February 2007 Archive
The once-popular phrase “Does Macy’s tell Gimbels?” has faded from use as fewer people remember Gimbels, Macy’s retail rival on New York’s Herald Square for much of the last century. Gimbels disappeared in the 1970s, joining other famous names such as B. Altman in New York, Lazarus in Cincinnati, and more recently, Chicago’s own Marshall Field’s, in the retail graveyard.
Field’s and Lazarus were consumed by Federated Department Stores, which has become the nation’s largest department store operator largely by swallowing beloved local chains and renaming them all (except for Bloomingdale’s) Macy’s. Led by the dapper Terry Lundgren – whose mission is to reinvent the American department store by attracting younger shoppers– Federated is set on making Macy’s a national brand with all the benefits that come from such heft, much like Wal-Mart has done at the discount end of the market. (In fact, Federated plans to change its corporate name to Macy’s Group in June.)
Lundgren’s chief rival for the hearts and dollars of Middle America is Myron E. Ullman, the talented merchant who heads J. C. Penney. Ullman is credited with staging an impressive turnaround for the dowdy 105-year-old company, capped by the premiere on Sunday night’s Academy Awards ceremony of its “Every Day Matters” marketing campaign. (That couldn’t have been cheap!) The campaign is designed to build and deepen an emotional relationship with shoppers, while Federated is busy trying to make nice with Chicagoans irate over the renaming of Marshall Field’s.
Penney and Federated are using many of the same tactics to make their stores more stylish and appealing, chief among them is signing exclusive deals with big name designers. Federated has enlisted the likes of Martha Stewart and Elie Tahari, while Penney has signed Liz Claiborne and Nicole Miller, and has partnered with cosmetics retailer Sephora to open small in-store Sephora shops in its department stores. Penney has also lassoed a new line called American Living, designed at Polo Ralph Lauren, to debut next year.
After years of losing sales to specialty stores and discounters like The Gap (before its death spiral), Bed Bath & Beyond, and Target, merchants Lundgren and Ullman appear to be staging a comeback for department stores. They’re also creating a new rivalry for the 21st Century.
Price declines for semiconductor parts are never a big surprise. In an industry where product features and technology change so rapidly, many devices have a short shelf-life at a certain price point. The laws of supply and demand take hold, and prices naturally follow.
NAND flash memory is a case in point. This versatile, non-volatile memory device type is designed into many products, such as Apple’s iPod nano and iPod shuffle MP3 music players, mobile handsets, USB flash drives, digital still cameras, and Sony’s PlayStation Portable.
High demand for NAND flash memory in recent years has driven suppliers to switch their wafer fabrication plants (fabs) to making NAND flash memory or to build new fabs for that purpose. The market grew from $10.8B in 2005 to $16.8B in 2006, according to iSuppli. IC Insights sees the market growing 31% a year through 2010, to more than $33B.
So, it wasn’t unexpected when market forecasters predicted oversupply would cause the price of NAND flash memory to fall, as more product flooded into the market. What was a surprise was the extent of that decline: 65% in 2007. Yes, that’s right – a price drop of two-thirds over the span of 12 months. If only that would happen to gasoline prices! (Flash – this just in: Prices for NAND flash memory have fallen 50% in just two months.)
Ultimately, this will be a boon to consumers, as the prices of products based on NAND flash memory will inevitably drop. On the supply side, it’s a shock to the system, of course. Just ask the 250 employees of SanDisk who are about to lose their jobs as a result. The stock of Micron Technology took a small hit as a result of the news, but the pain is bound to spread, especially if prices continue their freefall. Some of those new fabs will be put on hold or switched to making devices with more price stability, such as dynamic random-access memories (DRAMs).
That would be richly ironic, as the DRAM market has a long history of pricing jitters, and many semiconductor companies have given up on DRAMs because of the uncertainty in making a profit on the parts.
Ladies and gentlemen, the gloves are off. In the blue corner, former Yahoo Music chief David Goldberg. And in the red corner, the perennial 800-pound gorilla, digital rights management (DRM).
Last week Goldberg and general manager Robert Roback resigned from the company following a few choice comments Goldberg made regarding DRM, the technology used by Yahoo Music and other online digital music retailers to control access to and usage of digital data. In short, Goldberg opined that DRM is an unnecessary restriction placed on users that should go the way of the Dodo bird.
“I’ve long advocated removing DRM on music because there is already a lot of music available without DRM, and it just makes things more complicated for the user,” he told SiliconValleyWatcher.
The DRM debate basically falls on two sides: Advocates argue that DRM protects copyright holders by preventing unlawful duplication of their work, while critics say that such restricted use of copyrighted material infringes on their Constitutionally guaranteed grant of exclusive commercial use. A smaller, yet no-less vocal third group contends that DRM inhibits competition.
DRM comes in many different forms, all accomplishing the same basic goal. The iTunes Store allows users to purchase tracks and burn them to CD or transfer them to an iPod an unlimited number of times. However, songs can only be played on five computers at once and tracks cannot be played on many non-Apple MP3 players. Napster charges its users more money each month to use their music on portable devices, and makes all downloaded tracks unplayable if a payment is missed (ouch!).
Goldberg’s point was that the technology places an unneeded burden on buyers, and that online music retailers could learn a thing or two by getting rid of it altogether. It worked for Yahoo Music – the seller actually saw increased sales when it sold unprotected tracks in a little experiment prior to Goldberg’s exit. Hmm, no DRM, better sales…no DRM, better sales. No matter what side of the debate you fall on, you can’t deny the connection.
We’ve always known that Richard Branson is all about hot air. The brash, devil-may-care Virgin whiz kid has piloted his hot air balloons for record-busting distances. He’s also built a Virgin megaconglomerate whose tendrils reach into all aspects of consumer life, including a reality TV show. Now he’s putting his money where his mouth is – he’s created a contest that will award $25 million to anyone who can come up with a way to extract one billion tonnes of carbon dioxide from the atmosphere each year. (Note: The extra ne of tonne must weigh a lot, as a British tonne is actually heavier than an American ton.)
Rising levels of atmospheric carbon dioxide are a side effect of global warming, which scientists worldwide have just confirmed that, yeah, is a result of human activity since the start of the Industrial Revolution. Since modern humans developed only 40,000 years ago, we don’t know what high levels of carbon dioxide will do to us. By some estimates, the world hasn’t seen these levels of carbon dioxide for 650,000 years. It’s all a grand experiment, see?
Still, $25 million is nothing to scoff at, so I decided that I would give it a go. You can’t win unless you play.
So I did a little research, and you know what — Australia beat me to it. The country plans to phase out incandescent light bulbs, the kind Thomas Edison invented 125 years ago. They are turning to compact fluorescents.
But will that work? Well, I assume that replacing 15 incandescents with compact fluorescents will save some 500 kg of carbon dioxide per year (per this quiz about Canada, but I think a little extrapolation is OK here). If you multiply that number by roughly 20 million Australians, yeah, I think they’ve got it.
Oh well, you snooze you lose, and all that.
Besides, I don’t think Sir Richard would have liked my idea very much, which was to shut down Virgin Airlines.
Earlier this month, Viacom ordered YouTube to remove more than 100,000 unauthorized video clips posted on the popular video sharing site. Couple this with the December announcement that Viacom backed away from a proposed joint venture with NBC Universal, CBS, and News Corp. to form a “viral-video” site, and you could make the case that the company was just another paranoid media conglomerate struggling to keep up with the times — or so I assumed.
Imagine my surprise, then, when Viacom announced the other day that it has partnered with Joost, a company created in early 2006 by Niklas Zennstrôm and Janus Friis (founders of internet telephone company Skype and file sharing phenomenon KaZaA). The fact that Viacom had finally made a strategic decision is not as shocking as the way the deal was sealed. The media heavyweight has got game after all.
In early 2006, Zennstrôm and Friis rounded up some of the world’s best “engineers, web gurus, and media visionaries” to work on “The Venice Project.” What seemed to be a benign research and development initiative emerged as the framework for a global, high-quality video distribution system by the start of 2007. On January 16, the company abandoned the “Venice Project” code name and unveiled the Joost brand. Within a month, its partnership with Viacom — including its MTV, BET, and Paramount Pictures divisions — finalized the success of the startup’s secret slickness.
After reviewing the past year of Viacom news. I can’t help but wonder about how much of its online content struggles were just smoke and mirrors. What appeared to be big media fumbling has been revealed as an impressive and premeditated strategic plan. Needless to say, I will be revisiting NBC’s, CBS’, and News Corp.’s past news and paying closer attention to the activities of other seemingly benign digital media startups. YouTube should probably do the same.