HP cuts off its nose to spite its face by giving up iPods

Tags: Marketing, HP, Apple, iPod

In what we assume must be an attempt to focus on its core business, HP today announced that it is not going to sell iPods any more. That move leaves an interesting question unanswered: How is HP going to participate in portable digital music? The iPod accounts for 80% of the music player market now. The next largest player only has 5%. So not selling iPods means that either HP intends to bypass this market or is engaged in wishful thinking that some magical Microsoft/Intel combination will allow it to change those figures. Either way, we can forget about HP being a consumer electronics company until it figures out that music is important to consumers.

This is a great example of how high-tech management by the numbers without a clearly communicated strategy doesn't work. Blackfriars noted previously that a CEO who focuses primarily on cost-cutting was not the type of person who was going to revitalize HP into any semblance of its former self. When you combine this move with the decision last week to eliminate 10% of its workforce, we can only conclude that the new HP strategy is not about innovation and new markets. With the PC business stuck in the doldrums and its printer business under assault from Dell and the Japanese, unless HP starts communicating clearly what it plans to do and why, the HP way is gone for good -- and maybe HP as a high-tech leader as well.

Advertising for a TiVO world

Tags: Marketing, HDTV, TiVo, DVR

Also in the Wall Street Journal today is an article describing the new tactics advertisers are trying to recapture the attention of digital video recorder (DVR) owners who are skipping over broadcast commercials. The branded tags and showcase advertising opportunities are interesting and certainly reflect the shift we at Blackfriars have been seeing away from the 30-second spot and to more non-traditional advertising vehicles. But we particularly liked the conclusion at the end of the article as the real answer to the problem:

Consumers, meanwhile, are pushing forward. In the end, the one way to snare their attention may be to simply produce ads that are as compelling and entertaining as the TV programs the commercials currently interrupt.

Amen.

What Sony needs is a flat panel Trinitron

Tags: Marketing, HDTV, LCD, Plasma, Sony

Today's Wall Street Journal notes that Sony reported weak earnings yesterday because of its TV business's poor business performance. The onslaught flat panels has been particularly hard on Sony because it invested so much marketing and energy in rear projection systems. With a price war raging in the sexiest products -- that is, flat plasma and LCD TVs, Sony's non-flat technologies just haven't been able to command the premium prices Sony needs to keep its business healthy.

Undoubtedly, new Sony CEO Howard Stringer will be looking at how to improve Sony's performance in television. But from a marketing point of view, what Sony needs now is a home-run product such as it had with its Trinitron-based TVs in the 70s and 80s. And while it has made valiant attempts to innovate in television with its Qualia line of projection TVs, the company is fighting the trend of flat technologies like plasma, LCD, and next year's SED. Given that Sony hasn't invested in the large scale plasma manufacturing that Matsushita has, I'd put my bets on Sony trying to make LCDs with picture quality significantly better than plasma. That's a tall order, but it is what it needs to do to succeed in this cut-throat business. And while Sony's brand carries a lot of value, that value is declining without amazing products to sustain it.

One final observation: the article did note that Sony was planning to take steps to reduce costs. Specifically, the company announced plans to build more of its TV components itself as a way to revive its profit margins. That's refreshing to hear given the mad (and in our eyes penny-wise and pound-foolish) rush to outsourcing we've seen in American business. It looks to us like Sony wants to create success the old-fashioned way: through proprietary research and dogged development. The only question is whether it has the time it needs to succeed.

Managing for Creativity

Tags: Business, Management, Marketing

Harvard Business Review Online has a great article on managing for creativity. In the context of Richard Florida's The Rise Of The Creative Class, this case study of how SAS fosters creativity in its organization bears serious thought. After all, we can think of creative businesses as the ones most resistant to outsourcing. And that type of job security is a major plus in competing for the best workers.

Plasma EDTV for less than $1200

Tags: HDTV, LCD, Plasma

MacMall is currently offering the Vizio 42-in Plasma EDTV for $1199. You need to factor in shipping costs ($199), but even so, this offer may now be starting the price erosion we thought we'd see starting in August.

We should note that a refurbished Akai plasma is also available from Tiger Direct for the same price. $1200 seems to be the new low price bar for plasma EDTV -- and it was only last month that that number was around $1500.

As a secondary comment, when stopping at my local Shaw's grocery store, I noticed that they are now running advertising on Sony 42" plasmas throughout the store as well as at 15" LCDs at the checkouts. This is just another example of how flat screens will transform pieces of our lives that we wouldn't expect to be affected by technology.

Vacation from blogging

I'm taking a vacation until the end of July, so this blog won't be updated until then. And while I could post entries by cell phone, sometimes one just has to say no. Just because I can communicate anytime anywhere doesn't mean I should.

Expect the next post on or about July 31st.

Medicare drug plan struggling because of too much choice

Tags: Communication, Marketing, Tyranny of too much

Also over the weekend, The New York Times noted that the current administration has mounted yet another campaign to sell the benefits of the new prescription drug plans to the nation. But frankly, these guys have an uphill battle given that:

In a stop here, four top Bush administration officials, including the surgeon general of the United States, said the drug benefit would be a boon to retirees, worth $1,300 a year to a typical recipient and much more to those with low incomes.

But the officials offered none of the details that would have allowed beneficiaries to judge for themselves. Crucial information, like the monthly premiums and the names of covered drugs, will not be available until mid-September.

After hearing federal officials praise the program for about 45 minutes, Joan M. Jenness, 72, of Bridgton, Me., said: "I heard nothing I had not heard before. I still have lots of questions."

So they can't say how much it will cost or what drugs it will cover, but they are trying to convince people to sign up. Wow. That type of marketing in a corporation would probably get a marketing manager fired. But even more significant is a comment made late in the article about the fact that the array of choices being offered is actually a negative.

stimates of enrollment nationwide are uncertain. In the Federal Register of Jan. 28, the Bush administration predicted that 39 million people would receive drug coverage in 2006 through a Medicare plan or an employer-sponsored health plan subsidized by Medicare. In June, Michael O. Leavitt, the secretary of health and human services, predicted that 28 million to 30 million people would receive such coverage.

Carol S. Rancourt, coordinator of health insurance counseling at the Southern Maine Agency on Aging, said, "My biggest fear is that people will be confused by the large number of options, will be shocked into inertia and will just do nothing."

Many people are automatically enrolled in Medicare when they turn 65, Ms. Rancourt said. But, she added, most beneficiaries must "make an affirmative choice to enroll in the drug benefit."

Ms. Rancourt's fears are justified. Studies with retirement plans show that the more choices that are given, the lower the rates of enrollment. It's just another proof point that the tyranny of too much applies just as much to government programs as it does to media and advertising.

The science of framing ideas

Tags: Communication, Marketing, Tyranny of too much

The New York Times magazine had a terrific feature article on George Lakoff's work on "framing" ideas for the Democrats in response to the highly effective communication campaigns Republicans have used successfully for years. Blackfriars is a huge fan of Lakoff's work; we too believe that people's brains are influenced heavily by stories and anecdotes that may influence listeners more than logical and rational arguments.

Lest anyone disagree that the Republicans have been highly effective at communicating their message, the article points out a significant difference in how the parties communicate:

''I can describe, and I've always been able to describe, what Republicans stand for in eight words, and the eight words are lower taxes, less government, strong defense and family values,'' Dorgan, who runs the Democratic Policy Committee in the Senate, told me recently. ''We Democrats, if you ask us about one piece of that, we can meander for 5 or 10 minutes in order to describe who we are and what we stand for. And frankly, it just doesn't compete very well. I'm not talking about the policies. I'm talking about the language.''

Blackfriars believes that what you say cannot be extracted from how you say it. And while this article does its best to note that framing is nothing more than a tool (we would agree), we believe it is a powerful tool in today's world of the tyranny of too much.

But we do have to agree with the writer of the article that Lakoff missed the boat in his response to the Republican eight words:

Consider, too, George Lakoff's own answer to the Republican mantra. He sums up the Republican message as ''strong defense, free markets, lower taxes, smaller government and family values,'' and in ''Don't Think of an Elephant!'' he proposes some Democratic alternatives: ''Stronger America, broad prosperity, better future, effective government and mutual responsibility.''

The problem here is that he's unwilling to draw a clear distinction between the two positions. One of the litmus tests we use is whether the opposing viewpoint could use the same words to describe their position. If that is the case, then your position needs more clarity. Do we think the Republicans wouldn't be for a strong America? How about broad prosperity?

We believe it would be better to draw the lines more clearly with a statement like "Security for all, fair markets, fair taxes, and protection for the less fortunate." If nothing else, it would draw the distinctions between the two parties more clearly and provide substance for a discussion of the two views. And given that the current political environment tends to discourage discussion, that would be a huge step forward.

High technology -- in keyboards?

Tags: Keyboards, Marketing, Technology

I have no idea what the right tags are for this product, just because it is so unusual.

Probably one of the most interesting new products I have seen in a while is the Optimus keyboard, which is designed by Lebedev Studio in Russia. What's so cool about a keyboard? All the keys have small displays inside them that allow programmers and users to change the writing on the key. So if you want to type in Russian for a while, the keys will have Russian glyphs on them. Need an easy way to use all the Photoshop keyboard shortcuts? Put the Photoshop menu icons on the keys!

So the real question is, how will this product be marketed? Who is the right target market for it? And how should the designers reach that target market? I sure hope these guys have some first class marketing folks working with them; otherwise, despite it being a cool technology, it will never reach the people who need it.

Robert X. Cringley, Apple/Intel, and display Digital Rights Management (DRM)

Tags: Apple, Intel, Marketing, Displays, LCD, Plasma, HDTV

Robert X. Cringley this week speculates that the Apple/Intel deal was really to be able to provide content from the not-yet-announced iTunes Movie Store to Intel-branded DRM'ed entertainment devices to be available this Christmas as well as to video iPods.

I believe Robert is right to parse Steve Jobs claims about the Apple/Intel deal with a critical eye. I agree with him that this deal wasn't done just for Pentium chip speed or power consumption. I believe the real value of the deal is that Apple will have access to a wide variety of Intel technologies, including XScale processors, WiMax wireless chips, and flexible wireless systems (remember Intel's Labs' Radio Free Intel initiative? It asserted a goal to put wireless capabilities into every major system that Intel made!). Also, Steve has got to be looking at various types of digital rights management (DRM) technology for movie content, since that affects the bottom line of Pixar, the other company he leads.

I mention DRM because I believe this to be one of the new marketing battlegrounds between Apple and Microsoft. Engadget had a fairly scary article this week on the possible use of very restrictive DRM in Microsoft's Longhorn OS. In essence, the article says that when people upgrade to Longhorn, much protected content such as DVD movies and games will not display on non-DRM protected displays. Only those with HDCP (high bandwidth digital content protection) inputs will be able to display protected content at full resolution. On other displays, users will see a black screen or (if they are lucky) standard definition TV resolution.

As someone currently typing on a 1600x1024 pixel display, I can tell you many users will scream bait-and-switch if this type of DRM hits the market. Think about it. You upgrade your computer to the latest version of your OS. Of course, this OS has a shrink-wrap license that says once you install it, you can't return it. And then you discover that the best quality media you buy -- the latest HD DVDs or highest quality video games -- for your computer won't play on your old display. You need to buy a new one. Last I checked, very high resolution displays aren't cheap, often exceeding the cost of the computer that they are connected to. This is bad marketing at its zenith.

Oh, lest you consider this to only be a problem for computer users, the next generation of DVD players -- both HD-DVD and Blu-Ray -- and the next generation of video game consoles -- XBox 360 and Playstation 3 -- are likely to have exactly the same DRM as Longhorn will implement. The main difference: they expect to connect to TVs, which are more likely to boast HDCP ports. But computer displays are still back in the DVI and VGA era, so computer users will get to experience the hassles of DRM first.

So what will Apple do about display DRM if it launches the iTunes Movie store? We won't know all the pieces to this puzzle for a while. But we should get some ideas at the Intel Developer's Forum next month. You can bet I'll be there looking for technologies that Steve Jobs will be delivering to market in 2006 and 2007, as well as what Intel is implementing in its hardware for DRM. That should be a show worth watching.

Strike one for XBox 360

Tags: Microsoft, Sony, Games, Gaming, XBox 360, Playstation 3, Marketing

Today's Wall Street Journal notes that Electronic Arts has postponed the release of its videogame "The Godfather" past the XBox 360 release date and the Christmas selling season. I had noted in a previous post that XBox 360's release date is aggressive at best. This is simply the first bit of proof that the game developers recognize the same problem -- and are starting to adjust their release schedules appropriately.

Apple sees little interest in renting music

Tags: Apple, MusicMarketing

In yesterday's conference call on Apple's impressive earnings, Apple Chief Financial Office Peter Oppenheimer provided some interesting bits on Apple's music business, reinforcing an opinion Blackfriars wrote back in January: Apple's purchase model for music is vastly outgrowing competing subscription services. And lest anyone question the business value of the iTunes Music Store, it is making profit for Apple as well as revenue.

The iTunes Music Store continues to be the world's leading online music service. It operates in 19 countries which represents about 70% of the global music business. We are close to crossing the major milestone of 0.5 billion songs sold, and despite increased competition from companies like Napster, Microsoft and Yahoo!, our share of legally purchased and downloaded music in the United States has actually increased to above 80% as measured by Nielsen SoundScan.

…With our share… growing to over 80%… we just don't think very many customers are interested in renting their music. So we think that the success of the iTunes Music Stores show that most customers want to own their music.

AMD's lays out its case against Intel

Tags: Intel, AMD, Microprocessors, Marketing

For anyone who hasn't been following the news, chip-maker AMD has recently filed suit against Intel for anticompetitive activities. You can read the actual text of the complaint here. Now, I know that would normally be about as much fun as going to the dentist, but surprisingly, this complaint is both 1) well-written (especially considering it is a legal document), and 2) compiles a remarkable list of quite dramatic claims. If a substantial number of these are actually true, you can expect Intel to be spending either a lot of time in court or a lot of money with AMD.

Does this have anything to do with the other Intel news of the day, namely the raid of Intel offices in Europe today? It's hard to know. But given that there are now actions against Intel pending on three continents, it doesn't look good.

The New York Times on framing consumer choices

Tags: Advertising, Marketing, Tyranny of too much

Today's New York Times has an interesting article on how careful framing of consumer choices can radically affect business results in insurance, 401(k)s, and coffee. It's another spin on how consumers cope with what we call the tyranny of too much. Apparently, the challenges of getting consumers to make choices have become so severe that it's starting to have economists interested.

At McDonald's, people buy the combo meal when they might rather just have a small order of fries with their Quarter Pounder. Car buyers take the options that come as part of the most heavily promoted package even if they do not want all of them. For their 401(k), many workers simply accept the contribution rate and the investment choices their company picks for them. In countries where being an organ donor is the default choice on driver's licenses, many more people are listed as organ donors.

The habit is so widespread that some economists have begun making a novel argument. Sometimes, they say, the more severe and the worse that a default option is, the better off people will be. Only then will they take matters into their own hands.

Demystifying 1080p

Tags: HDTV, LCD, Plasma

Pete Putnam, also known as the HDTVexpert has a great article noting the lack of 1080p programming in today's high-definition TV market, and the challenges associated with actually getting any TV to display a 1080p signal without it getting compromised along the way. My favorite quote:

First off, there is no 1080p HDTV transmission format. There is a 1080p/24 production format in wide use for prime time TV shows and some feature films. But these programs must be converted to 1080i/30 (that'’s interlaced, not progressive scan) before airing on any terrestrial, satellite, or cable TV network.

What'’s that, you say? Those 1080p/24 could be broadcast as a digital signal? That's true, except that none of the consumer HDTV sets out there would support the non-standard horizontal scan rate required. And you sure wouldn'’t want to watch 24Hz video for any length of time; the flicker would drive you crazy after a few seconds.

The article is definitely worth reading. But I think it misses an essential point: 1080p is a marketing tool as well as a technology description, and a lot of consumers think it is worth paying a premium for "future-proof" technology. Even if they can never use it, they may be willing to buy it to avoid buyer's remorse in the future. And with today's HDTV scalers, extra pixels won't go to waste, even if they can't be used to their full advantage.

If nothing else, this all proves that free markets and consumers are better equipped to judge what technologies are worth than regulatory agencies. After all, the HDTV spec says nothing about 1080p -- this specification is entirely a product of innovation and the willingness of companies to speculate on technology. Unlike in the Federal Communications Commission, every consumer has the right to vote with their wallets -- and that's a good thing.

Apple grabs a burning platform to become -- a phone company?

Tags: Marketing, Apple

Forbes.com is claiming that Apple is planning to offer wireless services using the new Motorola cell/iPod phones. The claim is that it would do so as a Mobile Virtual Network Operator, i.e., a branded distributor using someone else's network.

Personally, I don't think it will happen because of how much it would distract Apple from its core business. Besides, it would raise a lot of issues about how the revenue gets split between the carriers and the iTunes store for music content and airtime. It's not impossible, but with the transition to Intel occupying Apple for the next year, I don't think Steve Jobs is looking for more challenges in the short term.

China takes a dim view of overstatement in advertising

Tags: Advertising, Marketing

Today's Asian news in the Wall Street Journal has an article on China's crackdown on over-reaching claims in advertising. Who are they choosing to go after? None other than the biggest and most savvy US marketer, Proctor and Gamble.

In April, P&G paid a $24,000 fine to the Administration of Industry and Commerce in Nanchang after Lu Ping, an insurance agent there, complained that the company's $100 SK-II skin cream wasn't the "miracle water" it claimed to be. Ms. Lu says the product not only failed to make her skin look 12 years younger in 28 days, as its brochures suggested it would, but also caused itchiness and pain.

Blackfriars' methodologies include questions that ask whether marketers are being honest about what their products do and don't do. Apparently, we aren't the only ones who feel honesty in advertising is the best policy.

Steve Jobs: doing the right thing is the best branding of all

Tags: iPod, Marketing, Apple

Today's New York Times notes that Apple CEO Steve Jobs called the family of the teenager who was mugged and killed for his Apple iPod over the weekend. It was not a long call, but the father of the boy noted its sincerity.

"Some people talk to you like they're something remote," Mr. Rose said. "He was so familiar. After every word, he paused, as if each word he said came from his heart."

Apple rightfully wouldn't comment on the call. But the humanity of this billionaire CEO certainly speaks volumes for the company and his brand. Bravo Steve.

Employee discounts sound clever, but aren't a good marketing strategy

Tags: GM, Automotive, Marketing

The Associated Press has a story as do many others on the success of GM's employee discount marketing strategy for its cars. The attraction to buyers: they feel like they are getting a deal. The attraction for auto makers? It gives them a simple story for unloading 2005 inventory. But while many articles have noted that this marketing strategy is being viewed favorably because it eliminates some of the incentives that have been killing automaker profits, they are missing an essential point: The employee discount marketing IS an incentive, just one with a different name. And this incentive won't cure the fundamental underlying problem that automakers are producing a lot of vehicles nowadays that aren't very attractive in this era of $2.50 a gallon gasoline.

Remember, good marketers only sell on price when they have nothing else to sell. Employee discount programs are just a fancy name for cutting price and profit to move inventory. GM will need a better strategy if it expects to pull itself out of its marketing slump.

30-inch LCD TV for less than $900 shipped now

Tags: HDTV, LCD, Plasma

Thanks to DealMac.com, you can now get a 30-inch LCD TV shipped to your home for less than $900 from Target. While 1280x768 falls far short of a 2560x1600 30-inch Apple Cinema Display, it is a lot easier to drive it from your computer, and besides, you could buy three of them for the price of the Apple display.

And most of the new LCD production capacity in China hasn't even hit the market yet.

XBox 360: an aggressive schedule at best

Tags: Microsoft, Sony, Games, Gaming, Marketing

I observed last week that both Microsoft and Sony must have flawless execution in the upcoming battle of the third generation gaming platforms. Well, according to GamesIndustry.biz, Microsoft has just shipped to developers ts first beta XBox 360 development kits, with final development kits to follow in a few months.

If I were an Xbox 360 developer, I'd have exactly one reaction to this: Yikes!

What's the problem? The calendar. XBox 360's big advantage is that it is expected to launch before Christmas. I'd interpret that to mean launch by "Black Friday", the Friday after Thanksgiving, when every store in the US will be competing for shoppers with huge promotions and high expectations. If I'm a developer, that means my title has to be ready to ship in about 16 weeks from now, assuming a month for printing and production and store distribution. But I only have beta hardware at this point. I won't be able to certify that my title actually works until I get real XBox 360 hardware "in a few months". That could be as late as a few weeks before I have to ship. And remember, this platform is completely different from the Xbox platform, so having a running game on the current Xbox provides no guarantee I have something that will work on XBox 360. In short, my whole 2005 business plan and multi-million-dollar investment required to bring a new game to market for XBox is depending entirely on being able to find most of the bugs on a beta platform and then quickly port to the final hardware in the last four weeks before shipment.

Further, Xbox 360 relies on some 3 GHz processors from IBM. Apple just abandoned IBM's chips because of its inability to hit delivery, speed, and power milestones after working with them for years. So there's risk in the brand new chip supplies as well.

Compare this scenario with Sony's situation. They already have development systems in game developer's hands that are fairly close to final hardware (although they share similar risks on the PowerPC front), yet Sony's delivery timetable here in the US is about three months later. And at the end of the day, Sony's timetable has more contingency built-in. After all, if Sony runs into technical glitches and the PS3 comes out in July instead of April, developers will grumble, but that slip would still allow a successful 2006. On the other hand, if any technical problems crop up in XBox, developers counting on beating Sony to the punch in 2005 will just be out of luck; no one has yet succeeded in slipping Christmas.

Oh, one more thing. The above is just the technical schedule. Marketing these products well and compellingly requires a similar hard and fast schedule that will require a go/no-go decision well in advance of technical delivery to reserve venues, buy advertising space, and line up promotional events. The marketing cost of slipping Xbox 360 will be ten times more than the technical costs. So developers betting on XBox 360 are making a very high-stakes gamble -- and if Microsoft has problems, they'll be the ones who lose their shirts.

So at the end of the day, this battle of gaming platforms will come down to not who has the best platform, but who has the best project planners, logistics control, and risk management: Sony or Microsoft? On those criteria, Sony may already have won.

Bill Gates says internet security is Microsoft's biggest challenge - Forbes.com

Tags: Branding, Microsoft, Marketing, Security, Spyware

This speech given by Bill Gates that Internet security is Microsoft's biggest challenge rings a bit hollow given that they are in negotiations to buy spyware-maker Claria.

Memo to Microsoft: You are either with us or against us

Tags: Branding, Microsoft, Marketing, Apple, Security, Spyware

The Wall Street Journal notes that Microsoft is in talks to purchase adware-maker Claria. Should the company do so, it would prove what many have always suspected: that despite all its claims of providing consumers with lower cost and innovative products, Microsoft brand stands for extracting maximum money from consumers, without regard for their interests, security concerns, or privacy.

For those unfamiliar with Claria, it writes software that delivers software like Gain that is one of the banes of the PC users's existance: pop-up ads. It further tracks user behavior and transmits logs of that behavior over the Internet for analysis by third parties. Many people refer to this type of software as spyware, since the ads don't really advertise the fact that they are tracking user behavior. And regardless of what you call them, all of these programs use fairly opaque end user license agreements which hide what they are actually doing -- and that no one reads anyway. Users install these programs when they mindlessly click through licensing agreements, typically associated with free software downloads.

What's Microsoft's excuse for getting into the spyware business? It fears Google is eating its lunch in the on-line advertising business, which, as it turns out, it is, and it feels that Claria could help them open new lines of revenue. But what Microsoft is missing is the undeniable damage and destruction Claria will do to its brand. As soon as consumers figure out that Microsoft is promoting pop-up ads as a competitive move, their image of Microsoft will drop like a stone. And should Microsoft ever start shipping Claria components as part of Windows, it can kiss any claims of promoting security first goodbye. The current security backlash against Microsoft will turn into a full-fledged revolt by both consumers and government agencies.

Now I'm sure someone will respond, but Windows is a monopoly! How can consumers revolt when there is no place to go? That objection is so last month. Apple has Mac OS X running on Intel hardware today. If there's a groundswell of consumers who want Mac OS X for their hardware, do you think Steve Jobs is going to say no? All he needs to do is offer a side-grade promotion -- one where you give us your old PC, and we'll give you a shiny new Intel-based Mac to replace it -- and he's off to the races. This strategy requires no change in development plans or hardware support, just plain and simple competitive differentiation -- the OS with no pop ups! -- and basic marketing.

This won't happen overnight. Microsoft already has a reputation for ignoring security that is doing its brand harm. But if Microsoft actually buys Claria, everyone will remember the date of purchase as the day when Microsoft turned against its customers -- and started its long decline.