Charlie Rose interviews Bill Gates a few weeks ago in Seattle. They talk about the remarkable life of a man who changed the World by putting a computer on everyone’s desk. And about someone who we all expect will make an impact with the foundation he runs with his wife. You may like or dislike Microsoft, but Bill Gates is an admirable man.
December 28th is the Spanish equivalent to April Fool’s day. That is why I had to read twice the news that iFart Mobile (see video) was the best selling application in App Store during the holidays (iTunes Link).
All I knew was that a lot of people would be getting iPhones and iPod Touch MP3 players on Christmas Day. Christmas came a day early for us. On 12/24, my jaw hit the floor when I checked my stats. We sold 19520 units, providing $13364 in net income after Apple takes their cut. I now knew that Christmas Day would be bigger than I would have imagined. I made sure I was sitting down before I checked my day-after-Christmas stats. It was a good thing. On Christmas Day, 38,927 people purchased iFart Mobile. Thirty-eight thousand nine-hundred and twenty seven. Wow. Thats $27,249 net. Again I say, wow.
Ten years ago the RIAA fought the decrease in sales of music CDs by different means, including: taking their customers to court, lobbying to have the ISPs stopping Internet Access to anyone who shared music files, and imposing taxes to any device able to store or play music, assuming everyone was in piracy.
Ten years later, all these actions from RIAA seem ridiculous. In 2019 music is no longer sold in discs or in any physical format. All music is distributed online and, to what would have been a surprise for RIAA in 2009, for free. Artist distribute their tracks freely online, and encourage their fans to share them with their friends.
Social Networks like Facebook, MySpace, uTube and Amazon.net play now a central role in the music industry. All artists compete for attention and try to influence others to become fans. Becoming a fan of a band gives the user access to their songs, to their music videos and to buy their merchandise online.
Artists get the ad revenues from their sites, and more substantial revenues for the $0.99 monthly fees that the SuperFans (premium fans) pay to have access to exclusive content around artists, such as interviews, live chats, or clips behind the scenes. Superfans enjoy other benefits, including discounts in tickets for live concerts.
In 2019, the labels and the RIAA have almost disappeared, and artists now deal directly with their audience, thanks to the social network platforms that manage the SuperFans subscriptions, as well as the online purchases.
Now there is a huge amount of semiprofessional artists that generate some revenues from their creations. Still there are a few celebrity artists that command hundreds of thousands of SuperFans.
Music did survive the era of the Recording Labels. The new Online Music era is more democratic in who gets the attention, and has removed inefficient intermediaries between artists and fans.
An interesting analysis from Telco 2.0 compares the business of YouTube versus Hulu in 2008. The table summarizes the key data used in the analysis:
YouTube
Hulu
No of videos/day
1000+ million
3-4 million
Average duration
2.75 min
27.5 min
% clips with ads
3-4%
80%
Average CPM
$10
$15-20
2008 Revenues
$118 m
$52 m
2008 Loss
$91 m
$9 m
According to Telco 2.0, YouTube would be generating revenues of $118 million, versus $52 million for Hulu, while the low percentage of videos carrying ads in YouTube would make them lose $91m versus only $9m for Hulu.
Hulu business model is closer to that of broadcasters and it shows in a better margin. To make their disruptive model fly in the next years, YouTube will count on:
decreasing costs of infrastructure: storage, processing, bandwidth and efficient data centers
ability to place ads in clips from amateurs and semiprofessional creators
agreements with media companies to become their online video platform in return of a share of ads
“Worldwide subscriptions to internet Protocol television (IPTV) services are on pace to reach 19.6 million subscribers in 2008, a 64.1 per cent increase from 12 million subscribers in 2007, according to Gartner, Inc. Worldwide IPTV revenue is projected to total $4.5 billion in 2008, a 93.5 per cent increase from 2007 revenue of $2.3 billion.”
In 2008, no doubt Online Video got the headlines, but the IPTV Telcos still got the bucks.
The essence of Net Neutrality is “All Packets are created Equal“. No ISP should block or prioritize any traffic based on what the IP Packet carries. That is, no VoIP/Skype, YouTube video, music download or Bittorrent traffic should be processed differently based on its nature. All packets will be equally treated by the network infrastructure.
This week the Net Neutrality debate has been agitated by an article in The Wall Street Journal accusing Google of violating the net neutrality principles with their OpenEdge efforts to locate Google servers in the premises of broadband providers. Google was quick to deny the accusation and clarify their position in their official blog.
What is wrong with investing in more servers and putting them closer to the users? With Google/YouTube handling such a huge traffic, it is normal that Google wants to cache as close to the users as possible to make their service better. Caching is not a new practice in Internet. Companies like Akamai have been doing it for years, specially for video and audio streaming.
Net Neutrality is not about “let’s forbid anyone to invest more to improve their service over others”.
Net Neutrality should not prevent either that a Telco can build a separate IP network where they can prioritize their own traffic depending on its nature, e.g., to provide IPTV HD multicasts streams. Telcos must be free to build alternative IP infrastructures to deliver innovative services, as long as they also offer a neutral broadband service. If anyone wants to build a new top-notch IP network to provide 3D holographic pictures, no one should forbid it. The only thing the authorities should guarantee is a competitive market for a broadband access service where all bits are treated equal. Public initiatives to incentive investment on high-speed broadband are also advisable as the Internet is a key public infrastructure, as important as roads or railways.
People watch far more hours of TV from the couch than on the PC. According to Nielsen (see table above found via GigaOm), 142 hours/month for TV versus only 2.5 hours/month for Internet video. Online TV will sure grow, but still a long way to catch the habit of watching TV from the sofa. A habit that will surely remain for long duration shows, like movies or NBA games.
TV devices connected to Internet will grow from 28 million in 2007 to 300 million in 2013 according to IMS research echoed by NewTeeVee.
Some lucrative consumer segments are ready to pay for quality, speed, ease-of-use and exclusive content (e.g. Apple knows very well this segment). Some reports foresee penetrations as high as 20% and even 50% in developed countries urban areas.
P2P will keep growing, and that includes also a growth of licensed content relying on P2P or P4P networks, although illegal traffic will still dominate for some time.
IPTV Telcos should defend from the threats of Online TV by embracing it:
Address facts 1 to 4 by providing a one-stop-shop to integrate Online TV within the IPTV Service. Provide a quick, easy-to-use way to enjoy Online TV from the couch, integrated into the IPTV Service. Why not embed iTunes, YouTube or Hulu channels?
People will manage to have only two to three devices connected to the TV in the living-room. IPTV Telcos should position their set-top-box to be the box to connect the TV set to Internet without hassle (including legal P2P) and in the way defend from other boxes that could make IPTV replaceable later (e.g. Apple TV, PC2TV or HTPC units).
Add Facebook Connect to IPTV, so that you can see who of your friends is watching the show, or browse what shows your friends are watching.
In other words, keep the boxes from “over-the-top” players away from the living-room for as long as possible. Differentiate from the ”over-the-top” players with the unique experience that IPTV can provide on exclusive live HD content, like live concerts (expect music artists to do more of these, as recording sales drop) or sport events.
Android announced this week that 14 new companies are joining the Open Handset Alliance. The new members are: AKM Semiconductor, ARM, ASUSTek Computer, Atheros Communications, Borqs, Ericsson, Garmin International, Huawei Technologies, Omron Software, Softbank Mobile Corporation, Sony Ericsson, Teleca AB, Toshiba Corporation and Vodafone.
Some readings:
Sony Ericsson sold their shares of Symbian to Nokia to be able to run to Android, as predicted.
ARM does want to power Android handsets processors (G1 has a Qualcomm processor)
Even Vodafone will put Vodafone Live on Android. Wouldn’t they sell it as a mobile App in App Market and make Vodafone Live available to users from any carrier for a wider audience?
Softbank (is this the same Japanese mobile operator that sells iPhone?) might be hoping for an Android flip phone that meets the Japanese taste for clam-shell phones.
Garmin, fearing of the strong threat of mobile phones with A-GPS and Google Maps to their navigator devices, might be thinking that better partnering than fighting. Garmin already launched its first GPS-phone, the Nuvifone, earlier this year. It seems that there will be more to come, confirming that GPS and Phone synergy is here to stay.
Nokia, RIM, Microsoft and Apple keep resisting to join the “Alliance”, and remain in the dark side of the Force. No wonder Android logo looks so much alike C-3PO!
Let’s get ready to enjoy the cool devices that the members of the Alliance, as well as Apple, Nokia and RIM, will bring in their own star wars.
“I once debated Michael Porter at Davos on the overall value creation of the internet. I argued that the internet created valued and he argued that the internet destroyed value.”
Many examples come to mind, where Internet seem to be killing multi-billion industries:
- Skype is dropping the cost of voice to virtually zero. What before was a hefty business of international telephone calls, has been reduced by several orders of magnitude with VoIP.
- Instant Messaging killing SMS. We all know that SMS is terribly expensive in terms of price/byte. At a rate of 5 cents per SMS, considering 140 bytes per message, we are paying at $375 per Megabyte!! As you can imagine, with IM and unlimited data plans becoming popular, in the mid-term SMS will die.
- Music Industry. Used to charge $20 for a CD with 8-12 songs, the labels are struggling as they see the revenues from music downloads far too low to offset the reduction in revenues from CD sales. Music distribution in discs is likely to disappear in a few years, replaced by online distribution.
- Online Newspapers cannibalize sales from print editions, with online ads revenues not always compensating.
Are these examples really showing that Internet is destroying value? or is value simply shifting?
Looking back in history, it is not the first time there is a perception that technology progress destroys value. The Industrial Revolution saw workers protest as they lost their jobs to machines. Demand for unqualified workers doing repetitive activities dropped, forcing workers to get trained and qualified to build, operate and maintain machines. Those machines produced goods (and new machines) that were cheaper and in bigger volumes, deriving in more people benefiting from those goods. What initially seemed like job destruction, in fact it was wealth generation for the society by making goods affordable for more people.
History demonstrates that innovation simply removes inefficiencies, and in its way destroys industries if needed, shifting value to other parts of the economy, not necessarily within the same industry. And Internet is a fine example of that. Internet (and mobile) makes communications affordable to billions of people, and it is one of the engines behind Globalization, making knowledge and information available widespread.
So where is all this value (business) shifting to?
Let’s take the Music Industry. By removing inefficiencies (like physical distribution of information in discs or in print) the Digital Revolution is shifting the value from selling expensive disc copies to improving fan’s experience, by forcing artists to do more live concerts and spectacular shows as Madonna’s latest World Tour. Value is also shifting from the monopoly of recording labels to select the next star, to the most democratic system ever, with Internet empowering all sorts of musicians to publish their work. Labels and intermediaries are clearly losing business, but isn’t the Digital Revolution bringing more value to both fans and thousands of creators?
There are still many things to do to make this World a better place for our children and grandchildren. Let’s put the focus on improving it harnessing the power of innovation that Internet brings.
Obama made a wise address last weekend, reminding us that we need a strong purpose and that we still have a lot to do in green tech as well as in broadband.
Internet clearly creates huge value for the society. A different question is, are Internet start-ups with unclear business cases (other than getting funds from VC) sustainable? We got an answer to that question when the late 90s bubble burst. Now we are getting the same answer after Bubble 2.0 is bursting too.
Taiwanese vendor Asus brought the Netbooks to mainstream with their popular Eee PC, leading the way for other manufacturers to jump into a now crowded category. Following that success, Asus introduced a small-form-factor desktop, the Eee Box, creating a new NetTop category, that so far has failed to take off.
But this could soon change with Asus recent announcement of the new Eee Box B204 and B206 models. The new models are powered with an ATI HD graphics cards that delivers High Definition video through an HDMI port. Asus completes its box Media Center capabilities adding their Eee Cinema software controlled by a remote control, for a complete home theater experience.
The tiny Eee Box can be VESA mounted on the back of a display, it is quiet (26 dB) and consumes only 20 watts of power! An ideal box for a Media Center front-end, to play content from a media library on a back-end Home Media Server (NAS or Desktop), as well as being an ideal device to enjoy Internet TV (Hulu, YouTube, etc) and Amazon Unbox downloads in the living-room.
Asus has not unveiled the price of these new models yet, but if it is close to the $300 of previous Eee Box models, this could be the ultimate box for a PC2TV / HTPC / Media Center solution.
Still to be seen if the 1.6GHz Atom would be capable of any TV recording, but even it is not, the B204 and B206 boxes are still great lightweight front-end solutions.
Specifications from Asus website:
Model
B204
B206
Operating System
Microsoft Windows XP Home
Microsoft Windows XP Home
CPU
Intel Atom N270 (1.6GHz)
Intel Atom N270 (1.6GHz)
Chipset
Intel Chipset
Intel Chipset
Graphics
ATI Radeon HD 3400 series with 256MB DDR2 memory
ATI Radeon HD 3400 series with 256MB DDR2 memory
DIMM
DDR2 SO-DIMM 1GB
DDR2 SO-DIMM 1GB
Storage
160GB HDD SATA II 5,400rpm
10GB Eee Storage
160GB HDD SATA II 5,400rpm
10GB Eee Storage
Card Reader
SD/SDHC/MS/MS Pro/MMC
SD/SDHC/MS/MS Pro/MMC
Bluetooth
Yes
No
Wireless
802.11n
802.11n
LAN
10/100/1000Mbps
10/100/1000Mbps
Audio Chip
Realtek ALC662 Azalia CODEC
Realtek ALC662 Azalia CODEC
Rear I/O
Giga LAN x 1, USB 2.0 x 4
Giga LAN x 1, USB 2.0 x 4
Video out: HDMI port x1 / DVI-D port (through adapter)
Audio ports x 1 (with S/PDIF out)
Video out: HDMI port x1 / DVI-D port (through adapter)
Audio ports x 1 (with S/PDIF out)
Mike Manos, Microsoft Data Center Chief, has unveiled in his blog the design of future “Generation 4″ Microsoft data centers. With the mission to provide massive easy-to-scale computing infrastructure to power the Cloud, Microsoft envisions pre-assembled containers equipped with a few thousands of servers each and its associated cabling and cooling system.
Microsoft is already using the flexibility of “containerized servers” in their Generation 3 Data Center under construction in Chicago. Generation 4 pretends to take the concept of building block even further with a central spine infrastructure for mechanical, electrical and security components, to which the pre-assembled containers are connected in a plug-and-play mode. The containers are designed for high efficiency, minimizing both footprint and the use of water or air for cooling.
The target is to achieve an average power usage effectiveness (PUE)* of 1.125 by 2012. Taking into account that current average data centers have a PUE of almost 2, that would be a huge achievement in green IT, even though Google alreadly claims to be at a 1.21 PUE in some of their facilities.
Microsoft modular container-based design is ideal for a scalable cloud infrastructure that can adapt computing capacity to demand. On top of that, not only operation costs are reduced due to the optimized footprint and cooling, but also CAPEX is improved with server containers assembled in a single manufacturing plant for far less cost than deploying the servers on-site.
“… in conjunction with announcements of the Azure Services Platform and Office Live, there is no doubt that the giant in Redmond is aggressively focused on delivering enterprise cloud computing. ”
*Definition of PUE extracted from Google corporate site:
PUE is defined as the ratio of the total power consumed by a data center to the power consumed by the IT equipment that populate the facility:
For example, a PUE of 2.0 indicates that for every watt of IT power, an additional watt is consumed to cool and distribute power to the IT equipment.
