Michi Knows

This one is predictable, but it seems an Italian company is marketing a new (Italy only) digital reading device based on e-paper technology.

If the main draw of e-paper is its low power usage and flexible nature, it needs to be on a device without a huge battery and without a giant pocket foot print. The handheld device should be half as thick and act as a digital document folder you can flip forwards and backwards through. Lastly, it needs to do what a cell phone, regular paper, or tablet PC can’t do. That would mean targeting applications that involve being far from power sources and only requires reading of data. This could include:

• Sales people on the field (such as realtors) to store figures, buyer information, and prices
• Presenters for storing digital note cards
• Anywhere crystal displays are used

In other words, it is still too clunky to be useful in the implementation we saw today, but this is still an important first step.

Again, I cover e-paper news because I believe it will become a major component of our daily lives in the coming years as its prices drop and its resolution and color capabilities increase.

Apple’s CEO wrote an open letter today decrying DRM. I’m happy to see it. In it, he wrote a really interesting factoid about the consequences of DRM:

Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full.  This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats.  Its hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future.  And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.

The point made is that DRM isn’t really locking people in because most of people’s music isn’t from iTunes.

He’s sneaking around the issue. 22 songs works out to $22 “invested” in the iPod. That’s $22 extra “tax” every competitor of the iPod must offset just to let the consumer break even for switching. That doesn’t include the cost of learning new software, the risk of the new player sucking, or the time spent re-buying and setting up the new player. Nevertheless, the point is that the $22 plays a significant role in keeping the iPod competitive.

This may help explain why the cheaper prices haven’t persuaded consumers to switch, for example, to the Zune.

Zune’s success is diminished though when we consider that it took 9% of the hard drive MP3 player market. These numbers also do not include sales from Apple retail stores, which sell only iPod players.

Anyway, Jobs also talks candidly about the idea of DRM-free media:

Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat.

Don’t worry, Jobs. The day will come, and your iPod’s iron grip on digital media will help it happen.

So it seems Wal-Mart is entering the digital movie download service. But they’re doomed to fail. I combed the article looking for how Wal-Mart is going to distinguish itself from Apple’s iTunes. You know, that competitor that has nothing but dominated the digital download market? Instead, I found that the only thing they could talk up was:

It will have access to 3,000 productions, including films like “The Devil Wears Prada” and “Little Miss Sunshine” and TV series like “24” and “Veronica Mars.”

So they’re going to have more movies than iTunes? There are three questions anybody is going to ask: Do any of those 3,000 movies play on my iPod? Consumers won’t be happy to hear the answer. And will you be able to burn the download to DVD? No.

Mr. Swint of Wal-Mart said the company would create discounts that encouraged shoppers to purchase both DVDs and digital videos.

Wow, so what part of this will be appealing to the average consumer? The price, perhaps?

Nope. The worst part is the pricing.

To avoid running afoul of studios, who want to protect their DVD business, Wal-Mart said the price of a digital movie would be comparable to that of the DVD at its stores.

How will Wal-Mart become king of the movie download business if they are purposely inflating their prices. If there is a better form of self-sabotage, it would be the equivalent of oil companies building electric cars, but pricing them too high to protect their gasoline market. We all know how that would turn out.

But the shooting-of-feet doesn’t end there as evident by this little tidbit:

It will have to pass the same test all services do at Wal-Mart.com: to lure customers into Wal-Mart’s 4,000 stores, to buy groceries, electronics and clothing… “If you are doing digital distribution, you are doing it because you do not want to be in the store,” said Mr. Goodman of the Yankee Group.

The single greatest incentive to buy a digital download is so you don’t have to get off your lazy butt. Unfortunately, the success of Wal-Mart digital downloads would also means decreasing a customer’s likelihood of entering the store - something they will stop at all costs.

Wal-Mart seems to have too many conflicting interests to want to make this work. This will fail just like their online DVD rental business.

Update: It seems TechCrunch seems to mostly be in agreement, mostly focusing on the price being “too high.”