Mar
8

Warner Bros. Revolutionizes Movie Rentals

WGHubris on March 8th, 2011

Here is something very interesting. Warner Bros. is trying out offering movie rentals via Facebook. Using Facebook’s own Facebook Credit payment system, the company is offering online movie rentals of The Dark Night.

Online Business StrategyWhat makes this new business strategy so interesting is that it completely cuts out the middle man companies that Warner Bros. currently depends on to rent it’s films. The idea is that instead of going to Netflix or Redbox to rent a movie, customers could do so directly through their Facebook account. Assuming the user already has Facebook Credits or a credit card linked to their Facebook account to do so, paying for a movie rental is as easy as clicking a button.

This is an important step because it prevents the possible hodgepodge of payment systems that would arise if each studio rented its movies directly from their own websites. Facebook credits are not necessarily used widely even by the the website’s own users, but Facebook is working hard to change that, and once a customer makes their first rental, subsequent rentals have virtually zero barrier.

The success of Warner Bros. Facebook gambit will be limited, however, because the studio refuses to face the realities of movie rental. Pricing is set at 30 Facebook Credits, or approximately $3, which is the same price for a DVD movie rental at the now bankrupt Blockbuster video stores.

Renting the movie is actually cheaper if you go through the middle men rather than buying direct, a completely upside down pricing system.

Warner Bros. is overvaluing the convenience of renting online through Facebook and charging a premium for it, rather than following the pricing model of every single successful online venture, which is to make it cheaper online. Customers have no incentive to rent through Facebook rather than through Comcast On Demand or other services, and customers actually have a disincentive compared to renting via Redbox or Netflix.

No doubt, the company’s strategy is to offer new releases directly to customers first, before they can be rented via Netflix or Redbox, thereby justifying the premium charged on the rental. Of course, in order for that strategy to be successful, Hollywood would have to generate movies that customers can’t wait 90 days to rent, and those don’t seem to be too common these days.

Warner Bros. Online Movie Rental Strategy

In the fantasy world that movie studio executives live in, they will be able to build up a large enough distribution channel for online movie rentals via Facebook that they won’t have to do business with Netflix or Redbox at all.  Unfortunately, in order for that strategy to work, the company would have to understand the reality of business strategy.

As everyone else seems to understand, the way you build a large base of users is to aggressively price your product. Only AFTER people have fully invested in your service and seen your full value proposition can you squeeze out competitors. Apple’s iTunes dominates because of its low-price and ease of use.  Amazon’s Kindle platform has grown to dominate the market by offering lower priced electronic books.  Google’s Gmail email service displaced established market leaders by offering more storage space at a lower price (free) than the competition.

At this price point, there is no incentive for customers who don’t already have and use Facebook credits to put the effort into learning about them and getting the setup, and for anyone who lives within a 5 minute drive of a Redbox, there is no incentive to forgo the quick trip to rent a movie in person, and there is most definitely no incentive for a cable customer to setup and use online movie streaming rather than just click a button for their cable company’s pay-per-view service.

With the current terms, the Warner Bros. online movie rental scheme will fail, but the revolution may have begun anyway. Smarter studios will offer their movies for lower prices and Warner Bros. may actually learn that they can make more money renting many movies for $1 per rental than they can by having 10 percent as many rentals at $3 per rental.

Until then, look for the real growth in online movie rentals to come from Netflix and Amazon. In the offline world, Redbox and the copycat Blockbuster Kiosks will continue to dominate.

 

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Mar
1

Synchronize Android Phone with Windows 7

WGHubris on March 1st, 2011

For all of the flack that Windows Mobile 6.5 and its predecessors have taken, there is one area where the old cell phone version of Windows had something that Android mobile phones are missing.

I had an HTC Touch for a few years. I’m not a cell phone power user and I spent most of my non-phone call time on the HTC reading news, using Google maps, or settling disagreements or looking up that kind of trivia that seems to pop-up whenever you are out with friends.

When the power button on the top broke, it was time to get a new cell phone.  I had no interest in paying several hundreds of dollars for a device that is basically a phone plus a GPS and internet browser.  In addition, I had the old school, original, Sprint SERO plan which gave me 500 minutes of call time (plus unlimitted calls to other Sprint users, which includes my wife, and thus makes the 500 minutes more than enough time.)  More importantly, it gave me unlimited text messaging and data all for $30 per month.  There was no way I was giving up that cell phone plan because there is nothing out there near as cheap and Sprint’s coverage in the Denver area is actually quite good.

It all added up to the elimination of any of those gee-whiz, top of the line, phones like the iPhone or Evo, or whatever.  At the time, there were no Windows 7 mobile phones so my choice was the aging Windows 6.x line of cell phones, old out of date Palm phones, or Android.  I ended up with an LG Optimus S cell phone on Sprint and it has worked out just fine.

Along the way, however, there has been one thing missing from my Android cell phone. There is no built-in way to sync Android with a PC.

Syncing to the Cloud

I am well aware that “the cloud” is all the rage these days.  However, I am a techie from back in the day.  I’m still a freelance technical writer today.  In other words, I believe in being responsible for my data.  It’s nice when someone, or something, else backs up important data for me, but I don’t trust anyone as much as I trust myself.  It hasn’t happened yet, but the days will come when an online service provider loses a bunch of data that cannot be recovered, and when an major service has a significant security breach resulting in a lot of data becoming public.

So, while I am happy to have my email synced with Gmail automatically on my Android device, and I’m perfectly content to sync my contacts there as well, I want my text messages between me and loved one archived on MY COMPUTER, not out in the cloud somewhere.  I want my photos of my kids backed up to MY COMPUTER, not to Picasa or Flickr, or whatever is out there.  Since Google’s entire business strategy is to make it so you don’t need a computer for anything but accessing the web, they don’t have a desktop sync in Android by default.

I can get my photos easily enough by just copying the files manually or through Dropbox, but getting all of my text messages is trickier.

Sync Android with Android ManagerFortunately, I recently discovered a free desktop synch program for Android called Android Manager.  It provides the same kind of backup and synchronization between a PC and Android phone as ActiveSync provided for Windows Mobile phones with Windows.  Coupled with Evernote to synchronize my “memos”, it provides pretty complete data coverage for what I end up creating and saving on my phone.

Interestingly, it does it over WiFi instead of a USB connection, which would be really cool, except it does not work over the Internet or anything.  Rather, you have to be connected to the same wireless access point with both your PC and Android phone.  That works out OK once you have gotten your first sync in, but it takes a really long time for the first sync, especially if you have a bunch of photos on your phone. If you buy the OEM version I guess it has a USB synch option, but for now, this works OK.

Now all I need is a decent calendar/to-do list combo that is able to convey BOTH of those simultaneously to a well-designed widget in order to remind me what I should be doing at 3:30 p.m. when I look down to check the weather.

 

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Feb
15

Will Apple Subscription Demand Destroy the iPhone

WGHubris on February 15th, 2011

The Apple iPhone and Apple iPad are some of the most revolutionary and beloved devices on the planet. So many people use them, in fact, that providing a user friendly, integrated means for publishers to sell and install content on these devices is a valuable service that Apple should be compensated for.  In fact, Apple has decided that system is worth a 30 percent commission on any subscription sold via the App Store.

angry-computer-userHowever, Apple may have gone too far with its latest demands for apps that appear in the the App Store.  Any publisher that has an app in the Apple AppStore that offers a content subscription anywhere, including applications or services not available in the AppStore or even on iPhones or iPads, must also offer the same subscription at the same price from within the app. 

So far, so good.

However, any such subscription is subject to a 30 percent commission payable to Apple for the right to be included in the AppStore.

It seems that some publishers may be balking at this demand.

Here is how it works in Steve Jobs’ head.

A publisher might be able to sell 10,000 subscriptions on their own via their own website or through another device’s app store.  But, because of the popularity, ease of use, and integration of iPhone and iPads with Apple’s App Store, the same publisher could sell many more subscriptions, thereby justifying the charge made by Apple.

To some publishers, however, this is starting to sound like a ransom demand from Apple.  Their contention is that while Apple has made a great product and has been rewarded with high profits and sales of their electronics, the customer buying a subscription to a magazine or other publication is buying the value of the publisher, and Apple doesn’t have any right to those sales.

There is more at stake here than the math, not the least of which is the publishers’ ability to sell their product how and where they want. However, it is useful to break down the economics of selling subscriptions through the Apple Appstore.

If XYZ Publishing can sell 100,000 monthly subscriptions at a cost of $4 per month, that is $400,000 in revenue.

If XYZ Publishing sells all 100,000 subscriptions via the AppStore, then they lose $120,000 to Apple. That leaves just $280,000 in revenue. Over a year, that is a difference of nearly $1.5 million per year. That is a lot of salaries.

Is it worth it?

That depends entirely on how many subscriptions the publisher can sell without Apple versus how many they would sell with Apple.

If XYZ Publishing can sell just 70,000 subscriptions at $4 per month without using the AppStore, that is the same $280,000 in revenue that they would generate by selling 100,000 subs with the AppStore. But, if they can’t sell anywhere near that number without the AppStore, then Apple’s point is valid and the publishers have no choice but to play ball.

Apple Plays Chicken with Publishers

Here is where things get interesting.

Assume that publishers decide to not support iPhone or iPad apps and subscriptions. If just a handful of publishers go down this path, then there is no real impact on Apple or iPhone and iPad users.  Just like when the Beatles wouldn’t allow their music to be sold on iTunes.

However, if many publishers — or just a handful of the biggest ones — decide not to play ball with Apple and the AppStore, then iPhones and iPads become the devices that you can’t use to access everything. They’re great machines but they just do not have widespread support of all the features and functions that other devices do. Sound familiar Mac lovers?

Apple has already played this game once by declining to support Flash. However, that was a technical decision made to prevent Flash from causing sluggish performance and bad battery life on Apple devices. So far, Apple seems to have won that battle. (If we’re lucky it might finally cause a positive change in how Adobe supports and develops Flash.)

The big question is whether or not the game will play out the same with publishers who can’t really afford to be losing 30 percent off the top.

Consider a Sports Illustrated subscriber who learns that their subscription to the magazine allows them full, free access to all online SI content on any device EXCEPT an iPhone or iPad. Would that sway that user’s decision? What if there is a list as long as your arm of content that you can get anywhere except on an Apple device? Would that be enough to impact Apple sales?

This game was played before by the music industry and Apple’s iTunes store.  The music industry lost. Will the outcome be the same here?  The answer might determine whether iPhones and iPads are short-lived phenomenons or whether they change the world of publishing forever.

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Feb
13

NY Times Exposes More Google Spam

WGHubris on February 13th, 2011

The New York Times has another high profile article exposing how Google is broken.  The article notes that JC Penny ranked #1 in Google search results pages for numerous terms during the lucrative shopping season thanks mostly to numerous paid links.

Both the writer and Matt Cutts quickly lose sight of the real issue and veer off-track into the actions taken by Google after the fact. However, the real conclusions that should be made come from what was happening to Google’s results BEFORE someone (a high-profile someone) pointed it out to the company.  The data gathered in reporting how JC Penny scammed its way to the top of Google’s search results without anyone noticing is not so easily explained away.

How Google Search Spam Keeps Getting Worse

searchIt has been suggested by stock investors and analysts on Wall Street that Google as a company is a one-trick pony whose only ability is to make money from online advertising clicks.  Perhaps there should be more concern that Google is a one trick pony whose only ability is to count incoming links to webpages.

Google has a carefully constructed mythology in which it insists two core ideas are true.  First, that content is king and that quality content will naturally attract links and, by extension, that the best quality content will attract the most links.  Second, the company has webmaster guidelines, and unofficial company spokespersons, constantly reiterating that counting links is not all there is when it comes to ranking highly, and that those who engage in forbidden practices like buying links or link schemes will be detected and punished.

The Times article proves that neither of these things are true.

While investigating the mysterious #1 Google ranking for everything from dresses to area rugs it was noted that there were tons of incoming links with the same anchor text from websites all over the web.  Many of these links came from low-value, low PageRank webpages and websites.  In fact, many of them came from seemingly dormant webpages.  Most came from sites completely unrelated to the search terms that JC Penny was ranking #1 for.

Unfortunately, the article heads off course with the sensationalistic news that JC Penny was manually penalized for cheating Google’s rankings, or more officially sounding, "violating Google’s webmaster quality guidelines."  Google’s Cutts and other commentators have attempted to spin this as a lesson in what happens if you do naughty things like buying links or other black-hat SEO tactics.  Ironically, it actually proves the opposite.

Google Cannot Detect and Filter Spam or Black-Hat SEO

The article notes that JC Penny was able to rank #1 for all of these high-volume search terms for MONTHS, completely undetected by Google. It was only AFTER a journalist detected it and gathered up the evidence that Google MANUALLY adjusted the rankings to penalize JC Penny’s, who unlike smaller website will reap no long lasting penalty from Google because they are both too big to eliminate from the rankings and because they are blaming their SEO contractor for the issue.

In other words, if you cheat, lie, and steal your way to the #1 Google ranking without attracting the attention of a major journalist, you are going to be very successful for a very long time.

Here are the real lessons to be gleaned from the New York Times article.

  1. Black Hat SEO Works — Not only does it work, but it either takes a very long time to detect, or it cannot be detected at all.  JC Penny violated one of the "biggies" by buying links and no one noticed a thing until it was all over.
  2. Google’s "Hundreds" of ranking factors are a joke — Google goes out of its way to say that there are hundreds of factors that go into a ranking, and there probably are.  Unfortunately, none of those factors has anything near the weight of backlinks.  Google-bombs have shown this to be true for years.  All that really matters is that there are a lot of links with the right anchor text and any webpage will rank higher and higher for that term.
  3. Links are Links – Google always says that links from "related" pages are more valuable than links from unrelated pages.  This is either untrue, or the additional value is so insignificant that it affects nothing but tie-breakers between two equally linked webpages.  Most of the links Penny bought were on pages that have nothing to do with home goods or clothing and yet they were enough to propel them to the top of the SERPs for months during the holiday shopping season.
  4. Google’s Algorithm Is Flawed — In order to "fix" things, Google had to MANUALLY tweak its search results. In other words, the company’s vaunted algorithm would keep ranking Penny’s #1 for all of those terms without manual intervention.  That means that unless what you are doing ends up in the New York Times, chances are that no one will detect what you are doing and that even if they do nothing will happen.  Google can’t have an algorithm with hundreds of thousands of manual patches on it that have to be managed.

Link Counting Is Dead

The biggest lesson from the JC Penny search spam scam is that link counting is worthless.  It may have been true that links were earned in the past, but that is no longer the case.  Webmasters routinely link to their own stuff for the sole purpose of SEO.  Numerous website owners and publishers post articles anywhere and everywhere for the sole purpose of getting links to their websites.  Bloggers and others routinely exchange links in order to help each other out.

Perhaps most telling is the increasing number of websites that deliberately link without the primary keywords.  Technology websites writing about Norton Antivirus no longer link to the company using the anchor text Norton Antivirus because that will just boost another company’s website.  Rather, they link with the work Norton or with a unusable "click here" type of text.  Keep in mind that these websites no exactly what they are doing and they are deliberately withholding link value for their own benefit.

The day has come for Google to admit that counting links is no longer a meaningful way to rank websites.  While it may be useful as a lessor factor, it has no place in the mix as a primary ranking criteria.  The only reason Google continues to dominate search is that it has the best index of websites to pull from, not because it returns the best results from an equal index. 

As technology matures and indexing becomes less of a technical challenge, the company’s edge will diminish.  The only question is whether Google can figure out a new trick before that happens.

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