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

Google buys Motorola Mobility: More questions than answers?

This morning opened with a bang, when Google announced that it had made a friendly offer to acquire Motorola Mobility for $12.5 billion. The offer caught a lot of people in the industry flat-footed (although not Ben Bajarin, who wrote an amazingly prescient post last week on why Google should buy Motorola Mobility.)

$12.5 billion is a 63% premium over the price that Motorola Mobility's stock closed at last Friday, so why would Google pay so much to purchase the company? The one thing that everyone agrees upon is that Google wanted Motorola's patents, a pool nearly four times larger than the one that the company bid on from Nortel. The question is how valuable those patents will be in protecting Google's Android licensees from patent challenges by Microsoft, Apple and others. Microsoft was suing Motorola Mobility for patent infringement before today's announcement, so the Motorola patent library might not provide all the protection that Google needs. In addition, acquiring Motorola Mobility for $12.5 billion to get the patents prompts the question, in hindsight, whether Google would have been better off staying in the Nortel bidding and perhaps winning exclusive ownership of the patents for $5 or $6 billion. It also begs the question as to why Google didn't simply buy Motorola's patents, not the entire company; the consensus opinion is that Motorola's management refused to sell the patents by themselves.

Google got most of its top hardware partners to sign onto a press release endorsing the acquisition, but you have to wonder what the leaders of companies such as HTC, Samsung and LG Electronics are really thinking. In one move, Google went from being a supplier of perhaps their most critical smartphone technology to one of their biggest competitors. As Henry Blodget points out, hardware is a low-margin, semi-commodity business (for everyone except Apple). It's radically different from the software business, and the Motorola acquisition will increase Google's headcount by 60% overnight.

Google has declared that it will run Motorola Mobility as a separate business, and won't change the way that it runs its Android business. That's what Motorola's hardware partners (and possibly regulators) want to hear, but it creates a dilemma for Google. If the company wants to maximize the value of Motorola, it has to much more tightly integrate Android and Motorola, enabling Motorola to get new features and new versions of Android before other licensees. That, however, would violate its pledge to run the two businesses independently. The second option is to run Motorola so that it doesn't compete with other licensees, but that would cause the company to lose all its good developers, designers and hardware engineers. No one wants to work for a crippled company. The third option is that Google could sell off Motorola's hardware businesses, but to whom? The fate of Motorola's hardware businesses will be up in the air until the acquisition is completed, if not substantially after that.

In addition, despite some analysts' opinions that antitrust regulators won't stop the acquisition, there's substantial reason to doubt that the acquisition will occur without significant concessions by Google. There are so many antitrust investigations of Google underway, from the U.S. Federal Trade Commission to U.S. State investigations, to European Union investigations, that this acquisition can't help but be looked at in the context of Google's overall behavior. At the very least, Google will have to make its "hands-off" approach to running Motorola Mobility a guarantee, and will have to agree to make Android and related products available to all licensees on an equal, non-discriminatory basis. Regulatory agencies may also use approval of this acquisition as a lever to get Google to agree to restrictions on how it runs its search engine, how it integrates its products, and how its services work on mobile platforms.

One final note: Most reports have noted only in passing that, in addition to mobile phones and patents, Google is also getting Motorola's set-top box business. In fact, depending on who's doing the measurement, Motorola is either the world's #1 or #2 vendor of set-top boxes. Historically, customers such as cable and IPTV operators have had enormous control over the design of the set-top boxes they buy, so Google can't arbitrarily add Google TV or the Google search engine to all of its devices. However, this acquisition gets Google's foot in the door with established multichannel video providers in a very big way. At the very least, we're likely to see the next generation of Motorola's set-top boxes and home gateways run Android, even if Google's customers hide the Android layer from end users.

Google's proposed acquisition of Motorola Mobility poses more questions than it answers. We may be waiting for the answers for quite some time.

Startups are not a game

Earlier this week, I attended an event in Chicago where startups gave brief presentations about their businesses and answered a few questions from the audience. On the whole, the event was very disappointing, for a variety of reasons. Of the eight startups that presented, one (or perhaps two) identified viable market opportunities that aren't 1) Irrelevant, 2) Already being served, 3) Impossible to scale, or 4) Vulnerable to immediately being taken over by a bigger company. In addition, many of the presentations were amateurish. You expect demos to crash--that's a given--but most of the presenters hadn't thought through what might happen if they couldn't access WiFi. (And, if they didn't think through a simple problem like not having access to a network, how likely are they to think through much more difficult problems like building a sustainable business?)

What's disconcerting to me is how many people see startups as a game. It's incredibly easy to start a company; the software and services necessary are available for free or at very low cost, at least while the business is in the development phase. Incubators, startup weekends and shared workspaces are popping up everywhere. Yet, the real process of starting and running a business is hard work. There's no glamour and very little fun involved with spending 12 to 14 hours a day raising money, staffing up, talking with customers, writing and testing code, and selling. However, creating a startup is far too often seen as a game that's won when the business raises funding.

Eric Ries has written an excellent post about the "startup winter" that will inevitably come. There's too much volatility in financial markets for venture funding to continue at its current pace. Today alone, five IPOs were delayed or withdrawn. Ries believes that "a shocking number of the current crop of incubators, accelerators, and other startup-support programs will suddenly disappear," especially second- and third-tier programs. Think about how few of the startups spawned from these programs actually mature into successful businesses, and how many of them pivot just in the few months that they're in incubators and accelerators.

Given the low success rate of most of these programs, they look a lot less like incubators for successful businesses and a lot more like post-graduate entrepreneurial education programs. They do have one big difference from conventional educational programs: Instead of charging tuition, these programs pay a stipend to participants. It's not a bad way to learn (depending on who's teaching), but it's not necessarily a good way to launch a business. Don't get me wrong--incubators like Y Combinator and TechStars have had a lot of success; it's the second- and third-tier programs that are much harder to justify based on their track records.

If the flood of capital that's been chasing startups dries up, running a startup will no longer seem like a game and will become what it always has been--hard, risky work. At that point, I expect many of today's startup entrepreneurs to go back to looking for full-time jobs.

Consumer electronics' U.S. renaissance

There was a time, before World War II, when the U.S. was the undisputed world leader in consumer electronics. U.S. manufacturers, led by RCA, dominated world markets. However, U.S. manufacturers' operations in Japan and most of Europe were nationalized at the start of WWII. More importantly, RCA discounted the value of transistors in consumer electronic design after the war. Japanese manufacturers licensed transistor technology from Bell Labs and used it to build smaller, less expensive and more reliable products. That spelled the beginning of the end for the U.S. consumer electronics business.

At one time, companies like RCA, Westinghouse, Zenith, Philco, Magnavox, Sylvania and Motorola were household names. Now, only Motorola is still in consumer electronics, with its mobile phones. RCA, Westinghouse and Sylvania are nothing more than trademarks licensed to other companies, Zenith was acquired by South Korea's LG Electronics, and Philco & Magnavox were acquired by Philips. Until the late 1990s, the U.S. consumer electronics business was effectively dead. Today, however, there's a resurgence in U.S. consumer electronics.

The leader of this renaissance is Apple, which has dominated the personal media player market for almost a decade with its iPods. Foreign manufacturers have tried to wrestle market share away from Apple's iPods, without success. As of last quarter, Apple became the world's largest seller of smartphones, and it's been the leader in tablets since the launch of the iPad. Apple also dominates music sales through iTunes. Apple TV is Apple's only consumer electronics product that's struggling in the marketplace (although no one in the over-the-top set-top box market has yet found a winning formula.)

Apple doesn't manufacture any of its hardware products; it designs the products and farms out manufacture to Chinese and Taiwanese manufacturers. Vizio has applied the same formula to HDTVs, and either leads the market for LCD HDTVs or is close to the top every quarter. Vizio's aggressive pricing strategy has helped to force Sony out of the TV manufacturing business, and is pushing other Japanese and South Korean manufacturers to rethink their HDTV market strategies.

Sonos came from nowhere to become the leader in wireless networked home audio systems. Sonos applies an Apple-like design philosophy to its products, and has steadily expanded its product line both up and down to cover a variety of price points. Roku licensed a streaming media player originally developed in-house at Netflix and has become the leader in the market for those devices, at very aggressive price points: When Logitech launched its Google TV-based Revue set-top box at $299, the least expensive Roku player was $59.99. Now, the price of the Revue has been cut to $99 (the same price as Roku's top-of-the-line model) in order to clear out an apparently massive inventory of the devices.

It's true that U.S. companies are nowhere near recapturing the share of the consumer electronics market that they had before the 1970s, but if anyone had predicted any resurgence of U.S. consumer electronics companies even ten years ago, they'd have been laughed out of the room. The ability to anticipate (and drive) consumer desires, together with leveraging Chinese and Taiwanese manufacturing resources, is allowing U.S. companies to compete on equal footing with companies that could have crushed them only a few years ago.

Two new HTML5 authoring tools

More than a year ago, I wrote a blog post bemoaning the lack of HTML5 authoring tools. Then as now, you could create sophisticated content using HTML5, CSS3 and JavaScript, but you had to hand-code everything. Now, we have beta versions of two different HTML5 authoring tools that promise to make the process a lot easier.

First, there's Sencha Animator, which focuses on CSS3 effects (transitions, animations, transforms, and anything else you can define in CSS3). It provides an interactive timeline for creating animations with keyframes. Next, Adobe announced the first preview version of Edge, its authoring tool for HTML5, CSS3 and JavaScript. Like Animator, Edge uses a timeline, but it's considerably more sophisticated: The user interface is designed to look and work similar to those of Flash Professional and After Effects, its animation framework is based on jQuery, it natively imports and exports HTML, CSS3 and JavaScript, and it stores all its animations in a separate JavaScript file rather than modifying the CSS3 file(s).

With Adobe jumping into HTML5, the obvious question is whether Edge is a replacement for Flash Professional? Not yet. Both Sencha Animator and Adobe Edge remind me of Swish Max4, an Australian authoring product that outputs Flash but is considerably simpler and easier to use than Flash Professional. Edge is still early in its development; when Adobe releases a new tool like this, it's typically a year away from commercial release. In addition, different browsers implement different portions of HTML5, and it will take time for the most popular browsers to fully implement the specification (which isn't even scheduled for ratification by the W3C until 2014). However, we're getting closer to the point where HTML5 becomes a viable replacement for Flash for a variety of applications.

Given that Adobe is cannibalizing itself with Edge, there's an obvious concern that the company might cripple Edge in order to keep Flash viable. If Adobe was the only company creating HTML5 tools, that would be a legitimate concern, but other companies are competing in the authoring tool space. If Edge creates inferior content, developers and artists will use a competing product. My belief is that Adobe would like nothing more than for Edge to make up for all the revenues that it's losing as Flash is abandoned, and that means that it can't create a second-rate authoring tool.

Adobe and Sencha are working to make HTML5 look and work more like Flash, and additional companies and organizations are inevitably going to release their own authoring tools. We may only be a few years away from witnessing Flash become a legacy application.

A better way to do startup weekends

The TechWeek conference that I wrote about earlier this week included a startup weekend event. At a startup weekend, a group of aspiring entrepreneurs propose ideas to turn into businesses over a weekend (typically, 50 hours). The first step is to whittle the list of ideas down to 10 or so, and then the participants whose ideas weren't chosen join the teams whose ideas will be pursued. For the remaining time, the teams flesh out the ideas, talk to customers and write code. At the end of the weekend, the teams present their startups to a group of judges (typically, angel investors, venture capitalists and other entrepreneurs).

Startup weekends have a lot of problems, but the biggest one is that they turn startup creation into a game played over two days that can be won. That's not how startups work, and startup weekends trivialize the process while focusing on things that the team members already know how to do.

I sat in on the presentations at TechWeek's startup weekend. The demonstrations of working code were very basic, when there was any working code at all, and by and large, the "customer interviews" turned out to be nothing more than a collection of market size statistics gathered through Google. Jason Cohen, in his "A Smart Bear" blog, wrote some advice for startup weekend participants, and he pointed out that the goal should be figuring out whether or not you've identified a viable business opportunity, not demonstrating your ability to code:

You and I know you can code an app and produce a simple clean home page. Everyone here can. So the quality or quantity of that creation will not be why your company succeeds.

Cohen makes some excellent suggestions about what startup weekend participants should try to accomplish, but his key recommendation is to get out of your comfort zone. Developers are excellent at writing code, but they tend not to be as comfortable with talking to customers or identifying business models.

With that in mind, here are two suggestions for alternate startup weekends that could be more valuable in the long run for their participants:

• Customer Development Weekend: As with current startup weekends, participants propose product and service ideas and whittle them down to 10 or so. Each team then figures out how to present its concept, writes a questionnaire and starts interviewing potential customers. The team must interview at least five potential customers face-to-face. It then takes the customer feedback from the interviews and uses it to either modify the original concept, or discard it in favor of a new concept, which then has to be retested. Once the concept is solidified, the team considers and selects one or more business models, and develops arguments for why the model (or models) will work. Finally, the teams present their concepts, along with the interview research to substantiate them, and their business models.
• Building Strengths Weekend: It starts with the same process of coming up with a list of 10 or so product and service ideas, but then the team members work on the areas where they need the most help. The developers are responsible for getting out and talking with customers. The businesspeople with no programming experience learn how to program enough to build a skeleton of the concept. Everyone learns by doing. The final presentations show what the teams accomplished, and what they need to work on in the future.

The goal of starup weekends should be to learn what you don't know, rather than do the same thing on the weekend that you do during the week. If the objective is learning rather than winning a prize, the competitive aspect does more harm than good.

TechWeek: A big step forward for Chicago's startup community

TechWeek, a week-long group of conferences, meetups and social events for the Midwestern startup community, is going on in Chicago. midVentures, a consulting firm and conference organizer based in Chicago and San Francisco, organized TechWeek. The actual TechWeek Conference began last Friday and ends tonight, but additional partner events will take place through Thursday, July 28th.

The first-day crowd was far beyond midVentures' expectations--more than 1,500 paid attendees, with five times as many people registering at the door as the organizers expected. The demand was so great that they ran out of badges on Friday and had to rush to print more in time for Saturday morning. The event was held at Chicago's landmark Merchandise Mart, the biggest building in the world when it opened in 1930, and still a very impressive structure. The Merchandise Mart has its own El (elevated train) station, food court and retail shops, as well as the hundreds of private merchandise showrooms for which it's known. It also has three floors of meeting and event space, and TechWeek took over one of the three floors.

The speakers that midVentures lined up were first-rate, and in the sessions I attended, there were very few sales pitches--the emphasis was on practical knowledge for developers and businesspeople. Here's a list of some of the better-known speakers:

• Aneesh Chopra, Chief Technical Officer of the United States
• Jason Fried, Co-Founder and President, 37Signals
• Gian Fulgoni, CEO, Comscore
• Jeff Lawson, Co-Founder & CEO, Twilio
• Dave McClure, Founding Partner, 500Startups
• Craig Newmark, Founder, Craigslist.org
• Dominique Raccah, CEO/Publisher, Sourcebooks
• Hiten Shaw, Founder and CEO, KISSmetrics

There were a number of local investors making keynote speeches and on panels; perhaps the best-known, at least locally, was J.B. Pritzker, Managing Partner of the Pritzker Group, founder of New World Ventures and a member of the family that owns Hyatt Hotels and TransUnion.  However, with the exception of Dave McClure, there wasn't much participation from the Silicon Valley angel and VC community, nor was there much interest from the New York or Boston investment communities. That has to change in a big way for Chicago to become a first-tier startup community.

One of the things that I noticed in the sessions I attended was that there were far more businesspeople than developers at the event, and most of the businesspeople had little or no idea how to find technical talent or a technical co-founder. An event to help match business and technical co-founders would have made a lot of sense, but it didn't make it onto this year's schedule.

There was clearly enough interest in this year's event to make a 2012 version a certainty, and there are a few things that I'd suggest to the organizers for next year:

• The Merchandise Mart is a great location, but the sight lines in the two largest meeting spaces were awful. The stages were blocked by pillars from many places in the rooms. It would be better to have the presentations in better spaces within the Merchandise Mart, or if that's not possible, in conventional hotel conference rooms.
• Rather than scheduling the midVenturesLAUNCH event in parallel with the final day of the TechWeek Conference, LAUNCH should be held on its own day, with no other events going on. The TechWeek events that I watched on Monday via streaming video were very poorly attended, due to LAUNCH going on at the same time.
• There needs to be more presence from Silicon Valley, New York and Boston investors.

TechWeek was a very encouraging event for Chicago- and Midwest-based entrepreneurs, and I hope that it's a sign of much more to come.

The end of Borders

By now, most of my readers know that Borders in the U.S. has given up on trying to find a buyer to keep its stores in operation, and plans to submit a liquidation plan to the bankruptcy court on Thursday. Despite Borders' management's claims, most of its wounds were self-inflicted: The company missed the key transitions in the book industry over the past several years. First, instead of investing in its own online presence, it partnered with Amazon and ended up sending traffic and revenue to the company that became its biggest competitor. (It eventually withdrew from the Amazon deal and created its own online store, but the damage was done.) Next, instead of building its own eReader and eBook infrastructure, it invested in Canada's Kobo and marketed its eReaders, as well as a mishmash of other models and brands. Kobo has only had a truly competitive eReader in the last two months, far too late to help Borders.

Now, at the 11th hour, Kobo is trying to get the bankruptcy court to give it a right of first refusal for repurchasing of Borders' share of the company. It's unlikely that Kobo's request will derail the liquidation plan. Assuming that the judge approves at least the retail store portion of the plan, going-out-of-business sales will begin in some Borders locations as early as Friday, with all stores expected to close by the end of September.

Beyond the loss of over 10,000 full- and part-time jobs, the biggest loss will be the closure of Borders' retail stores. No more than 50 stores are likely to be taken over by Books-a-Million and Barnes & Noble after Borders closes, and some areas will be completely without a local bookstore. Unlike Barnes & Noble, which built "cookie cutter" stores, many of Borders' locations are architecturally interesting, like its store in a converted movie theater in Palo Alto, CA.

Perhaps the saddest point is that Barnes & Noble's and Borders' aggressive discounting drove thousands of independent bookstores out of business. Now, Borders is closing, Barnes & Noble is struggling, and Amazon's strength makes it very unlikely that we'll see a renaissance of independent bookstores.

Rate this post

The August issue of Wired Magazine has an article by Chris Colin, titled "Rate This Article", that bemoans the impact of near-universal ratings on the ability of people to make their own decisions. I (mildly) disagree with Colin's belief that ratings interfere with the ability to make serendipitous discoveries--most people would prefer to avoid paying for a bad meal from a bad restaurant, or paying $40 to take their families to a lousy movie.

My concern is that we're increasingly being asked to rate everything, whether or not we have any interest in doing so. If you're an Amazon customer, sooner or later you'll receive an email asking you to rate a purchase. If you use Netflix, it sometimes feels as though you've been asked to rate every movie ever made. If you have your car serviced by a dealership, you'll almost always receive a survey from the manufacturer asking questions about the experience. Before you get the survey, however, your service manager, or whatever title the dealership uses, will implore you to give them the best possible rating on every question.

Most professionals who do surveys for a living, such as market researchers and sociologists, will tell you that there's a big difference between the ratings and reviews that people give without prompting (think Yelp) and those that they're asked to fill out, such as the car dealer's service survey. For most people, they're more likely to write a review or assign a rating for something that they feel strongly about, either positively or negatively. There's no point in giving a "meh" rating.

As for the car service survey, the manufacturer may as well throw the results out. The service manager has already biased your responses (you don't want to get them in trouble), so you're much more likely to give unreasonably high ratings unless something went very wrong. Was the floor of the waiting room so clean that you could eat off of it? Not likely, but you'll still probably give it an "Excellent" rating, so long as you didn't see roaches or rats.

I put more stock in the answers from respondents who choose to rate or review a product themselves, without being prompted to do so. The responses are more emotional, and thus tend to skew to very positive or negative, but they more accurately reflect the true opinions of the respondents at that moment. Note that I'm not including situations where people review products or services in return for compensation; those reviews should be considered biased unless proven otherwise. That's one of the problems with systems that reward reviewers based on the frequency of their reviews, such as Yelp and Amazon. Yelp, for example, throws parties and holds special events for its top reviewers, and Amazon awards special status to its top reviewers. These programs give reviewers incentives to write reviews for products and services that they don't feel strongly about, just to get more reviews posted.

On the whole, the "review economy" that we're living in is a good thing, so long as you consider the source, read the reviews carefully and look out for bias that goes beyond the norm (wild enthusiasm on one side and personal attacks on the other, or reviews that have been influenced by compensation).

Finding hope in difficult times

It's very difficult to live in Western society today without becoming cynical, or at least without seeing a lot of things as a "glass half empty". We have one universal language: Lies, and one universal religion: Money. Corporations, politicians, pundits and commentators lie so much and so often that it leads to deep cynicism--we expect our institutions to lie, and are pleasantly surprised when they tell the truth. Even the press, which we've relied upon for more than a hundred years to tell the truth, is regurgitating stories fed to them by PR flacks, avoiding stories that would alienate advertisers, using sensationalism to deflect attention from stories that are more difficult to tell and more important to understand, and spinning the news to the benefit of political parties or corporate interests.

The worship of money is very closely connected to the proliferation of lies. When there's no money at stake, there's no need to lie, but when the cost is high, it often costs much less to lie than it does to tell the truth and accept the consequences. Here are a few examples: Many energy companies and firms that either output greenhouse gases or make products that create greenhouse gases spend tens of millions of dollars in an effort to stop legislation designed to curb global warming. They hire lobbyists to convince legislators to block laws, underwrite bogus research that questions the impact of human activity on global warming, or even that global warming exists at all, and create "astroturf" groups to further inflame voters already panicked about the state of the economy.

Multiple pharmaceutical companies have been accused of suppressing research that found that their drugs may be unsafe. Health care organizations publicly supported U.S. reform legislation, but privately lobbied legislators against it and created their own "astroturf" organizations to try to defeat the legislation. The tobacco industry spent decades lying about the health effects of their products, and is now focusing on less-developed countries where companies can freely advertise to children and don't have to warn consumers about the risks of cancer and heart disease.

Banks and other financial institutions sold millions of mortgages to consumers who couldn't afford them, and then bundled the mortgages together and sold them (and their risk) off to others without detailing their shoddy quality. Companies pursuing high-profile mergers say and do everything they can to convince government agencies to approve the deals, and then backpedal on their commitments whenever they can once the merger is approved. Some corporations claim publicly that they're cooperating fully in civil and criminal investigations, while privately, they're destroying evidence that could be used against them.

Politicians, political appointees and staff members regularly go to work for lobbying firms hired by the same companies that they formerly monitored and regulated, at many times their governmental salaries. Some politicians are on a "Merry-Go-Round": They get elected, then after several years, move into the private sector as a lobbyist or corporate lawyer. A few years later, they make another run at public office. Their staffers often follow them, from public jobs to private, and back to public.

Journalists sometimes follow the same path, moving from a career reporting on companies to jobs in public relations firms, where they're paid by the companies and organizations they used to cover to pitch stories to other reporters and spin the facts. Of course, a reporter who's diligent in their efforts to learn the truth about individuals and companies that they cover isn't likely to get very many PR job offers, so there's strong pressure to run stories as they're pitched, and to not look under too many rocks.

Even with all these lies, all this gaming of the system, I maintain hope. Almost every day, I see organizations (primarily government-run and university laboratories, as well as start-ups) working on solutions to our energy and global warming problems. Some corporations recognize that global warming represents a bigger business opportunity than maintaining the status quo. As we get more existence proofs showing that we can maintain our standard of living while still decreasing greenhouse gases, the arguments of the companies and their paid advocates who say that it can't be done will be shown to be lies.

Our consumer protection systems continue to work, albeit often slowly and poorly. Some (but, unfortunately, not enough) of the abuses I wrote about above were detected by these regulatory agencies. Despite efforts to water down or eliminate many of these agencies, I believe that their value will ultimately be understood as essential for capitalism to be both effective and fair.

As "old media" companies find themselves in an ever-increasing spiral of sensationalism and irrelevance, new companies, large and small, for-profit and non-profit, are launching to fill the void. The Internet has eliminated the need for transmitters, printing presses and government licenses, and has decreased the cost by several orders of magnitude. Individuals can report as an avocation, and millions of them do, using their mobile phones, camcorders and personal computers. When you don't have to make a profit (or very much of a profit), it's very difficult for an "old media" company to kill you.

Even with all that, there are days when I just want to turn off my television, radio and computer, toss out the magazines and newspapers, and move to a cabin outside the range of modern media. There are just so many lies that I can take.

Cut & paste journalism

I've been reading the current issue of Mix Magazine, which covers the professional audio industry. I've read Mix for years, and it's one of my favorite trade magazines, but it's indulging in what I call "cut & paste journalism". It makes me doubt the independence and the veracity of what the magazine publishes. Here are a few examples:

• In an article on sound for the movie "Transformers: Dark of the Moon", re-recording mixer Greg P. Russell is quoted as saying "We want to have a defined soundscape, so it's not just a wall of mess--it's very articulate, with a lot of detail and definition." Later on, he says "The movie is really big and bold, but it's not painful." The writer of the article, Matt Hurwitz, didn't challenge Russell on any of his assertions; in fact, the article is written as one big advertisement for the movie.
  
  The problem is that almost every review of "Transformers: Dark of the Moon" comments on just how loud, painful and muddied the movie's sound is. It's possible that it sounded wonderful in the multi-million dollar mixing theater that Russell and his colleagues used, but it doesn't sound that way in real-world theaters. Mr. Hurwitz could have asked Mr. Russell about director Michael Bay's reputation for making his movies abusively loud, and what (if anything) Mr. Russell and his team might have done to fix things for this movie, but the question apparently never came up.
• An article on "Ribbons on the Road", about using ribbon microphones, which are notoriously fragile, in the field, turned into an advertisement for Royer's R-121, R-122 and SF-24 microphones. Only one other vendor of ribbons, sE Electronics, is even mentioned. There are many other companies that make ribbons; are Royer's customers the only ones who made the editorial cut?
• An article titled "Versatile Sound: New Loudspeaker Arrays for All Venues", is nothing more than a list of pull quotes from press releases and data sheets from more than 25 vendors. There's so little original writing involved that it doesn't even qualify for a byline. Would you like to know how the sound of these speakers compares? Interested in information on their manufacturing quality? Sorry, don't look here.

None of these examples includes the "New Products" section, which is also filled with quotes and pictures from press releases, with no editorial input except to shorten the releases for space. Yes, Mix does do reviews, but you have to look very hard to find one, in this or any other issue in recent memory, that suggests that you shouldn't buy the reviewed product.

I'm not saying that Mix's editorial standards are egregious; rather, they're representative of a wide range of trade publications that fill up far too many of their pages with editorial content that should more accurately be labeled as "advertorial", or simply as advertising. Journalistic standards and credibility in the U.S. are, by many measures, at an all-time low. Life is too short to waste it reading advertising disguised as an editorially-independent magazine.

Google (plus Microsoft, Yahoo, Wendy's, Pep Boys, etc.) are in talks to buy Hulu

The Los Angeles Times reported today that Google is in preliminary talks to buy Hulu. More precisely, as the newspaper reported in the very next sentence, Hulu's investment advisors have arranged to make presentations to Google, Microsoft and Yahoo, and probably any other company that has money in the bank. Whether Google is seriously interested, or is simply "kicking the tires", remains to be seen.

Hulu has a very nice technical platform and semi-exclusive distribution rights from its existing owners (Comcast, News Corporation and Disney), but it doesn't own any content. It has no permanent exclusive rights to anything, but it recently renewed its distribution rights with News Corp. and Disney. Comcast, which acquired part of Hulu when it acquired majority control of NBCUniversal, is prohibited by the terms of that acquisition from exercising any control over Hulu, so it's required to license its content to Hulu on the same terms and conditions as its other partners.

For Hulu to have any real value to Google or anyone else, the buyer will have to get Hulu's existing partners to grant semi-exclusive rights for much longer than three years. Most buyers would settle for a ten-year deal, but if Hulu's existing owners could take back the rights after just a few years, the company would have almost no value to an unaffiliated buyer.

If Hulu's current owners are willing to grant long-term distribution rights, an acquisition could happen fairly quickly. However, if, as reported elsewhere, Hulu's current owners and content partners are demanding that the company's distribution rights be renegotiated after the acquisition, it makes little sense for anyone to bid.

Ricoh agrees to buy Pentax from Hoya

Engadget has reported that Hoya, one of the largest glass makers in the world, has sold its Pentax camera business to Ricoh. Hoya acquired Pentax in 2007 and will retain Pentax's medical instruments business. Pentax has partnered with Samsung for DSLR product development since 2005, and it's unclear whether that partnership will remain in place once Ricoh takes over. Pentax has also had some recent success with projects that were apparently fully developed in-house, such as the 645D medium format camera and the new Q, touted by Pentax to be the world's smallest digital camera with interchangeable lenses. Ricoh's acquisition of Pentax is scheduled to be completed in October of this year.

Adobe drops prices for FCP owners by 50%

Adobe made a huge move today to capture disgruntled Final Cut Pro users who have been disheartened by the missing features in FCPX: Any Final Cut Pro or Avid OSX Media Composer owner can "sidegrade" to Premiere Pro or Creative Suite 5.5 Production Premium and save 50% off the full or upgrade price. The deal is only good for the Mac OSX versions of the Adobe software. However, any current owner of a Mac version of Premiere Pro or Creative Suite can also take advantage of the deal.

I give the company a lot of credit for making this offer, and I suspect that a lot of FCP and Avid users will take advantage of it. Of course, those people who purchased a slightly discounted upgrade to CS5.5 from resellers over the last few weeks may not be happy that they didn't wait for Adobe, and they may want to go back to their resellers to request a refund of the difference.

The sidegrade deal is available direct from Adobe through September 30, 2011. Even non-owners of Creative Suite (or people like me, who run CS on a Windows system, plus FCP on OSX) can get CS5.5 Production Premium for OSX for well under $1,000; those who qualify for upgrade packages will pay much less. It's an offer well worth considering, in that Production Premium also includes After Effects, Flash, Photoshop, Illustrator and Audition.

Should I base my start-up in Chicago, or move to Austin, Portland or Silicon Valley?

I'm in the early days of working on an Internet services start-up, and one of the questions that I'm wrestling with is where to base my business. In the early days, it's very easy to move from one city to another; once my business has multiple employees, many with families, it'll be much more difficult (and more disruptive) to move. I haven't yet come to a decision, but my thinking may be of value to some of my readers who are also going through the process, or who may do so in the future.

Let's start with Chicago, since that's where I'm currently based. Specifically, I'm located in a far northwestern suburb of Chicago, not the city itself. As a practical matter, I'll have to move to Chicago or to one of the near suburbs, such as Evanston or Skokie, to find the talent I need. Chicago has just about everything a technical startup needs--excellent colleges (University of Chicago, Northwestern, Illinois Institute of Technology and University of Illinois at Champaign-Urbana) for talent, a culture with plenty of night life and social activities to attract young people, and reasonably priced office space. It's also got some angel investors and venture capitalists, but by and large, they're significantly more risk-averse than investors in Silicon Valley. Investors in Chicago like to see a start-up making money before they invest, which goes against the whole purpose of seed funding, which is to help new businesses get to the point where they can generate revenue. If you need to be generating revenue in order to attract the necessary investment in order to generate revenue, you're not being offered seed money.

Another problem with the Chicago financing community is that there's a big hole between angel investors and when most local venture capitalists will participate. Even if you manage to get angel investment, it's extremely difficult for growing businesses to get the next round of funding. The amount needed is too high for the local angels, and the risk is too high for local institutional investors.

There are two other issues that make Chicago less than ideal for start-ups (I'll deal with weather in the section titled "Potential Natural Disasters"). The first one is political corruption. Chicago is the most corrupt major city in the U.S., and Illinois is the most corrupt state in the U.S. Last Night's "Daily Show" gave an amusing, but accurate, look at the situation, but for now, consider that you're more likely to go to prison if you get elected Governor of Illinois than if you commit murder in Chicago. This corruption adds billions of dollars each year to the cost of government (which results in higher taxes), and to the cost of running businesses (in the form of those same higher taxes, plus payoffs, contributions to political campaigns, requirements to use union labor when non-union labor is just as good and is much less expensive (even with benefits), and other expenses.)

The second issue is the risk-averse nature of the Chicago community. Just as investors look to minimize their risk by focusing on revenue-producing businesses, Chicagoans would much rather take a job with a start-up, with a guaranteed income and benefits, than start a business themselves. Taking the personal and financial risks involved with a start-up simply isn't ingrained in the local culture, as it is in Silicon Valley.

Potential Natural Disasters: This is where I'll discuss weather and similar problems. For Chicago, the issues are winter weather in general, with blizzards in particular, along with floods and tornadoes in the spring and summer.

Another option is Silicon Valley. The universities (Stanford, U.C. Berkeley and U.C. San Francisco, along with many smaller colleges), existing base of trained developers, engineers, marketers, lawyers and financial experts, and deep financial resources in the form of angels, super-angels and venture capitalists, along with the local culture that supports and encourages start-ups, make Silicon Valley the best place in the U.S. to start a business. Some Chicagoans brag that there's more money in the Chicago Merchantile Exchange than in all of Silicon Valley, but if the people who are investing in the CME won't invest in start-ups because they don't fit their "risk profile", their money is worthless.

Silicon Valley's Achilles' heel is the cost of doing business. Everything in California costs more than just about anywhere else in the U.S. Taxes are higher, and housing costs more, as does medical care (and the insurance to cover that medical care). All of those costs mean that salaries in Silicon Valley are higher than just about anywhere in the U.S., yet the standard of living isn't any better. So long as I can find qualified people in another location, I can save 30% to 50% of my operating costs by basing somewhere other than Silicon Valley.

Potential Natural Disasters: Earthquakes, floods, mudslides, droughts and firestorms. Silicon Valley (and much of California) has earthquakes all the time; most of them are too small to be sensed. However, everyone waits for "The Big One", a magnitude 7.5+ earthquake on one of the major fault systems that's overdue. Any big earthquake has the potential to disrupt transportation, electricity and natural gas supplies for days, weeks or even months. It also has the potential to take many lives. The one big positive is that California's building codes have been upgraded many times, and few places in the world are better prepared for earthquakes. In the coastal areas of California, including Silicon Valley, winter is the rainy season, and that's when the state gets floods and mudslides. The summer is when California gets firestorms, usually in some of the state or national forests.

Austin, Texas is a good alternative. Austin is the capital of Texas, the home of the University of Texas at Austin, and it houses Dell's and Freescale Semiconductor's headquarters as well as major facilities for AMD and Intel. It's also a little circle of liberalism inside a huge red conservative state. Austin has a young, creative population, as perhaps best illustrated by the city's annual SXSW conference every spring that attracts techies, filmmakers and fans from around the world. Austin is a moderately-sized city, but it has technical and business resources that belie its population size. It's also small enough that a start-up isn't likely to get lost or ignored. Finally, Austin's cost of living is a bit lower than Chicago's and much lower than Silicon Valley's.

Austin has a small angel and venture capital community, but it's not as developed as Chicago and nowhere near the size of Silicon Valley. It's also largely dependent on the University of Texas to provide an ongoing supply of young talent.

Potential Natural Disasters: Summer weather in general, droughts and tornadoes. An oppressively hot day in Chicago would be considered cool and comfortable in Austin, where daily maximum temperatures near or even over 100 degrees Fahrenheit are common. Texas is in the midst of a severe drought, and the state suffers a drought every few years; combined with the heat, this causes pretty miserable conditions.

I've also considered Portland, Oregon. I haven't been there for many years, but it's a beautiful city with a strong technical community (Intel, Tektronix, Agilent, Nike and others). Portland State University is based in the city, and both Oregon State and the University of Oregon are two hours away or less. It's also less than 150 miles to Seattle, where Amazon, Microsoft, Nintendo U.S. and many other technology companies are based. Portland's a young person's city, with lots of night life, easy access to the Pacific Ocean, and a deep commitment to the environment. Surprisingly, Portland's cost of living is almost identical to Chicago's.

Portland's angel and venture capital community are similar to Austin's, with one big difference: Portland's location--driving distance from Seattle and two hours from Silicon Valley by air--makes it possible for Portland start-ups to attract funding from both areas, as well as local investors.

Potential Natural Disasters: Volcanoes, earthquakes, tsunamis, floods. When I lived near Portland, Mt. St. Helens erupted (not the devastating eruption that blew off the side of the volcano). Both Mt. St. Helens and Mt. Hood are active volcanoes. Earthquakes occur due to faults and plate lines off the Pacific coast. Portland is much less seismically active than Silicon Valley, but like California, Portland and the rest of the Pacific Northwest are awaiting their own Big One, which is likely to trigger tsunamis due to the underwater location of the faults. Perhaps the biggest weather problem with Portland is its almost continuous rain for eight months out of the year. Unlike other cities, the rain is more like a mist, and the sun comes out so rarely during the rainy season that weather forecasters predict "sun breaks". When the sun finally comes out and stays out, however, Portland is spectacular.

So, those are my options: Chicago, which has a lot of things going for it but also has some serious drawbacks; Silicon Valley, which has much more going for it but is an incredibly expensive place to live and work; Austin, which is a great city with an excellent cost of living, but is incredibly hot in the summer; and Portland, which is also a great city with an excellent cost of living, but it's rainy and overcast eight months of the year.

What are your thoughts? What other cities should I consider, and why?

FCPX Part 3: The backfire

I didn't want to write another post about Apple's Final Cut Pro X debacle (I really, truly didn't), but I've reached my irritation limit. Let's be frank: Apple blew it, but not necessarily for how FCPX turned out. Rather, it blew it by:

1. Not fully communicating just how much of a departure FCPX is from FCP 7, and not educating users to see it as version 1.0 of an entirely new platform,
2. Not anticipating how vehement user reaction would be to key missing features, such as the inability to import FCP 7 projects, no multicam capabilities, and the lack of any facilities for getting audio and EDLs from FCPX to and from other applications, and
3. Not keeping Final Cut Studio 3 available for sale while Apple and third-parties worked to bring FCPX up to functional parity with FCP 7.

As I said, Apple blew it, but the reaction by users and resellers is completely out of proportion to the problem. There is absolutely nothing keeping existing FCP users from continuing to use their current copies of FCP. If it worked for you last Monday, it will still work for you today. Multiple sources indicate that FCP 7 will work fine on Lion, the new version of OSX that will be released next month. Moving to any other editing platform is going to entail a learning curve.

The enormous reaction, for a product that represents a minute fraction of Apple's revenues, suggests to me that there's something more at work here than simple customer dissatisfaction. For example, Adobe started looking for "Premiere Pro ambassadors" just prior to the launch of FCPX. Call me paranoid, but I have to suspect that Apple's competitors are encouraging the firestorm, even to the point of offering talking points to bloggers and tweeters. I have no evidence that this is happening, but the number of posts and tweets, and their similarity, sound very much like what would be driven by a competitive response team. (I used to run those teams in the past, and I know how they work.) Throw in free "evaluation" copies of software that have valid serial numbers, and you end up with a corps of people who have motivation to keep the pressure on.

The resellers who have been tweeting constantly since last Tuesday, trying to get FCP users to switch to Avid or Apple, have a transparent reason for doing so: They can no longer make any money selling FCP. FCPX will only be sold through the Apple App Store, so resellers and integrators can't make any money selling it. They can continue to sell peripherals that work with FCPX, but they can't make any money on FCPX itself.

The FCPX release has stirred more negative reaction than Microsoft's decision not to support direct Windows XP upgrades to Windows 7. Remember that one? It affected, and still continues to affect, millions of PC users--many times more than the FCP user base--but it didn't get this level of vitriol.

So, I've stopped following the resellers that continue to tweet negative coverage of FCPX and exhort me to buy Avid or Adobe. When Apple gets this resolved, as I'm convinced they will, there's going to be a lot of people with egg on their faces. And, for the record, I've been compensated by no one for this (or any other) post, and I'm not writing from anybody's talking points other than my own. I just wish that a whole bunch of people would grow up.

Two more words about Final Cut Pro X: Don't Panic

Ever since Apple released Final Cut Pro X today, there's been a flood of tweets and blog posts offering instant analysis, most of them referring to missing features and capabilities, such as the inability to import previous FCP projects into FCPX. Some of the complaints are just plain wrong; for example, one person tweeted that FCPX can't use shared media, then tweeted a bit later that it can.

One thing that some commenters are getting right is that this is Final Cut Pro X Version 1, not Final Cut Pro Version 8. It's (apparently) an entirely new code base, with a dramatically different user interface, and different terminology for some of the same functions in previous versions. Version 1.0 of a new product always has bugs and missing features. It's a given with any software product, and FCPX is no different.

If you're already using Final Cut Pro 7 or Final Cut Studio, you should continue to use it for deadline-based and revenue-producing jobs while you get up the learning curve on FCPX. Even if FCPX was a completely incremental release, I'd still be suspicious of switching to it immediately. New releases always have bugs. However, if you're an existing Final Cut Pro user and you can afford the $300, I'd suggest that you buy it, in order to learn the software on your own schedule. This is the future of Final Cut Pro, and unless you want to eventually abandon the platform entirely, you'll need to understand and use it.

On the other hand, if you're a new user or you have questions or concerns, there's no risk in waiting. Those "instant" reviews are likely to be largely appended, corrected and superseded over the next few weeks. Let others dig into the software and give you their feedback.

When OSX Lion ships next month, the App Store will be integrated into the operating system, and updates will be much faster and easier than they are today. Only the parts of the code that need to be changed will be updated, not the entire application, so downloads and installation will be much faster. Over the next few weeks and months, Apple will release updates, and third parties will release utilities and drivers to correct or compensate for the more serious shortcomings in FCPX.

In short, don't panic. This isn't a race.

Final Cut Pro X: The war is on

Earlier today, Apple made Final Cut Pro X available in the OSX App Store for $299.99 (U.S.). Since NAB, there have been many questions about how Apple would make the other applications in the previous Final Cut Studio suite available, and the company answered the questions today: Motion is available as a separate application, for $49.99, as is Compressor, for the same $49.99. Final Cut Pro X includes much of the functionality from Soundtrack Pro, Color and DVD Studio Pro, so I assume that those applications have been discontinued.

Yesterday, I noticed a number of posts on Twitter, saying that Adobe is looking for bloggers to become Premiere Pro "ambassadors". The reason is clear: Adobe has got to be very scared by Apple's new pricing. A full copy of Creative Suite 5.5 Production Premium costs $1.699. If you just want Premiere Pro, that's $799; After Effects is $999, and Audition is $349. In other words, it's cheaper to buy the Production Premium suite. I would say that Adobe has to lower its prices dramatically to compete with Apple, but that goes against Adobe's corporate philosophy, which is to continually raise, not lower, prices.

Avid is also feeling pain; the company launched a preemptive strike against Apple by making Media Composer available to Final Cut Pro users for $995 right before NAB, only to learn that Apple planned to sell Final Cut Pro X for $300 a few days later. Again, I don't expect Avid to drop its prices to compete with Apple; the company remains in somewhat fragile condition, and a price war is the last thing it needs.

One question is, why did Apple drop its prices so precipitously? It didn't really need to in order to satisfy the needs of the professional audience, which has been conditioned to expect pro video editing packages to be priced at $1,000 or more. I think that there are a few possible reasons:

• Final Cut Pro X is dramatically different from previous versions of the software, and Apple may have wanted to lessen resistance to buying the new version. At $300 (or $400 for the equivalent of the previous Final Cut Studio), it's almost an impulse buy.
• By making Final Cut Pro X available at a low price and selling it only in the OSX App Store, Apple may be conditioning its customers to buy all their software, not just inexpensive software, online. (It may also be part of the process of getting customers ready for Macs without any optical drives.)
• Apple and Adobe aren't friends, or even "frenemies". They're enemies. Apple is already driving a stake into Flash, and any sales that Apple takes away from Premiere Pro and After Effects will show up in Adobe's bottom line. In this battle, Avid may turn out to be an unintended casualty.

This is most likely not the end of Apple's pricing moves. There's still Logic Studio, sold as boxed software and priced at $499. I wouldn't be at all surprised to see a new version of Logic Studio, priced at perhaps $199 or $299, released in the OSX App Store later this year.

Apple's pricing for Final Cut Pro X opens up a new front in its war against Adobe (and to a lesser extent, Avid). Apple's competitors absolutely don't want to respond, but they may have no choice.

Incoherence in the movie industry

Something happened this weekend that caused me to reflect on the state of the U.S. movie industry, and that something was the release of "Green Lantern". No one movie better exemplifies the state of corporate moviemaking in the U.S., which can best be explained by the following analogy: What would happen if a bunch of drunks stumbled on a satchel full of money and decided to make a movie?

Movie executives readily affirm their desire to minimize risk by making movies based on "pre-sold" properties--that means books, comic books, television shows, cartoons, other movies and anything else that consumers recognize instantly. (I'm amazed that we haven't already seen "McDonalds, The Movie.") So, this summer, we got "Thor", "X-Men: First Class", "Kung Fu Panda 2", "Pirates of the Caribbean: On Stranger Tides", "Fast Five", "Judy Moody and the NOT Watchable Movie" (not the real title, but accurate), and, of course, "Green Lantern." We're waiting for "Cars 2", a second version of perhaps the worst movie that Pixar ever made, and "Transformers: Dark of the Moon", where Michael Bay blows up Chicago without getting rid of a single corrupt political official.

Some pre-sold movies turn out very well; I don't think that Christopher Nolan can make a bad movie, the original "Iron Man" was brilliant, and the first two X-Men movies were fun, but not one of the series movies that have been released so far this summer, with the possible exception of "Fast Five", is as good as the best movie in its series.

"Green Lantern" is reported to have cost Warner Bros. $150 million to produce. For $150 million, you would have thought that studio executives would have read the script. Martin Campbell, who directed "Casino Royale", directed "Green Lantern" with the alacrity of a blind man driving an Indy Car. For that matter, Kenneth Branagh, who directed some of the best versions of Shakespeare's plays ever put on film, directed "Thor", another pre-sold superhero movie that wasn't worth the price of admission. This conclusively demonstrates that the "auteur theory", which states that the director, not the writer, is the "author" of the movie, has been replaced by the "hooker theory", which states that directors will knowingly film any complete piece of crap if they're paid enough.

What the U.S. movie industry has done is not minimize risk by fixating on pre-sold properties--it's attempted to absolve itself of any responsibility for making good movies. You can make excellent movies from pre-sold properties, as Brian Singer, Gore Verbinski, Jon Favreau, Christopher Nolan, and even Martin Campbell (with James Bond) demonstrate. You can also make really lousy movies. If you're paying $150 million, it doesn't cost any more to make it good. J.J. Abrams' "Super 8" proves that you can make a good movie for much less than $150 million that's still loaded with special effects and suspense.

My philosophy is that any movie from a U.S. studio other than Pixar has to be regarded as crap unless proven otherwise.

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.

Technology previews vs. premature release

Earlier today, Nintendo previewed its new Wii U at the E3 conference. The Wii U is a new console with a tablet-like device that serves as a controller and second display device. Like a number of other Nintendo events, today's Wii U announcement was deliberately positioned as a technology preview rather than a formal product announcement. The Wii U won't ship until 2012, and it may be significantly different by the time it ships. However, Nintendo is encouraging developers to start writing games and applications for the Wii U, so that when it ships, there will be a significant third-party library to support it.

I'm not a fan of early announcements, but when it comes to new platforms, technology previews make a lot of sense. They introduce developers, the press and potential customers to new product concepts, and they build interest and support for the formal product release. They buy time for their vendors--Nintendo said "2012", which gives them almost 18 months. They're clearly prototypes, and they give vendors the time they need to gather feedback and make changes before they go to market.

Compare this approach with what Google did with Google TV and its Android 3.0 tablets. Last year's Google TV announcement was clearly premature; the resulting products from Sony and Logitech were too expensive and too hard to use for most consumers. There was no reason for Google and its partners to rush Google TV out for last year's holiday season. Had they positioned the announcement at last year's I/O Conference as a technology preview, with a product release scheduled for some time in 2011, they would have had the opportunity to get developers involved, get much more usability feedback and resolve objections from television and cable networks before they went to market.

Much the same thing happened earlier this year with Android 3.0 and Motorola's Xoom. Google and Motorola were determined to beat Apple's iPad 2 to market, so they rushed out both Honeycomb (Android 3.0) and the Xoom. Third-party developers had almost no time to develop tablet-aware Android apps before the Xoom shipped, and the first version of the Xoom was much too expensive: $799 (U.S.) without a data plan, or $599 with a two-year contract. In addition, Motorola promoted the Xoom's LTE broadband compatibility, but the initial model shipped with 3G CDMA, and Motorola still hasn't released the LTE capability.

Honeycomb was rough around the edges, with almost no tablet-specific apps, and the Xoom was too expensive. It was a replay of the Google TV launch. Even though there are many more Android tablets coming this year, it looks like there won't be a big market for them until 2012 at the earliest.

If Google had given a technology preview of Google TV last year for release in 2011, and if they had previewed Honeycomb with "reference platform" tablets early this year for release in time for the holiday season, it would have given developers time to build a base of compatible apps, and hardware vendors time to build devices that took full advantage of the operating system while meeting customers' price expectations. In hindsight, it wouldn't have hurt Google and Motorola at all to ship after the iPad 2; in fact, they would have shipped better products at lower prices.

The lesson is that if you're working on platforms, not just products and services that are compatible with existing platforms, technology previews are a much better option than prematurely releasing final products.

Can "old media" survive a double-dip recession?

Last Friday, the U.S. Labor Department announced that national unemployment unexpectedly rose in May to 9.1%. 54,000 people found jobs last month, but that was more than 100,000 less than what most economists expected. That follows news that the Conference Board's Consumer Confidence Index dropped to 60.8 in May from 66 in April, and more than 100 before the start of the Great Recession. The Standard & Poor's/Case-Schiller Index of housing prices in the 20 largest U.S. markets fell in March to its lowest level since 2003.

I don't usually dabble in economic forecasts, but it's increasingly looking like we're entering a double-dip recession. In the current issue of Business Week Magazine, writer Peter Coy refers to the situation as the economy's "You First" problem: Unemployed people don't have money to spend, and people who are employed don't want to spend money, because they're still afraid that they might lose their jobs. Businesses are unwilling to start hiring again because consumer spending is so low. Both sides are waiting for the other to go first, and the Federal Government is in gridlock, so the economy has no option but to fall back into recession.

The Great Recession did no favors for incumbent media companies. The decline of newspapers, which had begun years before the start of the recession, took on a fatal momentum. Magazines' advertising dropped precipitously, and many magazines either shrank their page counts or folded completely. Radio and television advertising revenues also dropped dramatically; in the case of television, the drop in advertising made local stations much more dependent on retransmission fees from cable, satellite and IPTV operators in order to stay in business.

While there seems to be no hope for the recovery of the newspaper industry, advertising revenues for other media have improved, although they're still far below their pre-recession levels. However, a double dip recession would likely drive revenues back down to where they were two years ago. It's hard to overestimate what impact that would have on incumbent media companies. Internet companies will likely hold their own, but a lot of media companies that barely got through the Great Recession won't survive a second one.