition and innovation in the mobile space, delivering, for the first time, on some of the promises that had been made around that concept for well over a decade. It also forced carrier to rethink their own business models as the heavy loads of traffic generated by the 3rd and 4th generation of the device defied the predicted usage patterns and forced mobile providers to upgrade their network.

2. Time-Warner acquired by AOL

Whether a deal is good depends on the side of the table one sits on. The January 2000 acquisition of Time-Warner by AOL was great for AOL shareholders and turned disastrous for Time-Warner’s. Playing on the fear instilled in media companies by the success of dotcoms left and right, AOL managed to engineer a deal where most of the shares of a merger would go to its shareholders.

Ultimately, the deal became a disaster for all parties involved as the attempt at finding synergies between the two companies found themselves bumping against the cold reality of political warfare and corporate protectionism. With units fighting against each other for most of the decade, the only way to reclaim the piece was to spin-off AOL, 9 years later, for less than 1 percent of the combined value of the two companies in 2000.

If there is a bigger example of destruction of financial value by a deal, I’m not aware of it. Ultimately, the importance of this deal is two-fold: first, it was the last big deal of the dotcom era and can serve as the marker for the end of that era (some might quibble that the stock market didn’t fall apart until about 6 months later but that’s just a detail). The deal also showed that expertise in online and not online are not necessarily compatible. Both require different business models and experts who understand the particulars of each market.

1. Google acquires Applied Semantics

The number one tech deal of the decade is probably going to be a contentious choice as it is also one of the smallest deal on a financial basis. Google acquired Applied Semantics in 2003 for a bit over US$100 million, most of it in stock. What did Applied Semantics do? Well, to put it quite simply, it did contextual text-based advertising. The company’s work serves as the base for Google’s AdSense program, which delivers roughly half of Google’s ad revenue. I would argue that, without this acquisition, Google’s advertising reach would not have extended as far as it did and that this acquisition serves as one of the largest drivers of revenue to the company and its key differentiator against other online ad offerings.

Because AdSense has been such a substantial engine of revenue Growth for Google; because it was developed by an outside company most people haven’t heard off; because Google is now one of the most important players in the tech space, dictating and directing trends in our industry;  I would say that this is the single most important tech deal of the decade.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 10 Tech Deals that Defined the Decade — Part 2. You can follow him on twitter here or receive his weekly newsletter by subscribing here.