Business Blog: Hoover’s Business Insight Zone

It’s tempting, if you keep your head in the tech blogosphere, to think that the only meaningful pools of innovation to be tapped are in the traditional fields attached to computing and telecommunications — hardware, microchips, software, wireless transmission, etc. Then you read something like this:

Gibson shows new self-tuning guitar

. . . Nashville, Tenn., guitar maker Gibson and Tronical said Powertune is the world’s first self-tuning technology, and Gibson says it is particularly useful for beginners, who tend to find tuning a headache.

Musician Ichiro Tanaka, who tuned and played a sample guitar at Gibson’s Tokyo office Monday, said the technology is handy for professionals too. If they use special tuning for just part of a concert, as he often does, it means they don’t have to lug around an extra guitar with the second tuning ready.

“It’s more than just convenience,” said Tanaka, of Japan. “It’s a feature I really appreciate.” . . .

Kudos to Gibson for continuing the tradition of guitar innovation embodied in every Les Paul it makes. And thanks to my Hoover’s colleague Paula Smith (a hard-shredding guitarist herself) for pointing this out.

My colleague Russ Somers pointed me to an item from Michael Arrington, who discusses the extreme ease with which Amazon’s new Kindle e-book reader can be used to read e-books in formats other than the proprietary one sold by Amazon.

Stealing Books For The Kindle Is Trivially Easy

So since the Kindle makes for such an easy open-format e-book receptacle, surely it’s helping move the book world toward a day when e-books will flow over the ‘Net as readily as song files do today. For context on what I’m talking about, see this post from 19 November:

A BitTorrent for e-books?

As Arrington points out in his post, e-books are already on BitTorrent. The only missing link for wide-scale e-book piracy, working from the model I proposed a couple of weeks ago, is this:

A workable system for translating large numbers of printed books into digital files. This could include all sorts of approaches:

• optical scans, with or without character-recognition, image smoothing, and so on;
• system hacks of publisher/compositor computer networks that would enable direct piracy of typesetting files;
• Project Gutenberg-style keyboarding ventures. It seems clear that a technologically-driven solution based on scanning would be infinitely preferable to relying upon individuals (haphazard volunteers, paid employees, whoever) to keyboard very much material.

Mind you, it seems clear that the Kindle still needs some Apple-style design TLC. (Watch this Robert Scoble video on same if you’re in the mood to hear a rant.) But, at a minimum, it’s compatible with the scenario I laid out earlier.

If it needs saying, I don’t endorse violation of anyone’s copyright. I’m a writer myself, after all, and I’d rather make a living from what I write than not make a living from it. But if, say, you wanted to download a free novel from Project Gutenberg or Cory Doctorow or Charles Stross or Baen Books or . . . you get the idea.

Om Malik has this short item about rolling out tech in the developing world to test and learn before rolling it out in the higher-stakes markets of the more-highly-industrialized world.

Emerging Markets As Cutting Edge Tech Test Beds

Worth reading, and worth contemplating how the phenomenon — which Malik addresses in business-technology terms — also applies to boosting environmental and social goods in the developing world, as discussed in this May 2007 post from WorldChanging:

Principle 8: Leapfrogging

Whatever angle you take on this — human development, green business, filthy lucre, whatever — it certainly seems worthwhile to test concepts in markets without an intrenched infrastructure that must be overcome. Doing so eliminates one of the major status-quo inputs to the market equation, which would seem to make experimentation easier.

It’s nearly December, which means it’s time for the 2007 retrospectives. Here’s a good pretty good one that reviews some of the top tech failures of the year. (I might have included the unfolding Beacon saga at Facebook, but that’s with the advantage of an extra 10 days of hindsight over this November 20 story.)

Top 10 Tech Train Wrecks of 2007

(Thanks for the link, Mom!)

Ed Zander’s not really out, he’s just kicked upstairs to the chairman role while MOT long-timer executive* Greg Brown takes over the CEO duties. Two quick thoughts:

1. Yes, given my previous diatribes on this point, I’m pleased that the Motorola board believed that there was someone in the house — someone whose record sure looks like a future CEO’s record — to take over the reins. According to the company’s press release, Brown has “headed four different businesses at Motorola. He also led the $3.9 billion acquisition of Symbol Technologies” — on top of serving as president and COO until this promotion.
2. Ed Zander came into Motorola with a stellar record compiled at Sun Microsystems and as a venture capitalist. So here’s the question: is it that Zander just didn’t have the right answers for what ails Motorola . . . or is it that Motorola is now operating in a telecom market environment so different from before that the answers aren’t there?

Time will tell how Brown does. I’ll be watching with interest.

~

* UPDATE: What with all the puffery in the press release, I misremembered Brown’s history with the company. As this post points out, he’s been with MOT only since 2003. Still, it’s better to have a medium-term insider take over the CEO reins than to have to turn to an outsider.

Michael Dell on Apple, 1997:

“What would I do? I’d shut it down and give the money back to the shareholders.”

Apple’s performance for the 2007 quarter just passed:

• Apple Rises to a Record on Macintosh Sales, Outlook
• Apple results top targets, Mac sales strong

Dell’s performance for the 2007 quarter just passed:

• Dell shares fall 10% on poor results
• HP grabs punishing lead over Dell in PC market share

Percy Bysshe Shelley’s commentary on same, 1818:

. . . “My name is Ozymandias, king of kings:
Look on my works, ye mighty, and despair!”
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

~

* Not really, of course. Dell’s middle name is actually Saul. Which is no help at all for the writer trying to evoke something poetic about the problems at Dell’s company.

Charlie Stross, über-smart science fiction writer of instant classics like Accelerando, offers some intemperate but highly germane thoughts about one possible future for the PC business:

. . . For too long, the software and CPU giants had been treating the PC market as a cash cow, with a natural floor on the price of the product; the [One Laptop Per Child Project's] XO-1 proved that they were overcharging grossly. Intel’s reaction was the Classmate reference design, their own purported rival to the XO-1; the Asus Eee is what you get when a large far eastern OEM thinks “hang on, can we commoditize this and sell it in bulk?” Microsoft, incidentally, failed to make it onto the Eee bandwagon because they wanted $40 for a Windows XP license — on a machine that starts at $250 for the stripped-down version. Mine runs Linux perfectly well, thank you, and comes with the basic stuff you need to be productive; OpenOffice, Thunderbird for email, Firefox as a web browser, and some other gadgets (like Skype and a webcam).

The Eee isn’t an order of magnitude cheaper than a normal laptop but it is close to an order of magnitude cheaper than previous ultra-lightweight subnotebooks. And I think I’m going to use it as a pointer to a future trend in the computer business, at the low end. The Eee is about 8 times as powerful as that 1998 Omnibook, at a quarter the price. That’s an improvement of half an order of magnitude in one direction and close to a full order in the other. And it’s a tipping point, I think, showing that the price points that have defined the goal posts for the personal computer business aren’t set in stone.

The dirty little fact everybody in the consumer computer trade have been trying to ignore — Dell, HP, Microsoft, Intel, AMD, Apple, all of them — is that the computer biz is overdue for commoditization. There is no intrinsic reason why a kilogram of plastic and metal with a couple of silicon chips in it should sell for more than its weight in silver. . . .

Very much worth a read, on two levels: 1. The specifics of potential PC commoditization. 2. To remind us that existing ways of doing business aren’t set in stone. We humans have these neurological quirks that get us down; one of them is that we tend to take the status quo as a given until something comes along to upset it, or unless we specifically think our way around it. Asus is doing that now with the Eee subnotebook; Johnathan Goodwin would do that to the stick-in-the-mud ways of the automotive industry (not just moribund Detroit, but all major car makers).

It usually seems like things must be the way they are only until someone — an inventor, a company, an organization, whoever — helps us to remove the scales from our eyes.

Thanks to Marc Andreessen, I came across this great piece from Patrick Goldstein of the L.A. Times:

Come on, writers, script your futures
The Big Picture: As the writers strike enters its third week, I think the future belongs to a tantalizing new hyphenate: the writer-entrepreneur.

. . . “The studios have got to be hoping that this idea about being entrepreneurs doesn’t sweep over the TV show runners, because once you start seeing really good production values on the Internet, I mean, what does Larry David really need HBO for? This is all everybody is talking about on the line. They’re not talking about healthcare. They’re going, ‘Wow, is there a different way to get our movies and TV shows made?’ ”

. . . “Writers who create something rare — a story with great, original characters that movie stars will cut their price to play — have a real value,” says Mandate production chief Nathan Kahane. “But that value doesn’t get unlocked in the studio system. If writers are willing to share our risk, then we’re willing to give them a lot of control and share in the profits too.”

This kind of entrepreneurial formula couldn’t have existed in the era when the studios had a stranglehold on every facet of the business, notably talent, money and distribution. But those days are gone. The stars became free agents long ago. In the last few years, with billions of private-equity dollars flooding the business, the studios have lost their lock on financing too.

All that’s left is marketing and distribution. It’s hard to equal the way studios launch their summer popcorn extravaganzas with a $40-million marketing blitz. But as more entertainment migrates to the Internet, where distribution is basically free to anyone with a computer, the studios will lose that monopoly as well. If the last couple of weeks are any indication, with clips from out-of-work comedy writers popping up every day, the Web could be littered with new must-see video sites by Christmas.

Various things can scramble a monopoly, starting with antitrust actions by the government, e.g. the Standard Oil case, or the breakup of the old vertical integration in which the movie studios also owned movie theaters. But government actions can usually be undone — just witness the different ways that the Clinton and Bush administrations have handled Microsoft. Labor actions like the current writers’ strike, or the repeated strikes by the Major League Baseball Players’ Association, can have profound effects, too.

But the thing that will really scramble a power relationship is technology, which is exactly what we’re seeing now. And all this cheap digital-video equipment seems to be working together with the phenomenon of independent wealth looking to bankroll movies. There have always been rich individuals underwriting films, but now the environment is such that some of those backers are willing to underwrite films totally outside the studio system.

The studios aren’t going to go away overnight. The trend Goldstein describes is about films with budgets below $30. That being said, though, independents can even make the big special-effects-driven blockbusters, as we know from the examples of George Lucas and Peter Jackson, who have succeeded in going their own ways and making tons of money working in parallel with — but hardly in obeisance to — major studios.

So, to echo Goldstein and Andreessen, here’s a memo to studio executives: prepare to be disintermediated. The sweep of technological history is not on your side.

Who will come up with the system for transforming the world’s giant backlog of printed books into e-books? I assume it will be done. The question is, by whom?

The blogosphere (including us) is awash in talk about Amazon’s new Kindle e-book reader, and Steven Levy’s big Newsweek cover story about it. Sample reactions:

• Kevin Kelly thinks the Kindle is headed in the right direction, but doesn’t yet attain what he wants: “that one Cloudbook device still to come” that will integrate everything: books, video, Web, e-mail, phone, whatever — all in one place.
• Rex Hammock is in line with Kelly (and me, by the way): even last year, before the iPhone or the iPod Touch ever came out, he was calling for a book-sized, iPhone-like device that would let you read e-books and do all these other functions.
• John Scalzi is happy to have one of his own novels among the Kindle’s debut titles, but he doesn’t see shelling out $400 for a reader and no books when you could buy 50 printed books for the price.
• Robert Scoble thinks that the Kindle itself will probably fail, but could be important for opening the gateway to e-book readers that really work.
• Peter Kafka disputes the notion that the Kindle will, or even can, be the e-book equivalent of the iPod, simply “because the books you own, the ones you borrow from the library, and every book you buy for the forseeable future, are stubbornly locked in paper format. If you want to read a book on your Kindle, you’ll have to buy a digital copy.” This is very much unlike the current iPod model, in which you can load your whole CD collection — or songs you find online etc. — onto the device with minimal friction.

Which leads me back to my original question. In fuller form: Who will come up with the BitTorrent- or early-Napster-style system for jumping the analog-to-digital hurdle, to transform printed books into e-books?

Let’s do some amateur reverse-engineering to figure out what would be needed:

1. A workable system for translating large numbers of printed books into digital files. This could all sorts of approaches:

• optical scans, with or without character-recognition, image smoothing, and so on;
• system hacks of publisher/compositor computer networks that would enable direct piracy of typesetting files;*
• Project Gutenberg-style keyboarding ventures. It seems clear that a technologically-driven solution based on scanning would be infinitely preferable to relying upon individuals (haphazard volunteers, paid employees, whoever) to keyboard very much material.

2. For distribution of newly created digital files: BitTorrent and its existing analogues. In other words, at this point, the challenge becomes trivial, because it relies on technology already in place.

As far as I can tell, that’s all you would need. Fairly simple project, once you jump the analog/digital divide.

As for who would do this . . . I don’t know. Step #1 is potentially far more labor-intensive than the sort of coding at the root of BitTorrent or the original Napster. Then again, it might be just the sort of challenge that would inspire some in the MAKE crowd to get creative.

What do you think?

~

* Let me be explicit in saying that I would never advocate breaking the law this way. I’m just observing that it could be done.

Even when I disagree with him or find some of his ideas wildly impractical, I like Seth Godin because he is so willing to challenge the conventional non-wisdom that afflicts so very, very many industries.*

Now he talks about what he wants Amazon to do on the e-book reader front.

You won’t find me on Amazon’s new book reader

. . . I’ve been hyperventilating about Amazon becoming a book publisher since at least 1998. . . . Lots of room there for Amazon to integrate the process, to find long tail successes, to match hidden needs with authors needing promotion.

. . . My thought was to use it, at least for a few years, as a promotion device. Give the books for free to anyone who buys the $400 machine. (Maybe you can have 1,000 books of your choice, so there’s not a lot of ‘waste’.) You’ll sell more machines that way, that’s for sure. And the people willing to buy the device are exactly the sort of people that an author like me wants to reach. No harm, no foul, all three of us win. If there were a million of these machines out there and an author had a chance to have her next book show up automatically on all of them, few among us would say, “no thanks to that exposure.”

This is an idea worth pursuing. I’ve expressed my own doubts about the utility of e-book readers. My hunch is that, at least while e-book readers sit at such an enormously high price point, they have very little future as a standalone device. People will read books on electronic devices, but my guess is that these will be smartphones or iTouch-type devices rather than expensive single-function toys made for rabid early adopters.

Godin’s idea would help e-book readers expand beyond the early-adopter market — but so far no one’s biting. My guess is that Apple or Nokia will solve this issue before Sony will. In other words, the solution will come in the form of an integrated communications device rather than an electronic entertainment gizmo. When the time comes, Jeff Bezos will figure out how Amazon can make money from the phenomenon — but that still looks to be a ways off.

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* You and I shouldn’t sit here feeling so smug. I can guarantee you that I’m locked into many kinds of conventional unwisdom in my own approach to business, and I’ll bet you are, too. Am I wrong?