Did Apple and the book publishers get what they wanted?

With all the Sturm und Drang surrounding the eBook price-fixing charges against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, and the counter-charges that their actions prevented Amazon from establishing an eBook monopoly, a fair question to ask is: Did Apple and the publishers get what they were after? The short answers are "no," "yes" and "don't forget the Law of Unintended Consequences."

Apple: It may have hoped to become a major bookseller by getting the publishers to force all its competitors to sell eBooks at the same price, but if that was its hope, so far it's failed. Apple's eBook market share in the U.S. is, at best, in single digits, while Amazon still controls around 60% of the market and Barnes & Noble has approximately 25% market share.

The publishers: They wrested pricing control for their eBooks away from Amazon and were successful in getting Amazon to raise its prices. They also, at least in part, enabled Barnes & Noble to become a viable competitor to Amazon in the eBook market (although a good part of the credit should also be given to B&N's own strategies, including selling and supporting its Nook tablets and eReaders in its stores.)

The unintended consequences:

1. Amazon moved quickly to develop a supply of titles that are beyond the control of the Big 6 publishers, first by strengthening its self-publishing efforts with the Kindle Direct Publishing program, and then by entering the publishing business itself with Amazon Publishing. Amazon is now competing directly with the Big 6 for contracts with top authors and licenses for popular backlist titles. Had the publishers not taken away Amazon's pricing power, the company probably would have gone much slower in building up its own publishing business.
   
2. Price-fixing lawsuits have been filed in the U.S. by the Federal government, 16 state governments and private individuals, and in Canada by private individuals. Lawsuits are being considered by the European Commission and Australia. These lawsuits have the potential to cost Apple and the publishers hundreds of millions of dollars in damages and legal costs, not to mention years of management distraction, reputational damage and constraints on how they do business. Hundreds of millions of dollars may be negligible to Apple, which has $110 billion in cash and equivalents, but the cost is much more significant to the publishers. 

Given Apple's inability to turn the deal into significant market share and the publishers' inability to keep Amazon from maintaining control of a majority of the U.S. eBook market, it's hard to argue that Apple's and the publishers' actions were worth the cost.

Apple's potential defense: The publishers didn't need us to collude on pricing

I've been wondering about Apple's apparent resolve to fight the eBook price-fixing charges leveled against it by the U.S. Justice Department, states and private individuals. Apple's defense and decision not to settle have, so far, made no sense to me. The relative cost and inconvenience of settling with the Justice Department and states would be minimal compared to the potential distraction of Apple's management and reputational damage resulting from years of litigation. So, why is Apple holding out? Keep in mind that I'm not a lawyer, but here are some thoughts:

The publishers wouldn't possibly have been stupid enough to talk directly with each other about adopting uniform agency terms and pricing. Apple would have had to serve as the "switchboard", acting as an intermediary between the various publishers. The problem is that if the Justice Department charges are correct, the publishers did meet face-to-face multiple times to discuss business issues including "the Amazon problem," and also had myriad communications between each other by phone and email. Years ago, when I took a Business Law course in college, my professor said that such contacts between competitors simply shouldn't happen. Even if all the parties do nothing more than talk about the weather, the very fact that the meetings took place can be used as evidence of collusion among competitors. That may explain why, according to the Justice Department, there were never any corporate counsel at the face-to-face meetings held by publishing CEOs in various Manhattan restaurants.

The CEOs could never agree on how to take on Amazon and force the company to increase its selling prices for eBooks; it took Apple to propose first agency terms, and then a "Most Favored Nation" clause that would guarantee that Apple would always have the lowest eBook prices. The publishers could have come up with a similar scheme and worked the details out among themselves. It was convenient for Apple to do the work for them, but Apple wasn't necessary to either create or further the collusion.

The problem for Apple is that the Justice Department appears to have evidence that the company did, in fact, act not only as a "switchboard" between the publishers, but that its role was essential to getting the five publishers on board with exactly the same terms and conditions. There's also evidence that Steve Jobs himself intervened to try to convince Random House to join the other five Big 6 publishers in implementing agency terms. That may be enough to prove that Apple was integral to the conspiracy.

Adobe is onto something with Creative Cloud

Adobe has started accepting pre-orders for CS6 Creative Cloud, its software subscription program. Everything that's been in Adobe's previous Creative Suites, plus a number of new applications that are either being released from or are still in Adobe Labs beta, and all of Adobe's tablet apps, are included in one monthly subscription. Month-to-month subscriptions are $75/month; annual subscriptions are $49.99/month. Prior purchasers of any version of Creative Suite from 3 or above qualify for a discount on the first-year subscription, which brings the price down to $29.99/month.

There were many complaints when Adobe first announced its plan to move to subscription pricing. The fear was that subscriptions would cost more than purchasing software outright--and in some cases, the fears were well-placed: Upgrading from CS5.5 Master Collection, which is the equivalent of Creative Cloud, costs $525, less than the $600 annual price of Creative Cloud before the first-year discount. However, if you skipped version 5.5 and stayed with version 5, the upgrade price is $1,049.00. Upgrades from earlier versions of Creative Suite are even more expensive.

The $29.99/month discounted first-year subscription price is a powerful incentive for Creative Suite users to switch to Creative Cloud. Adobe hopes that it can convince enough people to switch to Creative Cloud that eventually, it will no longer be economic for people to upgrade their packaged software. There's nothing keeping Adobe from raising prices once they get a critical mass of CS users to switch, of course. However, it looks like Adobe is willing to take a chance that lower prices will result in more total users. In addition, the company may be counting on the psychological benefit of a fairly low monthly payment versus a one-time big purchase to get into or upgrade Creative Suite. A completely new Creative Cloud user will get the equivalent of  $2,599 worth of software for a first-month payment of $50 on the annual plan.

My bet is that Adobe's pricing is going to bring in many more users, and it's going to put additional pressure on Avid, and especially Apple.

When "something for everyone" may be too much

On the cover of the current issue of "TWICE" (This Week in Consumer Electronics,) there's an ad for Nikon's cameras with the tagline "There's a Nikon for Everyone." It got me thinking about something I noticed at the Sony and Panasonic booths at last week's NAB conference. These companies have so many different camcorders and cinema cameras that even the people selling them can't keep track of all of them. For example, when I was in the Sony booth, I couldn't find the 35mm cinema cameras (NEX-FS100, FS700, F3, etc.) I asked one of Sony's salespeople where they were, and she said that all of the company's cameras were on display in the huge circular "camera pit" at the center of the booth. I'd walked around the entire pit and hadn't seen the 35mm cameras, so I went around again but didn't find them. It turned out that the 35mm cameras were in a completely separate section of the booth.

There are so many products that they overlap each other in price and functionality. The same is also true for still cameras from Canon, Nikon, Sony and others, and smartphones from Samsung, HTC, LG, Motorola, Nokia, etc. Makers of notebook and desktop computers have the same problem--just look at the proliferation of models at HP, Dell and Acer. Manufacturers make so many models in order to avoid losing a sale, but they wind up confusing potential customers. Each of these products costs a significant amount of money to develop, manufacture and support. Resources that could be used to develop entirely new products are instead used to create minor product variations to fit into every conceivable price point.

Apple is a great example of a better approach to the problem. At any one time, Apple has a single line of smartphones, tablets, and notebook, all-in-one, mini and full-sized desktop computers, each of which is refreshed once a year. Apple continues to sell a single version of the previous year's tablet and smartphone (two years in the case of phones) at lower prices. Each computer line has four or five models, which vary by display size and processor. When a new computer line is launched, the previous line is discontinued. It covers all the price points, yet it's simple for consumers to understand and for Apple to sell. It also works well with Apple's strategy of making product announcements into newsworthy events.

Sony lost $6.4 billion last year; Panasonic lost $10.2 billion. They no longer have the money to invest in endless product proliferation--which might explain the relatively paltry number of new products shown by Panasonic at NAB. They, and companies like Canon, Nikon, Samsung, etc., would be well advised to focus on fewer, better products that are clearly differentiated from competitors and from each other.

David vs. Goliath? How about Goliath vs. Goliath?

In the U.S. Federal, state, and private eBook price-fixing lawsuits against Apple and five of the Big 6 publishers, some observers have equated the battle to David vs. Goliath. The defendants are David and Goliath is Amazon, which, they argue, would have monopolized eBooks and wiped out the publishers if they hadn't imposed agency pricing. The problem with both the analogy and the rationalization is that most of the Davids are actually Goliaths. Here's a rundown:

• Apple: Until recently, it was the most valuable company in the world, with $100 billion of cash and equivalents on its balance sheet and profit margins that Amazon, and the other defendants, would kill for. 2011 revenues: $108.25 billion.
• Hachette: The second-largest publisher in the world, and a division of Lagardère Group, which owns magazines including ELLE and Paris Match, a variety of television broadcasters in Europe, a network of duty-free shops, and 7.5% of EADS, which is the parent company of Airbus. Parent company 2011 revenues: $10.02 billion.
• HarperCollins: A division of News Corporation, which owns Fox, The Wall Street Journal (which has been one of the most vocal critics of the Justice Department's lawsuit,) the New York Post, a bunch of newspapers in the U.K. (which are embroiled in an ever-widening phone hacking scandal,) newspapers and broadcasters in Australia, 39.1% of British Sky Broadcasting, and a lot more. Parent company 2011 revenues: $33.4 billion.
• Macmillan: A division of Georg von Holtzbrinck Publishing Group, owner of Macmillan Education, Nature, Scientific American, several German publishers and the newspaper Die Zeit. Privately held; parent company 2010 revenues: $2.98 billion.
• Penguin: A division of Pearson PLC, the world's largest education and trade book publisher; owns Pearson Education, the Financial Times and 50% of The Economist. Parent company 2011 revenues: $9.45 billion.
• Simon & Schuster: A division of CBS Corporation, which owns the CBS television network, multiple television and radio stations in the U.S., Showtime, CBS Television Distribution (which used to syndicate Oprah and still syndicates Dr. Phil and other shows,) and CBS Interactive (which owns CNET among other Internet properties.) Parent company 2011 revenues: $14.2 billion.

Amazon is certainly no slouch; its 2011 revenues were $48 billion. However, that compares to total revenues of the defendants of $178.3 billion. Even if you leave Apple out of the comparison, the parents of the five publishers had revenues of $70 billion. You can argue that publishing is only a small portion of the revenues of some of the parent companies, but books only represent a small portion of Amazon's revenues as well. In 2011, Amazon's media sales, which include books. music and video, were $6.01 billion--12.5% of the company's total revenues.

In short, the conflicts between the five publishers and Amazon aren't David vs. Goliath--they're actually Goliath vs. Goliath. When Apple is added into the mix, it's Amazon that could justifiably be called David.

Blackmagic Design crashes the cinema camera party

Last year at NAB, when I spoke with Blackmagic Design's CEO Grant Perry and Director of Marketing Americas Terry Frechette about the company's new video production switchers, I noted that they sold just about everything for video except cameras. This year, they corrected that oversight. The new Blackmagic Cinema Camera shown at NAB was a huge surprise--to my knowledge, there were no rumors that Blackmagic was working on a cinema camera, especially one as "out of the box" as this design. It looks like a simplified, trapezoidal DSLR with mounting points on both the top and the bottom of the case. It should work with a variety of cages and mounting systems from companies such as Redrock Micro and Zacuto.

The Blackmagic Cinema Camera has a 2.5K sensor (2432 x 1366) with an active area of 15.6 x 8.8 mm—bigger than Super 16mm but smaller than Micro Four Thirds. The company claims 13 stops of dynamic range. It supports Canon's EF-format lenses, including Canon's autofocus lenses, as well as Zeiss's EF-compatible ZE mount lenses. The camera can output RAW using Adobe's 12-bit open-source Cinema DNG format at full 2432 x 1366 resolution, as well as compressed video in Apple's ProRes and Avid's DNxHD formats, at 1080p/23.98, 24, 25, 29.97 and 30 fps. It saves onto a SSD using a built-in recorder and outputs through both 3Gbps HD-SDI and Thunderbolt interfaces. (A 256GB SSD can store 30 minutes of RAW footage or more than two hours of video in ProRes or DNxHD format.)

Virtually all interaction with the camera is through a built-in 5" 800 x 480 touchscreen display that comes with a snap-on hood--there's no separate viewfinder. A handful of buttons are used for recording (buttons on both the front and back of the camera), automatic iris, focus, transport control, bringing up the menu and power. Audio in is via standard stereo mic/line inputs. The camera can run on 12V to 30V DC and has a built-in battery. And, I forgot one important thing: Its list price is $2,995 (U.S.). That's not a misprint--it's priced less than $3,000. The Cinema Camera is scheduled to ship in July.

According to Blackmagic's representatives, the company learned from customer feedback that, while cinematographers love the price and video capabilities of today's DSLRs, they're tired of working with cameras that were designed for still photography first. That includes small LCDs designed more for changing menu settings than for accurately judging image framing and quality, limited recording time, no built-in support for industry-standard video recording formats and HDMI outputs that are useless for live recording.

The Cinema Camera fixes all these problems, drops all the still photography-oriented features, and sells for $2,995. It also comes with a full copy of DaVinci Resolve software for color correction on Windows and OS X PCs, and Ultrascope for monitoring output--the software alone costs $995 when purchased by itself. Of course, the camera's not perfect--it's not 4K, the imager is small, the compressed output is 10-bit 4:2:2, there's no 60p mode, slow motion or ND filters--but it's $2,995, which covers a bunch of complaints.

As I always say when new cameras are released, you'd be smart to hold off on placing an order until good third-party reviews of the Cinema Camera are released, along with sample footage. (Australian John Brawley was the first cinematographer to get his hands on a prototype camera for in-field testing. He's posted footage on Vimeo.) However, I suspect that there are lots of people who aren't going to wait--they want to be among the first to get their hands on it. 

It's On: U.S. Justice Department sues Apple and five publishers for eBook price-fixing, settles with three of the publishers

The long-rumored eBook price-fixing lawsuit against Apple and five of the Big 6 publishers (Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster) was filed in Federal court in New York today by the U.S. Justice Department. In addition, the Attorneys General from Texas, Connecticut, Ohio and Pennsylvania are filing their own lawsuits today in Federal court in Texas. Here's a summary of U.S. Attorney General Eric Holder's remarks:

• Hachette, HarperCollins and Simon & Schuster agreed to a settlement, which must be reviewed by the court, with the following terms: 
• The publishers will go back to the wholesale model and allow retailers to set their own prices for eBooks.  Update: Publishers Lunch Direct has clarified the situation (and given the actual verbiage in the settlement, I use the word "clarified" advisedly.) The three publishers will be allowed to continue to offer agency contracts, and they can use variable commissions and discounts to encourage resellers to limit their discounting of eBooks to consumers. However, they can't prohibit resellers from offering discounts. Publishers Lunch Direct claims that this clause prohibits resellers from selling eBooks below the retail price less commission set by the publishers, but I don't read it that way: Resellers can sell eBooks at any price they choose and take as much of a loss as they want. In addition, resellers can refuse to purchase on agency terms, but publishers can refuse to sell to them.
• They will terminate their "Most Favored Nation" agreements with Apple, Amazon, Barnes & Noble and other eBook retailers. 
• They're prohibited from placing constraints on resellers' ability to offer discounts on eBooks for two years. 
• They're prohibited from conspiring or sharing competitively sensitive information with their competitors for five years. 
• They must implement a strong antitrust compliance program. 
• Justice charges that the defendants held regular, near-quarterly meetings to discuss confidential business and competitive matters as part of a conspiracy to raise, fix and stabilize retail prices. 
• They also mutually agreed to seize pricing authority from resellers, agreed to pay Apple a 30% commission on eBooks sold through the iBookstore (and to impose the same 30% on other resellers,) and used most-favored-nation provisions to guarantee that no reseller could sell their eBooks at a price lower than Apple's. 
• According to the statement, "...one CEO allegedly went so far as to encourage an e-book retailer to punish another publisher for not engaging in these illegal practices." 
• Acting Assistant Attorney General Sharis A. Pozen quoted from the complaint as follows: "One executive said that, 'the goal is less to compete with Amazon as to force it to accept a price level higher than 9.99.' And yet another said, 'we’ve always known that unless other publishers follow us, there’s no chance of success in getting Amazon to change its pricing practices.' Our complaint also quotes Apple’s then-CEO Steve Jobs as saying, 'the customer pays a little more, but that’s what you [he’s referring to the publishers here] want anyway.' As you can see, we allege that these executives knew full well what they were doing. That is, taking steps to make sure the prices consumers paid for e-books were higher." 

The "Most Favored Nation" landmine

Reuters is reporting that the U.S. Justice Department could file suit against Apple and one or more publishers for eBook price-fixing as early as Wednesday. I won't rehash the details of the case; you can read this or this for background. In this post, I want to discuss one of the sticking points in the case--the "Most Favored Nation" clause. Apple's "Most Favored Nation" clause requires publishers to price eBooks that they supply to Apple at least as low as the lowest price offered by any other reseller. If the publisher or one of its resellers lowers the price for a title below that of Apple, Apple has the right to drop its sale price to maintain the lowest price.

It's very important to understand that Apple isn't the only eBook retailer with a "Most Favored Nation" clause; both Amazon and Barnes & Noble have them as well. In fact, Amazon is far more aggressive at exercising its clause than the other two retailers. Amazon regularly scans the prices for eBooks at competitive websites and will automatically drop the price of any title that it finds lower at another site, without giving notice to the publisher (or, for a self-published eBook, the author.)

The effect of Amazon's "Most Favored Nation" clause is magnified by another clause the company demands: For non-agency titles (in other words, titles that Amazon purchases to sell under the wholesale model,) Amazon reserves the right to set and change the price as it sees fit, although it will still remit the same wholesale amount back to the publisher or author. If Amazon drops its price for a title below that of Apple or Barnes & Noble, even without the knowledge of the publisher or author, Apple and Barnes & Noble have the right to match Amazon's price.

You may already see where this is going. If, either by design or error, the price of an eBook drops at one retailer, the others have the right to drop their prices. Any pricing mistake can quickly cascade. Is it possible that the price could go to zero? Self-publishers have been giving away some of their eBooks to encourage customers to buy others, so finding a title priced at zero wouldn't necessarily be flagged as an error. In at least one case, Amazon mistakenly found a self-published eBook priced at zero at another retailer, and dropped its price on the title to zero.

Okay, so what happens when the price accidentally goes down to zero? All the publisher or author needs to do is make a phone call or send an email to the retailers in order to fix the problem, right? That assumes that they can figure out who to contact at the retailer, and that the retailer takes action quickly to correct the problem. So let's say that you're an author whose eBook is, through no fault of your own, now priced at zero. You contact Amazon, Apple and Barnes & Noble, and they all agree to correct their prices. Amazon goes first, and you're back at, say, $4.99. Then, before the other retailers have a chance to change their prices, Amazon's scanner checks Barnes & Noble's website, sees that their price is zero, and sets Amazon's price back to zero. Then, Barnes & Noble corrects the price, until the Barnes & Noble price scanner sees that Amazon is selling your eBook for zero, at which point Barnes & Noble also sets its price back to zero.

There are two big takeaways:

1. "Most Favored Nation" clauses suck for everyone except retailers, and
2. Just getting Apple to get rid of its "Most Favored Nation" clause without doing something about Amazon and Barnes & Noble isn't going to fix the problem.

Update. April 30, 2012: According to The New York Times, Apple selected "After Friday Night Lights" to be part of its "Pick of the Week" promotion that allows Starbucks customers to get a free copy of the eBook. Amazon saw the promotion as a giveaway and dropped its price for the eBook to zero. Then, Byliner, the publisher of "After Friday Night Lights," withdrew the eBook from Amazon until the conclusion of the Apple/Starbucks promotion on May 1st.

Apple: Don Quixote de Cupertino?

Update, April 11, 2012: Bloomberg is reporting that the U.S. Justice Department filed suit this morning against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster for eBook price-fixing; Hachette, HarperCollins and Simon & Schuster settled with the Government.

Bloomberg reported that Apple, Penguin and Macmillan are unlikely to agree to a settlement with the U.S. Justice Department over eBook price-fixing accusations, and are preparing to go to court. The three other publishers in the case, Hachette, HarperCollins and Simon & Schuster, are said to be very close to agreeing to a settlement with the Justice Department.

Regular readers of my blog know my opinion on the subject: There's very strong evidence, even if circumstantial at this point, that the publishers imposed agency terms on all of their resellers at almost exactly the same time, including the exact same commission rate, and that all of them threatened to stop supplying eBooks to any reseller who refused to agree. Apple's precise role in the scheme isn't clear, but it's known from Steve Jobs' own words that Apple proposed the scheme to the publishers and knew that it included the part about refusing to sell eBooks to any reseller (including Amazon) that didn't agree.

Apple may believe that it didn't coordinate the actions of the publishers (or that it's covered its tracks well enough that the Justice Department can't prove that it did coordinate their actions.) It may also not want to agree to a settlement for fear of its impact on the civil price-fixing case underway in New York. However, in my opinion, Apple is taking a huge risk by not settling the case before it goes to court.

As it looks now, Hachette, HarperCollins and Simon & Schuster are close to a settlement. If they settle, they'll enter into what's called a consent decree, which doesn't require them to assume guilt for the charges. They'll be required to change their business practices, possibly pay a fine, and agree to court supervision for a limited period of time. The pain and reputational damage will be over quickly. For Apple, Penguin and Macmillan, however, their senior executives are in for months of depositions, they'll be required to provide many thousands of documents as part of the discovery process, and the court trials and appeals will likely take years to play out.

In addition, the Justice Department will be able to compel Hachette, HarperCollins and Simon & Schuster to testify against the other three companies. They'll have immunity as a result of their settlement, and they'll have no reason to protect their competitors or Apple. This is a standard part of most price-fixing cases: One or more defendants cut early deals with the Justice Department and gain immunity, and then they provide evidence against the other players in the price-fixing scheme.

The worst possible outcome for Apple would be for it to lose in court, even if it eventually wins on appeal. All they have to do is look at Microsoft to witness the damage that could be done. That case was eventually settled with a consent decree, but Microsoft was under court supervision for ten years. The company could no longer pursue the aggressive tactics that it had used in the past to suppress competition. Most importantly, it became a convicted monopolist, which changed both the public's perception of the company and the stakes for any future litigation. (When Bill Gates eventually passes away, stories about his philanthropy will have to share time with the videos of his depositions.) The press was no longer afraid of retaliation by Microsoft's public relations department for running negative stories, and Microsoft lost control of its messages.

Apple is unafraid of litigation, as witness its myriad lawsuits against Android licensees. In Walter Isaacson's biography, Steve Jobs clearly saw Android as not only a theft of Apple's intellectual property by Google, but a personal betrayal by Google Chairman Eric Schmidt, who served on Apple's board of directors for years. Jobs swore that he would spend Apple's entire cash horde, if necessary, waging "thermonuclear war" on Google and Android.

Unfortunately for Apple, its cases against Samsung, HTC and Motorola have been far from the "slam-dunks" that Jobs thought they would be. Apple has estranged perhaps the most important component supplier for its mobile products, Samsung, and it's being forced to bring alternative vendors up to its quality and deliverability standards. For example, Apple had planned to launch the new iPad with three LCD vendors, LG, Samsung and Sharp, but only Samsung was able to meet Apple's quality requirements and ship in the necessary quantities in time for the launch. In addition, some of Apple's own patents are being challenged and could be invalidated.

Apple, like Don Quixote in Cervantes' novel, enjoys its battles. Unlike Quixote, however, Apple's opponents fight back, and are likely to hurt Apple much more than Apple hurts them.

Sony's new NEX-FS700: 4K, Super Slo-Mo, Under $10,000

Engadget has a press release with details about Sony's new NEX-FS700, the follow-on to the FS100, which I expect to remain in Sony's product line. Here's a summary:

• The good: The FS700 has a 4K Super 35mm Exmor sensor, and it has a variety of slo-mo modes, including 120 fps in a 16-second burst at 1080P and 240 fps in an 8-second burst, also at 1080P. If you're willing to settle for lower resolution, the FS700 also has 480 and 960 fps modes. It uses E-mount lenses and can support all the usual E-mount adapters. It also has built-in ND filters and a 3G HD-SDI output in addition to HDMI.
• The bad: The FS700 has the same "Lego blocks" form-factor as the FS100. There have been many complaints about handling the FS100 in the field, including poor placement of controls; it remains to be seen if the FS700 will remedy at least some of these problems.
• The unknown: Sony's press release quotes the price of the FS700 as "under $10,000 (U.S.)." Leaked reports on the camcorder had it priced at $9,000 or even $8,000. We'll probably know the real price in a few weeks at NAB. In addition, even though the FS700's sensor supports 4K, the camera will require a firmware update at some unspecified time in the future in order to output 4K over 3G HD-SDI to a Sony recorder. Will Sony charge for the firmware update, or will it be free for registered owners of the FS700? Again, we'll most likely learn the details later this month.

Given that the Scarlet-X is already shipping at a $9,000 base price, the FS700 isn't likely to be a game-changer, although it will be considerably less expensive than a fully-equipped Scarlet-X or Canon C300. Canon has a new cinema camera announcement scheduled for NAB, so they may already be preparing to compete in the "4K for under $10K" market. The company that I'm surprised that we haven't heard anything from yet is Panasonic: The AF100 is getting old. Will they have anything new to show at NAB?