Monday, May 29, 2006

Cell Phones Will Not Displace iPods

Okay, I've had all I can take. I think reading one more sentence of illogical tripe supporting the notion that cell phones will soon begin eroding the iPod's death grip on the portable music player market, and my brain will explode. Now hear this: It ain't happenin'.

The Experience Sucks

I happily own one of the super-thin little SLVR candybar phones, and even have 90 or so tunes loaded on the device from my iTunes library. I have wanted this device to work as my primary music player. It does not. It can't. It is a royal pain in the butt to use that way, compared to simply tossing a "real" iPod in my pocket. So, after months of determined effort to adopt the SLVR, I now am back to carrying both devices.

The reason for my rejection of the SLVR's music player abilities is simple: I actually use my phone... a LOT. If I never needed to actually conduct a telephone conversation using the product, it would be a capable, albeit exquisitely pricey, music player. No problem. But, that is not the case. I need to easily answer and place calls on the SLVR throughout the course of my days and evenings. That's where the whole cellphone music thing breaks completely apart.

While listening to music with the SLVR, first, I am forced to either (A) use the bargain basement earbuds shipped with the product that are terminated in a mini-USB plug, or (B) use the mini-USB plug adapter that is provided, and use my own higher quality earbuds. Believe it or not, I actually have a hard time making certain that I always happen to have that little adapter in my pocket at all times. I also hate the ugly thing hanging off the side of my phone. And, using the adapter with regular earbuds makes the easy call-answer ability that can be had with the OEM buds unavailable... no microphone on the adapter. So, given a choice between using the horrifically bad OEM earbuds, with a microphone in the cord, or, using a no-mike set of better sounding earbuds, but not being able to answer calls without removing them, I choose a third option: carry my iPod.

An Unfixable Flaw

Sadly for the hugely fantasy-driven predictors of the cell phone's ascendency to music player leadership, the problem of "how to answer calls" cannot be fixed suitably. Ever. Listening to music and talking on a telephone are mutually exclusive activities, insofar as using earbuds. So, the issue will always be there of having to deal with switching back and forth between talking or listening.

For a small group of user who spent much time listening to mobile music and texting, but little time actually talking on a phone, a feature to switch the earbuds from one use to the other would work. Should Apple ever build a phone I expect this functionality to be included -- along with a whole slate of functions for everybody else.

There are other interface and file management issues that I have with my few month experiment with my SLVR. But, why complain? It is the basic flaw I discuss here that is the impassable hurdle that will keep cellphones from ever toppling standalone music players from their sales perch. For the foreseeable future, the iPod product line is in no danger of being slapped into irrelevance by music phones.

Saturday, May 20, 2006

The Reason For Apple's Resurgence

Over the past couple of years a growing stream of business and technology media have been extolling the many successes Apple Computer has been achieving in the marketplace. And, while many of these pundits have hit on most of the great moves executed by Apple's management, I have not seen one piece published anywhere that has drilled down to expose the one, simple fundamental reason that Apple is blossoming.

The reason? The overall cost of computers as a percentage of the consumers' earnings has steadily plummeted down to a point where the actual difference in price for a Windows versus and Apple system has become irrelevant. Click on the below chart to see a larger version you can actually read. Then, come back here and let's talk a bit about what those numbers mean... not just in the Apple vs. Microsoft war, but to the manufacturers of all manner of consumer electronics products.

PC & Apple Prices vs. Family Income
Click Image For Larger View

This chart shows historical price points that loosely represent the total price a consumer would have had to pay in the years shown to get a fairly basic PC or Apple computer system... entry level desktop or notebook, and display/printer. Don't fuss with me about the precision of the numbers, please. Recall I used the word "loose." And, from here forward, I will state all prices and income values as CPI/inflation adjusted to 2005 values, in US dollars.

In 1980, a PC system cost about 25% of a family's yearly income, and an Apple system about 35%... explaining why the first wave of PC adoption circa 1980's was principally in the business market. The increased worker efficiencies gained by using the PC was something that could be quantified and justified as a business purchase, but pre-internet home users were rare. So, with Apple's machines aimed squarely at home users and the PC machines aimed straight at businesses, it is obvious why Apple began bleeding market share throughout the 1980's.

By 1990, prices for entry level PC or Mac systems dipped below 10% of the typical family income, and home user adoption began to take off. But, Macs were still more expensive than PCs, and most consumers then buying their first home computer were doing so from having used the machines at their jobs, so they were more inclined to buy a Windows based machine for home use, too.

Since 2000, prices for either Windows or Mac based computer systems have plummeted, both in absolute terms, and in relationship to family income. In fact, the relative cost-to-income percentage dropped by greater than a factor of ten since the early 1980's. This decade has ushered in a new era where PCs of any sort are a truly minor expense to the vast swath of buyers.

PCs And Macs Are Both Negligible Expenses Now

PCs are nearing a point where complete systems can be bought for 1% of annual income, or even less. And, this makes the price of these products less relevant than ever in the buying decision. Consumers and businesses alike are now looking more closely at the attributes of the computers they choose... at attributes other than price.

Because prices for computers in general are so easily affordable to consumers and businesses, buyers are pausing and are more likely to buy the one that looks the coolest, has the extra features, or has the hipper brand image. And, they are already showing their preference for good-looking, easy-to-use, status-branded products. After all, if the "step up" system is only an extra 0.2% of your yearly pay, why not buy the sexier product?

Apple has fought for its livelihood historically by making sexier products than the Windows world has offered. In fact, in both software and hardware, Apple's primary business advantage is its intense focus on industrial design and user experience... two areas historicaly neglected by Windows PC makers. So, Apple is winning a swarm of new customers. But, all of that is really just background for my next point.

All Consumer Electronics Are Cheap Now

It's not just computers that have been steadily declining in price as a function of disposable income. All consumer electronics products have become so easily affordable that price is rapidly becoming a non-factor in the buying decision. And, it is the companies across this market space that are focusing on non-price attributes that are seeing huge growth. Motorola's march back to market leadership in the cellphone arena is just one good example. Their sexy phones are similarly priced to the many non-sexy options, and all cellphones are so easily affordable now, that choosing the sexy option is a no-brainer for a fast growing block of mainstream buyers.

CE Manufacturers Need To Wake Up

As price diminishes even further as a buying factor, it is the companies that fully embrace user experience and industrial design that will emerge as new market leaders in the coming decade. Music, video, and communication products are all priced for the masses, and will continue to be priced even lower as mass market technology production becomes even cheaper. Investing a wee bit more effort on making a product look great and work easily will steadily differentiate the winners from the losers in this new era of non-price based buying.

Apple has always emphasized user experience and product design. Motorola may be learning to do the same thing. Other companies are shifting their attention to these non-price factors: Even Dell has announced a corporate mission to offer better looking machines. For fans of gorgeously designed electronics gear that just works without any hassle, the next several years will be a playground of slick and sexy new toys. And, the ranking of market leaders in all of these consumer electronics sectors is going become a scrambled mess. Traditional sales leaders will falter, newly emerging combatants will rise. And, along the way, the average consumer is going to have a steadily growing array of hot, sexy products to tempt their wallets.

The reason for Apple's resurgence is the same reason that can drive any other consumer electronics maker straight to the top of their category... if they are just smart enough to deemphasize price and put more effort into people-pleasing, beautifully designed and packaged gear.

I can hardly wait to look back from ten years hence and to see who got smart and made the most of this fundamental shift in market and product priorities. What a thrill it will be to watch the concept of "industrial design" become the major marketing theme rather than "price."

Monday, May 08, 2006

The Mac OS X Virus Contest, A Year Later
An Open Challenge To The Technology Media

My name is Jack Campbell, until September, CEO of a manufacturing company producing Apple Computer related products.

Just over one-year ago, my company, DVForge, announced a $25,000 prize for the first virus developer who could infect two Powermac G5 computers located in our office, both with plain-Jane installations of OS X, by propagating that new virus over the internet. In the onslaught of correspondence that quickly then began streaming into our office we found enough wisdom to convince us to cancel that contest, due almost completely to potential risks to legal liabilities. But, the flare was shot into the sky, and the challenge received a huge degree of worldwide press attention, in both Apple press and mainstream press outlets. Presumedly, any virus coders who had not previously eyed the Apple platform would have seen some of this press exposure, and would have been enticed by the challenge, regardless of the retraction of the cash prize.

Well, more than a year has passed. And, surprisingly (or not, to some of us), there is still not one self-replicating virus in the wild that attacks the Mac OS X operating system. That's right, folks... not one. Not the first. Ever. Never. Zero.

Against this reality -- zero actual propagating OS X viruses in the wild -- there has been a groundswell of press attention offered recently to the notion that, somehow, Mac OS X is "nearly" as vulnerable to such afflictions as is Windows XP. In fact, this idea has become the darling for seemingly every writing hack in the industry to use as a stepping off point for whatever brand of yellow journalism they wish to pen.

When I announced the OS X Virus Contest, OS X had been on the market for four years, with still not one single in the wild virus. Now, it has been more than five years. And, guess what?... still not one in the wild virus!

We structured the contest last year to isolate the threat of an in the wild, self-replicating, self-propogating virus as that is the one true worldwide threat to any computer operating system. This can be seen from at least two hugely publicized attacks by just these creatures against the Windows OS in just the past two-years. Worldwide panic and devastation to millions of computers was the result in both instances. These were not "malware" or "trojan" attacks... and despite the yellow journalist's efforts to blur the distinction between these various security threats, the fact remains that it is the self-propagating virus, that launches from computer to computer without conscious involvement by the user, that poses the highest risk of devastating damage. So, that is where we focused.

Today, in honor of the many people who so vocally supported our virus contest last year, I am publicly challenging the many tech industry writers who have so loudly heralded "the growing OS X security risk" over the past few days to step up and show me one thing: just one in the wild virus that infects Mac OS X.

Show me that one item, and I will shut up.