So I was standing next to this friend of mine the other night when he casually mentioned that he might be joining the board of Barnes & Noble. My first reaction. Dude, the Nook has no chance. No one talks about the Nook. No one uses the Nook. I sit in a Barnes & Noble Starbucks quite a few days a week and I have never ever seen anyone even pause to look at the huge Nook display at the front of the store. You have to give that thing away to get anyone to use it. It's the only hope. Quite possibly Barnes & Nobles only hope not just in the eReader market but for their survival. In ten years there are not going to be any bookstores to walk into.
Well I get up the next day find out that Barnes has broken off talks with a gentleman named Ron Burkle to expand the B&N board by three seats, and that a judge had ruled against Burkle in his attempt to increase his ownership position at B&N. Ron Burkle is seriously rich. He is in the Forbes 100. He owns an investment company called Yucaipa.
So quicker than you can say kindle Yucaipa started a proxy fight. Mike McQuary, whom I worked with for a number of years, is on Yucaipa's slate of nominees for Barnes & Noble's board of directors.
If you are ever going to read SEC filings proxy statements are the best. Proxy statements filed by a party other than the registrant are the very best. They are full of intrigue. Buried with the proxy statement is this little gem:
In Yucaipa’s view, the B&N College acquisition (Barnes and Noble purchased B&N College for $514 million. B&N College just happened to be owned by the Barnes & Noble CEO and his wife) benefitted the Riggio family but does not make strategic sense for the Company. It gave Barnes & Noble over 600 retail textbook locations and essentially doubled the Company’s exposure to a “brick and mortar” market segment most at risk to technological changes, including increasing online textbook sales and digital textbook downloads. Yucaipa believes this capital could have been better and more timely utilized to support the Company’s digital media and e-books strategy.
Yucaipa understands the need to aggressively go after the e-books market. And my bet is that McQuary is thinking the same way I am about what to do. Amazon wants to view Kindle as a business that will stand on its own. Apple is proud of the iPad.
Barnes & Noble has got to get price/promotionally aggressive on the Nook. Is anybody asking for a Nook this Christmas? No. Change that by giving the things away on Black Friday with the purchase of x number of books. Treat the Nook cost as a marketing customer acquisition expense. With a small and shrinking market share a razor and blades strategy is B&N's only chance in the digital media and e-book world.
If they don't use it Barnes and Noble becomes Tower Records.
The hordes waiting in line for hours today to get that new iPhone 4 make it hard to believe that Apple is losing share in the smartphone market. But as I wrote last week, they are and they will continue to do so. Those hordes are merely trading up, not increasing iPhone share one bit.
In the comments of that post, Stephen Fleming, my boss, noted this:
I don't disagree that Android, in its many variations, may dominate MARKET share of smartphones a few years from now. But, with all the revenue streams from iTunes, the App Store, the iBooks store, and iAds, I think Apple will continue to dominate the PROFIT share. And that's what Jobs is targeting this time around.
Stephen is right. He's right because it's not really about the phone because the phone is no longer a phone.
Tell you a story.
About eight to ten years ago I was the guy that started and ran EarthLink's mobile business. The Internet was just beginning to move off the desktop into handhelds and there was a big rush to get there. Companies such as AventGo and Everypath promised to get web content into the mobile environment. There was just one problem with this plan. Well maybe two. Back then wireless transit speeds were extremely limited. Viewing any content was painful. Very painful, nobody had the patience. But the bigger issue was that users did not even want content on their mobile devices. They wanted what got them to use the Internet in the first place. Communications. Email. The handheld, that is what we called them back then, needed to morph to a communications device not a content device. So we went out and built that capability, sold it to our installed customer base, and built a nice little business around it.
Fast forward to 2007. The launch of the iPhone 2G. Why they called the 1st generation phone a 2G when all other Apple handhelds use the numeric before the G to designate generation is beyond me. But I digress. The iPhone was not a phone. It was something. A platform. At the time what exactly it was a platform for was unclear. But if you used one a little voice deep inside was telling you "this changes everything."
And what is becoming clear in 2010 is what it changes. The iPhone is not a phone. Yeah it does all that communications stuff like email, talking, texting, and more. But it does something else, and it does it pretty darn well. It delivers content. Hell it creates content. The iPhone has made the jump from being a communications device to being a content device. It's the only thing out there like it, which is why the hordes are waiting in line to upgrade. And even more importantly, delivering content can be a very big and profitable business even if the iPhone becomes a niche player in the smart phone market.
So yesterday, according to The New York Times, Apple took about 600k in new iPhone orders. Rock on. At about $200 a pop that is about $120 million in revenue plus whatever the AT&T sub happens to be. Most likely three x that or $360 mill in total. Not bad for a day when you are unable to complete customer orders.
A big yippee ki-yay for Steve and his dedicated team from Cupertino. Atlanta based Gerry Purdy chimed in “It shows the Apple magic is still present, it’s impressive.”
As a heavy Apple user and someone that intends to get a new iPhone my response is "perhaps." The money quote from the NYT article:
Still, analysts said, Apple is struggling to maintain the same clear-cut lead over rivals that it had in the past. In particular, the growing portfolio of Android-powered phones, which number in the dozens this year and are offered by many companies, is a significant threat.“The reality is that in the long term, the Android market share is going to catch up to Apple,” said Charles Golvin, a wireless analyst at Forrester Research. “When you have one device being sold to a smaller portion of the population, it’s not going to compete as well as many devices from many vendors on multiple carriers.”
We've seen this movie before. Apple. Microsoft. The personal computer early market share war. We all know how that ended. Apple niche. Microsoft dominance.
The end game for the mobile OS wars has been foreshadowed.
"I think people are willing to pay for content. I believe it for music
and video, and I believe it for the media."
Steve Jobs
Steve made the comment at D8 on Tuesday. About the same time I was having an interesting conversation with some smart people about the same subject. And here was the most interesting point of the conversation. Music, video, and whatever the heck media is are very different.
People purchase music for the most part because it is provides very repeatable consumption. The number of times I have listened to Damn The Torpedos is countless. But with the exceptions The Lord of the Rings, T2, and whatever your personal favs happen to be, video is generally rented or subscribed to because you really only need to see it once.
Music, as content, is a little bit ahead of video in terms of consumption via new technology distribution methods. The buying model has held serve. I would surmise that as video becomes more Internet oriented that the traditional model of renting or subscribing and not owning will become the predominant purchase method.
People will indeed pay for content if packaged the right way. The big question is who will figure out the right way to package and deliver these next generation video rental/subscription services. It is going to be an interesting game.
I have been involved in the Internet industry a long time. Much much longer than most people reading this ever heard of Netscape. Much much longer than most people reading this have been online.
Well a long time ago in a place far far away the evil empire with its death star logo known as AT&T came into the Internet access market and dropped prices by 40%, wiping out the profit margins for the startup where I was working at the time.
One of our strategies for fixing this problem was to create what we called incremental revenue. Revenue from things other than access. And we dreamed up all kinds of services that we could upsell our customer base on. And being good little marketers we toted this ideas into a room with M&M's and a one way mirror so that we could watch our customers reaction to our brilliant ideas.
Within minutes our plans were dashed. One participant pretty quickly declared "I can find it for free at..." to a quick discussion and nodding of heads. This was repeated over and over again. It has been repeated over and over again in every research project that I have been involved in on the subject. People don't want to pay for content on the Internet because they believe, they know, they can find it somewhere for free.
I bring this up as the fact that Newsday has garnered a total to 35 subscribers to its paywall service in the last 90 days. Nine thousand dollars in revenue on a web property that cost $4 million (an ungodly sum) to redesign and relaunch.
People will not pay for Internet content that they can find for free elsewhere. Trying to get them to do so is foolish.
Last night was the airing of American Idol's initial auditions that were held at the Midtown W in Atlanta. The kids love the the show so we were having a little family TV time.
As I was watching I was amazed by how much the first round of American Idol is like advising early stage entrepreneurs. Many contestants and entrepreneurs alike don't understand when they lack the skills needed to compete, make poor song/business choices, and do not listen to feedback. Or if they listen to the feedback, take it personal, get mad, and call those giving advice idiots or worse.
The other thing that is just like Idol is this magical moment of anticipation when you are seeing a person for the first time. You really want something amazing to come out of their mouth. More often than not it does not, but from time to time there's that "you're going to Hollywood" moment. And that is when the real fun and ability to improve and be successful begins.
Last night the Atlanta auditions ended with the not aged qualified 62 year old General Larry Platt's original ode to saggy drawers, "Pants on the Ground."
It's catchy. Somebody is going to make it into a hit.
And while I am not a big fan of country music Mallorie Haley is quite attractive and sure can sing. She has the skills and made a great song choice. If she listens and works my bet is that she makes it to the finals.
Chris Anderson the editor of WIRED was on Colbert last night pimping his new book, Free: The Future of a Radical Price (which by the way is free on iTunes as an audiobook.
At the 4:57 mark this exchange takes place:
Colbert: Can I twitter send me cash? It that legal?
Anderson: Twitpay. I believe.
Colbert: Twitpay?
Anderson: Twitpay.
Colbert: Some say I get that now.
The entire vid is worth a watch.
And it's pretty cool that the editor of WIRED knows about a company I helped create at Atlanta Startup Weekend. The company was also written up again in The New York times yesterday.
Disclosure: I am a Twitpay adviser and stockholder.
Yesterday was a great day in the history of America. A great day to be an American.
A great celebration of the power of our democracy. A peaceful transfer of power between two people that have the most power in the world.
A great celebration of civil rights progress. A celebration that it is possible for anyone to become president of the United States. In 2007 I would have said it was impossible for an African-American with the name Barack Hussein Obama to be elected president. In 2008 it happened. America has come a long way.
A great speech delivered by a great orator. But I am not really sure if many people heard what President Obama said. I don't think they wanted to hear the words. They were celebrating. The words were sobering. Change is yet to come to America.
What I heard President Obama say is that we needed to stop acting like children. Children label things so they can understand the world. Adults should not. The labels of Democratic or Republican. Conservative or liberal. Rich, middle class, or poor. They need to go away. Yesterday there was a disturbing mixture of hatred and glee directed toward George W. Bush. It's childish poor sportsmanship. Stop it.
What I heard President Obama say is that the people that take risks, the people that do things, the people that make things are the people that make a difference in the United States. I agree. And the United States can not take away the incentives for individuals to make this country great.
What I heard President Obama say is that each citizen has a responsibility to this great country of opportunity. A responsibility to work hard. A responsibility to be fair and honest. A responsibility to be tolerant.
What I heard President Obama say is that the greatness of our country must
be earned. That we all have a responsibility to make it happen. It takes work. Hard work. And sacrifices. Americans did not want to hear that yesterday. I hope in the days ahead they will.
America is a great country. A country that can adapt. President Obama provides an opportunity for renewal and change. My hope is that Obama makes a great president. I hope for real change.
I was breezing through the headlines in The Wall Street Journal this morning when I came across this: "Obama to Tap Tech Adviser as FCC Chief". As in Internet this got my attention and the more I read the more excited I got about the selection. Julius Genachowski is an excellent choice to lead the Federal Communications Commission.
First of all he has FCC and beltway experience. During the Clinton administration he served as General Counsel to the Chairman of the Federal Communications Commission. A little bit of a so what, but the guy knows his way around Washington.
Second of all when he left the FCC he went to work for Barry Diller at IAC/InterActiveCorp. He has been on the board of directors at Expedia, Hotels.com, The Motley Fool, Tickermaster, and Website Pros. My bet is Mr. Genachowski understands the Internet and the challenges facing Internet companies.
Third of all he is a Venture Capitalist at Rock Creek Ventures. A firm he co-founded.
Fourth of all his email address is in his profile on the Rock Creek Ventures site. There's some openness for you.
Fifth of all he gets early stage technology. In addition to Rock Creek Julius founded LaunchBox Digital, an seed stage investment firm based in Washington D.C. LaunchBox follows the Y-Combinator model.
Time will tell, but I think this guy understands technology and understands telecommunications. I can't think of a time when I have been more excited about a government appointment. Happy New Year!
You can call the Clintons I lot of things. Stupid is not one of them. This is brilliant and it's going to go viral in a big way.
With that said, I can not believe that voters chose Celine Dion's "You and I". Bill's call of Smashmouth's "I'm a Believer" would have been so much better. If Hillary gets elected (which I can't see coming to pass) I can think of a certain Elton John song that would be most fitting.
For the record, I loved the final episode of the Soprano's, thought the choice of "Don't Stop Believin" as the final song was most excellent, and would never, ever under any circumstances vote for Hillary Clinton.
The opinions expressed here are mine and mine alone (with the exception of comments by others of course). They do not represent the opinion or position of any other person on entity. All postings adhere to my personal values.
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