Apple's Q1 2101 revenue and profit results were astounding by any yardstick. A company with $13B in net profit is obviously doing something right. You don't haul in over $46B in revenue in one quarter through slick marketing; customers are rewarding Apple for constructing an interlocking system of products and services that people enjoy using. Apple fans are justified in lobbing a hearty "I told you so" to those who doubted the Apple approach.
Yet there is something unsettling about all the celebrating in the Mac blogosphere. We're losing sight of what's really important.
I've been using Apple products since the late 1980s, and I've forked over thousands of dollars to the company over the intervening years. I fought to use a Mac when I ran the website for a government agency, and had to go all the way to the CFO to gain approval. I created a blog devoted to helping Mac-using law students, back in the days when such a blog was necessary. You could say Apple is in my blood.
That said, I think it's important for those of us who use Apple products to be mindful of what we're celebrating. Are we celebrating the fact that Apple has a staggering $97B in cash? Or is it that the company has a higher valuation than every other company on the planet? Are we rooting for the football team that got pummeled for years and has finally become unbeatable?
In a sense, we are. After years of hearing about how I was a bit weird for using a Mac, there's a certain satisfaction in watching friends switch from Windows to Macintosh. I get a kick out of going to parties and noticing that even the Apple naysayers now have iPhones. The little band of outcasts has become a globe-enveloping swarm, and I was there in the beginning.
This sort of tribal affiliation should come as no surprise. We are, after all, just humans. I'm sure there are some people who are happy to use Apple products because it helps them feel hip and sophisticated. But in my experience most people fork over their hard-earned cash to Apple because they want their personal technology to work in a way that is comfortable and reliable.
For a time, if you wanted that kind of ease of use and quality, Apple really was the only game in town. Apple still holds a strong lead. By building the hardware, software, and cloud services themselves, Apple can maintain a strategic advantage that is difficult for competitors to overcome. As long as Apple stays on its game, no mix-and-match set of hardware, software, and services can provide a comparable user experience.
But Apple's success has forced even the most sluggish of its competitors to realize that the total user experience is of paramount importance. Android v4 marks a leap forward for the mobile OS in style and polish. Windows Phone demonstrates that Microsoft is capable of producing an exceptional user interface without mimicking Apple. Nokia continues to ship hardware of outstanding quality. There is no shortage of companies learning from Apple's success.
One could argue that Apple came first, and that Google, Microsoft, and Nokia are mere copycats. But that discussion invariably devolves into a useless tit-for-tat comparison. The big players in consumer technology are all busy innovating. They're all learning from each other's successes and failures. That's the nature of any market, and that's as it should be. What matters is not that one company succeeds or fails, but that I am well served.
If Apple continues to deliver an intelligently designed, well-implemented array of products and services, they'll get more of my money. But at the end of the day, the reason I have supported Apple for so long is that they have made my life better by producing tools that are valuable to me at work, at home, and on the move. If Apple loses its focus and stops delivering value to me, and another company is able to step in with a better approach, I'll gladly turn coat.
Steve Jobs wouldn't have it any other way.
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A friend of mine uses the term counterpunchers to describe those people who wait for you to make the first move, to expose yourself, to make a statement or perform an action. Then they bash at you, not with reasoned criticism, but with ad hominem attacks and snark.
Trolls are a different breed. While counterpunchers actually seem to believe they are performing a beneficial service, trolls revel in disruption for its own sake. They know they're providing nothing meaningful, and that's the whole point. Annoying, disturbing, and (if they're really good) angering strangers gives them a thrill.
Every day we spend online we put up with counterpunchers and trolls. They infest the comments sections of news sites and blogs. They lurk in discussion boards, ready to pounce. Like the slow drip of a leaky faucet, they're ambient noise. We've learned to accept them, to tune them out, to go about our online lives as if they did not exist.
But they do exist. And we, the people who build websites, keep them alive. We build houses for them by creating websites with social features that don't include robust reputation and moderation systems. We feed them by writing linkbait content that is designed to score eyeballs and create controversy. We get them into a frenzy by responding to them.
There would be far fewer counterpunchers and trolls roaming the highways and byways of the Intergoogle if we stopped building them houses, if we stopped feeding them, if we stopped coddling them. Reducing their numbers simply requires that we step back from the social features flypaper for a moment and recognize that giving every participant the ability to add their $.02 to the conversation is not necessarily a good thing.
I believe that in many if not most cases the addition of comment functionality does more harm than good. I say this having run sites with and without comments enabled. There's a way to do comments right, but it takes ongoing effort. In the best case scenario most comments are still chaff, and readers will still have to work to find the meaty bits. In the worst case scenario, which is far more prevalent, the inmates quickly overrun the asylum and comments sections become spleen-venting areas where the hostile, the ill-informed, and the self-righteous take center stage.
The nice thing about running your own website is that you can do as you please. But when clients are paying you to build a site, they call the shots. And these days most publishers want social interaction because they've been told over and over again that it's the right thing to do. Hey, everyone's doing it, right?
Unfortunately social features have also been sold as a fire-and-forget exercise. Spray on some social and you'll get that genuine interactive flavor without the hassle of creating inherently compelling content! Publishers have also been sold on AdSense and affiliate links, so they can't help but equate time on page to increased revenue. If visitors are commenting, they're staying on the page longer!
When taken to its logical extreme this approach leads to sites like the execrable Business Insider, which treats its readers as if they were Pavlov's dogs, clicking from one inane story to the next and occasionally hitting an ad link along the way.
With ad revenue firmly lodged in the minds of site owners as the only way to make money, or at least as a means of making money that is worth ruining the user experience for, how do we get out of this mess?
John Gruber, who writes Daring Fireball, has built a dedicated readership and brings in revenue from three primary sources: a syndicated RSS feed sponsorship, a single ad spot from The Deck, and t-shirt sales. He may not be getting rich off Daring Fireball, but he charges $6,500 a week for RSS feed sponsorships. He's doing all of this without employing any social features on his site.
Gruber is able to pull this off because he is an excellent writer who puts in the work. He produces a great deal of original material and provides commentary on a larger stream of linked content. There is no foolproof get rich quick scheme at play, just a guy showing up every day and creating something he believes in. Whether you agree or disagree with his opinions, the way he has structured the reading experienced makes it obvious that he respects his readers.
Unfortunately the Daring Fireball approach is the exception to the norm. Social features have increasingly become tools that are cynically deployed against site visitors. Instead of helping, they hinder. Instead of making the Web a better place, they are have become just another manifestation of the manipulative, lazy attitude that so many online publishers have adopted because of reliance on the AdSense/affiliate links shell game, rather than on great writing.
Joe Wilcox takes Gruber to task for his no comments policy, and Gruber responds.
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Freddie deBoer's The Resentment Machine is a scathing critique of the current Internet as a vehicle for the aggrandizement of consumption, driven by the competitive forces inherent in our society. It is well-argued and worth a careful read.
DeBoer's analysis focuses on the "postcollegiate, culturally savvy tastemakers" of the Internet and the ultimate triviality of their online discourse. It's easy to agree with him that "buying an iPad does nothing to delineate you from anyone else." That said, I think he's missing the larger context.
When the popular Internet arrived I was already an adult. I can testify without reservation to the fact that competitive consumption was already a way of life in America well before Internet hipsters showed up.
It can be difficult to remember now, but in the 1980s the television reigned supreme. It told you what to wear, what to eat, what was cool, what was out of style, and how to act. And people wanted so badly to do what their televisions told them to do. Most of the people who bought K-Tel disco albums had never set foot in a dance club, but they'd seen plenty of disco on TV, and they knew they were supposed to like it.
Before the television, radio told Americans how they should think. Before that it was newspapers. Now we all just tell each other how to think and what to consume. We argue about it. I'm not sure if that's better or worse than simply being told what to consume and how to consume it by broadcast boxes.
Are we unable to create meaningful self-identity because we are too busy blogging, tweeting, linking, and liking? In those musty pre-Internet days we didn't assemble our identities online, but we didn't create them from scratch either. DeBoer seems to believe that you can either be a consumer and critic, or you can engage in some sort of artistically meaningful and authentic endeavor of your own.
But authenticity is a will-o-the-wisp. Every time you think you've got a handle on it you realize you've just grabbed hold of a nascent trend or reconfigured artifact from the past. Today's earnest striving is tomorrow's ironic nod, and today's irony is tomorrow's deeply held conviction. The pieces from which we assemble identity are not unique; it's the manner in which they are assembled that defines us.
DeBoer does an excellent job of laying out the grim reality of an unexamined life. He merely misses the larger truths: The Internet did not create nor did it necessarily magnify competitive consumption, and the quest for an authentically-constructed self has always been and will always be difficult.
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Judas Kiss has been taking the film festival circuit by storm. It's an audacious film in many ways, and it sprang forth from the imaginations of Carlos Pedraza and JT Tepnapa. The success of the movie comes as no surprise to me; I've marveled at Carlos's ability to get things done since the late '90s, when we were both humorless Washington bureaucrats.
It's been 2 1/2 years since our last interview, so I asked Carlos if I could get his thoughts on bringing any indie film to market and the larger movie industry. Calling him a road warrior is like saying Lance Armstrong is a cyclist. I caught up with Carlos as he and JT zoomed up I-5 en route to a Judas Kiss screening in Salem, Oregon:
The last time I interviewed you it was May of 2009. At the time I asked, "In 2012, Carlos Pedraza is doing what? And this nascent industry of independent video producers is where in relation to that?" Here's the money part of your answer:
"I would like by 2012 to have figured out at least one avenue for that talent to be harnessed, and to have done that successfully one or two times, so that people say, 'Here's a system. Let's buy into it. Let's refine it.' Let's have some examples of how that's being done effectively, and share that knowledge, because it shouldn't be secret."
Well, I feel like I'm still on schedule, even with so much of the economic landscape having changed since then. Not just in terms of the recession but in how business models around independent film distribution are changing even as we speak. That conversation you and I had 2 1/2 years ago informed the way we negotiated all our distribution contracts for Judas Kiss.
What is changing?
Revenue streams, ancillary products, and how to structure new media venues for distribution. For example, YouTube now offers downloads and rental for films, majors and indies. Hulu is doing the same thing. Netflix's shift from DVD distribution to instant streaming and its attempt to divest itself of its DVD distribution business then retrenching.
So not only did you have to be forward thinking about distribution, you had to be agile enough to adapt to changes.
Yes. Things are changing so fast, even within the time frames in which we've been negotiating our contracts with various distributors here in North America and overseas. For example, we see iTunes as a big potential revenue source for us, and we are fully capable of making the film available in that venue without having to rely on a distributor as a middleman. So we've retained iTunes rights for ourselves.
But we also planned on piggybacking the marketing and promotion of our iTunes version of Judas Kiss on top of the DVD marketing and promotion that's being paid for by our distributors. Because, of course, the challenge for an indie filmmaker isn't merely making your film available online, it's getting people to know it's there, and whether it's good enough to spend their money to download it. iTunes also gives us the opportunity to offer the film for sale in parts of the world where there isn't a reliable distributor to really take the film under its wing.
This requires, of course, our having to take on a lot of the work a distributor would normally take care of, like translating and subtitling. All our marketing and promotion is designed to dovetail between what our distributors — especially in the US and UK, as well as Germany and France — are doing with the social marketing we've been doing for years now via our own website, judaskissmovie.com, and Facebook.
That's one thing I've been really impressed with — your engagement with your audience up front has been targeted and seemingly very effective, even well before production started.
The secret to independent film success is branding and relationship-building with existing and new fans.
Problem is, most indie filmmakers just wanna make movies. We don't live in an economy anymore where you can simply do that, and hope that distributors take care of the rest. We're lucky in that we've been able to merge the old-school distribution models with new-school social media.
It seems that a huge amount of your work is what a traditional filmmaker would consider as ancillary, stuff that is handled by someone else.
We were able to raise the critical development funding for the film, early in conception, thanks to the fans we had built relationships with during our days with our Star Trek web series. They followed us to this new project and have stuck with us right up to purchasing their Judas Kiss DVDs.
Major studios know that there are plenty of other revenue streams for a film beyond the film itself: merchandising, adaptation into novel or comic formats, and so on. The Internet offers marketplaces for all these kinds of products to independent films, too, now. For example, we are planning on publishing the shooting script for Judas Kiss as an ebook, along with annotations, embedded video files, and so on. We've also talked to a traditional publisher about adapting the script into a novel.
None of these things by itself, including even the film, turns the project into a huge moneymaker. But taken together, the long tail can in fact offer revenue that eventually positions us to make our next film, to further build on our brand, to offer new products to the people who believe in our work, to encourage them to recommend the work to others.
It's definitely like running a marathon, whereas I think most filmmakers think of their work as wind sprints.
It seems that the start point doesn't really matter any more. Whether it's a book or a comic or a movie initially, the story is the thing. You're telling the story in film, and there is potential for others to help you tell the story in other forms. The trick is to think of it as a much larger fabric than the movie itself.
That's so true! And isn't it ironic that story seems to be the thing that Hollywood films are given short shrift to these days? I think I remember reading a recent interview with a Disney executive who said story wasn't important, branding is. I thought, "Bullshit! Story is how you build and extend your brand. It's at the heart of what your brand means!" I mean, look at the difference between Pixar's original Cars and the pathetic sequel. Clearly, Disney took a turn there toward the cynical — "Think of all the merchandise we can sell the kiddy-poos!"
I get that big films make the most money, and minimizing risk is prudent, and going with "known quantities" is prudent. But that's ultimately a losing proposition. It's a stopgap measure from a creative standpoint. All the studios are doing is creating a niche for more nimble, more innovative and more creative people to tell new and more engaging stories. The key thing is keeping costs down. Which of course is the thing that has painted studio pictures into a corner.
Hollywood studios, who are in the business of storytelling, are abandoning it in favor of gimmicks like 3-D and incessant remakes of old properties. Frankly, the studios are totally at sea when it comes to the delivery vehicle. They've bungled every new delivery technology, from TV to VHS, to DVDs, Blu-Ray only a little, and now digital delivery. They have to learn to stop relying on gimmicks.
The studios' dirty little secret is that most adults rarely go to the movies any more. Rather than thinking, "Hmmm, our audience is consuming our products in other venues, maybe we should make it easier for them to find us there," studio instead say, "The only people at movie theaters now are teenage boys. So let's make all our tentpole movies for them!"
Now that I've made my first feature film, I'm confident that there are ways to make films that people will buy that don't cost hundreds of millions of dollars to make. There will always be a place for big tentpole movies, for sure. I'm not against them, but that shouldn't be the only economic model for filmmakers to follow, or even to aspire to. Smaller projects, more creative ones, well-targeted to narrow demographics offered in multiple venues with a focus on user-friendliness: That's actually the formula to independent filmmaking success in the digital world.
Smaller films entail less risk. Keeping costs down minimizes that risk, but it maximizes creativity. There are things need to change. The actors' unions, for example, offer breaks to indie filmmakers who want access to their talent but at lower cost than studios and TV pay. Lower pay has to become the new reality for a lot of film professionals. But more projects mean more work, and isn't that what we really want to be doing — making more movies?
Would you say that the funding approach you used for Judas Kiss could be considered a patronage model?
To some extent. But like most everything we've done so far, it's a mix of traditional and new. We raised development money from fans and friends we made through a Web series. But our financing for production and post-production has largely followed a traditional model, with an LLC as the legal entity behind the film. The structure of the investment model is pretty textbook for indie films. The difference is that many of the investors are people with whom we built relationships over time.
Even though the old ways may be changing or dying, they may still be with us in some form for quite some time. In the meantime, new technology and social media offer new venues to find support for a film and to make it available for sale.
We're also seeing some potential legislative changes that may make crowd funding for indie films a more tenable financial proposition. The SEC has rules designed to keep small investors from being fleeced by unscrupulous "film producers" seeking to deprive them of their life savings. Things like Kickstarter prove that by spreading financial risk around to a much larger number of people, producers don't have to rely on a small number of investors for a large amount of money. Small investors can pitch in on financing a film without having to take on a big financial risk. The talk in Congress from both Republicans and Democrats is that a change like this is necessary in order to free up capital that would otherwise stagnate. And we need capital moving toward innovative projects to jumpstart our economy.
Over the course of the last five years or so, as you've worked on Judas Kiss, what portion of your time would you estimate has been working on licensing, legal matters, and all those things that in the old era would have been handled by someone else?
Just in dealing with licensing and promotion has been a full time job for me since we wrapped the film in September 2010. Most filmmakers turn over that kind of work to a distributor, but distributors don't do it for free. Believe me, they take their cut. The reality is that most independent films don't make their money back. So the traditional model, where a filmmaker hands everything over to a distributor is not tenable.
In that scenario, the distributor makes money guaranteed. Filmmakers don't. But filmmakers mostly aren't business people. They want to be artists, so they don't always make the best business decisions.
So your advice to filmmakers is…?
Learn to be strategic about what aspects of the business you need to remain involved in. Learn enough of the business so you know what to negotiate away and what you should retain. Think of the brand you're trying to build – your brand, not your distributor's.
That brings me to the marketing of Judas Kiss. Obviously there's a core audience you're going after, but it's also clear that the film is not confined to that audience.
We knew what we were selling was a story with broad appeal, but we also knew that targeting a market is the best way to make money. At this stage in our careers, we need a track record that says: 1) We can tell a story, 2) we can sell that story, 3) people want to see more stories from us. That's what attracts new and more diverse investors.
I think of it as a form of inkblot strategy. Hit that well-defined target, and you'll likely also have the impact grow beyond the initial audience as people spread the word to friends who might not otherwise be exposed to the film.
Yes. An inkblot strategy. I like that metaphor. May I use it?
Use it!
Thanks!
A good story is a good story. The challenge is not to tell it in a way that says to potential customers, "This isn't for you," but still allows you to tell specific markets, "This is your story, too." That is a big challenge, but good films should be big challenges.
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It was a real bike - a 27" red Miyata 10-speed. The Peugeot my grandfather had picked up at the flea market only a few years earlier was too small. And it couldn't stand up to the Miyata's coolness factor. The Miyata was so cool it actually had side-pull breaks. Yeah, it was that cool.
Being only 15 years old, I wasn't exactly flush with cash. Neither were my folks, for that matter. But they both worked, and our house was off the beaten path. I lived a mile from school and two or three miles from my closest friends. So if I was to have any sort of life out side of the house, a bike was required.
My dad offered to pay half the cost of the bike. He built houses, so I scraped up my portion helping him at job sites on the weekends. I gathered scraps, moved lumber, helped on concret pours, dug a lot of ditches, and generally did whatever needed doing. After a few weeks I'd accumulated my half, and we went to the bike shop to scoop up that Miyata.
I was rather excited to have this sterling piece of machinery at my disposal, so I told my dad I'd meet him at home. What kid with a new bike wouldn't immediately want to break it in? After tearing all over Aptos, I arrived at the house with a ravenous hunger and a grin a mile wide. "So what's the dollars to miles ratio?"
He'd caught me off guard with that one. "Uh, I guess it's something like 175 to 10. So that's $17.50 per mile or so." He just nodded.
A week later he asked me the same question. "Let's see, I've been riding it to and from school every day, and I went to Scrub's on Saturday. I'd say it's 175 to 36." It took me a moment to calculate that one in my head. "That's almost $5 per mile." He lifted his eyebrows, but said nothing.
This became a game with us. I rode that bike for years. For most of my college existence there was no car, only the Miyata. When my parents came to my apartment on graduation day, Dad saw the Miyata and grinned. "Hey, what's the dollars to miles ratio now?" I did some quick guesstimating. The figure had to be on the order of 4 cents a mile, and that included the cost of a replacement wheel and tires and inner tubes over all those years. Not too shabby.
I've incorporated the dollars to miles concept as a yardstick when I'm thinking about making a large purchase. It helps me frame how something will actually be used. Is this something I'm buying on a whim, or will it be used and enjoyed long enough to make it worth the money? Most of the time the actual measure is dollars to hours of use.
This is particularly helpful for entertainment purchases. I tend to use going to the movies as a baseline. On a per-hour basis going to the movies is rather expensive. Assuming you take in a matinee and don't buy much popcorn, you're still easily looking at $7 or $8 an hour. My current favorite iPhone game is Zombie Gunship. It cost me $1 and I've probably put 10 hours into it so far. That's 10 cents an hour.
Using the dollars per hour metric, paperback (or electronic) books almost always provide great bang for the buck. A good book also may even get read twice, which doubles the value.
One of the things I like about the dollars per hour approach is that as long as you're looking at the value of something that requires your attention (such as a book, a bike, a computer, or a game), you can compare one purchase to another in a relatively straightforward fashion.
For example, I could spend $300 on the complete Battlestar Galactica on Blu-Ray (67 hours if I watch every episode once), or for $80 I could buy The Lord of the Rings on Blu-Ray (11 hours if I watch it once). That's about $4.47 an hour versus about $7.27 an hour. But after watching every single episode of Galactica I doubt I'd be in the mood for a re-watch any time soon. The Lord of the Rings, on the other hand, deserves a full viewing once a year. Let's call it three viewings for the sake of argument. That makes $4.47 an hour versus about $2.42 an hour.
Even $2.42 an hour pales in comparison to a good meaty book, even one you blaze through. It probably took me five hours to read David Benioff's City of Thieves, but the book only cost $8, so we're looking at $1.60 an hour.
None of these calculations takes into account any sort of qualitative measure. Even if someone paid me $4 an hour to watch Laverne & Shirley, I'd feel cheated. Looking at the value of a purchase in terms of hours of enjoyment isn't something I take too seriously, but it's a fun way to apply a sanity check before making an impulse buy.
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twitter: @erikschmidt