by Dana Blankenhorn
  Volume VIII, No. XIV

This Week's Clue: Greedheads

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This Week's Clue: Greedheads
SSP (Shameless Self Promotion)
SP (Shameless Promotion)
Voice Is The Always-On Interface
Hints Of Always-On At Wherify
Cellular Data Requires New Forms Of Selling
Clued-in, Clueless

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For the Week of April 5, 2004

They say economics is based on fear and greed. We've had three years of fear, but greed ain't pretty either.

Greed was on display at the CTIA show in Atlanta March 21-24. It was on display in the form of their new President, Steve Largent. He's a Washington player again, having spoiled his image with a failed run for Oklahoma Governor. It was more evident in the behavior of the music industry, which came on the industry like hyenas on a limping gazelle.

The past years of failure have not humbled this industry one bit. Nothing is ever their fault, and when they want to tell you you're getting screwed they simply say "it's complicated."

But now there's hope, in an Asian and European fad called "ring tones." That's what plays on your phone when a call comes in. Thanks to uniform standards, a pictographic language, and the disposable income of outsourcing (single 20-somethings taking your jobs for half the money are rich by the standards of their hometown) it's considered cool to "personalize" your phone with your favorite song, or a tiny screen of your favorite singer. And this can change from day-to-day - some kids buy a dozen "polyphonic ring tones" (10 second MIDI files) a month.

It's a huge market. The estimate may be apocryphal, but the number was flying around the show that, at $3.5 billion, this is 10% of the entire recorded music industry. And the labels were getting none of it, because MIDI files are all covers - they're not the actual performance.

The "solution," according to the industry, lies in MP3 files, 30-second bursts of real recordings called "ringtunes," or "master ringtones" by the labels. Since they're of "such high quality," they're worth three times what the MIDI files are worth. And in Europe and Asia, they're getting it. (Like I said it's a fad.)

But they're not going to get it here. Already, limits have been clamped on Asian ringtone spending. They now want "subscriptions." The money is guaranteed, and you can try to sell a whole year's worth at once (although that's not usually the way it works), but the money is limited.

Then there's the U.S. market. These bozos are equating Asian workers to American teenagers, thinking that when kids here are desperate for their band, when they're "in the zone" in the words of North American EMI CEO David Mumms -- they'll buy anything. And at any price. Maybe some, maybe once, but not after mom-and-dad get the bill they won't.

Worse, they're facing another set of greedheads in the form of the U.S. cellular carriers. Chief among these is Verizon Wireless. It won't let any data service onto its network, period, unless it approves the technology, unless it approves the offering, and unless it gets the full retailer's cut - half. The only way you can buy any data service (and ring tones are a data service) if you have a Verizon phone is through the Verizon online store. You buy it off Verizon's "deck" at Verizon's price. Oh, and all your applications must be written in Qualcomm's Brew, not the Java which is the lingua franca everywhere else.

This isn't the way the industry is used to working. The industry is used to a level playing field, all carriers using the same technology, where you have third-party billing (called "Premium SMS") and a multitude of offerings. Verizon's guys were all wearing black at this show, with an in-house magazine promoting these fatties as the company's "dream team."

If that's not bad enough, there's the horrid merchandising of all the U.S. carriers. Whether stores are company-owned or run by re-sellers, they care only for selling contracts, on which commissions are paid. There's no premium to them in selling better phones, no incentive for selling data services, and certainly no reason for them to train anyone. Hey, it's a phone, what's training?

But it's not a cell phone anymore. It's a sell phone. The better the phone, the more it can sell you. The sound quality is moving toward the MP3 standard of the iPod, the cameras are all going to snap 3 Megapixel images, and the screens will display full-motion video next year, thanks to graphics technology from Nvidia, in chips produced by Texas Instruments. The rushing sound you hear is mobile telephony coming into the computing and communications mainstream.

And the industry isn't ready for it. Heck, they're not ready for polyphonic ring tones, or any kind of free market. Yet the Greedheads lay their plans. "Hey, we can get $3 for a 30-second ringtone, so iTunes are woefully underpriced at 99 cents," said one greedhead (named David Ring, believe it or not). "We have very high costs. Our content is not free," said Mumms. And if you don't like the terms, and you try to get around these guys to make a little something for yourself, they'll sic their lawyers on you. "It's complicated."

No wonder they were called Brad Zutat "the anti-Christ." Brad runs Xingtones. It's a $15 application that lets your PC create all the ringtones you want. Want to rip one of your own CDs and make "Squonk," from Genesis' 1976 "Trick of the Tail," into your ringtone? No problem with Xingtone.

And you know what Mumms will call you then, don't you? A thief is what he'll call you. Why? "It's complicated."

Closed networks, limited choices, and monopoly prices. The greedheads think Americans will flock to it, because they're kids, and they don't know any better.

Maybe. But I tend to doubt it.


Shameless Self-Promotion

I work as a business analyst with Progressive Strategies, a New York research firm that has the ear of the world's top technology companies.

My last book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards .

You have my permission to forward this newsletter widely. And if you have trouble subscribing let me know. Remember: it's journalism that keeps the Clues coming...


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Takes on the News

Voice Is The Always-On Interface

I have long said that voice is the best interface for Always-on. Your voice can make for easy authentication. Your voice is a natural interface for "talking" to a complex system. Once you learn a few commands, you're good to go.

But what can you "write" such applications to? The best place is the browser. That's why news that Opera which just went public in Norway, has announced a "talking browser," based in IBM technology, is important stuff.

What's being provided here is an interface, between the Internet and voice, which can be embedded in all devices, not just PCs.

Opera and IBM are talking up the value of putting this into cell phones, which is cool. But what about putting this into Always-On networks? Now you can simply write interface routines in HTML, and interact with those routines from wherever you are in the house. Or, you could make your cellphone an Always-On interface, simply by adding an 802.11 radio (or an interface between cellular and your 802.11 network) to the mix.

Say, for example, you have a kitchen inventory program and you're sitting at your desk in your home-office. You collect data with a UWM radio, through the refrigerator wall, and collect that on a Web page. You do the same thing with what's in the pantry, using RFID tags. You interface that inventory against recipes on-command, either from a private collection or a Web site like Food Network.

Anyway, I'm sitting in the office, remembering a recipe seen during a "study break" earlier in the afternoon, and I ask the computer whether we've got what's needed to make it. The computer consults the recipe (which is written in HTML), consults its "database" and tells me. I don't even have to look up from my work -- most of this happens in the background.

Now, how much work have I saved? Today I would print the recipe, then go through the pantry and refrigerator manually, calculating my supplies. Maybe I'm only saving a few minutes this way. But remember, I'm getting older (as we all are), and you can multiply this savings many times over the course of a day. Where's my dental floss, where are my keys, where did my wallet go off to...anyone with ADD (heck, any messy man or woman) goes through this frustration all the time.

Now it can be banished. And if it runs on a network you already have, using interfaces you already know, why wouldn't you consider it?

That's just one application, just one of many, that can be had in today's homes with technology available today -- 802.11 networking, UWB radios, RFID, and the HTML-voice interface announced by Opera this week.

Are you starting to get excited?


Hints Of Always-On At Wherify

The cellular world is slowly being dragged, sometimes kicking-and-screaming, into the computing mainstream. Always-On applications are playing a big part.

I saw during the cellular show at the small stand of Wherify . This company makes strap-on GPS devices. The sales material in their booth was filled with kids on skateboards whose mommies worry about them. But when I sat down to talk, CEO Tim Neher admitted that the message didn't match the market.

The company has been deluged with requests from the families of Alzheimer's patients, he said. In response the second version of the company's product strips away the fashion statements. It's a tiny box, the size of the chewing gum samples you get from cheap houses at Halloween. He noted that one woman sewed a false pocket onto her father's trousers, and talked movingly of a patient who was traced across the LA bus system from Hollywood to Santa Monica. I suggested gluing a pin to the thing, and mentioned a company that has turned walkie-talkies into Star Trek-style communicators, worn on the front of the shirt.

More important, by thinking about old folks instead of kids, Wherify is moving from the world of safety and convenience to Medical Monitoring, a major Always-On application set. Once you've moved into that mindset, you can think about monitoring other aspects of the patient's health, maybe their heart rate, to check for signs of panic. Once you're monitoring heart rate, the world of the hypertense (like me) starts to open up to you. Or consider the world of blood sugar, and here stands diabetes. Currently the handheld devices in this market can't communicate, and most tests require patient or a doctor's intervention. Make it automatic, report automatically, alert when necessary. Use the cellular network to pass data, use the GPS to find the patient.

This is how Always-On applications evolve, when the light bulb goes off in some executive's head and he is lured into a new direction. And it's starting to happen.

Cellular Data Requires New Forms Of Selling

The biggest problem I found at the CTIA is its merchandising.

When you sell one thing, voice, to a mass market, then mass marketing makes sense. Stores, whether run by carriers or by re-sellers, are in business mainly to sell cellular contracts. And the people who work there don't have to know a lot.

But as you enter the world of data, and as cell phones enter the computing and communications mainstream, selling becomes more complicated. You no longer want to push the cheap phone, you want to up-sell to a "sell phone" that sells more high-bandwidth services. And then you have to lead the customer through those services, to those that provide the most value to them, and train them to use those services.

It's more than the present cellular industry can handle. Something fundamental has to change.

The way in which products and services are merchandised through the cellular channel has to change. Consumers have to be trained to want better phones, they need to be trained to use the phones, they need to be trained to find valuable services and implement them in their lives.

There is a huge opportunity here for someone with a loyalty program and it puts the lie to G. Pascal Zachary's latest for Salon, called "Triumph of the Telcos."

Superficially, Zach's right - the telephone companies have plans in place to dominate voice over IP. But what's happening under the surface is more complex. The same thing is happening here as in wireless. You combine voice and data into complex applications, requiring complex sales and training, something the telcos aren't equipped to handle.

FCC chairman Michael Powell hinted at this during his CTIA keynote. "It's short-sighted to see Voice Over IP as another way to do something," he said. "When you see Voice Over IP as an Internet appliation you see both the potential and the challenge. The applications change when you move from selling a service to software." And where did Powell come up with this idea? It might have been , visiting the Wherify booth at a recent trade show.

At CTIA Powell said that, in fitting voice into a 3G data infrastructure, the wireless guys are thinking about this more than the wireline guys, but they're still building a network utility, not applications. And complex applications demand a more complex sale than you can do on a TV spot.

This is the point Powell didn't make, partly because as a government man it isn't his point to make. But a computer application is fundamentally different from a voice application. There's the whole issue of training people to use it, for one thing. The present voice channel is completely unprepared for any of this.

We need both the complexity of Microsoft, behind the screen, and the simplicity of a remote control, in front of the screen, in order to integrate voice and data into systems that deliver solutions. That's a long sentence, one that needs to be broken down. So let me put it more simply.

The channel can't handle what's coming. No way, no how. We need new channels, indirect channels, channels with multiple levels, in order to get from here to there. The present telco network imperative of trying to control everything - best seen through Verizon's "Get It Now" channel - isn't going to deliver these computing-based applications. You need to build in margins for complex system sales, for training, for small application niches.

This is the key challenge facing Always-On in the next few years. It's changing the merchandising system into something complex solutions can live in. Greedheads like Verizon won't help. We must make them pay a price for their intransigence, in lost customers and lost revenue. If that means boosting Cingular in the process, so be it.


Clued-in, Clueless

Clued-in is Microsoft trying to unify its games development under XNA .

Clueless is Boeing's pricing on in-flight WiFi . Charging $10 per Connexion, delivered by satellite and ground stations, is way too high for anyone outside first class.


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