Online business models: the nub of it

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If you’re thinking of sustainable business models for the future then it comes down to something very simple. Either (i) you arrange that your online revenues exceed the costs of creating content; or (ii) you reduce your costs to the point where they’re lower than revenues.

There: that wasn’t hard, was it?

The thought was prompted by a typically insightful post by Clay Shirky. “About 15 years ago”, he writes,

the supply part of media’s supply-and-demand curve went parabolic, with a predictably inverse effect on price. Since then, a battalion of media elites have lined up to declare that exactly the opposite thing will start happening any day now.

To pick a couple of examples more or less at random, last year Barry Diller of IAC said, of content available on the web, “It is not free, and is not going to be,” Steve Brill of Journalism Online said that users “just need to get back into the habit of doing so [paying for content] online”, and Rupert Murdoch of News Corp said “Web users will have to pay for what they watch and use.”

Diller, Brill, and Murdoch seem be stating a simple fact—we will have to pay them—but this fact is not in fact a fact. Instead, it is a choice, one its proponents often decline to spell out in full, because, spelled out in full, it would read something like this:

“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”

Yep. Shirky’s post was prompted by an inquiry from TV executives about how they would make money in the future.

Some video still has to be complex to be valuable, but the logic of the old media ecoystem, where video had to be complex simply to be video, is broken. Expensive bits of video made in complex ways now compete with cheap bits made in simple ways. “Charlie Bit My Finger” [a YouTube video which, to date, has had over 176 million viewers] was made by amateurs, in one take, with a lousy camera. No professionals were involved in selecting or editing or distributing it. Not one dime changed hands anywhere between creator, host, and viewers. A world where that is the kind of thing that just happens from time to time is a world where complexity is neither an absolute requirement nor an automatic advantage.

When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.

Much of the problem with the current debate about all this is that people who have prospered (or been conditioned in) the old ecosystem just cannot imagine things being radically different from the way they used to be. And of course they are (understandably) distressed by the thought that some of the good/great things enabled by the old ecosystem might disappear (which they will). But that’s creative destruction for you.

LATER: We all (me included) use the term “content” too casually. The old publishing industries think that content is what they produce, which is why the concept of user-generated content is — to them — an oxymoron. But — as Jeff Jarvis points out here — ‘content’ is what everyone produces all the time: as email messages, tweets and, yea, even blog posts.

Why the iPad and iPhone don’t support multi-tasking

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Really useful explanation by Robert Love (an Android developer).

Apple says they do not support multitasking because it is a hamper to stability and a drain on battery life. That clearly isn’t true—the iPad has plenty of processing power and battery capacity. Rumor is that Apple is going to add multitasking in a future OS release. This rumor likely is true. Is Apple somehow going to make background applications not consume any battery? Of course not. These excuses are straw men.

The real reason that the iPad and iPhone do not allow third-party applications to multitask is likely more complex, more technical. Bear with me here. Both the iPad and iPhone, as mobile devices, have limited memory (256MB in the current incarnations) and no hard drive. No hard drive means no swap file. Limited memory and no swap imply that applications have a small, fixed amount of memory at their disposal. They don’t have the luxury of seemingly-infinite memory, as a modern system with swap has. Memory consumption is thus a critical system constraint. Like most systems, the iPad and iPhone deal with this by killing applications that use too much memory via a mechanism called the out of memory (OOM) killer. Unlike most systems, applications designed for the iPad and iPhone know how much memory they have at their disposal, and are designed to operate within those constraints. This is classic memory management in embedded programming. No swap, fixed memory, you deal.

What would happen if third-party applications could multitask? Some number of applications would be in the background. But each application was written presuming it had access to some fixed amount of memory. Thus, if the background applications consumed too much memory, the operating system would have to kill them. But the user would expect that he or she could switch back to an old application, and it would still be running where it was left. He or she certainly doesn’t expect applications to just die every time a new application is run, losing state and even data.

Simply put, the reason the iPad and iPhone do not support multitasking is because it is hard to allow multitasking in a system with no swap and a limited amount of memory. Apple could enable multitasking—indeed, there is no reason that the devices couldn’t support it right now, with a one or two line code change—but your applications would constantly be killed. That isn’t a very useful feature.

So how is Apple going to enable support for multitasking? Likely similar to how Android allows it…

He then goes on to outline how Android does it via its Bundles concept, which effectively enables apps to be stateless. A really informative post, and a good illustration of why the Web is wonderful.

Computing for couch potatoes (contd.) Or coffee-table computing?

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From Jeff Jarvis.

The iPad is retrograde. It tries to turn us back into an audience again. That is why media companies and advertisers are embracing it so fervently, because they think it returns us all to their good old days when we just consumed, we didn’t create, when they controlled our media experience and business models and we came to them. The most absurd, extreme illustration is Time Magazine’s app, which is essentially a PDF of the magazine (with the odd video snippet). It’s worse than the web: we can’t comment; we can’t remix; we can’t click out; we can’t link in, and they think this is worth $4.99 a week. But the pictures are pretty.

That’s what we keep hearing about the iPad as the justification for all its purposeful limitations: it’s meant for consumption, we’re told, not creation. We also hear, as in David Pogue’s review, that this is our grandma’s computer. That cant is inherently snobbish and insulting. It assumes grandma has nothing to say. But after 15 years of the web, we know she does. I’ve long said that the remote control, cable box, and VCR gave us control of the consumption of media; the internet gave us control of its creation. Pew says that a third of us create web content. But all of us comment on content, whether through email or across a Denny’s table. At one level or another, we all spread, react, remix, or create. Just not on the iPad.

LATER: Just noticed this comment by Quentin on Jeff’s post:

I don’t know, Jeff… I never expected to do much more than consume with it. I saw it as a better iPod rather than a better laptop. After all, I never worried that the Kindle would turn people into mere consumers of books, rather than authors.

So I have been pleasantly surprised, for example, by how good the onscreen keyboard is, and I can use my bluetooth keyboard if wanted…

I’m more likely to have this with me than I am a laptop, and I’m more likely to create content on it than I am on an iPhone. So I think content creation may increase rather than decrease for me.

Your point about data being locked inside apps is a good one, though needs to be balanced perhaps with, say, the adoption of the open epub format for books, which could result in an increase in the amount of searchable data out there when compared to things like the Kindle…?

Quentin calls it “coffee-table computing” btw. Not a bad metaphor.

iPad=AOL Release 2: computing for couch potatoes

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Revealing post from the Columbia Journalism review about the WSJ and NYT Apps on the iPad. The author finds it “worrisome” (quaint word) that the two papers “think they can partially return to the cloistered existence of the pre-Web days. That’s clearly a mistake.”

Yep!

One big missing feature in the WSJ and NYT iPad apps: You can’t copy text. Take a screen cap[ture] of it all you want, but you can’t get the actual text. That’s a basic function on a computer, and the iPad has a clever cut-and-paste function, but it doesn’t work here.

That would seem to be a conscious decision and not just a missing feature in these quasi-beta apps. If so it will make it hard to blog or email about a story. Of course, it will also make it harder for people to rip off whole stories on splogs, and it could lesson the relevance of aggregators.

Neither paper embeds links in their stories. While nytimes.com links to a U.S. embassy news release in the third paragraph of its Pakistan attack story today, the Times app has no links.

It’s also worth noting that you can’t comment on stories in either the Journal or Times apps.

The absence of these features is not accidental. Forward to the past.

LATER: Gosh! The steam media crowd still don’t get it:

Three days into the Apple iPad’s launch, many magazine customers are embracing the new format for print but howling over what they consider excessive prices for single issues.

“Come on, guys, help us help you,” read one typical customer comment, on Apple’s iTunes store, in response to Popular Science’s iPad app. The app, a digital replica of the monthly magazine, is priced at $4.99 per single issue, the same as the print. “… This is the future of magazines. This is how I want all of my magazines. But I will not pay $5 per issue.”

Magazines are pinning their hopes on the iPad and other, forthcoming tablets and e-readers helping offset a decline in circulation and ad revenue. But as the early feedback shows, they may be paying the price for the industry’s longstanding practice of charging steep discounts for subscriptions. As a result, consumers are well aware of the per-issue discrepancy between subscriptions and single issues.

As one customer of Time magazine’s app ($4.99 single issue) wrote, “Not to put too fine a point on it, but they’re … passing the savings on distribution and raw materials to themselves. I can get 56 issues of the paper version for $20. How am I supposed to feel about this?”

Making matters worse, some customers of magazine apps thought they were downloading a subscription when what they got was a single issue. (To date, magazines that are sold through Apple’s app store are available on a single-copy basis only, although publishers said their titles would be available on a subscription basis in the coming weeks.)

Common sense and the iPad

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Dave Winer is one of the wisest people on the Net, so I was wondering what he thinks of the iPad. Here are his initial thoughts. They make sense to me.

It’s definitely not a writing tool. Out of the question. This concerns Jeff Jarvis, rightly so. This is something my mother observed when I demoed it to her on Saturday. Howard xxx writes that not everyone is a writer. True enough, and not everyone is a voter either, but we want to make it very easy for people to vote. And not everyone does jury duty, but we require it. Writing is important. And experience has shown that the winning computer platforms are the ones you can develop for on the computer itself, and the ones that require other, more expensive hardware and software, don’t become platforms. There are exceptions but it’s remarkable how often it works this way.

Most of this is negative, and it reflects my feeling about the iPad, which is generally negative, even though I have a lot of fun discovering the problems with the device. It feels so nice to use. It’s so pretty and the nice touches are so incredibly nice. I like using it the way I like driving my BMW.

And the battery performance is astounding. Apple, who seemed never to understand how important battery life is, has achieved it. My iPad still has 44% of its battery left after flying with me across the country, in use the whole time, and on the train trip from the airport, and reading the news this morning at breakfast. That's remarkable, not for Apple, but in comparison to the netbook that I admire for its battery life.

Further, in the iPad’s favor — the screen is uncluttered with the 30-year history of personal computer development, and my netbook screen is. As a result, even though the netbook has a slightly larger screen, the iPad feels larger, and effectively is larger. That’s why the map application feels so much bigger and more useful, because it has more screen real estate to play with. But this comes at a substantial cost. There is lots of missing important functionality. And even where the functionality is present, it's hard to find, and because it works differently makes it hard to use both the netbook and the iPad. And I believe that, for me, the netbook will win, for a variety of reasons…

The iPad and the CD-ROM

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Lovely post by Danny O’Brien.

For those of you blessed with senile amnesia or youth, CD-ROMs were the first wave of “interactive media” in the mid-eighties, and the great hope for publishing houses struggling to understand what they might be doing in the 21st century. Companies from Dorling-Kindersley to News Corp threw millions into CD-ROM publishing, with very little ultimate return. They’d do some fancy-schmancy David Bowie joint project, or an incredibly complex animated re-working of their existing bestsellers. Each one won more awards than it sold copies, and eventually those “interactive divisions” were rolled into the “online media” departments, where their designers would get drunk and bitter, until one night they were sacked after uploading 640MB Adobe Director files onto the website front page.

Back then, geeks were unused to other industry sectors barging into our little rustic byte farmyards with their fancy suits and corporate expense accounts, braying triumphantly about digital convergence, and then, seconds later, striding into the business-model threshing machine that thrummed in the corner. We did not know then that there was a queue of people like this, waiting to dance past us into the bloody knives. We watched their cockiness with alarm, not with the disdain that would come later and definitely not with own brand of hubristic Internet rockstar smugness, the smugness that tempts us all to look a bit less closely at ourselves, and a bit more closely at that thresher.

No, back then it was all a bit shocking. We assumed these people knew what they were doing.

This is a very sharp essay. His point is that developing iPad Apps is one thing, but making them into sustainable income-generators is quite another.

I know that publishing companies will be tempted to go for the all-singing, all-dancing iPad application. But what they’re doing that, my suspicion is that what they’re aiming for is a product which exudes credibility, status — an aura of a professional media product. And when you’re spending the kind of money that a professional application requires, solely to improves your status in the world, you’re not selling a product, you’re buying the love of your audience. That may be an investment in credibility, but it’s not an incoming revenue stream.

The goldrush economics of the iPad will hide this for a little while, because everything will be briefly profitable. But to be sustainable, you need to either be producing something that consistently costs you less than it earns, or will produce regular super-hits among a string of drabber products, or just makes you so much money in its first few months that you never need work again. You can’t just make some single wonderful shiny demo product. You need to keep producing them; you need some way of economizing that process. And you need to stop others from making their shiny thing cheaper than, yet interchangeable with, yours. Otherwise you’re just throwing nice fancy gee-gaws into the thresher’s hungry mouth.

The “best newspapers in the world”? I don’t think so.

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Hooray! Someone else who shares my scepticism of the deluded hubris of the British newspaper industry. Vigorous polemic by Kevin Marsh.

Of all the arguments in favour of newspaper paywalls, one is utter tosh. It is that we – the readers – must pay online to preserve what one tabloid editor once called “the best newspapers in the world”. It’s a description that’s reared its head again this week.

Now, as a general rule it’s always a good idea to reach for your revolver when you hear anyone say any country has the best TV/health service/newspapers/football teams … anything “in the world”.

Not because we/they don’t, necessarily. But because life’s more complicated than that. But one thing we absolutely, certainly, assuredly don’t have here in the UK is the best newspapers in the world. Full stop.

If we did, a quarter of those who used to buy them wouldn’t have stopped doing so over the past 20 years – a desertion that long predates the web, incidentally. If we did, our press wouldn’t be one of the least trusted institutions in the land and our newspaper journalists the least trusted in the world.

We wouldn’t have journalists sent to prison for hacking into mobile-phone mailboxes. Nor editors fired for printing fake photographs or “setting the agenda” while, by their own admission, still drunk from the night before, or admitting that they pay policemen to breach their public trust and give information to journalists.

A newspaper group wouldn’t have had to pay the McCanns hundreds of thousands of pounds for quite literally making up over 100 separate defamatory articles.

Right on. The truth is that Britain has some quite good newspapers, and a larger number of truly awful ones which — among other things — make it impossible for society to have a grown-up discussion about the really hard problems that our society needs to address: like what to do about our over-crowded prisons; immigration policy; the NHS; the BBC; the environment; etc., etc.

The truth about Cameron’s Svengali

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Excellent Observer piece by Peter Oborne about Dave’s key apparatchik, Andy Coulson, the former editor of the Screws of the World.

First, there is no question at all that the News of the World routinely used private investigators during the seven years that Coulson was running the paper. Though much of what they did was legal, some was not. One of these investigators, Steve Whittamore, ran a network of specialists who concentrated on “blagging”, or tricking information out of confidential databases run by banks, credit card and phone companies, Revenue and Customs, the police national computer and other sources. Whittamore, who provided intelligence for other Fleet Street titles as well, was convicted in 2005 of offences committed under the Data Protection Act.

Mulcaire was an expert in intercepting voicemail messages. However, Mulcaire, who was on a full-time contract worth £100,000 a year until his arrest in August 2006, was also a skilful blagger. In all, four investigators who worked for Coulson’s News of the World have been convicted of criminal offences. One of them, whose name cannot be revealed for legal reasons, was actually re-employed by the News of the World after serving his prison sentence. This happened in 2005, while Coulson was still editor.

It is no exaggeration to state that under the editorship of Coulson the News of the World was running what was effectively a large private intelligence service, using some of the same highly intrusive techniques as MI5. This illegal surveillance was targeted at the most famous and most powerful men and women in Britain, including footballers, politicians, members of the government, police and military. The budget stretched to hundreds of thousands of pounds a year, probably more. As deputy editor, and then editor, Coulson was routinely commissioning and editing stories to which these investigators had contributed vital information.

Yet when Coulson gave evidence to MPs last year, he insisted that throughout the time he was editor he had been wholly unaware of any of this, with the exception of the “very unfortunate rogue case” of Clive Goodman.

By these standards, Alastair Campbell was pretty clean.

Techno-hysteria

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There are a lot of smart people out there today who ought to be ashamed of themselves. The spectacle of so many geeks surrendering to Apple’s Reality Distortion Field over the iPad has become positively nauseating. For many years I’ve been influenced by Neil Postman’s conjecture that our future would be book-ended by the insights of two authors: at one extreme is Aldous Huxley, who thought that we would be destroyed (i.e., rendered passive and happily acquiescent) by the things we love; and George Orwell, who thought we would be destroyed by the things we fear.

The iPad is the latest embodiement of Huxley’s Soma. It’s a seductive, closed device designed for passive consumption of pre-approved objects. That’s why the old ‘content’ industries are slavering over it. They see it as the way to undo all the damage wrought by the openness of the Web and its TCP/IP underpinnings, a way of rounding up all those escaped couch-potatoes and getting them back into the pen. And of being able to charge them for everything they use — and collect the money via Apple’s toll-gate.

All of which is predictable. What wasn’t predictable is the way the hive-mind of geekery would check out its formidable collective intelligence at the door and go all gooey over Mr Jobs’s latest coup. A puppy lying on its back and asking to have its tummy tickled is a paragon of stern objectivity by comparison. My Twitter stream — which is largely fed by people whose intelligence and judgement I respect — has morphed into a drip-feed of drooling acquiescence that Huxley would have recognised.

Here and there I’ve found vestiges of independent thinking. Cory Doctorow, for example, has written a terrific essay likening the iPad to “the second coming of the CD-ROM “revolution” in which “content” people proclaimed that they were going to remake media by producing expensive (to make and to buy) products.” Quinn Norton has a moving post about the socio-economic dimension of all this:

I live a really rich intellectual life and get to do lots of things most poor people don’t, and I appreciate that it’s because almost none of my social group are poor. But sometimes my social group kind of goes crazy and forgets that while they have a lot of power, my class is a whole lot bigger than theirs. And none of them will be buying iPads.

A few of them do have iPhones, because phones are one of those durable goods we need to survive and that’s most of their meager disposable income. A few probably have iPod touches that they got as gifts, hand-me-downs, or because that was their one nice thing they wanted. But the iPad does absolutely nothing vital, and nothing a cheaper piece of electronics doesn’t already do well enough to get by. I’m pretty sure Apple knows this, and couldn’t care less. Poor people do buy iPods, sometimes even new, but they’ve never bought anything else Apple has ever made. And that’s fine. I’ve never felt the urge to get me some Tiffany, and they’ve never felt the need to try to get my money. Similarly, Apple’s just not a brand very open to the poor. But why does this mean anything to the political arguments? Because other vendors out there do want to take our money. We don’t have much, but there’s a lot of us, and unlike the other classes, we’re getting a lot bigger.

And Aaron Schwartz is characteristically thoughtful about the brouhaha:

A lot of people have argued that requiring Apple to approve every application for the iPhone OS is some kind of “mistake”, something they’ll remedy as soon as they realize how bad things have gotten. But recent events — Phil Schiller’s personal interventions, comments on their call to analysts, etc. — have made it clear it’s not a mistake at all. It’s their plan.

The iPad is their attempt to extend this total control to what’s traditionally been thought of as the computer space. This is just the first step, but it’s not hard to imagine Apple doing their best to phase out the Macintosh in the next decade, just as they phased out OS 9. In their ideal world, all computing will be done on the iPhone OS.

And the iPhone OS will only run software that they specifically approve. No Flash or other alternate runtimes, no one-off apps or open source customizations. Just total control by Apple. It’s a frightening future.

There are doubtless some more signs of independent thinking out there, but they are exceptions that prove the rule that the tech-savvy community has succumbed to mob hysteria. In the newspaper business a recognised way of stopping journalists from becoming too enamoured of their own importance was to remind them that the brilliant story they had just filed (and of which they were so proud) would be tomorrow’s fish-wrapping. Perhaps the geek community should be reminded that Mr Jobs’s shiny new wonder will be eWaste in a couple of years?