R.I.P Steve Jobs - Memorial

On October 5, 2011, we said goodbye to arguably the person most singularly responsible for the way we have been using computers (and, more recently, entertaining ourselves and making phone calls) for nearly 30 years.

In the interest of full and fair disclosure, I should state up front for the record that I have never personally purchased an Apple product. It was (and is) easy at times to poke fun at the “Cult of Apple”. Like so many of my contemporaries, though, many of my formative computing cycles came on an Apple ][, and I have always admired the design (and marketing!) of Apple products.

Visionary Innovator

In the hours and days following the death of Steve Jobs, there were a lot of comments in the world of social media asserting that he had never actually invented anything. This is not only completely untrue (Jobs is listed as the primary or co-inventor on almost 350 US patents or patent applications), but completely irrelevant: claiming that Steve Jobs was not an innovator because he “didn’t invent anything” is like saying that Nikola Tesla wasn’t an innovator because he didn’t invent electricity, or that Henry Ford wasn’t an innovator because he didn’t invent the internal combustion engine.

Contributions

It is beyond the scope of this Tech Tip to serve as an exhaustive compendium of all things Apple, all things Steve Jobs, or even as a complete list of all of Jobs’ groundbreaking and innovative contributions to the world of computers and consumer electronics, but here are a notable few:

The Mouse & GUI

This one almost goes without saying. Nearly everyone knows the story of how Jobs “stole” the ideas of the mouse and the GUI (Graphical User Interface) from Xerox PARC to develop the Lisa and, later, Macintosh computers. Remember using computers before they had mice? I do. Were it not for Jobs and the success of the Mac, which of course inspired Microsoft Windows, who knows how or when the mouse and GUI would have made their way into mainstream computing.

“Fonts”

Before 1984, you got any computer font you wanted – as long as what you wanted was the default system font. One of the biggest features of the early, black and white-only Macintosh computers was the ability to use different typefaces not only on-screen, but in print. This seems incredibly pedestrian now, but for a home computer user to be able to do this back then was revolutionary. My friends and I joked that “everyone with a Mac was a ‘desktop publisher’. ” The joke was on us, though: that was the idea all along.

USB

This one’s for the EE (Electrical Engineering) Geeks out there, but no less relevant for all of us. Obviously, Apple didn’t invent the Universal Serial Bus. But they probably inspired it: The Apple Desktop Bus (invented by Steve Wozniak) was simple, inexpensive method for connecting a variety of external devices, including keyboards and mice, to a host computer. ADB had four pins: Data, Power on, +5 VDC, and Ground. Sound familiar? The first system to use ADB was the Apple IIGS in 1986. The USB working group didn’t begin development until 1994.

AppleTalk

AppleTalk as a networking protocol has, for all practical purposes, been gone for a long time now, having been deprecated by Ethernet (TCP/IP). The point though, is that AppleTalk shipped with every Macintosh computer beginning in 1984. This meant that all Macs were “networkable” right out of the box. Ever try to network a few IBM “clone” computers together before, say, 1990? I did, and two words come to mind: “expensive”, and “nightmare”. Clearly, Jobs and Apple understood very early on the importance of easily and inexpensively connecting people, by way of their computers, together. After all, that’s what they set out to do.

PDA

Anyone remember the Apple Newton? I do. It was generally considered the first commercially-viable Personal Digital Assistant (remember those?) Incidentally, “personal digital assistant” was a term coined by Apple CEO John Sculley to describe the Newton. It didn’t work particularly well, and was later supplanted primarily by the Palm Pilot (and variants). But like a number of other products on this list, it was an industry first – a concept, if not a product, that changed the way we work with information and with each other.

iPod/iPhone/iPad

The iPod, iPhone, and iPad aren’t category killers. Like the Newton, they’re category creators. There were no digital music players to speak of before the iPod, no “smartphones” as we define them today before the iPhone, and no tablets (other than in Star Trek) before the iPad. These devices have changed the way we listen to music, read books, watch movies and TV, and connect with our friends and family.

iTunes

Without a doubt, one of Steve Jobs’ single greatest contributions to the world was convincing the archaic, slow-moving music industry to not only break up its product (overpriced CDs) and sell songs à la carte, but also to stop insisting on useless, annoying, and fair use-infringing copy-protection schemes. He was still working on applying the same concepts to movies and TV shows.

MacOS/iOS

A quick nod to the powerful, intuitive, aesthetically-brilliant software that powers Apple’s computers and mobile devices.

The Personal Computer

“PC” became a hardware, software, and ideological “them” to Jobs’ “us” at Apple, but of course it always really stood for “Personal Computer”. Jobs didn’t invent computers, or even personally-owned computers – I remember seeing ads for Tandy Corporation’s TRS-80 “PC” for $999 in 1977. I used an IBM “PC Jr. ” in 1985. But Steve Wozniak and Apple, through the vision of Steve Jobs, made computers personal.

Final Thoughts

In the end, Steve Jobs’ legacy is so much more than a vast laundry list of cool inventions and fun gadgets: Steve Jobs set out to change the world. He succeeded.

Netflix continues to fall amid subscriber worries

Shares of DVD rental and streaming video company Netflix Inc. continued to decline Friday amid fallout from its lowered expectations for its U.S. subscriber base.

THE SPARK: Netflix announced plans in July to split its DVD-by-mail and video streaming services, raising the price of a monthly subscription for people who still want both. The decision was met with anger from some customers, and on Thursday Netflix lowered its guidance for U.S. subscribers by 4 percent to 24 million in the third quarter, saying more customers had dropped their subscriptions than it expected.

That means the company will have 600,000 fewer customers in the U.S. at the end of September than it did at the end of June.

THE BACKGROUND: Netflix kept its forecasts for its earnings and international subscriptions intact. But its July guidance was already below analyst expectations. Despite the subscriber exodus, Netflix maintains that the split was a good idea.

But investors may be worrying that this is just the start of Netflix's troubles. The company had another setback this month when it couldn't agree with Starz Entertainment on new licensing terms, which means Netflix users will no longer be able to stream Starz's popular mix of recently released movies and TV shows after the current deal expires early next year. This could cause more customers to leave.

ANALYST COMMENT: The lowered numbers "reflect a degree of customer disinterest in streaming only (which features improving content that is far from spectacular) and DVD only (for low volume renters, Coinstar's Redbox still presents a better value option), as well as displeasure with Netflix's subscription plan changes," Wedbush Morgan analyst Michael Pachter said in a note to investors.

The analyst added that while the plan changes "clearly" hurt subscriber growth, their full effect on Netflix's revenue earnings growth is difficult to predict. That's because the mix of Netflix's subscriber base is unclear, he added. That is, some customers could be switching to cheaper plans while others could be switching to more expensive ones.

"Until Netflix provides greater detail about the composition of its subscriber base, the uncertainty caused by mix will remain," Pachter added.

He kept an "underperform" rating on Netflix.

SHARE ACTION: Netflix shares fell $14.09, or 8.3 percent, to $155.16 on Friday. The company announced the lowered forecast early Thursday, and the shares tumbled 19 percent that day. They have traded between $140.02 and $340.09 that past year.

The stock is down 45 percent since July 12, when Netflix announced it was splitting its subscription plans.

Can Amazon push Netflix out of limelight?

Amazon CEO Jeff Bezos

(Credit: CBS)

For years, Amazon appeared to be a big pushover when it came to delivering Web entertainment.

During the early part of the Internet Age, Amazon shipped CDs and DVDs to customers who ordered them via the Web and CEO Jeff Bezos' company was synonymous with Web music and movies. Then Apple's iTunes, and Netflix, laid waste to physical discs by delivering digital downloads or streaming video and Amazon seemed to quietly drift to the back of the pack.

But today Amazon flexed some muscle of its own by announcing it would stream movies for free to people who subscribe to the e-tailer's Prime service. Amazon Prime subscribers will be able to log on to the Web from Internet-connected devices to instantly access a pool of 5,000 films and TV shows. For $79 a year, Amazon Prime subscribers receive unlimited free two-day shipping without being required to meet any minimum-purchase requirements.

Plenty of commentators in the blogosphere are noting that Amazon's video service isn't a Netflix killer yet, and they're right--but this is just the merchant's first volley as it prepares to take on Netflix, Apple, and others in the growing streaming media sector.

The imagination runs wild when one considers what Amazon could do if the Web store throws its considerable retailing and financial girth into marketing a streaming-video service. Consider that Amazon must pay the film studios and TV networks for the rights to offer the streaming video, but so what? Amazon has loads of cash. The company reported $3.7 billion of cash and cash equivalents for the 12 months ended December 31, 2010. With a snap of their fingers, the Amazonians now offer an unbeatable subscription price.
Amazon can keep ads in front of the 65 million online shoppers that visit the company's site each month. The video service could be promoted and bundled with all kinds of other product offerings. Dan Rayburn, an analyst covering Web video for consulting firm Frost and Sullivan, said Amazon could conceivably sweeten its offer by selling deeply discounted set-top boxes that enable Prime subscribers to watch streaming video on their living-room TV sets.

Heck, Amazon's deep pockets might allow the company to give those boxes away.

Another advantage Amazon has over Netflix is that the company has the horsepower to stream its own video to Prime members without having to pay a third party. Netflix can't say this. On the contrary, the company overseeing that chore for Netflix is Amazon's Web Services (AWS). That's right, Netflix is dependent on a rival for some of its back-end operations. But as full of potential intrigue as that sounds, it's doubtful Amazon would ever undermine AWS' reputation by torpedoing Netflix that way.

Wall Street apparently believes Amazon could cause Netflix some hurt. Netflix's stock tumbled more than $13, or 5 percent, in afternoon trading. Netflix shares have risen steadily over the past year and the stock posted an all-time high last week when it topped $247.

Investors should factor in that Amazon is not likely to unseat Netflix anytime in the near future. Netflix has more than 20 million subscribers, a far larger selection of films and TV shows than Amazon, and has already shown that it can outmaneuver larger players. Experts once thought Blockbuster, the brick-and-mortar video-rental chain, would smash Netflix. The opposite happened. While Blockbuster was still charging late fees and engendering a deep well of consumer bitterness, Netflix was delivering videos to customers' doors via the U.S. Postal Service--creating an entirely new delivery model--and telling users to hang on to the DVDs as long as they liked without charge.

"A growing market attracts competitors," said Netflix representative Steve Swasey.

While Amazon has several businesses to distract management's attention, Netflix thinks exclusively about delivering movies and TV shows. The company has posted a team of dealmakers in Hollywood so they can insert the company into the studios' future plans. Netflix has deals with such content suppliers as Warner Bros. Pictures, Relativity, Starz, and Epix, and just today it added TV shows from CBS, parent company of CNET.
And consumers are already streaming video from Netflix via more than 200 different kinds of Internet-connected devices, such as video-game consoles and Web-enabled TVs, which are compatible with the service. Even if Amazon did offer a Roku-like box for free, it would likely take the company a while to cut enough of the deals to make itself as widely available as Netflix.

The real loser could be Hulu, the joint venture operated by Disney, NBC Universal, and News Corp. that has recently suffered from internal strife. Hulu offers some content for free but the service requires users to pay $7.99 to access a growing number of shows. In addition, Hulu's pay service also forces viewers to watch ads. Amazon's new video service is ad free.

Regardless of which company takes over, with all the price cutting and scrambling to add programming, the real winner--for the time being at least--will be consumers.

Why Starting Justin.tv Was A Really Bad Idea, But I’m Glad We Did It Anyway

Editor’s note: The following guest post was written by Justin Kan, founder of Justin.tv. 

Right now I’m neck deep in product launch mode, putting the finishing touches on our new mobile video application—Socialcam. Of course, I’ve been here before . . .

Years ago when we launched the Justin.tv show we had no idea what we were doing. This much was obvious to anyone who watched. Outsiders attribute far more strategic thought to the venture than we gave it. Some think that we planned all along to start a live platform, and that the Justin.tv show itself was a way of promoting that platform. While this ended up happening, none of it had crossed our minds at the time.

Emmett Shear and I had been working on Kiko, the first Javascript web calendaring application in the Microsoft Outlook style. We prototyped the application in our final year at Yale, went on to raise money from Y Combinator, then continued working on it for over a year.

Then Google Calendar was released—boom—absorbing most of our nascent user base and capturing most of the early adopter mindshare. But to be perfectly honest, Kiko would have failed regardless. We were too easily distracted and hadn’t really thought through the strategic implications of owning a standalone calendaring property (hint: no one wants a calendar without email). A short time later we were burned out and spending most of our time playing Xbox with the Reddit guys in Davis Square—hardly a startup success story.

Emmett and I started thinking about possible ways to get out of the calendar business. At the same time, I was startup fatigued. We had spent over a year paying ourselves nothing. The seed and angel investment market conditions were the polar opposite of what they are today. It had been a struggle to even raise a paltry $70,000, and we had failed to build a product with real traction. I was starting to think about moving back to Seattle to try something new, maybe in a different industry.

Still, we learned a ton and it was fun to be part of the early Y Combinator startup community (then largely in Boston). We became friends with Matt Brezina and Adam Smith (of Xobni), Trip Adler, Tikhon Bernstam and Jared Friedman (of Scribd), and many others. It’s amazing to see how many of those friendships persist today, and even more amazing how well many of those companies are doing.

Coming back from one particular YC dinner, Emmett and I were discussing strategic ideas for Kiko, and I remember telling Emmett an idea that popped into my head: what if you could hear an audio feed on the web of our discussion? Wouldn’t that be interesting to other like-minded entrepreneurial types? We kept going, and eventually the idea morphed into a video feed. Then it became a live video feed. Then it became a continuous live video feed that followed someone around 24/7. Then it had chat, and a community built around watching this live show, which was now a new form of entertainment. I was hooked.

I couldn’t stop talking about the idea. I mentioned it at YC dinners and to other friends. I even came up with a perfect name for it: Justin.tv. On one trip to DC, I told my Dad and my college friend Michael Seibel what I was thinking. Eventually, in-between drinking sessions, we thought of a brilliant idea for divesting ourselves of Kiko, which is a story for another day. After that, Emmett and I were coming up with other startup ideas (I guess we got excited about staying in the industry after all). One particular favorite was the idea of a web app that would ingest your blog’s RSS feed and then allow you to layout and print physical magazines from it. Excitedly, we drove one afternoon to Paul Graham’s house to pitch it.

We explained the idea to Paul and Robert Morris, who just happened to be at the house visiting. I vaguely recall there also being a “this will kill academic publishing” angle, although I can’t figure out how that sensibly fits in now. Paul didn’t particularly like the idea: he didn’t think people would use it. “Well,” he said, “what else do you have?”

I said the only thing I could think of: “Justin.tv.”

Because it was something I was clearly passionate about, and because creating a new form of entertainment was clearly a big market (if you could invent one!), Paul was actually into it. Robert’s addition to the conversation was “I’ll fund that just to see you make a fool of yourself.” Emmett and I walked out of there with a check for $50,000.

Six months later, we’d recruited two other cofounders (Kyle Vogt, our hardware hacker, who we convinced to drop out of MIT on a temporary leave of absence, and Michael Seibel, my college friend from DC, who became our “producer”). We built a site with a video player and chat and two prototype cameras that captured, encoded and streamed live video over cell data networks, negotiated with a CDN to carry our live video traffic, and raised an additional couple hundred thousand dollars. Our plan? Launch the show and see what happens.

Now, let me just tell you why this was a bad idea:

• We didn’t have a plan. We loosely figured if the show became popular we could sell sponsorships or advertising, but we didn’t have a plan to scale the number of shows, nor did we understand what our marginal costs on streaming, customer acquisition, or actually selling ads were.
• We didn’t understand the industry. We didn’t know what kinds of content advertisers would pay for. We didn’t have good insight into what kind of content people wanted to watch, either.
• We relied on proprietary hardware that we were going to mass-produce ourselves. Smart angels told us to drop the hardware and figure out how to do it with commodity equipment, but we wouldn’t listen because we thought hardware would be easy (or at least, doable). Ironically, months after we were told this we switched to using a laptop.
• We were trying to build a “hits” based business without any experience making hits. We knew a lot about websites, but little about content creation. Smart VCs (who took our calls because Paul referred us) told us as much: nobody really likes investing in hits based businesses, because it requires the continual generation of new hits to be successful (instead of, say, building a platform like eBay or Google whose success is built on masses of regular users).

How did we get as far as we did?

• We were passionate. We honestly believed we could create a new form of reality entertainment. Put to the side that we had no experience with creating video (or any kind of content), by God, we were going to make this work.
• Early stage investing is often about the people, not the idea. Paul has said as much about what he looks for. As two-time YC founders he knew that we worked well together and even if we were working on something totally inane we were going to stick it out with the company and iterate until we found a business model.
• We sold the shit out of it. Everyone we knew was excited for Justin.tv. Why? Because our excitement was infectious. That’s how we got Kyle to drop out of school. That’s how we got Michael to quit his job and move across the country.

Ultimately, the show failed. But all told, I’m thankful every day that things went the way they did. Why?

• We built a strong team. The four of us started, and the four of us all still have leadership roles in the company. Along the way we recruited the smartest engineers and best product designers we could find.
• We were willing to learn, and to pivot. After quickly realizing the initial show wasn’t a sustainable model, we decided to go the platform route, and built the world’s largest live video platform (both on the web and in our mobile apps, which have millions of downloads).
• It got us started. Some people wait until the stars are aligned before they jump in. Maybe that’s the right move, but plenty of businesses get started with something that seems implausible, stupid, or not-a-real-business but turn into something of value (think Groupon). If we hadn’t started then, would we have later?

Today, I’m more excited about Justin.tv than I’ve been at any time since we launched the initial platform. Why? We’re taking everything we’ve gathered and learned over the past four and half years building the largest live video platform on the Web (17 million monthly unique visitors in Dec according to comScore’s MediaMetrix), and applying it to tackle a new generation of problems in mobile video. Our world class web and mobile engineering team, all of our product development knowledge, our substantial, scaled video infrastructure, and everything we’ve learned about building engineering teams has all been put to work on a new app that we think is going to change everything.

Our new app is called Socialcam, but that’s another story.

Netflix rises as studios' DVD money plunges

Not long ago, ambitious young executives at the six major Hollywood film studios maneuvered to get into the home entertainment divisions.

Nowadays, getting assigned to home entertainment is like being sent to the Eastern front. Better to work in theatrical distribution, international, or maybe studio facilities. Recently, I spoke with an executive from one of the big studios who, while discussing the challenges of working in the film industry, noted there was one silver lining: "At least I don't work in home entertainment."

The home-entertainment divisions at the studios typically oversee sales of DVDs and Blu-ray discs as well as Internet distribution. But the DVD has long been synonymous with these units for the simple reason that the discs account for the vast majority of revenues. This week, Sony, Time Warner, Viacom and News Corp., reported earnings and their film divisions continue to see falling DVD sales.

For the quarter ended December 31, Paramount Pictures saw a 44 percent decline in home video revenue from the same period a year ago, according to Viacom, Paramount's parent company (don't people give DVDs as holiday gifts anymore?).

Bad films or dying format?
Time Warner, which owns Warner Bros. Pictures, generated $923 million in revenue from home video and electronic delivery of feature films. That was a 23.5 percent tumble from the $1.23 billion made during the prior-year quarter. Sony and News Corp., which operates 20th Century Fox, don't break out their home video numbers, but they both signaled that DVD sales were ailing. Sony reported that Sony Pictures suffered a 20 percent overall decline in "sales and operating revenue" in the quarter partly due to "lower home entertainment revenues from catalog product."

For two decades, DVDs and before it, VHS tapes, were a huge source of profit for the studios. DVD sales outpaced box office sales between 2002 and 2009. Barry McCarthy, Netflix's former chief financial officer, noted a couple years ago that the DVD was the most successful consumer product launch in history measured by penetration into U.S. households. He said five years after debuting, DVDs could be found in half of all U.S. households. But the garden years appear to be over, as consumers continue to show less and less interest in physical media and turn to the Web for entertainment.

In their earnings report, the studios blamed the poor quarterly performances in home entertainment on the high number of hit films they had during the prior year. The way the studios tell it, they produced a higher number of popular films in 2009 than they did in 2010 and that resulted in lower DVD sales. This explanation, however, doesn't jibe with box-office figures.

Overall ticket sales in 2010 were $10.5 billion, just shy of the record-setting $10.7 billion generated in 2009, according to Boxoffice.com, an online service that tracks theatrical revenue. There was plenty of popular films last year. What this suggests is that in a down economy, people continue to find enough money to go to the movies. What they're apparently cutting back on is DVDs.

Why own movies?
Now, contrast the studios' dismal quarterly numbers with Netflix's performance during the same period. The video-rental service, which mails DVDs to subscribers as well as streams films and TV shows over the Web, added 3 million subscribers in the quarter--largely on the growing popularity of its streaming service, the company said.

It's not an apples-to-apples comparison, but it shows significant numbers of consumers are moving to Netflix, a service that all but eliminates the need to own movies.

Netflix now has 20 million total subscribers, a 60 percent year-over-year increase. If Hollywood wants to know where the DVD money went, this would be a good place to start looking. It shouldn't be hard to figure out that Netflix is thriving because it provides consumers with what they want: convenience, control, and a good price. For $7.99 a month, a Netflix subscriber gets access to all of the service's streaming content. That's just a better deal, when a single DVD often costs twice that amount.

That Netflix offers an alternative to owning movies or paying for cable TV, may explain why Time Warner CEO Jeff Bewkes has criticized Netflix so much lately. Another reason could be that at this early stage, Web-video distribution doesn't appear to be the cash cow that DVD was in its heyday.

The good news is that not everybody at the studios sees Netflix and Web distribution as a threat. A group calling itself DECE--made up of film studios, software, and hardware makers and almost everybody else connected to film and TV--is trying to create a set of standards and specifications designed to make approved digital content playable on a wide range of certified devices. The standards are called UltraViolet.
Supporters say this could help mainstream consumers make the jump to streaming distribution. Critics say this is an attempt to wrest control of digital distribution away from users. Regardless of whether UltraViolet works, it's a sign that some at the studios see the end of the DVD coming and are preparing for that day.