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A Tale of Two Companies: Apple and Netflix

October 25, 2011 Leave a comment


You could write a textbook on this topic but I’ll try to do it in 600 words or less.

Netflix, once a phenomenally successful company has seen its stock price tumble 35% this week on news that it managed to lose 800,000 subscribers over the past six months and that four different analysts downgraded them because no one can make sense of their business plan. Apple just lost its CEO and resident genius but is riding an I-Phone computer voice and plans for a new TV that just might revolutionize how you watch the medium- all the way to the bank.

Earlier this year, Netflix hiked prices 60% when they decided that’s what you’d have to pay to get both DVD’s sent to your home and get streaming. And they did it rather arrogantly without much of an explanation or even, an “I’m sorry, it’s the cost of bringing you all this great quality.”

Then when they finally did apologize, they announced they were splitting into two companies, Qwikster, which would be the old DVD-sent-to-your-home business and Netflix, which would now be the streaming part. The two companies would keep separate data bases and be basically disconnected from one another- which confused their customers and made them mad all over again, because you’d no longer be able to go to one place to figure out if they had the programming you wanted to watch.

Then they changed their minds and dropped the Qwixter idea and said, nah, we’re going back to what we originally intended.

Meantime, they seem intent on cutting really expensive content deals with companies like Dreamworks in order to be able to provide decent streaming services- except with their current business model charging what amounts to about $10 a month, there’s no way they bring in enough revenues to pay for these content deals. Seems to me you either collect good (and expensive) content, suck it up, and tell your customers it’s going to cost more but its worth it- or you keep being a real cheap monthly service wih average to below-average offerings of old movies and TV shows. But you can’t have both.

It’s all stated best by a guy named Tony Wible with Janney Capital Markets who gave this analysis to his customers, as quoted by Marketwatch.com:

We believe the [Netflix business] model is unsustainable, as the company faces rising costs that it hoped it could pass on to its [subscribers],” who appear unwilling to accept them, Wible wrote to clients. “The company has paid exorbitant prices for content while painting itself as a cheap rental service. Simply put, the company’s brand does not fit with its large/growing content obligations.

Meantime, Apple sold about 4 million of it’s new I-Phones a week after launch, mostly because of one added feature- Siri. This is the friendly computer voice you can interact with that looks stuff up for you and offers suggestions, tips, reminders, etc., etc. You can even talk dirty to Siri, though her sense of humor is such that all you’ll get back is words like “dirt and compost.” For the record, I have not tried this but so I’ve read.

And I see today that the “next big thing” Apple is up to is the launch of Apple TV. This would be a smart television that with a few easy, typically Apple-like steps, would allow you to see what’s available to watch without having to wade through category after category of Cable TV, Netflix and Hulu menus. And, of course it would incorporate a Siri-like application so you could ask your TV what’s on or have it find you the program you want to watch.

With their on-again, off-again, customer-belligerent and confusing business strategies, one of these two companies is coming off like New Coke on steroids. The other seems to be confidently pursuing its climb toward global domination. I’m going with the ghost of Steve Jobs over the seemingly aimless and perplexing strategies of Netflix CEO, Reed Hastings.

Assorted Thoughts on Steve Jobs & Professional Basketball

October 11, 2011 Leave a comment


NBA: Rich Guys vs Rich Guys

I’m in mourning today after hearing the news that the first two weeks of the National Basketball Association have been cancelled due to an impasse in contract negotiations. Crushed beyond belief. Why can’t millionaires all just get along?

No, seriously. You could have cancelled the first two weeks of every NBA season since the dawn of time and no one would have noticed. I would argue that, really, there are very few people in this country who care all that much about the NBA, except in April, but not usually until the final round of the playoffs.

But what is charming about the current labor dispute is the picture of grown men fighting selfishly over how many hundreds of millions of dollars to split among themselves. At this time, with the economic calamity that has befallen so many people, it is the perfect message for your sport to be sending to America: We Are Clueless About Your Pain.

Steve Jobs Contrarians

I have noticed that one of the most predictable trends in the world of blogging is the 2nd day contrarian viewpoint. This is the opinion that is forged by people way smarter and more clever than you and I who decide the initial consensus on any given story is too quaint or trite or too predictable, whether it’s valid or not.

Gawker recently posted an article on the “dark side” of Steve Jobs. He was mean. He once told someone at Apple their work was crap. He fired a project manager. Shocked, I tell you, I’m completely shocked. Why, he must’ve been the first successful media mogul in history to have been an SOB. Hey, I worked for Ted Turner. A visionary. A hilarious man. A great businessman. Check, check and check. Nice? Not so much.

And Andrew Sullivan published a reader letter today that says the notion that Steve Jobs changed the world is a ridiculous exaggeration. All he did was repackage existing technology and charge outrageous prices for it.

Let me give you just one example of his genius and how he changed at least the music world. Do you remember life before the I-Pod? Yes, others had digital media players but they were crap. Here’s what life was before the I-pod; CD’s. The genius was not just the simplicity of the device but the development of the business model that connected it to countless amounts of content: I-Tunes. By charging 99 cents a song, he singlehandedly saved the music business, even as the industry complained that selling songs for a buck was bad business. To the contrary, it saved the music industry from pirates who were giving the stuff away for free and artists were once again able to receive royalties for their work.

And by the way, I bought my I-Phone precisely because it was so integrated with I-Tunes and my song list and everything else you can get from videos to podcasts. So as the I-Pods become obsolete, the appetite for the technology is now transferred to smart phones.

We don’t even have to go into Jobs’ development of the first computers designed for use in the home. Or the first personal computers to connect with this thing called the World Wide Web. No, he didn’t invent the mouse, but he did make the graphical computer interface the world standard.

So Steve Jobs was no saint. He did not reinvent the world, just portions of it. He had a temper and he was single-minded and intense and ignored his kids and family for years and he said nasty things to his workers when they didn’t execute his vision properly and he wasn’t generous with his philanthropic giving. And blah, blah, blah.

I, for one, did not nominate him for sainthood last week. I just thought he had a hell of an impact on the world and certainly as much as famous innovators before him like Thomas Edison.

And he lived and urged others to live life as if every day was their last. Find me the contrarian point of view on that one. I’m sure it’s out there somewhere.

iSad


That’s what someone wrote on a post-it note and put on the glass wall of an Apple store last night. A lot of people are doing that today. Paying heartfelt tribute in one form or another to Steve Jobs.

I thought about him this morning as I slipped my I-phone into my jacket pocket after checking my e-mail and my messages. I thought about him last night as my girlfriend tapped away on her I-Pad. And then again as I used my mouse and clicked and dragged an item on my non-Apple PC. I thanked him silently on the subway as I put in my ear-buds and listened to a beautiful song composed and performed by my own son- a tune I had transferred from my I-Pod to my I-Phone. And I think about him as I write this- knowing he was the guy who produced the first personal computer designed to interact with the internet.

Many have compared Steve Jobs to Thomas Alva Edison (very interesting piece on that here). In terms of impact on the everyday lives of billions of people throughout the world, the analogy is spot-on. And like Edison, he didn’t exactly invent any of this stuff. He figured out how to put it all together. He’s the guy who understood the creativity that could be realized if only computer technology were made simple enough to use by anyone, not just techie geeks who knew how to maneuver through MS-DOS.

And when he got fired at Apple, his way of dealing with unemployment was to revive a then dormant animation studio called Pixar.

Of all the lovely tributes being penned about the genius of Steve Jobs, one of the most eloquent came from the White House in a statement released by the press office at 9:15pm last night:

By building one of the planet’s most successful companies from his garage, he exemplified the spirit of American ingenuity. By making computers personal and putting the internet in our pockets, he made the information revolution not only accessible, but intuitive and fun. And by turning his talents to storytelling, he has brought joy to millions of children and grownups alike.

Steve was fond of saying that he lived every day like it was his last. Because he did, he transformed our lives, redefined entire industries, and achieved one of the rarest feats in human history: he changed the way each of us sees the world.

I’ve always been taken by the sleek, modern simplicity of Apple products. Their lap tops were the lightest and thinnest. The I-pod was the size of a pack of gum, but thinner. The I-Phone is a simple rectangle activated by one button. Besides a virtual one, the I-Pad doesn’t even have a keyboard. And here is the essence of what I think was one of Steve Jobs’ guiding philosophies; that there is great virtue and elegance in simplicity.

Thank you, Steve Jobs, for your spark and your vision and your good sense and good taste; for the lessons you leave behind about how to live life and for your undying belief in the enormous creativity and possibility that can be unleashed by the digital age you helped create and that you made accessible to us all.

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