1. It is SO SIMPLE. It is basically a highly responsive capacitative piece of glass with solid state memory and an IPS display. Just as a book is basically paper bound together in a portable form factor. The simplicity is what allows everyone, us, software developers, content providers and accessory manufacturers to pour themselves into it, to remake it according to the limits of their imagination. I’ll stop before I get too Disney.

The book analogy is a great one, also ironic since the iPad is also intended as an alternative to paper books…

From StephenFry.com

Another really cool nugget from the article by Stephen Fry-

“I have always thought Hans Christian Andersen should have written a companion piece to the Emperor’s New Clothes, in which everyone points at the Emperor shouting, in a Nelson from the Simpson’s voice, “Ha ha! He’s naked.” And then a lone child pipes up, ‘No. He’s actually wearing a really fine suit of clothes.” And they all clap hands to their foreheads as they realise they have been duped into something worse than the confidence trick, they have fallen for what E. M. Forster called the lack of confidence trick. How much easier it is to distrust, to doubt, to fold the arms and say “Not impressed”.

Apple won. And this time they have the traction and experience to keep the lead.

If you want to look at the iPad long term, forget about the specs, the interface is the only thing that won’t be COMPLETELY different 5 years from now. Anyway, I’m sure multitasking and possibly Flash is coming in a few short months with OS 4 anyway.

This is the future of computing, I don’t mean in a ‘wow the new Intel CPU has 20 cores!’ sorta way. Actually, the original iPhone represented the future of computing, this is just the next step in that progression. As Stephen said, without the iPhone there would have been no Android, WebOS, etc.

While Microsoft was devoting much of its effort on Windows 7 (and should be commended for it), Apple just completely changed the future of computing. Do you think people will be using clamshell notebooks in 10 years? Think again.

From insidedigitalmedia.com

It won’t be just a ‘tablet’, or a big iPod Touch. A bigger iPod Touch in itself is not enough, that by itself doesn’t add anything you can’t already do on an iPod Touch or iPhone. It will be an (almost) fully-featured computer that runs on the Touch OS.

I think they want to develop something that addresses the needs and desires of netbook users/potential buyers, but without the overhead of a full desktop operating system. Now take that saved overhead, and put it into snappier performance and better design/hardware/user experience (and a little bit for Apple’s profit margin.) Because if you look at the majority of netbook users, you’re mainly looking at web, email, and light productivity work- does that require a full desktop OS? No- and this is the starting point for this new Apple product. You can really address most potential netbook users with a Touch OS-based device, and gain some nice advantages in the process. Keep in mind that the Touch OS interface is not just an amazingly great mobile interface- it’s an amazingly great interface, period.

Let’s say they add an even faster than 3GS processor with that ~10″ display, with video hardware capable of at least 720p as well. It runs a modified Touch OS (and runs it REALLY fast) with some extras. Some sort of iWork type suite, as well as enhanced iLife type apps (good thing Apple has developed these productivity/lifestyle app suites to start from.) And a built-in keyboard, or perhaps a detachable keyboard that turns it from a tablet to a clamshell. And failing that, at least bluetooth keyboard support (good thing Apple already has a slim Bluetooth keyboard.) Also throw in some sort of synchronization of files with your regular Mac Windows PC, and an iSight camera with iChat. It’s Touch OS-based, but is designed to give almost desktop functionality. Any sort of specialized device for movies, digital music albums, home media centers, etc. is not enough- those are niche applications- solutions in search of a real customer base. Computers are Swiss knives, and they sell in the many millions. And this will be a really, really sharp Swiss knife (and a very thin and beautiful one as well.)

So now it does not fit in a pocket, but neither does a netbook or small notebook and those sell pretty well. And the hardware will run very well because even though its souped up compared to an iPod Touch or iPhone 3GS, it doesn’t have the overhead of a Windows or Mac OSX.

So basically, this is a device that does what netbooks are used for, but is not a netbook. The big thing here is price- Can they do something like this for under $600? Anything more and most people will just pick a real notebook/netbook computer. The new 32GB iPod Touch will probably be $299 or $349, so maybe they can intro a 16GB tablet for $449 and a 32GB version for $549 (perhaps the keyboard will be an extra add-on.) If they can come in at around those prices, they will sell a boatload. Especially if it looks thin and beautiful, which Apple does better than anyone (sorry about the non-user replaceable battery though.)

You might be able to buy a netbook for cheaper, but this device has been designed to be a huge improvement over the netbook experience (for 80-90% of netbook users), at around the same price point (and I say this as a general fan of netbooks.)

Apple iPhone grabs 28% of U.S. smartphone market; ahead of all Windows Mobile devices combined.

Canalys estimates that Apple took 28% share of the fast growing US converged device market in Q4 2007, behind RIM’s 41%, but a long way ahead of third placed Palm on 9%. This was also enough to put Apple ahead of all Windows Mobile device vendors combined, whose share was 21% in the quarter according to Canalys figures.

(Source- MacDaily News)

(And this is up significantly from Q3 2007, when Apple had 19.5% market share in the US. Of course, you can’t go too far back because the iPhone just launched in June 2007.)

Meanwhile, the Cupertino-based company’s combined shipments of 2.32 million iPhones during the fourth quarter were also good enough to place it third in the worldwide smartphone market, ahead of Motorola’s 2.3 million unit shipments, but behind RIM’s 4.0 million and Nokia’s 18.8 million.
(Source- Apple Insider)

Meanwhile, the company last quarter crept its way onto the list of the world’s Top 10 handset vendors.
(Source- Ars Technica)

Perhaps even more telling than the market share numbers, is that the iPhone mobile browser share was many times higher than that:

Google on Wednesday said it had seen 50 times more searches on Apple‘s iPhone than any other mobile handset…
(Source- Financial Times)

So now that we know the answer to the question I led this post with, let’s twist that question around a bit:

-What happens when Apple actually has more than 1 model?
-What happens when Apple has 3G?
-What happens when push email is available?
-What happens when 3rd party apps are available?
-What happens in a couple of years when today’s iPhone is 10x more -powerful, or when the iPhone product line starts at say $199?

‘Wow’ comes to mind (and by that I don’t mean Windows Vista.)

Apple vs. Microsoft- Vaporware vs. RDF?

One of the most intriguing differences between Apple and Microsoft is the completely opposite approaches they take to announcing new products. Microsoft typically announce early, and more often than not delivers late. Apple likes to keep things secret, and then wow the market with a big press event. (Microsoft tries to do its version at CES every year, but Bill never seems to generate one tenth the excitement.)

What does this tell us about the respective companies? Microsoft is typically more concerned about leveraging Windows and maintaining dominance. It new products are typically legacy-oriented. It never has any surprises up its sleeve, so it may as well announce early.

Apple is totally different, not just from Microsoft but from most all high tech companies. If you read about product development within Apple, you see how obsessive they get about product development, how much they CARE. How else would they take Palm and Microsoft TOTALLY by surprise?

We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.

- Palm CEO Ed Colligan, commenting on then-rumored Apple iPhone, Nov. 16, 2006

There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.

- Microsoft CEO Steve Ballmer, April 30, 2007

But wait, there’s even more.

It’s not just a phone, it’s a platform.

And it’s called Cocoa Touch, not iPhone SDK, not iPod SDK.

Yes, Apple did come out with a new phone and a new iPod, but more importantly they came out with an entire new OS, one that kicks Palm OS and Windows Mobile to the curb in terms of usability AND power. An OS whose importance was significantly shrouded by lack of support for 3rd party apps. But that shroud has been now lifted, and the future is now in clear sight.

All many of us were hoping for/expecting/wanting were native iPhone widgets (analgous to Dashboard widgets in OS X). What we’re actually getting is 3 or 4 levels above and beyond. As I said before, the iPhone is the first teleputer.

The SDK includes everything you’d expect from an Apple environment, including the UNIX-based internals of OS X. In addition, developers will have access to Keychain, Bonjour, SQLite and Core Location as well as a mature, Quicktime-based media layer including video playback, Core Audio, Core Image, Core Animation, PDF rendering, OpenAL, and OpenGL ES. Cocoa Touch gives developers access to the hardware and interface, including Multi-Touch events and controls, Accelerometer, View Hierarchy, Localization, Alerts, Web View, People Picker, Image Picker and the integrated Camera.

(Source- Ars Technica)

The Cocoa SDK and the iPhone ‘OS’ is the first mobile platform that offers the depth of a full desktop OS. It is the first ‘next leap’ as we have jumped from the mainframe to the desktop to the laptop and now to the handheld. The significance won’t become clear for another couple of years, until developers really learn how to develop for this new mobile platform and really take advantage of this beautifully crafted UI (but they’re chomping at the bit, judging by the big names that have announced plans to develop software for the iPhone.)

Believe it or not, Nintendo presents an interesting comparison at multiple levels. Their new home and portable consoles both incorporate brand new control mechanisms. It took awhile for developers to take advantage of the Nintendo DS touchscreen and Nintendo Wii sensor controller. There were concerns that those were gimmicks to cover up inferior hardware (similar to concerns about iPhone’s lack of 3G, etc.) Both the DS and Wii have SIGNIFICANTLY inferior graphics hardware compared to their competition, normally a KILLER in the video game market. Just as lack of 3G and 3rd-party apps led many to write off the iPhone. It’s easy to do quantitative comparisons of feature lists, but is much harder to compare user interface and user experience.

Many, many millions of units sold later (and many, many millions later in profits), we see that they were revolutionary all along. I have noodled around with my daughter’s DS, and it enables all sorts of new types of games that simply weren’t possible before. There’s cooking games, surgery games, brain training games, even a game where you get to draw the character you are controlling onscreen.

The Cocoa Touch platform will be just like the DS and Wii in terms of enabling new user experiences. And not just for games (although there will be plenty of those too.) This new SDK/platform/OS will ultimately power more than just iPhones and iPods, it will enable a whole platform of products, products we haven’t yet seen or even conceived.

Just the basic IDEA of the iPhone UI trumps Palm and Windows Mobile by at least 2 or 3 levels. Even the glass screen, little physical details like that, show how much work Apple put into getting the entire user experience right. The way screens ‘bounce’ when you scroll all the way and hit the end- not only does that look cool, it provides clear visual feedback that the user intuitively grasps (rather than the scrolling just stopping, and the user wondering if his finger was not being recognized.) It’s these things that truly enable a mobile platform, so that instead of feeling like you’re navigating a compromised, squished down device, you’re using something that was built from the ground up to do exactly like it does. More screen space is not necessary even if the option was there.

It’s the kind of new product that can only come when the designers completely throw out ALL old assumptions about how the device should work, what the best way to do it is, how things worked on other similar but not the same products. Windows Mobile was a glaring example of how not to do it- the designers took in a lot of baggage from both Palm OS and Windows desktop OS, and it took quite a few iterations before things finally got usable. Palm could have come out with something like the iPhone, but they have carried ‘baggage’ from the original Palm OS and carried it over to smartphones. The Treo is great- if you want something that is like a PDA but can make phone calls. Many people expected an iPod-like Apple phone, with possible even a click scroll wheel, that’s another example of baggage. It’s all almost to the point where the simplicity belies what you can actually do with the iPhone- if you don’t have to navigate through 4 different submenus, then it can’t be that powerful or fully featured, can it?

Of course, now that the iPhone has been out 6 or 8 months, everyone is coming out with their own take, complete with pretty touchable icons and glass screens. But Cocoa Touch is out of their grasp- how can a hardware maker such as Samsung develop a operating system and software platform like Apple can? Of the two other companies that might have had a shot, Microsoft isn’t experienced at hardware, and Palm was too busy releasing successively slightly tweaked versions of its original Treo 600. I guess that’s not surprising, as the once leader of handheld devices missed out on 2 other big ships as well- messaging and music/multimedia. Now they’ve missed out in the one market they were actually trying in.

Short term, long term, how about the mid term future?
The other aspect of this looking forward, is what kind of hardware power we’ll be seeing in 2-3 years? Let’s conservatively say 10x the CPU power and storage space- what can Apple do with that? The iPhone is already a pretty amazing device, and does far more with just the basic UI than most have ever even tried, and does it very smoothly with little response delay. The iPhone offers not only mobile versions of desktop applications, it offers mobile applications that are just as good as desktop applications, and thus actually BETTER than desktop applications because they are mobile. Mobile Safari. iPod instead of iTunes. ActiveSync ON THE PHONE, not tied to the desktop. And it will only get much better, very quickly.

It’s not just a phone, it’s a platform. And it’s not just a SDK, it’s the future.

P.S. One final point- Although I have focused on Apple, its the technology they are bringing to the table here is the most important thing. They will lead for the next few years but what happens after that is unknown, just as Apple led with the first consumer-level desktop GUI. Many elements of Apple’s original Macintosh GUI can be seen in Windows today, just as many handset makers are now copying elements of the iPhone UI. The iPhone/Cocoa SDK represents the same step forward on a mobile platform. When all is said and done, Apple will be recognized as one of the great innovators in mobile computing, regardless of what company is leading this market 10 years from now.

(on a side note, 2 of the biggest consumer electronics devices are the Nintendo Wii and Nintendo DS, which coincidentally usher in new ways of physical interaction. They offer not the best graphics, but inventive new interfaces that have paved the way for new TYPES of games. Hmmm…)

Before the iPhone was announced, and during the time iPod sales GROWTH was still increasing, we kicked around ideas for what new product class Apple would come up with to go alongside the Mac and the iPod. iPod earnings were contributing roughly 50% of total earnings, what would the genius designers and engineers at Apple come up with next? Sooner or later something had to come, and was one reason for holding onto the stock despite stratospheric P/E levels.

It turns out the iPhone heralded this new ‘platform’ (the term actually applies in more ways than one.) But not only the iPhone as a single product, but the iPhone/iPod Touch OS/GUI/physical interface as well. The ‘Cocoa Touch’ SDK means much more than just native iPhone apps, it paves the way forward for a totally new class of Apple products that could easily match Mac/iPod sales, of which the iPhone and the iPod Touch are only the first models. This new SDK has seemingly arrived just in time as well, as iPod sales have levelled off along with the rest of the mp3 player market.

Of course, the stock didn’t move much after the SDK presentation, and currently is hovering around 120 with a P/E of 26. While the economy could of course hammer the stock further, I think providence is called for here rather than greed. I think this is the best buying opportunity for AAPL that we’ve seen in a long, long time.

Imagine what the story would have been if Warner had switched to the other side, it would have been a disaster for Blu-Ray, for the PS3, and for Sony as well (of epic proportions.) Sony really bet the company on Blu-Ray, and it looks like they have turned the corner.

Instead, public perception has swung on the PS3. The blue noose around its neck is no longer, now it becomes an asset especially as production prices drop and the price premium for including a next-gen optical drive goes down. The reason this works is that adoption of new video games consoles is much faster than that of new movie or music formats. So even a middling sales volume for PS3 had a huge impact on the Blu-Ray vs. HD-DVD user base battle.

Everyone has wanted a winner in the Blu-Ray HD-DVD battle, and the longer the stalemate has gone on the more everyone wants a winner. So it’s become a self-fulfilling prophecy in a way. This has been the biggest news in awhile, and now everyone is willing to more or less declare Blu-Ray the winner, more or less in the hope that it will become reality, and we can all go out and buy a Blu-Ray player to take advantage of our 42″ flatscreen HDTV’s.

I Coulda Been a Contender
Microsoft erred by not dropping the price more last year to widen the gap from PS3, and catch up a bit with Nintendo. Although hindsight is 20/20, I think he is right on. But Microsoft is fully aware of the implications of this news and is going to have to counter it somehow.

The other possibility (since that opportunity passed last year), is that Microsoft could’ve tried to help tilt the battle to HD-DVD’s side (maybe they did, but evidently not enough.) They didn’t actually need HD-DVD to win, although that would be a big benefit. They would’ve been happy with the status quo of a format stalemate, as that prevents PS3’s Blu-Ray from being as big a benefit as it will now become.

Microsoft has a large enough user base that it won’t get destroyed or anything like that. But I think the recent Blu-Ray news decreases the chances of Microsoft achieving big profitability on XBox 360 because they are now in a war again (3-sided, no less).

In addition, there are rumors that Sony will soon drop the base PS3 price to $299. This would be a good move by Sony, and I think perceived as a proactive move on the heels of Blu-Ray’s recent wins. This is the point at which Blu-Ray stops being a noose around the PS3’s neck, and becomes a key differentiator vs. the XBox360.

A $300 PS3 is a great deal almost as much as a $99 HDDVD player. Microsoft can come out with a Blu-Ray atttachment drive, but the total cost of ownership will be in Sony’s favor.

Sony sacrificed the PS3 (at least out of the gate) in a big gamble to push Blu-Ray, and now it seems it will actually pay off. If they are going to really try to build enough momentum to catch up to Microsoft, they need to strike while the iron is hot, and with all the Blu-Ray talk recently, the iron is now hot.

I know the games matter the most, but in terms of general marketing and holiday consumers, a $300 Blu-Ray playing PS3 is gonna be big. Until a couple of months ago the PS3 is probably the last next gen console I would buy, but now it is likely neck-and-neck with the Wii for me personally.

Everybody has sales projections for the new consoles based on previous sales and known information, but the biggest key factor for PS3 was Blu-Ray vs. HD-DVD, and it was impossible to predict if and when that battle would dramatically shift one way or the other. HD-DVD tried to tilt the battle with discounting over the holiday season, but it was not enough to even up disk movie sales in the face of the significant PS3 owner base.

What about Apple TV?
Let’s look at basic value proposition here-

I’m not convinced that digital downloads to a HD-based device provides a better cost:benefit ratio over physical optical media. Apple TV downloads are convenient in some ways, but inconvenient in others. You can’t take the movie with you to a friend’s house, or play it in your car, etc. (this will come as Blu-Ray increasingly replaces DVD.)

Keep in mind that a DVD contains anywhere from 4 to 8 gigabytes of data. 5 years ago, 1 gigabyte downloads would probably seem excessive, slow, inconvenient (dial-up, HD storage, CPU power, etc.) Now computer technology has caught up, but HD content requires much more data. Blu-Ray and HD-DVD disks store in the range of 30 to 50 gigabytes of data. Apple TV HD movies are in the range of 4 or 5 gigabytes. Both formats use new compression schemes too, digital download quality is going to suffer compared to next-gen disk formats.

There is also the question of content availability- in one year we know the Blu-Ray library is going to be big and get bigger, how large will the Apple TV library be in comparison?

Apple TV:Video as iPod:Music?
The other angle to look at Apple TV is comparing it to the iPod. After all, AppleTV is conceptually similar to an iPod, right? Both are HD-based devices that play back their respective primary media (music or movies) that is either downloaded digitally, or can be converted from physical media (CD’s are easy, ripping DVD’s to AppleTV involves some workarounds.)

But…I love my iPod but don’t really want an AppleTV. Why? Functionally they are the same, but the end user experience is much different. The main convenience of my iPod is access to many songs and portability. I typically buy physical CD’s, and rip them all to my iPod, and have my entire collection with me in my car and at work. Those advantages largely go away with movies in my living room- after you pick a movie to watch, you’re done for the next 2 hours, so it doesn’t matter whether it takes 10 seconds to pull it up on an AppleTV or 1 minute to pull out a DVD. And it’s not like I would tote my DVD player or Apple TV along with me, so that it’s important that I can have my entire movie collection with me. Finally, video files are much larger and slower to work with, so even if you know how to convert DVD’s to your computer, it takes much longer than with CD’s.

We Love Underdogs
For a family with a couple of kids, the Playstation 3 is starting to now ironically look like a bargain, because it plays the HD next-gen movies with the best of them, and also plays games with the best of them too, in one box. A rumored price drop to $299 could really seal the deal here.

I think Apple is entering the phone and media markets a couple of years earlier than optimal, so we shouldn’t jump to any conclusions- they’re just getting started. The iPhone is $400 and above the reach of many, but what happens in 2 years when the power of today’s iPhone is available in $99 handsets? Those handsets are still going to benefit from a good interface to handle all that functionality. And the $400 handsets are going to be even more powerful, and benefit even more from Apple’s design expertise. The same could probably be said for home entertainment, although computing is not nearly as front and center. If Apple were to eventually pull out of Apple TV, it would be short-sighted to call it mistake and failure- it was worth it to experiment and gain some experience in the living room.

So for now, it looks like Blu-Ray and probably PS3 will become the big news for 2008. Microsoft and Apple will both peter along in their respective segments, but neither has the goods to prevent Sony from finally capitalizing on their ‘bet the company’ type gamble. What’s fascinating about this is for Sony, is that for all the planning, market research, etc. that Sony must have done, at some point it is still a gut decision based on many factors that would be extremely hard to predict in advance. If there was one crucial factor that Sony could’ve anticipated, it was studio support for their HD format, and perhaps Sony knew that they could probably tilt the studios in their favor eventually, even if there would be some dark days for Sony Playstation 3 until they got the studios in their favor. After all, their new slogan is HD DNA…

They’ve already had to cut the current iPod prices by $50. Dressing it up in a new shell and making it shorter will not be enough to keep their price points. Even if the base iPod goes to say 40 or 60GB, it will not cause many waves, nor will it allow them to bump back up to $299 and $349/$399 IMO.

I think the fullscreen iPod is BY FAR the most exciting thing Apple could do right now, and would re-invigorate the full-sized iPod line. There’s been more focus on movies by Apple, so it’s also a natural progression. The touchscreen UI on the iPhone is oh-so-sexy, and the iPod could use that injection of sex appeal (being that it’s been outsold for years by Mini/Nano.) I only hope they can hit the $299 price point for a 30GB model (without camera or wifi). With the onscreen keyboard you could even add and edit playlists (not just on-the-go).

There will be tactile controls for volume and play/skip in one form or the other. It will probably have volume buttons just like the iPhone, and probably earbuds with ‘play/pause’ and ’skip’ button. They can also cut the price of the radio remote, which people forget is available for the current 5G ipods.

Maybe if they cut out the radio, they can reduce this thing to $20. The shuffle control set is the easiest to use without looking. I actually use my 1G Shuffle more than I use my 5G iPod (if I didn’t own a Shuffle I’d go ahead and buy the radio remote.)

With these additions, a touchscreen iPod would be easier to use without looking IMO than a clickwheel iPod. The clickwheel iPod is somewhat distracting for me to use in the car because I have to be careful not to accidentally tweak the volume.

Then next year, after the iPhone gets 3G and other improvements, they can add wifi, Safari, chat, YouTube, etc. to the next iPod. (iPhone Safari absolutely kicks ass over all other mobile browsers.) Heck they can even add Skype perhaps, since it’s not a phone and is not subject to limitations by ATT.

They do these things, and other mp3 makers will basically give up at the high-end of the market. Whatever minimal chance Zune had to make a comeback will have evaporated into thin air in Paris. And how the heck is Creative or any other company going to be able to come up with an OS and UI like Apple’s? Game over.
In the long run, the line between iPod and iPhone might blend a bit, but Apple wins no matter what we buy. Both are simply different iterations of the future mobile platform running OS X (sorry Palm, Windows Mobile, etc.) The only thing they have to worry about is maintaining proper feature sets between the different price points.

A year ago, everyone was talking about how Apple would lose out music sales to cell phone makers. Turns out Apple wins again, as they not dominate the music market but expand into others. In the big picture, it doesn’t really matter if the device has GSM, CDMA, wifi, or whatever- it’s all connected anyway, those are just technical specs in the long run. Those worrying about sales cannibalization between iPod and iPhone are missing the point- they’re all Apple mobile computer sales.

Well, now we know where all the money Sony is sinking into the PS3 is going- so Sony can claim to be the winner 2 months into a long, long race. They may not have won the console war over the holidays, but did win the format war. I guess the attach rate for BR movies is much better than that for PS3 games…

Look, we all know this is PR. But heck why wouldn’t Sony use all the ammo it has at its disposal? MAYBE this ends up being one of those situations where Sony only has to win 1 battle (console or next-gen DVD), and that will eventually tip over the other battle too.

For example, let’s say that the early install base lead plus the larger number of content providers (which is more significant IMO) does eventually lead to Blu-Ray winning and HD-DVD folding. How will that impact the console war? Will Microsoft rush out a Blu-ray add-on player? Will the perceived value proposition of the 2 consoles change?

OTOH, if HD-DVD had taken a clear and early lead, maybe that would spell doom for the PS3 on the optical drive tech alone, since it is saddled with an expensive, obsolote technology. BUT…surely Sony was counting on PS3 sales giving Blu-Ray an early lead for the first year or so, coupled with greater studio support…maybe this ends up being a fairly good gamble for Sony to make. It’s rare to see such a huge company make such a bet-the-company type move, it will be entertaining to watch the outcome unfold.

One thing I think is clear- I think the HD-DVD camp is going to have to do something to answer the volley. It’s a war of perception here- the perceived winner will eventually become the true winner. So Sony is rightfully tooting its horn right now. Either the HD-DVD hardware makers or the content providers will have to do something to answer and try to establish their own momentum. If Microsoft doesn’t want to discount the 360, it should have a fat $100 rebate on a 360/HD-DVD bundle or something like that, throw in a free movie as well. The regular player makers are in less position to subsidize, except with free movie deals.

I think when people talk about the influence of porn, the greatest influence porn had was on videotape in general because before then you had to sneak into a XXX theater, there were no other avenues, no internet, etc. So while I think porn has some influence here, it’s not going to be the ultimate decider or anything.

None of this really affects me one way or the other. I’m not going to buy a player until they’re under $200, and the format war will probably have ended by then…

1. This is NOT just an iPod cell phone.
All those various fake mockups we’ve seen the last few years have basically been that- a combo cell phone/ music player. Luckily Apple had the vision to go (way) beyond that goal.

So what is it? This is the first genuinely marketable iteration of a smartphone/teleputer (George Gilder- interview at Inside Digital Media) for a mass audience. This IS the teleputer version 1.

(and forget whether it’s 3G or Edge or carrier-restricted or whatever- all those concerns will go away sooner than later with new iterations.)

2. So why is the iPhone such a huge leap?
Simple- User experience (also known as User Interface.)

The first question of course should be, ‘What does it do?’ But the second question must be ‘How does it do it?’

It cannot be emphasized enough how much the basic initial design choices- fullscreen display, fingertouch interface- fundamentally changes the entire design of this product (both software and hardware.) Apple understands this, and that is why they have done such a tremendous job.

By going with a largely context-sensitive interface geared around its core functions, Apple has significantly reduced the number of steps it will take for the important stuff that people will actually be doing with this phone. It will beat the Zen of Palm (or Treo) in this regard. No need to take out a stylus, tap on a drop-down menu, etc. This cannot be emphasized enough for a smartphone geared for a large market. It’s not that the Treo did a bad job, but this product will totally redefine expectations for UI in handheld devices.

What difference does it make if the HP iPaq 9857 can do everything the iPhone can and more, if no one wants to learn/ doesn’t actually enjoy using/ will never buy such a phone? The UI is much much more than flashy icons and lickable buttons, it defines the user experience.

And here the little things (demo by Phil Schiller) DO matter- like the visual voicemail, or the tight Google Maps integration- why didn’t anyone else think of that? Because only Apple truly sweats the UI details.

That’s exactly why companies like Microsoft fail in these markets- they figure 90% is good enough for something like a smartphone or a music player. (I’m not talking about market share, I’m talking about their internal design goal for a product.) There’s been numerous discussion about how Palm or WinMob or anyone can increase sales of PDA’s/smartphones/handheld devices. Well, here’s the answer.

10 years from now, people are going to see the introduction of the iPhone (and this is just the first step of several) as significant as going from command-line to GUI.

3. Welcome to the real world (not the social)
Take a look around on any busy city block, and you will see one thing- people not just talking on their phones, but playing around with them. Cell phones are now the new toy for people to play around with while alone- waiting in line, walking alone somewhere, etc. How much fun can you possibly have playing around with a regular Moto phone? They’re fine as phones, but for anything else they suck.

Just wait til people get their hands on the iPhone. Steve Jobs said at his keynote that he could play with this phone all day, and that’s what people are going to do. When people see other people with this thing, they are all going to want one too.

4. Expandability- yes, no, maybe so?
So far we’ve heard that the iPhone is going to be closed to 3rd-party development, which is in general a bad thing. But that doesn’t mean no additional applications will be available.

If Apple releases a large collection of widget-type apps, and some sort of document viewer with the same functionality of Preview (OS X app), most people aren’t gonna care that they can’t buy or install 3rd party apps. It’s that same old mantra about Palm apps again (where did it come from anyway?), about 95% of Palm owners never installing a 3rd party app. You can be pretty sure Apple took this sort of market research into account.

Apple is probably going to gear additional functionality towards connectivity, not handheld computing. A document viewer would still fall into that category though, since people get these docs via email. Otherwise, widget apps to handle stuff like weather, Wikipedia, Myspace, Ebay, Youtube, etc., are mainly what people are going to want to do on this thing. And they’re going to be able to do it on the iPhone.

I personally will have serious reservations about getting this phone without software expandability, but I don’t think we will have the full picture for a few months yet.

5. But the price!
The original iPod came out in 2001, and offered a black and white screen in a relatively chunky body (though not at the time) with 5GB of storage for $399.

The current iPod starts at 30GB of storage, with better battery life, color video, and assorted other functionality, for $249.

That’s a lot of progress in 5 years. The iPhone will have an even more accelerated evolution, due to competition, the exponential growth rate of technology, and the importance of this product to Apple. This product is more important to the future of Apple than either the iPod or the Mac, perhaps even more than those 2 combined (simputer, remember?)

At launch, Apple is going to make every single unit they can sell. By next MacWorld, Apple is going to up the specs and drop the price, and they will continue to sell every unit they can make. Repeat that process for a few years, and Apple will have no problems hitting that 1% market share Jobs talked about (~ 1 billion phones a year.) They do that, and Apple will have hit a home run revenue-wise.

The big question is what kind of upper ceiling exists for such a product- 3%? 5%? 15%? No matter what, Apple (and ultimately, everyone who uses a cell phone) wins.

6. Apple has already succeeded- literally.
6 months before the first iPhone sells, Apple has already succeeded. How? Apple has already redefined expectations of what a cell phone/ smartphone can be. Steve Jobs specifically said this in a CNBC interview, and it’s about an apt a statement as you can make about the iPhone.

Other companies have set out to meet people’s expectations for this type of product (with varying success), which is why Apple has eclipsed them all in a single keynote. Just wait and see what new products everyone is going to announce and show off the next few years- they will all have been influenced by the iPhone.

(BTW, no one has managed to successfully copy the iPod or Mac OS X after many years. The iPhone combines Apple’s expertise with both (which is why only they could have created this), and will be even harder to successfully copy.)

It won’t be perfect, and there will need to be improvements and price drops in future iterations. And there are some issues- how well will the touchsceen work, software expandability, future pricing. But this product redefines what people will expect from smartphones (or whatever you want to call it, doesn’t matter) from now on.