Items by Betsy Schiffman
Wired: Top Stories
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VCs Put the Brakes on Early-Stage Startups
Posted: October 31st, 2008, 3:44pm EDT by Betsy Schiffman
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Venture capitalists claim the money is still flowing in Silicon Valley, but entrepreneurs say it just ain't so. The only companies that are getting money right now are big, established businesses or startups founded by repeat entrepreneurs. In Silicon Valley, the so-called center of innovation, it now takes more than a good idea to raise a buck.
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RIM Could Rot With the Economy
Posted: October 20th, 2008, 3:21pm EDT by Betsy Schiffman
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Despite a slate of fancy new BlackBerry phones, Research In Motion could find itself in a pretty ugly situation, as corporate and consumer spending dry up in the slowing economy.
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Google Handily Beats Wall Street Expectations
Posted: October 16th, 2008, 3:35pm EDT by Betsy Schiffman
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Google posts sharp third-quarter ad growth in the face of a global financial crisis. Seems the economic downturn isn't catching up with the search giant yet.
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'Citizen Journalist' Could Face Prison for Fake Jobs Story
Posted: October 3rd, 2008, 4:09pm EDT by Betsy Schiffman
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An erroneous story on a citizen journalism site saying CEO Steve Jobs has had a heart attack prompts a sell-off of Apple shares. The writer of the false post could face criminal charges.
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Apple Rots; Shares Hit New 52-Week Low
Posted: September 29th, 2008, 1:20pm EDT by Betsy Schiffman
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Apple's vaunted stock takes a sharp dive Monday amid general market turmoil and the fear that PC sales are drying up.
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Economic Meltdown or Not, Online Video Will Grow
Posted: September 23rd, 2008, 12:00am EDT by Betsy Schiffman
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The financial markets are on the verge of implosion and the economy looks like it's going to hell, but online video is still growing at a ridiculous rate. At Streaming Media West, an online video conference that officially kicks off in San Jose, Calif. today, old-media execs, tech geeks, video gurus and advertising honchos from a range of companies will meet up, talk through and work out some of the issues in the space.
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Death, Taxes and Bandwidth Caps
Posted: August 29th, 2008, 3:32pm EDT by Betsy Schiffman
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Are the days of all-you-can-eat broadband over? Comcast joins a growing number of ISPs that are introducing usage caps in order to crack down on so-called bandwidth hogs. Caps may help service providers manage traffic, but they won't do much to enhance innovation or broadband adoption, charge critics.
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DTV Upgrade Proves Costly, Headachy
Posted: August 26th, 2008, 2:50pm EDT by Betsy Schiffman
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As the FCC pushes $40 coupons for digital TV converter boxes, complaints about the boxes have grown loud -- for many Americans, the device hasn't delivered an acceptable quality of television reception.
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'ITunes Tax' Back From the Dead in California
Posted: August 14th, 2008, 4:40pm EDT by Betsy Schiffman
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The proposal for a so-called "iTunes tax" in California was widely criticized and promptly shot down this spring. So why is it back on the table? One state assemblyman reintroduced a bill that would levy an additional tax on digital download purchases, potentially driving more paying customers to use file-sharing sites.
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U.S. Broadband Speeds Too Darn Slow; Adoption Hits 7-Year Low
Posted: August 12th, 2008, 1:15pm EDT by Betsy Schiffman
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The broadband market is full of disappointments: Service speeds are improving at a spectacularly slow pace, while sign-ups have stalled amid a weakening economy.
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How American Youth Will Screw Viacom
Posted: July 30th, 2008, 9:00pm EDT by Betsy Schiffman
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Viacom posts decent enough results, but tucked in there is evidence that youth-oriented networks VH1 and MTV were not carrying their weight. The fundamental problem could be that the youth demo Viacom has hotly chased after for the last couple decades is a bust.
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The Broadband Boom May Be Over
Posted: July 23rd, 2008, 2:38pm EDT by Betsy Schiffman
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AT&T reports a measly 46,000 broadband subscribers added during the second quarter, down from nearly half a million in the first quarter. The numbers imply that broadband growth has come to a screeching, painful halt. The news doesn't bode well for other broadband providers.
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TiVo to Cash In on Couch Potato Commerce
Posted: July 22nd, 2008, 2:20pm EDT by Betsy Schiffman
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TiVo is looking for new ways to generate revenue from its existing subscriber base. Its most recent plan: Let subscribers shop through Amazon while watching TV.
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Piracy-Schmiracy: 'The Dark Knight' Rakes in the Dough
Posted: July 21st, 2008, 5:30pm EDT by Betsy Schiffman
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Hollywood execs argue that piracy is killing their business. Just how much has it hurt business? "The Dark Knight," with bootleg copies available online almost immediately, grossed a record-breaking $155.3 million in one weekend.
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Turns Out Porn Isn't Recession-Proof
Posted: July 21st, 2008, 2:12pm EDT by Betsy Schiffman
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Adult filmmakers have reason to be glum. The DVD market has peaked; there's an onslaught of free, amateur content; and piracy is eating away at revenue. An industry that has historically been "recession-proof" is feeling the pains of the economic downturn.
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There Are No Winners (or Losers) in the Amazon-Netflix War
Posted: July 18th, 2008, 2:38pm EDT by Betsy Schiffman
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By the looks of it, Amazon declared war with Netflix with the launch of a competitive, on-demand streaming-movie service. The thing is, there isn't much of a market to fight over yet.
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The Many (Geeky) Faces of Bill Gates, a Capsule Biography
Posted: June 27th, 2008, 2:00pm EDT by Betsy Schiffman
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The Bill Gates that most people are familiar with is the socially awkward nerd who strong-armed his way into becoming the head of the largest software company in the world.
In reality, Gates is a smooth operator who, despite his uncombed hair, baby face and disheveled appearance, knew exactly what he was doing every step of the way. He successfully transitioned from cocky college dropout to brass-knuckle negotiator to seasoned captain of industry, eventually becoming the richest man in the world and a model philanthropist.
"This is a guy who really morphed over time," says Mary Jo Foley, a longtime Microsoft watcher and author of Microsoft 2.0: How Microsoft Plans to Stay Relevant in the Post-Gates Era. "When I look at other CEOs -- guys like [Oracle CEO] Larry Ellison -- they haven't changed much, but Gates has really changed. I still think he's a hard-charging businessman, though -- I don't think he's gone soft."
Here's a look at some of the tricky transitions that Gates successfully navigated over the course of his career. Each of these changes were necessary and probably inevitable for any ambitious entrepreneur. It's a measure of Gates' business acumen that he successfully pulled these off where many lesser entrepreneurs have failed.
Transition One: Coder to Negotiator
If you told the 20-year-old Gates, who co-founded Microsoft in 1975, that he actually pulled off his grand plan he probably wouldn't be surprised. And that's part of his charm.
Back in 1980, when Gates was barely old enough to rent a car, he walked into a room filled with IBM execs and sold them a product he didn't even have. IBM wanted to get into the computer business, and Bill Gates wanted to get into the software business. He didn't have any negotiating skills, but he landed a deal under which IBM licensed MS-DOS from Microsoft. It was a ridiculously advantageous arrangement since it gave Microsoft the freedom to license the operating system to any other computer maker -- which is what eventually fueled Microsoft's fantastic growth.
"He's not a rock star programmer, but he's always had a knack for seeing where the industry is going. He's not always right, but he's a visionary in terms of seeing how markets and industries evolve," Foley says.
Transition Two: Founder to Fortune 500 CEO
Many entrepreneurs are fully brilliant leaders of startups, but they crash and burn when those companies grew beyond the startup stage. There's little overlap between the skill sets involved in running a small startup and those required to steer a major corporation.
Gates is one of the few to pull off both feats with aplomb.
"His management style worked really well when they were a scrappy upstart. He brought in young smart guys like him. But he had to tone it down when Microsoft became a big company. A ruthless management style doesn't work as well with a company of 80,000 people," says Foley.
Gates matured simultaneously with the company. He learned to tuck his shirt in, comb his hair, and make polite cocktail conversation.
"When I was a summer intern at Microsoft in grad school in 1989, he hosted the summer MBA interns to a very nice backyard barbecue at his old house, before he got married. He worked the crowd expertly, despite his reputation for being ill-at-ease with people, and gave everyone their chance to ask him a question or two," says Ted Weinstein, a San Francisco-based literary agent.
Transition Three: Monopolist to Savvy Defendant
His visions didn't help when the feds came knocking in the late 1990s for one of the longest, most drawn-out antitrust cases in U.S. history. In what has been famously characterized as the 1998 "Rainman" deposition, Gates rocked back and forth in his chair, at times snapping at prosecuting attorney David Boies and generally behaving like a temperamental child. The thing is, it worked. Gates didn't give an inch. And roughly 10 years later, even Boies concedes that Gates' performance was spot on, both in the deposition and on the stand in court.
"He was the most potentially effective witness," Boies says. "Nobody knew the stuff as well as he did, and nobody had the passion for it that he did. I definitely would have called him to the stand ... He's a very smart guy."
Gates wasn't the most sympathetic witness, though, and in many ways it was a risk to let him testify.
"If you're going toe to toe with the government, and the message you want to send is, 'Come hell or high water, we're fighting this until the end,' then you do exactly what [Gates] did," says Barbara Sicalides, an antitrust attorney with Pepper Hamilton. "But in any case where you have a client the size of Microsoft, and where you have inflammatory documents, it's the sort of situation where you'd want to think twice about fighting until the bitter end ... For the most part, I think Microsoft's lawyers were exactly right."
Transition Four: Captain of Industry to 'Venture Philanthropist'
It was a peculiar situation, though, when, in his early 40s, Gates found himself one of the richest men in the world and had to start thinking about giving away his money, while he was still hungry to earn more. His initial attempts at philanthropy did not go over well.
The Gates Library Foundation, founded in 1997, was widely criticized for being too modest (he initially funded it with $200 million) and for being self-serving. And indeed it was -- the mission of the foundation was to provide libraries in low-income communities with internet access and computers. While a worthy cause, Microsoft was also a beneficiary of the foundation's work.
"I think he started the library effort because it was related to things he knew about," says Stacy Palmer, editor of The Chronicle of Philanthropy. "That's pretty typical. I think it was successful, but it was limited compared to the things he's involved with now."
It didn't take long until philanthropy became Gates' full-time occupation. In 1999 Gates folded his various charitable efforts into one organization, the Bill and Melinda Gates Foundation, and in 2000, Gates stepped down as CEO to spend more time on philanthropy.
"He seemed to be really interested in philanthropy from the beginning," says Foley. "He's the kind of guy who doesn't care what other people think of him, so I don't think he was bowing to pressure."
The net effect is that he has shaken up the philanthropy world. In earlier decades, industry titans often gave locally and more or less felt that their work was done at that point. Bill Gates -- and other tech-made billionaires -- have changed the landscape.
"We're seeing a growing emphasis on bringing bottom-line efficiency to venture philanthropy," says Palmer. "It's fairly dramatic -- he's trying to change the face of global philanthropy, but it started in a fairly parochial way."
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Flickr Founders Flee Yahoo
Posted: June 18th, 2008, 3:30pm EDT by Betsy Schiffman
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Microsoft deal or not, Flickr founders Stewart Butterfield and Caterina Fake are bidding an odd adieu to Yahoo.
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What's Good for Apple Is Better for Everyone Else
Posted: June 9th, 2008, 12:00am EDT by Betsy Schiffman
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As Apple prepares to launch the iPhone 2 on Monday, competitors like Palm and RIM are not worried. On the contrary, they are licking their chops, preparing for a surge in sales, even though Apple expects to sell millions of new iPhones worldwide.
"The way I look at it is there are 1.2 billion cellphones out there, and we're just scratching the surface," said Mike Laziridis, CEO of Research In Motion, which makes the BlackBerry, the iPhone's closest rival.
Steve Jobs is expected to announce the second version of the iPhone on Monday morning during a keynote speech kicking off Apple's annual Worldwide Developer's Conference.
The iPhone 2 has already been dubbed the "BlackBerry killer." It promises to be faster, slicker and cheaper, boasting features like fast 3-G networking, Exchange support and even carrier subsidies. If the rumors prove true, it will be the iPhone many buyers have been holding out for.
It's a standard line for companies to say they "welcome competition," but it's usually a throwaway meant to deflect attention from strategic vulnerabilities.
In the case of the iPhone, however, competitors earnestly have reason to welcome Apple to the market. Sales show that what's been good for Apple has been verrrry good for smartphone makers. Retail sales of the BlackBerry, for example, are up 38 percent in the year since the iPhone's introduction.
It didn't initially look that way. When the iPhone 2 rumors first surfaced, nervous investors sold off shares of RIM under the assumption that the company would get creamed by Apple. Instead, RIM's market share of smartphones in the United States has actually swelled from 35 percent in the fourth quarter of 2007 to 45 percent in the first quarter of 2008.
"The fact of the matter is this," said Pablo Perez-Fernandez, an analyst with Global Crown Capital. "There were a lot of BlackBerrys in those stores where iPhones were selling, and there were people who may not have thought about a smartphone before, wanted the iPhone, thought it was too expensive, and bought a BlackBerry instead."
And for smartphone makers like Palm, Nokia and RIM, Apple helped whet the market's appetite while they went in for the kill, helped by discounted prices and a choice in carriers.
Palm says the sell-through rate on smartphones over the last two quarters has climbed 21 percent to 833,000 units in the third (and most recent) quarter, from 686,000 in the previous quarter (although the sell-through rate was 689,000 in the first quarter).
"The Centro has played a critical role in moving our transformational efforts along at a fast pace," said Ed Colligan, CEO and president of Palm, in a March conference call. He added that more than 70 percent of Centro buyers are traditional cellphone users who are purchasing a smartphone for the first time.
"What the iPhone did was make it cool to use smartphones," said Ramon Llamas, an analyst with research firm IDC. "Before, you had the BlackBerry, which mostly just resonated with enterprise users or business people. Now, there's a whole new market of smartphone consumers . Before the phone came out, I actually asked guys from companies like Nokia and RIM how they were going to respond, and the answer was unanimous -- it was, 'Welcome to the party, hop in the pool, the water's fine'"
It's an odd phenomenon because it's not as though Apple invented the smartphone or any of its features – touch screen devices have been around for years and lots of mobile phones already had music capabilities on phones. What Apple did was package it -- and market it -- in a way that made it attractive to mainstream consumers.
"The fact that it looks cool and sexy has helped Apple, and has called attention to a portion of the market that had been under the radar for a lot of people," Llamas said.
In many ways, the iPhone's effect on the market can be compared to what the iPod did for MP3 players.
Before Apple rolled out the iPod, the portable audio market wasn't doing much. In 1999, there were really only a handful of MP3-player makers and unit sales were marginal. Just a couple years after Apple rolled out the iPod in 2001, an industry was born.
Total sales of MP3 players in the United States jumped from a paltry couple million (depending on whose data you use) up to tens of millions over the last few years, as less-expensive models have become readily available.
"The combination of Apple's iPod device and its iTunes Store for music downloads has energized the music industry," gushed a JupiterResearch report in 2003.
Now we'll have to see whether the iPhone will have the same effect on the smartphone market.
Senior Editor Dylan Tweney contributed to this report.
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Author: Microsoft is Still Here, Dammit!
Posted: May 7th, 2008, 9:00pm EDT by Betsy Schiffman
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Even though Microsoft's Steve Ballmer bungled Yahoo and Vista is sticking to store shelves, the company he runs is as dangerous as ever, says the author of a new book about the future of Microsoft post-Bill Gates.
While Gates will remain as Microsoft's chairman, he will no longer be involved in day-to-day decisions, leaving Microsoft's showy, sometimes sweaty CEO Steve Ballmer to his own devices.
Many industry watchers are hesitant about Ballmer right now, partly due to the botched Yahoo deal and a bumpy Windows Vista release. Still, Mary Jo Foley, a ZDNet blogger who has covered Microsoft since Bill Gates first emerged from puberty, believes the company has a big future ahead of it.
We chewed the fat with Foley about the release of her book Microsoft 2.0: How Microsoft Plans to Stay Relevant in the Post-Gates Era, the Yahoo fiasco, Microsoft's biggest challenges and the evolution of Bill Gates.
Wired: What's your prediction -- when do you think Steve Ballmer will give up or get kicked out?
Mary Jo Foley: I think he's going to stick to what he said. He said last year he would [serve as CEO] for nine years, because that's when his youngest son will be in college. I don't think they'll get rid of him before then.
[The board] would be hard-pressed to find a better CEO than Ballmer. He's pretty wedded to a lot of old-school ideas -- like, he's never going to say, "Let's just toss out Windows and start over," which is what a lot of people think is necessary. But he epitomizes Microsoft.
Wired: Do you think Ballmer's equipped to deal with Microsoft's biggest problems right now?
Foley: Their biggest challenge right now is to continue to profit from existing products while not neglecting new business models and strategies that come up. Many people think Microsoft's biggest challenge is competing with Google. That's not true. Their biggest challenge is to make sure Windows stays relevant.
Wired: So what do you think of Windows Mobile?
Foley: I've avoided it like the plague. Every time I get a new cellphone, everyone always warns me not to get Windows Mobile. The thing's awful. I think Windows Mobile is a huge challenge for them.
They've got this new "consumer" bug where they think they've got to be a player in every consumer market. I think they would be better served sticking to their enterprise roots and not chase every consumer trend.
Wired: You've covered this company for a long time. Did you have any "Aha!" moments when you were researching this book?
Foley: I was stunned by how quickly people count Microsoft out these days. It's almost like a knee-jerk reaction, like, "Oh, they're irrelevant." In the old days, startups pitching VCs used to have what they called the "Microsoft slide," they had to plan for what they would do when Microsoft came into their market. Now, instead of looking at Microsoft as a player, people think they don't matter. But it's dangerous for companies of any size to count them out. They're still good at figuring out how to come back into a market and steal everybody's lunch.
Wired: What did you make of the Yahoo takeover attempt?
Foley: When I first heard they were going to buy Yahoo I was completely incredulous. I thought, "This is going to be such a disaster." I had just submitted the manuscript the week before so I had to revise it. I knew a lot of employees at Microsoft didn't want it, and I just could not see how it would be a positive.
I sort of think they dodged a bullet -- I think it's going to be great for Microsoft [to have dropped the offer for Yahoo] and I hope they don't go back into negotiations.
Wired: And what do you think happens to Microsoft after Gates retires?
Foley: There's always been this dichotomy between "Bill's guys" and "Steve's guys." Steve's guys have MBAs and their roots are in sales. Bill's guys have been traditional technologists. The people who are more like Steve will probably get more power and will run the show, so I wonder who's going to be the tech champion for Bill's guys. I think that's going to be a big cultural and noticeable change once Gates is out from his day-to-day duties.
Wired: How has Bill Gates changed during the time you've covered Microsoft?
Foley: The first time I interviewed Bill Gates was in 1984, and back then, he was a really difficult interview. As a reporter you went into a Gates interview knowing that you were going to be insulted. He would say things like, "That's the stupidest question I've ever heard." Or he would look off into the distance and ignore you. He's a much better press-trained guy now. People attribute that to his marriage, having kids or getting older. But whatever the reason, he's more press-savvy now.
Wired: And Steve Ballmer?
Foley: He's the same. He's always been unpredictable and crazy. He's a really fun interview. You never know what he's going to say. You always walk out of a Ballmer interview with a great sound bite.
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Tip to Microsoft: Buy AOL, Not Yahoo
Posted: May 2nd, 2008, 3:50pm EDT by Betsy Schiffman
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Microsoft may have overlooked a potentially cheap little acquisition that could help it get the scale it wants: AOL.
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Movie Industry Doubles Down on 3-D
Posted: April 13th, 2008, 11:00pm EDT by Betsy Schiffman
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Many filmmakers and movie studios place big bets on 3-D movies. For studios, the hope is that it will help increase revenue by boosting ticket prices.
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'Pervasive' Recession Won't Repeat Dot-Com Bust, Experts Say
Posted: March 17th, 2008, 7:00pm EDT by Betsy Schiffman
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Economists see few parallels between the one kicked off by the bursting of the dot-com bubble in 2000 and the one brewing today.
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Microsoft Bids for Yahoo: Do Two Losers Make a Winner?
Posted: February 1st, 2008, 5:00pm EST by Betsy Schiffman
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The key to Microsoft's proposed $44.6 billion acquisition of Yahoo is both companies' desire to build an advertising platform that can compete with Google's AdWords.
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As Downturn Looms, Google Looks Recession-Proof
Posted: January 29th, 2008, 5:45pm EST by Betsy Schiffman
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Google's dependence on ad revenue makes it particularly vulnerable to an economic recession, some experts say -- but others point out that the nature of its advertising may insulate Google from any downturn.
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Near-Revolt on Digg Underscores Site's Dependence on Its Users
Posted: January 24th, 2008, 5:32pm EST by Betsy Schiffman
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A narrowly averted boycott of Digg by some of its most prolific users shows just how dependent social media sites are on the goodwill of their audiences.
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Advice to Aspiring Entrepreneurs: Play Poker, Triggit CEO's Example Shows
Posted: January 17th, 2008, 6:30pm EST by Betsy Schiffman
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Triggit founder Zach Coelius tells how secured the initial funding for his startup when he started playing poker in a game frequented by Silicon Valley venture capitalists. The web publishing tool launches Thursday.