Does Android have the advantage in the smartwatch war?

Earlier today, ReadWrite ran an article about two new Android Wear-based smartwatches: LG's G Watch R and Asus's ZenWatch. According to ReadWrite, both watches are significant improvements over previous Android-based smartwatches. The G Watch R has a round face, like the Motorola 360, but unlike the Motorola watch, it uses the entire watch face as the display. In addition, it looks more like a conventional watch, uses conventional watchbands, and has better battery life. The ZenWatch is rectangular like the Apple Watch and has an attractive design, but it uses conventional watchbands, has an AMOLED display and runs Asus's ZenUI user interface on top of Android Wear.

Neither of the new watches has all the features of the Apple Watch, but it's becoming increasingly clear that feature parity really isn't an issue. The watch you buy depends primarily on the smartphone you use--the Apple Watch only works with iPhones, while Android Wear watches only work with Android smartphones. Android smartphones had 84.7% of the worldwide market share (in units shipped) in Q2 2014 according to IDC vs. 11.7% for iOS. That means that about 88% of potential buyers are not in the market for an Apple Watch unless they also want to throw away their current smartphone and switch to an iPhone.

Android smartwatches have another, less-obvious advantage: There are several companies making them, and new smartwatches are being released all the time. Samsung, LG, Motorola/Lenovo and Asus are all making Android Wear-based smartwatches, and each company is on a more aggressive release cycle than Apple. Consider that Apple generally only releases a new version of a product once a year. That makes Apple's upgrades predictable, but it also means that it takes a year for new features to reach the market. In the Android world, on the other hand, smartphone makers are releasing new models all the time, often with features that are intentionally experimental, in order to gauge consumer interest. That enabled Android smartphone makers to get big screens and NFC for financial transactions out before Apple.

The Android smartwatch makers could have the same advantage over Apple. Their watches are evolving continuously, as new features and form factors are introduced, while Apple is a monoculture that will probably only release new watches once a year. That means that if a smartwatch vendor stumbles on a very popular combination of designs and features, Android smartwatch makers can clone the designs and features and get them to market faster than Apple can.

In my opinion, the jury is still out as to whether there really is a mass market for smartwatches. However, the Android ecosystem is in a far better position to take advantage of the market opportunity if and when someone comes up with the "killer app" of smartwatches.

If you buy a Microsoft Surface, it probably won't be because of the price

Earlier today, Microsoft announced the prices for its Surface for Windows RT tablets. The entry-level Surface for Windows RT tablet comes with 32GB of storage and sells for $499 (U.S.); the same model with a black Touch Cover keyboard sells for $599. The 64GB model bundled with a black Touch Cover sells for $699. If your tastes run to a more colorful Touch Cover, those are available separately for $119; if you prefer a more conventional keyboard design, the Type Cover is also available in black only, for $129.

Several months ago, there were some rumors that Microsoft would try to underprice Apple with an entry-level Surface tablet priced as low as $199; those rumors were disproved today. Microsoft has taken pains to point out that it's pricing its 32GB model where Apple prices the 16GB third-generation iPad, and the 64GB bundle is priced the same as Apple's 32GB model without a keyboard. Microsoft's prices are very competitive, but Windows RT will only have a tiny fraction of the apps available for iOS or Android when it and the Surface tablets are released next week.

Microsoft seems to be at a loss to describe exactly what the Surface is--according to Windows business unit president Steve Sinofsky, it's neither a tablet nor a notebook computer. Microsoft's new television ads don't help--they show people dancing around with Surface tablets as they connect and disconnect keyboards, but they don't actually show anyone doing anything useful with the devices. That's the trap that tablets like the Motorola Xoom and BlackBerry Playbook fell into--Motorola and RIM showed their tablets playing videos and games, but not doing anything useful.

There's not going to be a lot that consumers will be able to do with Surface tablets when they first ship, at least in comparison to iPads and Android tablets. It will take time for developers to build up a competitive catalog of apps, and developers won't bother until they see Windows RT gaining market momentum. By themselves, Microsoft's prices will do little to stimulate sales.

In addition, I believe that we're going into the Christmas of 7" tablets: Apple said that it plans to make an announcement, most likely of a 7" iPad (among other products,) on October 23rd. The focus this holiday season will be on tablets selling for $199 to $299, not $500 or up. Consumers will be comparing the small iPad to the big iPad, or the small iPad to Amazon's Kindle Fire HD, Barnes & Noble's Nook HD and Google's Nexus 7. They're unlikely to be comparing anything to the Surface for Windows RT.

Microsoft may believe that Android, on tablets at least, is highly vulnerable to being displaced. Under this scenario, Microsoft's goal would be to make Windows RT the credible alternative to iOS, and then wait for Apple to make a serious mistake, just as the Xbox 360 capitalized on Sony's mistakes with the PlayStation 3 to become the video game console market leader. (It's the "I don't have to outrun the bear, I only have to outrun you" idea.) If that's Microsoft's approach, all they have to do is beat Android, not take away a significant number of iPad sales. If Microsoft fails, however, people will be comparing the Surface not to the Xbox, but rather, to the Zune.

Scholastic to release 50th Anniversary "Clifford the Big Red Dog" titles as eBooks and apps

In time for the 50th anniversary of the "Clifford the Big Red Dog" series, Scholastic will publish Normal Bridwell's Clifford Collection this September, a set of six Clifford titles published between 1963 and 1977. In Spring 2013, the company will publish Clifford's Birthday Party and a new book, Clifford's Bedtime Story. Both the Clifford Collection and Clifford's Birthday Party will be published simultaneously in print, eBook and Spanish versions. In addition, more than 20 Clifford books will be made available as eBooks for Scholastic's Storia eReader.

Scholastic will also publish Clifford's Big Birthday App for iOS and Android in September. Both versions of the app will be priced at $0.99.

Book Retriever iOS app identifies titles by reading level

Publishers Weekly reports that Book Retriever, a $0.99 iOS app launched by St. Louis-based K-8 educational distributor Classroom Library, matches children's reading levels with 136,000 titles in its database. The app uses a proprietary database of leveling information based on four leveling systems that was developed by Benjamin and Marla Conn, Classroom Library's founders.

Parents can use a built-in ISBN barcode scanner to determine whether a book is appropriate for their child's reading level, and teachers can use it to create reading lists for their students. The barcode scanner can also be used to build a database of a home's or school's books. The app can also print ISBN barcodes for titles in its database that can be applied to a home's or school's books.

Android, iOS and Windows Phone all increased their U.S. smartphone market share

ComScore has released its MobiLens report on U.S. smartphone market share, for the three months ending May 2012. Here's a summary:

• Android increased its market share to 50.9%, from 50.1% in the three months ending in February 2012. 
• iOS increased its market share to 31.9% from 30.2% in the previous three months. 
• Windows Phone 7's market share increased to 4% from 3.9% in the previous three months. (It remains to be seen whether Microsoft's market share will continue to grow, now that consumers have learned that no existing Windows Phone devices will be able to run the forthcoming Windows Phone 8 operating system.) 
• BlackBerry's market share declined to 11.4% from 13.4%. 
• Symbian's market share declined to 1.1% from 1.5%. 

In terms of hardware vendors, Samsung and Apple increased their market share, by 0.1% and 1.5% respectively, while LG (-0.3%), Motorola (-0.8%) and HTC (-0.2%) all lost market share. (Neither RIM nor Nokia are in the U.S. top five, so they've not been reported on by comScore.)

Amazon updates Kindle readers

TechCrunch reports that Amazon has updated its HTML5 Kindle Cloud Reader, iOS and Android Kindle apps with a number of new features:

• Graphic novels, comic books and children's picture books are now supported in all three eReaders. There are more than 1,000 comic and children's books available. 
• Kindle Text Pop Up enlarges text in selected children's books. 
• Kindle Panel View makes comic books and graphic novels look more like their printed equivalents.
• Android and Cloud Reader eReaders now support two-page view mode. 
• iOS users can now search their library of eBooks by title, and the margins on the iPad have been made smaller for more display space. 

Apple's WWDC announcements--the 60,000-foot view

At Apple's Worldwide Developers Conference keynote today, the company completely refreshed its notebook computers and introduced an important new model, got OS X Mountain Lion ready for release next month, and previewed iOS 6. Rather that dig deep into all the new products' features and functions, I'm going to focus on a high-level view:

• The future of Apple's notebooks: Apple announced its MacBook Pro with Retina Display, which represents the future direction for all of Apple's notebooks. It's slightly thicker than a MacBook Air, yet it has as much or more processing and graphics power than the top-of-the-line "classic" MacBook Pro, which remains in the product line. It also has a 15.4" Retina Display with 2880 x 1800 resolution, four times as much as the "classic" 15" MacBook Pro.
• Hard drives are dead: Every MacBook model now comes with flash memory rather than a hard disk, with a minimum of 256GB on most models to a maximum of 768GB on the new Retina Display model.
• USB 3 is in, Thunderbolt is still around, and FireWire is on the way out: All MacBooks now have USB 3 interfaces, which are backward-compatible with USB 2. There are far more USB 3-compatible peripherals on the market than Thunderbolt-compatible models, and they're less expensive. On the other hand, the handwriting is definitely on the wall for FireWire: The MacBook Pro with Retina Display drops both FireWire 800 and Gigabit Ethernet interfaces. Instead, Apple is offering Thunderbolt to FireWire 800 and Gigabit Ethernet adapters. 
• OS X is looking more and more like iOS: Mountain Lion includes integration with iCloud, a notifications center, and Messages, Reminders and Notes apps, all of which were first implemented in iOS. Dictation is built into Mountain Lion and works in all apps, much like dictation in the new iPad. Links, images and video can be shared with a new share button in every window, much like Android. The updated Safari browser has a unified "smart search" field, like Chrome, and a Tabview feature, taken from Mobile Safari.
• "Fix Siri, integrate Facebook, replace Google Maps, and clean up everything else": From today's presentations, those seem to be the central goals that Apple has for iOS 6. Siri is going to be more tightly integrated into iOS 6 and will become a key component of integration with automobile telematics systems, so it has to work much better than it currently does. Facebook is going to be integrated as completely into iOS 6 as Twitter is. Google Maps will be replaced with Apple's own Maps application, including real-time traffic, turn-by-turn navigation, Siri integration and Flyover mode, with 3D renderings of cities around the world. Other features, such as FaceTime and phone calling, will be improved.
• With today's announcements, Apple is sanding off the remaining rough edges of its operating systems, and keeping its hardware at the leading edge. The true innovations, if they arrive, will come later this year, not at WWDC.

Is there a market for "enhanced" eBooks?

Shortly before Christmas, The Huntington Post published an interview with David Prichard, the President and CEO of Ingram's Content Group. Ingram is the largest book distributor in the U.S. and operates Lightning Source, which is one of the largest publishing-on-demand services companies, and a major vendor to self-publishers. In the interview, Prichard talked about the future of publishing, and one of the things he talked about were "enhanced" eBooks:

"Enhanced e-books are only in their infancy, allowing authors to add alternative endings or interviews. Down the road, who knows what's possible? Maybe we will have biometric devices that can sense your pulse and body temperature and change the plot based on your feelings -- and you think Stephen King is scary now." 

"...for example, a biography can to come to life in many ways. Jacqueline Kennedy: Historic Conversations on Life with John F. Kennedy has all of the interview audios, videos, photographs, text, and transcripts available. Even classics -- Penguin has updated Pride & Prejudice with clips from the movie and even instructions on dancing. For the 75th anniversary of The Hobbit, HarperCollins released an e-version with exclusives including J.R.R Tolkien's book illustrations and recently discovered Tolkien recordings. Publishers are still learning what added value readers will or won't pay for. I expect we'll continue to see lots of experimentation in this arena." 

Seth Godin, well-known author and marketer, responded on paidContent.org to Prichard's remarks:

"It (the interview) is filled with breathtaking visions of the future, and they are economically ridiculous. The Long Tail creates acres of choice, so much as to make the number of options almost countless. But at the same time, it embraces (in every format) much lower production values. For what Michael Jackson and Sony (NYSE: SNE) paid to produce the Thriller album, today’s artists can make and market more than 5,000 songs. You just can’t justify spending millions of dollars to produce a record in the long tail world." 

"The same thing that happened to music is going to be true of books. The typical e-book costs about $10 in out of pocket expenses to write (more if you count coffee and not just pencils). But if we add in $50,000 for app coding, $10,000 for a director and another $500,000 for the sort of bespoke work that was featured in Al Gore’s recent “book”, you can see the problem. The publisher will never have a chance to make this money back." 

"Sure, there will be experiments at the cutting edge, but no, they’re not going to pay off regularly enough for it to become an industry. The quality is going to remain in the writing and in the bravery of ideas, not in teams of people making expensive digital books."

Others have picked up on the discussion; for example, the Teleread blog summarized Godin's post, and as of now, every comment on the Teleread post opposes Godin's position. I agree with what Godin wrote, with some reservations. First, let's leave the "long tail" arguments aside--the long tail theory has largely been debunked. The long tail only makes money for distributors, who can aggregate small numbers of sales from a large number of publishers/writers/producers. However, the market is being flooded by titles from self-publishers, and it's harder than ever for consumers to separate the wheat from the chaff. Price is no longer an indicator of quality. The most likely outcome is that there will be a small number of titles that do well (as usual), and an ever-larger collection of titles that barely, if ever, earn back their investment in time and money.

Many of the Teleread commenters objected to Godin's statement that it costs "$10 in out of pocket expenses to write" an eBook. He doesn't include editorial, design and eBook conversion services, which can cost hundreds to thousands of dollars if an author farms them out, but that's not what the commenters objected to. Their concern was that Godin made no accounting for the value of the time that authors spend writing. I understand their arguments, but I'm not sure that they're realistic, especially in today's climate. In the 1990s, I wrote two computer books, one for Prentice Hall and the second for Ventana. The first one earned back its advance and sold around 12,000 copies domestically, as well as local-language reprints in a variety of markets. The second one was never released in the U.S., but was released by Ventana's partner in Japan as a local-language title. It didn't earn back its advance. Considering the time I spent writing the two books and the amount I earned, I would have made about the same amount on an hourly basis if I'd worked at Burger King. That's why I stopped writing books.

Your market value is what your customers or clients will pay for your time. In the case of a self-publisher, it's the income that you get from your title divided by the number of hours you spent working on it. If that number doesn't satisfy your financial requirements, you have to increase the number of copies you sell, change your pricing, or do something else that pays more money.

Now, to Godin's central point: Most publishers and self-publishers are very unlikely to recoup the additional cost for adding rich media and interactivity to their eBooks. His cost estimates may be off, but his logic is correct. The fact is that most "enhanced" eBooks to date have sold poorly. If you're creating a native app for iOS or Android and you have to hire developers to do it, that costs money. Even if you're sticking with, say, Apple's EPUB extensions for rich media, Barnes & Noble's extensions for Nook Kids, Kindle Format 8 (when it becomes available to all publishers) or, in the not-too-distant future, EPUB3, there's a cost in time and money for adding interactivity and rich media. For now, at least, you're unlikely to earn back that cost. Thus, the most reasonable approach is to create conventional eBooks.

At some point, enhanced eBooks will "crack the code" and become widely popular, and the additional front-end expense to produce them will be justified. Today, however, that's not the case.

HP's WebOS opportunity

Update, August 18, 2011: HP just announced that it is discontinuing all its webOS-based hardware devices, including the TouchPad tablet and smartphones. According the The Wall Street Journal, it will hold on to the webOS operating system and will pursue licensing it to other companies.

Google's decision to acquire Motorola Mobility has thrown the Android ecosystem into chaos: Will Google really treat Motorola no differently than any other Android licensee, or will it give Motorola priority for new features and new versions of Android? Will Google be able to stay focused on releasing new versions of Android that are competitive with iOS while dealing with the Motorola acquisition?

Google's acquisition opens the door for Microsoft to become an alternative operating system vendor for some of Android's licensees, but Microsoft's partnership with Nokia has spawned its own concerns: Nokia clearly has "favored nation" status in the Windows Phone ecosystem. As a result, Microsoft may be less able to capitalize on Google's decision than it would first appear.

The company that might have the best opportunity to capitalize on Google's acquisition is HP, if it can execute quickly and decisively (always a big if when talking about HP). WebOS is an excellent operating system, but it's been crippled by HP's indecision in launching new products, and its inability to run an effective developer program. AllThingsD reported yesterday that Best Buy has taken delivery of 270,000 HP TouchPads but has only sold 25,000 of them. Best Buy is reportedly demanding that HP take back its inventory of tablets. Now, HP is launching a new line of webOS-based smartphones in Europe, but the company's chances of success aren't much better in the smartphone market than they are right now in tablets.

A number of observers have suggested that HP should license webOS, but for this plan to be successful, HP has to follow a more radical course. Here's the approach that I believe HP should take:

1. Set up a Mozilla-like organization to run future webOS development, and in particular, run the developer program. This organization would insure that all licensees have a common code base to work from, and that webOS apps work on the widest possible range of devices. One goal would be to avoid the proliferation of versions that frustrates Android developers.
2. Give licensees partial ownership of webOS and the development organization. That would give the licensees a say in the future direction of the operating system.
3. Licensees would invest in the development organization rather than pay royalties. (There could be two classes of licensees: One that owns a stake in the development organization, and another that pays royalties in lieu of investing in the development organization.)
4. Once the development organization is launched and licensees sign on, HP would drop its smartphone line. HP would remain in the tablet business, and could use webOS throughout its product line. The company would have the option to reenter the smartphone business after a number of years.

I have to believe that a joint venture development company, with talent contributed by companies such as Samsung and HTC, as well as HP, could do a much better job managing and promoting the webOS platform than HP alone. You may say, "Isn't this what Nokia tried to do with Symbian?". Yes, Nokia established the Symbian Foundation and open-sourced the operating system, then brought it back in-house and made the license proprietary. The problem was that Nokia wanted it both ways--the company wanted to control the development of Symbian but also wanted its competitors to license it. If HP is to succeed in licensing webOS, it has to truly cede control to a joint venture with its licensees, and it has to (at least temporarily) get out of the smartphone business.

In the long run, if HP establishes webOS as an industry standard for mobile devices, its acquisition of Palm will have been worth it, even if the company gives up a minor revenue stream from smartphones

The (second) rise and fall of walled gardens

Those of us who have been around for long enough remember the era of proprietary online services. In the U.S., the leaders were America Online, CompuServe, Prodigy and GEnie. Canada and several European countries had teletext services. All of these services were what came to be known as "walled gardens": Each service had its own collection of content, its own email service, and its own client software. Subscribers could use the content and services from one vendor, but couldn't get to the content or services from other vendors without subscriptions to their services. You could easily send email and messages to subscribers of the same service, but it was very difficult to send email from one service to another. Content providers had to use the publishing tools provided by each online services, and needed contracts with each service to reach their subscribers.

The Internet, and in particular the web, changed all that. Anyone with a web server on the public Internet could reach anyone with a web browser. Thanks to HTML and HTTP, browsers, servers and authoring tools were standardized, so that proprietary software and tools weren't needed. It only took a few years for the open Internet to displace the proprietary online services. Of the four U.S. leaders, only America Online survives, with web-based services and content. CompuServe is now a brand name of America Online, GEnie closed down at the end of 1999, and Prodigy closed down in 2001.

We're now living in the second era of walled gardens, thanks to smartphones. Apple's iOS, Google's Android, RIM's BlackBerry, Microsoft's Windows Phone 7 and HP's WebOS all support web content, but they have their own proprietary standards for apps, their own app stores, and their own rules for which apps will or won't be allowed to run on their devices. Apps written for one platform won't work on a different platform without recompiling and significant recoding.

As with the proprietary online services, the web (especially the combination of HTML5, CSS and JavaScript) may lead us out of the walled garden era of mobile operating systems. PBS's MediaShift recently published an excellent video interview with Tom Peeters, the multimedia manager for Mediafin, the Belgian-based publisher of newspapers De Tijd and L'Echo.

Mediafin has been working on an HTML5 version of its newspapers for the iPad for some time, even though it already has native iOS apps in the App Store. The Financial Times' decision to release an excellent HTML5-based web app for iOS, and to commit to eventually replace its existing iOS app with a web app, is bringing a lot of other publishers with similar plans (especially European publishers) out of the woodwork. The FT's actions are also serving as an existence proof--publishers can deliver usable web apps with a high degree of interactivity without going through Apple. FT's decision also gives momentum to HTML5 publishing toolkits from companies such as OnSwipe and pugpig.

One point that you'll hear in the interview is that there's a definite marketing advantage to being in the App Store, but if you already have a way of reaching customers directly, as Mediafin does with its newspapers, you can gain much more control over the development process and save the 30% commission (closer to 40% for Mediafin, due to VAT) that would go to Apple.

It may be wishful thinking, but ten years from now, I expect that we'll look back at today's mobile walled gardens and wonder how they ever existed.

Apple's control advantage, and what Google needs to do with Android

Earlier this week, Apple announced the iPad 2, a solid, if incremental, next step for the iPad design. When the iPad 2 goes on sale on March 11th, nine days after it was announced, it will be launched with two important media creation apps, iMovie and GarageBand, and a new version of iOS, 4.3. For its part, iOS 4.3 will be deployed at no cost onto all iPads and most iPhones and iPod touches starting the same day. (Update, March 10, 2011: Apple made iOS 4.3 available for download starting yesterday.)

Apple controls its own hardware, software and distribution infrastructure. That level of control causes a lot of consternation on the part of consumers and developers who'd like the freedom to run what they want, when they want, on Apple's devices. However, Apple's control gives it a significant ongoing advantage over Android.

The existing and forthcoming collection of Android tablets demonstrates the disadvantages of Google's approach. Last fall, Samsung introduced its Galaxy Tab tablet, which launched with Android 2.2. It was officially endorsed by Google, meaning that it got access to the Android Market and could run Google's own Android apps, although Google's own executives cautioned that Android 2.2 was designed for smartphones, not tablets. Galaxy Tab purchasers reported that the product functioned more like a big smartphone than a tablet, and as reported by a number of sources, sales have been disappointing.

Google's hardware and mobile carrier partners are under no obligation to upgrade smartphones and tablets in the field to the most recent version of Android. They're not even obligated to release new devices with the latest version of Android. Google itself released Google TV with an earlier version of Android. Google keeps track of the versions of Android in use by monitoring Android Market app downloads, and according to its own statistics, more than 10% of Android devices actively in use are still using Android 1.5 or 1.6. (Google's statistics don't track the "unauthorized" Android devices that don't have access to the Android Market.)

Update, March 6, 2011: Here's an excellent example of Google's dilemma: According to Engadget, Olivetti in Italy just announced its OliPad Android tablet. It has all the hardware features it needs to support Android 3.0: Tegra 2 processor, 10" 1024 x 600 display, WiFi and 3G, yet it's being released with Android 2.2 rather than Android 3 as its operating system.

Many developers have complained about the variety of Android versions in use, but Google's management says that it's a "non-issue". Nevertheless, buyers of Android devices have no guarantee that their smartphone or tablet will ever be upgraded to a newer version of Android. Apple developers can largely target the newest version of iOS, with assurance that it will quickly spread to most iOS devices, but Android developers have no such assurances.

That brings us to the current wave of tablets running on Android 3.0, also known as Honeycomb. First out was Motorola's Xoom, which launched with less than 20 tablet-aware apps, a price very near Apple's top-of-the-line iPad, and future compatibility with LTE that will require the tablets to be sent back to Motorola for free upgrades. Early reports indicate that the Xoom is selling much more slowly than Motorola or Verizon, its sole carrier partner in the U.S., expected. Next up will most likely be LG's G-Slate, with similar specifications and a carrier partnership with T-Mobile, followed by Samsung's Galaxy Tab 10.1.

Google could have taken control of the process and required hardware vendors and mobile operators to agree to upgrade their devices to the latest version of Android within a reasonable period of time after they're released, but it chose not to do so. It could also have compelled vendors to hold back their tablets until a critical mass of tablet-aware apps was available, but again, it chose not to do so. If you buy a Motorola Xoom today or a G-Slate or Galaxy Tab 10.1 tomorrow, do you have any assurance that it will run Android 3.1, or 3.5, or 4.0, or that the manufacturer or carrier will allow you to upgrade? The answer is no.

Google could have orchestrated a huge day-long event in April or May to introduce the Xoom, G-Slate and Galaxy Tab 10.1 together, each with its carriers, along with perhaps 1,000 tablet-aware apps. Each vendor could separately announce their products, along with ship dates, prices and carrier partnerships, at the event. A separate Developer Showcase at the event could have shown off the best of the new apps. But, none of that is going to happen. All three tablets, along with their apps, will trickle out over the next few months.

Google needs to start exercising more control over its hardware partners, carrier partners, and the Android Market (see this week's malware breakout). Android is now important enough to its partners that Google has the power to coordinate product launches and updates, if it chooses to do so. Google can still have open source and an open development process, but it needs to act a bit more like Microsoft used to when it coordinated hardware partner launches with new versions of Windows.

eBooks on iOS: Apple slits its own throat, shoots self in foot

Yesterday, Sony reported that an eBook reader app that it submitted to Apple for inclusion in the iOS App Store was rejected because it didn't sell eBooks through the app. There was a great deal of discussion and confusion about the situation--some people thought that Sony had simply misinterpreted Apple's existing rules, while others thought that Apple had changed the rules.

Ars Technica is now reporting that Apple has indeed changed the rules, in a way that makes it effectively impossible for anyone except Apple to make any money selling eBooks for the iPhone and iPad. Update: The Wall Street Journal has reported that Apple will enforce the new rules described below effective March 31st. No new eBook or eMagazine apps will be accepted without an in-app purchasing capability, and presumably, any update of an existing app that doesn't include this feature will be rejected.

Here are the new rules as I understand them:

• If you sell content from outside an iOS app to be used in that app, you must enable purchases from within the app. That means that Apple gets 30% of any sale.
• If you sell content from your website that you then distribute to an iOS device to be used within an app, that app must also allow in-app purchases.

Let's take Amazon's Kindle Store and app as examples. Today, you can select a title to purchase from within the Kindle app, but the app opens a Safari browser window and takes you to the Amazon website to complete the purchase. That approach would only be allowed if Amazon also allows users to purchase the title directly within the Kindle app. However, Apple would take 30% of the sale price for the in-app purchase. You can also go to the Amazon website on your PC, select a title from the Kindle Store and tell Amazon to send it directly to your iPad or iPhone. Under Apple's new rules, that would be prohibited unless the Kindle iOS app allows in-app purchases.

There are still ways around this; eBook vendors could price titles 30% higher in their iOS apps, and offer a link to their websites that would price them normally. However, many consumers could end up spending 30% more than they should, and every eBook vendor will have to rewrite their iOS apps.

This is an anti-consumer and anti-competitive move by Apple, to say the least. It's equivalent to Microsoft saying that every Windows eCommerce application that downloads content or software has to be processed through Microsoft's own order processing system, and that Microsoft will get 30% of every transaction.

In addition, Apple is killing the viability of its iPhone and iPad as eBook readers at exactly the same time that Android is outselling iOS smartphones and Android 3.0-based tablets are coming to market. If I'm interpreting Apple's move properly, it's a greedy, stupid decision that will once again open the company to antitrust investigation. It won't cause any more eBooks to be sold through Apple's failed iBookstore; instead, it will merely clear the path for Android 3.0 and additional Kindle sales.

If this is an example of Tim Cook's decision-making capabilities, Apple is in much worse shape post-Jobs than I (or many people) thought.

Microsoft introduces Windows Phone 7 and partners' smartphones

Earlier today, Microsoft formally introduced Windows Phone 7 in New York, along with ten new compatible smartphones (nine at launch, the tenth in early 2011) to be offered by sixty carriers in more than thirty countries. Each carrier will sell a different set of phones; AT&T, for example, will offer three models, one each from HTC, Samsung and LG, all priced at $199, while T-Mobile USA will offer one model each from Dell and HTC. (Engadget has a complete list of carriers and the phones they'll offer, and Gizmodo has pictures of all the phones.)

The early reviews for Windows Phone 7 have been very positive. The operating system is a clean break from Windows Mobile and has more in common with the Zune UI than it does with Windows. The phones vary considerably in price and features, but they all seem to perform well, even though Windows Phone 7 uses a lot of animation in its user interface.

Update: Well, some of the reviews aren't quite so good after all: PC Magazine reports that the LG Quantum's slide-out keyboard has a "bizarre" keyboard layout and a balky sliding mechanism. Of more concern is that Windows Phone 7 doesn't want to reconfigure its display properly when the phone is moved to landscape format. The LG Quantum's keyboard forces the phone to be used in landscape format, so unless Microsoft fixes the problem soon, the Quantum and similar phones will be virtually unusable.

As you might expect, there's already a fair amount of "too little, too late" sentiment about Windows Phone 7. Those feelings may ultimately be justified, but Microsoft has done an excellent job of bringing top-notch smartphone manufacturers on board. The big question remains third-party developers. Apple and Google both have tremendous support for their smartphone operating systems, and RIM's BlackBerry, while not as well accepted by the developer community, has an entrenched customer base. The third-party app announcements and demonstrations at the launch event today were nice but far from overwhelming.

Windows Phone 7 smartphones will ship so late this year that they probably won't make much market headway until next year. Developers that are already struggling to keep up with updates on the iOS and Android platform are likely to take a "wait and see" attitude on developing Windows Phone 7 apps; developers of the most popular iOS and Android games may be offered financial incentives by Microsoft to port their applications. There's no rush for them to staff up in advance if they can get Microsoft to pay for the effort.

In the long run, Windows Phone 7 is likely to have more impact on HP and Nokia than it does on Apple or Google. Most developers, given the choice between supporting Windows Phone 7 that runs on smartphones from four manufacturers, or supporting WebOS that runs only on HP's smartphones, are likely to prefer Microsoft's platform. And, at least in the U.S., Windows Phone 7 will be one more nail in Nokia's smartphone coffin.

There were two puzzling aspects of today's announcements: The first was Microsoft's statement that based on feedback from developers and early users, it would release a version of Windows Phone 7 that supports cut and paste in early 2011. You would think that Microsoft would have learned from Apple's experiences with the iPhone and would have incorporate cut and paste from day one.

The second was that Verizon, the largest mobile operator in the U.S., was completely absent from today's announcement. You may recall that Verizon was Microsoft's exclusive carrier partner for the Kin, its feature phone that was a complete marketing and business disaster for both companies. Kin's failure may explain why Verizon won't be selling Windows Phone 7 smartphones any time soon. However, Verizon may also be gearing up to carry the iPhone, as has been rumored by the Wall Street Journal and other sources, in which case it really doesn't need Windows Phone 7.

Apple TV: A lost opportunity?

When you were a child, did you ever annoy your parents into buying you a toy for Christmas or Hanukkah, only to find that once you unwrapped it and took it out of its box, it wasn't exactly what you were expecting? I felt that way after Steve Jobs' introduction today of Apple TV Part Deux. For months, there were rumors flying around about what the new Apple TV would be able to do. Jobs himself specified the problems with the old Apple TV approach in an interview with Kara Swisher and Walt Mossberg at the D8 conference last June:

"The problem with innovation in the TV industry is the go to market strategy. The TV industry has a subsidized model that gives everyone a set top box for free. So no one wants to buy a box. Ask TiVo, ask Roku, ask us... ask Google in a few months. So all you can do is ADD a box to the TV. You just end up with a table full of remotes, a cluster of boxes... and that's what we have today. The only way that's going to change is if you tear up the set top box, give it a new UI, and get it in front of consumers in a way they're going to want it. The TV is going to lose in our eyes until there is a better go to market strategy... otherwise you're just making another TiVo."

The new Apple TV doesn't solve any of these problems. It's not a replacement for any existing set-top boxes, especially the ones from cable, satellite and IPTV operators, because the only content providers that have signed on are Disney/ABC and Fox. So, to use Apple TV, you're adding a set-top box and remote. Jobs said that the solution was to "...tear up the set-top box (and) give it a new UI...", but Apple TV is simply a smaller version of the original Apple TV, with a slightly improved UI. In short, it doesn't do what Jobs correctly said had to be done in order to change the game.

Further, Apple TV is closed. It apparently doesn't use iOS, it doesn't allow developers to create apps that extend its functionality, and it doesn't have a web interface or other means to access content on the open Internet. Many people, myself included, were hoping that the new Apple TV would be iOS-based and would run iOS apps. Apple may have decided that the living room TV would stretch the iOS user interface so much that it wouldn't make sense to try to run phone- and tablet-based applications. They may have also believed, as Jobs said today, that consumers don't want to deal with a computer when they want to watch television. However, they still could have opened up Apple TV to content from third-parties. With the exception of Netflix, YouTube and Flickr, Apple TV is a walled garden and other content providers need not apply.

The only real improvement that Apple TV brings to the table is price. The box and the content are less expensive than in the first version. However, much of that same content is available for free from other sources, and other solutions provide far more content overall.

At the end of the day, I don't know why Apple and Jobs bothered to release this iteration of Apple TV. It doesn't do what Jobs himself said that it had to do in order to be viable, it doesn't have a critical mass of content partners, and it provides only small incremental improvements over the product it replaced.

Apple's opened a hole wide enough for Google TV to drive a truck through...if Google has the talent to take advantage of it.

Apple's announcements: iOS News, All-New iPods, New iTunes and Updated Apple TV

Apple made a series of new product announcements in San Francisco earlier today; I'll summarize the ones that are most relevant to regular readers of this blog:

iOS Announcements

Apple's iOS 4.1, which has been in beta test since the release of the iPhone 4, will ship to customers next week. The most important media-related feature is support for High Dynamic Range (HDR) photos, a capability that has been provided by some third-party apps. iOS devices with cameras will be able to take three pictures in quick succession, one underexposed, one properly exposed and one overexposed, and then digitally merge the three pictures together to bring out additional highlight and shadow details. Both the "properly exposed" and HDR images will be saved.

iOS 4.2, to be released to customers in November, will be the first version of iOS 4 that will run on iPads. It will bring all the functionality of iOS 4.1 to the iPad, and will also introduce two new capabilities for iOS devices:

• Wireless printing: Printers can be selected and documents can be wirelessly printed from iOS devices.
• AirPlay (the next generation of AirTunes) will enable audio, video and photos to be streamed between devices over WiFi. For example, content can be streamed from a Mac to an iPad for viewing.

A new iPod touch

The entire iPod line has been refreshed, except for the "classic" hard disk-based iPods, which remain in the product line. The most important announcement was the next-generation iPod touch, which keeps the same iPhone 3-based design but is thinner. It has a number of major improvements:

• A Retina Display with the same resoultion as the iPhone 4
• The same Apple A4 chip as the iPhone 4
• A three-axis accelerometer
• A front-facing camera and support for FaceTime over WiFi
• A rear-facing camera with HD video recording

You're probably figured out that the new iPod touch is essentially an iPhone 4 without a phone, in a package that looks like a slimmer iPhone 3GS. The iPod touch will ship next week (as will all the new iPods.) Here are the prices (U.S.):

• 8GB: $229
• 32GB: $299
• 64GB: $399

iTunes 10 and Ping

Apple also announced the next version of iTunes, Version 10, available for immediate download. The most important new feature in iTunes is called Ping. It's a social network built into iTunes that works on PCs, Macs, iPhones and iPod touches (and presumably will work on the iPad once iOS 4.2 ships.) Ping allows performers and individual users to share song lists, videos and notes.

Apple TV, Take 2

As widely expected, Apple introduced its next-generation Apple, one-quarter the size of the existing Apple TV. The new Apple TV, which will ship in four weeks at a price of $99 (U.S.) streams content for viewing on demand, rather than downloading it to an internal hard drive. It has minimal connections: Power, HDMI out (720P, not 1080I or 1080P,) a Toslink optical connector for 5.1 audio out and a wired Ethernet connection. (It also has 802.11N WiFi wireless Ethernet.) The component and composite video outputs on the existing Apple TV have been dropped.

Apple's business model for the Apple TV is content rental only, not purchases. HD movies that are released day-and-date with their DVD versions will be priced at $4.99 per play, and prices for older movies will be lower. HD television shows will be available for rental at $0.99 per episode. In addition to video, music and images can be streamed to Apple TV from iTunes 10-equipped computers, as well as iPhones, iPod touches, and iPads, using AirPlay (and iOS 4.2.) Apple TV owners will also be able to stream content from Netflix, YouTube, Flickr and Apple's mobileMe. The user interface has been enhanced to include reviews from Rotten Tomatoes and related content.

There were a few serious disappointments:

• Apple has only been able to come to agreements with Disney/ABC and Fox to make their movies and television shows available for rental. Warner Bros., CBS, Viacom (Paramount, MTV, Comedy Central, etc.), Sony and NBC Universal have all refused to participate.
• Contrary to some rumors, it's not an iOS device and it's not open to developers. iOS apps can't be run on the new Apple TV, and it's unclear whether or not it can be hacked to run Boxee or other third-party media management apps.
• The lack of a component video interface means that owners of older HDTVs and audio receivers won't be able to use the new Apple TV.

The new Apple TV is a refinement of the original vision of the Apple TV, not an entirely new concept. It doesn't bring the world of iOS apps to the big screen, and it's not a platform for developers. Apple deliberately opted for usability over expandability, so there's going to be room for products like Boxee, Roku and Google TV for more sophisticated customers.