October 2005 Archives

FT.com / Your money / FT Wealth - Apple worms its way into the music industry

Wal-Mart’s $5bn a year in album sales currently accounts for nearly 20 per cent of all albums sold. The operative word in that sentence is “currently”.

With total iPod sales expected to hit the 50m mark by the end of 2006, you can extrapolate another $100 per iPod in revenue for iTunes (the equivalent of only six CDs over the lifetime of the iPod), which would entail $5bn in sales for Apple over the next few years.

Frankly, it is probably more reasonable to assume $500 (the equivalent of 35-40 CD purchases) in iTunes revenue every three or four years for every two or three iPods sold. That estimate would put the expected sales at iTunes up to $10bn-$15bn in the next few years.

Some interesting math I haven't seen anywhere else.

The black box in this equation, of course, is where the $100 over n years [lifetime of the iPod] comes from. It would seem, to me, to depend on some notion of the average upgrade cycle for iPods, the average number of iTunes purchases per iPod, some way to account for regional variation in iTunes Music Store catalogs, and the capacities of various iPod models (and their respective proportions of the total iPod population out there).

Papadopoulos also talked about Sun’s vision for the future, moving from shrink wrap software to services and from client/server to utility computing. Reflective of the shift to new network-centric models, he said: “I want to be the Google of something, not the Microsoft or SAP.” Perhaps, but so far Sun is ahead of the curve with its vision of commoditizing infrastructure and trailing in terms of generating growth in its business, compared to Google, Microsoft or SAP.

The $1 per CPU utility, which Sun–as an infrastructure provider–is doing to stimulate the market and show how the business and computing model is possible, is still mainly confined to technical workloads. “I’m not so concerned with what’s happening now from a business model sense. We aren’t going to make a lot of money in the near term. What matters is the hardware and software stack, how to do it securely and efficiently. It’s also a long lead time to get ISVs there,” Papadopoulos said. He is also banking that the million-fold increase demand on the Net from sensors networks will be an area where Sun sell its infrastructure.

He also believes that the commoditization of computing, which has the virtue of transparent pricing (e.g., $1 per CPU), and the associated utility computing lower switching costs, doesn’t favor a Microsoft’s more closed system and higher margin model. Sun’s model, he said, is to drive commoditization, which can also mean lower margins.

» Sun CTO Greg Papadopoulos on Google's soft underbelly, Microsoft, HP and other topics | Between the Lines | ZDNet.com

The bottom line seems to be that Sun's making two big bets, both around commoditization: assuming continued growth on the client/demand side of public and private networks, they're redoubling efforts to be the hardware vendor of choice for the back end. The second bet is that some combination of Sun hardware, Solaris, Java, and JES, delivered as a utility, will become the platform of choice for software developers (as opposed to certifying to a specific OS, as companies like Oracle or SAP do today).

On the other hand, you could read this as Sun being unwilling (and, actually, unable) to be anything other than a hot box business, bringing us back to the old question of how Sun can fight off the combined resources of Intel, Microsoft, and the open source community. Of course, the strategic ju-jitsu of their alliance with AMD for Opteron CPUs, and the open-sourcing of Solaris makes that riddle all the more interesting.

She said that she had resisted surrendering internal documents, including legal advice to the president, because to do so would have interfered with the independence of the Executive Branch.

"Protection of the prerogatives of the Executive Branch and continued pursuit of my nomination are in tension," she wrote. "I have decided that seeking my confirmation should yield."

Miers Failed to Win Support of Key Senators and Conservatives - New York Times

On the one hand, I fear who Bush will dredge up next, especially since the theocrats will be feeling victorious. On the other hand, the justification for this withdrawal is confirmation of my main concern: that Bush is stacking the court not with doctrinaire religious conservatives, but that he's stacking the court with doctrinaire deferentialists -- judges who believe in an extremely limited court, especially with respect to executive branch power.

No president, no legislature, should be afforded that kind of latitude.

Not many commentators have picked up on this but, as Office meets ERP systems, it will democratize business intelligence in much the same way that desktop word processors democratised document preparation. This will put a premium on people and innovation that can provide easy (situational) access and insight. Email and portals are the likely situational applications and mashboards, and insight will be provide by innovators like Metapraxis (board-level insight into company performance), Tableau Software (data and relationshop visualization) and CXO Systems (business and IT visibility).

Most of the time: What happens when business data is liberated?

Leaving aside the appropriateness of the term "democratizing" when applied to Microsoft Office System (is it still a "System?"), it is interesting to think of what can be done when horizontal front-end applications (like email or IM) can be extended to act as situationally-appropriate interfaces to multiple applications.

Disparate data sources can be united. Familiar workspaces and interfaces can be reused. Most importantly, the gap between information and action can be substantially narrowed, if not altogether eliminated.

All good stuff, of course, but big questions remain. For example, the hard part of uniting disparate data sources into a single place for intelligence and action usually isn't the front end, as much as it is the integration and transformation of data on the back end. Has this gotten any simpler in the last 15 years (and I just haven't noticed)? Familiar horizontal interfaces are far more capable than we might imagine, but isn't there a host of applications whose functional demands outstrip the ability of Office to act as the front-end?

Editors of the World Bank's book say policies may be needed to raise the incomes of professionals in their home countries.

Others, including Professor Kapur and Professor McHale, who is an economist at the business school of Queen's University in Kingston, Ontario, suggest that new ways be found to compensate the hardest-hit countries for their losses. They also say rich countries should consider setting up time-limited visas that would allow professionals to work for a few years before taking their expertise, and savings, back home.

Developing Lands Hit Hardest by 'Brain Drain' - New York Times

If I listen hard, I can hear the value of my Queen's degree dropping. McHale's is a terrible idea, and here's why: educated, capable people leave their homes because there are better opportunities elsewhere. In other words, the market for their skills is more competitive abroad than at home. The conditions that trap poor countries in poverty (a lack of democracy, a lack of individual and political freedom, repression of independent institutions, no stable rule of law, labor and capital controls, artificial market distortions or restraints) are what prevents emigrants from obtaining appropriate compensation for their skills in their homelands. Compensating these countries for their losses creates a perverse incentive to maintain these conditions, since, combined with remittances, it creates a quicker path to hard currency inflows than reforming their economies and societies.

The only long-term fix would be to let this exodus of talent create a shortage which would, in turn, put upward pressure on compensation for these talents. As compensation goes up, the outflow should slow and then stop.

I weep for my alma mater.


Motorola Inc.'s iTunes music phone, developed with Apple Computer Inc. and unveiled last month in front of an audience of more than 500, may have flopped.

Motorola Chief Executive Officer Ed Zander said he is disappointed with the phone's marketing and plans to fix it.``We got off to a little bit of a rough start,'' Zander said in an interview after Motorola reported on Oct. 18 that third- quarter profit tripled, driven by more-popular phones such as the Razr. ``People were looking for an iPod and that's not what it is. We may have missed the marketing message there.''

Bloomberg.com: Top Worldwide

It would be cynical of me to suggest that this also has the effect of helping Apple demonstrate to the wireless carriers that, even when you hand over the software to a handset manufacturer, only Apple can create an iPod. It could make discussions with the "five orifices" easier for Jobs.

Profit Rises Sevenfold at Google - New York Times

Safa Rashtchy, an analyst with Piper Jaffray & Company, said one driver of the strong results was that Google had been able to convince major marketers that search engine advertisements - which are mostly short snippets of text - are good ways to promote brands rather than simply to consummate immediate sales.

"You see General Motors interested in being in front of users any time they type in anything automotive," he said, "rather than just for products they sell."

Mr. Schmidt said that Google was working to develop graphical advertising and had expanded ways for marketers to promote their brands.

Yet another good quarter from Google. The strength of their core advertising business is undeniable, and offers them the equivalent of Microsoft's Windows and Office revenue stream. This means that Google can play around in whatever ancillary markets they want, biding their time until they can move in for the kill.

This approach is pretty clearly sustainable since we're only at the beginning of the rise to dominance of Google (and Yahoo!, and MSN) over the advertising world (at the cost of the traditional channels). The money quote, on that front, from the Google conference call was that the shift "to accountable media" was underway.

� IBM to Cisco: Get back down in the weeds | Between the Lines | ZDNet.com

At first glance, IBM's announced intention today to buy XML optimization appliance maker DataPower smacks of trying to accelerate the adoption of SOA and head off any pesky performance hiccups along the way. But a deeper look portends an even bigger fish to fry with the deal — for IBM to move quickly to head off Cisco on the road to managing the intelligent IP business networks of the future.

It's a case of both companies (Cisco and IBM) seeing the evolution of applications correctly, but only one of them has the strategic high ground within the enterprise customer.

In Cisco's case (and I'd suggest other infrastructure players like EMC are in the same boat), they're trying to avoid eventual, if slow, irrelevance by taking on a greater role in defining and controlling application architecture. Makes sense: it would be nice to make use of some intelligence and horsepower outside of an application's client and server endpoints. Why not do more with messages in transit, rather than round-tripping everything when heavy lifting needs to be done?

The problem for Cisco is that this requires them to elevate their role in the typical enterprise—to move beyond infrastructure and become relevant players in application architecture. This is where IBM, Microsoft, SAP, and Oracle (and, I suppose to an extent, Sun, BEA, and others) live. To resort to a military-ish analogy, these incumbents are defending the high ground. With entrenched defences and the power of position, it will be difficult for Cisco to become king of this hill.

A Charter for the Future of Intellectual Property. Copyfight:

Over the past year, James Boyle has been fighting to expose the truth about how intellectual property law and policy is crafted: in the dark, with the only light provided by the glimmer of faith.

Now Boyle has struck another blow against faith-based initiatives. He's gathered a group of artists, scientists, lawyers, politicians, economists, academics, and business experts to form the Adelphi Charter. This posse, which includes Gilberto Gil and Nobel Laureate Sir John Sulston, has developed a set of principles for vetting proposals for new copyrights and patents, and urges governments around the world to apply a new public interest test. The group also advocates what it calls a "new, fair, user-friendly and efficient way of handing out intellectual property rights in the 21st century." It hearkens back to the days of Thomas Jefferson, when, Boyle observes, "even the proponents of intellectual property saw it as a necessary evil, something to be limited to the narrowest scope and time necessary."

As with most self-described IP minimalists, I place tremendous value in protecting the creator and owner rights in copyrights, trademarks, and patents. When the various IP monopoly exceptions are being abused by businesses resistant to forces of economic and technological change, however, it's time to redress the imbalance and return some power to the smaller players in our economy: entrepreneurs and individual customers.

Nine Senators who think Torture is OK

U.S. Senate: Legislation & Records Home > Votes > Roll Call Vote

These Senators think the United States, at the sole discretion of the Executive branch of government, has the right to subject people to torture:

These nine Senators, all Republicans, went on the record with "nay" votes on an amendment (SAmdt 1977) to the Senate DoD Appropriations Act, 2006. The amendment reads:

SA 1977. Mr. MCCAIN (for himself, Mr. GRAHAM, Mr. HAGEL, Mr. SMITH, and Ms. COLLINS) submitted an amendment intended to be proposed by him to the bill H.R. 2863, making appropriations for the Department of Defense for the fiscal year ending September 30, 2006, and for other purposes; which was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SEC. __. UNIFORM STANDARDS FOR THE INTERROGATION OF PERSONS UNDER THE DETENTION OF THE DEPARTMENT OF DEFENSE.

(a) IN GENERAL.--No person in the custody or under the effective control of the Department of Defense or under detention in a Department of Defense facility shall be subject to any treatment or technique of interrogation not authorized by and listed in the United States Army Field Manual on Intelligence Interrogation.

(b) APPLICABILITY.--Subsection (a) shall not apply to with respect to any person in the custody or under the effective control of the Department of Defense pursuant to a criminal law or immigration law of the United States.

(c) CONSTRUCTION.--Nothing in this section shall be construed to affect the rights under the United States Constitution of any person in the custody or under the physical jurisdiction of the United States.

SEC. __. PROHIBITION ON CRUEL, INHUMAN, OR DEGRADING TREATMENT OR PUNISHMENT OF PERSONS UNDER CUSTODY OR CONTROL OF THE UNITED STATES GOVERNMENT.

(a) In General.--No individual in the custody or under the physical control of the United States Government, regardless of nationality or physical location, shall be subject to cruel, inhuman, or degrading treatment or punishment.

(b) Construction.--Nothing in this section shall be construed to impose any geographical limitation on the applicability of the prohibition against cruel, inhuman, or degrading treatment or punishment under this section.

(c) Limitation on Supersedure.--The provisions of this section shall not be superseded, except by a provision of law enacted after the date of the enactment of this Act which specifically repeals, modifies, or supersedes the provisions of this section.

(d) Cruel, Inhuman, or Degrading Treatment or Punishment Defined.--In this section, the term ``cruel, inhuman, or degrading treatment or punishment'' means the cruel, unusual, and inhumane treatment or punishment prohibited by the Fifth, Eighth, and Fourteenth Amendments to the Constitution of the United States, as defined in the United States Reservations, Declarations and Understandings to the United Nations Convention Against Torture and Other Forms of Cruel, Inhuman or Degrading Treatment or Punishment done at New York, December 10, 1984.

This is a simple prohibition against what should be completely unthinkable acts by agents of a civilized democracy and a free society. That these Senators voted against it is shocking. That the administration, loath to veto anything, has indicated that they would veto any legislation carrying this amendment, is disgusting.