Apple's iPhone Sales Rep Can't Tell You The Price Of An iPhone

The joys of carrier relationships – or perhaps the downside of hiring short-term undertrained sales support during a product purchasing blitz – is that getting an intelligible answer about the price of an iPhone has become challenging.

First, I went online to test availability and typed a bunch of information in about my account so Apple's online store could work out my pricing.  I saw Exhibit 1.

Exhibit 1:

Puzzled why a $399 phone would actually cost $435, I called the number on the screen for clarification.  The explanation was that AT&T didn't really subsidize the phone to the extent that it would be driven down to the price Apple advertised ($399) and that the "upgrade fee" priced the phone where AT&T and Apple were actually coming out on the deal where they expected.  This explanation might be complete hogwash, but it was what I got from the guy answering a line dedicated to iPhone sales (to which I was transferred after speaking with a front-line phone responder and then tech support personnel).

Since the salesman was blaming this extra $36 on AT&T, I asked if he should happen to know what carrier might actually sell the iPhone 5 for the listed price.  Without hesitation, he said Sprint.  He said, if I were upgrading with Sprint, I'd get the listed price.  Since I didn't have prior service with Sprint, of course, I would not be upgrading with Sprint.  When I asked about new service with Sprint and a 2-year contract, Apple's iPhone sales rep said that new service would face the unsubsidized iPhone 5 charge of a gazillion billion dollars.  Since I was sure this was, in fact, the unlocked price rather than the new-service price with a 2-year contract, I called B.S. but he was adamant.

Eventually when I explained the difference between unlocked purchases and purchases with a 2-year contract, Apple's iPhone-only sales rep said that new service with a 2-year contract from Sprint (not AT&T or Verizon) would sell for the listed price ... if I met Sprint's terms of qualification.

So, what are those terms of qualification?

He couldn't tell me.

Bon Jovi: Real Men Don't Know What Music They're Buying

This latest piece from Bon Jovi isn't a musical number, it's a screed against the tide.

Let's back up a few centuries. Let's say you want to hear world-class music from artists you've read about in the papers. Unless you're in Berlin, London, Paris, Vienna, Rome, or maybe Moscow, you're kinda out of luck: that's where the top acts play. There is no recording. If there's a carriage collision on the way to the venue and you are delayed, there's no way (other than by asking patrons how good it was) to know, or re-hear, what you missed. Homebound invalids get to daydream about music, unless someone can carry them to a pub where a traveling act stops – but the traveling act gigging in a local pub won't be the world-class stuff you read about in the papers, it'll be a knockoff by someone who may never have heard it. Or something completely different. And if two acts compete in the same time slot, you may miss one entirely. And there's only so many seats. And the pubs can be noisy – a poor place to hear music.

Moving forward toward the modern era, we transited through an era in which a large hand-cranked wheels carefully manufactured at great expense spun fragile graphite slabs beneath a needle connected to an amplifying cone (don't drop the recording media!) and into an era in which mass-produced handheld players let users carry an entire hour-long concert on one's belt while walking. For a few hours' wages and no trip across the ocean, the best tenor on the planet – or a rock act that died before you were born – could be enjoyed for as long as the tape held out (which might be years if not left on the dash in the summer sun). If you couldn't bear to part with that much money, bands' labels marketed as "singles" a favorite song, paired with a lesser-known song the sellers hope will get some notice due to the packaging. The "single" might be on a cheap-to-press plastic disc designed to be spun at 45 revolutions per minute (that wouldn't shatter when dropped – nice!), in which case it'd be hard to carry with you (too big), or you could plug the player's output cables into an available-everywhere tape recorder and make your own mix tape full of singles, album fragments, and everything else you might want to hear. Sometimes, whole albums were aired on the radio ad-free and you could tape the whole thing.

Today, whole songs can be found digitally encoded online, with free evaluation ranging from a 30-second clip to a full-song stream. Instead of having to buy twelve tracks from Golden Earring just to hear Radar Love and Twilight Zone, you can buy the ones you like for a small fraction of the federally-established minimum wage employers must pay employees for an hour of labor. If you fall in love with the cheap music, you can drink straight from the fire hydrant: everything that's for sale electronically is for sale on your computer, and so is everything that's not available digitally, because all record shops and secondhand book venues have become major retailers online.

Against this background, Bon Jovi's kvetch against user-previewed per-track online purchase is a quaint "we walked to school in the snow, uphill both ways"-style joke. He literally argues that the "magic" buyers "enjoyed" involved buying closed albums with no idea what they sounded like – buyers were in effect playing a lottery as to whether the music was worth the money. Bon Jovi argues this was a good thing.

Well, maybe if you are Bon Jovi: people recognize the name and buy it. It's a brand. But let's face it: for the average Joe, who wants to get what he pays for, he benefits from knowing what he's buying – and he benefits from being able to see a selection bigger than can be carried in the inventory of a physical-media-peddling corner store.

I for one never wanted to buy the picture on the album, I wanted to know what it sounded like inside. That's why, when Napster was new and I could gather songs from the libraries of likeminded listeners for review by L, we bought more music in a month than previously we'd bought in an entire year.

Purple Fringe Boots Now Available

I have discovered that my daughter is a girly-girl. Neither L nor myself have any idea how this happened. M must wear a dress every day and is not consoled by the fact no-one else in the household does. M is also a neatnick -- and how that happened, I am also at a loss to explain.

However, it seems that shopping for her without spending undue amounts of time in some distant hall of fashion is possible. I've noticed that you can, at the right sites, view purple boots with fringe -- and can see very good detail by scrubbing the cursor around the boot image. Unlike some outfits, this one seems to offer something like a plausible shopping experience. You can see how the light hits the leather, how the stitching looks -- you can actually see the product.

If only I could shop for jeans like this.

The iPhone Platform

Apple's iPhone 2.0 software includes access to the App Store, the Company-run single-source software shopping venue for Apple's handheld platform (the iPod Touch uses the same operating system and can run the same software, though some titles have already been pulled from the store). In response to the App Store -- which is an Apple-run store servicing only Apple's platform -- T-Mobile is launching a software store, too.

Developers hoping to access the T-Mobile store won't know for sure what their fee split will be with T-Mobile for offering the application on the phone (it depends, according to the article, on applications' network demands). Will T-Mobile host developers' free apps?

Quoting one gushing developer, the Washington Post suggests the T-Mobile store is the real story of the year:

"The App store was a big deal, but that's one phone. This is an entire carrier." In other words, we are talking about T-Mobile's 31.5 million subscribers today vs. the 10 million iPhones Apple expects to sell by year-end
via Washington Post (emphasis added)

T-Mobile, unlike Apple, has several phone platforms to contend with. Developers interested in targeting T-Mobile's 31.5 million subscribers (is that U.S., or worldwide?) would need to deliver apps capable of running on the entire range of handsets T-Mobile allows customers to operate on its network. Presumably, some of the phones on T-Mobile's network don't have the computing power to do much in the way of interesting applications. Among those that do have the processing power, developers need to figure out which ones have a little finger-joystick, which ones can take a stylus tap or a touch, and which ones have always-available physical keys (and how those keys are labeled, and how they line up with the screen so on-screen indicators can suggest the right buttons for various functions). Without knowing something about the physical layout of the input devices, it could be hard to know what to draw on the screen, or which way the screen faces when the input devices are within reach.

This, of course, assumes the phone in question is one running an operating system for which the would-be developer has a developer kit. Developing without the dev kit is kinda a chore. Do we know the breakdown among T-Mobile phones by software platform? Are there many RIMM devices, or are they mostly Windows Mobile? Will T-Mobile support Android? Do Symbian devices get used on the network? Of the Windows Mobile devices, how many are actually going to support an application of the sort envisioned by our hypothetical developer?

The diversity of the hardware in the mobile space has been commented on at Daring Fireball as a reason developers might have a hard time providing a consistent experience to users even within a single software platform. The possibility that this problem hampers the growth of mobile devices as software platforms may give rise to a Microsoft cell phone, but given the possibly declining share the Microsoft music player has arguably attained, this might not be a big deal.

Apple's announcement that it's averaged over a million dollars a day in application sales (despite most apps being offered without any fee at all) offers some reinforcement that Apple might make significant revenue from the store. What is missing from this announcement is that the entire ecosystem around the App Store is gaining value, whether Apple makes a cent on the store or not. If the ticket into the ecosystem is iPhone purchases, Apple need not earn any net from the store to succeed from its existence. The fact that developers see they are keeping 70% of the store's revenue and that the revenue is enormous and growing will tend to bring developers to the platform. After all, that's where the app-buying customers are, and where the easiest store to use[1] installs its software.

The platform being delivered in the form of iPhone hardware and software is becoming as potentially important to Apple as Macs: it's a platform that can reach a much larger audience (people who can afford and use phones on a daily basis being a larger population than that which can afford and will need computers), and it offers Apple a way to sell software (and upgrades) and services (and service support) to organizations and individuals worldwide.

The biggest problem facing Apple may be Apple's readiness to offer commercial services to a demanding world.

The combination of a sought-after hardware device, a software platform for which developers gush and plan development, and the ability to package all one's localizations in a single application bundle and to leverage user participation to create new localizations may yield Apple a platform trifecta: easy development, easy localization, and consumer demand sufficient to promote content. Even if individual applications can be replaced (ePocrates exists for numerous platforms, and is a free download), the experience -- the convenience, the integration of parts -- may be so good users are loathe to leave. As the platform grows, the possibility of lock-in due to unique applications certainly arises, but I don't think that this is the lure of the iPhone.

In these early days of the App Store, the iPhone sells without much "platform" value enhancement or lock-in from third-party apps; nevertheless those sales haven't been bad. Down the road, I expect better still.


[1] Here, "easiest to use" is intended to include the developer's ease in getting a free SDK, not having to worry whether his customers' hardware will be compatible, and so on. The $99 one-time membership to get the digital certificate needed to deploy on strangers' hardware may be the lowest barrier to entry of any mobile platform. When Android deploys, the mystery of figuring out what kind of hardware the developer is trying to program for will probably be a bigger problem, even if you neglect the cost of the web hosting needed to make the application available to (hopefully) curious seekers.

Apple Erases Booby Trap App

It turns out Apple's engineers aren't the only ones upsetting people over the App Store. Apple has pulled an application from the store. Called "I Am Rich", the application's only function is to display a glowing green gem. It has a price tag of $1000.


According to the article, a user who thought it was a joke and clicked the application's "buy" link, and presumably obtained the full utility of the application with neither bug nor technical incident, begged Apple in his allcaps product review to pull the app from the store.

He was one of eight buyers.

Just because it's easy to steal from fools doesn't make it good. Apple's exercise of judgment in this way may irritate Apple critics who entertain fantastic ideas about managing a platform and a user's experience, but I can think of no benefit to be had wasting bandwidth on what amounts to an electronic booby trap whose only impact will be the creation of litigation and bad press.

The sideshow: stay tuned for information on whether refunds are sought or issued, and whether Apple tries to unwind transactions like those that occurred here.

Apple: Good News -- Therefore SELL!

Apple announced its best Mac-selling quarter ever (its best Mac quarter in the year is typically the quarter that includes August, the "back-to-school" quarter) for the quarter that ended with the close of June. Despite worries about Apple's margins, Apple's gross margin for the quarter was 34.8%. Foreign sales have grown to 42% of sales. Retail stores are making a killing.

On the release, the shares lost ten bucks.

Thoughts?

Maybe wild speculators were hoping for some kind of outrageous miracle, and bailed when it didn't appear.

Apple says China, Russia, and Latin America supposedly growing over 50% y/y, as are France and Germany. I think we just saw an outrageous miracle announced. With Apple's sales growth in a segment producing >60% of Apple's revenue, one would think profits should drive price upward.

Ohh, down fourteen bucks.

Nice, eh?

Interestingly, Apple's repeated discussion of product transitions involving things competitors will not be able to match seem to suggest either (a) patent-protected products based on Multitouch, or else (b) temporary exclusivity on, for example, Intel-supplied hardware (á la MacBook Air) to support products with feature leadership. This is consistent both with Apple's brand-image (e.g., exclusivity; yes, don't remind me how Apple is growing out of being a niche supplier) and its recent behavior.

AAPL down sixteen bucks.

Get 'em while they're hot!

UPDATE: Apple's continued use of subscription accounting for iPhone sales means that it recognizes between 1/24 and 1/8 of each sale's revenue in the quarter in which it is sold, depending which month in the quarter it is sold. The remaining revenue is amortized for the remaining 24 months going forward. Thus, exploding phone sales won't hit the bottom line in the quarter sold even though Apple has all the cash from the sale. Because Apple reports lower profits, calculations of Apple's price-to-earnings ratio will make Apple look like it's overpriced based on its phone business, or Apple will be underpriced to meet some "appropriate" P/E number. Given how useless Apple has been at creating value from cash on hand, one wonders why Apple should bother deferring revenue (and thus tax payments), unless to obfuscate the payments received under its agreements with third parties.
Also, this guy seems to have some interesting ideas about how products compete with one another. While one may talk about iPhones "cannibalizing" sales of iPods, the fact that the phones cost more and are more profitable make this a good thing for Apple. What the poster misses is that average sales prices are down for iPods not because sales dropped (they're up 12% compared to the year-ago quarter, though for seasonal reasons they're down sequentially from last quarter), but because Apple is aggressively choking off competition with sales of the low-cost Shuffle. The iPhone and the Shuffle aren't competitors; the Shuffle has no screen, much less a touch screen, and has no functions at all other than playing music from onboard Flash. (Well, you can hear audio books, too, I imagine.) The iPhone and the iPod Touch are plausible competitors, of course -- and by design. The idea that the iPhone is a fad and thus Apple is doomed is pretty entertaining: virtually every electronic gadget has some element of chic that can become outdated -- a fact Apple exploits to sell upgrades. Apple's managed to sell folks notebook computers in order to have the right color, for example. This may not be the bulk of the market, but Apple's brand management is leagues ahead of anything I've seen at Dell or Research In Motion or the like.
As for concerns about Jobs' health: read a biography on Jobs and then come back and tell me you really believe he would authorize company officers to comment on his health, good or bad. In The Second Coming of Steve Jobs, I recall an employee getting rough treatment for answering truthful questions about Jobs' personal life, and I think the lesson didn't go untaught at Apple. Jobs is the only person authorized to speak specifically about Jobs' home life and health. The last time I saw him comment on it, he was pronouncing himself cured, which I imagine would be a pretty clear indicator of his conviction regarding his (now-removed) pancreas.

Not To A School's Credit

Florida State University isn't the only school to have an "affinity card" -- that is, a deal to let a bank use school colors to promote a card in exchange for a kickback to the school from fees generated from card use -- but it may be the first one to have its deal publicly outed. The millions FSU is guaranteed by its contracted affinity card issuer are a surefire reason you will certainly find that bank's agents pushing cards to students right on the campus (which apparently leads students to conclude the cards are endorsed by the school, reducing students' scrutiny of terms, and leaving the suckers worse-off than those holding cards found off-campus).

Ignoring the power of directly marketing cards to suckers, let's look at why a consumer would pick a specific card. Things like a high credit limit, low interest rates (but this is only interesting to suckers who will carry a balance), and wide availability (which any card bearing Visa or Mastercard will get, and to a lesser extent American Express) are plusses. Given the fact every bank pushing a card is offering a Mastercard or a Visa, though, how will you pick?

When Discover was first launched, the big deal was getting cash back from purchases. Up to 1%!* Other issuers decided this was effective marketing and piled in. Discover then initiated its Discover Private Issue card to try to capture and keep high-rollers who wanted additional feautures, and paid them a higher cash-back percentage -- "up to 2.5%". That was a fat deal, let me tell you. In fact, it proved too good to customers for the issuer to afford; the card was discontinued long enough ago that Discover's own links answering questions about conversion of the cards to regular Discover cards now lead to missing-page notices. And this little story serves as a parable: card issuers can only pay out so much as an incentive before they have to turn to other tricks to compete.

Some cards offer low interest rates, in the expectation of making money on the fees received by the issuer when the card is used. Obviously, in a scheme like this an issuer has to have confidence in the card holder's eventual payment, as low interest rates limit issuers' ability to absorb bad accounts without experiencing a net loss. In the case of American Express Centurion Card (the "American Express Black Card"), for example, the gimmick isn't cash-back (holders pay thousands a year for the card) but personalized services and the ability to wow onlookers by brandishing a card known only to be issued to those spending over a quarter of a million dollars a year on the card, and willing to pay for the privilege.

The school affinity card is part of the same game: they don't buy you off, they trade on your school spirit (after buying off your school, which is how the bank got your name and address). And since all the issuers would like access to the school's alumni lists, there's significant competition for the school's business. Thus, it's not you the issuer is buying off, it's your school. (Or your professional association, or what have you.) Your affinity card gives you airline miles or reward points or multilevel marketing points, you're doing better than just being able to flash to the world your membership in the AMA (not to be confused with the AMA), but you are still being taken for a ride. The "donation" you make to your organization of choice isn't going to yield you a receipt or a tax deduction, for example, and you have little control of the way your funds are spent. Donating to your school, you can decide whether you want to give it to the chair of the physics department rather than risk the money being used to subsidize an overpaid-but-losing football coach's next off-campus birthday party.

Since the amount of credit card fees you will generate in a year isn't unlimited, a card whose appeal is based chiefly on your rewards will be paying you less if your school, professional organization, church, bike club, or scouting group is getting a cut first. If you want to make a donation, make sure you know what they're getting by doing it from your own pocket. That way, if you itemize on your taxes, you can also get a tax benefit by getting a receipt. To repeat: if your school's name is on the card, you are being shorted when your reward is being calculated. Or they're screwing you on the interest rate. Or they're stealing you blind in fees. Or they're averaging several months' balances to calculate interest due so you can't escape interest by paying off the card once you have paid interest once. There are lots of ways to turn lazy card use into revenue if you control card agreement terms, and with only so much money to go around, anything shared with your school has to come straight out of your pocket.

Do what the school should have taught you to do anyway: think for yourself.

Specific Cards
How much can you make on card rebates? I've never found converting miles into dollars make for a very favorable result, so I suggest picking a card that pays cash. Some finds I've made:

Advanta Business --
These guys are dogs. Advanta was one of the first banks to hire data mining experts to maximize their customer revenues by mathematically analyzing customer behavior. However, Advanta has a business card that offers 5% back on utilities and fuel, though it's subject to a fairly low monthly ceiling. My advice: get the card, put your phone, internet, electricity, and other utilities on the card and don't carry it. This way, you avoid hitting the 5% cap. If you find you hit the cap, remove a bill from auto-pay on this card. Pay the thing monthly.
The trick? the cash pack is paid only when you request it. That is, they will may it more than once a year, but will pay it less if you never notice you're entitled to it. Whenever they owe you $50 you can ask for it. It comes in your next bill so it blends in with the papers you are throwing out because they are redundant of data available online. Make sure you look at this stuff after you've requested the check.

Discover --
Although Discover has ditched its 2.5% back deal for all charged purchases, it does offer special 5% deals for certain types of purchases, which vary with time of the year. Some months, it includes prescriptions. Other months, fuel. If you pay attention you can game it. Don't bother to use it outside the special categories that pay 5%, because you can do a lot better than 1%. Bonus: the 5% specials aren't tied to meeting the silly threshold that bars you from getting 1% back from the first dollar spent. Your reward can be credited to your account; click to redeem accumulated awards, which are spelled out on your online account information page.

American Express --
American Express offers a diverse array of cards, some of which aren't suitable for the user who wants no fees and wants cash back. However, AmEx has figured out that there is a subset of this frugal demographic that is worth having as a customer, and for that customer they offer Blue Cash. Like the old Discover cards, you have to look behind the "up to 5%" rhetoric to get the real cash back amount.
After you spend above a certain threshold you get 1.5% or 5% depending what category of purchase. The 5% category includes groceries, fuel, and pharmacy purchases (though not at Costco, WalMart, or Target) you will be buying all year long. Put these on the Blue Cash. The downside? If your annual expenditures are slight, you will never get to the 5% bracket, which currently requires expenditures exceeding $6500 within a membership year (based on your anniversary date, not the calendar year; before hitting the threshold, you are paid a lower rate). However, if you are paying your tuition and auto insurance on the card, you can quickly push your spending into the right range. If you spend a lot that can be put on a card, you may discover this is your main card.
AmEx pays cash rewards once annually after your anniversary date.

Chase Mastercard --
Chase offers several cards with cash back features that give a flat 1% back (better than other cash-back cards before you've hit their threshold) but offer a 3% rebate on certain expense categories. I have a Chase business Mastercard that gives me 3% back on restaurant purchases, for example. Needless to say, I use it whenever I'm at a restaurant. The fact that it gives 3% back on fuel isn't exciting in view of AmEx' 5% rebate on fuel, but unless it's a month Discover is giving 5% back on restaurants, I wouldn't use a different card at a restaurant. Other 3% deals I've seen on Chase cards include things like home improvement, office supply stores ... there's quite a bit you can do on the 3% deal. Note: the 3% categories have some kind of ceiling before they revert to 1%, but you never get less than 1%. Certain cards pay 3% based on the categories in which you do the most spending. Check the rules for the specific card for which you apply, so you don't get surprised.

CaptalOne --
This isn't about cash back, it's about not getting the shaft when you travel abroad. Both Visa and Mastercard charge a percent surcharge for international transactions, and card issuers commonly add another two percent surcharge for foreign transactions, so when all the dust settles you are paying a 3% penalty for crossing borders. American Express isn't better: the card agreement's definition of the currency exchange rate includes a 3% surcharge, putting you in the exact same place.
CapitalOne doesn't charge a 2% surcharge for foreign transactions, and it eats the 1% fee charged by the branding company for international use on the card network. Instead of being dinged 3%, you pay what you expect. CapitalOne has a rewards structure I don't really understand, but it's paid me some cash atop the 3% tax I avoided using the card abroad, and though it's not the biggest cash back you will see it's the biggest avoidance of foreign transaction penalties you will see.
Seriously consider using CapitalOne if traveling abroad. Then, to avoid trouble with the fraud detection unit, warn them when you travel so your charges aren't declined. I learned that one the hard way, and I pass the wisdom along to you, gratis.

But I Love Miles When I Eat Out!
There's hope! You can take any of the above cards and register them with Continental's OnePass Dining by Rewards Network and get both cash back and one mile per dollar (including the tip, ka-ching). In Houston, the network includes some favorite restaurants: The Black Walnut Café and The Mockingbird Bistro. By registering my Chase and Discover cards with the OnePass miles program, I've gotten 3% or 5% rebates plus one mile per pre-rebate dollar spent at the restaurant. This is pretty slick for an expense you wanted to make anyway.
And yes, it does make me suggest these restaurants. There are few better (Mocking bird isn't cheap, but it's got terrific food, hard to describe in a post about credit cards), and it's great to get a price break at a favorite restaurant.
It inclines me to return again soon :-)

CONCLUSION
Your school thinks you are a revenue source. That's why you get calls and mailings for donations. That's par for the course. But don't fall into the trap of taking the school-logo credit card, though. If you want to show your school spirit, donate personally. If you want to donate from card use, just donate your cash back checks.
The one reason to prefer a miles card over a cash card is the possibility that the miles card will let you buy your way into using a higher-end lounge than you'd normally access at your miles tier. This is only a big deal if you fly too much to tolerate the normal lounge, but you don't get enough miles on one airline to use its high-end lounge. Here, you're choosing to sacrifice money for quality of life. It's not because miles are better, it's because you like the non-cash benefits and are willing to pay extra to get them.
If it's true that the average college senior has four credit cards, you won't be out of line to have several cards to game their rewards rules. Some cards are good for some things, and it's fair to use a Sharpie to write "FUEL" or "FOOD" on a credit card. It's all about the Benjamins.
Refusing your school's affinity card won't keep your school from its contractual minimum payments, and it won't prevent the school from receiving your intended donations. Make your voice heard when you donate, and do it yourself.

* The Up To 1% line turned out to be bogus; the formula ensured nobody ever got 1% of their annual purchases in cash back, because the top rate was 1% and it only applied after a certain level of purchases had been credited at 0.25% and 0.5% tiers and so on. If you graphed total cash back as a percentage on the Y-axis and annual charges on the X-axis, you could push X to infinity and never actually hit 1%. The kernel of truth in the ad, and its saving grace from a consumer fraud suit, was that one could get 1% on the last dollar charged, if one charged enough. However, the ad's implication was that folks should imagine getting 1% back on their annual charges, which wasn't realistic -- especially for small-spending students, and especially in a world in which merchants weren't accepting Discover at anywhere near the frequency of Mastercard or Visa or even American Express.

iPhuque

Today's iPhone launch offers a kind of "even worthy Homer nodded" opportunity to watch how a firm known for carefully orchestrated product launches can manage to screw the pooch at the very moment everyone is paying the most attention.

As I type, I note the shares are down on the day (over 2% in one day), despite that this is the official worldwide iPhone rollout, and despite that Apple's application sales portal shows some software vendors have already rung the register for tens of thousands of dollars in sales for single software titles. Mind you, this was day one. The fact that folks seem to accept the applications store well enough to pump tens of thousands of dollars into single titles (upgrade revenues for ongoing customers arguably have the same effect as new releases, as upgrade revenue is software vendors' single biggest revenue source) seems a fairly good endorsement of the App Store, considering its lack of history.

I, for one, would have no idea how the App Store is to use on an iPhone. It turns out that Apple's updater system, after informing me that a software version 2.0 was available for download and then updating iTunes to ensure it could be installed on my iPhone snidely displayed this gem:

This, after I'd clicked a box instructing iTunes to install iPhone 2.0 software.

Now, this might not be a new launch issue. My iPhone has been misbehaving, giving me spurious errors for a while now. The phone would be partway through synch, then report an error like this:

After repeated unsuccessful attempts to synch, I decided to try a software restore:


This is frustrating, because it doesn't tell you how long you are in for ... but, aha! I get a progress bar ...


... for a while ... then I get this cryptic message:

This is the kind of cryptic numerical error message I used to hear Apple fans describe when sniggering at Microsoft products, and which I don't think I've seen much since the days of MacOS 9. So maybe my phone is borked, and I'll have to get help at the Apple Store.

This would still leave unexplained the network crash, activation issues, cloud service outages, and other lunacy that seems to have plagued the Apple's 2.0 launch.

Assuming Apple likes its products described as "more workhorse than show pony" I'd think Apple would work harder to avoid what from the outside look like rookie mistakes. This isn't the kind of thing that inspires confidence in enterprise, particularly if Apple is to be entrusted with the iPhone's push messaging system that is to underpin all the incoming communications with third-party network tools like email, IM, and the like.

UPDATE: Apple may really be innocent in activation problems. Apparently activation issues are reported with O2, Rogers, AT&T, and possibly other carriers. Sales were reportedly brisk in many countries. I'm interested in leads on whether activation issues lay with Apple's back-end rather than with carriers' infrastructure, but I'm not sure how I'd find out. Presumably, a country whose launch was tame might have little carrier overhead, and failures there might point to a bottleneck with an Apple-operated activation step rather than a carrier dependent one. If there's a country with no problems on launch, it'd seem to clear Apple. Anyone got a specimen of a problem-free launch?

XP Sales Soar!

Now that Microsoft has stopped selling its last operating system, folks wanting to avoid its new operating system have made versions of its predecessor major players in Amazon's top-25 list for software.

The linked article points out that Microsoft benefits from being ranked even higher in sales for its office suite. I would add that these numbers would be higher if folks better understood that their state university ID cards could get them state government pricing or media for installing personal use under university site licenses (not long ago, that was under $20 at the University of Texas). However, easy things get complicated when Microsoft is involved. For example, if you do a year abroad, do you need a note from a Redmond parole officer?

This kind of complexity, and its attendant compliance overhead, makes competitive offerings all the more attractive.

Japan Says 'Ije' To iPod Tax

Unlike Spain, which apparently learned little from the experience of Canada, Japan has apparently killed efforts to enact a tax on storage devices of the kind found inside music players.

Perhaps Japanese seem to understand that the solution isn't to assume everyone is a criminal and that every storage device will be a vehicle for copyright infringement, and are offended that the honest folks will pay twice for their music -- once when they buy it, and again when they buy something with which to play it. Given the growth in digital-only music, a player tax seems contrary to the growing commercial reality that digital storage is a necessary tool for playing lawfully-acquired music.

Reason has to start someplace. It's certainly not doing well here (except perhaps to the extent you believe Lexmark should be able to use digital signatures to prevent you from accessing competitive vendors for printer supplies, or similar nonsense seemingly enabled by Congress over the signature of William Jefferson Clinton).

New Cranberries Album Discovered

Lest I be accused of perpetrating a consumer fraud myself, let me be clear from the outset: I have just discovered the existence of a Cranberries album. This does not mean that the Cranberries just issued a new album!

I have liked the Cranberries for some time. I discovered the Cranberries using Napster's[1] tool that allowed one to troll through the music files of folks identified using searches of favorite music. The libraries of folks with your taste in music is an outstanding place to discover music. The music need not be new: a novice looking for Jazz can easily miss ancient gems, and a non-English speaker who can't make out the words may need hand-holding to find things he already knows he loves, like "Bad To The Bone" by the well-known Jim Thorogood. At least, he's well-known if you have native fluency in the language in which he sings. If you don't, you may love the song but have no idea whose album you want. Napster's chat feature was excellent for that.

So as I stand poised to order the Cranberries' album Wake Up & Smell The Coffee, I see there really is a new album called Gold, which seems to be full of already-known Cranberries tracks, which the Amazon preview reveals to be the same tracks I know from the albums I've got. Given that I'm not on a campaign to own every title, but am just interested in the music, I'll have to compare the tracks on Gold (a 2-disc, 31-track 2008 release) to the tracks on all the albums I've got to determine whether there's anything new on it at all. As I checked the link in the Gold album, I spot yet another Cranberries compilation -- Treasure Box: The Complete Sessions 1991-1999.

This last product, like Gold, promises a remastered collection of tracks, but Treasure Box also promises completeness to the extent of the Cranberries' first four albums, and weighing in with four discs and 74 tracks, it's plausible it delivers.

So, looking at the surprising number of Cranberries offerings that consist of re-releases, I decided to count it up:
Albums

• Everybody Else Is Doing It So Why Can't We (1993)
• No Need To Argue (1994)
• To The Faithful Departed (1996)
• Bury The Hatchet (1999)
• Wake Up & Smell The Coffee (2001)

TOTAL: 5 Albums

Re-Releases

• Stars: Best of the Cranberries 1992-2002 (2002)
• Treasure Box: Complete Sessions 1991-1999 (2002)
• Gold (2008)

TOTAL: 3 Compilations

I was just set to make a joke, but then I looked at Treasure Box again. The four albums each have 18 or 19 tracks, rather more than the band averaged on its first four albums. What's the extra material? Joining Pavarotti to sing Ave Maria? A cover of Fleetwood Mac's killer tune Go Your Own Way? This stuff is good. You don't even have to like it all for the whole to be worthwhile. The extras on the ends of the four discs sum up to a new album on their own. Though of course there's no "album" feel to this collection, it's not a re-issue; it's stuff I've never seen before. Stuff that makes me want to buy the thing. If you like to hear Dolores O'Riordan singing, I'm inclined to conclude that Treasure Box can't be lumped with the other repackaged tracks and has to be thought of as an album for real band fans to own.

People just discovering the band should ignore the original four albums and buy Treasure Box. Folks wishing to be further mesmerized by O'Riordan's voice should also check out her other work.

I have the score now at 6 to 2, which is much more respectable than 5 to 3. The question now is what to buy first, the "new" album I found ... or Treasure Box!



[1] When I say Napster, I mean Napster 1.x, the real Napster, the one that enabled one to stroll through the music libraries of folks you discovered had musical tastes like yours, to see what else they liked. That was the killer feature of Napster, as proven by the fact it let me find so much new music that I ordered as many as twenty albums a month while it persisted. Now, of course, Napster has been neutered and I can't listen to full songs with it (you can't tell if a song is a winner in a 30-sec sound bite, you can at best identify whether it's the song you were looking for, which is no good if you are looking for new music and have no idea what you will turn out to want of the tunes you find) so it's basically useless to me for discovering music.

iPhone Issues @ AT&T? Or Just Issues With Yager?

This guy has got some things right, and others ... less right. He says here that Apple's unique revenue-sharing agreement with carriers is dead (true) and predicts panic at Apple if AT&T sells unsubsidized and unlocked phones it might buy from Apple, that Apple assumed AT&T would sell discounted with service plan bundles.

Which AT&T might do, I suppose. AT&T might have, say, large corporate customers with some very particular requirements and longstanding service contracts that would require contract-free hardware sales in order for the hardware to join the existing contract without mucking up the much larger and more longstanding arrangement with the carrier. But let's face it: why would AT&T sell phones unlocked if, as Yager states, AT&T's current practice is to push AT&T-locked devices to corporate customers? Doesn't AT&T prefer customers to carry and depend on devices that are tied to its networks?

Yager hypothesizes that AT&T's threat to sell unlocked, unsubsidized phones might create leverage to negotiate with Apple over iPhones.

Let's parse that. Yager spends the first couple of paragraphs explaining why Apple is making more on the new subsidy structure than it did on the revenue-sharing structure, and because Apple is paid all its money up front we can tell Apple is making this money faster under the new deal. And we recognize that iPhone users will have the same incentive to subscribe to Apple's MobileMe services that they might have if they used any different carrier. And there's no reason to suspect users' appetite for iPhone applications will differ materially based on carrier preference. It follows that Apple is happy as a clam allowing any willing buyer to get into this scheme, and would love to be able to reach customers whose only reason not to buy iPhones is a deep loathing of AT&T.

Given that iPhones have been on sale in Germany and France unlocked and unsubsidized for some time, and will be for sale unlocked at unsubsidized prices in other jurisdictions where mandatory service bundling is unlawful, there's no reason to think AT&T would be in a unique position to offer an ultimatum to Apple. Moreover, Apple can't be pressured with "threats" that will only increase its sales.

Now that Apple isn't expecting any shared carrier revenue, Yager is going to have to work harder to explain why Apple should care at what price or with what service AT&T sells iPhones. I can think of one factor only that matters to Apple: Apple may prefer carrier service rate structures that won't punish its customers for using iPhones' data capabilities, or Apple might get the criticism rather than the carrier (because other phones on the same network might not get used enough that the data plan rate matters much). Other than that -- which isn't an issue if customers rather than Apple pick the carrier -- what's the difference to Apple?

German Enterprise Goes Mac

Axel Springer AG, publisher of 150+ newspapers in 30 countries (including Germany's Die Welt) and employer of some 10,000 across Europe, announced today it's switching from its existing Microsoft platform to MacOS X.

There had been a video available of this announcement, but as I write it's offline.

Thoughts on the matter: Springer isn't the first German organization to give Microsoft the cold shoulder. Berlin made a high-profile move toward going Linux, but apparently was thwarted from complete migration. Nevertheless, various German governmental units like Munich[1] and the tax authorities of Lower Saxony (who moved from Sun systems to KDE for reasons of cost, data control, and support for the German language) have made the jump. Whole national governments, such as that in Brazil, have also made the leap. India, described as "a hotbed of Linux talent" for private firms looking to do Linux work, is also a growing locus of government migration to open source alternatives. Chinese compliance with a mandate that government units must use Chinese-produced software apparently supports use of Chinese distributions of Linux, which is in use in numerous departments and agencies there.

Microsoft hasn't taken public defections laying down. When Munich considered a report on why Linux might make good strategic sense, Microsoft lobbyists met with city personnel and laid out arguments why Microsoft's proposals met the report's various analytic criteria, in the exact same order as listed in the report -- despite that acquiring the report violated the city's fair bidding process. Likewise, grassroots efforts to protect state public access to data created by government employees in the United States from lock-in to proprietary file formats through legislation that would require use of the Open Document Format have been systematically assaulted by Microsoft -- successfully.

Any lessons here?

Private companies are better able to organize migrations in line with their preferences, because their decision-making processes are less open and their information potentially less leaky. Major enterprises like IBM and Google have been able to deploy whatever operating systems made sense. Governments wishing to do the same are likely to face serious friction in the form of lobbying and contract leverage.

The good news?

The crazy plans we heard years ago about Microsoft deploying an encrypted database filesystem that would be inaccessible to anything but a licensed Microsoft application, and migrating applications like MS-Word that create oft-used documents to file formats stored in multiple streams that would be impossible to store on any other filesystem, and the pervasive use of encryption and DRM to ensure that nothing but a licensed Microsoft product would be able to access the data placed in such a document by any user ... those seem to have died. First, Microsoft failed to deliver the filesystem. Second, efforts to make file content inaccessible to folks who don't keep up their subscriptions will certainly trigger ODF migrations, as claims that Microsoft supports ongoing data access would be more transparently false.

The promise offered by open-source tools -- avoidance of costly licensing management, avoidance of licensing litigation, avoidance of costly forced upgrades and/or licensing subscriptions, and the ability to apply funds toward value-producing efforts such as ensuring software meets organization-specific needs and ensuring that users are supported in their use of the software -- is likely to get more and more enticing as a growing base of interested organizations systematically improves the quality of the open-source suite of offerings.

What does this mean for Apple? The *nix users who want a high-quality user-interface, organizations with a desire to reduce the overhead of running multiple region-specific software packages by deploying a single image enterprise-wide regardless of local language, and organizations who happen to find Apple's hardware offerings compelling may all benefit from trends that reduce Microsoft-specific lock-in. Organizations with dependence on closed-source software -- many industry-specific tools lack quality open-source replacements -- will be able to consider Apple as a non-Microsoft alternative even if not an entirely OSS alternative: MacOS X depends on the open-source Darwin operating system, but the user interface depends in addition on Apple's Cocoa development environment which is not open source, but instead stands as Apple's principal discriminating feature in comparison to other platforms. To the extent Cocoa is attractive (e.g., for localization), migration to Apple may be of value even if the ability to deploy open-source Unix tools atop Darwin is not of interest.

It'll be interesting to watch how Apple does in enterprise going forward. Historically, Apple's been utterly uninterested in enterprise. However, AT&T and the iPhone may have led to something of a turning point, with Apple now offering Enterprise-specific features (and even admitting it) in order to pursue market with a new device (that is also a Cocoa platform). Pushing enterprise developers to Cocoa is really a small step from pushing them to Macs. Well, in fact, since the iPhone dev tools themselves must run on Macs, it is pushing the enterprise developers onto Macs, which is a small step from advertising Macs to the enterprise.

How the world turns.

If Apple's sales growth continues, it'd be hard for Apple not to end up selling Macs to enterprises in fiscally meaningful numbers. Maybe the Germans aren't weird outliers, but are merely ahead of the curve. If so, Apple's got quite a story ahead of it.

Of course, the story that will hang off Apple's handheld Cocoa platforms is also interesting. Apple will probably sell more of those than it does Macs from June 11 forward. Depending how those mobile buyers consume applications, this could also be the start of an interesting revenue stream as an application reseller. Definitely an interesting time to own Apple shares.

[1] Munich's effort might bear some scrutiny. Some allege it's not so much a movement away from Microsoft than it is a move toward a system that will require more intense IT support (see the comments) in order to grease some local vendors with political connections. The Munich effort, spurred in part by Microsoft's decision to sunset support for the software comprising Munich's installed base, was expected to cause München to pay more for migration to Linux than it would have paid to migrate to a new slew of Microsoft product versions, and according to the comments in the post in this footnote, they overran even that budget. If corruption is behind the migration, it's pretty clear there's no hope for public efficiency regardless the ostensible technological advantages.

On Apple's Software Strategy: Part II (Buy A Good Defense)

In Part I of this series I discussed my mid-1990s insight that someone with user-interface expertise and the will to do so could replace X11 on Unix and build something of high quality for developers, businesses, and administrators while also offering usability advantages over current alternatives. That part concluded with Apple actually buying NeXT, and my eventually overcoming my fear that I was wrong about a stock everyone (apparently including Steve Jobs, whose liquidation drove the shares to about $14 two splits ago) had given up as dead money. I ended Part I with a slew of questions about why Apple's hardware and software businesses were related and what this might tell us about Apple's trajectory from its current perch, so far above where Apple was a few years ago.

I mean ... where is there to go from here, right?

Let me repeat my comment from the last post: I bought without the intent or inkling I might make money inadvertently on a fashion for translucent colored desktop computers, or a revolution in portable music players, or the advent of Apple as a major entertainment reseller. Honestly, I don't think Apple had any inkling that its music players would be such a hit, either, but that's getting ahead of the story. We're here about the connection between Apple's software strategy and Apple's source of profit, its hardware business (Macs, iPods, and the new business in phones).

People don't buy computers because they make them taller or longer-legged, or because they are versatile accessories. People buy them because they want certain things done. The things they wanted done in the late '90s produced a number of questions for folks considering buying Apple's products:

• Can I email MS-Word documents to co-workers? (ans: yes, but whether you can create them or read them depends whether your version and the version on the non-Macs you're emailing are using compatible file formats, which despite Microsoft creating both application versions isn't a sure thing)
• Can I open WordPerfect attachments? (ans: they hadn't updated WordPerfect for Mac in years and later discontinued it and until OpenOffice appeared for free you were screwed)
• What will happen to all the software I already own? (ans: those apps will look beautiful on the shelf where they sit. Or you can use an emulator program to run a Microsoft operating system atop a pretend-PC on your Mac, and access anything you like so long as you are patient)
• Do they make games for the Mac? (ans: sure!)
• OK, I mean ... good games? (ans: dude, you're being mean now!) (OK, Myst was developed on the Mac, but they saw their sales coming from the PC and moved development platforms. Id's John Carmack, who was nostalgic about NeXTSTEP, posted in a .plan file when MacOS X appeared that it was worlds better for developers than MacOS 9 and prior and announced plans for simultaneous Mac and NT releases, but eventually panned early MacOS X in comparison to WinNT for development of 3D games. In the late '90s and early '00s the answer wasn't encouraging even though there were a couple of slick titles from Mac developers. Pangea's Nanosaur in 3-D was so cool. But Carmack, no Microsoft apologist, made it clear that games performance on Macs wasn't an evil plot to make Macs look bad, but a result of the performance PowerPC machines actually delivered plus the expected results of the unsurprising and natural preference of developers to spend time optimizing applications to perform best on the platforms with the most sales.)

In short, everything users want to do turn on software questions. If the machine is lightweight or pretty that might be a plus, but inability to do the things the user demands is a deal killer.

Steve Jobs obviously saw this was true when he announced the slick new operating system without telling folks exactly when it'd ship. Why did Apple need a slick new operating system?

First, security means more than just crackers trying to turn your machine into a slave-bot spam engine. Security means knowing that the mere act of running imperfet applications on your machine won't compromise the good work of the other applications. (Keeping applications from overwriting the memory in use by other applications -- or by the operating system itself -- is called protected memory and MacOS 9 didn't have it any more than Win95.) Security includes reliability: if your machine can't be depended on to do tasks when told, you can't expect your faxes to go out or your important email to be collected. (Making sure misbehaving, non-sharing applications don't hog all the computing resources and keep your machine from giving time to the applications you want to see run requires someone to play referee, and that 'someone' is the operating system's scheduler, which does preemptive multitasking -- assigning resources to tasks at the will of the referee rather than at the whim of the applications that might be playing on your machine. MacOS 9 didn't have preemptive multitasking, it depended on everyone to share nicely.) Security also means knowing something about the users on your system, and preventing them from monkeying with stuff that's not theirs. On a single-user machine this might seem silly, but it's still important: you don't want to inadvertently screw up important system resources with a mis-key, and you don't want misbehaving (or malicious) applications to be able to do so. You don't want your business letters, your financial records, or your really good school paper to get lost because some dingbat wrote a bad entertainment application. Giving different users (including fictitious users created solely for use by particular applications, like the web server) limited permissions is important on any computer system, to prevent badly-coded (or evilly-coded) software from causing you undue irritation. MacOS 9 pretended to have multiple users, but this was a joke, like multiple users on Win95.

I could go on and on, but the upshot is simple: Apple's old operating system was not secure in any sense that mattered to a developer (who didn't want to reboot from a protected network drive after every application crash in case the application's death throws included botching the on-disk system information on which the developer was depending to be consistent) or a user who didn't want to leave a machine running just one known reliable application all the time. Trust impacts purchase decisions.

Everyone "knows" that Mac users love the interface. What about Mac programmers? It turns out that programmers also have a user interface, it's just not the one customers use. When they sit down to use the developer's tools, they use an application programming interface provided by the system to enable their programs to get stuff done. If your operating system is OpenBSD, that interface is minimalist, designed to expose only the minimum that need be done by the application, and includes no stepladders to get to "frills" users expect, like graphical buttons and text that looks like pretty type. If your operating system is Microsoft Windows NT, your operating system provides all kinds of interfaces to every sort of development interface offered to programmers by Microsoft dating back to the says before Microsoft's operating system could run more than one program at a time, and before user interfaces contained color graphics. The vast variety of programming interfaces gives rise to considerable territoriality among programmers, who have strong views about the suitability of their favored development environment for the kind of work they do.

Upshot: programmers are as picky -- or moreso -- about their programming interfaces as their potential customers are picky about the interfaces presented to them by applications. Modern
programming interfaces that reduce programmer time and support good coding habits and facilitate code maintenance are Good Things™. The programming environment on MacOS 8 and its ilk was reportedly quite good for some things, but it was a 1980s-style procedural rather than object-oriented environment involving lots of functions with few parallels in the programming universe, accessible only through a high-dollar developer's tool kit sold by Motorola for use by its PowerPC customers, which if you read the history books was a small enough list that Motorola bailed out of the chips business. In short: the development tools were miles behind the competition and the programming interfaces involved new ideas shoehorned into an ancient software architecture only its mother could love. Apple wasn't going to seduce developers to write for the platform, it was going to have to pray for fanatics who refused to code for anything else.

This, of course, was a problem.

That's because without developers, there's no software. Without the software, there's little reason to buy the machine. Without the hardware sales, Apple's dead. And all for the want of a horseshoe nail.

So this, folks, is why Apple needs a software strategy if it's to succeed in hardware.

As it happened, Steve Jobs had some experience in the movie business, and lots of Mac users had interest in media creation as photographers. Indeed, despite Apple's scant few percent of market share, the Macintosh platform reportedly yielded to Adobe (the developer of Photoshop, which got its start on the Mac) even in those dark days over a quarter of Adobe's profit. But back to Jobs: he'd had personal experience at Pixar signing purchase orders for machines to do high-end graphics stuff, and he was sure there was money in it. Also, Apple's researchers were able to spot competitors like Avid charging several tens of thousands of dollars for electronic film editing systems that Apple imagined might be done in software on machines it could sell.

Apple bought the Final Cut video editing software -- which depended on special hardware accelerator video cards for real-time effects -- after its development team had bounced from firm to firm unable to sell the product due to intellectual property licensing restrictions in which Microsoft prevented hardware accelerator vendor Truevision from selling poducts that worked with QuickTime (Apple's cross-platform multimedia development environment). Thus, Apple bought Final Cut as a defensive move to prevent a promising Mac application that might sell desktops from being killed off, and with it, Apple desktop sales. Unable to find a buyer, Apple continued developing the tool as a competitor to Avid. Increases in the power of Apple-supplied hardware made more and more effects possible in real time, eventually without the aid of graphics cards that wouldn't be marketed to gamers. Apple's cheap video-editing alternative (compared to the Avid systems) were touted as saving the bacon of small film ventures, and as the software became more capable its comparison to Avid became increasingly favorable.

Apple saw a niche to exploit, though. Apple bought a DVD-authoring application (a Windows app whose customers Apple offered an upgrade path to Macs) to re-brand as DVD Pro so folks might master DVDs on their Macs, using content Apple offered to edit and arrange video. Apple later bought a pro audio application (whose Windows version died, etc.). Apple bought the developers of Shake, the application that made possible the special effects seen in Lord of the Rings, and after issuing a single Windows version update explained how folks could, you know ... migrate to Apple products. Apple cleverly offered cluster computing software for offloading big rendering jobs from the console where Shake was operated, and dropped the costly per-node Shake licensing fee. You just ... heh, heh ... needed to run the thing on Apple's servers ....

By 2002, Apple won an Emmy for Final Cut Pro. Apple, which killed the Windows versions of the product promptly on purchase, hit its millionth Final Cut Pro license sale and reportedly holds nearly half the video editing market, a position well ahead of #2 contender Avid (22%). Apple has added server products to manage video content, rolled out storage hardware and software to hold the media users want to access, and now offers a video editing lineup (storage, image manipulation, sound editing, film editing) that covers pretty much all the bases. Although Apple is still filling in the gaps, and tweaking the products to stay competitive and to leverage Apple's hardware offerings, Apple didn't create any of this.

Apple bought it.

And that's been interesting. After buying NeXT's beloved development environment, Apple didn't build everything it wanted from the ground up. Apple didn't know what it wanted. Apple was simply moving defensively to prevent folks from demolishing Apple's ability to make sales by killing key applications by buying applications that would fill the gaps and keep hope alive.

Apple's buy a good defence software strategy wasn't just unleashed for movie editing. When iTunes was launched by Apple, it was little more than a relabel of the SoundJam application formerly available from Cassady & Greene. Apple didn't yet sell a music player, but Apple saw that folks were using their computers for music. When Apple in 2001 launched a firewire-only iPod, running a licensed Pixo operating system and with support only for its own operating system, Apple was just working a niche it'd discovered. When the niche was threatened with DRM -- and everyone seemed at the time to agree that Microsoft would eventually overtake the field because it was the biggest and had the best development budget and the most financial clout and there wasn't really room for multiple competing standards for devices to license and use -- Apple defensively launched a service to make sure Apple's customers could buy electronic music formats that would interoperate with its products.

Once Apple announced iPod and iTunes for Microsoft's operating system, the addressable market for its music products exploded and Apple began seeing serious sales. It's worth noting that Apple didn't envision this or try to foster it at the outset: Apple was essentially prodded into offering support by third party developers who proved folks would pay money for a way to get the iPod to synch with music collections on computers that ran The Other Operating System. Apple had little alternative to official support if it hoped to maintain quality control over the user experience. After all, user experiences from other vendors can in some cases be pretty poor. Apple's been selling tens of millions of music players a year for a while now, and the latest version of the players have a curious feature.

The latest version, the iPod Touch, runs MacOS X, the operating system Apple migrated folks onto in order to save its hardware business. At first, Apple didn't want to allow third parties to develop applications for the platform (which is the same as the iPhone), but developers revolted and Apple, seeing the possibility of iPhone use in enterprises that needed to deploy applications to workers, relented.

The development environment on this Apple handheld's operating system has an interesting feature: John Carmack wants to develop games for it. And Carmack isn't alone. Since the development tools (that are free) are the same on the Mac and the iPhone, developers attracted to the platform for access to the handheld (or desktop) market find themselves developing software very nearly able to run on the other (the interfaces and input aren't the same; the desktops don't have an accelerometer, for example, and the phone hasn't got a mouse).

So we see Apple's software strategy in action: Apple buys, buys, buys to broaden the market it can address with its products. Apple's new development environment (which is largely unused in these Apple acquisitions) attracts third parties to write the applications folks want to see. And -- and this is kinda interesting, as it's not yet proven itself a winner -- Apple is using its NeXT-derived development environment to build novel applications to address customer needs. (Yes, Keynote is beautiful, though the performance of the 1.0 application was abysmal. Aperture 1.0 was a fiasco, useful mostly as an object lesson on the mythical man-month. Who knows when iWork's document or spreadhseet applications will be ready for prime time?)

Now that we've seen what Apple's done to defensively protect its ability to make hardware sales by promoting key niche software and encouraging third party developers to add value to Apple's platform, Part III of this series will examine where this puts Apple in the competitive landscape and what it means for the future. Remember that stock graph? That's what we need to know: do we hold or cash out?

Sour Milk: Purchase Misses Target

L likes to buy the best sustenance possible. Gouda from Holland is the tops in cheese according to L. To avoid unnecessary additives L favors milk.

The chocolate must be dark chocolate.

L values quality.


I will avoid the gruesome details of how Borden's gallon of Elsie's Finest, bought at a Super Target on June 27 with a sell-by date of July 2 was, on the very day of purchase, so foul it ruined a meal and forced me to gag on homemade hot cocoa. (Oh, the humanity!)


Suffice it to say that $5.39 doesn't go as far at Target as it used to.

The answer? I get into my Diesel and return to the scene of the crime. En route, I am reminded that the highly-detailed Mercedes literature on the safety features of the car lied about the passenger seat weight sensor's 75-pound setting, as I am beeped at for the affront of putting a jug of milk on the passenger seat while driving a few blocks. The red blur you may see is the seatbelt warning light, a feature which according to the pre-sales literature is supposed to be engaged in the Mercedes E320-CDI when the weight sensor in the passenger seat is triggered, which in turn is described as occurring when it senses 75 pounds of pressure. You are supposed to be able to put your milk on the seat without harassment.


After waiting several minutes to reach the front of the customer service queue to return the milk, I ask Redbeard: "It isn't s'posed to come pre-spoiled, is it?" He says he hopes not, and refunds me via a credit to my American Express Blue card.

I then drive to Whole Foods, by a 365-brand milk gallon for $3.99, and charge that to my American Express Blue. The interesting thing is that I think Target is considered a superstore and only to qualify for the 1.5% cash rebate, whereas Whole Foods is a grocery store, is on AmEx' list of "everyday shopping" locations (like fuel stations), and thus nets ne 5% cash back.

The upshot?

I lose 8¢ in cash back on a $5.39 Target credit, gain 20¢ cash back on a Whole Foods charge, for a net 12¢ cash back atop the $1.40 savings on the milk itself (there's no sales tax on this purchase where I live). Excluding the mileage and time to pull this off -- owing entirely to Borden's transportation or Target's handling of the milk -- I note to myself that the gallon of milk has an effective price that's $1.52 cheaper at Whole Foods.

Later I'll have to post on the credit card reward system game. For now, I'll just keep buying milk at Whole Foods, where food is a core mission and not a lure in the hope you will buy an electronic appliance. Besides, the Whole Foods bakery offers the yummy "Seeduction", and many breads worth making into sandwiches.

And L will be going to Whole Foods anyway.

(For those of you concerned with the poor quality of the photographs accompanying this post, I sympathize: they were taken with a v.1.0 iPhone, whose shutter speed is timed to match the pace of an arthritic turtle and whose motion stabilization simply does not exist. I would suggest a tripod for use with this camera, but the iPhone has no tripod attachment. Perhaps some enterprising person will build a tripod with an iPod Universal Connector so iPhone users can occasionally get a non-blurry picture without first embedding the phone in hardening cement, which has to be bad for the button. The tripod could also, you know, have integrated speakers and a solar recharging feature for backpackers breaking for lunch. Just an idea.)

MP3ft! (MP3 is Theft?)

Resurgence in interest in music, despite a decline in CD sales, has meant a boost in vinyl. The newest hook for the audiophile? Buy the LP, get a free download. Why do you need a "compact" disc when you've already got it as small as MP3? (or FLAC, or MPEG-4, or ....)

Meanwhile, iTunes has sold five billion songs in the last, oh, five years.

A Theory of Shopping

Getting a good martial arts instructor is like getting a good auto mechanic, plumber, or
physician. If you don't know anything about the field, you're in a poor position to tell the wheat from the chaff, and you're likely to get had. If you walk into the shop and ask whether the professional you need is the one standing in front of you, you know already the answer you'll get:

Why, certainly.

What you need, my friend, is a guide. Hopefully, a little common sense will set you on a less treacherous path.

The first thing you need to know when you are shopping -- for anything -- is What You Are Looking For. If you don't know What You Are Looking For you will either go home empty handed (if you are extremely cautious) or will go home having bought whatever was available when you stumbled into the first salesman who caught you. If you don't know what you want,
if you don't know what need to satisfy, you will likely fall to some sales pitch designed to move whatever is in stock (or, to push whatever expertise is available, if you're buying services).

This is why, if you want to avoid disaster, you (a) make a grocery list and (b) don't go grocery shopping hungry. Ever gone shopping hungry someplace that takes credit cards? Then you know exactly what can happen.

Supposing you are interested in shopping for a martial arts instructor, you might be looking for:

• Exercise
• Outlet for Competitive Instincts
• Self-defense
• Dating Material That Is Fit
• Company of People Who Afford Leisure Activities
• Someplace Harmless To Kill Time 'Till The Addiction Meeting
  
• An Alibi
  

Other things may come to mind. If you want to be able to fight you may want to find an instructor that is either built like you are (understands how one with your body fights), or has satisfied students built like you are. Talk to them. How long have they been there? How has the class changed the way they do anything they do in their lives?

(If you're looking for a mechanic, you might be asking: what kind of car do you want maintained? How far are you willing to drive? Do you need a loaner when you drop it off? Some of these questions will be very similar regardless whose skills you hope to employ.)

Let me give you a little hypothetical. A man of obvious physical fitness and great demonstrable strength runs a martial arts business some distance from the campus of a well-known university. Through a personal connection with a member of the coaching staff, he is able to offer a class through the university for credit. The school allows students to get one credit for P.E., which is two semesters of some P.E. activity like kayaking or Karate. When you meet the instructor, he's wearing a red-and-white belt that (he says) indicates that he's a 6th Dan, or sixth-degree black belt. As you ask him questions, he tells you he's about to start an Aikido class, and why don't you stay to watch? You see folks of all sizes rolling on mats, practicing falling on their butts, and moving on command in repetition of various strikes and blocks using short staves about shoulder height or shorter.

Here's what you don't see: The instructor's 6th Dan is in Karate, and he's only first studied Aikido last summer. The reason the students in all his classes use a weapon is that the cost of the weapon isn't part of the student's tuition, and enables a direct-sale opportunity directly from his school. He tried to upsell them into a high-end uniform, too, of course. The instructor's enormous physical strength makes him utterly oblivious to the problems facing small women asking advice about wrist throws' effectiveness against thick-jointed men with an eighty-pound advantage, and when questioned about specific techniques that do depend on either surprise or superior force, he acts like the students just aren't doing it right. After all, it always works when he does it. When he demonstrates projecting chi (spiritual energy) -- a subject on which he is happy to open discussion, mostly because (you can tell by his smirk) there's nothing anyone can say to prove wrong anything he might claim -- there's nothing he ever seems to do that isn't fully explained by the fact he's a wall of muscle who weighs two hundred thirty pounds if he weighs an ounce (and probably more). Students are invited to attend master classes given by guests, that serve as advertisements for his classes because they are all held at his studio. (In fact, the entire university course is an advert intended to allow himself to distinguish his business as the only one endorsed by the blue-chip university whose coach is his personal buddy.) A master class instructed by a little 5'5" guy from Atlanta turns out to be a killer deal: the guy really knows his stuff and can teach in one day what the studio owner can't convey in a year, because he knows the answers to questions, and the studio owner is basically a giant brute who's carefully learned all the buzzwords needed to redirect pesky questioners trying to ascertain whether he has deep understanding to convey, or is just personally a highly-fit badass who's memorized a specialized vocabulary of Japanese.

And as you stand in the studio after the master class, you learn there's a dicount: if you sign today, you can join the Black Belt Program for 10% off the normal price, which is itself a 25% discount off the price you'd pay month-by-month, and you get the belts thrown in for free, plus a special patch indicating you're in the Black Belt Program. Asking about what the Black Belt Program means you'd discover it is a prepaid program for about a year and a half of classes, or until you pass the black belt test, whichever comes first. Folks who stop making payments on their Black Belt Program contracts discover that a contract for services is enforceable where the studio does its business, and that deciding you're done with the school because it's not teaching you the things you need to learn (or because incompetent instructors have allowed you to become injured by insufficiently supervised students) isn't going to prevent a court from enforcing your obligation to pay a few grand in tuition fees. This last bit, you can learn spotting the studio owner walking into the county courthouse, where he is not shy about telling you he's there to sue nonpaying quitters because he's got a business to run.

Oh, yeah. Did I mention I actually met this guy? I see on his web site that he's got a long-limbed woman working as an instructor. I'm thinking already that her ability to smack female competitors for points while they're still too far away to hit back (the body is points under most strike-oriented martial arts tournament rules, not the limbs) was probably a major plus when she was recruited.

This isn't to say giant, brutal badasses can't be good martial arts instructors. There's a specimen like this in Austin who can probably outgrapple a bear, and studying with him will make sure you (a) know where your technique is faulty, and (b) know when you are trying to win with strength (which doesn't work against him) and when you are actually succeeding in some defense due to quality technique. And that's the problem: you can't tell by from their advertisement or their portrait which ones are the worthless chumps and which ones have What You Need. You need to meet them. You need to see if their philosophy about their craft is deeper than a pile of buzzwords. You need to see if the school is all about selling belt tests, or is really about the craft.

If you don't want to compete, do not go to a studio that requires competition or whose instructor uses competition results as a credential. I'm here to tell you it's possible to win in tournaments by being longer-limbed, quicker, more heartless ... there are lots of things that can aid the race to a winning score in a tournament than being able to impart knowledge about martial arts technique. In fact, being a worthwhile teacher is probably not much of an asset in a tournament. On the other hand, if you want competitive athletics, find studios that organize attendance at several events a year -- or run their own tournaments that attract out-of-towners. Don't look at what the instructor has won, look at his students and ask them how they've done.

Watch a class. Bored students, questions that don't get answered effectively, instructors who don't seem attentive and don't stay with students they're correcting until they've got it right ... walk. Most of all: before you sign a big contract to get that quantity discount, get a sample to make sure it's a cake you really want to eat.

I've seen instructors give students explanations cribbed from ninja movies, stuff about launching bone splinters into the human brain for immediate death, and so on -- there are folks who will try anything on the gullible, and some of them have actually fallen for it themselves. Like the big oaf who talked about chi, he didn't know any better. At his size, he'd never if noticechi took a vacation. And, looking at him at work, I'm thinking it's been on sabbatical for years. It's his business plan that's gotten the good exercise. And the word of caution is that good salesmen stay in business longer (skills or no skills) than teachers who haven't worked out how to make a profit. Survival bias favors businessmen, not martial arts instructors.

It's a jungle out there.

The sad thing is that the story is exactly the same when you need an attorney, a pediatrician, a mechanic ... you really benefit from having a native guide to help you understand who you're dealing with. A surgeon knows what surgeon to visit if personal need arose. These kinds of references are invaluable. Shopping by the yellow pages is a lottery.

You can google for commodities and not get burned: the reason they're commodities is that they're interchangeable. Skilled services is harder to shop for. Later, I'll post on services that allow folks to rate businesses with which they've had experience. This looks like a trend that may really be worthwhile, though the possibility exists that fear of liability may prevent some bad reviews.

More later.