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Apple outsmarts its competitors

March 31, 2012

Unmistakable stress signs among competitors appear to herald a tectonic shift in the smartphone sector – to Apple’s advantage.

One rival RIM – maker of Blackberry – has retired hurt from the consumer ring. Another, Apple’s principal adversary in the field, is having to carefully rethink its ‘open-door’ strategy.

No surprise, perhaps, that the cracks are appearing at RIM, which has been heading for the casualty ward almost since the iPhone first appeared. After a disappointing financial year and downright disastrous Q4, new RIM chief executive Thorsten Heins has cleared out most of the old guard, including former co-CEO Jim Balsillie – still on the board – as well as the COO and CTO. And announced at the same time that RIM is all-but jettisoning the consumer market in favour of the business and public sectors.

At very least this means RIM will cease to develop content and music services. But the strategic review could signal a lot, lot more where that came from. Why exactly should business and government be interested in propping up the failing Blackberry brand, just because consumers aren’t? Even if they are, would RIM – so pared – still be a scalable global business? These are two of the questions Heins has, understandably, failed to answer so far. And yet, even at this stage, he has admitted that the future is “outsourcing” and possibly a trade sale. Echoes of Palm here, the PDA innovator which – despite a superior operating system – was eventually gobbled up by Hewlett-Packard.

More nuanced than Blackberry’s rout is Google’s response to worsening sales figures in the most hotly contested smartphones sub-sector, tablets. Here, Android-powered product is being squeezed by the exotically priced but more glamorous iPad (entry-level, $399) and the bargain-basement ($199) Kindle Fire, made by Amazon.

Reportedly, the search and smartphones titan is preparing to sell Google co-branded tablets directly to consumers through an online store.

That shocking, you say. So what?

Superficially, Google adding its awesome brand to the Android-powered tablet platform looks like a sign of strength. But that’s not what the techno-commentariat to a man and woman believes is behind the move.

On the contrary, they say, Google is attempting to shore up its position in a fracturing market. Unlike Apple, which maintains a dictatorial control over its operating system at all levels of innovation, manufacturing and distribution, Google has always favoured a laissez aller approach. By opening up its Android operating system to outside manufacturers such as Samsung, HTC and ASUS. This strategy has the merit of reducing development costs and potentially speeding up market penetration, with the corollary of making a killing in the apps field. If it succeeds, that is. But the downside is a lack of quality control; meaning that the Android brand and, indirectly, Google will be tarnished by the poor performance of its weakest collaborators.

It is this perception of fragmented user experience that has driven Google to intervene more directly in the market by taking over distribution.

With what effect we shall see. Commentators have been quick to point out that Google has tried this stratagem before, with the HTC-manufactured Nexus One smartphone.

And failed. The co-venture was shut down in mid-2010.

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HMV outfoxed by Dixons recovery story

January 6, 2011

It’s probably just as well I can’t remember the name of the national newspaper pundit who, only the other day, tipped high street retailer HMV Group as one of the hot recovery plays for 2011. Yesterday, its already severely mauled share price – down 80% in the last year – lost a fifth of its value on news that like-for-like sales over Christmas had been abysmal, and that the company was going to have to sell off 60 of its stores as a result. Not that I had invested. If I were to take a punt in this sector (which I’m not), I would select Dixons – which has some interesting parallels to HMV. But more of that later.

Simon Fox, HMV’s dynamic chief executive, started out in 2006 as a latter-day Prometheus; now he resembles nobody so much as Icarus. HMV has pleaded it had an awful end to the season (which it did). But then, so did everyone else, and look what that didn’t do to John Lewis sales over Christmas. Behind mitigating excuses lies an increasingly sad reality: HMV’s visionary strategy for coping with drastic structural change brought about by the internet has failed.

“Sad” because if anyone was equipped to bring off mission near-impossible at HMV, it was Comet-bred Fox. Fox has shown a gamut of qualities infrequently found in one chief executive: drive and leadership (of course), imagination, flair, tenacity. It’s not as if he hasn’t had some decent job offers along the way, too. The stewardship of ITV – we now know – was not the nightmare it then appeared, and helming the media company’s turnaround would have brought recognition and reward far in excess of anything Fox could ever earn at HMV. So, to that list of qualities we should perhaps add loyalty.

Unfortunately, the feat at HMV seems to have been superhuman – beyond even the powers of a demi-divine titan. In the bid to address the classic “clicks and bricks” dilemma facing legacy high street retailers – particularly those involved in the technology and entertainment sectors – Fox has scored highly rebranding HMV as an online brand, but stumbled on one of the basic precepts of his trade: retail is detail.

We can admire the strategic vision of recasting the core gaming and DVD area – together with a new co-venture into cinemas – as ‘screen-based entertainment’. We can appreciate the imaginative logic of introducing fashion lines into the high street offer. We can even sympathise with Fox over the catastrophic decline in CD and album sales generally – which has far outpaced predictions. But, oh dear, what about customer service? Judging from online commentary, not from the commentariat but the general public, HMV has become a byword for ignorant, unhelpful, under-manned and under-managed frontline staff. Only in part is this down to cost-saving retrenchment, which has squeezed numbers and forced out experienced (and therefore more expensive) sales people. Oddly, this shortcoming seems to apply only to the HMV arm of the group. At Waterstone’s – similarly ill-favoured by the e-commerce revolution – the lesson has been learnt that solicitous attention to customer needs is an integral element of post-digital survival in the high street. No coincidence, perhaps, that the book shops have weathered last year’s turbulent conditions rather better than the music and DVD side.

It’s not something that has gone unnoticed at Dixons – not so long ago the uncontested winner of the wooden spoon award for customer service. Like Fox, Dixons’s chief executive John Browett is a retail high-flier. His previous employer Tesco – which he left in 2007 – valued him so highly it would not let him stop working a day before his gardening leave was completed. In some ways, Dixons (then DSG) was in more of a mess than HMV Group when Browett joined. In a knee-jerk reaction to the internet, it had unwisely relegated the historic Dixons brand to an online presence (airports excepted) and confused the high street offer with a Currys.digital rebrand. Browett has managed to unwind most of this, regrouped the Currys and PC World brands under the Dixons monicker, streamlined the consumer electronics offer (with such rabbits out of the hat as an exclusive distribution deal with Apple over the iPad launch) and, most importantly, perhaps, embarked upon a massive staff retraining exercise. Halfway through his four-year turnaround programme, Dixons appears to be heading for a profit. We’ll have to see whether Browett maintains the momentum in 2011. But from the present vantage point, Dixons appears a much better recovery play than HMV Group.


Murdoch and Jobs – Frenemies of the Internet

November 22, 2010

Now we know why James Murdoch, heir apparent at NewsCorp, has been so messianic about the iPad recently. The Times/Sunday Times “apps” experiment is merely part of a bigger picture – perhaps a small one at that.

It has emerged – rather curiously via US fashion industry journal Women’s Wear Daily – that Murdoch Sr is working closely with Apple chief executive Steve Jobs on launching an entirely new, exclusively apps-driven newspaper (there will be no website or print ancillaries) that can be purchased on an iPad. Other tablet formats may follow (though Jobs’ views on this egalitarian gesture are unknown). What we can say is that the news vehicle will be called the Daily, that it will appear as early as the end of this month, that it has an upmarket skew, that it will cost 99 cents a week, and that it will probably be edited by NewsCorp’s blue-eyed boy Jesse Angelo, currently managing editor of The New York Post.

For the fuller implications of a personal alliance between these towering giants of the media and technology worlds, turn to Tim Berners-Lee. Spookily but – so far as I know – entirely independently, the founder of the internet has just published in Scientific American a searching critique of what he regards as internet abuse. Unwittingly, it provides considerable insight into why Murdoch and Jobs are batting in the same team.

Berners-Lee casts his net widely. He sees the internet – once a kind of communitarian brotherhood in virtual space – as increasingly under siege. The attack on its ‘inalienable’ freedoms comes from a number of sources, many of which are themselves firmly rooted in web culture. High on his list of targets, for example, are social networking sites such as Facebook and LinkedIn. To these he adds Google and US telecoms carrier Verizon, which earlier this year struck an agreement to exempt mobile access to the internet from web neutrality; that is, from the accepted principle that no web service may be prioritised over another by a pricing structure imposed on its delivery. And finally, he rounds on mobile and desktop applications – Apple’s in particular – which operate behind a walled garden of restricted access.

Berners-Lee’s wider point is that these forces have something in common. Each in its separate way is parcelling out the freedom to communicate on the internet by hiving off “silos of content”. Berners-Lee believes this development is a Bad Thing, because it will eventually choke off innovation by creating a more fragmented internet.

There is, however, another way of looking at Berners-Lee’s argument – and one likely to find far more favour with Messrs Murdoch and Jobs: turn it on its head.

While the internet remains a free, or “near-perfect” (in the economist’s jargon) market, no one can enjoy a lasting commercial advantage. Look no further than the record industry, or the media itself. This is good for internet joyriders, who want their news, views and music free, but unsustainable in the wider capitalist economy. Without a carefully managed investment programme and the principle of reasonable investor returns, innovation on the internet is just as likely to be stunted as it is by the dark forces of silo monopolies that Berners-Lee sees gathering on the virtual horizon.

Murdoch and Jobs have every reason to cooperate. The internet may, in the longer run, have much to lose if they do not.


James Murdoch’s faith in iPad ‘flagship products’ is misplaced

November 12, 2010

Here’s a sentence to savour. “Our flagship newspaper products are our iPad apps,” says James Murdoch, speaking at the Monaco Media Forum.

If that’s the case – I’m tempted to say – then we’re all in trouble; those of us in publishing at any rate. Certainly a recent study published by MediaVest, the global media buying outfit, doesn’t give room for much optimism. The 1500 people polled about their use of the iPad seemed to have a host of other preoccupations – such as reading books, managing personal calendars, watching video, accessing maps, listening to the radio – before they got round to reviewing a publication. Top of MediaVest’s Must Try Harder list were magazine publishers, but I suspect the news business was not all that far out front either.

In fairness, the survey was compiled back in July – practically a Pre-Cambrian era in terms of iPad experience; although that’s not exactly a reason for complacency. Have things moved on since then?

Murdoch Jnr clearly thinks they have. From what we now know of the Times/Sunday Times digital paywall experience, iPad users actually make up a fairly small proportion of the 105,000 paying online users: about 15,000 of them according to a Guardian analysis. Considering the newness of the Apple device and format (launched in April 2010), that’s not bad user penetration. But Murdoch’s point is a larger one.

The iPad app has certain similarities to a print product. Like a cover price, the access fee encourages people to pay for their content. Determining just how that payment should be made is a much more complex issue, and part of a broader online publishing strategy. But that’s less important for the Murdochs than the fact the iPad experience is helping them to surmount a huge psychological hurdle: the idea of parting people from their money for general news online.

Take this argument a little further, however, and we can see there is trouble ahead. The iPad news habit is attractive precisely because it so resembles the way we read a newspaper. It has a lean-back, browsing quality to it, wholly unlike the information-grubbing experience of assimilating information from a laptop or PC. As Murdoch himself says: “The problem with the apps is that they are much more directly cannibalistic of the print products than the website. People interact with them much more like they do with the traditional product.”

In other words, journalists and publishers beware – the news business is going to get a lot worse before it gets better. The iPad and its like may have the ability to supplant the “traditional product”, but – as I have pointed out before – the commercial terms under which media owners operate are not going to be nearly so favourable as they were in the print era. It is technology companies, like Apple and Google, who are the gatekeepers in this new era. They make the kit, devise or control the ad platform, license the apps and determine the profit margins.


Laugh now, pay later if Murdoch gets his hands on the rest of BSkyB

November 2, 2010

At last, hard news from the impenetrable walled garden girdling The Times and Sunday Times these last four months. The Murdochs’s paywall strategy has harvested an astonishing 105,000 online subscribers – says News International, owner of the titles.

Well, not “subscribers” exactly, because that 105,000 includes quite a few birds of passage who have paid a couple of quid to visit the sites and then come no more. Lots of them, in fact. So the true number of subscribers? About 50,000 according to the Guardian – admittedly not the most objective of sources on the subject of paywall strategy, but probably near the truth on this occasion. Did I mention the iPad and Kindle subscribers? No, I thought not. They’re about 15,000 of this 50,000 figure. Which sounds heartening for Apple and Amazon, but less so for News International when you realise that they got an introductory two months of online access free.

I could go on, but I won’t. The figures are pretty meaningless in themselves, and muddied still further by the fact that there are another 100,000 print subscribers who receive the online version free. Even on the most optimistic viewing – that is to say 205,000 dedicated online visitors – the revenue would not amount to much by comparison with advertising lost after shutting down free access.

So what though? Never let it be said Rupert Murdoch bought The Times to make money – if he did, he’s been sadly disillusioned these past 30 years. In truth it has always been a loss leader in experimentation under his stewardship. First he tried dumbing it down, to take on The Telegraph. Now he is, perforce, reverting to a still loss-making but more elitist publication that happens to serve as an invaluable guinea pig in the post-print era.

Whatever the present cost of these lessons, it will be amply repaid should NewsCorp ever get its hands on the 61% of BSkyB it does not already own. BSkyB has total revenues of about £6bn a year; News International, the European subsidiary of NewsCorp, about £2.7bn. Forget enhanced earnings. The torrent of cash surging through the organisation alone would give the Murdochs all the flexibility they need  to experiment much more boldly with an online newspaper bundling programme for 10 million Sky subscribers. And the beauty of it would be that these self-same subscribers would have underwritten the experiment as well.

No wonder the competition are desperate to stop Murdoch’s bid in its tracks. In any forthcoming price war, he would be able to outspend the lot of them combined.


Kindle’s bright idea incenses Apple iPad fans

September 20, 2010

Kindle’s latest pitch to a UK audience is very weak. Two people sitting on a beach, marvelling at how easy it is to use the Amazon-inspired e-reader in bright sunlight: who in their right minds would be doing such a thing anywhere near sand?

Berlin Cameron is capable of much better work, and the stuff currently airing in the US is a good case in point. The USP is similiar to that of the UK ad, but what a world of difference in execution.

‘Poolside Girl’ has, in just a few days, created a sensation on YouTube – with closing on 2 million hits – and managed to stir up tribal hatred among the many adherents of the rival Apple iPad in the process. Which can have done Kindle sales no harm at all.

How so? Let’s set the scene a little. The scripting is economy itself. Two holiday-makers are lying side by side next to a ritzy swimming pool. The bloke, so quaintly clean-cut he must have been remaindered from the Mad Men cast, is struggling with his cumbersome e-reader (it’s clearly an iPad, though no one says that) in the bright sunlight. He leans over to the bikini-clad girl next door – effortlessly devouring her book with a gizmo less than half the iPad’s size held in one hand – and asks her what it is. “A Kindle” comes the smug reply as she lifts her fashionista sunglasses and gives him a pitying smile. “$139. I actually paid more for these sunglasses.” Sub-text: ’What a schmuck. Fancy spending $500 on that piece of overrated junk.’

That’s it really. All the salient product advantages put across in just a few pithy words. The Kindle works in bright sunlight, unlike the iPad. It’s light to handle: you can hold it with just one hand. Oh yes, and it’s about a quarter of the price.

We could, of course, unpack all this quite easily by asking what else the Kindle can do for its $139. Not a lot compared with the iPad and its multitudinous apps. It doesn’t offer colour. Nor, for that matter, are we likely to do much reading by the poolside. I don’t know about you, but I do most of my reading indoors – where the iPad suffers no such disadvantage.

But that would be picky. Hats off to an audacious knocking ad – which appears to have been the personal inspiration of Amazon founder Jeff Bezos – especially when the target is as iconic as Apple. For more on this topic, look up Jim Edwards at BNET.


The conundrum at the core of Apple

July 21, 2010

Look on my works, ye mighty, and despair! Apple’s awesome quarterly results have made ‘Antennagate’ – the obscure controversy surrounding iPhone 4’s wraparound aerial – a storm in a teacup.

Sales up 61% to $15.7bn, $1bn ahead of expectations; earnings up 77% to $3.25bn; all product categories performing well, most breaking new sales records: these are the kind of things that Wall Street wants to hear. And which have enabled Apple – having lost ground to Microsoft after the iPhone  crisis ‘press conference’ last week caused a share-price dip – to recover its status as the world’s largest tech company, estimated by market capitalisation.

Most gratifying for the company will have been the success of the iPad tablet computer, launched during this reporting period. With 3.27 million units sold (worth $2bn in sales), Apple has once and for all disposed of the vociferous nay-sayers, who claimed it was launching into a non-existent market niche.

And yet, and yet. Quarterly figures, however good, are the rear-view mirror. The Antennagate controversy has revealed to the wider world a worrying chink in Apple’s corporate armour. Steve Jobs, the wayward business genius at the heart of Apple’s success is also its Achilles’ heel. “Control freak” does not do justice to his paranoia about the competition or his obsessive secrecy. Apple is a cutting-edge corporation powered by an old-fashioned command-and-control culture. One which proved pitifully inadequate in dealing with adversity.

If you haven’t already, read David Jones’ post on Pitch: ‘Why Apple needs some social media duct tape’. The light touch belies a serious purpose. For all its immersion in the white heat of consumer technology, Apple simply doesn’t “get” 24/7 media.


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