I must say, I’m beginning to admire Henry Blodget for his unabashed willingness to ignore any irony others might see in his analytical posts about Amazon.com, like this one that looks at Citi analyst Mark Mahaney’s report that the Amazon Kindle could be a $750 million iPod-like franchise in a couple of years.

Blodget does not explicitly agree with the prediction, indeed, he points out some holes in the theory. He doesn’t fully repudiate it, however.

I’m clearly not a financial analyst and so any disagreements I may have with Mahaney’s predictions have nothing to do with market-share numbers. I have no idea about the revenues or bottom-line impact of future Kindle developments. However, since some of his analysis is based on his personal experience with the device, I feel I can at least weigh in on that front.

First, let me say I use the Kindle frequently. Not quite daily, but several times a week. My review of the Kindle from last December is still accurate. I haven’t really been surprised by anything about it during the past five months. It’s still a clunky, poorly designed piece of hardware with a ridiculous interface. Yet the EVDO (digital cellular)-powered feature that allows one to instantly purchase books from Amazon for less than $10 is near magic. That price-point for books and the instant download are what make the device work for me — and, apparently, the Citi analyst, also.

However, I stand by my earlier prediction — and this is where I find a flaw in Mahaney’s analysis: Apple won’t stand still and let Amazon have this market all to itself. As I’ve written about ad-naseum, a slightly larger iPod Touch linked to eBooks distributed via the iTunes store would match and raise the game with Amazon. At that point, Amazon would be competing with the iTunes distribution channel, but with Amazon hardware that looks and feels like it was designed in Soviet-era Russia.

Also, with Apple in the game, its eBook format would be readable via the Mac or iPhone, as well. The Kindle format is locked into a Kindle device.

As I wrote last November, I’ll continue to use my Kindle until Apple comes out with something like this (even if it’s not in the next couple of weeks):

Via PaidContent.org, comes news (I guess it’s “news” that the Financial Times and Wall Street Journal are reporting what every Apple rumor site has been saying for weeks) that Apple will announce a rental option for some video purchased via the iTunes Store. However, there’s a new twist to the report today: At least one studio, 20th Century Fox, will start adding an MPEG-4 version to DVDs it sells, allowing purchasers to easily transfer the movie to iTunes or their iPod/iPhones. According to FT.com:

“A digital file protected by FairPlay will be included in new Fox DVD releases, enabling film content to be transferred or “ripped” from the disc to a computer and video iPod. DVD content can already be moved to an iPod but this requires special software and is considered piracy by some studios.

Many people who read that last sentence will know what it means. But if you don’t know, you can find out by clicking over to this website to learn about HandBrake, an open-source, GPL-licensed, multiplatform, multithreaded DVD to MPEG-4 converter, available for MacOS X, Linux and Windows.

For the record, in my opinion, it’s crazy to call what you do with HandBrake piracy. Converting a file is not piracy — it may violate some obscure and legally-dubious terms of usage agreement, but it’s not piracy. You can do perfectly legal things with such a file. Or you can do illegal things, like try to re-sell it. The act of trying to re-sell such a file is piracy — not the conversion of the file.

Of course, I’m not a lawyer, so what do I know? Rather than a legal confusion, mine may be merely a confusion of logic. However, I find it an intellectual challenge to understand how I can be pirating something when I purchase a digital file on a DVD and convert the file into another digital format merely for the purpose of watching it on a digital device other than my TV, like a video iPod or iPhone — or on my computer without having to lug around DVDs. I’m not selling copies or even letting others borrow the movie — something I could easily do with a physical DVD. I’m merely transferring digital media I’ve purchased to another device for personal convenience — a variation of time-shifting, which has been determined to be legal. (I guess this makes me what Fake Steve Jobs calls a “freetard.”)

With music files, the industry has pretty-much given up their efforts to turn their customers into criminals when they decide to transfer their purchase between listening platforms. Recording industry schemes like Apple’s ironically-branded FairPlay DRM are slowly going away. (I purchase DRM-free music through Amazon.com. Update: And now I can buy even more DRM-free music via Amazon according to this press release announcing that downloads from Warner Music Group’s vast catalog are available in MP3 format from Amazon starting today. My guess: Anticipate follow-up announcements from all of the other usual suspects, including Apple and Walmart.) It will take a decade or longer, but I’m sure movie studios and, if they actually become popular, eBook publishers, will go through a period of attempting to “protect” media files (translation: keep you from reading what you buy for a Kindle on any other eBook reader). Ultimately, publishers and studios will understand why it makes sense to let their customers buy digital versions of movies or books one time and then view/listen/read it on any digital platform they choose.

(Note: For those who think I might not understand the differing value of content offered in different forms, let me be clear: I’m referring to various “digital” formats of the same digital file. I’m not suggesting that I gain the right to download the movie free because I paid to view the movie in the theatre — however, I think that would be a clever marketing strategy by studios. Here’s a slogan for them: Buy it once, enjoy it forever. But unfortunately, if they did that, the writers wouldn’t have anything to strike about.)

There have been lots of good comments on my week-old post about the Amazon Kindle vs. a possible larger-format iPod Touch. Today, Michael Hyatt, CEO of Thomas Nelson Publishers (the sixth largest trade book publisher in America and the world’s largest publisher of Bibles and books for the Christian market) comments that Apple may now have a good 2/3rds solution to eBooks — a hypothetical larger format iPod Touch and the iTunes Store channel — but what they don’t have is a relationship with book publishers — and Amazon is most publishers #1 customer.

Says Mike:

“I completely agree. I would much rather have an Apple Touchbook than the Kindle (which I own). However, you’re forgetting one small detail. The device is only one-third the equation. iTunes is another third. So far so good. A seamless way to get content from the store onto the device. What Apple is missing is the RELATIONSHIPS. They don’t have any relationships with book publishers that enables them to get access to the content. (I know because I am the CEO of the Thomas Nelson. We are the sixth largest book publisher in the U.S.) Could Apple develop these relationships? Sure. My point is that they haven’t started and this is where Amazon has a leg up. For most of us, they are one of our largest customers—and we trust them.

Related: I’ve had several people email me saying they already read books on their iPhone. And one web-apps company has contacted me with a solution they offer related to reading an eBook this way. I’ll be trying out the different solutions — along with my review of the Kindle I’ve ordered — sometime in the next couple of weeks.

Later: Robert Scoble pops a blood vessel ranting after his first week’s use of the Amazon Kindle. Really, Robert, tell us what you really think about the Kindle. I lost count after the fifth, “Whoever designed this thing should be fired.” He then gives the designers the worst insult imaginable, “Did you hire some out-of-work Microsoft employees?”

Equal time: I point once more to Aaron Pressman’s positive review.

While John Gruber’s post on the new Amazon MP3 download service is filled with interesting facts and dead-on observations, his math regarding the profitability of music sold via the iTunes Store is a bit suspect as he dismisses the significant “costs” associated with servicing the downloads, i.e., “acquisition costs” and marketing expenses. Moreover, the point being made by others is not that Apple makes no money (sorry for the double-negative) from selling music — rather it’s more about dogs and wagging tails. Even if you use Gruber’s inflated numbers for what Apple “gets” from selling digital music, it’s a rounding-error compared to what it “gets” from selling the hardware used to organize and play that music. And, more importantly, the profit margins on those hardware products dwarf the thin margins of selling music downloads. iPods, et al, are brilliant golden eggs — the iTunes Store is goose feed.

Again, I agree with Gruber’s observations about Amazon’s missed-opportunity by launching their MP3 service ten-years too late. However, I can’t help but believe the numbers-crunchers at Amazon helped to delay the launch by continually pointing out just how lame the margins are on selling music downloads.

Admittedly, I’m no fan of the iTunes Store. As much as folks who read this blog may consider me an Apple fan-boy, the Apple iTunes Store does not benefit from any halo-effect of my admiration for certain other Apple products. Indeed, I hate the Apple iTunes store and its ridiculous authorization and DRM approaches. You can blame it on the record industry all you want, but the iTunes Store’s implementation of DRM makes a mockery of Apple’s typically savvy approach to pleasing the customer with ease-of-use elegance. Unfortunately, iTunes Store is filled with “gotcha” tricks that seem designed to make the customer feel like an idiot, or, worse, a victim.

I’m sure I’ll get plenty of drive-by shots on this post from people who haven’t read this blog over the years and know of my regular suggestions to anyone who uses the iTunes Store to immediately burn a CD of music purchased there and to strip-out the DRM as quickly as possible. Yet, I’ve also learned that real-people in the real-world have no idea how to do that (including members of my own family who have had to re-purchase certain iTunes purchases recently). If you want to know how absurd the iTunes Store is, tell an Apple Store “guru” that your hard drive has died on your Mac and the only place you have your purchased music backed up is on your iPod. He’ll say, “I can’t officially tell you this (wink-wink), but there are ways to do that” if you search on Google.

I’ll stop ranting there. I’ll still use iTunes (the desktop software) and I believe there are certain free things on the iTunes Store — iTunes U, for example — that are modern marvels. But there’s no magic — and a lot of potential agony — in purchasing music via the iTunes Store.

Bring on all the competitors possible.

Sidenote: I regularly back-up all music to an external hard drive and have burned all music (6,000+ tunes) to DVDs.

Update: An impressively-instantaneous e-mail response to this post suggests I should check out mediamaster.com for storing and accessing my music collection. I haven’t checked it out, but not having such a feature incorporated in the iTunes Store is one of my core-problems with it: It should provide me “access” to my purchased music…forever.

Update II: Those witty Amazon MP3 folks are selling an 89¢ DRM-less version of the Feist tune, 1234, to help kick-off the new store. The tune is the #1 download of the day. You’ve heard the tune because it’s the one played endlessly on the new iPod nano commercials. For ten cents more, you can purchase a DRM-ladened version on the iTunes Store. For the record, I think the song sounds like Shania Twain trying to go alternative, and failing.

When I attended Macworld in February, I wrote, “The least impressive thing about the iPhone is that it’s a phone.” Several times, I’ve suggested that getting an iPod with all the iPhone features except the phone” would be a good thing. So, yes, I like what I’ve heard about the iPod touch. I guess, I’m just not a “phone” person, as I primarily use the iPhone in every way possible, but don’t really talk on it that much. Again, that may just be me.

Even better than the iPod touch or iPhone/ATT would have been the iPhone/wifi/voip device Dave Winer suggests as an alternative version of what could have happened over the past few months:

“Suppose Apple had never done the deal with AT&T and they were announcing the iPod Touch today. If they hadn’t announced a deal with Skype or their own software to connect the new iPod to the phone network through wifi, we’d all be speculating about it widely. It would be the obvious next step. And suppose they had announced it. At the same time they could have said “Okay, we know wifi isn’t everywhere yet, but 17 billion Starbucks outlets have them, and you can use your new iPod at every one of them to call anyone, for a very astonishingly low price.” So intstead of propping up the old over-priced locked-down phone system, they’d be like the runner in the 1984 commercial, throwing the torch in the face of the oppressor.

I agree with everything Dave says, except I think there are now, officially, 18 billion Starbucks.

Here’s my alternative to Dave’s alternative. Suppose that software hack that opens the iPhone actually works and someone hacks a bridge to Skype or some other VoIP provider. Since the price of an iPhone dropped to, roughly, the price of an iPod touch (16 GB iPod touch and 8 GB iPhone are priced at $399), wouldn’t that be about the same thing? I agree with Dave, however, it would have been much more elegant and radical and under-warranty had Apple done it.

In reality, for business purposes or many other reasons, some people will always want the stability and infrastructure of what an AT&T can bring to the iPhone. But for many, an iPhone/wifi might be a great alternative (for a $60 a month-savings trade-off).

Sidenote: On Twitter, @SteveRubel twitter.com/steverubel said that Apple was “horrifically rude” to drop the iPhone price $200 nine weeks after the launch. I responded, “We now know the market-value of nine weeks of iHipness.”

The other day, I speculated-out-loud that Apple may have grounds to sue Universal for factors related to “restraint of trade” in not allowing DRM-free music to be sold via the iTunes store while opening up such an option to nearly all other online retailers of any heft. (I admitted — and still do — I have absolutely no knowledge of the law surrounding such an issue, but I do recall “restraint-of-trade” being a central-focus of legal and regulatory battles in the book-retailing industry whenever one channel of distribution appears to gain preferential treatment from publishers or wholesalers.)

However, after thinking about it some more and reading articles like this one in the LA Times that re-hash the conventional wisdom that Universal is using this as some type of warning-shot against Apple, I have thought about it some more and come to this conclusion: Why should Apple give a rip about how people purchase DRM-free music? They should be encouraging Universal to do this and hoping that Walmart, Best Buy and anyone else who can sell DRM-free music will be as successful as possible.

Why?

In reality, Apple doesn’t make that much money from selling music. I once wrote about 10,000 words pointing out how Apple’s podcasting strategy, in which they support the RSS-distributed delivery of what is, for the most part, free music and programming, is a winner for them because, duh, Apple is in the business of selling hardware that organizes and plays music — the “content” part of iTunes is not their business. I won’t repeat the economics of this, as I’ve covered it before, but believe me, the margin Apple earns on selling music is a microscopic fraction of the margin they earn on selling an iPod or iPhone.

In reality, Apple wants you to purchase DRM-free music any way you can. They are begging Universal to the throw them into the briar patch if they doth protest too much (to mix literary metaphors) Universal’s selling of DRM-free music through every other channel possible. Steve Jobs & Co. know that on iTunes, there is this little menu item called “Consolidate Your Library” that will automagically suck into iTunes all of that DRM-free music you purchase via other sources.

Steve Jobs & Co. know that in a few months, Universal will let them sell DRM-free music. Even I, who am observing this from so far away I have to squint, can see it is inevitable that Universal will cave-in on this after all of their “testing” is done.

It’s official: Wearing an iPod in a thunder-storm is not a good idea. Quote: “Although the use of a device such as an iPod may not increase the chances of being struck by lightning, in this case, the combination of sweat and metal earphones directed the current to, and through, the patient’s head.”

Next month the New England Journal of Medicine will look into whether or not one should use a Blendtec blender in a thunderstorm.

Still traveling: I’ll be back in Nashville — and online — late tonight. Until then, anything I may have posted on this blog was probably not that interesting, anyway. One observation however: I think the iPhone coverage has entered the Paris Hilton-zone. It’s just a gadget, folks. As a long-time (since 1984) purchaser of almost every Apple product ever produced (except the Newton), I can tell you one thing: In six months, there will be a much better version of the iPhone on the market and everyone who purchases one tomorrow will wish they had one. If you wait until February, 2008 (or maybe November, 2007), you’ll be able to get the iPhone this one should have been.

Or better yet, you’ll be able to get an iPod with all the features except the phone.

Khoi Vinh writes about the limits of his stupidity, which just-about (except for the R.E.M. tickets) sums up my thoughts on when I’ll get an iPhone:

“I’m cringing at the idea of queuing up outside the Apple Store to get my hands on one. That’s about where I draw the line, I think. Standing in line too easily dredges up memories of long spells in line at my local shopping mall trying to get decent tickets to see R.E.M. or some such act when I was sixteen — I guess I’m glad I experienced that kind of extravagant stupidity once, but I’m not about to do it again. Ever. The fact that I’m more or less mentally committed to buying an iPhone at the first reasonable opportunity — regardless of what potentially scathing reviews its touch-based keyboard will undoubtedly receive — is enough, I think. I’m not going to physically plant myself on a sidewalk through heat, rain or multiple mealtimes just for bragging rights. It’s just too much; this personal investment in having an iPhone of my own by Saturday isn’t that important to me. On the other hand, if you have a surefire plan to share queuing duties, let me know.

The 16-year-old volunteered to camp out for me — if I’d get him one. Forget it, I said.

Actually, having been burned in similar ways, I’m a bit like Eric Rice, who says that despite already having AT&T phone service, he thinks EDGE is awful for wireless internet. He also knows of Apple’s consistent record in not getting the kinks out of the first batch of new products. Been there, done that, many times. Eric is going to wait a while.

I will probably order an iPhone online and get it when I get it. Intuitively (I won’t know until I try it), I still think the least impressive thing about the iPhone is that it’s a phone. As Apple is sure to come out soon with an upgrade of the iPod that has all the features of the iPhone, without the phone, I would wait for that if I weren’t so programmed by Steve Jobs to run purchase everything he tells me to. What do I mean, “all the features, except the phone”? Well, watch all those iPhone ads and you’ll notice something. They’re about all the cool stuff you can do if you have an iPod with wifi and accelerometer features — and then at the end, there’s a throw-away line that goes something like, “and, oh yeah, it’s a phone.” Well, frankly, I already have a phone. It’s all that other cool stuff I want.

That said, I reserve the right to be wrong — as I often am when it comes to Apple products. For example, I thought the iPod Shuffle was ridiculous when it first came out because, at the time, a nano cost just a little more and had many times the features and memory. So much for my theories.

Here’s some advice to those who want to upgrade to a newer iPod, cheap. Now is the time to look on eBay for some really nice, used ones — recent models with all the video bells and storage whistles. The early-adopter wave that will be purchasing iPhones all own nice iPods, already — and many will be selling their last early-wave purchases on eBay to help defray the costs of purchasing the new iPhone. The supply will be heavy for the next few weeks, so there will be some great deals. Happy shopping.

I learned that trick from observing the 16-year-old sell old videogame platforms to help fund the purchase of new ones.

This photo posted on Flickr is supposed to be an iPod that deflected a bullet from an AK47, saving the life of a soldier in Iraq. I’d like to believe it, but whenever a description of something starts off, “this is from my friend’s, wife’s uncle,” I remain skeptical until it is analyzed by Snopes.com. Again, I’d like to believe it, but the elements of a hoax are too obvious. In addition to the convoluted source of the photo, another indication it’s a hoax is that it’s an iPod. Pranksters know that gullible Apple cultists* never doubt any miraculous claim about what one of its products can do.

*Please, no attacks. I am one.

(Thanks, Cole.)

What do you call this decree from Steve Jobs? A manifesto? An essay? An edict? A judgement? I call it a long-overdue Apple papal bull.

In a minimalist presentation of 1,877 words, lacking his typical flare for graphics, Steve Jobs issues an essay on the topic of the cumbersome and easily hacked protection record labels require on music sold through Apple’s iTunes Store. Titled simply, “Thoughts on music,” the document is a big-pulpit, big-club swing at the big-four record labels calling on them to stop requiring DRM on music sold online when the same music sold on CDs carries no such protection.

Quote:

“Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.”

Jobs then suggests that European governments and consumers are barking up the wrong Apple tree when they protest that Apple is the culprit in the music-protection debate. He invites everyone to point their protests at the record companies.

“Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.

I think this is a great statement, but it would have impressed me if he had issued it in 2003 when the iTunes store launched. Any time is better than never, but Jobs loses some of the moral high-ground when doing this in reaction to governmental regulatory threats. While some on the blogosphere are ready to saint him, let’s pause: this is merely a logical business decision on Apple’s part. That aside, no DRM is a good thing.

Next suggestion: Drop DRM on those videos you sell on iTunes.

Observation: It’s odd Apple has no “blog-like” platform to issue such statements. Hey, but when you’re Steve Jobs, issuing some “thoughts” is enough, I guess.

Observation II: Mark Cuban is a better writer than Steve Jobs’ ghost on this.

Technorati Tags: apple, drm, ipod, itunes

I’m back in my room briefly before heading out on the exhibit floor to see all the new stuff. Here are some thoughts:

First, I hate perpetuating an Apple rumor meme. I’d prefer to just point to my page of “All the Apple Rumors You’ll Ever Need.” However, I can’t help myself from commenting on the newest iteration of what seems to me to be the longest-running rumor in Apple history. Today, Gizmodo and others are rumoring that the iPhone will be announced on Monday. I’ll confess: I’m so sick of hearing these rumors (they’ve been around so long, it seems they started when Jobs and Wozniak were still working in a garage) that I’m beginning to hope the whole thing is a decoy.

Yet part of me looks forward to such an announcement on Monday because, frankly, I’m curious how they’ll explain the decision to announce a highly-anticipated consumer product seven days before Christmas.

Longtime Apple watchers know that January 9, the opening day of Macworld, is the typical day for such an announcement. Usually (and logically) Apple waits until right after Christmas to make consumers have buyer’s remorse for getting a product without the newest feature. If Apple announces a new iPhone on December 18, they’ll be creating an avalanche of, what, something I don’t know what to call (perhaps the Germans have a word for it). Something like: pre-buyers remorse.

As for me, all I want for Christmas is no more Apple rumors.

Technorati Tags: apple, ipod, marketing

Here are some items I would write about if it weren’t such a beautiful fall day in Nashville and my wife didn’t have a long list of things I’ve been putting off: