Apple’s proxy war with Amazon over ebook pricing and market

Amazon has apparently withdrawn all Macmillan titles from sale (print and electronic) because of an argument with the publisher over the terms of sale. Macmillan CEO John Sargent says:

This past Thursday I met with Amazon in Seattle. I gave them our proposal for new terms of sale for ebooks under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles. By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon. The books will continue to be available on through third parties.

“Windowing” means delaying availability, to allow a window of time during which a premium price is charged.

This is a fascinating spat with many implications. The immediate issue: Macmillan wants to raise ebook prices and/or get a bigger cut of Amazon’s selling price.

Macmillan is trying to dictate prices and terms:

Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.

Amazon is unlikely to be content with a miserly 30%. It is used to wholesale terms. Further, according to author Charlie Stross in a must-read post Amazon likes to sublicence Kindle titles, which means it pays even less; in effect just a royalty to the original publisher, “turning the traditional publishers into vestigial editing/marketing appendages.” Amazon wants to keep prices down on Kindle titles to build both the market and Kindle’s dominance.

The stakes must be high for Amazon to take such drastic action, and for Macmillan to risk its relationship with the world’s biggest bookseller. And they are. Ebooks are an increasingly important market; who knows, they may become most of the market eventually – though paper and ink is resilient.

Why has Macmillan chosen this moment to take on Amazon? Apple. The key is in this conversation between Walt Mossberg and Steve Jobs at the launch of the iPad, recorded by Kara Swisher:

In the video, Mossberg asks Jobs about the iBooks application and the price of e-books, and Jobs insists the price will be the same on Apple as on Amazon (AMZN).

“The prices will be the same,” said Jobs, before getting in a little dig at the maker of the Kindle e-reader. “Publishers are actually withholding their books from Amazon, because they’re not happy with it.”

Translation: Apple has big plans for ebooks. Part of its strategy is to win publisher support by offering better terms than the currently get from Amazon, both in terms of pricing flexibility and the size of their share. With breathtaking confidence, Jobs believes that publishers will be able to dictate better terms to Amazon on the basis of what Apple is offering, even though iPad is not yet released, and that the outcome will be price parity.

Macmillan is obediently putting that theory to the test.

So far Macmillan and Apple are winning the PR war. On the face of it, that’s surprising, since Amazon wants to keep prices down. However, withdrawing stock from sale comes over as petulant and bullying, and the move has upset authors like Stross who by the nature of their trade are highly articulate. The reading public is also sympathetic to publishers and authors, perhaps presuming that since most books make a loss, squeezing prices down will not benefit them long-term.

Bizarrely, it is almost the opposite of what happened in music, when it was Apple trying to force the labels to accept fixed pricing. There is less public sympathy for the music industry, thanks to mishandling of DRM and downloads, and a reputation for not giving artists a sufficient share.

Personally I’m cautious about accepting that any party here has the moral high ground. I am sure Apple is making all the noises publishers want to hear right now; but that is because it is a new entrant in the market. If the publishers are canny they will foster a diversity of ebook suppliers, because that is in their best interests long term.

Update: Amazon has capitulated.

Windows 7 booms for Microsoft, everything else is flat

Microsoft has had a bumper quarter driven by Windows 7, as expected. I’ve put this into a table as I have before.

Quarter ending December 31st 2009 vs quarter ending December 31st 2008, $millions

Segment Revenue % change Profit % change
Client (Windows + Live) 6904 69.9 5394 98.9
Server and Tools 3844 0.24 1491 8.4
Online 581 4.60 -466 -49.5
Business (Office) 4745 -2.78 3010 -0.36
Entertainment and devices 2902 -10.87 375 288.5

The poor performance of Vista meant latent demand for Windows 7, as both individuals and organisations deferred upgrades, which was unleashed in this quarter. Microsoft said it was a “record quarter for Windows units” and “the fastest selling operating system in history”. Windows 7 is also a strong product in its own right.

There isn’t much else to cheer about, though given the general weakness of the server market the sliver of growth there is impressive. There is still no sign of a profitable online business, which is of major concern as interest in cloud computing accelerates.

Entertainment (Xbox) is now a steady business; I’m guessing that the huge growth in profits reflects lower investment and a reduction in cost of fixing endless red rings of death thanks to better quality hardware. Revenue on the other hand is somewhat down.

Windows 7 will continue to do well, though once the upgrade bump is passed the results will be less spectacular. Windows 8 will not get the same easy ride, unless Microsoft delivers something that surprises us all with its excellence.

The positive spin on these figures is that the company still has an opportunity to reinvent itself, financed by Windows profits. It needs its own iPod equivalent to show that it can escape its Windows and Office legacy. Windows Mobile 7? Laugh if you like; but the two things with obvious growth potential in the market generally are mobile devices, and cloud computing – the two go together, of course. That said, there is no evidence yet that Microsoft has the energy and agility to reverse its poor performance to date in both areas.

Who knows, perhaps after a couple of months of mobile focus, with details to be revealed shortly at Mobile World Congress and Mix10, the picture will look more promising?

Apple’s lock-in works. Can anyone improve on App Store?

Timothy B Lee writes of the App Store/iPhone and now iPad lock-in:

The store is an unnecessary bottleneck in the app development process that limits the functionality of iPhone applications and discourages developers from adopting the platform.

While instinctively I agree, the evidence for the damaging effect of the App Store is not there. On the contrary, the locked-in iPhone has transformed the mobile app market and expanded it remarkably.

Reason: the user experience is great, the approval process at least weeds out apps that would be intrusive or harm performance, and installing an app from the store is less risky than installing an app onto Windows or OS X.

Ironically, Apple’s own iTunes is an example of an app that installs services you do not necessarily want or need. Personally I keep it off PCs and use a Mac Mini for gadgets that require it.

Is it possible to find a app distribution model that avoids the monopolistic and dictatorial model of App Store, but delivers an equally good user experience during and after purchase and installation?

A good question, but to my mind an open one.

Apple iPad vs Windows Tablet vs Google Chrome OS

Apple has announced the iPad – essentially a large-size (242.8 x 189.7mm) iTouch. Large multi-touch screen, claimed 10 hour battery life, flash drive of 16GB up to 32GB, browse the web, play music and video, read eBooks. Keyboard dock for the desk, virtual keyboard for when you are out and about. App Store support and runs iPhone apps.


Here’s my instant reaction with a few pros and cons.

The design looks great, as you’d expect from Apple, and I’m a fan of the tablet concept. I wrote a piece on the subject back in 2003 when it still looked possible that the Windows tablet would take off. I think laptops are too big and bulky, and that the clamshell keyboard idea is desperately awkward when you are travelling. Ever tried to use a laptop while eating a meal, flying economy, for example? Or quickly fire up your laptop to get an address from an email, while walking down the street? It’s a horrible experience and the tablet concept is much better in these scenarios.

I also think that Microsoft’s big mistake with Tablet PC was requiring a stylus. Styluses are horrible, expensive, easily lost, and destroy much of the advantage of having a tablet. They are fine of course as an optional input mechanism, for writing or drawing, but not as a required item. Our fingers are capable of fine control on their own.

Apple’s device wins here; plus it has a UI designed for multi-touch, rather than a desktop UI with pen input bolted on top. The same will be true of the apps.

All good reasons then why iPad will succeed. And it will.

Still, I have reservations. When I travel, I need a mobile phone, for voice and all the other things smartphones are good at; and I need a laptop for all the things laptops are good at: email, word processing, spreadsheets, web browsing, custom apps and so on.

However, I will be reluctant to carry three devices with overlapping features, so for the iPad to work for me, I will need to ditch the laptop. Otherwise I’ll leave it behind, use it a little round the house, but eventually wonder why I bought it in the first place.

Thus, the critical question for iPad is this: to what extent can it enable me to leave the laptop behind? A lot will depend on the usability of iWork, the virtual keyboard and so on.

A related issue is the extent to which the device is locked down. I’m not 100% clear about this, but my impression is that the only way to get apps onto the iPad is via App Store. You can get music on via iTunes, and pictures via a USB adapter designed for cameras, and there must be a way to transfer documents via iTunes, but I’m guessing these go into some secure area which cannot execute applications – though no doubt there will be hacks to get round this. In this respect the model seems to be the same as iPhone and iTouch, and different from the Mac. Another factor is the relatively limited storage space.

This aspect is an annoyance – unless you change gear and think of it as a web client. Let’s say I wanted to get my custom database app onto the iPad. Maybe I could do that with the SDK; but better still, why not write it as a web app? Add a bit of offline capability and it could be just about perfect.

In other words, if I can truly get the web habit, so that all the stuff that matters to me is available online, then I can leave the laptop at home and just take out an iPad.

Or indeed Google Chrome OS. From what we’ve heard so far, Google’s devices will also be locked down, and unlike the iPad you will not even be able to install apps from an app store or save music and video locally – though who knows, maybe that could change, when people complain about how useless it is on a train or aeroplane. And like Gizmodo I reckon Google should make a Chrome OS tablet.

I’m beginning to think that Apple could have the high-end tablet market, and Google the low-end, because it’s safe to say that a Chrome OS device will be cheaper.

Microsoft will do its own iPad-like multi-touch device in around 2013, judging by how long it has taken to do Windows Mobile 7 following the launch of iPhone in 2007.

See also: Battle of the portables: Netbook vs Apple iPad 2.

Picture courtesy of Apple.

The insecurity of Verified by Visa and MasterCard SecureCode

An article on the H points to this paper by Steven Murdoch and Ross Anderson, from the University of Cambridge Computer Laboratory, on the poor security design of the 3-D secure (3DS) protocol used by Visa and MasterCard in the UK and catching on worldwide. In addition, 3DS undermines privacy by sending a full description of each transaction to the card issuer or its contractors.

Banks also use the supposed additional security of 3DS to shift liability for fraudulent use towards the customer.

What’s wrong with 3DS? The authors list a number of issues. The 3DS system throws up a request for additional authentication in a pop-up dialog or iFrame, which means you cannot easily check its source; it could be a phishing attack. The memorable pass phrase that is meant to prevent this is vulnerable to man-in-the-middle attacks, as well as impatient users who might not bother to read it. Password reset mechanisms are often poorly implemented, and may depend on semi-public information such as date of birth.

The authors suggest that a simple approval process, such as a text message to your phone asking for an authorisation code, would be more secure, even if only as a stop-gap before adopting a more robust solution.

I find it surprising that 3DS has been adopted so widely despite well-known flaws. As the authors note:

3-D Secure has received little public scrutiny despite the fact that with 250 million users of Verified by Visa alone, it’s probably the largest single sign-on system ever deployed.

Well, with this post I am doing my bit.

The mystery of the slow Exchange 2007: when hard-coded values come back to haunt you

Following a migration from Microsoft Small Business Server 2003 to SBS 2008 users were complaining that Exchange was slower than before in some scenarios. How could this be? The new machine had 64-bit goodness and far more RAM than before.

I checked out the machine’s performance and noticed something odd. Store.exe, the Exchange database, usually grabs vast amounts of RAM, but in this case it was using surprisingly little, around 640MB. Could this be related to the performance issue?

I speculated that Exchange memory usage was limited in some way, so looked up where such a limit is set. I found this article. Ran ADSI Edit and there it was, a 640MB limit (or thereabouts), set in msExchESEParamCacheSizeMax.

I removed the limit, restarted Exchange 2007, and it immediately said “thank you very much” and grabbed 8GB instead.

Why did this setting exist? No doubt because back in the days of SBS 2003 and a much less powerful 32-bit machine, someone set it in order to prevent store.exe from crippling the box. It is another example of why Small Business Server is harder to manage than full server setups when Exchange invariably has a dedicated server (or several).

SBS 2008 cannot be installed as an in-place upgrade; but the official migration process does preserve Active Directory; and since that is where this value lives, and since it is not specific to any version of Exchange, it was dutifully transferred.

Why wasn’t the setting discovered and changed before? Well, you will observe that it is somewhat hidden. The main chances of finding it would be either if you were deeply schooled in the ways of Exchange, or if one of the Best Practices Analyzer (BPA) tools picked it up, or if the users screamed that Exchange was slow (which is what happened) and you figured out what was wrong.

The SBS BPA did not notice it. The Exchange BPA did, kind-of. It was not shown as a critical problem, but listed for information under “Non-Default Settings”, ironically with a tick beside it, as “Maximum ESE cache size changed”. Summoning help on this setting leads to this article which refers to Exchange 2000.

An admin failure, yes, but arguably also a defect in Exchange and SBS. Typical Microsoft: critical setting, hard-coded when it would make more sense to use a percentage value, not checked by setup and persistent across major upgrades of Exchange, deeply buried in Active Directory.

Mentioned here just in case it saves someone time when trying to figure out why their shiny 64-bit Exchange 2007 is running worse than 32-bit Exchange 2003 ever did.

A Silverlight UI for Windows Mobile 7, backward compatibility in doubt

Note: speculative post; I have no official information on this.

It’s been rumoured for ages; but at this point I would be surprised if the Windows Mobile 7 UI were not built with Silverlight. Consider:

  • Silverlight has to be supported – it should have been in 6.5 – otherwise nobody will take mobile Silverlight seriously
  • WM7 has to have excellent UI design; and WPF/Silverlight is Microsoft’s designer-friendly UI framework
  • Silverlight 4 already supports touch control in the current beta
  • Scaling/Zooming is baked into Silverlight and ideal for a mobile UI
  • If Silverlight is present on the device it would make sense to build the UI with it

If this is right, there are a couple of interesting aspects for developers. It will make Silverlight a more attractive platform in scenarios such as Enterprise roll-outs where the device can be specified.

The awkward question: what about all those existing Windows Mobile apps built either with native code or with the compact framework? Again, there are rumours of lack of backward compatibility. Does that mean that all Windows Mobile 7 apps with a UI will have to be done in Silverlight? That’s what John Biggs says:

WinMo 7 will not run 6.x code. End of story. It is based on Silverlight and .Net. Everything save a few basic programs will not work under WinMo 7. There is no expectation that this will be a “business device” and the focus is currently on games including some XBox Live functionality for gaming and messaging. There will be a Microsoft App store with an easy approval process.

I find this a stretch. I can believe that Microsoft might initially target the consumer market, or have crippled “consumer” versions; but not that it would give up on mobile business apps – we heard at PDC (to the point of tedium) how Microsoft is supporting “three screens and a cloud”, unified for developers by Visual Studio. There’s no reason why Silverlight should not be used for business apps.

What about backward compatibility though? Traditionally Microsoft does a good job of keeping your old stuff running, within reason; possibly too good – Windows is full of compatibility hacks that may be to its detriment overall.

Another point to bear in mind: WM7 needs a browser, and I don’t see Microsoft re-implementing IE in Silverlight.

So I’m sceptical about this too; but with Windows Mobile at such a low ebb could the company decide it has little to lose?

Windows Azure is too expensive for small apps

I’m researching Windows Azure development; and as soon as you check out early feedback one problem jumps out immediately. Azure is prohibitively expensive for small applications.

Here’s a thread that makes the point:

Currently I’m hosting 3 relatively small web applications on a VPS. This is costing about $100 per month. I’m considering transitioning to Azure.
Q: Will I need to have 1 azure instance per each application? So if I have 3 web apps, then I will need to run 3 instances which costs about $300 per month minimum, correct?

The user is correct. Each application consumes an “instance”, costing from $0.12 per hour, and this cost is incurred whenever the application is available.

Amazon also charges $0.12 per hour for a Windows instance; but the Amazon instance is a virtual machine. You can run as many applications on there as you like, until it chokes.

Google App Engine has a free quota for getting started, and then it is charged according to CPU time. If the app is idle, you don’t pay.

In addition, all these services charge extra for storage and data transfer; but in a low-usage application these are likely to be a small proportion of the total.

Summary: Azure’s problem is that it does not scale down in a way that makes business sense. There is no free quota, unless you count what is bundled with an MSDN subscription.

I realise that it is hard to compare like with like. A cheap Windows plan with a commodity ISP will cost less than either Amazon EC2 or Azure, but it is worth less, because you don’t get a complete VM as with Amazon, or a managed platform as with Azure, or the scalability of either platform. The point though is that by cutting out smaller businesses, and making small apps excessively expensive for customers of any size – even enterprises run small apps – Azure is creating a significant deterrent to adoption and will lose out to its rivals.

Check out the top feature request for Azure right now: Make it less expensive to run my very small service.

Silverlight 4 with COM can do anything – on Windows

At PDC Microsoft played down the significance of adding COM support to Silverlight 4 when run out of the browser and fully trusted (you can also be out of the browser and not fully trusted). The demos were of Office automation, and journalists were told that the feature was there to satisfy the requests of a few Enterprise customers.

Now former Microsoft Silverlight program manager Justin Angel, who has implemented his blog in Silverlight, has spelt out what we all knew, that Silverlight with COM support can do just about anything. His richly-illustrated blog post has code examples for:

  • reading and writing to any file (subject I guess to the permissions of the current user)
  • executing any command or file
  • emulating user input with WShell.SendKeys
  • pinning files to the Windows 7 taskbar
  • reading any registry values
  • adding an application to the Windows startup folder
  • doing text to speech using Windows built-in engine
  • accessing local databases with ODBC
  • automating scanners and cameras
  • using the Windows 7 location API, accessing the full .NET Framework
  • and of course … automating Microsoft Office.

Well, fully trusted means fully trusted; and these are great features for powerful though Windows-only Silverlight applications, though I hope no user installs and trusts one of these applets thinking it is “only Silverlight” and can’t do much harm.

The post also has comments on the lack of any equivalent feature for the Mac in Silverlight 4:       

If Microsoft chooses to not go ahead with Mac support in Silverlight 4 RTM, well, it’s not because they couldn’t

says Angel, suggesting that it would be easy to add AppleScript support. (I had to type that quote – no clipboard support in Silverlight 3).

Of course there is time for Microsoft to unveil such a feature, say at Mix10 in March, though I wouldn’t count on it.

Why F# rather than IronPython in Visual Studio 2010?

Dynamic languages are all the rage; and after JavaScript, Python is perhaps the dynamic language of the day, loved by Google and gaining increasing attention. IronPython, built on .NET, is stable and at version 2.6. Now Visual Studio 2010 turns up with an additional language in the box, but it is not IronPython; rather it is a little-known language out of Microsoft Research called F#.

Now, F# is very interesting and brings real diversity to Visual Studio; it is great for mathematics and for parallel programming. But wouldn’t IronPython have sparked more immediate interest from the .NET community? Judging by this feature request, with 500 votes, it would. It’s is a little embarrassing for Microsoft that the favoured IDE for IronPython work is SharpDevelop. Plenty of IronPython enthusiasts are pressing for Visual Studio support.

Here’s what IronPython MVP Jeff Hardy says:

I think I can safely say that adding full, high-quality support for IronPython to Visual Studio would require at least a couple of man-years of work. The rabbit hole goes pretty deep when you consider all of the functionality that VS offers, not to mention the difficulty of doing IntelliSense well. I estimate they’d have to at least double the IronPython team to get full support into VS11. IronRuby would require the same commitment.

Hardy is hopeful for VS 2012.

I still find it odd. Official Visual Studio integration would do a lot to raise awareness and usage of IronPython; and make Microsoft’s commitment to dynamic languages more visible – though I guess F# supporters will be happy with Microsoft’s priorities here.