Sunday, January 29, 2012

The vanishing trade show

Saturday I attended what's left of Macworld Expo, now known as “Macworld/iWorld” in San Francisco’s Moscone West.

I last attended the show in 2009, which was also the last year of Apple’s participation. Their huge exhibit space cost hundreds of thousands of dollars in booth rental, setup charges and salaries — so with other avenues to reach customers, they decided to drop out. The show never has been the same ever since, although despite some predictions (including my own) Macworld Expo is not dead yet.

Founded in 1985, the Macworld Expo once helped justify the construction of the Moscone convention center complex. At one point it required more than 400,000 square feet of exhibit space in Moscone (South) and Moscone North. (Earlier in the week, the Photonics West optical trade show filled both halls).

This year, despite the longer name the show needed less than 100,000 square feet in Moscone West.

The only one of the traditional major Macworld Expo exhibits was HP, through seniority occupying a 20x30' booth right at the show entrance. In a new take on the traditional “booth bimbo,” HP hired two of the “Gold Rush” squad (aka 49ers cheerleaders).
Another longtime exhibitor was Xerox, taking over the Tektronix Phaser color printers that date back to 1988 (the one color printer company that didn’t need the help of Palomar Software). As for Mac software, I was unable to solve my Exchange calendar synchronization problems. However, saw two new (to me) drawing programs — Art Board and Concept Draw — which might replace my old copy of Smart Sketch for the times that PowerPoint is not nearly enough.

My favorite hardware item was microcone, a (pricey) five-sided microphone for recording 5 6 separate voice tracks from a meeting to a Mac, for transcription or for use as a Skype microphone. On the music side of audio, there were other microphone vendors on the show floor (from Blue and MicW) but the show seemed much less (Mac) music oriented than any other time in the 21st century.

The main trend was that the new name reflected the longstanding shift away from Mac to cases, headphones etc. for iPods and iPhones. I lost track of the number of booths selling cases and headphones, including major audio companies like Polk (with athletes jumping on their trampoline) and Sennheiser (showing their $200+ headphones).
If you wanted to play an electric guitar, you could try it out with the iRig plugged into an iPhone or iPad. However, iPod speakers were much less common than in 2008.

There were a few things that I would have bought for my iPhone or iPad — if I owned an iPhone or iPad. Tops were the keyboards, which included the RightShift and ZaggFolio for the iPad and the Slide to Type 2.0 for the iPhone.

But in the end, we left with two free cases from the moshi drawing and a pair of $10 earphones that claim to be waterproof. In the end, we split our $30 direct cost equally between the earphones, our two Groupon tickets and the offstreet parking.

It was a nice chance to show my daughter an example of that vanishing 20th century phenomenon, the trade show. I can’t imagine going to a smaller show in the future, but perhaps we can find another more vibrant example of the genre to visit before the phenomenon dies off permanently.

Update 2:00 p.m.: Correct error on Microcone pointed out by sharp-eyed reader. Serves me right for not putting on my glasses when in the booth.

Monday, January 23, 2012

RIM: we've seen this movie before

Research in Motion this morning promoted COO Thorstein Heins to be the new CEO. The two co-CEOs, Mike Lazaridis and Jim Balsillie, stepped down from any executive position but remain on the board. (Lazardis, a co-founder and the only remaining original director from 1984, becomes vice chairman).

The FT reported:

Thorsten Heins jokes that as a German, he knows something about discipline.

“Once I decide on building an idea, or on building a product or a service or a network, I do this very rigorously,” Mr Heins told the Financial Times. “Discipline in the development process, flawless execution, quality [and] accountability in the system.”
The analyst reaction was mixed; this comment from RBC (via the WSJ Deal Journal) seems representative:
On the one hand, this appears a positive step, as Messrs. Lazaridis and Balsillie are stepping away from the Co-Chairman, Co-CEO structure which some investors have highlighted as one source of RIM’s current problems… On the other hand it’s unclear to what extent the new CEO will be able to materially impact the vision and direction of the company in light of rapidly changing competitive conditions, and correct RIM’s seeming inability to navigate these challenges. CEO Heins, while a seasoned network executive, has never been a public company CEO, and lacks deep consumer marketing and software experience.
When I heard the news, two words immediately came to mind: Michael Spindler.

Spindler was Apple Europe president, promoted to Apple CEO after John Sculley was ousted in 1993 (and before Spindler was ousted for Gil Amelio three years later). Spindler was a notoriously operations-oriented executive (nicknamed the “Diesel”) who sweated every detail in sight.

I’ve never met Heins, so I don’t know if he has the Spindler stubbornness and lack of imagination. However, in most companies the COO (contrasted to the VP of R&D or the VP of marketing) tends to focus on implementation rather than generating great new ideas.

Certainly RIM could use to ship better products sooner, so improving execution is a good idea. But in the end, will it change RIM’s eventual fate? I doubt it, any more than Spindler’s (or Amelio’s) execution was ever going to save Apple. RIM has still to solve its fundamental problems.

RIM had a great run, bringing email to the cellphone, solving key ergonomic and battery life issues. However, like Nokia (and unlike Samsung, LG and even Motorola) they underestimated the impact of the iPhone and the desire of cellphone owners to access the open Internet. Pursuing the same strategy (even with better execution) and expecting better results is the very definition of insanity.

RIM doesn’t need new execution: it needs a new strategy. Nokia made a bold move — which may or may not work — but at least licensing Microsoft’s platform provides an ally, newer technology and perhaps the badly needed economies of scale.

RIM clearly lacks the scale to support its platform alone, in the face of the Android onslaught and Apple’s continuing success in controlling the industry’s wallet share. It was rumored to be trying to license its platform to other firms, but who would want it now? That’s the problem with most proprietary platform leaders: they open up when it’s both too late to hurt the company and also too late for any potential partner to care (NB: DEC, Sun, Sony).

One strategy for RIM would be to concentrate more on the server side, providing BlackBerry push e-mail to handset makers, network operators and business users who don’t have BlackBerry hardware. The problem I can see is that the traditional BlackBerry business model is dying because most of the differentiation is gone: why would I pay $10/month for BlackBerry services when I can get gmail (or hotmail) for free? (This is exactly the Windows 95=Macintosh ’89=Macintosh 2000 problem.) Or, as one analyst quoted by the WSJ put it, “Our discussions with carriers suggest declining relevance and increased pushback on BlackBerry fees.”

Another strategy would be to sell the company for the value of the patents, as Nortel (the oldest of Canada’s onetime telecom giants) and Motorola (the creator of the cellphone) have done. Obviously the RIM management has little interest in this as long as there’s any other alternative.

Absent a partner, RIM is going to go the way of DEC, Sun and Motorola, sold for its residual value. Even after the management change, RIM appears no closer to forestalling that seemingly inevitable outcome.

Friday, January 20, 2012

Legacy of an OPM addict

Despite bad news after bad news after bad news, California Governor Jerry Brown doubled down this week in his commitment to spend nearly $100 billion to build a permanent legacy to match his father’s: the California High-Speed Rail. Unfortunately for the state, his desired legacy is an unaffordable white elephant — while his father provided water for the state and expanded both the UC and CSU systems.

I heard Brown on the radio Thursday, defending spending the money to build the proposed 520-mile system. Pressed by fiscal conservatives, he argued that state’s growth requires development of the Central Valley to handle the population than won’t fit in existing cities — and linking the Central Valley to these cities.

Once the price ballooned from $30 billion (1999) to $45 billion (2008) to $99 billion (in November), that should have been it. After the latest budget estimate, the project attracted editorial opposition from reliably progressive sites like the San Jose Mercury News and Huffington Post. Or as a Bay Area TV commentator put it:

Here are three things that claim to be living but are still dead:

1. General Francisco Franco (see Chevy Case, Saturday Night Live circa 1975).

2. That dude in "Weekend at Bernie's" who was proppped up, dressed and carried as though he were alive.

3. The California high-speed rail project.

This week saw the latest attempt to breathe new life into high-speed rail. Something similar was done to the high-speed rail plan. The dead body of high-speed rail was propped up and made to look more life-like with a new business plan.

But it's still dead. … [H]igh-speed rail costs billions in a state with persistent budget deficits. Its costs exceed — by about 800% — the amount of money the state and feds have to devote to the project.
Even the California Rail Foundation now opposes the plan, arguing that it assumes ridership that exceeds comparable European bullet trains by an order of magnitude.

If that wasn’t bad enough, earlier this month the independent financial review board recommended that the state not issue the (voter-authorized) rail bonds, because they posed an “immense financial risk” for the state of California. The next week, two key officials of the rail authority resigned. In criticizing the plan, Washington Post columnist Charles Lane wrote:
It’s “more important than ever,” [President Obama] said, to get “recommendations not based on politics, not based on narrow interests, but based on the best evidence, based on what’s going to do the most good for the most people in this country.”

If only the president and his political ally, California Gov. Jerry Brown (D), would follow that advice regarding their pet project for the Golden State: high-speed rail. No matter how many times they tout the mega-project as the job-creating wave of the future, they can’t change the mountain of evidence that high-speed rail is, in fact, a boondoggle.

It’s especially odd for a Democratic president and governor to saddle California with the cost of bullet trains when the state is facing chronic deficits, tax increases and social spending cuts. Maybe this is why polls show that a majority of Californians have turned against the project. It’s still not too late to hit the brakes.
Like Jerry Brown I, the latest incarnation of the would-be Jesuit is nothing if not stubborn. Still, his impassioned defense of the project was surprising. One of my former SJSU coworkers put it this way:
"It intrigued me that he put all his marbles behind high-speed rail and that he's willing to spend political capital on it," [Prof. Larry] Gerston said. "These big infrastructure projects do provide a whole bunch of jobs, but it would also put California back on the map. It's almost a status thing as much as it is a transportation thing, a way that Californians can say: Yes, California is back on top."
Brown argued that because other big ideas proved prescient, this one would too:
“During the 1930s, the Central Valley Water Project was called a 'fantastic dream' that 'will not work. … The Master Plan for the Interstate Highway System in 1939 was derided as 'New Deal jitterbug economics.' In 1966, then Mayor Johnson of Berkeley called BART a 'billion-dollar potential fiasco.' Similarly, the Panama Canal was for years thought to be impractical and Benjamin Disraeli himself said of the Suez Canal: 'totally impossible to be carried out.' The critics were wrong then and they’re wrong now.”
The former Governor Moonbeam needs a little reminder about the laws of economics, particularly the importance of substitutes in limiting pricing power.

The Interstate Highway System was the first way for many people to travel across and between states, reducing travel times by as much as 50% over the old windy US highways and serving far more of the country than rails did. The water project was the only way that parts of the state could get water — from any source — fueling growth in both farming and residential development.

By comparison, the proposed bullet train has two entrenched competitors — airplanes and private cars — which challenge both the convenience and pricing assumptions. The “bullet” train will never threaten Southwest for travel time, at least from the Bay Area to L.A. or San Diego. Even assuming that costs will come in as projected — unheard of for a public works project of this magnitude — the claimed revenues assume a pricing power that is unrealistic (absent $200/barrel oil prices).

If it’s like Amtrak — or California’s regional rail transit systems — it will require ongoing operating subsidies. Meanwhile, California would have to spend tens of billions of dollars before the system generates first revenues, and the system wouldn’t be finished until (at least) 2033.

Jerry Brown will be long-retired by then. He’s hoping that generations of Californians will agree to pay for his legacy — perhaps in perpetuity.

It’s easy to build a legacy with Other People’s Money. If Brown really believes in his legacy, he should step down in 2014 after his third term, and raise the billions in private investment needed to build this system.

Sunday, January 8, 2012

Old media partners with its conquerers

I was surprised not to find any discussion of the brand/image implications of NBC partnering with Facebook to host this morning’s presidential debate in New Hampshire.

NBC, after all, is a once-reputable international news organization, home of Meet the Press, and former home of Tom Brokaw, Huntley and Brinkley. (It’s now owned by a cable TV conpany). Facebook is an 8-year-old website where people share pictures and post ads for Farmville.

With a little investigation, it turns out the NBC-Facebook pairing is not the only partnership of old and new media. According to a website on “social TV” called, Fox is partnering with Google, ABC is partnering with Yahoo and the Washington Post is leveraging Twitter. (Apparently CBS, CNN and the New York Times feel they don’t need a social media partner). NBC also has the 15-year-old partnership with Microsoft called “MSNBC.”

NBC doesn’t mention the Facebook partnership on its main Facebook page, but apparently that’s part of the strict separation between news and entertainment (with reserved for the latter).

The debate is prominently mentioned on the Facebook page for Meet the Press, but not that many people go there. The Meet the Press page is liked by 80,000 members while the main NBC page warrants 215,000. However, this compares to 2.5 million for the Green Bay Packers, 27 million for Starbucks and 37 million for Katy Perry. Even my hapless San Diego Chargers have a million fans.

By partnering with the new social media, the old media are facilitating the shift to the new social media. Does NBC hope that it will legitimate itself with a lost generation by partnering with Facebook? Is there any evidence this has ever worked before?

Of the five major US news networks — ABC, CBS, CNN, Fox and NBC — only CBS is a standalone company (valued at $18 billion). CNN can be bought with its parent Time Warner (TWX) for $37 billion, versus $67 billion for NBC/Comcast and $72 billion for ABC/Disney (DIS).

However, the shift has already taken place. Despite its problems, analysts speculate that Facebook will be worth $100+ billion in its long-rumored 2012 IPO.

The Facebook market cap may reflect an optimistic growth multiple that eventually disappears (ala Netflix, Cisco, Microsoft, etc.) Or the company may continue to chase Google ($210b) in market cap. Either way, it’s hard to see a case where old media will threaten it in public influence (or market capital) any time in the foreseeable future.

Friday, January 6, 2012

Intractable online IP policy controversies

Hat tip: Matt Asay (@mjasay)

Like anyone who follows the tech industry, I’ve been seeing apocalyptic stories, emails and seminar announcements about how SOPA (the Stop Online Piracy Act) will destroy the Internet, Internet companies and technological innovation as we know it.

With my new job, I haven’t been paying as much attention as I’d like to, but from what I’ve read, it’s another law in the general direction of the (much loathed) Clinton-era Digital Millennium Copyright Act. Certainly the motivation and opposition sound nearly identical to DMCA.

What also sounds similar is the oddfellow coalition: I mean, how often do Republicans try to make Hollywood studio execs richer? And how often do Democrats have to choose between the supporting the entertainers (and entertainment execs) who help them raise millions against the grass roots consumers and the EFF/civil liberties types?

I spent a fair amount of time studying DMCA. After briefly working as a consultant to one of the earliest Internet music streaming sites (Live365), I wrote two teaching cases about the challenges facing the entertainment industry in the Napster generation, and the trade-offs of Federal imposition of terms for content producer-consumer negotiations (particularly the Online Royalty Tribunal).

My favorite part of that era was when I asked my MBA students to do a five forces analysis of the record industry ca. 1995, when there were 6 major labels instead of the soon-to-be 3. After walking through the buyer power, supplier power, substitutes, rivals and entry barriers, I led them to the inescapable conclusion: this is as close to a cartel as you’re ever going to see. (Hint to students: professors love examples of industries with very high or very low forces.)

There are no white hats here. The DMCA was a sledgehammer to kill a mosquito, but that didn’t make the mosquito any less deadly. My sense is the SOPA is roughly the same.

So I was thrilled to read a blog entry (tweeted by Matt Asay) by John Lilly:

What’s bothering me about the SOPA “discussion”

There are 3 things that have really been bothering me about how the SOPA/PIPA discussion has been going so far.
  1. it’s not a discussion at all — it’s people calling each other names.
  2. it’s highly likely to have a result that is unhelpful at best, and insanely destructive at worst
  3. we’re building a completely worthless/bad roadmap for how to deal with technology policy going forward, and it’s going to get worse
Let me be very clear: SOPA is a terrible law that should not be enacted under any circumstances. It’s broken technically and misguided from a policy point of view. It not only won’t accomplish what advocates want it to accomplish, but it also will create backbreaking burdens and barriers to entry for some of our most promising technology companies and cultural movements of the coming decade.

But also: content creators & owners have a legitimate beef with how their content can be appropriated and distributed so easily by rogue actors.

I don’t share John’s interpretation of the law. Part of this is because I’ve not read the law, nor heard more than a smidgen of the articles regarding it. But part of it is also because entertainment companies are getting killer, the other side (consumers, Silicon Valley, cyberlibertarians) are at best indifferent to their situation and it’s only with the threat of bad legislation will they make even the most modest concessions.

John was particularly funny as he caricatured the name-calling on both sides:
[Here] I use the term “conversation” here very loosely, since it has characteristics more like a bunch of schoolyard name calling. The conversation that’s happening is going more like this:

- content: “you people are stealing our stuff. you’re thieves”

- techies: “we’re not stealing it. we’re just building great apps for users.”

- content: “you’re ignoring the problem and helping the thieves. you’re effectively pirates, so we’re going to shut everyone down.”

- techies: “you’re acting like jackbooted fascists, embracing censorship and your’e going to end everything that’s good about culture today.”

- content: “we’re trying to protect our content — you guys are pretending like there’s no problem, then getting rich off platforms that pillage our content.”

- techies: “you don’t understand how the Internet works — how do you even live life in the 21st century? dinosaurs.”

So that’s awesome. Then you throw Congress into the mix and hilarity ensues. Because if you’re looking for folks who really do not act like they want to understand the Internet, Capitol Hill is a pretty good place to start.
John advises that “we need to be thinking about copyright law — in an age where copies are the natural order of things, as opposed to previously, when it was harder to make copies.“

What I find particularly depressing here is that fixing entertainment copyright law is trivial compared to fixing patent law. Here we have a pretty simple mix of stakeholders: content producers, content consumers, interested bystanders and pirates.

When you’re trying to fix patent law, you a particularly rich mix of people in an industry. For example, for the patent term on a therapeutic compound you’d have big pharma, startup biotech, insurance companies, the Feds (Medicare/Medicaid/VA), consumes, and senior citizen lobbies. But when the same patent system also impacts IT — with components, systems, software, open source, patent trolls — and dozens of other industries, then the prospect of finding a patent reform compromise that a majority will endorse becomes virtually impossible.

Tuesday, January 3, 2012

How much longer are atoms important?

We need atoms to power out laptops and cars and HVAC systems. We need atoms to nourish and rebuild our corporeal selfs. But how much longer will atoms be used to deliver information and information goods?

I’ve written about newspapers dying, but apparently the end is quicker than we thought. The journalism program at USC predicts only four major dailies will be in print in five years — nearly a decade earlier than expected. (I’m not sure why the Washington Post will survive, so perhaps it will be only three.) The only other survivors will be (they predict) hyperlocal papers, those serving communities of 20,000 or more. (The former dailies may survive a little longer as weekly newsprint magazine wrapped around department store ads.)

We know that most teens and young adults have never bought a CD — at best, having received one as a gift or used an iTunes gift card to buy a song. Now they don’t even have to rent videos, with online streaming by Netflix and its many rivals. After more than a century, Blu-ray is probably the last physical form of recorded entertainment our civilization will see.

Amazon is doing their best to kill physical books without (as Netflix did) cannibalizing its core business in the name of cost reduction. Unfortunately, citizens and policymakers have not confronted the desire of content owners to eliminate sale of content and replace it with DRM-infested rental. The established “first sale” doctrine (along with markets for used books, movies and records) will be moot if nothing is ever sold again.

What really surprised me was film cameras. When I gave my UCI MBA students a homework assignment on convergence devices a decade ago, we could see that video-still cameras and PDA phones would converge. But we didn’t see that phones would replace cameras

Over the Christmas break, I was prompted to consider how much longer the annual holiday letter will survive. This year we sent about 110 cards and received about 60. (The older generation no longer can send letters and the younger generation never got into it). We also got three electronic holiday letter-cards and one electronic greeting card. Will we be emailing a PDF in three years?

Even so, there must be some limits to this transformation? Between Christmas and New Year’s, someone mentioned a young man who e-mailed virtual flowers. (No one volunteered how effective this was in achieving his romantic goals.) Call me old school, but that seems like a bridge too far: the first young man who comes to escort my daughter better be bringing actual dead flora.