Out of the Box

It’s a pundit’s cliché to prognosticate something like “this will be the last generation of game consoles” or “Blu-ray will be the last physical format” (maybe not). If you want to go out quite a bit further into the future, though, you can listen to the likes of OnLive CEO Steve Perlman, who says that, eventually, virtually all computing devices will go away in a world that can take advantage of ultra-high-speed wireless technology like DIDO.

Are these the ramblings of a mad scientist? Not for Perlman’s former employer, Apple, which has traditionally made money from devices supported by software and content. The latter has historically represented relatively little of the company’s revenue when compared to its well-known hardware products.

But that is starting to shift, at least on a relative basis. In a charting of Apple’s YoY third-quarter revenue shares, Stuart Carlson shows the growing  influence of the iPhone and iPad over time. But look a bit further down the Y-axis from those ascendant lines and you will see that revenue form the iTunes store, while down on a percentage basis from a few years ago, now accounts for more revenue than desktops and the iPod, two products that are still strongly identified with the company. This has more to do with cannibalization of these products by notebooks and iPhones than a particular surge in digital sales. I wouldn’t expect this revenue stream to overtake iPhones or notebooks any time soon. Still, it demonstrates that Apple is positioning itself for a world in which bit distribution may pick up growing importance versus devices.

I was excited when Apple announced support for folders in iOS 4. Folders were the solution to the iPhone’s home screen limit and Apple implemented folder creation in a pretty slick way – dragging one app icon atop another, even suggesting a name in the process .But while I appreciate that Apple has tried to simplified the organization system in iOS when compared to the hierarchies in Mac OS and Windows, folders have become more frustrating than helpful to me.

First, the limit on the number of items (which varies depending on whether you are using an iPhone/iPod or iPad, forces arbitrary organization schemes. I’ve found this to be particularly true for games, the abundance of which on iOS has left me scratching my head as to how to group them. Is Traffic Rush a skill game? A strategy game? A  driving game? I’ve mostly given up and just created sequentially named Games folders that lead me to forget what is where.

But this creates another problem because you can’t search for folder names. If you’ve forgotten which folder you’ve used for an app, about your only alternative aside from opening every potential folder to spot check is to search for the app every time you want to launch it.

Finally, even after you’ve gone through the painstaking process of creating folders – a task not particularly enhanced by the iTunes desktop interface – restoring your folder organization can be a dicey proposition.

Old Mac hands will remember that the Mac’s first filing system, the Macintosh Filing System (MFS), also had folders that were merely cosmetic and not hierarchical. Apple could better balance the needs of those wanting a more robust organization scheme and novices by creating a one level-deep hierarchy as it sort of has in iPhoto. It would also be great to see Apple create a more powerful desktop tool to organize apps, screens and folders, But  I’d happily pass on either of those options if Apple would simply offer the option to keep apps and folders alphabetized as they do on the Mac and as they are in the Windows Phone app list and Android’s stock  launcher. This creates a default way to find things as the number of apps grows.

Google Play may not be the least confusing name for a digital storefornt and the collection of wares that it offers exclusives the Web apps that are offered via its Chrome Web Store. But the rebranding of what was primarily Android Market best represents what an integrated way to purchase the main digital media types – apps, music and video, and books and magazines – should be. While Amazon has subbrands e-books (Kindle Store) and its music and video service (Amazon Instant Video), but these are under the Amazon umbrella brand that is synonymous with retailing..

Apple, though, remains stuck with three different stores for music and video, apps, and books. And two of those storefronts use the iTunes name which, in addition to mixing the function of an organization tool and a storefront, is far out of date with respect to what might be considered relevant to a “tune.” Yes, Apple, can take its time in revealing how a brand makes sense after all, but “iPod” connoted something general. In contrast, iTunes connotes something specific.

Indeed, Microsoft has been on a similar path. It has the Windows (Phone) Marketplace for apps, Zune for music and videos, and its new partnership with Barnes and Noble will result in a Nook-branded e-book store. If iTunes is too broadly associated with the success of one type of digital media, though, Zune of course has the opposite problem, and I’ve never understood why Microsoft would hang on to a brand so strongly associated with a device that failed in the market. The company has decided to move on from its branding of Windows Live, but it also has been known to keep services limping along forever.

In a recent Switched On column about the iPad, I talked about how Apple can lavish “a level of favoritism that Google and Microsoft can never have for any given device running its licensed software.” Keeping the software consistent has been one of the hallmark’s of Apple’s iOS device appeal, but there is also something to be said about keeping the industrial design relatively consistent as Apple has done between the iPhone 4 and 4S and now between the iPad 2 and third-generation iPad. I don’t expect that this will be the last form factor revision for either device although Apple has stayed very faithful to the current designs of the iMac and Mac Pro line for years.

Particularly for these mobile products, keeping a consistent form factor amplifies the advantage that Apple has versus competitors in the accessory-rich tablet and smartphone markets. Obviously, every case-maker breathed a sigh of relief when it saw the dimensions of the latest iPhone and iPad did not stray from the previous generation. But there are also a large number of keyboard clamshells, stands, mounts, clips, docks and all manner of other accessories. By preserving continuity across iDevice generations, Apple may forfeit some excitement that comes at the differentiated shape of a new thing, but it gains in preserving the consistency of the platform (in the broadest sense) with a device that hits the ground running in a ready-made accessory ecosystem, one where the hardware may even be optimized ahead of the third-party software.

The past few weeks have been an incredible time for smartphones. Apple launched its iPhone 4S, sticking with its successful iPhone 4 design and repeating a play that the company used before when it launched the 3GS as a follow-up to the 3G. The move bespoke a confidence in its approach, focusing efforts on where the company thinks it matters while resisting temptations such as a larger display or LTE.

And if the introduction of the iPhone 4S was classically Apple, what happened the following week was classically Android. Within 24 hours, two Android licensees announced bleeding-edged phones. The Motorola Droid RAZR packed LTE into a .71 mm splashproof, Kevlar-coated, stainless steel-supported profile. And the other side of the globe, Google and Samsung teamed up to reveal the first Ice Cream Sandwich phone, boating a 4.65” AMOLED display, NFC to enable Android Beam, and face recognition-based unlocking. Both handsets are headed toward Verizon, the high-end Android cup of which seems like it will overflow this holiday season.

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At PCWorld.com, Brennon Slattery has a good rundown on the terms of Apple’s new in-app  subscription service, which seems to invoke the most controversy since Apple’s decision not to allow apps created with tools other than its own, a policy that Apple eventually reversed. The policy seeks to give Apple credit for initiation of subscriptions via its iOS products while allowing subscription providers the flexibility to also bring to the iPhone subscriptions initiated off the device. The tension is around the idea that app developers who offer subscriptions from sources other than the device must also offer them from within the device, and must do so for the same (or lower) price while giving Apple a 30 percent cut of the transaction.

It’s not unreasonable for Apple to want to monetize a transaction for which it has offered exposure (and in doing so, it can create a user experience of not economic equation that is customer-centric.). It is, however, somewhat of a leap to think that just because a consumer activates a subscription on an iOS product that that the iOS product drove that subscription; this ignores much of the promotion that providers of these services do in other media. Providers of subscription products might try to get around the requirement by obscuring the ability to sign up in the app or offering some bonuses for offline activation.

But why encourage these games? Apple could compromise and still save face simply by making in-app subscription activation optional. Then, if the subscription provider feels as though the iOS audience is worth it, they can pay Apple the share. If not, then they risk losing out on that customer until she goes to a Web site, calls a phone number, or engages in some other delay that may risk losing out on the subscription. If Apple holds its ground, we may at best see subscription providers pushing customers to competitive platforms. Making in-app activations optional offers a cost-effective customer acquisition mechanism for companies that aren’t spending a lot on off-device promotion while recognizing the investment of those that do.

During the Adobe CS5 development tool controversy, I argued that Flash developers were more likely to simply abandon iOS than switch, and that would be even more true for subscription service providers that found customer acquisition unprofitable on iOS devices.

This is simply another situation where Apple must decide between iOS devices being a platform versus being a sales channel. By allowing services that compete to an extent with iTunes such as Rhapsody, Slacker, Hulu Plus and even Netflix – the latter of which Apple has embraced on its own closed AppleTV product – it has done much to silence critics that complain about the closed nature of the platform and continue to attract best-in-class and exclusive applications. Apple has historically leaned to the platform end of this debate to the benefit of its customers and its products.

In previewing some of the features of the next Mac OS, code-named Lion, today, Steve Jobs decried the idea of using a touch screen on a notebook. Apple’s CEO cited the ergonomic burden of having to constantly reach forward to touch a vertically oriented screen and said that the proper orientation for a touch surface is a horizontal surface. Hence, Apple is expanding the multitouch gestures invoked from input peripherals such ad the MacBooks’ trackpad, Magic Mouse and Magic Trackpad.

However, the iPad is not generally used in a horizontal orientation — just check any of the Apple Pad billboards. There is a bit more to the story than just orientation. First, despite the iPadian nods to touch manipulation Apple is planning in Lion, desktop operating systems simply are not designed around the same kind of large on-screen UI elements and design that characterize the iPad experience.

This becomes obvious on a touchscreen Windows system long before arm fatigue sets in. (If you don’t have a touchscreen Windows system but do have a Winsows PC and an iPad, you can test this by using the Splashtop Remote Desktop app or any number of screen sharing alternatives.) Apple could, as many PC makers have, tweak the controls, but then the apps would still be a UI generation behind stuck in the traditional paradigm a on Windows

Second, the iPad is far more of a passive consumption device than a Mac.I’m not sure how many touch gestures the average iPad user makes versus mouse movements for a Mac user, but I would guess that the latter number is generally much higher. So even if. Apple were to create a Mac slate and tweak the UI elements, using such a computer would not be the smooth, gentle experience of an iPad.

Amid news of stellar financial results this week, Apple announced that it had added another $5 billion in cash to its already teeming coffers fo a total of $50 billion. When asked about returning some of that money to shareholders,, Steve Jobs noted that it would rather keep its “powder dry” (invoking the maxim attributed to Oliver Cromwell..

Apple, though, does not have a history of large acquisitions like its rival HP, which has amassed its own private technology company history museum by scooping up such pioneering companies as Palm ($1.2b), 3Com ($2.7b) and Compaq ($25b). In contrast, Apple’s high-profile acquisition of NeXT, which brought Jobs back to Apple and laid the foundation for the future of the Mac, was only $429m (about $581m today). This begs the question, what would Apple buy that would possibly cost that much?

Not a competitor. Looking across the value chain, Apple already has its own processor. About the only critical delivery piece it does not own today is a network – perhaps a telco or something to deliver landline content like a cable or satellite company (or equivalent). Despite the predictable uptake in Apple TV sales following its price reduction, Jobs has previously bemoaned the “go to market” problem of getting content to the television Of course, the companies that are out there delivering these pipes today are all either regional (like Comcast) or infrastructure-challenged (like Dish Network); it might be more efficient for Apple to build its own network as Google has been doing for some time although I’m inclined to think that it would prefer something wireless.

As I was writing this, I saw that Peter Kafka at MediaMemo has speculated that Apple might buy Facebook. I could see tremendous synergy there. Apple hasn’t cracked the social media nut, and buying Facebook would provide no only a tremendous online hedge against Google, but a fantastic complement to Apple’s mobile, music, games and college businesses. Hey Facebook, how about sweetening the deal by developing an iPad app already?

Long before the launch of the iPad or the introduction of the smartbook concept, a client asked me what I thought about the idea of netbooks that didn’t run Windows. Versions of the ASUS Eee and HP Mini had been available with Linux distributions, but were ultimately cancelled in the face of consumers’ overwhelming preference for Windows on those devices. If it walks like a mouse being used on Windows, consumers expect to use it with a mouse being used with Windows. Now, SlashGear notes that Qualcomm CEO Paul Jacobs says that the iPad has delivered the concept of “always-on, all–day devices” that smartbooks had originally promised.

I read that comment as potential validation, but SlashGear frames it as a concession. If Jacobs has indeed taken up the white flag from Shantanu Narayen, It’s oddly timed given the barrage of ARM-powered Android tablets that are in the works. Archos, for example, just announced a whole family of Internet tablets (if you can call a device with a 3.2” screen a tablet as they do) and Samsung has announced the highest-profile iPad competitor to date in the Galaxy Tab (more on that name later).

So perhaps the term smartbook, like netbook, implies a keyboard – something that wasn’t the case in concept videos shown early on by Qualcomm. The Lenovo Skylight (pictured) was shelved, but promised to return one day running Android. Challenges abound. Not only is Android is not optimized for larger screens, but it needs a staple of applications to fill in the gaps with Windows (something Linux actually had for productivity in OpenOffice). Furthermore, channel, task and usage scenario overlap with Windows becomes more pronounced.

Over time, though, consumers may be more accepting of a keyboard-equipped smartbook. As the SlashGear post notes, HP and Toshiba have dabbled in the market. The paradox is that consumers need more successful non-Windows tablets like the iPad to understand such a device with a keyboard. Apple probably won’t produce one, but has opened the door to accessory makers to create an equivalent, and others will. The key for these vendors is to show consumers that even keyboard-enabled smartbooks are not neutered netbooks, but supersized smartphones.

Samsung appears to recognize that in using the “Galaxy” brand across its smartphones and the Tab, but it is both a new brand and one that has been subdued (at least in the U.S.) under the monikers that various carriers have given it. In any case, consumers have of course accepted physical keyboards on smartphones (with at least one successful clamshell feature phone that may be Android-bound).

Prior to this week’s iPod announcement, it was a bit inconsistent that the midrange iPod nano could capture video (but not stills) and the high-end iPod touch could capture neither. With the new lineup, hough, the iPods’ capture capabilities have been rationalized. The iPod nano has no image or video capture capabilities whereas the iPod touch now has both – including high-definition video — even though the stills are of a lower resolution than those the iPhone 4 can capture. Of course, video capture is a better fit for the touch than the nano anyway. Not only can it now take advantage of the remarkable iMovie app, but video can be uploaded via Wi-Fi (which the nano lacks) and used by third-party developers.

Indeed, while the new nano boasts a novel and fun form factor, Apple’s new lineup has a sort of retro feel to it, with the shuffle reclaiming its buttons and the nano focusing more on music and a smaller screen. Why, the dock connector on the nano even returns to the center of its bottom, where it was on the third-generation nano. Both the shuffle and nano show that Apple thinks it’s hip to be square.

Paradoxically, the iPod touch, which looks most similar to its previous generation, really has an opportunity to spawn a whole new category of products – the consumer videoconferencing appliance. For less than $500 and a Wi-Fi connection, you can now set up a simple point-to-point videoconference, one that will be able to tie into more users as Apple enables FaceTime over 3G. Not only is the device now, more than ever, a contract-free smartphone, it’s a contract-free videophone.