the art and observations of Ranjit S. Mathoda

Saturday was a big day for Microsoft and Yahoo, with Microsoft CEO Steve Ballmer offering about $33 a share for Yahoo, and Yahoo CEO Jerry Yang stating that the Yahoo board had concluded that undervalued Yahoo by about $4 a share. Microsoft decided to walk away.

A few hours earlier, about 1,700 miles away, Sue Decker, Chief Financial Officer of Yahoo, and Bill Gates, Chairman of Microsoft, who are both on the board of Warren Buffett’s Berkshire Hathaway, happened to be meeting in front of 30,000 people attending Berkshire Hathaway’s annual meeting. Given the momentous meeting between Ballmer and Yang that was to happen later in the day, I kind of wondered what they said to each other. Now I’ve found out:

Sue Decker: Should I kiss you hello? Or will people think we’re getting married?
Bill Gates: Don’t!
[stands up swiftly and shakes her hand]

According to Sue Decker, at the time she spoke to Bill Gates she thought Steve Ballmer would accept Yahoo’s higher asking price, and was surprised they didn’t. Here’s Sue Decker stating all of this and describing in insightful detail Yahoo’s past, present and future:

(http://edcorner.stanford.edu/authorMaterialInfo.html?mid=1975)

When I first saw multi-touch screens being developed in universities, I knew it would be pretty revolutionary. They later showed up in movies like Minority Report, devices like the Apple iPhone (my iPhone post), and presentations such as the one shown here: http://www.mathoda.com/archives/112.

Microsoft has now thrown it’s hat into the ring with Surface, a multi-touch table computer:

http://www.microsoft.com/surface/

Pretty neat, although they are targeting high end resorts and other such places as the first customers for their $10,000 computer.

I suggested desktop multi-touch would happen in an earlier post, stating:

Despite this recent history, I believe software that runs on your local computer without needing an internet connection is going to make a come back. Two things will cause this change.

The first is that multi-touch interfaces will come to desktop machines, allowing for new types of desktop applications. You only have to look at the Nintendo Wii to see that when the human interface to a machine changes, new forms of software can meet previously unmet or unknown desires.

http://www.mathoda.com/archives/123

As cool as multi-touch desktop computers are, I’m waiting for the first laptop/tablet computer with multi-touch capabilities.

Steve Jobs of Apple indicated that their multi-touch efforts were first directed to such a device, but they decided to redirect towards the phone market due to its size and the obvious integration advantages with the iPod.

I’m sure Apple and Microsoft and a few dozen startups are hard at work developing a multi-touch laptop… who will get the prize?

Update July 20, 2007: Microsoft research demo’ed a rudimentary multi-touch laptop.  See my blog post: http://www.mathoda.com/archives/167

What video game console does the job that consumers want done the best?

Microsoft’s Xbox 360 has high definition graphics, a wide variety of great games, classic controllers, a vibrant online network, and is affordable.

Nintendo’s Wii has crappy graphics, a small amount of games, an innovative motion sensing controller and games intuitively adapted for that controller, a nascent online network, and is cheap (but hard to find).

Sony Playstation 3 has high definition graphics, a small set of games, classic controllers (with motion sensing that is barely utilized by the games), a nascent network, and is super expensive because of its bundled in high definition dvd player hardly anyone yet uses.

For a few months now it has seemed like the battle for supremacy is being fought by the Xbox 360 (getting the hard core gamers) and Wii (getting some hard core gamers and a lot of new to gaming casual users), with the Playstation 3 being a great and expensive flop. However, Sony hasn’t given up the fight.

Sony has announced Home, a free software download that allows your Playstation 3 to access a virtual world. A place to meet friends, hang out, show off. Like Second Life, Sony’s Home allows people to create representations of themselves that wander around fake environments and interact. It’s unclear how much Sony will allow you to customize Home, the way Second Lifers have been customizing that world.

Sony may only be the first out of the gate with a virtual world for its video console, but it’s an impressive step to couple a virtual world to high definition TV’s. Of course, creating a virtual world that is very pretty isn’t the same as creating an environment that people want to use. Myspace is mostly text, but it actually attracts alot of human interest in a way that it will take some time (if ever) for virtual worlds to duplicate.

For more on Sony’s Home, including a video of it, click here: http://www.engadget.com/2007/03/07/playstation-home-revealed/

A number of news and blog sites (NYTimes, Reuters, Engadget, Tai-Pan Way) have noted that Microsoft has agreed to pay a record company, Universal, a certain undisclosed amount ($1.50?) for each Zune device Microsoft sells. They note that this is a major concession by Microsoft, since Apple only pays record companies for each song sold, not for each sale of an iPod device.

The record companies are upset by the deal they originally struck with Apple, since Apple has a tremendously large business with rich profit margins based on iPod device sales, but each iPod has on average only 20 or so songs sold on iTunes. That’s alot of music on iPods that was either legally ripped from CDs, or illegally traded.
Many parties seem to think Universal has done a number on Microsoft by convincing Microsoft to make a payment for each Zune sold. However, to my mind this isn’t so bad for Microsoft either. The true loser in this deal is … Apple.

Microsoft’s Zune has just been introduced, so it doesn’t cost much to Microsoft to make a payment on each hardware device sold to Universal today, and it will take awhile for its sales to ramp up to a point that such payments cost Microsoft much. Microsoft also hasn’t historically put the same emphasis that Apple has on trying to make money from the hardware (PCs, Xboxs, cell phones); Microsoft is content to make money from its software (Windows, Office, Xbox games, Windows mobile).
Apple already has a huge number of iPods it sells every month. And Apple’s contracts with the record companies are going to expire in a year. If Universal insists on the same deal from Apple that they got from Microsoft, in both dollar amounts and in business model structure this is going to cost Apple alot more than it costs Microsoft.

Microsoft is therefore using Apple’s strength (the massive lead in devices sold) against Apple, a neat act of business model judo.  …and since record company contracts often contain a provision that states if you give another record company a better deal you will give me the same deal as well, it’s not just Universal that will get this payment from Microsoft, or demand this type of payment from Apple…  all of the record companies will.
Of course for Microsoft to truly succeed, and for the record companies to obtain some real type of leverage against Apple, the Zune and its successors must still be great products. The early reviews indicate the Zune is a promising device… but time will tell.