Hands On: The Amazon Kindle 2…

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I’ve had the chance to spend a little time with Amazon’s Kindle 2, and I want to share my initial thoughts. I have also included a photo gallery at the end of this post to give you some close up views of a few of the things I talk about here.

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The Packaging:
The first thing I noticed was the attention to detail that went into the packaging – it was almost Apple-like in its design. The outside of the box looks like a standard Amazon cardboard shipping package. On the “Tear Here” tag on the side of the box, the words “Once upon a time…” are printed – a nice, subtle touch. Opening the box, there is a covered tray holding the Kindle itself, the charging cable, and a thin, fan-fold “getting started” brochure. When you remove the cover from tray, the Kindle 2 is sitting on top, and has some basic instructions on it’s screen for charging it up and turning it on.

All in all, the new Kindle makes a great first impression.

The Device:
Unlike the slightly awkward feel of the previous generation Kindle, the new Kindle 2 feels refined and balanced. It has traded in the angular look for a smooth, rounded, very modern appearance. The ergonomics are really good. It’s easy to hold and use the device with either hand, and it is far more difficult to accidentally press any buttons. The new 16-grayscale display is great upgrade, especially when it comes to e-content that contains images – newspapers, periodicals and web content (more on this later). Even for books, the new display felt easier on my eyes than the monochrome screens of both my Sony reader and the Kindle 1.

Navigation:
Navigation on the Kindle is handled via a small five way joystick, Next and Previous Page buttons, and Home and Back buttons. Collectively, you can use them to navigate any menu or page. For the most part navigating books is dead simple, but moving through non-book content isn’t always that intuitive. That said, once you figure it out it isn’t difficult to do.

Buying Content:
Purchasing content is simple. One option is to shop online at Amazon.com and purchase books, newspapers, magazines, etc from the Kindle store. These purchases can be sync to your Kindle over Whispernet without needing to attach the reader directly to your computer. The other option is to buy content right from the device itself. Though lacking the refined shopping experience of the web, it is straight forward to find books you are interested in and to then purchase them with a single click. They are downloaded immediately. You can also download the first chapter of any book for free, letting you browse the catalog until you find something you’d may be interested in buying.

You can also purchase subscriptions to publications that will be delivered automatically to your Kindle. You could have the NY Times and The Wall Street Journal download daily to read on your daily commute or even when you’re traveling. While incredibly convenient, some of these subscriptions are quite expensive when compared to the cost of their online or physical counterparts. They also don’t have advertising (which I don’t understand) and lack some of the content found in the other formats as well. They come with a 14 day free trial, and I would recommend trying it out before you buy it to see if it works for you.

Adding Your Own Content:
Beyond purchasing, you can also put free content or content you already own on the Kindle. Every Kindle is assigned an email address in the form of name_of_your_choice@kindle.com. You can attach PDF’s or office documents to an email message you send to this address and they will be delivered to your device. As a part of the emailing process, Amazon will convert these attachments to a Kindle friendly format on the fly. There is a $0.10 charge for emailing documents to your Kindle, but that is probably about the same amount you would pay in consumable costs to print out a normal sized document on paper. I haven’t tested the limits of compatibility here, but it does seem to work well. You can connect the Kindle to your computer and move files to it directly, but Amazon hasn’t make a conversion application available yet that will let you convert files on your own. I would love to see them make something like this available, but I’m not sure if it is in their plan.

Though I haven’t done it yet, you can also add your own MP3 files as well as your own picture files to the Kindle 2 for playback on the device. It’s an interesting addition, but will probably be redundant for most folks, and a poor substitute for an iPod.

Accessing The Web:
Kindle also delivers the web to you – sort of. Every Kindle comes with Whispernet, a digital cellular connection (an EVDO Sprint connection here in the United States) that is used for delivering content to the device. Amazon does provide a very crude browser that lets you use it to connect to the web to do basic surfing. It works fine for simple sites like Wikipedia or Google, and does a serviceable job on news sites like CNN. Unfortunately, any site more complex than than probably wont work. I did a quick test of GMail, but that didn’t seem to work. Navigation runs from poor to painful to unusable based on the site, making this suited for light browsing at best. I’ll need to spend more time with this to map out what can reasonable be done – especially testing sites that are designed for more limited mobile devices.

An interesting, and controversial, new feature of the Kindle 2 is the inclusion of text-to-speech capabilities. This allows the Kindle 2 to read a book to you, albeit in a somewhat stilted, mechanical voice. The quality of the computer generated voice is actually quite good by technical standards, but it offers no where near the engaging experience a well read audio book can deliver. Unfortunately, this feature has also stirred up folks in the Authors Guild, who claim that text-to-speech conversions create a derivative work that Amazon has no rights to and thus see it as a violation of their copyright. I’ll post on this one separately, but Amazon has agreed to give authors control over enabling this feature for any books they publish.

The Reading Experience:
At the end of the day, the Kindle 2 is a device designed for reading, and at that it excels. The keyboard at the bottom, which I though would be a distraction, becomes more like the palm rest on a laptop and essentially disappears once you start to read. The screen is extremely readable – even under less than ideal conditions – and the font size adjustments easily let me compensate for the shortcomings of my aging eyes.

Conclusions:
While the Kindle 2 is pricey at $350 (US), you do get a lot for your money. The ebooks available for it are relatively inexpensive and you have a reasonably sized (and growing) catalog of digitized titles to choose from. There are also basic web capabilities built in to the Kindle, and the convenience of ‘on demand’ access to books, newspapers and magazines will guarantee you’re never in want of something to read. The Kindle 2 is far from perfect. Navigation can sometime be confusing, web browsing is really primitive, limiting what you can actually do online, and it offers no easy way to convert your own content for display short of the email option. There are no showstoppers in this list, and it goes a long way to making a ebooks a mainstream delivery model.

That said, ebooks aren’t for everyone. Some people I know seem to have an almost emotional attachment to the physical manifestation of the printed word. On the other hand, I much prefer the more streamlined experience of reading on these types of ‘virtual paper’ devices, and have been an ebook advocate for a long time.

If you feel like I do, Amazon’s Kindle 2 is definitely worth a look.

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A Video Overview Of The New Kindle 2…

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As expected, the new Kindle 2 was announced this morning.

Here’s a brief video overview of the new device:


See more over at Engadget

I want to point out a couple of cool new features in the Kindle 2:

  • Whispersync: – This allows syncing between Kindle devices. You can start reading on one Kindle device and have it sync exactly where you leave off so you can start reading on another. No big deal on it’s own, but I’m hoping this means an iPhone version is in the works. Having multiple personal Kindles sitting around seems just a bit decadent in the current economic climate.
  • Read To Me: – This allows a Kindle to read a book to you using a computer generated (though reportedly very good) voice. This would be ideal for ‘reading’ in the car – an excellent feature.

There were no real surprises at Amazon’s unveiling, but it’s still exciting nonetheless. I’m hoping some of the things I mentioned in my last post start to show up in one form or another as Amazon looks to expand it’s market for the device.

This new Kindle has the potential to be the device to put eBooks over the top. Amazon is in a great position to make it happen.

Time For Amazon To "Think Different"…

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As any regular reader of this blog knows, I am a big fan of eBooks. I am currently using Sony’s PRS-500, and have been both a user and advocate of eBooks since back in the days of the now defunct Rocket eBook Reader by NuvoMedia. Technology has really come a long way since then. Compared to previous eBook devces I have owned, the Sony has a great screen, is small and light, and has excellent battery life.

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I really do like my Sony reader, and have heard good things about their most recent model, the PRS-700. However, I think I may be ready to make a switch. Why?

Because the platform and technology are only a part of the story…

EBooks are an investment. You need to lay out at least $300 to buy an eBook reader before you even get to buy and read your first eBook. You then continue this investment by building up a library of eBooks over time that are effectively locked to whichever vendor you have chosen to go with. You need to count on this vendor to aggressively negotiate rights to sell a broader selection of books in electronic format, to seek out alternative forms of electronic content you can have access to, and to continue innovating their hardware and software to maximize the value you can get from your eBook investment.

So where does Sony fall short?

Sony has a track record of introducing products with proprietary formats and then abandoning them if they fail to dominate a market segment or add significant value to their bottom line. Over the past few years, they have walked away from the MiniDisc format and shuttered their ATrak based Music Connect store. I also expect their moribund UMD movie format to be sunset soon as well. Given where Sony is as a company right now, the eBook space can only be a distraction for them. Their recent dismal financial performance will no doubt force them to tighten their focus to just those areas that are critical to their immediate business objectives. I have no confidence that eBooks will make that cut, or that Sony will invest sufficiently in expanding the content they depend on. The bottom line is that Sony isn’t in the book business – they are in the ‘gadget’ business. I just don’t see them having a real commitment to this market, and I am concerned that any new eBooks I buy will end up being an investment in another orphaned Sony format .

So what will I probably be jumping to?

Amazon’s new version of the Kindle…

amazonkindle2-lg1I was no big fan of Amazon’s first generation Kindle. It was too thick and angular for my taste, and had a generally unergonomic layout. However, it’s built in “Whispernet” (that lets you wirelessly browse, buy, and download books) is a great feature, and support from Amazon’s bookstore is a major draw. They also let you download free samples of books before buying them – a brilliant “Try before you buy” model that lets people sample a broader selection of content risk free. Now that Amazon is launching the next generation of their Kindle eBook reader, it looks like it might be the right time to make the switch.

That said, Amazon still has a lot more to do if they really want to make eBooks a viable and ultimately successful component of their overall business mix.

Here are some of the recommendations I’d like to make to Amazon:

  • Remember to focus on being a book seller – View the Kindle as a platform that lets you sell content. Think less about making a profit on the devices themselves, and more about making them a ubiquitous platform you can sell content into. Do what you can to get the prices low, and look at creating a software version of the device that can work on other mobile platforms like iPhones, Blackberrys, and netbooks. In fact, make a deal with Apple and sell ebooks through iTunes. It’s not the number of devices you sell but the overall footprint that really matters.
  • Explore new business models – There are three business models that you should latch on to. First is the Nexflix model. Make all books over a certain age “rent-able” for a monthly fee. This would create a guaranteed revenue stream for you while opening up a extremely broad selection of books to Kindle buyers. The second one is based on the business model of your recently acquired Audible audiobook division. They charge a monthly fee that lets people download (to own) a fixed number of audiobooks per month. Expand the concept to bundle both the audio and eBook versions of a book as standard, and make it available to everyone. You can even track where people are up to in either format and let them switch between them to the spot they left off in the other. This could open up the sale of Kindle devices to the entire Audible community, and broaden the appeal of eBooks even further. The third model integrates what the mobile carrier market does – handset subsidies. If people are willing to sign up to specific higher end subscription plans, subsidize the cost of the physical Kindle device. Don’t let up-front cost become the obstacle to someone having a Kindle. And building up recurring revenue streams is smart business.
  • Get more free content online – Make deals with organizations like Project Gutenberg to produce Kindle compatible versions of works in the public domain. Do what you can to become the defacto repository for all creative commons work, making them available in an Amazon friendly digital format. Work with universities to make various academic research and journals broadly available. All of these sources should be available to everyone free of charge, or with very nominal fees to cover the cost of downloading via ‘Whispernet’. Why do this if your goal is to SELL eBooks? Because you need to attract a broad base of readers to adopt digital as their preferred method of consuming content – and that won’t happen at $10-$12 a book. This is a lesson you should take directly from Apple. Free (largely illegal) P2P music downloads fueled the growth of iPods, but the growth of iPods ended up making iTunes the largest distributor of legally acquired music in the world. Priming the eBook pump is essential.
  • Let applications extend the capabilities of Kindle – Make it easy for people to do more using their Kindle enabled devices. Make services like Twitter available on Kindle so people can message around content – especially subscriptions to newspapers, journals, or web based sources. Provide hooks for integrating applications like Evernote to allow people to take and share notes across all of their digital footprints. Allow people to post from Kindle into popular blogging platforms. There is huge potential locked in the small, connected Kindle footprint. In short, open parts of Kindle up to the development community and let the platform become more than you would ever be able to make it on your own.

Based on the images I’ve seen and whispers I’ve heard about this new version of the Kindle, I believe that Amazon will have a hot product on their hands. But to make their investment pay off long term, they need to do everything they can to break this market open and really push eBooks into the mainstream.

Amazon has never been short on creative thinking, nor shy about taking chances to open up new markets. eBooks have been on the cusp of a “breakout” for over a decade, but no company has yet been able to find the magic combination of business models, content, and technologies to move them beyond their current niche audience.

Amazon – you won’t have any better luck if you just play it safe this time around.

So please – don’t…

Walt Mossberg Reviews Apple's iLife '09…

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In the following video, the Wall Street Journal’s Walt Mossberg gives a fairly detailed overview of what he likes and doesn’t like in Apple’s newly released iLife’09 suite:

The bottom line: Walt believes the overall iLife ’09 suite is well done, but the highly touted FACES feature in iPhoto falls short of the quality we have come to expect from Apple. He doesn’t see this as a “must have” upgrade and would not recommend you run out to buy it.

I will be posting my own review of iLife soon, and will give some added attention to the FACES feature to see if I see the same issues with it.

Apple TV Finally Gaining A Foothold…

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It’s hard not to be impressed by Apple…

In their quarterly analyst conference call last week, Apple reported significant year over year growth in every one of their business lines. While some areas came in a bit weaker than expected (iPhone sales), they were easily balanced out by some that came in surprisingly strong (MacBook and iPod sales).

While not welcomed by the Apple shorts out there, this is certainly good news for everyone looking for leadership to help pull the tech sector out of it’s market slump. Given the broad drop in consumer sentiment it will take more than your typical corporation to fill that role – a company with products that are creative, innovative, and exciting.

That’s a role Apple has a track record of filling quite well…

While there was plenty of good news on the call about all of Apple’s most popular product lines, perhaps the most interesting bit of information to come out of it was an update on a niche product that Steve Jobs has referred to ‘a little hobby’ – Apple TV.
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It appears that Apple TV sales are up 300% from a year ago. That is a substantial increase for a product that has received almost no advertising attention from Apple. But it does get the most effective type of advertising a product can get.

Work of mouth from happy owners…

I love my Apple TV, and know that I’ve already talked at least three other people into getting one for themselves. I have no doubt that they will, in turn end, up influencing some of their friends to join the “Apple TV club” as well. It’s that type of product.

Once you have it, you wonder why you waited so long to get it…

Apple TV’s 2.0 refresh was a significant step forward for the device. One of the key features added to it in that release was support for video rentals – and it seems that movie rentals are actually one of the drivers behind its growing success.

“…it is clear the movie rental business has helped AppleTV and there are more and more customers who want to try it. We fundamentally believe there is something here for us in the future. We will continue to invest in it.

While Apple has shown some recent love to Apple TV on the software side, the hardware platform hasn’t changed since it’s launch nearly 2 years ago. It definitely needs to see a refresh, if for no other reason than to open up some of the awesome possibilities that new software updates could bring.

Here’s a breakdown of some of the things I’d like to see in the next generation of Apple TV:

Hardware:

  • True 1080p support – The current Apple TV hardware just can’t deliver on that. With flat panels getting cheaper and bigger – and all most of them being 1080p – the market is there for the full res HD experience. If Apple want’s to position digital downloads as a genuine alternative to BluRay, this is a must have improvement.
  • Bigger hard disk options – Selling a set top box today with drive sizes of 40GB and 160GB is kind of sad in an HD centric world. To keep costs low, Apple needs to create a new hardware footprint that will allow for full sized drives instead of just notebook drives. People just load up the box without worrying about running out of space. Failing that, I’d at least like to have some way for the Apple TV to make use of external drives both for storage and backup, or even integrate more directly with Time Capsule over the network.

Software:

  • Better integration of remote media – Apple currently allows Apple TV to stream content via iTunes from multiple local systems. Unfortunately, you can only connect to one systems at a time to do this. An update to the software should create an integrated view of all of the content available from any pre-connected systems. If I want to watch a particular movie, I probably don’t care that it’s on my son’s laptop or my iMac in the office. Show me everything and let me pick.
  • Support for the uPNP protocol – The uPNP protocol would allow non-iTunes devices to deliver video, music, and photos to an Apple TV. This could bring in content stored on low cost NAS devices from companies like Lacie or even on game consoles like XBox 360′s. Perhaps most importantly, uPNP brings DVR functionality to Apple TV – in a way. Both Elgato EyeTV and MythTV – two very popular DVR systems – both support uPNP streaming. This means you could record programs using these devices and simply have the recorded programs show up in Apple TV. That would definitely go a long way to integrating the oft requested DVR capability.
  • Games and Applications – This should be a no brainer. Apple has all of the pieces in place to make Apple TV a killer casual gaming platform. It could leverage either the iPhone or iPod Touch as a controller and change the console model in even more significant ways than Nintendo’s Wii did. This one probably deserves a post of it’s own.

Content:

    NOTE: I recognize that content is an area Apple doesn’t really have complete control over. Consider this a wish lists that I’d like to see Apple strongly advocate with the actual content providers.

  • Make rentals available the same time as Netflix – If the studios are serious about moving into the digital world, they need to get over making distinctions between physical and digital distribution. There is nothing more frustrating than seeing a movie on iTunes that I would like to watch, to find that it is only available for sale (in standard definition!) and will not be available to rent for another few weeks. The studios let you rent these movies at Blockbuster or via Netflix, so why not iTunes? Apple needs to be a strong advocate with the studios to make this shift in mindset happen.
  • Allow HD movie purchases – With Apple now in the process of shifting their entire computer line over to DisplayPort (which supports HDCP), I’m hoping that the studios will now allow movies to be purchased in HD as well as SD. I hate copy protection for all the myriad reasons I have talked about in the past, and see it as detrimental to the market in the long term. That said, if this is a precursor to getting the necessary HD content lined up to create a digital rival to BluRay, so be it. The stronger Apple can become in this space, the more leverage it will have to transform it the same way it did digital music sales.
  • Integrate TV network streaming sites – YouTube integration opens up a world of short form video content to Apple TV owners and is a great addition to the platform. However, the one thing that is specifically not available on YouTube is the content produced by the television studios. Instead of making it available there, most studios have chosen to either developed their own individual streaming sites (keeping everything under their control), or are providing their content to shared sites like Hulu. Getting these site natively integrated into Apple TV would be a really big deal. A well designed software interface could go a long way to making this form of television access mainstream. Note that until that happens, a great 3rd party alternative is available from a company called Boxee. They have a software mod for Apple TV that adds this capability and a whole lot more to Apple TV.

I have no clue when Apple plans to do their next Apple TV refresh. But given the traction it seems to be getting in the market place, I am confident that one will be coming in the near term. I covered the things I think are realistic both technically and politically, and hope to see at least some of them there when a new version drops.

Of course, my priorities may be different than yours.

Let me know what you’d like to see in the next Apple TV release…

The Importance Of Chance…

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Is “knowing more” always desirable?…

As counter intuitive as it may seem, there can be a downside to “perfect knowledge” – to having a completely transparent view to something. The fact is, we are creatures of chance. Avoiding knowledge, or acting in spheres where knowledge is limited, are very real components of how we operate as individuals and as a society. I would go so far as to posit that we need an element of uncertainty around what we do if we want to function optimally.

A good example of this is the enforcement of traffic speed limits.

Many drivers operate in the ‘gray area’ that lives at the edge of existing laws. Most will regularly go 5-10 MPH above the posted speed limit, and some will be willing to do a lot more than that. They do this because it “gives them an edge”, and the chances of “getting caught” – of being penalized for the violation – are small.

And law enforcement counts on this…

Most local and state police forces generate meaningful revenue from traffic violators. They depend on having people who are willing to ‘take a chance’ by speeding so they can keep this money flowing into their treasury. To encourage this behavior, police will often tolerate a certain level of non-compliance to maintain a steady stream of revenue producing violators that go beyond it. In effect, they create a loosely defined safe zone that extends beyond what the law proscribes – a safe zone that baits people into violating the law so they will continue to operate in this revenue producing area of chance.

And they know that having perfect knowledge would hurt them…

A zero tolerance policy for speeding would probably be very effective. It could even be implemented in practical ways. Many major toll roads track where you enter and exit the road, and charge you based (loosely) on distance traveled. They also track the time you entered the road and the time you left. It wouldn’t take much for them to combine these to calculate your average speed, and to use that to automatically generate fines for those that clearly broke the speed limit.

It’s possible that doing this could generate a near-term spike in fine based revenue, but once people knew that any speed violations would be detected and punished, they would simply stop speeding.

And the revenue would dry up completely…

This bigger model they count on just doesn’t work without chance. So instead, a sub-optimal enforcement model is chosen that attempts to balance the desire for revenue generation with optimized traffic flow and respect for the law. It’s a model that introduces chance into the mix by consciously limiting the information law enforcement chooses to collect. Thus, we end up having randomly positioned highway patrol officers with radar guns looking for violators instead of a more comprehensive and effective approach.

And this desire for imperfect information appears to be reciprocal…

Most people I’ve asked (admittedly a far from scientific sampling) seem to prefer the less deterministic approach to getting a speeding ticket. The thought of automatically getting a “ticket in the mail” if they crossed some specific speed threshold seemed almost draconian to them. They would lose the option to go faster than other drivers – even if it isn’t something they would routinely do. This would force them to limit themselves to a certain speed, and become far more passive – something that goes against their inherently competitive nature.

So they prefer to take their chances instead.

What does all of this have to do with technology?…

blog-piracybutton.jpgThis preference for chance is at the heart of the dilemma facing the record industry. The RIAA’s attempts to sue individual illegal file sharers is essentially the online equivalent of the hidden patrol car looking for speeders. It is simply too random to change broad user behavior. Just like speeders, illegal file sharers would change their behavior if they knew they would be caught.

But they know odds are in their favor – so they don’t…

What’s interesting is that the recording industry – unlike law enforcement – hasn’t figured out a way to generate revenue from this user behavior. In fact, they actully want to try and end it completely, even though it presents them with real opportunities for meaningful revenue. They simply can’t get beyond their own narrow definition of how their business can work. Despite the significant market dislocation a business model change would entail, the potential upside of making the change is certainly more compelling than the “death spiral” the record industry has fallen into from clinging to the status quo.

They just need to be willing to take a chance…

BluRay: The Fight Still Ahead…

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It’s finally official…

Toshiba announced last week that it’s throwing in the towel on HD-DVD. It will cease making players or promoting the standard, effectively ceding the high-definition media format war to it’s rival BluRay.

This didn’t really come as a surprise to anyone that was paying attention…

Things just started to pile up against the format. Warner Bros. dropped support for HD-DVD – a major blow on the content side. Both Blockbuster Video and NetFlix decided to back rentals of BluRay exclusively – killing the rental market opportunity for the standard. Both Best Buy and Walmart – probably the two biggest sales channels for media players and content – decided to opt for BluRay only. It was just a string of bad news that became overwhelming.

When Toshiba’s last ditch radical price cuts failed to stimulate sales, the only thing left to do was pull the plug and turn out the lights.

This left BluRay the winner by default.
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So is it time for a BluRay victory lap?…

Not Quite.

All that BluRay has proven is that it was able to get more traction than HD DVD. Truth be told, that doesn’t mean a whole lot. There were probably less than 1.5 Million standalone HD players sold since the launch of both formats. There are probably an additional 9 million BluRay drives/players already in homes thanks to their inclusion in the PS3, but as of last month, less than 5 million total BluRay movies had been sold since the launch of the format!

To put that number in perspective, about 5 million copies of the movie 300 were sold in DVD format in it’s first week of release.

BluRay may be the big HD fish, but it’s still swimming in a tiny HD pond…

To be successful BluRay will need to become truly mainstream. And to do that, it will need to seriously compete on two significant fronts:

Front #1. The Status Quo:

    The death of HD DVD has taken away any excuses the BluRay camp may have used in the past for slow adoption. BluRay is the only physical HD format in the marketplace. It will need to start demonstrating success in attracting buyers that are currently opting to buy upscaling DVD players (players that take standard definition video from a DVD and use signal processing to upconvert it into pseudo-high definition image.)
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    That is no small task. Good quality upscaling DVD players are available for less than $100 dollars – compared to a starting price of about $350 for a BluRay player. Compounding that marketplace challenge is the limited selection and high price of BluRay movies. There are only about 350 BluRay titles currently available, and each costs between one and a half to two times as much as it’s DVD version. Without a significant adjustment to both pricing and selection – for both movies and players – BluRay will continue to remain a niche format. Simply put, the longer a significant price gap remains, the slower mainstream adoption will be.

    And the more likely BluRay will be challenged on a second front…

Front #2. HD Video Downloads:

    First off, lets forget the ‘Quality will win out’ argument. If that were the case, we’d all be walking around with SACD players instead of iPods. Quality is important – especially when it comes to video – but we shouldn’t overstate the case for it. Does the HD video downloaded off of my Apple TV look as good as the same movie on BluRay? No, it doesn’t. But does look good? Yes – it is clearly better than DVD quality. Downloaded video today is true HD even if it is at a lower resolution and reduced bit rate compared to BluRay. It looks good now, and as bandwidth improves, the quality of these downloads will just keep getting better.

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    When it comes to convenience – especially for rentals – downloads rule. It won’t be long before Apple, Amazon, Microsoft, and every cable major company will be saturating the market with ‘on-demand’ HD content. If you combine that convenience with a basic level of HD quality that you can get today, BluRay may find itself struggling to define itself on this second front.

So what does this all mean?…

There is a limited window for BluRay to establish itself in the mainstream before it simply becomes yet another irrelevant format in the marketplace. It might have two years, maybe less, to gain widespread adoption before it gets discounted as yet another failed media format.

It has a long way to go before it can claim victory.

Beating HD DVD was probably the easy part…

What Is The RIAA's Real End Game?…

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The RIAA is on the attack again, but this time, with a slightly different spin…
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You might have heard about the RIAA’s case against Jeffrey Howell. He was recently sued by the RIAA for downloading and sharing music files on his computer, an act that, even if widely practiced, is legally wrong. But this case seems to have caused an uproar because of the following snippet that was found in the brief against Mr. Howell:

Defendant admitted that he converted these sound recordings from their original format to the .mp3 format for his and his wife’s use. … Once Defendant converted Plaintiffs’ recording into the compressed .mp3 format and they are in his shared folder, they are no longer the authorized copies distributed by Plaintiffs.

The uproar seemed to peak when the Washington Post published an article at the end of December claiming the Recording Industry was now going after not just file sharing but ‘unauthorized’ personal use of legally purchased media as well.

Without a doubt, that would be a scary development…

The statement in the brief is certainly ambiguous. It does express a new concept of ‘authorized copies’, and loosely claims that both the conversion of files to .mp3′s and their placement into a ‘shared folder’ contribute to making them ‘unauthorized copies’. While this wording may not appear to be exceptionally threatening now, if any of it makes its way into a future ruling in this matter, it could help create a base of precedent that the RIAA could leverage in the future to go after CD rippers.

But do they really want to?…

Yes and No. The recording industry has made no secret that they believe any use of media beyond direct playback is illegal. During testimony at a prior file sharing case, Jennifer Pariser, the head of litigation for Sony BMG, asserted:

When an individual makes a copy of a song for himself, I suppose we can say he stole a song.

This isn’t so much a legal strategy as a business strategy. What the industry wants to do is change the rules and convert all different types of heretofore legal activities into new streams of revenue. If they need to sue some people along the way to make that happen, so be it.

Are they really allowed to do that?…

All that said, many bloggers have pointed that this type of copying is a protected action under the Audio Home Recording Act of 1992.

No action may be brought under this title alleging infringement of copyright based on the manufacture, importation, or distribution of a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium, or based on the noncommercial use by a consumer of such a device or medium for making digital musical recordings or analog musical recordings.

While this may seem to cover ripping, a closer reading leads me to conclude that this probably isn’t the case. Specifically, there are two definitions within the statute that may be problematic.

According to the statute, the definition of “digital audio recording device” is:

“…any machine or device of a type commonly distributed to individuals for use by individuals, whether or not included with or as part of some other machine or device, the digital recording function of which is designed or marketed for the primary purpose of, and that is capable of, making a digital audio copied recording for private use.”

(Emphasis mine.)

Similarly, the definition of “digital audio recording medium” is :

“…any material object in a form commonly distributed for use by individuals, that is primarily marketed or most commonly used by consumers for the purpose of making digital audio copied recordings by use of a digital audio recording device.”

(Emphasis mine.)

Unfortunately for those looking for safe harbor in this act, neither of those statutory definitions would include the typical, general purpose computer or any disks or removable media. To make it apply, the courts would need to extend the definition of “device” to include software such as iTunes and other non-physical music players, and to extend the definition of ‘media’ to refer to folders and flash cards used to hold music.

As counterintuitive as it may sound, this is likely what the RIAA wants to see happen…

The reason for that is simple. Under the existing statute, if iTunes were to qualify as a recording device, it would be required support the Serial Copy Management System and be subject to mandatory royalty payments.

The serial copy management system allows a song to be copied to one device, but could then require that the hardware prohibit any copying beyond that if certain bits are set. The device the songs were copied to would become the ‘device’ subjected to the required royalty payment. This scheme is mandatory for all recording devices covered by this statute.

The RIAA is very shrewed…

If they were to litigate this issue, and the courts determine that ripping CD’s to computers isn’t a protected activity, they could then use that ruling as leverage with Apple et. al. to negotiate a revenue stream for the right to rip CD’s. On the other hand, if the court determines that ripping CD’s is a protected activity, they can use that as the basis for a judgment that defines iTunes and iPod’s as recording devices subjected to copy controls and royalties.

Either way, they would end up winning…

I have no doubt that this is where this is all heading. Ultimately, the RIAA can’t sue every individual that wants to rip their CD’s. That isn’t a viable approach, and certainly doesn’t work over even the near term. The recording industry has been itching to get a piece of the iPod/portable device revenues, and they see this as a way to force that to happen. I think the only thing staying their hand is concern over consumer blowback negatively affecting their businesses.

And they are close to the point where they don’t even care about that…

Though they want to portray themselves as the guardians of virtue and defenders of the poor artists, I think it is really important to remember that the RIAA is simply a well funded industry advocacy group. Their only interest is supporting the record companies. They are, in a word, lobbyists. And like any other other well funded lobbyists, they are looking to influence the legal system (at your expense) in whatever way suits their client. Logic, morality, justice, civic good – none of those matter to them at all. They want to find a way to require you to not just buy a CD, but to also buy the digital download, or buy the ringtone, etc. They want that to happen not because it’s right or fair, but because their client will get to charge you three times instead of once for the same basic thing.

Litigation on this point is coming. It’s just a matter of time.

The file sharing lawsuits were just a warm up – the real fight is just getting started…

Ebook Redux – Part 1: The Challenges…

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With Amazon’s release of Kindle, I’ve been thinking more about the ebook market…

I have been a long time fan of the eBook concept, starting with the original Rocket eBook Reader. I currently use the Sony Reader, which reset the bar on what we can expect in an ebook device – great battery life, an excellent screen, and a truly portable form factor.

Amazon has taken the Sony design even further by integrating wireless book purchase and download right into the device through an innovative deal with Sprint.

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The hardware side of this market has really come a long way…

So does this mean that ebooks are finally ‘mainstream’? Will holiday gift giving include a fair share of these digital book readers? Will I no longer be the lone ebook reader on my daily commute?

Not likely.

After nearly a decade of trying, ebooks are still struggling to catch on beyond their ‘hard core’ niche. There are a number of reasons why this is still the case:

REASON #1: Selection

Amazon offers about 90,000 titles in ebook format (including magazines and web feeds as well as books). While this may sound like a lot, it’s still small compared to the 1.2 million unique book titles that were sold last year. And it is absolutely tiny compared to the more than 40 million book titles cataloged in OCLC’s WorldCat, the open directory of books housed by libraries globally. And even within the titles that are available, some popular authors like Tom Clancy and J. K. Rowling are absent.

It would be extremely frustrating for someone to invest in an ebook reader, then find there are titles they want to read that aren’t available in digital format. You can’t grow a new product niche by asking people to simply ‘settle’ for what you can offer.

And this will absolutely be the case for anyone that jumps into the ebook space right now.

REASON #2: Price

For a new product segment to be successful, it needs to offer a fundamental and compelling value proposition that simply wasn’t available previously. Clearly there are elements of portability and convenience that are fundamentally unique to the ebook space. And while these unique capabilities are certainly nice to have, they probably aren’t sufficiently compelling on their own to attract most people to this new market.

What would be compelling is a radical reduction in the price of books.

Ebook readers carry an initial cost of between $300 and $400 dollars. After having to spend that much on the reading device itself, most people would want the cost of the content for it to be tiny.

But it isn’t.

It’s certainly cheaper to buy ebooks than the corresponding physical books, but only by about $6.00-$7.00. That means that you would need to buy at least 50-60 books just to break even on the cost of the device. That number of books probably represents better than three years worth of reading for even active readers.

With their current pricing model, it will be tough for ebooks to go mainstream. For most people, it would simply cost less to keep buying paper books.

Next to a limited selection, price is probably the biggest drag on the development of ebooks.

REASON #3: Rights Management

Once you purchase a physical book, you can pretty much do anything you want with it. You can lend it to family and friends. Trade it in for credit at a bookstore. Even sell it on EBay or at any of the numerous online book exchanges. You can even sell used text books on Amazon!

You have none of these freedoms with ebooks. You can only share them with people directly on your account – probably limiting distribution to yourself and your spouse. You can’t give them away when you are done – they are tied to your unique account. You can’t resell them either, further eroding the cost benefit of digital over print. Ebooks today are a buy and hold asset.

To bootstrap this marketplace, something viral needs to happen here. To start buying ebook readers, people will need to have a lot of content (and content they want to read!) available to them at a low price. And without selling a lot of readers, ebook sales will never take off. Publishers are only willing to go digital if they can lock down their content. And locked down content is the surest way to guarantee that going digital fails.

They have their own little “Catch-22″!…

Publishers are doing to the digital book industry what the record companies did to the online music industry – killing it with fear and control. They know they need to go digital because their old model is falling apart. But they are hell-bent on preserving their old economic model even though it doesn’t apply in a digital world. Just look at the state of the recording industry today if you need proof where this will lead.

REASON #4: Proprietary Formats

Unfortunate, the two main purveyors of ebooks – Amazon and Sony – have chosen to go the proprietary route when it comes to formats. You can only buy ebooks for the Kindle on Amazon, and for the Sony Reader on Connect. It is hard to fathom the thinking (or lack thereof) going on here. From a Game Theory perspective, even if mutual ‘defection’ will become the ultimate equalized state , the near term dominant strategy for each party here should be cooperation. At this point, being proprietary is simply a race to failure.

We are seeing the BluRay/HD-DVD war play out in ebooks. We have two upstarts offering basically the same capability in incompatible formats, and a public that would rather stay with the status quo and ignore them both. For an emerging market segment struggling to get a foothold, this is insanity!

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Given what I have laid out here, it’s clear that the ebook marketplace has some significant challenges to overcome before it gains a meaningful foothold – never mind becoming the ‘next iPod’ in the gadget space. But I do believe that ebooks have profound potential and can gain mainstream acceptance if the industry is willing to make some course corrections.

In part 2 of this post, I’ll cover what I think both the publishers and ebook players will need to do to turn this market around.

Publishers Go On The Offensive…

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Keep a very close eye on ACAP…

blog-acap-logo-sm.jpgA broad collection of content publishers have banded together to form a standards group call ACAP – Automated Content Access Protocol. They released the first version of their proposed standard yesterday. The goal of this standard is to give publishers a means of controlling how their content is discovered, indexed, and retained by web search engines. The objective of this group has been to replace ROBOTS.TXT, the current standard used to direct and limit web crawling, with a more robust and comprehensive model that provides more granular content permissioning.

And that’s not all…

ACAP outlines a more comprehensive long term agenda of control that places them in the middle of just about every type of content exchange that happens on the web today. They claim that having a standard like this in place, one which offers more flexible and descriptive rules for how their content can be used, will end up letting them make more content available to users. Their argument is that more content will be available to more people if everyone just goes along with more control.

Unfortunately, that sounds like the same argument used by the big media companies to justify adding Digital Rights Management to just about everything they’ve produced.

And look at where that got them

The media marketplace today is weak, fragmented, and struggling to remain relevant. The promised flood of ‘back catalog’ content never materialized, and prices never came close to the market’s perception of the value they received from digital distribution. Unfortunately, DRM was always more about protecting outdated business models than providing any benefits for consumers. And everyone has suffered because of it – both producers and consumers. The industry might never recover.

The same will be true with the publishing industry and ACAP…

All their marketing spin aside, ACAP is just a money grab by the publishers. Not satisfied with monetizing the significant traffic search engines generate to their own web properties, they now want to sell the right for search engines to index pieces of their content in the first place.

And that mindset has some serious implications for the future of the web…

The free web would start to erode. If they are unable to ‘pay to play’, small and niche search providers will fade away, along with any disruptive innovation they might have brought. The remaining folks – the Google’s, Microsoft’s, Yahoo’s, and Ask’s – will not doubt end up paying, and will likely try to create exclusives of some kind with these publishers to differentiate themselves and maximize their returns. If that were to happen, we could end up with a patchwork of coverage that will balkanize the search space.

And it could even jeopardize open content technologies like RSS…

The entire premise of ACAP is dangerous. It threatens free and open search on the web, and can easily become a slippery slope. The right to link to other sites freely, to create unencumbered feed readers that aggregate content, to aggregate comments left at sites, or to deliver other content centered innovations could all be at risk.

The publishing industry, like their peers in the media industry, remained rooted in the past and failed to adapt their companies and business models to the realities of a digital world. Instead of innovating, they want to go back to the way business was 20 years ago. Back to when they had total control and consumers had little choice.

ACAP is their attempt to reclaim that on the internet.

The entire web community will suffer if they succeed…

You can check the ACAP site at: http://www.the-acap.org/
A good overview document can be found here: ACAP Business Case.