16 August 2012

Missing the video store yet?

My amazing significant other and I were enjoying a sort-of second honeymoon this past week after we sent our 9 and 10-year-old troublemakers off on a one-way ticket to Alaska to terrorize my mother for a week. We had completely forgotten what it was like to get to the end of a day of work and be able to go do whatever the heck we wanted. Suck it, kids! The entire week we only had one minor quibble: We were not able to watch whatever movie we wanted whenever we wanted it.

This is the very definition of first world whining. We have Netflix, Amazon Prime, Hulu, MLB and all the other usual streaming suspects, so I really need to suck down a giant can of STFU. We found other ways to occupy our time, such as endless games of Parcheesi. Still, at the risk of looking like a snobby American cry baby, it is worth exploring what we lost on our road to the land of streaming.

Back in the Jurassic era (1999) we were shoveling out a couple hundred a year to Blockbuster for a couple flicks a week. Today the well-connected geek is paying for Netflix, Amazon Prime and Hulu which is stealing away about the same number of Benjamins annually. Yes, Netflix and Hulu have a wealth of TV shows to cut the cable and Amazon’s movies could be considered an add-on to free two day shipping, but these suspects with Redbox slamming the coffin door, helped kill the video store.

If I am telling my beautiful wife about this darling story about this young girl name Carol Ann who is trying desperately to get home to her family in the nice suburban home and avoid going into the light, in the past I would have rented it from the video store. Today, it is difficult if not impossible to find in streaming land. Fine. That is why DVD/BR rental from Netflix lives on. Perhaps the DVD will be here when I drag the kids back from rainy Sitka tomorrow.

New releases are another category to consider. A couple years ago, thanks to a now defunct agreement with Starz, new movies would show up for a period of time for streaming as part of the dollars we were already shuffling to Netflix each month. Today, if you want to watch “Jeff, Who Lives At Home” (fabulous movie, by the way), you are either going to drive to a Redbox in the couple weeks it is available or pay money to the Apple gold palaces or go slumming in Amazon Prime.

In addition to the maze of finding a movie is the issue of diminished quality. Amazon has a good example of the resolution opportunities: Standard is a couple bucks and HD will run you a finsky. If you believe the wacky-weed smoking folks at Gizmodo, the standard is on par with a DVD and the HD is nearly as good as Blu-ray. Don’t believe it. What they are comparing there is the pixel count, but because the material is so compressed, they are both significantly worse quality than what they are being compared against. A DVD played on a PS3 (yes, it upscales the quality) looks as good as the HD quality video on Amazon. It makes sence the quality would be much lower since a BR quality movie streamed would hit the bandwidth cap of a typical Comcast customer before the folks at Gizmodo finished their first joint.

So, yes, todays home movie viewing is typically lower quality with a confusing and expensive affair of balancing all sorts of different services to find the movie you want at the time you want it and the price you are wiling to pay. Would I go back to the days of Blockbuster? F-no. Geeks love a challenge, and watching a movie today is nothing if not that. Besides, spending an evening playing Parcheesi with my wife was much better than any movie we were going to watch, anyway.

12 August 2012

Why the iPhone is so cheap.

Walk into a Verizon or AT&T store and you can pick up the latest iPhone for a couple hundred bucks. If you are willing to settle for the previous gen model, you can cut the price in half. And when we all line up to buy the next iPhone, we need to give a big thanks to the people responsible for making this amazing device so inexpensive: Google.

The iPhone is by far Apple's most profitable product. While you may only pay two Benjamins for a new one, Apple is actually getting paid closer to six. How? Pre-paid services have unmasked the true cost of each device and have shown that an Android device running 4G costs a carrier about half the cost of Apple's hardware. Yet, when you visit a carrier, they both cost about the same amount.

How is it possible that carriers can sell a device that costs twice as much for the same price? By making the Android customers pay for it. It is well known that Verizon has been pushing customers to buy Android devices instead and it is not simply because they want everyone to have a fast LTE connection. Verizon makes approximately three hundred dollars more profit on a two year contract with a Samsung Galaxy SIII than they do on an iPhone. If all of Verizon's customers purchased Android devices then Verizon would be considerably more profitable and could consider lowering their monthly rates, but that additional profit it used to offset the premium required to sell the iPhone - so do not expect to see the monthly rates decreasing. In fact, we are seeing the price move up, instead.

Verizon and AT&T both had sizable profits this past quarter following a period of lower profits or losses, in the case of AT&T. Of course they did. No one is buying the iPhone right now and Android has four times the number of sales. The next quarter and Christmas will show a significant decrease in profit as these companies need to shell out huge dollars to Apple for the new version of the iPhone as anyone upgrades to the latest model.

Carriers could easily make it more equitable if they wanted to. If they doubled the price to buy an iPhone then the profitability point for both would be similar. However, no carrier (so far) has been willing to make that leap. Verizon has grumbled about potentially raising the price, but if they were the first to jump then all of the Apple fans would run to AT&T or Sprint. It seems likely that if anyone raises their price it will be a small change - perhaps $50 at a time to allow the competitors to slowly follow suit. Still, there is no indication that will be happening any day soon.

So, thank you, Google. Thank you so much for creating the Android market. Sure, you outright copied Apple's amazing concept, but by doing so you have allowed consumers to enjoy their products at a much reduced price. Sure, your customers are paying more than they should, but it seems like a small price to pay for Apple fans to get their favorite product at a discount.