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Wednesday, October 27, 2004

A Sour Apple Note

Yesterday I got a call from the San Jose Mercury News, which if you
don't know, is the daily newspaper that serves the Silicon Valley.
While the paper does what almost every paper does regarding news,
weather and sports, the Mercury News devotes a considerable amount of
ink to high tech related stuff.

This is the week that reporters wanted to know about Apple's latest
"coup", signing on Bono and U2 to help them hawk Apple iPods. And of
course, everyone asked about it was quick to toady up to Steve Jobs
and kiss his golden keister. Well, almost everyone.

Although I'm sure that others will speak to it differently, I'm
willing to go on record and tell you that the current campaign is a
mistake in the long run. And I'm not just saying that because I find
Bono to be among the most obnoxious musical personalities since
Barbara Streisand. I can forgive the stupid eyewear and the inflated
sense of self-importance. I can even overlook the fact that, like
Streisand, he can't seem to get through a song without yelling. What
I can't forgive is how his presence demeans the Apple brand by
treating it as a fashion statement.

There's no question that the iPod has had a great halo effect on
Apple a a whole. A substantial portion of Apple's revenues are
derived from iPods. You know it's a runaway hit when the likes of
Hewlett-Packard license it for their own. But hand-cuffing an entire
brand to the leather belt loops of a musical celebrity is playing
with fire, for a bunch of reasons.

First, whenever your brand panders to fashion/trendies out there,
your brand itself is in danger of becoming a fashion statement. And
if you know anything about fashion, you know that what's in this year
is out the next. Or, in the immortal words of Jerry Reed, "when
you're hot, you're hot; when you're not, you're not." How long until
the iPod is junked for something trendier?

Second, while iPod's halo effect has brought in a significant number
of Mac converts, this move places way too much emphasis on music and
will probably hurt the overall brand as a productivity tool.

Look, I'm a Mac guy myself, but I've got to call 'em like I see 'em.
I've suffered the slings and arrows of all those other Gates-driven
PC cranks who continually sneer at the fact that I require no virus
protection programs. I suffer through their mockeries as they claim
"there's no software for the Mac" (there is - tons of it). Or that
Macs are too expensive (not true, especially if you add in how often
PC users have to add on to stuff built in to Macs). So the last
thing I need is for Steve Jobs to wheel out an aging, over-rated,
pony-tailed knucklehead wailing some anthem about how cool iPods are.

What Jobs has overlooked is that the Mac is already the cool of
computers. It always has been. Up until now, it's been cool
precisely because it's been able to outperform its competition where
it matters most: in computing. In fact, one could argue that by
over-emphasizing music, Apple is actually risking the perception that
its capabilities are becoming limited, when just the opposite is true.

Time will tell whether Bono will add any more value to the Apple
brand. Personally, I don't think it's quite the boon that all the
media lemmings think it is. As far as I'm concerned, there's only
one thing Apple could add to increase their sales now.

A pair of really sturdy ear plugs.

Friday, October 08, 2004

Howard Stern in Outer Space!

Being the advocate of free speech that I am, I have a difficult time
with censorship. Being the kind of professional whose job it is to
break conventional thinking, I have an even hard time with arbitrary
authority. Self-appointed guardians of public morals always make me
suspicious. It's always the guys preaching home, hearth and family
that end up on the front page involved with some bleached blonde. At
a disturbingly increasing rate, the blonde ends up being an under-age
boy, but that's another story.

Taking all that into consideration, it's hardly any wonder that I've
long been a fan of Howard Stern. Sure, there are those who think
he's raunchy and obscene. I've been listening to him for many years
and still haven't heard anything I'd consider objectionable. The
Federal Communications Committee, however, differs in its opinion,
sanctioning Stern's syndicators with fines for utterances that
apparently are condemning mortal souls to eternities in hell. Never
mind that in America, the public owns the airwaves (which are
protected by the First Amendment's guarantee of freedom of speech).
The FCC is doing its best to drive Stern off the radio.

It's been a headache for Stern, so now he's decided to leave the open
air waves and head for satellite radio. Satellite radio, the theory
goes, is unfettered by the rules and regulations of the FCC because
it's a subscription service. Its signal is a paid product, which
means that since people can't "accidentally" hear it, they'd have to
make a concerted effort to receive the programming. All of that
makes satellite programming much freer and totally devoid of Federal
censorship.

Or does it?

On the one hand, Stern's move could be the hallmark of genius.
Howard's no dope. And if you think this is totally about freedom of
speech, you've got some learning ahead of you. On the other hand,
satellite radio in 2004 is like the internet in 1994. Big potential,
but still waiting for proof of commercial viability.

Stern's deal with Sirius is rumored to be worth about $100 million.
That's the big news. The smaller print reveals that Sirius has, at
the present time, fewer than a million subscribers, total. For the
deal to work out, Howard would have to bring at least one million of
his listeners over over to satellite radio, and that's the real issue
here.

As of this writing, the Stern show boasted over 8 million listeners
every day. In radio terms, that's huge. Really huge. Because his
show is syndicated throughout the country -- sometimes twice a day on
the same station -- a lot of people tune in to him on their drive to
work. Let's face it: it's a lot more fun to listen to strippers and
goofball humor than it is to stress out to the latest middle east
bombings. Yet all those 8 million listeners have only one thing in
common, really: they listen to the show for free. Satellite radio
costs money. You have to buy the radio itself and then, like
television cable, you have to pay a monthly subscription free.

So the real question becomes "will they pay for Howard?" I have my
doubts. Here's why:

First, there's a mean difference between free loyalty and putting
money where your mouth is. I can tell you from experience that my
Branded Community numbers into the thousands for the free services,
but when it comes to the paid newsletters -- where the real values
are -- a mere fraction of those members pay to play. Don't get me
wrong, the free members are loyal and supportive, it's just that
they're not loyal and supportive with their cash. For Howard to
bring one million free listeners over to satellite radio from his
current base of 8 million would translate into a 12.5% conversion
rate -- way high.

Second, because of the dearth of satellite programming, fence-sitters
who might purchase satellite have no other reasons to justify their
subscription. I mean, is it really worth $250 a year to listen to
Howard? That's about what the first year would cost.

Third, anyone old enough to remember when Nixon was president might
also recall what it was like when television cable was introduced.
At that time, cable held the same promises
that satellite radio does now: uncensored, subscription-based
programming. That didn't last long, though, and today's cable
programming is only slightly less regulated than its over the air
sibling.

Fourth, the proof of Howard's drawing power may lie in the
performance of his movie, "Private Parts," which like most thing
Howard attempts, was a fine effort. The movie was funny, real and
poignant -- but it wasn't the blockbuster you might have expected
from an army of 8 million listeners and daily plugging. The movie
did well, but I suspect, not up to Stern's box office expectations.

All this having been said, I wish Howard the best and hope it works.
We need more new frontiers, not less. We need more freedom, not
less. And if anyone can show the way, it's Howard. For all you can
say about the man, he puts his money on the line. I'm just not sure
everyone else will.