Microsoft's flawed marketing of high-def digital rights management in Windows Vista

Tags: Microsoft, Intel, Marketing, Displays, HDTV, DRM

Today, we have two points of view about Microsoft's addition of hard-core digital rights management to its next generation operating system, Windows Vista. CNET's News.com takes the position that this is necessary to appease Hollywood. Boing Boing on the other hand takes the position that Microsoft is abandoning its customers and proper copyright usage. Blackfriars poses the question: who is paying for the product and will these digital rights systems satisfy their needs and wants? Given that consumers are paying for the PC and its OS, forcing consumers to give up existing rights to even display high definition content on displays they have paid for feels like a marketing blunder of the first magnitude.

We wrote about this situation in July, but we got a refresh at one of the Intel Developer Forum sessions on presenting high definition content. And when we heard the presentation, it became quite clear that the customer Microsoft was marketing to was Hollywood and not consumers. We will get a preview of whether consumers will accept this state of affairs when we see the HD-DVD and Blu-Ray high definition disk players arrive next year. But a quick look down the comments at CNET shows opinion running about 4 to 1 against upgrading to Vista if it includes this feature. One wonders whether Microsoft has run any focus groups on this feature in the beta version of Vista currently in the field.

Will it be phone or video for Apple next week?

Tags: Marketing, Apple, iPod, iPhone

Well, it's been three months since an Apple announcement, so it must be time for another. The San Jose Mercury News asks, is this the time for a Video iPod or an iPod phone? And what does the watch pocket on the jeans shown on the invitations mean?

Our bet: this is a combination announcement. I expect we'll see both the iTunes phone from Cingular, as reported by the Wall Street Journal AND a suite of new iPods with color screens. Huh, you say? What about the video? Well, once you have color iPod screens, video is a simple matter of software and a fast processor. And given the deal with Intel, it wouldn't be surprising to see a hefty Intel Xscale processor in an iPod.

The interesting bit is what type of service might we expect to load music into the iPhone. Conventional wisdom is that music would simply come from iTunes through an Apple Mac or PC. But what if Apple actually became a Mobile Virtual Network Operator, as has previously been speculated? Then, Apple might provide an over-the-air iTunes service and reap higher revenues for over the air loading.

All we know is that we will find out next week. Waiting is a pain, but it is good marketing.

LG adds plasma manufacturing capacity

Tags: HDTV, Plasma, LG

Ever wonder what is driving all these price cuts in plasma displays? There are several major manufacturers including Matsushita and Samsung spending millions of dollars adding plasma manufacturing capacity. One of them, Korea's LG, is opening a new manufacturing plant on Thursday that will double its plasma manufacturing capacity. Thanks to HDBeat.com for the heads-up.

Pioneer matches 50-inch Panasonic price reduction

Tags: HDTV, LCD, Plasma, Pioneer, Panasonic

BestBuy is currently offering the Pioneer PDP-5051HD 50-inch plasma TV for $4499.99 with a $500 rebate, thereby matching the MSRP of the current Panasonic 50-inch TVs. It sounds like $4K is the new 50-inch price point for the foreseeable future.

Panasonic starts the plasma prices falling for fall

Tags: HDTV, LCD, Plasma, Panasonic

This bit was buried in last week's announcement of Panasonic's sub-$10K 65-inch 1080p plamsa TV (whew, that's a lot of adjectives!), but today's bricks and mortar circulars proved that Panasonic cut its manufacturer's suggested retail prices for its plasma TVs this week. You can now go to Best Buy or Circuit City and pick up Panasonic panels at these price points:

• 50-inch HDTV for $3999


• 42-inch HDTV for $2999


• 42-inch EDTV for $1999

You can expect the on-line street prices to decline as well, but not as much as the MSRPs, which went down anywhere from $500 to $1000 depending on the model. I predict that these are the prices Panasonic intends to stick through the Christmas selling season. We may see some movement due to competitive pressures, but I doubt MSRPs will fall more than another $100 to $200, if that.

I've got to give Panasonic's marketer's credit, the new price points are easy to remember!

The Xbox 360 price gouging begins

Tags: Microsoft, Games, Gaming, XBox 360, IDF, Marketing

EBgames.com is now offering two XBox 360 SKUs for preorder. But these aren't just the standard Microsoft $299 and $399 bundles. Instead, they've added many games and accessories to bring the retail price up to $599.92 and $699.92.

I have commented before that I think XBox 360 production will be extremely limited this year. Sounds like the retailers intend to make the most out of lots of demand and little supply.

A real live XBox 360 at IDF

Tags: Microsoft, Games, Gaming, XBox 360, IDF, Marketing



Near the Media Center PC demonstration here at IDF, Microsoft actually showed a working XBox 360, shown here in a cellphone snapshot. Much of the time, the XBox was working as a wired media center extender showing content streaming from a dual-core media center elsewhere in the booth. But users have been walking by and using the remote control to explore its menus and it does seem to be working.

So that's the good news. The bad news is that the high def video stream it was displaying was quite jerky. I asked about it, and the Microsoft rep said that this was only hardware revision 5, that they were going to get 6 soon, and they hoped that would cure the dropped frame problem. They also said that they probably won't go to full production until around revision 10. As I have commented previously, that's a very tight schedule if they expect to ship 1.6 million units this holiday season. But working hardware is an encouraging sign.

Do consumers really want Intel Viiv?

Tags: Intel, Microprocessors, IDF, Viiv, Digital Home, Marketing

Don MacDonald, SVP of Intel's Digital Home initiative, today announced Intel Viiv, a new ingredient brand for media PCs due to arrive in 2006. Like the Centrino technology brand, Intel intends Viiv to represent an entire suite of Intel components, all of which must be present to create what it considers to be the best home entertainment experience. The concept is that Intel Viiv platforms will be available in a variety of form factors including small compact systems designed to fit in with ordinary consumer electronics products.

Dr. Genevieve Bell, an Intel anthropologist that studies consumer behavior, set the tone for the announcement with the comment, "LIfe doesn't go according to plan.", implying that consumers, not Intel, would decide whether and how consumer electronics products would fit into their lives. But that advice was promptly ignored as Mr. McDonald proceeded to show dual-core media center PCs in small form factors, claiming that they would give consumers access to their content anytime anywhere. But with special over-the-air encryption, Microsoft digital rights management, and broadcasters reluctance to provide media in digital form to consumers, we suspect this claim will take a long time to prove true.

Why the skepticism? Because 90% of the value that is being added through the PC doesn't require a general purpose PC, nor does it demand centralization of all the content. Worse, PCs don't meet most consumer's expectations for electronics devices, such as maintenance-free use, instant on and off, and plug and play simplicity. The Viiv brand is defined to include Windows Media Center OS. That's a far cry from the simplicity and consumer acceptance of a DVD player or an iPod, and I expect consumer adoption to reflect that.

Bottom line: it is going to take more than "its a PC" for Intel to crack the digital home. As Dr. Bell said, consumers don't want to build the digital home. They just want their home digital. And despite PC familiarity, it's going to take more than sleek form factors for conventional PCs to get them to want one in their entertainment center.

Intel enterprise platforms and the missing code books

Tags: Intel, Microprocessors, IDF, Enterprise Platforms, Marketing

Today, we had two back-to-back keynotes. Pat Gelsinger, founder of IDF and the host for many many years, talked about enterprise platforms and Don MacDonald presented Intel's vision and products for the Digital Home. We'll take those one by one.

Pat Gelsinger used to be head of Intel Laboratories and Research. Now he's in charge of Enterprise Platforms. Let's face it, enterprise platforms aren't as sexy as the latest cool research project, but they do make a lot of money for Intel. And Pat did show off some interesting announcements, including ones around virtualization, automated management, VOIP, and high density servers. And yes, they even showed Itanium 2 systems running. My takeaways for the interesting bits of Pat's speech were:

• Intel's virtualization technology makes automated PC image loading and management possible


• Intel and Cisco are aligning their strategies for protecting corporate networks and PCs against viruses and intrusions


• Intel and Skype are joining up to offer business audio voice over Internet (VOIP)


• Intel has some new low-power processor designs to aid datacenters and high-density server environments.


• Despite rumors of its demise, Itanium 2 is being deployed and being used in real world applications.
  

We do have one recommendation for Intel though: they need to provide code books for these speeches. Every speech referred to a minimum of six or eight code names, and even veteran analysts were getting confused. Hiding behind code names doesn't promote audience understanding, and if the information is being made public, then the code names have outlived their usefulness.

Don't let bad technology ruin a good message

Tags: Intel, WiMax, Mobility, Dual Core, Marketing

This afternoon, I saw the second keynote of IDF with Sean Maloney and David Perlmutter talking about the magic of mobility with Intel dual-core architectures and WiMax. At one point, one Intel exec took the audience on a trip to the four corners of the world, with videoconferences to a small city in China, a canal barge in Rotterdam, to a school in Argentina, and to a lakeside house in Canada, all courtesy of WiMax broadband. Great demos for a great keynote, right?

Well, er, not really. The concept was terrific -- show WiMax actually being used to provide wireless broadband. But the videoconferencing was terrible. Round-trip delays were on the order of many seconds, meaning that these live videoconferences became opportunities for miscommunication and confusion. At one point, for example, the vice mayor of a Chinese city spoke for about five minutes in Chinese with no translation. The audience was left wondering whether they were missing subtitles or some other bit of information that would help them understand. Similarly, when the interview with the ship captain in Rotterdam had ended here in San Francisco, the ship captain in Rotterdam couldn't really see or hear what was happening. So he remained on the screen looking puzzled and confused for a couple of minutes in living color, destroying the value of what should have been a very impressive demonstration.

The bottom line: This could have been a great keynote. But someone opted for demonstrating it badly, figuring that the wireless communication would wow the audience. In fact, it was the opposite. The audience ignored the important bits -- namely that WiMAx was actually delivering wireless broadband in remote corners of the world -- and instead focused on something that wasn't even the point of the demonstration, namely the videoconferencing technology. The result: the keynote went from being a wow to a "How's your Chinese?" moment. And that's not what Intel marketing was looking for.

Intel launches more cores for Apples and PCs alike

Tags: Intel, Apple, Dual Core, Marketing

Intel CEO Paul Otellini launched IDF with his keynote this morning. So what was the story? As predicted, Intel announced dual-core processors throughout its product line, promising a 10x improvement in performance per watt. And the announcements covered not only mobile processors like Centrinos (evolving to new names such as Yonah and Merom), but also desktops (code names Presler and Conroe) and servers (code names Dempsey and Woodcrest). When asked who is looking for this type of green computing, he brought up Urs Hölzle from Google, who demonstrated took us around the world in 80 seconds with Google Earth and noted that the power savings across hundreds of thousands of servers will actually save Google millions of dollars a year.

Paul did have a couple of quite remarkable demos to show. One was a videoconference with an Indian village at the foothills of the Himalayas via WiMax. Another was the demonstration of eight high-definition television streams across a wireless network in the room. But perhaps the most intriguing was his showing of a group of "Hand-top" processors weighing about 1 pound with 5 inch screens with 1/2 watt processors. What was interesting about them? The one he chose to show off was white. Now lets see, who makes white computers? Oh yeah. Apple.

The press Q&A was tough, though; the first question was why it took Intel to long to recognize what AMD, Sun, IBM, and others had already recognized. Paul simply claimed they were moving an entire industry. Then another press person asked Paul if he was going to accept the challenge that AMD laid down with full-page newspaper ads this morning, namely running his dual-core products against AMD's in a dual-core duel. Paul simply replied that they prefer their duels to be fought in the marketplace, not with benchmarks, and left it at that.

Our take: this was a well-presented launch of a whole new generation of Intel products. But there wasn't a lot that hadn't already been predicted. The fact that they have working dual-core products was good. But so does AMD, Sun, and IBM. Intel simply announced its next-generation architecture and didn't even name it, leaving everyone to refer to it in their own ways. And if the marketplace is to be the final judge of the success or failure of these products, we have some time to wait. Most of these won't really hit the market until the second half of 2006. With dual-core products in the market from other companies already, a lot can happen in a year.

We'll get more details when Sean Maloney talks about mobility at 11:30 PDT.

Panasonic to announce 1080p TV today

Tags: HDTV, LCD, Plasma, Panasonic, 1080p

Panasonic is launching the first volley in the next battle of flat-display wars. Gizmodo is noting that Panasonic is planning to reduce its prices its 65-inch plasma display below 1 million yen (at current exchange rates, that's about US$ 9,035) and announce its first 1080p displays today.. We had previously heard that this announcement was planned for September. Be careful; it's getting competitive out there.

Beyond Gigahertz: Fall Intel Developer's Forum 2005

Tags: Apple, Intel, Microprocessors, Marketing, IDF

Today, I leave for the Intel Developer's Forum in San Francisco. Speculation is that Intel is finally dumping gigahertz as their primary metric of performance. What will they substitute? No one really knows yet. The obvious metric for portable computing devices, namely instructions per watt, is too geeky for public consumption. And artificial benchmarks have been tried by companies like AMD and Apple, but they have never caught on either.

Regardless, we'll find out tomorrow what Intel's new architecture looks like and how they will bring it to market. Look for details and analysis about 3 pm EDT.

More falling costs of flat panel TVs

Tags: HDTV, LCD, Plasma, 1080p

The New York Times had a long article on Saturday about the falling costs of big-screen TV's to keep falling. While the article gets some of its facts wrong (specifically a sidebar that says if you want to watch sports shows, you should look for a 1080p TV; any progressive scan TV would look fine, and the quality would depend on the scaler, since most sports shows are actually broadcast in 720p), it does make a fairly strong case that we'll see more falling prices as we get into the, ah, fall.

Complete XBox specs and prices

Tags: Microsoft, Games, Gaming, XBox 360, Marketing

Xbox 360 News has a complete sell sheet on the XBox 360, including accessory part numbers, prices, and feature comparisons between the Core system and the premium XBox 360. Some interesting bits: the game prices are listed at $49.95 (there had been speculation XBox 360 games would be $59.95), and that the XBox 360 premium has chrome trim whereas the XBox Core System doesn't.

My reaction from a quick look through: other than the prices and part numbers, there's not much here that wasn't in the coverage from the product announcement. But you do get lots of very nice photos showing what the items look like. And those comparison tables between the XBox 360 Core System and XBox 360 are handy for someone trying to decide what they want.

But as I noted previously, unless you have a pre-order in now, the chance of getting an XBox 360 Core System this holiday system are somewhere between slim and none; supplies will be extremely limited and most retailers will emphasize the higher ticket version -- if either system is available in quantity at all.

How flat panels displays are changing everything -- including flying

Tags: HDTV, LCD, Plasma, Aviation, Flying



One of the reasons I write about HDTV and flat-panel displays is because I believe they are technologies that, like the personal computer, will fundamentally change much of how we see and experience the world. I was leafing through a copy of Flying magazine recently and was caught off guard by how much flat panels have changed private aircraft instrument panels. When I learned to fly about 30 years ago, the panel of a Cessna 172 or Piper Cherokee was full of vacuum-powered guages and between two and six radios; it looked like this. Now, with high brightness LCDs and integrated electronic navigation systems, it looks like this.


That's the latest Garmin G1000 integrated avionics system, which replaces the primary instruments of the aircraft. What used to be the primary guages are now backup instruments arrayed underneath the main multi-function displays. Ten years ago, glass cockpits were the province of multi-million-dollar airliners. Now, they are available as standard equipment in a Cessna Skyhawk. But at least now, when your passenger says, "Gee, that instrument panel is as complicated as a Boeing 777", they aren't far off.


Thanks to Garmin for supplying the G1000 panel photograph for the Cessna. They also are supplying similar systems for Mooneys, Diamond aircraft, and a host of others. Flat-panels: they aren't just for airliners any more.

Technorati Tags: Aviation, Flying, HDTV, LCD, Plasma

Much ado about Google and CNET

Tags: Marketing, Google, Apple, Microsoft, Journalism

David Kirkpatrick at Fortune seems outraged that Google stopped giving information or interviews to CNET after it wrote an article containing 14 pieces of personal information about its CEO, Eric Schmidt. He then goes on encourage both Google and Apple to emulate the openness of Microsoft because it lets its employees blog and has an aggressive PR function. Huh? Does he really believe that employees are unbiased journalists or are likely to reveal inside information about executives or unreleased products? And isn't this the same Microsoft that fired an employee for posting pictures of Apple computers arriving at Microsoft? I think we could do without emulating that type of behavior.

I understand what David is trying to get at. He wants journalists to have the freedom to write what they want. I'm all in favor of that myself, having been an analyst who has written critical articles on some very large companies, including Microsoft. But in the Google case, it seems to me that there is no freedom issue involved. CNET remains free to write what it wants. Google is free to refuse them access as it sees fit. Both parties know there are consequences for annoying the other.

But it is important to remember: there is no constitutional right for reporters and analysts to have access to public companies or their executives. My guess is that Google felt it needed to tell CNET it had crossed the line by publishing not only Eric Schmidt's net worth, but where he and his wife live. If you were worth $4 billion, how would you like to see your address published in major media? This is the sort of ad hominem writing that should have consequences other than a phone call saying, "We think that was out of line." Attack the company and its strategy, that's fine. Cause personal inconvenience and harm to the people working for or running the company, that's just an abuse of the job.

I think the best quote on this whole issue is Mark Twain: "Never pick a fight with people who buy ink by the barrel." But the corollary for people who buy ink by the barrel is "Don't alienate your sources." While CNET should feel free to publish what it wants, it needs to realize that it is not the only media outlet writing stories about Google. And Google is within its rights to remind CNET of that, even if it gets slightly less ink.

Plasma displays now outsell rear-projection TVs -- except in the US

Tags: HDTV, LCD, Plasma, Panasonic, LG, Samsung, 1080p


ExtremeTech notes today that plasma displays outsell rear projection TVs everywhere except the US. Here, apparently, we're addicted to rear projection's everyday low prices. Still, with plasma sales up 89% year over year and rear-projection falling 17 percent year over year, it's only a matter of time. And of course, plasma is under attack by LCD technology as well, so plasma's king-of-the-hill status may not last long.

Intel's next generation a very long instruction word (VLIW) processor?

Tags: Apple, Intel, Microprocessors, Marketing, IDF


The Inquirer has a long and interesting speculative article on next week's Intel announcements claiming it will be a Very Long Instruction Word processor as a way to save power. I don't buy it -- adding more microinstructions doesn't really help the power problem. I think Intel is doing something much more straightforward, namely using multiple low-speed (i.e., 1-2 GHz) core processors, and shutting down cores when they aren't in use. The key for me is that power increases as clock frequency squared. So if you want to save power, you want relatively low frequency systems. That said, the devil is in the details, and we'll find out the details next week. But I think they got one thing right: Apple wouldn't have switched if this were a small announcement.

LCD overtakes plasma in 37-inch TV segment; now to the 42-inch segment

Tags: HDTV, LCD, Plasma, Panasonic, Sharp, Westinghouse, 1080p

I predicted at the beginning of the year that this was the year that we'd see LCDs start to eclipse plasma displays. Well, according to DigiTimes, it is happening. They note that LCD has overtaken plasma in 37-inch TV segment already according to Pacific Media Associates (PMA). The question the article poses is when this will take place with 42-inch TVs.

The reason this trend may be a lot harder to track is that 42-inch plasmas are pretty different beasts than 42-inch LCDs. The best selling 42-inch plasmas are EDTVs, sporting only 852x480 pixel screens. On the other hand, even at 30-inchs, LCDs commonly deliver at least 1388x768 HDTV resolutions, and at least some of the 37-inchers already on the market -- for example, the Westinghouse LWM-37w1 -- already boast 1080p resolutions of 1920x1080. Yet, these panels compete already on price. The bottom line: you may see 42-inch LCDs really come into their own when 1080p TVs start to be more common next year. At that point, instead of commanding a price premium, LCDs may be cheaper than plasma at the same resolution.

PlayStation 3 for $299 too?

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

Engadget reports that Amazon has a listing featuring the PlayStation 3 for $299, despite no official announcement of price or availability. I wouldn't put much stock in it, but on the other hand, I doubt there will be more than $50 difference between the PS3 and the Xbox 360 when both are actually being manufactured and available at retail.

Targeting specific customers for profit at retail

Tags: Best Buy, Electronics, Marketing, Retail, Marketing Measurement,

Today's Washington Post has a great case study of how Best Buy has been redesigning its retail experience to address the wants and needs of specific types of men and women. Some stores are being targeted toward "Jills", women who are "CEOs of their families", while others are being transformed to favor "Barrys", or male shoppers looking for better entertainment experiences. Sound like fluff? Best Buy has the metrics to prove it works:

Since the redesign was rolled out in October, Jills have increased their spending at the Santa Rosa store by 30 percent, helping boost the store's revenue to what is expected to be $75 million to $80 million this year from around $50 million a year before the redesign and pushing its customer loyalty rating to among the top five in the country.

Nationwide, such "customer centricity" stores had an 8.4 percent increase in sales in the quarter ended May 28, compared with the same period a year ago, Best Buy executive John C. Walden said in June.

Kudos to Best Buy for noticing that consumer electronics retail has been underserving the more than 50% of the population that is female. That's smart marketing no matter how you look at it.

Microsoft Announces Two XBox versions priced at $299 and $399

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

As we predicted yesterday, Microsoft confirmed today that it will sell two version of XBox 360 for $299 and $399 in the US. Some marketing details are interesting though. The less expensive version eliminates the hard disk, the high-definition output cables, the headset, and the wireless controllers that the more expensive version includes. That said, we still believe that the low-end version will be both unattractive for most buyers and difficult to buy simply because both Microsoft and retailers will prefer to sell their limited stock of consoles this Christmas at higher prices.

Microsoft also announced that the XBox 360 will sell in Europe for prices of 299 and 399 euros. Given the current exchange rates, that appears to be a reasonable markup to allow for value-added taxes imposed by European countries.

Also of note today is the fact that Microsoft has hired another contract manufacturer to build XBox 360s. But this new addition to the two existing manufacturers won't help with supply constraints this Christmas; they aren't expected to start production until 2006.

Of more interest from a strategic point of view is the issue that the fragmentation of the XBox 360 console market. Purchasers of the lower-end console will have to be careful to check game requirements to ensure that the game will run on the lesser configuration. And developers will now have at least two versions of the platform to test against, and maybe more. Given that it is unlikely that XBox 360 will ship with the HD-DVD drives that have been speculated as part of the console, there may be even more XBox 360 configurations in the future. Given the backward compatibility issues previously noted, namely that original XBox disks are unlikely to run unchanged on XBox 360, and certainly won't run on the less-expensive XBox 360 without the optional hard disk, Microsoft appears to be sowing the seeds for serious consumer confusion and dissatisfaction when buying XBox games at retail.

Panasonic and Sharp 1080p announcements expected in September

Tags: HDTV, LCD, Plasma, Panasonic, Sharp, 1080p

Word from The Financial Mirror is that Panasonic will announce its TH-65PV500 65-inch 1080p plasma TV at the Berlin International Consumer Electronics Trade Fair (IFA) in September of this year. Sharp will also be showing its 65-inch LCD TV as well which also is believed to be 1080p-capable.

Thanks as usual to the contributors to the AVS flat panel forum for the links.

XBox 360 to debut at 600 Swiss Francs = $477?

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


Gizmodo is reporting that a Swiss Microsoft Web page says that XBox 360 will launch at 600 Swiss Francs or about $477 at today's exchange rates. I don't completely buy this as being close to the actual US price because:

1. European prices for consoles are typically higher than US ones due to value added taxes of around 15%.


2. There is no comment about what is included in this price. Usually consoles launch with bundles to maximize profits and take best advantage of the initial limitations on supply.

Still, it's another data point on a launch that really is only about 13 weeks away if it launches on Black Friday. My bet is that the US standalone price will be listed as $299, but due to supply constraints, you won't be able to buy a standalone console. Instead, the only SKU that will have supply will be bundles priced around $399 to $449.

The August silly season and the absurd case of Microsoft patents on the iPod

Tags: iPod, Marketing, Apple, Microsoft, Patents

In the words of the university president in that classicly wonderful nerd movie, Real Genius,

"Always.... er.... Never..... forget to check your references."

Sadly, the reporters who have been writing the silliness about Apple owing licensing fees to Microsoft have been ignoring this piece of sage wisdom. Some have felt compelled to write that Apple will have to pay hundreds of millions of dollars a year to Redmond regardless of the facts.

Fortunately, we've got people like Wizbang Blog and Engadget who are providing some counterpoint to this silliness. If anyone were to bother to check the history of the device, the iPod was released in the fall of 2001 (I know because I helped review it for the Media and Devices group at Forrester Research). Microsoft's patent was filed in 2002 as was Apple's. Because the shipping device predates both patent applications, neither are likely to be granted because of prior art. So all those reports about Microsoft inventing and owning a piece of the iPod are just silly bits of fiction. I guess this is just confirmation that we are in the height of the August silly season in technology reporting.

The silliness continues. SkyNews now is claiming that Microsoft is already asking for about $10 an iPod. Again, repeat after me. The United States patent system is based upon a "first to invent" philosophy, not "first to file" as in many other countries. The sale of iPods in 2001 will eventually invalidate both patent applications. And please note that Microsoft's patent has only been applied for, not approved, so any licensing deal is way ahead of the facts.

Sheesh.

Vodaphone Explores "Less Is More" For Cell Phones

Tags: Advertising, Marketing, Tyranny of too much

Today's Wall Street Journal features a page one article on the Vodaphone Simply, a vastly simplified cell phone targeted at older users. The article makes two important points:

1. Many technology products today from cell-phones to cars suffer from featuritis and the Tyranny Of Too Much, and


2. Older users are an underserved, yet well-heeled market for technology companies

The last point deserves some serious attention by marketers. Remember those statistics on Social Security that say that while today there are five workers supporting each older citizen, in the not-too-distant future, there will only be two? Those statistics can be recast in this way for technology marketers: While senior citizens make up less than 15 percent of your market today, they will grow to be more than a third of your market in the future. Perhaps now is the time to start designing and marketing products to that affluent group.

Next week's Intel Developer Forum and the race to faster notebooks

Tags: Intel, Marketing, Apple, Microprocessors, Microprocessors

Next week, I am off to the Intel Developer Forum (IDF) in San Francisco to catch up on Intel's new chip architectures. Given that this is the first IDF since Apple announced it was going with Intel for its next generation of systems, it should be a very interesting meeting. Today, Laptop Logic posted the current Intel roadmap for its chips, and from what I can tell, the story is really all about multi-core chips to manage power consumption.

There is no question that this is a wonderful turn of events from Intel's prior quest for performance through clock speed only. Why? Because most of the time, we don't use computers to compute. In fact, computers spend most of their time waiting for us to move a mouse or type. And high clock speeds mean a lot of waste of power. Think of a high clock speed processor chip like a Formula 1 racer. it can go very fast on straightaways, but you don't really need it to go to the grocery store. And while it gets you to the grocery store fast, you have to send it home again to take the next person to where they want to go. After all, it's only one car.

What Intel is doing now is saying, wait a minute. What if, for the same price as that Formula 1 race car, I gave you a collection of lower-performance, but quite capable cars for you to use. Could you use those instead? For your average computer workload, the answer is heck yes. Most highly intensive applications nowadays like Adobe Photoshop are multithreaded already. Ditto for almost all of the modern Apple applications. Yet, when you aren't running those intense applications, we can put the spare processors in the garage and not have them burn power. So batteries should last longer, yet peak performance should be nearly as good as -- or better than -- those Formula 1 processors.

What the roadmap says is that the first processors we'll see will be dual core -- that is, two processors in one chip. But that will just be the start. At previous IDFs, we've heard people say that we'll see quad core processors on the roadmap as well. And since these parts don't consume all the power the old ones do, we could have multiple quad-cores inside one notebook computer without running into cooling problems. Suddenly, the single-processor 2 GHz notebook will look so early 2000s compared with their long-battery-life multiprocessor successors.

Of course, this is all speculation at this point. But given what Jobs was talking about during his last keynote, this sounds a lot like what he was talking about when he said we could expect factors of 50 or 60 more performance per watt than we see today. The great thing: Intel may build the chips, but Jobs will be a marketing force for this new world of mobile computing. And don't expect it to stop at notebooks; after all, iPods are just mobile computers dedicated to music. It's going to be a fun couple of years.

Even Dell finds out low prices don't always work

Tags: Dell, Marketing, Apple

We commented earlier that low prices only rarely work as marketing strategies, the exceptions being companies like Wal-Mart and Dell that have enough market power to force the pain of those strategies onto suppliers. Yesterday, PC bellweather Dell missed analyst estimates for revenue growth because it sold too many low-priced machines. CEO Kevin Rollins laid the blame on Dell's failure to upsell from the low-priced machines:

Typically, Dell lures consumers to its Web site and to its toll-free phone numbers by advertising cut-rate prices. Once consumers take the bait, the company is usually successful in selling them extra memory, a faster chip or some other upgrades that increase the final selling price, sometimes by hundreds of dollars.

Dell did not do that as well in the quarter, Mr. Rollins said. He said the problem was being addressed.

Sound familiar? This is sort of like the car dealers who advertise the stripped-down models and then try to upsell when you get in the dealership to the fully-loaded cars with the clear-coat finishes and extra warrantees. This isn't marketing; it's basic sales strategy, and typically can't be used too aggressively or the attorney general of some state or another comes calling.

Dell faces a fundamental problem though. Because its value add for its commodity PCs is so low, and it largely leaves R&D to its suppliers, there isn't a lot to market other than low prices. That's why Dell has lately been introducing more luxury laptops and gaming desktops to its lineup. These higher-end systems raise the sticker price to better cover ordering costs and provide differentiation from commodity products. Said another way, they provide the marketers something to market. Expect more of that to improve business results in the next year.

One other thing in today's news coverage: I saw at least one news account that said that Dell is the only major profitable PC maker in the market today. That bit of lore has been around for years and just isn't true. To paraphrase Yoda, "There is another profitable PC maker.", and they do some of the best marketing in the business. That PC maker, of course, is Apple. I hope once the Intel-based Apple machines are in the market and people recognize that 95% of the parts are exactly the same as the ones Dell uses, journalists will lay that old PC market myth to rest.

One final note: Wall Street traders may be doing better at figuring out Apple's profit story than business journalists. Dell stock is down 7% today and has dragged most other technology issues with it, but Apple is up 4%.

XBox 360 taps into accessory revenues in search of profits

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

CNET is reporting that Microsoft will require XBox 360 accessory makers to both pay for certification and a percentage of their profits. The article claims that this is similar to Apple's tapping into iPod accessory revenues, but there is a significant difference: XBox 360 hasn't launched yet, nor do any accessory makers have any clue as to what the actual market for their products will be. Why does that matter? Well, think if you were the maker of a cool controller that you think you might really do well on the next-generation gaming platforms. You have two choices (assuming you're not working with Nintendo):

1. Pay to get certified by Microsoft, promise them a percentage of your revenue, and pray they gain market share this Christmas before Sony launches next spring, or


2. Sign up to be a Sony partner and plan on participating in the bulk of the market (since Sony currently controls nearly 80% of the console market and is likely to retain much of that lead). Oh, and by the way, at the moment, Sony isn't requiring a percentage of profits, so you have more margin for things like marketing.

The justification for this move? The article claims it is to ensure that the XBox product line makes a profit. While that makes good business sense, it seems this profit-seeking is a bit of a bolt out of the blue. After all, Microsoft is suspected to be planning to lose money on every console it sells (and that seems likely regardless of whether it gets accessory profits or not), in hopes of being able to subsidize the platform with game sales and later year profits. Does it really need to tap the little guys to add to its $50 billion in the bank?

The XBox 360 launch is looking riskier and riskier for everyone except slow-but-steady Sony.

Pioneer and IDC take on plasma myths

Tags: HDTV, LCD, Plasma, Pioneer, Rear Projection, IDC

Plasma manufacturer Pioneer sponsored market research firm IDC to create a nice white paper that explains why you should have confidence that:

1. Buying a plasma screen TV is both going to deliver one of the best TV pictures you can buy, and


2. You needn't worry too much about the plasma myths in the market such as burn-in and lmited panel life.

The paper is a 3 MB PDF, but is highly recommended reading. Panasonic has a similar white paper that they produced themselves. From a marketing point of view, though, I like the IDC one better because of the third-party perspective. But if you're in the market to spend from $3,000 up on a plasma display, it's nice to have this type of data to justify your decision.

As an aside, LCD displays -- the flat panel technology we'd bet on long term -- come out fairly well, if second best in the testing. if I felt I needed the highest resolution or great pictures in uncontrolled lighting environments, I'd still consider LCD panels. And with the large amount of LCD production capacity coming on line in the next year, LCD's current price premium may turn into a discount sooner than you think.

More Microsoft xPod indications?

Tags: Music, Apple, Napster, Microsoft, Marketing

Bloomberg, in this case via The Seattle Times notes that Microsoft has an extensive program to ensure that Apple's iPod gets some serious competition. Specifically:

Microsoft is working with electronics makers including Royal Philips Electronics, Samsung Electronics and Creative Technology to design and test music players that rival iPod, said Erik Huggers, head of Microsoft's Digital Media Division.

"Come this fall there is going to be a number of devices that get close to competing with Apple's iPod," Huggers said yesterday in San Francisco. By the second quarter of next year, "There is going to be a whole lineup of products that can compete with Apple in industrial design, usability, functionality and features."

No surprises there. I'll note that all those manufacturers already have digital music players in the market, so why aren't those considered competitive now? Perhaps it has something to do with the PlaysForSure certification program, which a Jupiter analyst skewers nicely.

While Apple's iPod and iTunes music store work together easily, Microsoft has faced difficulty showing customers which of the many Windows-based players and music stores are compatible. A campaign called "PlaysForSure," to put a logo on devices that would show consumers what works together, hasn't helped because not all devices with the logo actually work with the promised services.

"We tend to call it 'PlaysForAlmostSure,' " Gartenberg said. "Meanwhile, Apple's iPod and iTunes are dancing together like Fred Astaire and Ginger Rogers."

I'll repeat the challenge that Microsoft faces: they not only need to compete with features, but also by marketing consumer products that work out of the box and don't require an IT department to support. Given Microsoft's reliability and security history, they have a long way to go before they put a dent in iPod's 80% market share.

John Dvorak's clever take on Apple/Intel

Tags: Microsoft, Marketing, Apple, DRM

OK, this almost never happens, but I actually liked John Dvorak's latest opinion piece on the whole question of whether Apple's OS X will be allowed to run on generic PCs. His argument is that the whole trusted computing/DRM included bits of the Intel version of Mac OS X is really a nefarious plot of Steve Jobs to market test Mac OS X as a competitor to Windows Vista. It may be fiction, but it is certainly entertaining fiction.

Rosencrantz and Guildenstern in XBox's Halo

Tags: Microsoft, Sony, Games, Gaming, Machinima

I don't know how I missed this in yesterday's reading of the NYTimes, but there you are. The New York Times magazine section had a wonderful article on the use of video games as creative cinematic tools. Of course there's a cool name for it -- Machinima -- and it is best demonstrated by the Red versus Blue videos by Rooster Teeth Productions that are entirely shot using Halo on XBox consoles for the video and voice-overs by the creators. Just proves once again the impact that video games are having on cinema and society. Once again, just when Hollywood thinks it owns movie-making and movie viewers, creative people manage to prove them wrong.

The Economist examines the social impact of video games

Tags: Games, Gaming, XBox 360, Playstation 3, Nintendo

The Economist today has has excellent, well-balanced article on the social impact of video games in today's society. They note that controversies over titles like Grand Theft Auto are not unlike those that existed in previous generations over rock and roll and movies. But what I thought was the best point was that most critics of video games are over 40, while most people who play video games are under 40. So what we're seeing is really a generational divide over different life experiences. As usual with the Economist, this is a well-written and thought-provoking piece.

Pioneer planning 1080p plasma

Tags: HDTV, LCD, Plasma, Pioneer, 1080p

The folks over at avsforum.com noted that Pioneer plans a more than 50 inch plasma display that does "full-specification high definition" (whatever that means). People seem to be interpreting that as a 1080p panel. And why not -- if you have that many pixels, there's no reason not to scan them progressively. At the very least, we know that they plan 1920x1080 pixels, which would make it the highest resolution plasma on the market to my knowledge. Planned delivery is June 2006.

A better article on why Sony might deliberately slip Playstation 3

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

ArsTechnica has a much better reasoned article about why Sony might choose to delay its PS3 launch until 2007. The interesting justification is that they would delay only if the XBox 360 launch flops! Why? Because it would tag Microsoft with a lot of very expensive subsidized console sales (read money losing, big-time) on both Xbox 1 and Xbox 360, and it would allow Sony to build a killer title base for its later launch. I don't completely buy it, but it makes a lot more sense than the previous one I cited.

Forbes sees XBox 360 on track -- and we're still skeptical

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

Forbes.com cites a Piper Jaffray analyst stating that XBox 360's launch is on track for November delivery of about 1 million units in the US, 400,000 in Europe, and 200,000 in Japan. They also expect 15 games available at launch, with 35-40 games available by year end, and two price points of $299 and $399, where the $399 unit bundles the hard-drive option, an extra controller, and memory.

Our take: We stand by our belief that the schedule will be very tight. Why? Well, let's think about PowerPC chip production and platform manufacturing. This is a prediction of 1.6 million XBox 360 units. You can't produce those all in one month, so the production line will have to start soon if they are going to hit their dates. My bet is that manufacturing has to start about October 1 to ramp up for the Friday After Thanksgiving sales (Black Friday). I'd expect a ramp rate of about 100,000 the first month, 250,000 the second, and 500,000 the third. That leaves deliveries almost three-quarters of a million short. So start September 1. Oh, wait, the final release-to-master design still isn't done yet.... Oops.

But that's not the whole story. those boxes need chips too, 3GHz chips made by IBM in East Fishkill, NY. This is a tougher story, because IBM has not successfully produced 3 GHz PowerPC chips in quantity yet (if that were not the case, Steve Jobs wouldnt' be switching processor suppliers). The Fishkill plant has a max production capacity of about 1/2 million chips a day, but that's for a well-understood, debugged chip. Further, not all those chips are good (in fact, most of them are no good -- big chips have very poor production yields, often in the single digits) and few of them run at the highest speeds. If IBM can get 3-5% yields on 3GHz chips early in production, that's great, but actual numbers will likely be considerably less. So expect IBM to be cranking out only about 30,000 Xbox capable chips a month for a while. And each XBox requires three of them.

The bottom line: I expect IBM to be the biggest bottleneck because of the unknowns in a new high-speed chip -- those production lines just take time to ramp up. And because XBox's design requires so many of the chips, I would be very surprised if XBox launches with anywhere near the number of units that Piper Jaffrey claims; my bet is that there will be at most about 1/2 million made, and that's only if everything goes perfectly (and we know they never do). Expect XBox 360s to be about as plentiful as hen's teeth at Christmas -- if they are available at all.

2006 iTunes price increases?

Tags: Music, Apple, Napster, Microsoft, Marketing

Macworld UK today has an article noting that Apple is going to have to renegotiate its digital music contracts next year, and that the labels plan to ask for more money than they are currently getting. This should be interesting, since iTunes has now sold more than half a billion songs that have been pure profit to the music labels. The question is who has the market power in this case. After all, there are a lot of digital music choices, including piracy and CD-ripping, as well as other music stores with different digital rights for consumers to choose from. I believe that Apple will largely stick to its price point, but will accommodate some tracks at higher prices, but won't sign up for a uniform $1.29 or such track price. Then consumers will get to vote with their wallets how much value they see in digital DRM'ed tracks.

Amazon in digital music: let's hope they have some new ideas

Tags: Music, Apple, Napster, Microsoft, Marketing, Amazon,

Today's Wall Street Journal notes that Amazon.com might offer digital music by Christmas. We have great respect for Amazon doing a great job in retail environments where there is a serious case of the Tyranny Of Too Much. Forrester's Josh Bernoff agrees.

Josh Bernoff, an analyst at market-research firm Forrester Research Inc., said he wouldn't expect Amazon to have a big impact immediately. But Mr. Bernoff said Amazon has managed to differentiate its offerings in other highly competitive markets, such as selling compact discs. "They are particularly good in environments where there are thousands of other choices," he said.

But as we've noted previously, the odds are against this working if they elect to build a me-too store based upon Microsoft's Janus digital rights management technology. After all, it's not like there's any shortage of those types of services: you can already choose from Napster, WalMart, Yahoo, Virgin, and a host of others. We don't think they can create enough differentiation to overcome Janus's limitations, namely that it doesn't support iPods, is flakey (despite Microsoft's Plays For Sure initiative, which should be renamed Pays For Sure regardless of whether it plays), and is tied to Windows Media Player only. While it may serve to hedge against a decline in Amazon's CD business as digital music takes hold, we don't think Apple's iTunes yet has much to fear unless Amazon has some clever new twist up its sleeve to address these issues and give it an edge.

Napster: headed for dead again

Tags: Music, Apple, Napster, Microsoft, Marketing

Forbes.com has an article today titled Napster On The Rocks? noting that despite growing revenues, Napster just keeps losing more and more money. Napster is the poster child for Microsoft's Janus DRM technology, which we've noted has had serious marketing issues since its inception. And as usual in the Microsoft ecosystem, Napster is getting crushed not only by Apple, by more importantly by other competitors using identical technology who can subsidize their music businesses. Just shows a business with little or no differentiation is not a business at all -- it's a pit into which you throw money. The real question is which music service will be next to fail after Napster does. Hint: it's not Apple.

Sony's PS3 launch slippage too?

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

Lest anyone think Sony can do no wrong in the video game business, Engadget has a story saying that one Wall Street analyst believes that Sony will simply cut the price of the PS2 to $100 and wait until 2007 to introduce the PS3. Our view? That would be a poor (and frankly unlikely) strategy for Sony, since it would simply put Sony in the position of marketing solely on price, which it almost never does. Instead, I would bet on a two-pronged approach: Cut the PS2 price to $100 for this Christmas, and introduce PS3 on time in April 2006 at its premium price, just as Sony did with the PS1 when the PS2 came out.

How high-price marketing can win in gaming consoles

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

We here at Blackfriars like to say that low price strategies are the first choice of bad marketers and the last refuge of good ones. There's some evidence of the truth in that statement in the current rumors about pricing for next generation game consoles.

I noted Sony's high-price Playstation 3 (PS3) strategy -- namely entering the market next year with a just sub $500 platform versus Xbox 360's rumored $299 price point -- in yesterday's posting about XBox 360 challenges in hitting its Q4 launch date. The Inquirer today has an insightful article about why this strategy might actually work for Sony.

When the PS3 arrives it will be – by all accounts – technically superior to the Xbox 360. Sony wants this one to last 10 years – twice that of the PS2 – so expect it to be packing everything but the kitchen sink.... you're only going to be buying one over the course of a decade. At worst, that's around £25-a-year for one of the most eagerly anticipated electronic devices on the planet. So, when people have an online spasm over the projected cost of the PS3, remember that obsessions have no price limit and kids have no patience. They'll be using every suck-up and emotional blackmail technique to ensure Mommy and Daddy and Step Mommy and Step Daddy have their chequebooks at the ready. After all, it worked for the PS2.

So bottom line, by this time next year, we'll have at least two next-generation gaming platforms slugging it out in the market. XBox 360 will have a three to four months lead in the market (best case -- as we've noted, there's lots of risk and little slack in Microsoft's development and launch schedule), and a likely pricing advantage of around $150 or so. However, XBox will have updates required to develop all of its features -- it was announced this week that Xbox 360 will feature DVD-HD disk drives, but won't have those in time for Christmas this year. And Microsoft will likely be selling Xbox 360 at a loss of between $50 and $100 per console.

PS3, on the other hand, will enter the market in a more complete and less huried launch, a higher-performance platform with backward compatibility with PS2 games, a more mature and debugged development platform, a larger stable of games and developers, and a lot of time for good marketing. And the high price, rather than putting buyers off, is likely to create a premium value halo around the product, while allowing Sony to break even or make a small profit on every console it sells.

Clearly Sony believes that low prices are the last refuge of the good marketer. The question is whether Microsoft understands that concept yet.

Strike 2 against XBox 360?

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

The Inquirer has a rumor that XBox 360 will retail for $299. However, of more interest is the developer comment below it, namely

XNA is a bitch to program for.

With "The Godfather" premiere game already pulled from launch, this comment certainly doesn't provide warm fuzzies for XBox 360's Q4 launch, does it? Somehow, I suspect that Microsoft got that "Underpromise and overdeliver" marketing mantra backwards. And from what I've seen of the competition's plans (including those that are setting a price tag of around $465 for that platform), Sony has made no such error -- yet.