Citizen Gates

On Sunday, Bill Gates delivered his final keynote at Consumer Electronics Show. He used to keynote COMDEX until it went belly up (in 2004) after 25 years. However, about a decade ago Gates made a second pilgrimage to Vegas to keynote CES, as Microsoft sought to cross over into more consumer technologies.

Most of Gates’ talk was on familiar themes of Microsoft technology everywhere. The major announcements by Chairman Bill and his staff were around content: NBC parnering with MSN to deliver on-demand Beijing Olympics coverage, as well as Disney and MGM movies available on Xbox Live. (Microsoft separately announced BT would deliver TV services via Xbox 360). They also explained a little more about the voice recognition partnership with Ford that’s been heavily advertised recently.

Even though Bill Gates is becoming non-executive chairman on July 1, it sounds like the company still has the same goal of total world domination — just without either of the founders. Steve Ballmer certainly seems capable of continuing this quixotic quest for another decade or so.

However, the most interesting thing about the keynote was the seven-minute video which purported to be an NBC news story on Bill’s last day at Microsoft. Narrated by NBC Nightly News anchor Brian Williams, it featured Gates being turned down in his post-retirement job search by U2’s Bono, Steven Spielberg, Hillary Clinton, Barrack Obama and some guy named Jon Stewart. It was moderately funny in an inside-the-industry way, but could have done without the laugh track (apparently the live CES reaction).

The farewell video is not available separately, but starts about 10 minutes into the overall Gates keynote which is posted to Microsoft’s website. Of course, it’s only available in one format (WMV), so us Mac types have to install the Flip4Mac QuickTime plugin to get it to work.

After July 1, Bill is going to spend full-time burnishing his image as a philanthropist. It certainly seems feasible — Andrew Carnegie did a world of good (not so sure about Rockefeller). Or is he just going to build a big house — like the nice one we visited last week built by Citizen Kane Hearst?

Still, it’s interesting that his two rivals and contemporaries, Steve Jobs and Eric Schmidt, are not retiring. Is it because it will take less time to burnish their respective images? Is it because they want to amass another $50 billion (each) to catch up with Chairman Bill? Or is it because they’re having more fun?

Ending a 25-year business relationship

After subscribing to the daily Wall Street Journal for the first time in 1983 — and buying individual copies since 1980 — this month I’ve decided to let it lapse. (My wife will be grateful for less newsprint being left lying around the house).

I first subscribed to the WSJ as a way to follow the computer industry and business in general. In its day, it was a unique source of information about American business. But in the past five years, it has published fewer smaller pages, more soft news features (lifestyle, entertainment, personal consumption) and less real news. The slant of its news pages (not its editorial page) has come to resemble more of a general newspaper (like the NYT or LAT) than a business publication like Barron’s, Forbes, or Investor’s Business Daily.

I had planned on renewing at $99/year but since I lost the #@*(# renewal coupon, they wanted to charge me $298. Instead, I cancelled the dead tree edition but paid $79 to renew (at least for now) my subscription to WSJ.com. But this is the first and last year for online-only: if Rupert Murdoch doesn’t carry out his vow to eliminate subscription fees and follow the NYT into all-free news, then I’ll let the subscription lapse and rely on BusinessWeek.com, CNET and various specialty sites.

Of course, newspapers have been losing readers for decades, and dead tree publications have been losing readers to their online editions for a decade, cannibalizing their own paid customers with free online ones. Trade journals have already stopped killing trees, and six months ago Business Week speculated that San Francisco would be the first city to have its main daily newspaper go all-electronic.

But the WSJ was different, in that it was one of the few major newspapers to gain subscribers over the past decade. My own experience suggests that Rupert Murdoch faces a tricky path if he decides to abandon online subscriptions (and presumably print ones someday, too).

I was very loyal and habituated to the WSJ; both the act of subscribing and the cost created real switching costs. If it goes free, it will be just another free site, and my loyalty to WSJ.com will be not much more than to the 167 different RSS feeds in my RSS reader. If it doesn’t go free, then at $80 year I’m history. So I’m not sure what the profit-maximizing strategy is.

Interestingly, the WSJ’s only real English-language competitor, the Financial Times, has a range of prices from $0 to $400/year. The FT is also between a rock and a hard place. It’s hard to see why I’d take the main ($109/year) online subscription given all the alternatives out there, while at the same time the FT is cannibalizing paid subscribers by giving out 30 free articles a month.

Graphic credit: Crotchety Old Bastard web log.

Paternal pride

For the past 4 months, I have been helping to coach a group of 9- and 10-year-old elementary school girls competing in the First Lego League. The FLL is an international competition in which 9-14 year-old kids build robots out of Lego Mindstorms kits to solve a series of missions.

Last month, our girls finished 5th out of 56 teams at their local qualifying tournament (which I’m told is the largest in the US). A week from today they will be competing in the Northern California championship.

I rarely have much use for YouTube, but below is the YouTube video of the girls’ Dec. 8 three competition runs, with the second delivering 310 of 400 possible points. (In case you’re curious, my daughter is the only blond on the team.) After our practice Friday, we are shooting for 380 points at the championship.

Last mogul cries uncle!

Business Week reports rumors that Sony BMG will finally face the inevitable, joining its three major competitors in offering DRM-free music. In case we might have forgotten, the BW report also reminds us of Sony’s sorry history of auto-installing stealth software back in 2005.

This marks the end of what most (all but the vendors) would consider an unfortunate experiment in copy protection and restricting the actions of the most honest customers.

However, just being a rumor, the report doesn’t say whether Sony BMG will eventually be going with iTunes Store or trying to punish Apple (for enforcing its own vision for industry downloads). BW implies the Sony announcement will come with the Pepsi/Amazon free (billion song) download promotion that begins with the Super Bowl on Feb. 3. (By comparison, Apple hit 3 billion downloads last summer, and presumably is already past 4 billion.)

Giving away a billion songs free will certainly increase the installed base for Amazon’s MP3 service. This is a big bet by the labels — presumably hundreds of millions of dollars in foregone profits — all to establish a single credible rival to Apple, while not helping any of the other Apple rivals.

There’s one thing I don’t quite get, however. The original dispute between Apple and the record labels was over price — the labels wanted to charge more than Apple’s flat 99¢ for some tunes, specifically hot new tunes from the most popular artists. But Amazon also charges 99¢ for its tunes, except for the hottest 100 new tunes where it charges less (i.e. 89¢).

This plan only makes sense if the labels will make more from Amazon in the long run. Is Amazon paying more than Apple today? Given that Apple makes almost no money off downloads, this seems unlikely. Will Amazon charge more down the road? That would be my suspicion, but as long as Apple is the dominant player Amazon would be unable to charge higher prices than Apple (and in fact is forced to charge lower prices).

So my guess is that the only reason for building up Amazon is to have the credible threat (exercised or not) to cut off Apple unless it renegotiates its contracts. Realistically, I think the industry is wasting their time unless the industry can fragment digital downloads into at least three major player — all with between 20% (enough to be credible) and less than 40% (not enough to be dominant). If I were an executive on Hollywood Boulevard, I would concentrate my efforts on making sure iTunes alternatives catch on in other countries.

Photo credit: iconic Capitol Records building in Hollywood, from Wikipedia.

Free beer, free XXX?

Programmer-turned-social activist Richard Stallman has repeatedly argued that free software is “free as in freedom,” not “free as in beer.” In my own studies of free/open source adoption — specifically Linux — I’ve found that free beer (not ideology) is the reason firms adopt.

Free is a powerful motivator. This is so obvious that it made it impossible for us to get our study published in a top-ranked journal.

Even in cases where openness matters in principle, in the end what matters is not openness but competition. A month ago, Dave Mock of Motley Fool made this point yet again — price is what matters — for Verizon’s “open” network plans.

So it was through the prism of “free” that I read this paragraph earlier this week by LA Times columnist Jonah Goldberg:

Last year may have marked the beginning of the end of the Internet's greatest financial success story: hugely profitable pornography. While the mainstream media spent billions of dollars and nearly a decade trying to make a buck off the Internet, the porn industry raked in cash from the moment Al Gore invented the thing. But with the rise of such free sites as YouPorn (the YouTube of the pornography business), the online subscriber model is imploding. DVD sales are plummeting too, and the adult video business is actually laying off workers (no pun intended). YouPorn is now the most-visited adult site in the world, and its traffic is growing at nearly 40% a month.

Despite the claims of Glenn Beck that 99.5% of American men either view porn or lie about viewing porn, I know almost nothing about the subject beyond a few movies in college (more than any reader wants to know). However, I once had a knowledgeable coworker who would tell me about places like WhiteHouse.com (until it went legit), so I was clear many years ago that online (as elsewhere) sex sells.

So this seems to be another example of how “free” online business models win out. Or, perhaps, an improbable triumph for Web 2.0, specifically user-generated content.

Now all that YouPorn customers could hope for is free beer to go with their free entertainment.