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Apple has been criticizing Adobe Systems lately for what Cupertino perceives as poor performance and design deficiencies in Adobe’s Flash web media technology, which it darned well wants to keep off the iPhone and iPad. Adobe, in turn, has been defending Flash, however gently, citing it as a great enabling technology that has got the web in large part to where it is today. Both companies are correct, and that’s the point that seems to be missed by most of the pundits standing around pointing at the fight. Flash has been vital to the success of the web, but Flash is old.

Apple’s preferred media architecture, HTML5, is the future of the web.

Web browsers have swallowed up most every app you used to have to install on your PC. Something like TurboTax needs forms to input data, display tables of numbers, and store your returns on their server. But if you want to have forms smart enough to know what’s a date and what’s a dollar; to draw piecharts; or store your W-2 on your laptop, then you need a new browser.

Flash always picked up where the browser left off, but it can’t talk to your webcam, store local files, or draw pixels directly to your screen. Now, for the first time, a cluster of technologies known as HTML5 allow a standards-based pathway to busting those barriers with canvas graphics, drawing video onscreen, smarter forms, and local storage for private data. So who needs Flash?

John Gruber is right: Flash is responsible for most of the crashes of my Mac. I can hardly blame Adobe for defending its very successful Flash franchise, though it feels strange coming from that nerdiest of nerdy companies. And I admit there are still a few things that Flash can do but HTML5 can’t, but the evolutionary path here is clear.

Where Flash a decade ago enabled browsers to do more, I can see a time coming soon when Flash will force browsers to do less than they might.

It’s time for a change.

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From a beta tester:

Apple tablet is OLED + back has solar pad for recharging, but (the charger) really doesn’t work quickly. More a gimmick. Verizon+att, wifi yes!

Apple Tablet has thumbpads on each side for mouse gestures, reads fingerprint for security. Up to 5 profiles by fingerprint for family.

Yes, there are 2cameras: one in front and one in back (or it may be one with some double lens) so you record yourself and in front of you.

I can tell u the battery life is great in ebook reading mode but not great when on wifi or playing games. 2-3hrs.

Yes, the apple tablet is running an iphone os flavor with ability to have multiple apps running at same time (ie pandora, browser).

The price will be $599, $699 and $799 depending on size and memory in apple tablet. Also, wireless keyboard + monitor connection for TV.

Also, the apple tablet is really amazing for newspapers. Video conferencing is super stable, but nothing new.

The best part of the apple tablet as beta user has been the built in HDTV tuner and pvr, and the chess game.

Yes, it’s true… I’ve been beta testing the Apple tablet for the past two weeks and it’s amazing!

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Tomorrow we’ll finally see Apple’s tablet computer, whatever it is finally called. I’ll write another column then attempting to explain where I think this thing is likely to succeed or fail for Apple. But right now I don’t see much point in speculating about something we’ll know for sure within 24 hours. It’s much more useful, I think, to look instead at the Big Media companies Apple is targeting with this device, why they might be attracted and whether the iPad/iSlate/iWhatever is likely to deliver what they think they need.

It won’t.

I was talking not long ago with editorial folks at an unnamed media company that rhymes with “The New York Times.” There was some possibility of my blogging over there. They were intrigued, but couldn’t fit it into their grand plan, at least not right away. The problem was resources were already allocated and such an endeavor takes months to mount and costs tens of thousands of dollars.

No it doesn’t, and that’s the problem with Big Media.

When I was at PBS we did occasional redesigns and I never knew what they cost because for most of my 11 years there I was just a paid contributor. But toward the end of my tenure I became a producer which means I was finally exposed to budgets and was, to some extent, even responsible for paying some of them. And I was shocked to learn that my final design for a Moveable Type blog over there did, indeed, cost tens of thousands of dollars — many tens of thousands of dollars.

PBS isn’t a company that rhymes with “The New York Times” but it still qualifies as Big Media, so the pricing was more or less confirmed.

Now look at the screen you are reading right now, my Wordpress blog at cringely.com. It cost me NOTHING to design. I did it myself in a single night with the help of an experienced and generous friend, Benjamin Higginbotham of Spacevidcast.com. This blog is hosted by Media Temple in Los Angeles and costs me $50 per month, which is a lot compared to most blogs, but then I’m getting more than a million page-views per month. One more Christmas card or IBM column and I might bump up to $100 per month just to get some more resources, but I think I’ve made my point: a good Internet media product doesn’t have to cost a lot of money. This is my living, remember, that’s putting three kids through school. What are my gross margins — 10,000 percent?

While those are my gross margins they aren’t the gross margins at PBS or at a company that rhymes with “The New York Times.” Those outfits have overhead I don’t. They have legacy relationships and obligations I can’t even imagine. They can’t just go from there to here in an instant even if they wanted to.

Which brings us back to the iSomething to be introduced tomorrow. No matter how great it is, it can’t support the legacy infrastructure of Big Media, which includes mid-town office buildings and business lunches (hence my picture of New York’s 21 Club, if you hadn’t already figured that out).

Big Media wants revenue approaching what they could charge if a web site was a printed magazine. Remember the original lure of the Internet for publishers was the idea that there would be more profit without the expenses of printing and distribution. But it didn’t work out that way because Internet users won’t generally pay for content.

But Apple has the mojo. Steve Jobs has been firm from the start that content should be paid for and his generally is, except of course for my podcast on iTunes. Big Media likes the way Steve thinks.  And so they can with one breath condemn him for killing the music album, yet in a second breath they can see him as the savior of magazines, newspapers, and good-but-thinly-watched TV series.

And Apple CAN be that savior, but only after a rationalization and severe downsizing of Big Media overhead, which I am not at all sure Big Media is really ready to do.

Based on the rumors I’ve heard so far I’m guessing the new Apple product will be — like the Apple TV — a hobby, a critical success but a business failure, though one with enough potential that Apple will give it a few years to succeed. It’s in giving those few years where Apple really can save Big Media, which will undoubtedly by then be not so big.

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Near the eve of Apple’s tablet announcement, I’d like to turn my 2010 predictive eye again to the mobile space where, as my title suggests, there are only three software players that matter — Apple, Google, and RIM (Blackberry).

But wait a minute, isn’t Nokia the big Kahuna in this space and aren’t they right now suing the heck out of Apple? Yes, but that’s an act of desperation, a stalling tactic intended just to slow Apple down or, possibly, send some useful license revenue from Cupertino to Finland. It doesn’t change the inevitable.

So-called “feature phones” are going away, to be replaced within two product cycles (three years, tops) entirely by smart phones driven by mobile app stores and the need for carriers to generate additional revenue. It’s not like you’ll even be able to find a feature phone to buy.

The smart phone marketplace will consolidate around three operating systems — Android, Blackberry, and OS X. Though there will be some ups and down in the market and the complete transition will take longer to complete than my usual 12-month timeline, Symbian, Windows Phone, and every other smart phone OS that isn’t from Apple, Google, or RIM, are likely to die or be reduced to insignificance.

None of these platforms expect to die, but that’s the way it is with these things. You don’t expect to lose until you’ve lost, generally.

On some level Nokia even thinks it still has a chance to win the war, but it doesn’t.

Nokia has faith in its very popular cross-platform application development environment, Qt, which it acquired in 2008 with the $153 million acquisition of Norwegian company Trolltech, father of Qt. Nokia sees Qt as its secret sauce — a potent weapon against Apple.

Qt, like any of a number of 4GLs can write once and deploy a lot of places. Where Qt is different from the other 4GLs (in the mind of Nokia at least) is that it manages to do what it does without killing app performance, probably because Qt began as a mobile product and mobile apps have to be lean and fast.

So Qt is growing up at just the time applications and OSes are growing down, thanks to OS X and the iPhone. Qt has made notable progress supporting 3D apps and a huge variety of processors, chipsets, and GPUs. They showed at CES the same apps running from the same source on a ton of different hardware platforms from handsets to desktops to set top boxes. And now Nokia has reportedly done the unthinkable, which is to rewrite Maemo, its Linux, in Qt.

Meanwhile, Apple has been rolling forward with its PA Semi strategy, the first fruit of which we’ll apparently see announced next week. I sense that Apple is headed toward a family of devices from handhelds to servers all linked to a cloud and ostensibly running the same OS. Apple is mining the ARM ecosystem for this move in addition to its own PA Semi extensions.

Nokia thinks that, through either Qt or various legal moves (or both), it can slow Apple’s mobile juggernaut. They won’t, and here’s why.

Apple hires the meanest lawyers it can find, paying extra bucks for that “kick them for good measure” attitude. I know a company that had long legal battles with both Microsoft and Apple and they said Apple’s legal team was far worse than Microsoft’s, hands down. So while Nokia’s appeal to the World Trade Organization (WTO) to punish Apple, is an act of desperation, Apple’s similar response is just the way they do these things.

This legal situation is going to get uglier and uglier but in the end it will be settled with patent cross-licensing, no monetary damages or license fees, and Nokia feeling relieved to get out of the negotiating room alive.

This will happen, I believe, because Apple doesn’t really give a damn about Qt or Nokia. They care much more about Google and Microsoft.

Nokia is going to fail in using Qt and Symbian to compete with Android or iPhone application frameworks because Nokia just doesn’t understand software. Nokia is a hardware company that does software and hardware companies aren’t fighting this new war, they just build the weapons.

Remember Apple is a software company that sells its products in an expensive hardware box.

Ultimately (more than 12 months from now) there will be a shakeout and Nokia will drop Symbian and even Maemo in favor of Google’s Android and Nokia custom apps, UI, and hardware.

Meanwhile Microsoft will cut its rumored (and incredibly expensive) iPhone search deal with Apple, then it will introduce Windows Phone 7, which will fail to gain market traction for Redmond. Microsoft will ultimately align with Apple to avoid the embarrassment of working with Google, but this alignment will be solely for mobile.

That is unless Microsoft buys RIM and then doesn’t screw it up.

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Back to my 2010 predictions, this time mainly about Apple, the PC company that fared best in 2009 and is likely to fare best in 2010, too. Though I also wonder at what point we take Apple’s hint and stop thinking of them so much as a computer company?

Over the past years Apple has brought out successively better and ever more solid versions of OS X. They’ve completed a transition from PowerPC to Intel processors that could have killed a lesser company. They’ve built a dominant line of professional apps and a competitive line of productivity apps, pricing them reasonably compared to Microsoft. They re-invented the media player and the smart phone. They revolutionized the record business. And having once vilified the very idea of Apple stores, they changed their minds and showed the world how stores ought to be run. The company is absolutely at the top of its game despite a CEO who was absent for months near death. How do you top that?

In 2010 you do so by entering new markets and turning on old friends, sometimes simultaneously. That’s likely to be the case with the coming iSlate tablet, or whatever it will be called, which definitely won’t be running exclusively on AT&T. You can see that from AT&T’s sudden embrace of Android, which never would have happened if Steve Jobs hadn’t first made a preemptive move of his own for the iSlate, probably to Verizon.  The Apple/AT&T marriage is now one of convenience only.

The iSlate (or whatever) will be Steve’s idea of a new category of computing, or at least that’s the way he’ll spin it. Not an ebook reader, not a tablet computer, not a pen computer, not a handheld, not a smart phone, the iSlate will be something else and I’d say that something will depend on: a) the content deals Apple can announce, and; b) whatever Steve decides to claim for the product, whether actually true or not.

So expect lots of print deals for newspapers, magazines, and books. Expect, too, audio and video deals for the iSlate. Expect some major UI gimmick too, because that’s always at the heart of one of these advances. “It isn’t an MP3 player! It’s an AAC player with this tuning wheel thingee!! ” See what I mean?

Apple will under-promise and over-deliver for the iSlate. And if for some reason they don’t, then they’ll just declare it to be a hobby, like the AppleTV.

Apple as a content company will move into subscription music based on its recent Lala Media acquisition, but don’t think this embracing of streaming means Apple will be abandoning downloads, no sirree. Remember that while Hulu, for example, has been making a lot of news delivering streamed TV and movies, Apple has been making a lot of profit downloading both for sale and rental.

The downloading-streaming-downloading pendulum is about to turn direction, I think, with the advent of true 1080p video on the net. Years ago no network was fast enough for high fidelity streaming audio, much less streaming video, so everything was downloaded. Then networks got faster and people streamed. Then video came along (and Bit Torrent) and people downloaded again. That’s when iTunes rose to power for those of us who actually pay our bills. Then YouTube made streaming again popular. But now 1080p files are just so darned big that downloading is, again, where it’s at.

So what does that say about Apple’s vaunted rejection of Blu-Ray disks? I’ve maintained in the past that Apple refused to offer Blu-Ray as part of its agenda to take control of downloadable HD video standards. and I think I was right. But here’s news: Apple’s new line of iMacs were supposed to ship with Blu-Ray drives, but didn’t. What gives with that? Maybe it was a technical glitch, maybe a last minute pricing problem, maybe Steve didn’t get enough blood or flesh from some corporate partner (Sony). But I think it means that the fight over HD was won by Apple to the extent that they feel they can start listening again to their professional customers from the video industry who have been screaming for Blu-Ray.

So look for Blu-Ray drives to start appearing, shortly, in Apple computers along with Blu-Ray support in all of Apple’s professional applications. Look also for Apple to offer some higher level of HD download, probably with expanded device portability courtesy of Disney’s new KeyChest technology, which I am sure came from Apple.

And then there’s the iPhone. The iSlate will be a bigger iPhone, but in 2010 we’ll surely see at least two next-gen iPhones, too — a smaller form factor in the Nano tradition and a 1 GHz processor on something like the current model. Apple will remain atop the smart phone market, where Android may eventually threaten, but not yet.  As we see from the first Nexus One reviews, Google has a lot to learn.

More about Google and the Nexus One tomorrow, as well as an interesting theory about Apple and Nokia.

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Dag nabbit I had hoped to get away without having to write a predictions column this year, but no such luck. Look for that one tomorrow. Tonight, of course, there’s Google’s Nexus One smart phone to write about. Is it an iPhone killer? Hardly. And that’s not even the point.

Google’s Nexus One is a very nice smart phone as far as I can tell. I only read what you read and I haven’t yet played with one, but a couple nice folks who were on TWiT with me this week have tried it and liked it a lot, especially the screen. Yet many of the stories I’ve read today have presented this product introduction as a seminal break between Apple and Google with one trying to kill the other. Not even close.

Apple is very happy with its iPhone sales, thanks, and those are unlikely to be hurt much, if at all, by the Nexus One. Not that the Nexus One can’t be a huge success for Google. But here are the points everyone seems to be missing: 1) there is plenty of room in the mobile market for both Apple and Google, and; 2) this product introduction really marks the ultimate decline and fall of so-called “feature phones” and the rise to dominance of smart phones. Within two years there will be no more feature phones, at least not in the U.S.

The real losers today, then, are makers of feature phones and, maybe, Microsoft, which has the most vulnerable smart phone platform in Windows Phone.

The Nexus One introduction, coming on top of the iPhone, marks the true ascendence of smart phones as an alternative platform to desktops and notebooks. No, you can’t survive on a smart phone alone, the days of one computing device per person ended long ago.

But this does mark the beginning of the smart phone shakeout, when the industry matures and inevitably drops to no more than three viably competitive smart phone platforms. So just as you have Windows, Mac, and some form of ‘nix fighting it out for desktops and notebooks, so too we’ll shortly have three major mobile platforms to choose from.

iPhone and Android will be here for the long haul with the question being which of Symbian, Palm, Windows Mobile, or Blackberry will die?

What’s your guess? My guess is that Blackberry will be the third standard, Nokia will eventually leave Symbian for Android, and Microsoft will buy Palm but then screw it up, losing its position almost entirely in the mobile client space where smart phones will soon dominate, selling up to a billion units per year.

Hey this did turn out to be a predictions column after all!

More predictions tomorrow.

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Last weekend a story in the New York Times blamed the bad reputation of AT&T’s wireless network on iPhone technical problems, not the AT&T network at all. Going further, Global Wireless Solutions, a network testing company, said the AT&T network is actually faster than Verizon’s, backing to a certain extent AT&T’s now-aborted legal effort to silence Verizon Wireless commercials that said otherwise. I doubt this is actually the case. Last summer as my family and I wandered across the United States in our old Winnebago motor home equipped with two iPhones from AT&T but also cellular data from Verizon, I can say with some certainty that Verizon coverage was consistently better, no matter what the Times has to say.

But the real issue here, it seems to me, is the obvious gag order successfully imposed on giant AT&T by Apple. Now that part I believe.

Apple and Steve Jobs (they are one and the same) feel a tremendous need to control stories about them. No other computer company I know of has sued its own customers to silence them, yet Apple did just that a couple years ago. Steve Jobs now reportedly controls most of the copyrighted photos ever taken of him, which is why editors and TV producers keep using the same few shots over and over again. The company, too, imposes on its commercial partners a virtual gag order. That’s the case here with AT&T, which apparently isn’t allowed to refute Verizon’s network performance claims even if AT&T has contrary data.

I’ve seen this before. PortalPlayer (now part of nVIDIA) was under a similar gag order when I went there in 2006 to shoot a NerdTV interview. PortalPlayer designed the innards of all early iPods, yet the people I spoke with at the company weren’t even allowed to acknowledge that Apple was a customer, much less that it represented 85 percent of their business. “We aren’t allowed to say their name in any context,” my interview subject told me. “They want the world to believe that all iPod technology was invented in Cupertino.”

And so it is with AT&T where the wireless carrier reportedly could respond to Verizon’s claims but generally doesn’t because doing so might piss-off Steve Jobs.

That must be very frustrating for AT&T (unless of course, as I suspect, Verizon is correct in its claim to have the better network). But the kind of inferiority complex it implies — one that would have the company accepting such a galling deal from Apple — shows up near the end of a long history of bonehead moves by AT&T or by its earlier incarnation SBC — Southwestern Bell Communications — one of the original Regional Bell Operating Companies.

Consider, for example, SBC’s onetime ignorance of Moore’s Law, as described to me recently by a friend who used to work there:

“Do you remember Americast? It was a cable TV joint venture between SBC and Ameritech. I was involved in evaluating set top boxes for that mess. They finally settled on a box and in the telco tradition signed a contract requiring the manufacturer to make ‘the same box at the same price’ for 10 years. The execs who cut the deal thought they had really won big because (they were convinced) the cost of the box had to increase over the next ten years. But, they really signed a contract requiring the company to build a box that looked the same, had the same connectors and the same functionality for the next 10 years. Then I asked if they had figured-in Moore’s Law?

“They, being Telco Executives, had never heard of Moore’s Law. When I pointed out that the cost of the electronics in the box should drop by a factor of between 8 and 16 over that ten years, they denied that there could be such a thing as Moore’s Law or it would have shown up in all their other purchasing. About a week later my boss asked me to write a memo on Moore’s Law and hand deliver it — paper only — to the President of TRI, later known as SBC Labs, now a tiny part of what is left of AT&T Bell labs. I was later told that paper copies of that memo circulated widely among executives at SBC.

“SBC had a corporate purchasing culture based on the idea that everything gets more expensive over time. I guess that is an example of people who should know better investing in things they didn’t understand. In this case they had an entire building full of people who did understand the technology but were either not consulted or were ignored.

“The SBC executives didn’t believe they needed help because they were experts. I mean they had to be experts to become executives, right? ”

Right.

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Christmas is approaching and with it the end of the first fiscal quarter for many computer companies including Apple.  This is the time when these companies make their biggest sales of the year.  It’s also the time when J.D. Power & Associates is finishing-up its PC quality surveys which cover initial quality and overall service and support.  If you are an Apple customer or a prospective Apple customer pay attention, because this could be a very good time to be you.

Apple is proud of its support operation, which is ironic given that back in the early Apple ][ days Steve Jobs wanted to save money by mimeographing user manuals.  I am not making this up. Obviously Steve has changed his point of view because he has been back in charge of Apple now for 12 years and for the last nine of those Apple has been the top PC company for both quality and support according to J.D. Power.

Winning a competition nine years in a row doesn’t come easily, certainly doesn’t come by accident and luck has nothing to do with it.

This month Apple has a chance to clinch a 10th win in a row and the entire company, from Steve Jobs on down, is determined to do just that.  I’m not saying this because of any intuition or simple application of logic.  I’m telling you that Jobs has made it clear in company meetings that Apple will win its 10th J.D. Power award whatever it costs.

So hie thee to an Apple store, my friends.  Take with you any and every Apple product you own that’s still under warranty and attempt to get them to give you a new one, because they’ll probably do it.  Apple is willing right now to spend tens of millions taking back or replacing products they would normally refuse to do — that they’ll probably refuse to do a month from now — just to clinch that darned trophy.

I’m sure they’ll win again, but let’s make them earn it, shall we?

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Last time I wrote about the business and technical context into which Apple would be bringing its long-rumored tablet computer, which many of us now believe will also be some form of e-reader. That column stimulated a lot of lively comments, thanks, but now I have to put up or shut up, giving my thoughts on both the still-secret Apple device and the possible content strategy behind it.

I think we’re all fairly sure at this point that Apple will shortly release such a device and that it will be nominally based on the iPhone or iPod Touch.  This is key because of the App Store and iPod ecosystems it will leverage.  Anything that runs on an iPod Touch will run on the tablet.

Since the tablet is also an e-reader, it has to have both a larger screen and greater battery life so users have a hope of making it all the way to the train platform scene in Anna Karenina.  Readers are probably correct, then, that the new Apple will have an e-ink display or equivalent. Current players in this very limited space are e-ink, SiPix, and Kent Displays, so Apple is likely to go with one of those.

But an e-ink display and the iPod Touch (or iPhone) app and content libraries are not enough.  Apple has to have unique content for the new device, which is why Cupertino has been talking to traditional publishers and those publishers have been blabbing to each other.

Publishers want to make money.  They want to be paid for their content.  They may also want to show ads.  Most importantly, though, they want a change of platform such that they can reassert control over their intellectual property, which has been for the most part subverted by the Web.  The easiest way to do this is through a new file format combined with a new category of content.  A tablet edition of the New York Times, for example, would ideally not be easily readable on other devices without paying something to the Times.  This is not to say it would be impossible to read the Tablet Times on your Windows PC, but not without first buying the content file.  And while viewing on a Windows PC is probably inevitable, don’t expect to read that same file on a Zune, ever.

One interesting way around this problem of getting paid while still reaching for a true mass audience would be to make certain content features usable only with the e-reader.  So the basic story might be readable on most any notebook or mobile phone, but to see the accompanying video would require the paid version.  This is just a thought, not a prediction.

The best user experience with this new content type would be using the iTablet, which would be supremely portable, silent, power-efficient and easy to read.  Bigger and with longer battery life than an iPhone or an iPod Touch, the tablet would be ideal for reading on a train or plane, in the car, during lunch — anywhere you’d read a magazine or book. Heck, hasn’t that always supposed to have been the idea behind an e-reader?

The content has to be somehow better than what can be read on a Kindle.  That’s made easy almost out-of-the-box given the iPod Touch software base.  Here’s the potential for content that actually does something.  I think that’s key.  For this device to succeed it has to have a large volume of content that simply does more than you’d generally expect on other platforms.  Otherwise why buy the reader?

As I wrote last time I have no inside knowledge of Apple’s plans.  But I know Apple as well as anyone and I do have one bit of insight.  Two years ago, while shooting interviews at e-ink in Cambridge Massachusetts, we saw what was probably the first demonstration of an e-ink display that was in color and supported full motion video.  I am absolutely convinced that display or its equivalent will be at the heart of the new Apple tablet.

Kindle is black and white.  Apple is color.  Kindle is static.  Apple offers animation and video, along with an LED backlight to make colors pop if the lighting is right.  Kindle is filled with books, magazines, and newspapers.  Apple is filled with books, too, but some of them will be like books in Harry Potter, with animation built into the pages.  Apple magazines and newspapers will include animation and video for a new kind of composite publishing format that will be Apple-protected and mainly for sale even if some ads are included. And the Apple device will play music, videos and movies, too.  Why not?

It won’t be cheap, not at first, because it doesn’t have to be.  I’d look for an introductory price in the $499-699 range for the first million or so units after which the price will start to fall.  Content will definitely be available by WiFi, but there’s also the possibility of a Kindle-like cellular connection that could be used by Apple to subvert AT&T’s network exclusivity on the iPhone.  This new device will be, after all, a new device, and not necessarily subject to the AT&T exclusive.  If there are cellular and non-cellular versions, then the iPhone/Touch analogy is complete.

Questions that remain concern how Apple will defend its new franchise and how the company will be paid for content. Many readers have yearned for a micropayment scheme as the cure for the common newspaper. As a guy who lives by writing I yearn for that, too, but I don’t see it coming, at least not in a form dramatically different from what Apple already has working with iTunes.  Sure it is attractive to make (or spend) a penny here and a penny there, but iTunes has already taken most of the friction out of purchasing content, both through one-click buying and (this is vital yet ignored by most pundits) the role of iTunes gift cards to bring online purchasing to tweens.  iTunes is an enormous money machine that will be extended to cover as many new types of content as Apple can think of.

How to protect the franchise is a little more complex.  Apple will look for exclusive deals wherever it can – exclusives with publishers as well as technology suppliers.  The publisher deals are easy since this new content won’t generally play on other mobile devices, though I’m sure you’ll be able to read it all on any iPhone or iPod Touch so Apple can claim an ab initio installed base in the tens of millions of units. I’d expect Apple also to try for a display exclusive of some sort, possibly even acquiring e-ink, which is in the process right now of being acquired by a Taiwanese LCD vendor called PVI.

This e-ink/PVI deal is especially interesting because it was announced back in June as an all-cash deal for $215 million then revised earlier this month throwing-in 120 million preferred PVI shares for the former e-ink investors.  This is a huge about-face that instantly doubles the price of the purchase while also giving the former e-ink owners a share in any upside for the business — an upside they obviously expect to enjoy or they wouldn’t have held out for it.

E-ink had, over the years, raised $150 million, so while the investors were being made whole by the original $215 million sale price, their upside wasn’t much.  But then the electronic ink business, for all its apparent potential, hasn’t really been that good despite e-ink’s use in both the Sony and Amazon Kindle readers. Four months ago the e-ink investors were thrilled to just get their money back.  Then something changed.  They just demanded (and got) twice as much money in the form of preferred shares giving them a significant piece of any upside explosion — an explosion they clearly didn’t expect when the original cash deal was negotiated.

The something that happened I believe was Apple’s entry into this market segment. That alone may have been enough.  I’m guessing Apple, like it did with Samsung and Flash RAM, made a huge commitment for most — maybe all — of e-ink’s color display production for years to come.  Or maybe PVI is simply flipping e-ink to Apple.  Only time will tell, but I know in my bones that there is something going on here.

Chances are that Apple’s tablet won’t revolutionize publishing, but for Cupertino it will accomplish more than enough to be a success if it extends the iPhone and iTunes user bases, crushes the AT&T exclusive, and pushes Amazon and Sony to second and third places in the e-reader category. For Steve Jobs the goal is always to change the world, but if that can’t be done then making money and beating the crap out of competitors is almost as good.

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It’s not that hard to predict what will happen in the future (I will die; Fifi, my son Fallon’s stuffed orca, will eventually need restuffing, etc.) but it is very hard to predict with any accuracy when things will happen. For technologies, I tend to see events happening long before they actually do, which makes me something of a prophet, though a pretty useless one.  This may be proved yet again in the coming months as Apple and other companies attempt to take most of the paper out of publishing, something I thought we were about to do 15 years ago, but didn’t.

Back in 1994, I proposed to my employer at the time that we start a strictly online publication to cover just Microsoft. We called the proposed e-magazine MicroSquish and took it so far as to make a pilot issue and do some very interesting market research. The World Wide Web was only a couple years old at the time, and I was unconvinced that it presented a suitable delivery platform in an era of dial-up Compuserve accounts and 2400 bps modems. So MicroSquish was conceived as a downloadable publication to be distributed by e-mail in the new PDF format then called Acrobat. It looked just like a print magazine, right down to the 75 percent ad-edit ratio. And just to be cool, we built into the technology the ability to report back data from readers. We could not only track who read each issue, but how many times it was read and which stories or ads. We figured this data of who read what and in what order would be very useful to advertisers and ad agencies. But we were wrong.

Ad agencies 15 years ago didn’t want to know whether or not their ads had actually been read, they told us. This was simply because if an advertiser discovered that few, if any, people were actually reading their ad on page 113, the company might just pull that ad and save their money, taking revenue away from the ad agency in the process. The entire ability to sell an ad-edit ratio of 75 percent (which was needed to qualify for printed distribution by second class mail – yet another buggy whip in a digital era) was based on this deliberate ignorance. Ad agencies and publications alike knew that many — even most — advertising dollars were simply wasted, but it wasn’t in their interest to admit that, so they didn’t.

Contrast this to pay-per-click, which is brutally honest, where every successful ad has efficacy and advertisers have a pretty darned good idea what they are getting for their money. This reality is precisely why ad-supported magazines, newspapers, and television are losing revenue. It is a trend that is likely to continue, and can only result in a degradation of production standards on the print side to match the reduced revenue potential of the online business, where BS gives way to measurable, though impoverished, results.

It is not a pretty picture. More pay-per-click means more online content but ultimately less money for producing that content. Print publications fade from sight or continue primarily as art forms, rather than businesses. None of this is intentional. This isn’t Google or Apple or any other company setting-out to destroy an industry. It is simple Darwinian evolution that will ultimately make many print publications as obsolete as I already am.

Back in 1994 I proposed to set an example with Microsquish but it never saw the electrons of publication.  Computer professionals who were already spending eight hours per day in front computer screens told us in focus groups that they didn’t see themselves reading a publication on those screens. Think about that statement for a moment and you’ll realize how crazy it was. But my bosses were, I think, relieved to hear it, because they weren’t ready to give up print distribution. Then there was the little problem of distributing up to 200,000 one-megabyte files per week, which looked like it might take more than a week back then simply to do. You can’t publish a weekly magazine that takes eight days to deliver.

Well what goes around comes around I guess because the rumor this week is that Apple’s long awaited tablet computer is some form of electronic reader and that Apple intends to get into the distribution of content for this new platform, just as it earlier did for the music, TV and movie businesses with the iPod and iTunes.

I have no inside knowledge about Apple’s plans, but as one of the guys who came up with the whole electronic publication idea, I think I’m in a position to put it in perspective.

Technology is the least of this.  Yes, we need an electronic medium that is price-competitive with what it replaces, but it doesn’t take an Apple per se to do that. The much harder parts are the business model and the mojo.

Mojo?

Mojo!

Let’s assume that Apple or some Apple competitor announces a really good electronic reader, which means one that costs little, is super-easy to use, stores a lot, and has very low power consumption.  That’s just the beginning.  To go with that reader they’ll need sources of content and a way to make money from the new content business.  Just making the reader isn’t enough: if you build it they won’t come. But in order to get the content you have to be able to convince content owners to share and that requires mojo – the perception on the part of the content owners that this thing is going to be a success whether or not they participate.

An important thing to remember here is how Apple evangelized the Macintosh 25+ years ago. For the Lisa, which predated the Mac, Apple didn’t bother to lure developers: Apple just wrote itself the seven core applications it thought would be enough to make the platform a success.  Only that didn’t work.  The Lisa was too expensive and seven apps weren’t enough.  So for the Mac, which was developed for far less money than the Lisa, Apple turned to third-party developers. And here’s the line they used, which I believe was the work of Alain Rossmann: “It’s obvious that graphical computing is the future, whether the Mac is a success or not. This is your chance to learn how to develop for such an environment. Choosing not to develop for the Mac, then, is choosing for your company to eventually die.”

The argument obviously worked, especially when persuasively made by guys like Steve Jobs and his surrogate, Guy Kawasaki.

Apple is doing it again, from what I understand, only this time the evangelizing is being done among print and electronic publishers. And what’s being dangled before this New York and L.A. crowd is the Hope diamond of modern electronic publishing – PAID CONTENT.

Every publisher wants to make money. The six ways to make money in publishing are: 1) selling the product outright, whether it is a book in a bookstore, a magazine on a newsstand, or a pay-per-view TV show; 2) selling subscriptions; 3) selling ads; 4) selling a combination of subscriptions and ads; 5) syndicating content – selling it for use by other publishers, or; 6) giving the thing away for free to support a live tour or event of some sort to which people in many cities and countries will buy expensive tickets.  The Internet era has supposedly taught us that almost nobody is willing to pay for a subscription so that limits publishers to ads, syndication, or touring/events – none of which appear to generate enough revenue to pay for the kind of lunches publishers like to eat, hence the fading print and broadcast industries.

Part of the difficulty here is that while we’ve effectively removed most of the production and distribution expenses from publishing, we’ve added some expensive layers, especially portals like Yahoo.  Also the old-line publishers like Time-Warner that are used to OWNING their content haven’t shown themselves to be as good as Lonelygirl15 at MARKETING it. And unlike Lonelygirl, T-W is saddled with very high overhead if very little teen angst.

Enter Steve Jobs, stage left, proffering an appealing concept (I make lots of money selling content: look at iTunes), embodied in an attractive package (the Apple tablet/reader/thingee), and suggesting an exciting outcome (the salvation of Big Publishing). And his mojo is having some effect. The New York Times, for example, is suddenly talking about paid content, having a couple years ago specifically walked away from that business model on empirical grounds. The Times and most of the other publishers (like Rupert Murdoch) suddenly taking another look at paid content have all been drinking Steve’s Flav-R-Ade.

But that’s not enough.  If Steve is going to change publishing the way he’s already changed music, he’s going to need more than what I’ve described so far.  He’s going to need a new publishing platform, a new kind of product to sell on that platform, and a new business model to pay for it. Anything less will not succeed. I’ll get into those details in my next column.  Until then talk among yourselves.