15 February 2012 – Last year there were a series of dire warnings that app developers would be driven from the U.S. by the activities of NPEs. 

But lo and behold, TechNet (a telecom/technology CEO network that to which we subscribe) says au contraire.  The surge in mobile software and other apps has led to a surge in jobs, almost half a million just in the U.S. by their estimate.  

Dubbed the “app economy,” the million or so apps created just for iOS and Android devices represent jobs for programmers, designers, marketers, managers, support staff, and other professionals, according to the TechNet report entitled “Where the Jobs Are: The App Economy”  (you can read the executive summary by clicking here).

But how just many jobs?  The analysis conducted for TechNet by Michael Mandel, president of South Mountain Economics and former chief economist for BusinessWeek, found that the app economy has been responsible for adding an estimated 466,000 jobs in the U.S., up from zero in 2007 when the iPhone was first unveiled.

However, it’s important to point out, as the study notes in its executive summary, that these are estimates and “may represent ‘jobs not lost’ rather than net jobs gained.”

That total includes jobs at a business like Zynga, which creates Facebook apps, as well as app-related jobs at companies like Electronic Arts, Amazon, and AT&T. It also naturally covers jobs at top app players such as Apple, Google, and Facebook.

As detailed in the study, the core platforms in the “app economy” include Google’s Android, Apple’s iOS, RIM’s BlackBerry, Microsoft’s Windows Phone, and Facebook’s own apps.

The top metro spot for app economy jobs proved to be New York City and its surrounding counties, according to Mandel’s research. But San Francisco and San Jose combined exceeded the jobs created in and around NYC. California got the nod as the highest state for app economy jobs. But the rest of the country is also benefiting, with almost two-thirds of the jobs counted outside California and New York.

As the study notes, on an economic level, each app represents jobs — programmers, for user interface designers, for marketers, for managers, for support staff. Conventional employment numbers from the Bureau of Labor Statistics are not able to  track such a new phenomenon.

Query:  in the great scheme of things perhaps NPEs do not matter much at all. RPX Corp has just signed an agreement with Alcatel-Lucent that some observers believe could generate US$1 billion in extra licensing revenue for the telecoms company in 2012 alone.  The deal could be a win-win for everyone concerned.

Yes, issues abound.  As Google edges towards the launch of its first physical product,  there are major IP challenges that this move poses. In the same vein,  Facebook’s patent strategy has come under scrutiny as the company approaches its IPO.  In Europe, meanwhile, the European Commission’s competition chief sent an ominous warning to the smartphone sector in its Google/Motorola decision.

Don’t you just love turmoil?

25 January 2012 – The entire tech community has been quick to compare Apple’s blowout figures announced yesterday to a range of other comparators – some more financially insightful than others.  FT Techhub scoured the web for reaction and came up with these:

• AppleInsider notes that Apple sold more iPads than HP sold PCs, by Gartner’s estimates.
• Mathew Ingram of GigaOm tweets: “Apple’s revenue for the most recent quarter was more than it made in all of 2009.”
• CNN Money’s Paul La Monica calculates that Apple’s $97.6bn cash pile “is higher than the market value of 476 of the companies in the S&P 500”.
• Horace Dediu of Asymco suggests that at 1.4m units, Apple TV probably outsold Nokia’s Windows phone sales in the same quarter(that’s the “hobby” standalone box, ahead of an anticipated full TV set release sometime this year).  Mr Dediu also notes, on Twitter, that Apple’s gross profit margin is at a 15-year high.

David Heinemeier Hansson of 37 Signals tweets a couple of stats: “Apple made more profit this quarter than the entire company was worth in 2004… Last year, Apple sold 93.1m iPhones, slightly more than it did in in 2007, 2008, 2009, and 2010 combined.”

Farhad Manjoo, a writer for sites including Slate and the New York Times, tweets that “Apple’s profits ($13bn) exceeded Google’s entire revenue ($10.6bn)”.

The Next Web reckons that there are now more iPhones sold every day than babies are born, globally.

Finally,  the surge in Apple’s share price in after-hours trading on Tuesday put it back ahead of Exxon Mobil as the world’s most valuable company by market capitalisation, worth $422bn.

17 January 2012 -  When Apple introduced the iPad a couple of years ago, one of the product’s promises was that it could change the classroom experience.   It looks to do that on Thursday.  Having trolled the digital media bloggers plus conversations we had at CES2012 in Las Vegas last week, Apple is reportedly working with some of the largest texbook publishers in the world — including giants McGraw-Hill and Houghton Mifflin Harcourt — in a new venture that will upend the traditional education publishing business.  And upending traditional business models is something Apple likes to do.

SiliconRepublic had a nice piece last week on how Apple will be the “game changer” and how the traditional education publishing business is screaming for a shake up and a move away from rote learning to more dynamic, interactive learning that can only be facilitated if the tired, cynical cycle of repeatedly publishing editions just to make money is broken (click here).

And today’s Wall Street Journal has reported that the mega U.S. education publishers McGraw-Hill is working with Apple on a model that will facilitate the delivery of dynamic e-books to iOS and Mac devices.  Other publishers are also understood to be involved (click here).

It is no surprise.  Steve Jobs had spent a lot of time on this venture.   Quoting Jobs in his recent biography, Walter Jacobson wrote: “Jobs believed that all books should be digital and interactive, tailored to each student and providing feedback in real time.”

And one interesting note for the Irish: the world’s first algebra app for the iPad was developed in Dubin (click here).

21 December 2011 – Google’s video publishing powerhouse YouTube recently unveiled a major upgrade to its video analytics predecessor YouTube Insight. The new system, YouTube Analytics, features a much-improved dashboard that’s easy to navigate and understand.  Beyond aesthetics, YouTube Analytics also includes a cache of new tools that allows you to have a deeper understanding of who’s watching your videos, what viewer demographic associations are and which topics viewers watch most.  For all the details from YouTube click here.

All of this becomes incredibly important as more and more businesses you integrate video into their online marketing efforts.   As more people use the Internet in search of information, online video becomes increasingly important for reaching and connecting with followers, fans and customers. Video’s rise in power as a marketing tool is due to its attractiveness to web surfers. By adding a smile and a friendly voice, you can build rapport with your customers faster and help them relate to your business on a more personal level.

And video connects customers on a deeper level because it covers and reaches out to different types of learning styles: the visual where people learn by reading or seeing demonstrations of a product or service and the auditory where people connect by listening to audio.

Videos also help sites show up higher on the search engines. Browsers and search engines are becoming savvier and are spending less time reading endless web pages of text. Instead, they are picking up on keywords tagged on videos appearing on sites.

Here’s a look at some of the most useful features that can help you tailor your business videos and offer a more engaging video channel:

Detailed viewer data: Among the new features is the ability to split off viewer data from engagement data and drill into each of these categories to generate insights into viewer “Likes” and “Dislikes” across all videos in your channel.

In addition to providing viewer stats, demographics and abandonment rates, the new program comes with data on how users are accessing content and which channels deliver the most engaged viewers. It also offers a host of engagement metrics that can help video owners understand the social side of their viewer data — specifically, what viewers think about each of the videos in your channel. This can help you decide which videos to promote, which new videos to create and what content to scrap.

Audience retention reports: For each video in your channel, you’re now able to see exactly where viewers start to lose interest in your videos. With this information, you can learn more about the attention span of your audience, as well as what specific types of content they prefer.

How to use the data: Ask yourself the following questions to get a feel for how to use the information found in the new Youtube Analytics program to make decisions about your current and future business video choices:

1. Take a look at your Top 10 Videos, as displayed in the new Youtube Analytics dashboard. Do you notice any trends throughout these videos? Do they cover similar topics or run about the same length? Extrapolating from this information should give you a good idea of what type of video to launch next.

2. Next, look at your top Traffic Sources. Which sites send you the most visitors? Can you use the other tools within the Youtube Analytics dashboard to learn more about the visitors from each source? Even if you have one source that sends the bulk of your traffic, keep an eye out for other sources that send highly engaged visitors and beef up your promotional efforts on these sites.

3. Finally, look at your Audience Retention reports. How long, on average, are viewers sticking around during and after your videos? If they aren’t making it through your content or seem to lose interest quickly, get a handle on what they’re looking for to provide future video content that’s more engaging.

1 September 2011 – No sooner do I touch down in Paris after 4+ glorious weeks at home in Greece but the DOJ decides to challenge the AT&T/T-Mobile merger. 

I have been involved in the merger on two levels:  providing attorneys (through two of my companies Project Counsel and The Posse List) for the massive document reviews involved in the DOJ AND FCC investigations plus independent work here at EAM Capital for a hedge fund client in the telecom business.   So I became involved early on (my first post was here).

As Sascha Segan of PC Magazine said in his post yesterday “sometimes the government works for the people … seeing through AT&T’s lies and its acres of Astroturf … The Department of Justice’s press release is so clear-eyed, I couldn’t believe it came from a government agency”.   It’s an interesting post.    (PC Magazine has done a brilliant job following the progression of this deal).

Now, whether Sascha is right when he says a “dead deal” will be good news for consumers, for phone makers who will still have T-Mobile to sell to, and for innovative technology suppliers who can provide ways for carriers to use their spectrum efficiently remains to be seen.   And as for T-Mobile’s German owners … well, there is that hefty $3 billion break-up fee.  But Deutsche Telekom could face the prospect of being left with an underperforming business, in a market dominated by AT&T and Verizon, where scale is crucial.   This could be as much fun to watch as that other “game changing” deal: the HP/Autonomy merger.

So the document review/antitrust investigation is over (I know: the FCC investigation is still in mid-stream), and the court battle begins.   And the fight ends when a  federal court hands down an order to block the merger, or AT&T decides it will just be too much trouble.  Or the deal gets a pass from the court.  All still an open question.   While the DOJ has signaled it is open to a settlement, the undertone is AT&T has a tough hill to climb.  And it doesn’t look like it will be solved by giving away spectrum and cell towers and adjusting prices on a temporary basis.  AT&T’s issue is competition.  As the DOJ’s complaint contends, none of the smaller telecommunications providers is large enough to provide meaningful competition to the big four carriers.

I am not alone in thinking that the battle is really simple:  the antitrust review/investigation … and the accompanying document leaks … completely undermined AT&T’s primary justification for the massive deal, and highlighted how AT&T was willing to pay a huge premium simply to reduce competition and keep T-Mobile out of play (read: out of Sprint’s hands). 

AT&T’s claims of job gains and network investment gained by the deal were not true at all.   (With impeccable timing, Sprint today released the study it had commissioned that debunks assertions made by AT&T that their proposed takeover of T-Mobile would be good for American jobs).    And while AT&T was telling regulators the deal will increase network investment by $8 billion, it was at the same time telling investors the deal will reduce investment by $10 billion over 6 years. 

Note:  based on historical averages studied by the DOJ, T-Mobile would have invested $18 billion during that time frame, which means an overall reduction in investment. 

Then there is the LTE issue.  LTE (short for Long Term Evolution) is considered by many to be the obvious successor to the current generation of UMTS 3G technology, which is based upon WCDMA, HSDPA, HSUPA, and HSPA. LTE is not a replacement for UMTS in the way that UMTS was a replacement for GSM, but rather an update to the UMTS technology that will enable it to provide significantly faster data rates for both uploading and downloading. Verizon Wireless  has already said that it will support LTE as its 4G technology of choice, abandoning its current CDMA based network.
 

To get the deal approved, AT&T’s key talking point to regulators was the claim that they need T-Mobile to increase LTE network coverage from 80% to 97% of the population.  Except it had grown increasingly clear from the documents … leaked and otherwise … that AT&T doesn’t need T-Mobile to accomplish much of anything, and likely would have arrived at 97% simply to keep pace with Verizon.  The DOJ came to the same conclusion.  The complaint reads that AT&T “could obtain substantially the same network enhancements … if it simply invested in its own network without eliminating a close competitor”.

And the analysts and critics who “crunched the numbers” said AT&T … who has fewer customers and more spectrum than Verizon (or any other company for that matter) … has all the resources and spectrum it needs for uniform LTE coverage without this deal.

So that became a real hot button item,  AT&T’s LTE coverage.  And when internal  documents showed that AT&T computed an internal cost of an LTE roll-out at $3.8 billion — well, quite a cost difference from the $39 billion price tag on the T-Mobile deal.    And as PC Magazine,  and EndGaget, and DSL Reports and countless other analysts said while the $39 billion price certainly would deliver AT&T customers, equipment, employees, and spectrum, most of T-Mobile’s network replicates AT&T’s existing resources in major markets, and T-Mobile’s network is significantly less robust in rural markets where AT&T would want to expand. 

So, the employment fudge, the build-out fudge and the LTE fudge gets you some problems.  Because nearly every politician and non-profit that has voiced support for the merger did so based largely on this “employment spike” and “investment build-out” promise.   Plus that huge problem in the DOJ review:  if the proof shows AT&T could complete their LTE build for far less than the cost of this deal that means the deal doesn’t meet the DOJ’s standard for merger-specific benefits.

So the reality appears to be that AT&T was giving Deutsche Telekom $39 billion primarily to reduce market competition.  That price tag eliminates T-Mobile entirely — and makes Sprint  more susceptible to failure given Sprint would have to face 80% AT&T/Verizon market domination.

29 July 2011 — I am off for my 4-week summer holiday, heading home to Naxos for sailing-sun-sand.  Each summer I take a large chunk of time and “disengage”, from late July through early September, fleeing my work-base in Brussels and heading home to Greece.  It is my time, where I read a bit, write a bit, sail a bit, and just plain veg a bit.  I follow the advice given to me long ago by Dominique Senequier (she now heads Axa Private Equity in France) who once told me the trick to happiness and personal success is to be committed to all aspects of your life and disengage from the daily noise and make time for them.

I will add that as a serial entrepreneur it also helps to have an infrastructure and crackerjack staff that is well trained and that you can empower to make decisions on your behalf.  In the end, it’s about what you want to create and be, not what you want to have that makes you a successful entrepreneur. 

So you need to disengage, escape the noise, focus on themes and trends.  As the scholar Thomas Cahill is fond of noting we tend to learn history and our world in pieces. This is partly because we have only pieces of the past (shards, ostraca, palimpsests, crumbling codices with missing pages) and even the present (news clips, Twitter/Facebook/”name-that-snip” barrages).

So how do we encompass the whole reality even of the times in which we live?  True, we may never know more than part, as “through a glass darkly”; and all knowledge comes to us in pieces.  But if we take a break — force ourselves to take that break from the deafening cacophony of daily noise – we can take the pieces and set them next to one another, examine, contrast and compare, till one attains an overview.  

Otherwise we are like fish who do not know they swim in water, are seldom aware of the atmosphere of the times through which we move.

And time to do a bit of history, too.   My wife and are history buffs and the impact of Venice (for some 500 years until the early 16th century this a global superpower) can still be seen throughout the Greek islands.  In fact its possessions stretched from the home waters of the Adriatic across the Mediterranean into the Black Sea and beyond.  There are a series of programs throughout Europe this summer on Venice (many as a result of Roger Crowley’s excellent book City of Fortune) with a common theme:  Venice’s success is that it was not so much a state as a company. From the start, La Serenissima was a corporate enterprise: the lion of St Mark was its brand logo; its workplace was the sea; the doge was its chief executive; the 2,000 noble families registered in the Golden Book were its board members; the populace provided the shop-floor workers and all were shareholders. Citizens, however far-flung they might be, remained first and foremost Venetians, “flesh of our flesh, bones of our bones”.  Should be great fun.

I also have my iPad loaded with technology related files plus a reading list suggested by that media polymatch Greg Satell of Digital Tonto.   I listened to the recent Apple analyst teleconference and picked up on the cryptic comments about a “future product transition” in the current quarter, suggesting an iPhone 5 could appear by September.  I am wrapping my mind around the “patent wars” and the battle over the smartphone market (Apple just revealed that it is putting up $2.6bn of the $4.5bn that the winning consortium of tech companies agreed to pay for the Nortel patents) and this unusual imbalance that exists in this market relative to the intellectual property held by Apple, Google and others. 

And it’s fun watching this slugfest between Apple and Google and the others.  Google and Microsoft seem to love massive acquisitions,  Apple has historically bought smaller companies with intellectual property and strong talent in areas of growing importance for the company. Modest deals in the past have resulted in the iPod – which grew out of contracts with software engineer Tony Fadell and outside design firm PortalPlayer – as well as the software behind the popular GarageBand music composition and Final Cut video editing programmes, which appear on its computers.

And the battle for a stake of the digital music market is just heating up among cloud vendors.  I recently attended a music media industry presentation in London where industry analysts said we have seen only the beginning of the next wave of cloud-based commercial media services where the focus will shift to include video.  Music is already a battleground for cloud and consumers are more open to cloud-based delivery models for music than they are for other media types, and the number of connected mobile devices capable of streaming music is growing rapidly.   The three tech bellwethers–Amazon, Google and Apple–all unveiled their respective music cloud services within months of each other.  The trend?  People love having access to their own music, especially easy, organized, multi-device access. 

Plus all the Zuckerberg “wannabes”.  Facebook’s rise has inspired entrepreneurs to pursue unrealistic start-ups instead of viable companies.  Although I tend to blame winners such as Google and Amazon who distorted the financial world by demonstrating that enormous amounts of money could be made even though there appeared to be no proven business model.  But they did not really change the rules: they were the exceptions.  My experience is that companies generally take from five to 10 years to break through.

Meanwhile, the amount of intellectual property litigation has skyrocketed.  The globalization of smartphone patent disputes has simply pointed out that the most aggressive corporate asset these days is IP.  This litigation crosses multiple countries and languages.  It is all about the convergence of technology markets — most clearly, the clash of mobile communications and personal computing in the smartphone — which has greatly added to the complexity as well as the potential for conflict as the prime battle for market share.  And it affects all my companies, not just EAM Capital.  The myriad issues affecting the digital media/IP world have impacted Project Counsel (which has a special IP team that works on numerous IP projects in Europe) plus Project Counsel Media. 

I also want to take some time and study two different but interrelated subjects that have come to dominate modern societies: postmodernity and consumerism.  It is a shift that began in the latter half of the 20th century as we became a society of producers to a society of consumers. It’s a reversal of Freud’s “modern life” trade-off: this time security was given up in order to enjoy increased freedom, freedom to purchase, to consume, and to enjoy life.

One of the best “explainers” of all this is the Polish sociologist Zygmunt Bauman whose seminal book Culture in a Liquid Modern World is finally available in English.   I have read translations of his numerous essays but this book is the best place to start.

His work on modern consumerism and the tectonic changes in technology and social life contrasts the “solid” modernity that preceded it with the “liquid” modernity we are now in.  According to Bauman, the passage from “solid” to “liquid” modernity has created a new and unprecedented setting for individual life pursuits, confronting individuals with a series of challenges never before encountered. Social forms and institutions no longer have enough time to solidify and cannot serve as frames of reference for human actions and long-term life plans, so individuals have to find other ways to organize their lives. And the screeching pace of technology has forced individuals to splice together an unending series of short-term projects and episodes that don’t add up to the kind of sequence to which concepts like “career” and “progress” and “life” could be meaningfully applied. Such fragmented lives require individuals to be flexible and adaptable — to be constantly ready and willing to change tactics at short notice, to abandon commitments and loyalties without regret and to pursue opportunities according to their current availability. In liquid modernity the individual must act, plan actions and calculate the likely gains and losses of acting (or failing to act) under conditions of endemic uncertainty.

Which (kinda) brings me to Black Sabbath. 

A long time ago (in a galaxy far, far away) I had the opportunity to meet Sandy Pearlman who was an important figure in the development of both American and British rock rock music.  He has been described as the “Hunter Thompson of rock” and among his many roles he was full-time artist manager, managing the careers of Blue Öyster Cult and Black Sabbath.   He pioneered the mega-tour stadium format of several bands traveling together, sharing promotional costs and production and travel costs, a format persisting today.

He is a very cool guy and we shared an affinity for music (my mother was very artistic and I learned to play piano and guitar as a kid), the mysterious  effect of music on the psyche.  He really has a searing intellect and vision of music.  In later years he introduced me to Daniel Levitin, an American cognitive psychologist and neuroscientist … and a record producer and musician (working with Blue Öyster Cult, Chris Isaak, Steely Dan, Stevie Wonder, The Grateful Dead, etc.) … who has written extensively on music cognition and neuroscience.  Levitin’s story is the co-evolution of music and of the human brain, how each one influenced the development of the other over tens of thousands of years.  It changed the way we think about how music gets in our heads.  His work does a masterful weave of human evolution, music, anthropology, psychology and biology.

And Pearlman is keenly attuned to the affect technology has had on the music industry and our enjoyment of music.  He recognized very early on how new information technology (especially in the music industry) would emerge first in the consumer market and then spread into business organizations, one of the “new new” things the pundits address: the convergence of the IT and consumer electronics industries.  The good old days: the microprocessor flourished, and PCs, calculators, VCRs, facsimile machines, and other devices were all consumerized.  But today:  CD-ROMs, DVDs, video games, and instant messaging all had their roots in consumer markets.  Pervasive societal usage eventually created vast economies of scale that businesses alone could never have achieved, supported by interoperable standards, ever-improving quality, and self-service operation.  And as always with technological change, an option has turned into a requirement.

And it started with music technology and the musical arts.  It involved all kinds of electronic gadgets and computer software to assist live performances, recordings, composition, and storage.   As a beginning IP lawyer in the 1980s I remember working on the first sequencer software (used to create an arrangement) and song identification software well before it was staple on iTunes.   I worked with musicians as they built their own “iPods” and video players long before they became a music staple.  Ken Olmstead, a childhood friend (he played bass in our jazz group), built the first ”surround sound” speaker system I had ever seen.  

My blending of music and technology continues today.  My wife and I are members of a restaurant syndicate (holding various levels of ownership interests in restaurants throughout Europe).  Our syndicate is working with Apple, IBM and two university departments of psychology to install iPods on diners’ tables with music keyed to the food they are eating.  Several studies have examined the relationship of listening to music while eating in a natural, relaxed environment.  The studies show that the presence of selected music is associated with a longer and more enjoyable meal duration.

And so the holiday begins.  Rest and renewal are counterintuitive for most of us, and countercultural in most organizations. Rewards seem to go to those who do just the opposite in the face of demand.  But the costs should seem self-evident. In a workday world devoid of real breaks, we just don’t think as clearly, logically or creatively.  That’s my goal: to renew the creativity.

18 July 2011 –  Apple has netted a victory in its legal dispute with HTC as a U.S. International Trade Commission judge ruled the Taiwanese cellphone maker infringed two patents that Apple had cited in a March 2010 complaint to the agency.

The patents relate to multimedia processing technology and data detection technology that lets users dial a phone number that appears in their email. Apple originally alleged that ten of its patents were used in smartphones from HTC, which uses Google’s Android mobile operating system. The ITC ruling Friday only applied to four patents.

As we all know, Apple has reshaped the mobile phone market with its iPhone but has been been grappling with the rise of competing smartphones that run Android.

For HTC, a major blow with implications for other Android phones that offer similar functionality.  And Apple has squared off in other patent cases against smartphone makers such as Motorola and Samsung.

But this ruling was closely watched because it was the first between Apple and smartphone makers that use theAndroid operating system. 

Companies on the losing side of these legal battles face the prospect of having to pay the winner hundreds of millions of dollars a year in royalties, eroding profit margins that are expected to shrink as competition in the sector intensifies. 

HTC’s shares have seen a major melt-down (HTC just announced a share buyback to try and stem the collapse) but most analysts we spoke with said the market had gone from over-bullish to over-bearish.   HTC’s recent acquisition of S3 Graphics, the chipmaker which on July 1 won an ITC court ruling against Apple for patent infringement, gave the group better bargaining power in royalties negotiation with Apple. 

Given it isn’t over yet (HTC will appeal) some analysts say the if the final decision were to go against HTC the direct financial impact might not be huge.  Morgan Stanley has estimated that even if HTC were to pay Apple $4-$5 per handset sold, that would shave only 1-1.4 per cent off estimated earnings per share of T$91.70 in 2012. 

But when it comes to that silly old bear, the market, we all know the market doesn’t like uncertainties.  HTC’s share price may continue to take a big hit. 

Because Google developed the Android platform – not the phone makers – most handset manufacturers did not bolster patent portfolios in areas such as software and multimedia and are thus vulnerable to legal attack by Apple and Microsoft.  Apple’s settlement with Nokia last month could provide some reference. No financial terms were disclosed, but analysts have estimated that Apple agreed to an initial payment of $300m-$600m plus royalty payments that could reach hundreds of millions a year.  

HTC last April moved to head off a possible second legal battle by signing a licensing agreement with Microsoft. Under the deal, Citigroup analysts estimate, HTC pays Microsoft $5 for each Google Android phone it sells. 

Having to pay royalties means the Android platform is no longer “free” for phone makers. 

Google initially distinguished Android by opening it to phone makers with no royalties for its use. Of even greater concern than royalties for smartphone makers like HTC, Samsung and Motorola is the shadow the legal battles are increasingly casting over the future for Android.

Android-based smartphones dominate global sales, but Apple is expected to launch a new version of the iPhone later this year, and Nokia is poised to re-enter the fray with its first smartphone based on Microsoft’s Windows platform. 

While smartphone penetration is still relatively low even in the more mature European and US markets, industry sales growth is expected to slow from 74 per cent last year to 49 per cent this year, according to IDC.

12 July 2011 — Online marketplace eBay is likely to have to increase measures to stop the sale of counterfeits, following today’s judgment from the Court of Justice of the EU.  The Court’s ruling on questions referred from the UK High Court in a case between L’Oréal and eBay has just been released and it makes grim reading for the online marketplace.  The Court rules that the operator of an online marketplace cannot be exempted from intellectual property rules and rights.

For some excellent analysis from our colleagues at The IPKat click here.

 3 July 2011 -  Last week we were invited to attend the OECD’s High-Level Meeting on the Internet Economy, held in Paris.  It came on the heels of the Digital Assembly in Brussels last month and the e-G8 Summit in May, the latter being the first “e-Summit” at such a high governmental level ever to discuss the Internet as a sector of economic activity essential to the growth of the world’s economies.

The OECD meeting build upon the “OECD Ministerial on The Future of the Internet Economy” held in Seoul, Korea in June 2008.   The events drew together members from all stakeholder communities, seeking to reach a consensus on adopting shared principles for an open Internet economy. 

There were a wide range of topics but the event focused on these three themes:

Supply: encouraging the extension of high-capacity communication networks to reach maximum national coverage and provide access at affordable prices.

Demand: fostering the use of the Internet in critical areas (health, education, transport, energy) in order to increase efficiency.

Measurement: benchmarking developments in high-capacity communication networks and quantifying the Internet’s impact on the economy in order to facilitate evidence-based policies. 

Principles for an open Internet:   encouraging countries to follow a number of basic principles for Internet policy ensuring that the Internet remains open and dynamic.

The principal speakers included OECD Secretary-General Angel Gurría,  European Commission Vice-President Neelie Kroes and Ministers from Brazil, France, Australia, the United Kingdom plus a number of business leaders from the Internet economy – including Tim Berners Lee and Vint Cerf (ARIN).   

There was a wide ranging discussion of the Internet and how it has become a fundamental infrastructure in OECD countries, in much of the same way as electricity, water, and transportation networks.  It began as an important tool for improving communication but has transformed into a general purpose technology supporting all sectors across the economy.   Taylor Reynolds of the OECD Directorate for Science, Technology and Industry  spoke about how the Internet is changing the world.  The following video clip was prepared before the conference but it summarizes the points he made at the conference:

Tim Berners-Lee spoke about how an open Internet is the key to driving innovation:

Nellie Kroes (who is also Commissioner for Digital Agenda) is ”the face” of the Commission when it comes to all-things-Internet-and-digital-agenda.   She has spoken at multiple conferences and has a very active blog, Twitter account, and Facebook page. 

She had commented on the discussion had by all stakeholders on the principles that underpin the Internet network.  Her guiding principle is that the Internet is a “European strategic domain” and that the EU stance must be underpinned by the same values, priorities and interests as everything else the EU does.

At the OECD event she set out her own “main ingredients” as follows:

- Civic responsibility. On the internet, we are not atoms. And just as when we are out in “normal”, offline society, we bear responsibilities to each other which go beyond the purely legalistic, especially when there is harmful behaviour out there.

- One internet.   We should safeguard the idea that, on the Internet, every node can communicate with every other. This unity is what allows the Internet to thrive in the way it has; we need to avoid fragmentation.

- Multistakeholder governance of the Internet.  Because the participation of all stakeholders in policy making is a good one, which we support in this domain and others.

- Pro-democracy. With the right tools – like open access to Government information, and platforms for collective action – the Internet can become an instrument supporting democratic life, and we should promote it as such.

- Architecture matters.   The architecture of the internet is fundamental to its dynamics. I’m sure the architecture will change in the future as new challenges emerge – but we need to be aware of the implications that different models might have.

- Confidence of users is a prerequisite.   Barriers to confidence and trust are barriers to access. If we don’t solve problems like protection of personal data, privacy and identify; like online safety for children; like cybercrime and resilience of the network, then people will be turned off the net and we won’t unlock the Internet’s potential.   

- Transparent governance.   So that the multistakeholder model doesn’t fall apart. In particular we need to be transparent about the role which government representing their citizens play, and ensure that those views aren’t ignored.

She called it her “Compact for the Internet”.  For a copy of her full presentation click here.

Comment 

When we get into a discussion of the Internet and government regulation we get into a minefield of emotions and competing interests.  While most Internet users (myself included) would prefer to have the Internet be free and unregulated, many politicians, organizations, and even governments are proponents of imposing stricter Internet laws and restrictions.  Government regulation of many facets of IP communications and media likely will increase over the next several years. 

Every mass communications medium in the U.S. faces some form of censorship and regulation or another. And if they are being regulated by the U.S. government, then they are being regulated by the Federal Communications Commission.   

The e-G8 internet forum in Paris in May certainly exposed the deep rifts between tech titans, academics and policy makers, even as they tried to agree on a “message” to take to world leaders at the Group of Eight.   Eric Schmidt of Google and Mark Zuckerberg, of Facebook had warned governments to “tread lightly” on internet regulation because moves to tame its rough edges risked hurting its virtues.

There will always be an inherent difficulty of finding a way to regulate the internet that is acceptable to governments, industry and civil society.  And the business and economic models underpinning the system are always subject to change.  Many current and many future proposals to regulate the network services business operate on the assumption that current revenues and profit margins will always be there. There is a good — perhaps inevitable — chance that neither revenue nor profit margin will remain at current levels. 

For Europe, amid the economic carnage that has dominated headlines in recent months, one sign of hope is European telecommunications companies continuing to invest billions of euros into the continent’s internet systems.  Not only does this create and sustain jobs, it also allows more people to share in the benefits.

Unfortunately these economic and social benefits will be in jeopardy if EU policymakers consider expensive rules that  give governments the ability to regulate the highly complex technologies underpinning Europe’s internet.

These rules could stifle the internet’s growth and undercut a crucial economic advantage as Europe copes with global recession. For typical consumers, it would also invariably lead to higher costs to access the internet.

Few industries are experiencing the kind of rapid, dynamic improvements that are taking place on the internet.  These improvements are vital given the increasing volume of video, television, music and other information speeding through the web. For example, according to several industry reports, the data sent by a single person during two hours of interactive online gaming roughly equals 3,000 photos, 5,000 e-mails, or a three-hour HD movie download.

If the modernization of Europe’s internet is suddenly held hostage to conflicting national rules interpreting “quality of service,” then not only will users see worse and more expensive service but businesses that rely on fast communications will be at an increasing disadvantage.

But there was also a revelation:  technological innovation may be very cheap and accessible but that does not mean marketing acumen comes along with it.  One of the big issues discussed at last week’s BEA by book and music publishers (a complaint, really) was that despite the proliferation of Kindle e-readers, iPhones and iPads they still struggle to sell titles beyond those that already dominate traditional best seller lists or pop charts.  The long tail is not selling as expected.  

Surprise!  Publishing does not know how to market e-books yet and they need physical retailers to survive as showrooms for their titles.  Barnes & Noble had a major presence at the event and representatives said that many of its e-book sales take place in its stores, as customers order digital editions of the titles they see on the table of staff recommendations.  Browsing on a browser is just not as satisfying. 

Wow.  So maybe that justifies (explains?) John Malone’s bid for Barnes & Noble this month: the combination of its stores with the Nook e-reader … which has claimed 20-25% U.S. e-books market.    

And that was a big theme at BEA: viewing the digital product line as a complement, not a replacement, for the physical book.  Plus what many publishers called “distinctive” books that “really surprise when seen, touched, picked up.”  On area where this is demonstrated:  children’s books, which are seen as relatively digital-proof.  Said Robert Miller, group publisher for Workman Publishing and a major industry player:  “Parents want to buy their kids physical books.  It’s a [unique] pleasure of sharing a book with one’s child. Parents want to give them as gifts, hand them down.” 

At the FT forum, bookstores were urged to become “consultants”, editors “curators”, and publishers “customisers” which followed other discussion that the industry needs to develop high-end, engaging interactive products that will benefit from the re-imagining of the digital content format.  Because many e-books are similar to early films – staged like a play with a static camera – before gradually, people realized what they could do to exploit the medium.

And the other challenge:  continuing to invest in the print product without passing those costs on to retailers and consumers.  Lonely Planet’s publisher said that its new line is much more expensive to produce but they consider pricing very carefully.   A digital product can cannibalize print sales if the price difference is too great, making price parity a necessary goal (trade paperbacks and e-books are essentially the same price). Parity also matters when releasing updated versions of printed work.  The best example given was a book that probably all of us own.  The new, color version of Workman’s bestseller 1,000 Places to See Before You Die will have the same $19.95 price as the original, black-and-white version. 

And as reported by Publisher’s Weekly, publishers have even seen success with print books based on already-existing Web content.   The show was full of stories about people ordering print copies of book versions on free Web site. ”

The other counter-intuitive story:  Moleskine journals (and we all have one, I’m sure).  In an age of increasingly sophisticated smartphones and tablet computers, a surge in sales of Moleskines.  

Yes, functional distinctions in publishing are blurring, as online and digital sales rise.  Witness Amazon’s appointment of Laurence Kirshbaum, a publishing veteran, to head its new general interest imprint.  It is another sign that the digital battle to shape the 21st century publishing industry has been joined.  

And as a concluding note, let’s not forget the enormous power of Oprah Winfrey in this industry who after 25 years on daytime television brought her syndicated broadcast show to an end last Wednesday in the middle of the BEA.  Nobody stands a chance of capturing the audience she built in an era of fewer distractions.   The amount of books she sold through her recommendations was extraordinary.  Can anyone else recreate it?  Individual influencers lack the impact of a mass media celebrity.  Winfrey helped give Amazon’s Kindle its lead in the US market by recommending the e-reader in October 2008.  That kind of “influencer power” is unmatched.