Thursday, September 17, 2009

The Beatles: Jumping the Shark or a New Era Edition



Everyone in the world knows The Beatles Rock Band is out. That's the point, everyone in the world knows The Beatles: Rock Band is out. You can't swing a dead cat without hitting a piece of media about the game. I believe this single game has more media hits than the aggregate hits for all the games being released in the fourth quarter. Don't believe me? Ask your mom, or if you are a bit older, your wife if she knows about The Beatles game. Now ask if she knows Splinter Cell and Bioshock 2 slipped out of the quarter. How about Assassin's Creed 2? Is she waiting for that one? Sorry to revisit old posts, but the folks behind the game did a simple little thing no game company has ever done before. They made a good –some say great, accessible game and told people it was available - and they are not even a game company. What seems so obvious to the marketers behind two of the best known brands in the world - MTV and The Beatles - is the antithesis of game industry thought and the title signals the ability to grow the industry from a relative niche industry of early adopters to one of mainstream.

Actard will certainly market its way through a lot of units of Call of Duty and perhaps penetrate 15 to 20% of the installed base, and Madden may have huge awareness and suffers no lack of love in the advertising department, but the inaccessibility of the game will prevent it from hitting the heights of The Beatles. We are not the first industry to go through these changes. It is actually a hallmark of industry maturation. We may be seeing the end of the US auto industry today, but one hundred years ago, it did not look much different from the game business. Cars were for early adopters. Because the industry was selling everything they could make, there was no reason to innovate. They forced the customer to adapt to the market.

Here are the controls for a Model T.


Item Description
A Transmission Neutral / Parking Brake Lever
B High Gear / Neutral / Low Gear Pedal
C Reverse Gear Pedal
D Brake Pedal
E Two Speed Rear Axle Shift Lever
F Battery / Magneto Ignition Switch
G Throttle Lever and Quadrant
H Advance – Retard Lever (opposite G behind wheel)

They are just about as intuitive as the controls for Madden 07 (I couldn't find a picture of a newer version)








Neither one is really inviting, but you had to learn the Model T controls if you wanted to get somewhere.



Ford was able to sell over 14 million Model T's and dominate the market with over 50% market share in 1919, so they never changed it. But they dominated the market when only 25% of the public owned cars. They thought they were doing great and focused on low price, rather than style, ease of use, product differentiation, or most significantly, market expansion. In 1920, the network - they call them roads - the infrastructure for fuel delivery and easier to use vehicles came on line; driving auto ownership from 25% in 1923 to 50% in 1929, with ownership over 90% in rural areas. Ford, and a host of other companies were left in GM's dust. GM dusted them with a radical concept, make a good, accessible product, and tell people you made it. GM moved the market from one driven by early adoption, to one driven by features and marketing. When consumers are done with the one they bought, have a new one ready for them. Just in case they want to keep it too long, incorporate “planned obsolescence” into your business plan. Ford was able to recover somewhat with the easier to use, more feature laden Model A, but it never recovered market share and GM grew to over 50% of the market over the next thirty years. Unfortunately, as a market leader both hands were busy at the same time. One hand was holding on to the past to maintain existing customers, while the other was trying to remain current. At some point the burden of supporting past success overcomes the ability to innovate and innovation comes from the guys with nothing to lose – in this case, MTV Games, the ones with no legacy. The funny thing is, in supporting Harmonix in making the game, Viacom didn't even have to take that big a leap. To say they took two great tastes that taste great together is overstating the risk profile. Knowing chocolate would taste great with peanut butter is less obvious than knowing the best known music in the world would fit well with the phenom music game. The innovation happened on the marketing side.

Before I rant any further, it is important to note, I am not denigrating the Model T or current games. The entire auto industry, and much of America was built on Model T's shoulders and I wouldn't even be writing this piece, let alone be able to pay for the computer it is written, on without all the games made to date. But we see MUDs, text based adventures and 8 bit games in the same entertaining, but antiquated light as the Model T and the patina found on highly desirable American muscle cars is forming on multi-button controllers. These are lasting representations of a golden age of engineering and creativity in each industry. The good news is we are finally appreciating our game heritage and creating a library value in games, rather than throwing each generation away as a new generation of console is introduced.

The other half of the equation is marketing. For years the most innovative move in game marketing was taking the games out of ziplock bags and putting them in a package with a picture on the front. We continue to take the same approach. Market first to the hardcore, get their buy in and then grow to the mainstream. I've said it before, and Actard is doing it, but has anything changed? Not since I started in the industry and certainly not since I started to write this blog. We are so concerned about market share and market protection, we built a wall around the industry and remain the benevolent protectors of our gaming populous. "Don't let the mainstream people see, they will pollute our waters and drive our core away." While we revel in our victories - Grand Theft Auto IV, Fallout 3, Madden whatever - years of learned helplessness have deluded us into thinking it is the best we can do when in fact our volume is barely a dust mite on the flea on the tip of the tail of the dog which is mainstream media. I am beginning to believe game industry domination of world media is the same pipe dream as Soccer American sport. It is always five years away and has been as long as I can remember, until The Beatles Rock Band. Viacom invested plenty of money in advertising and PR to make sure people knew it came. It treated the game like it does all of its media events.

Gaming purists and those who wish to retain the status quo will be convinced the industry jumped the shark. This title opened the doors and let the folks who have never killed an orc and don't know a Street Fighter combo from a Mortal Kombat finishing move into our stores. They are going to come into Gamestop and worse yet, they will pollute the Live network with their presence. Worse yet, they will find Microsoft's network useful and pull it into the mainstream. How will we be cool when the best we can do is say "I knew it before you did?" Others will say gaming finally came into its own. A mainstream media company got a hold of the secret sauce to make a credible game, marketed it like it was a form of entertainment and blew up the market at the same time the network infrastructure matured.

Viacom and Harmonix will benefit a lot from the product, but it is certainly not a one way street. The Beatles are pulling fans into the game, but they understand the game will pull fans into The Beatles.

Kids like The Beatles, but they don't always know it. They also look at the music in Rock Band differently than we do. Where we see the Rush, Cheap Trick or Who song from high school, they see a level. I'll never forget walking into a room full of ten year olds and having one look up at me and say "Keith, I unlocked Freebird for you" - don't get me started on kids calling me by my first name. After the quick set of flashback mental vignettes to stadiums with lighters, smokey rooms with bongs and people yelling "Dude, play Freebird," I realized this kid had no clue what he was talking about. Freebird isn’t a song, it’s an achievement, or at least it starts that way. After this could who would not be satisfied listening to song with no visuals plays it enough, he would hear the song. Then he may hear it on the radio and have a connection to the song because hearing for the first time marked an accomplishment. If The Beatles were not part of this, they would be missing out on an entire generation.
Finally, it will bring families together. Sure, a lot of people will be playing the game with their friends, and a lot of kids will play on their own. But one of the least discussed, largest benefits of a video games is the way it can bring families together. Parents interact with kids on a level playing field. While there are parents who are willing to have their asses handed to them in a sports or driving game the activity resides closer to the “chore” side than the “fun” side of life’s continuum. In some cases, it sits right along side root canal. Of course they played Wii sports for a while, but the lack of engagement is evidenced by the failure to purchase any other games. Even though the kids are playing levels and parents are playing the songs they love, Rock Band - especially The Beatles version - brings everyone together. Isn't that what games are supposed to do?

I am not saying this is the end of games as we know it, because the potential is there for great expansion. A rush of new consumers will feed the box on the top of the tv with their own game for the first time. The big question is what will we do with them. When they came for the Wii, we really didn't give them any compelling reason to buy more games. Now, when they come for The Beatles, will they find other compelling entertainment options? Natal on the Motion Controller are coming and could represent great opportunities but they are not here now.




Friday, September 11, 2009

iPod Touch Games: Reality Distortion Field Edition



Someone is giving Uncle Steve bad game industry advice and we have to wake him up. He has the chance to do something to pull our industry forward with the same impact he had on the music industry - and perhaps dominate our future - but instead, he is choosing to run down the same rat hole as the rest of the industry - and by extension use his reality distortion field to pull us along with him. At at time when we so desperately need to pull the mainstream iPod buyers into games, he is chasing after the same limited number of gamers we so jealously covet and cater to. He started out so perfectly, mainstream device, mainstream applications, reviewed and approved all the applications, pick up and play games, cheap to make, easy to earn out, and all of sudden, he decided to spin into the already crowded game industry hell last Wednesday. The iPod/iPhone is a unique device with the opportunity to magically create an economic opportunity for never before seen games, catering to unique attributes and leveraging unique distribution. Instead, he chose to apply his reality distortion field - believe me, it works - to have us believe there is a consumer mandate to make the iPod touch a game platform and support it by highlighting relatively expensive, crippled versions of games from other platforms.

In his post announcement interview with the New York Times:

Mr. Jobs reiterated what Phil Schiller, the marketing vice president, had said earlier in the onstage presentation: that Apple is really pitching the iPod Touch as a game machine these days. And to do that, you have to make it as inexpensive as possible.

“Originally, we weren’t exactly sure how to market the Touch. Was it an iPhone without the phone? Was it a pocket computer? What happened was, what customers told us was, they started to see it as a game machine,” he said. “We started to market it that way, and it just took off. And now what we really see is it’s the lowest-cost way to the App Store, and that’s the big draw. So what we were focused on is just reducing the price to $199. We don’t need to add new stuff. We need to get the price down where everyone can afford it.”


So he would have us believe he just threw this thing out there with no idea why people would want it. Forget iTunes number one position in music sales and mobile video distribution. Also forget that only 10 of the 100 games are anything other than extreme casual and less than half of the top 100 applications are games at all. Also, set aside the 50 some million people who bought the device, most of whom would never touch a DS no matter how many Beyonce ads Nintendo makes. Forget that the tie ratios for DS suck for anyone other than Nintendo because the owners really don't buy a lot of games. Finally, forget the 110 million people who purchased DS's and both people who bought PSP's bought them only for games while the people who purchased iPod/iPhones purchased them primarily for consuming media or talking on the phone with only a subset even caring about a game. If we don't forget all this stuff I would have to stop writing now, and if you are reading this post you know how much I enjoy writing long posts. Moreover, I am going to humor Uncle Steve - he really is right much more often than I am, I found this out sitting in a conference room with my Newton in front of me and him on the other side of the table when he told me people would by the Bondi Blue iMac, six months later I learned which was the better side of the table- and take a look at the event.

I understand where he is coming from, he's done it before, hell, we've all done it before. Conventional game wisdom says new platforms need exclusive killer apps to launch. When he launched the iTunes store he pulled in the best music and featured U2, delivered in a manner which catered to the unique attributes of the iPod - all the music in one place. When we launch consoles, we try to lock down the key developers and games. There is a must have list of games required to get the console to critical mass, the point at which publishers can make money and keep supporting the console. However, in the case of iPod/iPhone event, he did not show killer apps. He showed stuff very few people care about. He also ignored the acquisition of critical mass months ago. He's got 50 million units installed and a game can be built in the single digit thousands. He's already there.

At the event he chose to feature representatives from EA, Ubisoft, gameloft - which for those of you in the back row is pretty much Ubisoft - and a lone iPod game developer, Tapulous. They showed crippled Madden, crippled Assassins' Creed, an FPS called Nova which is kind of like flying a plane with a paper and pencil, and Tapulous which gives us gameplay like we haven't seen since Amplitude. I am sure these games are wonderful, but with the exception of Tapulous, each of these can, and are delivered better on other platforms. I remember before Halo when people used to say FPSs can't be played on consoles, and then they were proven wrong. But you know what? The iPhone really sucks for FPSs. Of the apps shown on stage, Tapulous is the closest to illustrating the potential of the platform, but even this one is not quite there.

If he really wanted to highlight the strength of the opportunity on the platform, he could point to the games people are actually buying for the device. Perusing the current top games, the are games like Mr. AahH!, Geared, Sheep Launcher Plus, Trism, Radgoll Blaster, Stick Wars and others that for budget, distribution and game play reasons could not find a home on any other platform and have one - sometimes lucrative - on the iPod/iPhone - and these are just the ones people pay for. There are a ton more free downloads. Don't kid yourselves, Apple doesn't care whether the apps are free or paid for, they make money on the hardware. Paid apps are only there to encourage others to develop for the platform. Uncle Steve has shown us over and over he is not a dumb guy and is always a dozen chess moves ahead of the rest of us, so why is he ignoring his unique position in favor of what could be perceived as a weak one. Well, I can only make a random, speculative guess, and again, if you have read any other posts on this blog, you know I will.

The simple answer is new technology adoption is driven by sports, gambling, porn and games - not always in that order. But this is not a new technology and I don't believe the answer is quite so simple. Games are a blue water opportunity for Apple. The iPod already dominates the music world and there is not much room for growth. He has to find new markets. With the touchscreen and openGL, he set his sights on the 150 million unit strong market of DS and PSP owners. The app store is a success when it comes to numbers of downloads, but the majority of the apps downloaded come from the free side, not the paid side. The unwillingness to pay for apps is evidence of the type of consumer purchasing the device. They are not gamers. A mainstreamer will purchase a mobile navigator and download a solitaire demo. They may download the bubble wrap and purchase a Tetris, but they are not checking the store daily to see what came out. If Gamers believe there are cheap, easy to acquire games that are as good or better than those on the DS and PSP coming out regularly, they will buy the iPod touch . . . or so he thinks. In reality, as a matter of simple economics, the iPod/iTunes games are doomed to being worse.

Phil Schiller touted the price disparity between the DS and PSP games and the iPod/iPhone games as a benefit. It is to the consumer, but not to the producer. The platform is great way to release inexpensive games which do not justify packaging and distribution as a physical sku. You just can't sell a 1 USD game at Wal-Mart. However, the platform is also not supporting a 15 or 20 USD price points needed for a return to justify development investment on a par with other platforms. With an installed base of one half the DS and only a subset of that base inclined to buy a game, let alone an expensive game - Madden lasted in the number one position on the charts for less than a week, only to be displaced by Appbox Pro - the hope of making up the difference on volume is years away. The only way to justify the model is reduced development budget, meaning reduced game.

The question of how long they will be worse is up to the guy who already has a DS, PSP or both and whether he cares enough about the iPod version to want to purchase the iPod touch. Moreover, will he want to buy it instead of a PSP Go with similar functionality, more buttons and deeper hard core games. While Madden quickly moved into the number one spot on the Apple store, I have to wonder how many of those sales went to new iPod owners. I am certainly not Steve Jobs by any stretch of the imagination, but if it were me, I would have kept swimming in the undisturbed clear water of the new game market I created with the app store, rather than frothy mess in which we tread.





Tuesday, September 1, 2009

Why Joseph Stiglitz Agrees with Steve Jobs: How the Game Business Taught Apple to Run iTunes Edition




"We do not see the world as it is. We see the world as we are."
— Talmud

The time between posts seems to be increasing and as you may notice, if you make it through this one, I’m a bit of practice when it comes to brevity. I started this about two weeks ago and have been thinking about it a lot. It kinds of goes off on a tangent that has very little to do with games, so in the spirit of this blog, I’ll let you know, I am playing Arkham Asylum right now and loving it. I think it’s not just because I am huge Batman fan and have been waiting for a good Batman game either. It really is great.

And now for something completely different.

The blogosphere is alight with stories of Apple’s anti competitive behavior. We’ve gone down the typical path of Apple is great, to Apple isn’t nice, to Apple is anti competitive, to Apple is Satan incarnate to your mother sleeps with goats. All of the discussion arises from Apple’s continued to decision to control the content distributed through it’s iTunes store – dare I say, a model cribbed from games. The very model which, when employed, allowed our business to rise like a phoenix from the ashes of unsold ET carts to 15% annual growth since 1988 – or as I like to think a locomotive. Those of us in the game business look at iTunes and the app store and say “OK” and start building and submitting. I suppose they may look at us as suffering from some sort of Stockholm Syndrome, and if we are, we really wouldn’t know.The rest of the world sees the trappings of an evil empire bent on world domination and control through a software application used by less than one sixth of the market. In reality Apple, as a platform operator, is highlighting the value of a shift from Adam Smith’s “invisible hand” to a Keynesian monitoring of the market. They are showing they were not wrong when the kept the platform closed, just too early, and today we are seeing a fundamental philosophical change. Technology companies have traditionally believed open is better and point to Wintel v. Apple in the 90’s as the classic example. But when mainstream consumers are thrown into the mix, Apple is showing us closed – or should is say semi permeable – is the way to go.

It’s kind of weird to think of Apple in a position to leverage market share. Especially when even their product with the largest market share cannot control artists. For those of you who feel Apple has the power to make or break content, or exert control of speech, you need look no further than rock legend, partner in the private equity firm with a large stake in Palm, owner of the only of eponymous iPod and current Blackberry shill:



U2 was able to use Apple to sell its music and when a higher bidder came along they went elsewhere. I am sure Steve Jobs is not happy about it, but so far, U2 is not sitting hungry in the street - and this all occurred in a market where Apple does have a majority share – of a market segment. While Apple has 69% of the digital music market sales, this percentage represents only 25% of the overall market http://www.businessinsider.com/itunes-now-25-of-all-music-sold-2009-8. Sure it’s a large number, but is less than a third of the CD market which continues to hold 65% of overall sales, and not enough to “control” significant player.

But the most recent arguments don’t stem from a dominant position in the music market, they come from a place where Apple is a growing, hip device, but still merely a bit flashy bit player. Anticompetitive behavior is actionable when a company has significant market power and Apple just doesn’t have it. People may think it does, because the company’s ability to secure press belies their market share. Their 13.3% share of the smartphone market is growing but still significantly smaller than to Nokia's 45% and smaller than RIM at 18%. It is really tough to leverage 13% market share all contained on a single carrier in each territory against all others in an anticompetitive manner. This is probably why the blogs did not start with anticompetitive accusations. It only got there after all the facts were stripped from the story.

The torch was lit when Apple rejected the Google Voice app. Michael Arrington posted why the lack of google voice caused him to drop the iphone. Arrington's meticulously researched blog is a fantastic resource for anyone interested in tech startups or businesses in general, so his posts often pique readers' interest. Some accused him of shilling for google based on their unique provision of voice portability, but Arrington disclosed his access in the first post. He described the feature set and really had nothing else to say about Apple than he chose a competitive product more suited to his needs. The coverage should have stopped there. Arrington didn’t like the product, he had other options, and he took one. But the coverage didn't stop there. Popular gadget blog Gizmodo (when do so many professional journalists work on a blog that it is no longer a blog?) used the post to plant the meme that Apple's App review process is "inexcusable, and. . . not going to work in the long term." In non-sequitur worthy of Fox News, they leveraged "this product does not offer the applications I need, so it loses my support and I am choosing another," into "this single application highlights the shortcomings of a closed ecosystem." This turn in the discussion led to debate over the long-term viability of Apple’s closed system and how the closed system is, by its nature, evil.

Arrington's sometimes partner, gadfly and founder of Mahalo (the human edited search engine populated by content hand selected by its employees, or “closed system”) went the "your mother's a whore route." Stories like this circulate around Jobs and show up in books all the time, but the sucker for Apple that I am, I clicked through to find a link to a post by Jason Calacanis. Calacanis is a master
attention getter and he certainly did it with this poorly crafted argument, but he is smart enough to write intelligently - and should have. Shockingly, or not, he was surprised to find "the 10 percent [of respondents] who are 'fan boys' are attacking me personally in a vicious fashion. Luckily their mothers won't let them leave the basement to come to my house to egg my Tesla" when he initiated personal attacks when he said "Steve Jobs is on the cusp of devolving from the visionary radical we all love to a sad, old hypocrite and control freak–a sellout of epic proportions" and "Steve Jobs gets a pass because we are all enabling him to be a jerk. We buy the products and we say nothing when our rights are stripped away." What Calacanis does to his Tesla in the privacy of his own home is not really my concern, but if he wants Mac addicts to leave him alone, he should not swing the ball on the Newton's Cradle.

Even stripping away the personal attacks and vitriol, Calacanis' arguments fall flat. He took Arrington’s argument and expanded from “I am no longer going to use this product and the company’s closed system will cause it to lose customers” to “the company’s closed system is anticompetitive.” His talk of anticompetitive behavior and monopolistic practices have the credibility of Hilary Clinton's citation of right wing conspiracies targeting Bill Clinton when confronted with the Lewinsky allegations. Unfortunately, Calacanis’ equation of closed and anticompetitive received wide coverage, when in fact, the two concepts are, in this case, not at all related. If he really wants to understand anticompetitive behavior, he should take a look at Google, the company he is supporting.

At the beginning of the year Google had a 76% market share of on line ads. If you were not on adsense, you did not make money and could not sell ads. According to Google:

All publishers are reviewed for policy compliance when they submit their application. Also, we actively monitor sites in Google AdSense to check for continued compliance with our policies. If we find sites that do not comply with our policies or Terms and Conditions, we will suspend or terminate the accounts. In some cases, payment for clicks may be refused.


One of these policies provides:

Competitive Ads and Services
In order to prevent user confusion, publishers may not display Google ads or search boxes on websites that also contain other ads or services formatted to use the same layout and colours as the Google ads or search boxes on that site. Although you may sell ads directly on your site, it is your responsibility to ensure that these ads cannot be confused with Google ads.


Another provides:

Content Guidelines Publishers may not place AdSense code on pages with content that violates any of our content guidelines. Some examples include content that is adult, violent or advocating racial intolerance.


In other words, Google has significant market power in its core market, and they are using to make no one else gets a foothold. Where you have a choice among Apple products and alternatives, Google cuts off anyone who supports a competitor.

But the “big bad Apple” argument didn’t stop there. Calacanis' piece was validated by Douglas Rushkoff, a guy whose opinion I've respected since he wrote Media Virus which is every bit as relevant today as it was at its release 13 years ago. The Rushkoff piece springboards from the Calacanis article into a world of irony housed in a room of fun house mirrors. Rushkoff uses the anticompetitive argument for a solid "I told you so." "Not only are they anticompetitive today, but they've always been anticompetitive. You guys just were not smart enough to see it."

Jason Calacanis, Web entrepreneur and a longtime Macintosh devotee, this week joined a virtual posse of prominent Internet leaders who now believe Steve Jobs has turned his back on the original promise of Apple to promote creativity and sharing over conformity and restriction.


Jobs never said this. He certainly supports creativity and created environments at both Apple and Pixar which celebrate the creatives over the suits, but Jobs never said anything about being sharing. His greatest skill is identifying talent and getting the best out of them. Not sharing. Apple only looked kind and gentle when Microsoft was its foil.



The funny thing about the argument from Rushkoff, the proponent of free bits and opponent of online abuse is, again, the use of Google Voice as support. An app which gives Google more access than the US Government to your personal data which when combined with your searches, gmail, google desktop and igoogle accounts gives google a better profile of you than the one enjoyed by your spouse. Sure, transcribing your email is nice for you, but don't kid yourself, it is better for Google. Transcribed email can be indexed and becomes searchable and may be cross referenced against the other data, all of which is subject to disclosure. When this kind of access was held by the US Government, the ACLU, and others, went nuts. http://www.pcworld.com/article/17818/does_carnivore_eat_privacy_rights.html

"Carnivore gives the FBI access to all traffic over the ISP's network, not just the communications to or from a particular target," said Barry Steinhardt, associate director of the ACLU. "Carnivore, which is capable of analyzing millions of messages per second, purportedly retains only the messages of the specified target, although this process takes place without scrutiny of either the ISP or a court."


But don’t worry Google says they will do no evil, so there is nothing to be concerned about. Besides, they are completely separate from the government, unless of course this bill goes through:

Probably the most controversial language begins in Section 201, which permits the president to "direct the national response to the cyber threat" if necessary for "the national defense and security." The White House is supposed to engage in "periodic mapping" of private networks deemed to be critical, and those companies "shall share" requested information with the federal government. ("Cyber" is defined as anything having to do with the Internet, telecommunications, computers, or computer networks.)



Getting back to the point. . . . .

Rushkoff hammers the closed argument home.

Still, a walled garden is hardly the image that a technology company wants to have in an age characterized by networking and collaboration. And the products that emerge from a walled garden are more luxury goods than they are suitable for the participation in open platforms. As the Net becomes more about cloud computing, customization, and sharing, the Apple-only solutions will start to become more limiting in ways that people can feel.


If Apple is going to fall victim to its own closed market, why do all these people care? Let it wither and die. But they are writing, because it won’t. Apple’s continued success defies their understanding and upsets the certainties established over the last generation of technology expansion. It makes them uncomfortable, they know AOL died because it was closed and the Web is alive because it was open, but the audience is changing. The world is not so black and white and AOL closed is not the same flavor as Apple’s semi permeable closed. AOL closed meant only content paid for by AOL appeared. Apple closed means the world creates, Apple chooses, and pays for nothing.

We are hearing voices from the generation who watched Apple go from 90 percent market share to 2 at the hands of Microsoft’s “open” system. But this market developed in a very well defined universe of educated business application consumers and computer enthusiasts. The percentage of consumers who would crack open their PC and add hardware was much higher during this period, than it is today. People who owned computers knew what they were doing and they knew what they were buying and installing. When I purchased my first computer in 1978, expandability, compatibility, chip speed and a host of other things were very important in making the decision. The computer was a hobbyist device. People who
bought them opened them up, noodled around and replaced things. Most people wrote at least a bit of code as well. Today, web enabled devices are mainstream products. The consumer does not care about any of those things I did. They want to know what they can do, and whether it will work. That’s all. If I am an expert user, I’ll go to Linux. I can expand it, I can see source, I can talk to a whole community of developers. But if I am a simple consumer, the risks of the open system cause it to pale in comparison to the supervised, walled garden approach of Apple. When we see the mass move into a market, they do not care about things like market expansion they just want something that works. Unfortunately, in a completely open market, that is not what they get. People who know more take advantage of people who know less.

Everyone you ask will tell you they tried a facebook app and accidentally spammed their whole friends list – open platform. Have you ever heard this from someone with an iPhone? Anyone who tries to install a game on a PC will tell you nightmarish tales of driver conflicts and application errors – open system. In the game business, we saw the entire industry collapse around our ankles under the weight of crap games sold to consumers who felt abused – open system - and then rebuilt when Nintendo built its walled garden.

The phenomenon is not unique to technology, Joseph Stiglitz has been trying to get people to understand the impact on the economy for years:

Stiglitz is perhaps best known for his unrelenting assault on an idea that has dominated the global landscape since Ronald Reagan: that markets work well on their own and governments should stay out of the way. Since the days of Adam Smith, classical economic theory has held that free markets are always efficient, with rare exceptions. Stiglitz is the leader of a school of economics that, for the past 30 years, has developed complex mathematical models to disprove that idea. The subprime-mortgage disaster was almost tailor-made evidence that financial markets often fail without rigorous government supervision, Stiglitz and his allies say. The work that won Stiglitz the Nobel in 2001 showed how "imperfect" information that is unequally shared by participants in a transaction can make markets go haywire, giving unfair advantage to one party. The subprime scandal was all about people who knew a lot—like mortgage lenders and Wall Street derivatives traders—exploiting people who had less information, like global investors who bought up subprime- mortgage-backed securities. As Stiglitz puts it: "Globalization opened up opportunities to find new people to exploit their ignorance. And we found them. . . . .

Stiglitz has warned for years that pro-market zeal would cause a global financial meltdown very much like the one that gripped the world last year. In the early '90s, as a member of Clinton's Council of Economic Advisers, Stiglitz argued (unsuccessfully) against opening up capital flows too rapidly to developing countries, saying those markets weren't ready to handle "hot money" from Wall Street. Later in the decade, he spoke out (without results) against repealing the Glass-Steagall Act, which regulated financial institutions and separated commercial from investment banking. Since at least 1990, Stiglitz has talked about the risks of securitizing mortgages, questioning whether markets and authorities would grow careless "about the importance of screening loan applicants." Malaysian economist Andrew Sheng says, "I think Stiglitz is the nearest thing there is to Keynes in this crisis."


The networked world Rushkoff describes is a complex, interrelated ecosystem, much like the economy as a whole. Like the economy, it is a collection of safe and not so safe subsystems interlocking into a worldwide network. Like the world economy, advantage is gained by exploiting inefficiencies. In the financial world, exploiting inefficiencies in information or timing – arbitrage – leads to great wealth. The same can be said in technology. Ev Williams hit it big twice by making it easier first to blog, then to send a short message. But as the systems grow, so does the opportunity for exploitation in a bad way and consumers end up with applications that don’t do what they purport to do. You can watch the migration of applications from useful innovation, to market glut to crap. The uncertainty leads consumers to look for security. Safe, predictable havens are imperative, and prove to be more important than feature set and functionality. Based on the perceived stability of the government and sustained growth of its economy, the US Dollar has been the world currency for many years. As uncertainty arises from key lenders like China, the role as world currency is coming into question. In our smaller much more easily defined world of technology safe havens will prevail over scary wide open spaces.

Jobs drives Apple as a consumer products company - remember when he changed the name to remove "computer" - and he sees the need to guaranty the experience. We turn on a television, toaster and microwave. We don’t boot them up. While the world may accept an occasional – or not so occasional - blue screen and even apologize for shortcomings of their beloved Apple products, they would not accept it from their toaster. Closed is the only way to ensure your computer or phone is as stable as your toaster.

Once stability is ensured, they can enable it do things. Apple sells consumers the ability to do things, not devices. The phrase “There’s an app for that” has become a mainstream joke, but that is exactly the point. When was the last time Dell or Microsoft coined a catch phrase? Just look at the iPhone ads relative to the ads for the Palm Pre. The Pre may in fact be a better device with a more advanced operating system. But if my viewing of Real Housewives of New Jersey is interrupted to look at a new phone what do you think I crave? "You can find a restaurant in your neighborhood, get directions and your friend can still call" or "The Pre has a unique web based operating system that allows you to perform multiple tasks simultaneously." Or worse yet, you show me this one:



that looks a bit too much like this one:



Huh? Please stop. Just give me the one that tells me where to go to dinner and lets me play the driving game with the caveman. If a company builds its brand on the ability to do things, the consumers who buy their products must be able to do them. They have to make sure the applications do what they purport to do and do not threaten other applications and for g-d’s sake, don’t open the hardware.

Like many things undertaken by Apple, the strategy is not for everyone. The beauty of the garden is in the eyes of the beholder. If like Mr. Arrington, the beholder finds no beauty, they will go elsewhere. To a certain extent, we rely on Uncle Steve to give us what we want, even when we don’t know we want it:

The nature of the personal computer is simply not fully understood by companies like Apple (or anyone else for that matter). Apple makes the arrogant assumption of thinking that it knows what you want and need. It, unfortunately, leaves the “why” out of the equation — as in “why would I want this?” The Macintosh uses an experimental pointing device called a ‘mouse’. There is no evidence that people want to use these things. I dont want one of these new fangled devices.

John C. Dvorak, San Francisco Examiner, 19 Feb. 1984


Contrary to Mr. Calacanis’ opinion, Jobs is not a dictator. We elected him with our dollars and put him up for confidence votes regularly. If he doesn’t listen, we can vote him. We’ve done it before. Throughout the nineties, with no Uncle Steve and no network of developers, Apple suffered. And even though Uncle Steve is not always right – the Cube launch – at least Uncle Steve 2.0 reacts quickly – the Cube death. He reacts to the market. When it comes to the iTunes and the app store, Uncle Steve is more Frederick Law Olmstead to New York’s Central Park, than Michelangelo to the Sistine Chapel. He built a garden and invited the world to plant seeds. Like Central Park the form is established but the content will change. Also like Central Park, some content just doesn’t fit and has to be rejected or pruned. So far, it seems Jobs is the guy to do it.
Jobs 2.0’s decisions are driven by long-term concerns over viability and stability of the platform. Do you think it was easy for him to allow an investment from Microsoft when he got back to the company http://www.youtube.com/watch?v=WxOp5mBY9IY? It was an important decision that supported the continued relevance of the platform. Do you really need more proof?

So, here is the dirty little secret. It’s not Rushkoff’s disclosure that Apple is really evil, it is Apple is out to make a profit. At the present time, a walled garden is the best thing for the company. It will continue to operate in the best interest of its consumers, and its long-term viability. If there is conflict between the two, it will favor the company. Some of these decisions may include keeping competitive products off the platform for purely competitive or strategic reasons, but right now and fortunately, consumers have alternatives. If Apple goes too far, it could be 1992 all over again. I won't wait for the thank you card to the game industry for telling them what to do.