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The Best of MobHappy

By russell ·
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Why DRM Will Kill Mobile Music

by russell In reply to The Best of MobHappy

<div><!--startfragment -->I want to follow up <a href="http://mobhappy.typepad.com/russell_buckleys_mobhappy/2005/08/greed_stupidity.html">this post</a> with some stuff I've been thinking about, brought into focus by something that happened to me yesterday. I was in a record store here in Austin, and I saw the CD of a band I've been hearing on XM and net radio stations that I've been wanting to check out. I was looking at it, flipped it over, and was presented with a compatibility notice detailing the restrictions caused by the CD's DRM -- the first time I've been confronted by something like this. It said that the CD could only be ripped in Windows Media Player, and would only work with MP3 players supporting its DRM, and could only be copied three times or something along those lines. I knew this stuff was out there, I'd just never seen it on something I was thinking about getting.
<p>Although none of this would have been a problem for me, I still didn't buy the CD -- I'm not trying to come off as an activist or agitator, but I've got no interest in making a record label think that, as a consumer, I think that sort of thing is ok, because it's not. It's just stupid. What are we coming to when CDs need compatibility statements? And why should a record label get to dictate on what equipment I play music I buy? Apparently <a href="http://www.amazon.com/exec/obidos/tg/detail/-/B0009I7NO4/qid=1124141810/sr=8-1/ref=pd_bbs_1/103-1431805-4727852?v=glance&s=music&n=507846">I'm not the only person that feels this way</a>. </p>
<p>The upshot of all this is that you've got the record industry bitching about how file sharing -- and now <a href="http://www.forbes.com/digitalentertainment/2005/08/15/riaa-targets-cds-cx_variety_0815riaa.html">CD burning</a> --  is destroying their industry, therefore they need stronger DRM. As is par for the course, they've got it backwards: what's going to destroy their businesses is DRM. </p>
<p>Story after story laments how <a href="http://www.rednova.com/news/technology/206840/incompatibility_slowing_growth_of_digital_music/index.html">"incompatibility" is slowing the growth of digital music</a>. That's slightly disingenuous: what's hurting things is incompatible DRM, which itself is an obstacle the record companies implemented. Companies like to complain that Apple won't license their DRM technology, but why is it there in the first place? Not because Apple likes DRM, but because record companies insist on it. So if labels aren't happy about this "incompatibility" and think it's hurting things. get rid of the problem by dropping their demands for DRM. </p>
<p>A parallel problem is that DRM often isn't used to "protect" music, it's used as a form of lock-in by device manufacturers and service providers. For instance, if somebody's bought a bunch of music from iTunes, what kind of MP3 player will they buy -- an iPod, or one that can't play their music? The same thing will play out in mobile as service providers, labels and operators all jockey for top position on the food chain. This doesn't really benefit anybody, least of which the end user. </p>
<p>What's funny about all of this is that the DRM doesn't work anyway. The latest Foo Fighters CD features similar copy protection, but <a href="http://arstechnica.com/news.ars/post/20050809-5187.html">that didn't stop it from topping the file-sharing charts</a>. Not only that, you've got bands and labels telling people how to circumvent the DRM -- the Dave Matthews Band <a href="http://www.dmband.com/news/news_popup_iPod.asp">tells buyers</a> to rip the CD through Windows Media Player, then burn a copy with it, then rip the copy into iTunes to get the music onto an iPod. Just so we're clear: you've got one of the artists with DRMed CDs telling people how to work around the DRM and make "unprotected" MP3 files of the songs, with one of the labels <a href="http://weblogs.jupiterresearch.com/analysts/card/archives/009807.html">giving the same advice</a>. Why bother having DRM if you're going to tell people how to get around it? If that's not a tacit admission of its ineffectiveness, I don't know what is. </p>
<p>(Of course, they like to act like this isn't of their doing and point the finger at Apple: "Please note an easier and more acceptable solution requires cooperation from Apple, who we have already reached out to in hopes of addressing this issue. To help speed this effort, we ask that you use the following link to contact Apple and ask them to provide a solution that would easily allow you to move content from protected CDs into iTunes or onto your iPod rather than having to go through the additional steps above." Well, if you didn't put the DRM there in the first place...) </p>
<p>Now, how this all affects mobile is that there will be a huge tide of MP3 players from a number of different vendors coming into the market, in the form of music-enabled phones. So what's going to happen when you've got all these different phones being billed by carriers as iPod killers or replacements and people come to find out their music won't play on them, or they can only listen to music that's been bought from one specific store or service? They're going to get pissed off, that's what's going to happen. They won't buy music that's tied to a specific device or has onerous limitations on what they can do with it -- which will probably rule out any carrier's download store from being a success. Regardless of how the record labels see things, people want to own their music, and owning music means being able to do with it what you like, and play it on whatever device you want. This means that vendors that focus on syncing, rather than playing along with carriers' dowload shop dreams, will be the winners. <a href="http://www.mobilemusicblog.com/2005/07/virgin_usa_boss.html">Few operators understand this</a>, though, and their stranglehold on the retail channel means it's going to be hard for manufacturers to succeed. </p>
<p>The RIAA likes to say that file-sharing costs them sales, a statement based on the completely flawed assumption that every person that illegally downloads a song would have paid for it. This simply isn't true for any number of reasons, while there have been <a href="http://www.techdirt.com/articles/20050301/1033229_F.shtml">plenty of musicians</a> who have gained new fans from file sharing. The reality of the situation is that pointless, stupid, ineffective DRM is going to cost them more sales than any file-sharing network.</p>
<p>For more from Russell and Carlo, check out <a href="http://www.mobhappy.com">MobHappy</a>, for the best writing on mobile technology.</p></div>

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Q2 Handset Market Share Analysis

by russell In reply to The Best of MobHappy

<div>Gartner's come out with its assessment of the second-quarter handset market, and <a href="http://www.iht.com/articles/2005/08/25/business/cellphone.php">there aren't any surprises, really</a>: Nokia and Motorola continue to eke out gains, while Samsung continues to drop, along with Siemens.
<p>Most stories compare the current quarter's results to the same quarter last year; I think that looking at last quarter's share percentages provide a better idea of a company's momentum and recent execution against its rivals. For instance, in the second quarter of 2004, Samsung had 12.1% share, while in this quarter, it has 12.8%. Those figures mask the fact that the company lost half a point of share from the first quarter of this year. </p>
<p>So here's how things look comparing this quarter to last quarter: </p>
<p><strong>Company</strong>     <strong>Q205 Share (%)</strong>    <strong>Q105 Share (%)</strong></p>
<p>Nokia                 31.9                       30.4</p>
<p>Motorola             17.9                       16.8</p>
<p>Samsung            12.8                       13.3</p>
<p>LG                       6.5                         6.2</p>
<p>Sony Ericsson      6.2                         5.5</p>
<p>Siemens               4.7                         5.5</p>
<p>Others                20.0                        22.3</p>
<p>The biggest movement is from Nokia and Motorola, which are consolidating their lead at the top of the pack. The is reflective of a wider trend of consolidation -- the share of companies outside the top 6 dropped by a couple of points. Nokia's price cuts and the low end and the filling out of its mid-tier look to be helping, while Motorola continues to ride the popularity of just one model -- the RAZR. Sony Ericsson, too, looks to have its latest reincarnation of the T610 midrange handset in the K750. Samsung, though, keeps falling. My guess would be that consumers are tired of its one-trick-pony approach to handset design and turning away from its ever-present silver clamshells. </p>
<p>I guess it's a little late to be outlining the challenges for the manufacturers for the third quarter, since it's nearly over, so we'll say the challeges "going forward": Nokia's got to continue filling in its product line, not the least of which the middle and low tier and in 3G, where it's only got 17% of the market. While the N series and 8800 are nice phones, they're just too expensive to move in mass quantities. </p>
<p>It's a similar story for Motorola: it's been riding the RAZR for a good while now, but where are the rest of its hot new designs? The delay of the iTunes phone has been well documented, and <a href="http://www.mobilemusicblog.com/2005/08/itunes_phone_re.html">all the signs says that when (if?) it ever comes out, it's going to be a real disappointment</a>, a real step back in looks from the RAZR. There's supposed to be a slew of models to follow in the RAZR's footsteps, in terms of both design and annoying names, but they better get a move on lest somebody else seize the Motomomentum. </p>
<p>Samsung's got to find some new designers. The silver flip stuff has gotten old, and their other designs -- or rather their other design, the slider -- doesn't inspire much confidence. Sony Ericsson is well-placed, with the aforementioned K750, and it will be looking to get a boost from its Walkman range. Sometimes I get the impression SE doesn't mind being a minor player in the market: I think its products are generally pretty solid, and it's got some hot models in Japan it could adapt for the West that would go over very well. One final question mark is what will happen to Siemens' market share, as it's hard to see BenQ hanging on to it.</p></div>

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Google

by russell In reply to The Best of MobHappy

<p><img src="http://www.googlestore.com/images/products/GO0137T.jpg" align="right" /></p>
<div>I thought it was time we joined in all the speculation about what Google's grand vision is, especially as I'm increasingly convinced that, <a href="http://mobhappy.typepad.com/russell_buckleys_mobhappy/2005/07/symbian_rampant.html">unlike Microsoft</a>, they really "get" what's happening vis a vis mobile technology. </div>
<div> </div>
<div>If you haven't been following recent events, let me start by summarising some of the key ones recently: </div>
<div> </div>
<div>Google Talk takes them into VoIP. This means that they can offer free (or cheap) phone calls to anyone with a net connection. This includes people connected to public or paid-for wifi connections. It also includes calls via a PC, or with a phone capable of hooking up via wifi. </div>
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<div>There's already models that can do this (Nokia's brick-like Communicator, as an example) and a lot more expected soon, subject to operators agreeing to distribute them. </div>
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<div><a href="http://gigaom.com/">Om Malik</a> wrote a <a href="http://www.business2.com/b2/web/articles/0,17863,1093558,00.html">Business 2.0 story</a>, which is a fine piece of investigative journalism and deduction. Om suggests that some of Google's recent moves indicate that they're planning (get this) to offer free wifi access to everyone in America. I know it might sound far fetched, but Om explains how it's possible and I certainly think it's more than plausible. </div>
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<div>Google likes to think big and how much bigger can you get than becoming everyone's ISP and phone provider? Google is about to raise another $4 billion by selling 14.159265 million shares. </div>
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<div>What do they need this kind of money for? Something big, obviously. </div>
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<div>In case you missed the story or the point, the number of shares is based on the first eight numbers making up Pi. Clever or smug? </div>
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<div>Google is about to launch Google Wallet, to compete with PayPal, based on numerous rumours. </div>
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<div>Again, I think this will happen. It's a great market opportunity that PayPal has had to itself for far too long. Enough people <a href="http://www.paypalsucks.com/">hate PayPal</a> to flock to a rival offering, especially if it was run by Google. I've had a few run-ins with PayPal myself, so I'll shed no tears if they get done over. </div>
<div> </div>
<div>But Wallet also offers their advertisers a way of charging for goods and services, especially for micropayments, where credit card charges are usurious (c 30% for transactions costing $1, for instance). </div>
<div> </div>
<div>Google have also just announced plans to <a href="http://www.dmnews.com/cgi-bin/artprevbot.cgi?article_id=33954">move into offline media</a>, by buying up adspace at wholesale prices and selling to its advertisers for a better price than they could get on their own. So they're exploring the offline world now. </div>
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<div>Google has already launched a form of local search, based on sms. </div>
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<div>OK, so that's some of the key trends and clearly, there's probably a lot else happening at Mountain View that we're not privy to - either by announcement or rumour and gossip. </div>
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<div>All this suggests to me that they're going to make a play for the Long Tail of offline media, just as they've captured the Long Tail of online media. Let me give a scenario, in maybe 10 years time. </div>
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<div>You're out shopping, with your mobile phone, obviously. Your mobile has taken over as your primary means of making all voice calls - using Google Net's VoIP, naturally. Why would you use anything else, when it's free and works everywhere? You don't even have to search for a good connection like those old GSM phones. </div>
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<div>Your phone has also become your primary means of accessing the internet, again via Google Net, obviously. Your phone is a thin client, with most storage and processing done on the web. Most people don't have even a PC anymore. If they want to do work that involves a keyboard and a bigger screen, they just pop their phone into the <a href="http://mobhappy.typepad.com/russell_buckleys_mobhappy/2005/03/nokia_wireless_.html">nearest docking station</a> and away they go. With the added advantage that the phone has ensured that the screen layout, favourite apps, bookmarks and files are all available exactly as you'd want them. </div>
<div> </div>
<div>Your phone also knows your location at all times - not through anything fancy, like Assisted GPS, but because Google Net knows exactly where you are on the Google Grid. So suddenly, true location based marketing becomes a reality, no longer a question like "when the tech is available" or "providing you're in line of sight" or "if it's accurate enough". </div>
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<div>Shops log on to Google's ZagMe service (indulge me!) and in the same way as they can tell AdWords who they wish to target and how much they're willing to pay, they can alert shoppers to offers they think they'll like. Unlike AdWords, where the merchant chooses keywords, ZagMe will work by matching merchants and shoppers, based on the shoppers' preferences. Because the ads are served over wifi, there's no cost of transmission (unlike today's sms), so ads can be cheap and gross margins for Google, humungous. </div>
<div> </div>
<div>ZagMe will also be a self-learning application. So if the shopper doesn't like a merchant or the type of offer, they can tell their phone and they don't get that again. The shopper can also decide when and where they want to get ads. And how they get delivered - with an audible alert, or just a silent pop-up on the screen. They can opt out of any and all messages too, if they want, permanently or for a period of time - say, two hours. </div>
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<div>So ZagMe tells you about an offer you want and you decide to go into the shop and buy it. </div>
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<div>You pay for it, with your mobile phone's Google Wallet. Google Wallet is more than just a payment system though. It's a feedback loop providing information to the ZagMe ad server. If you've just paid for a coffee, for instance, you're not going to want another coffee ad for say, an hour. </div>
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<div>More sophisticated that this, it builds up a pattern of your responses to offers and presents more of the same. It learns what'll make you buy a Hugo Boss suit as opposed to an Armani, and pitches the incentive just right. </div>
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<div>ZagMe and Wallet become a useful and valued tool for shoppers, as great targeting, relevance and location make everything they send you welcome. </div>
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<div>One of the things that Google has managed to do online and why they make so much money is that they've found a way to exploit the Long Tail of advertising - tapping into billions of marketing dollars that didn't really exist before. </div>
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<div>My bet is that they want to do no less than to open up the same Long Tail for real world merchants. This would allow them to become the most dominant media owner on the planet, cornering the ad market on and offline and at the junction where the two meet. If they can have all that for $4 billion, it's a bargain. </div>
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<div>A word of warning however. Moving from their existing model to a service where customer care will suddenly become important, will not be a stroll in the park. People don't generally call you to complain that their search engine results aren't very good. But they do to complain that their phone doesn't work, their internet connection is down or that their Wallet won't allow them to make payments. </div>
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<div>So if you want to run the world's biggest customer care programme, maybe your should be applying to Google. </div>
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<div>This has been rather long already, so what do you think? Am I on the right lines? </div>
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<div><a href="http://gigaom.com/2005/09/01/guessing-googles-voip-plan/">Om Malik thinks that it's about Pay Per Call</a> <a href="http://www.mobile-weblog.com/50226711/does_googletalk_have_an_ulterior_motive.php">and I agree that this could indeed be part of it. Oliver at my alma mater</a> comes to the Pay per Call conclusion too, but speculates that they'll then launch an ad-funded free calls programme, which is the point where I have to say, our opinions diverge. </div>
<div> </div>
<div>But do leave a comment and join the conversation on this one. Whatever Google ends up doing, it's going to have fundamental repercussions for business everywhere, as well as for all of us as technology users. </div>For more from Russell and Carlo, check out <a href="http://www.MobHappy.com">www.MobHappy</a>.com</a>, for the best writing on mobile technology.

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