> That’s not sustainable for the longer life of DVD’s,” Mr. Swasey said. “We need more revenue. It’s a business concern we have to address. We want two separate business units, each side of the service. We were not able to fulfill the requests for DVDs at that cost. Everything I’m reading about these new Netflix pricing changes suggests to me that this is more about accounting than anything else. Netflix clearly wants to separate the streaming business from the physical DVD business. In every way. Different management teams. Different groups of employees. etc. They even want customers split into those two distinct groups. That’s why you have to sign up for two separate $7.99 plans if you still want to have both streaming and physical DVDs. They will consider you two separate customers.

I wouldn’t be surprised if they didn’t become two separate incorporated entities under the parent company of Netflix. Maybe one of the two will be spun off into some other brand.

There are all sorts of possible reasons for doing this. Maybe it will save them a bundle on taxes. Maybe it will give them far better statistical information to guide future decisions and negotiations with the studios. We’ll probably never know, because the answer is probably not too appealing, from a marketing standpoint. “You’re paying more because we want better spreadsheets” doesn’t give you that warm fuzzy feeling as a customer.

Whatever the reasoning, the representative Pogue talked to isn’t wrong; Netflix will still come out ahead at the end of the day. Because, complain as people might, threaten to leave as they have, there’s still no better deal out there to be had. You’re still getting the best deal with their new prices. So few people will leave Netflix altogether. And those who downgrade to one of the two services will be offset by whatever tax breaks or other internal accounting benefits Netflix gets.

A public company can’t ever charge less than they have to for any product. It’s irresponsible to the stockholders. So the $10 a month combo deal was a mistake, whether Netflix wants to admit this or not. Clearly they could have charged more from the beginning and avoided this whole mess. But once the initial fury dies down, it’ll be back to business as usual. I don’t think this is a long-term problem for Netflix at all.

> Either way, Friday releases of major OS X upgrades have been somewhat of a tradition for Apple for nearly a decade. With the exception of Cheetah and Puma, which were released on a Tuesday and Saturday, respectively, back in 2001, all major new versions of OS X have made their debut on a Friday: Panther (Friday, Oct. 24, 2003), [Tiger](http://www.appleinsider.com/articles/05/04/29/notes_of_interest_tiger_party_iwork_encyclipodia.html) (Friday, Apr. 29, 2005), [Leopard](http://www.appleinsider.com/articles/07/10/26/an_introductory_mac_os_x_leopard_review_meet_your_new_desktop.html) (Friday, Oct. 26, 2007), and [Snow Leopard](http://www.appleinsider.com/articles/09/08/24/apple_to_release_mac_os_x_snow_leopard_on_august_28.html) (Friday, Aug. 28, 2009). A lot of people are making the assumption that because most OS X revisions have been released on Fridays in the past that Lion will debut this Friday as a result.

But ask yourself why most of the previous updates were released on Fridays. The reason is Retail. The Apple Stores held big parties on Friday nights, celebrating the new releases, with special offers, T-shirts, etc. Friday nights are great timing for in-store parties.

This time around, Lion is being released on the Mac App Store, not in retail boxes. So releasing on a Friday (which is a horrible press day) makes less sense than it did in the past. There’s no reason to go to an Apple Store to celebrate the release of Lion. You can’t even buy Lion there.

So when do you release, then? Well, there’s no precedent for this, really, so it could literally be any day they choose. But my money would be on a Thursday, since Thursdays are when Apple tends to update its Mac and iTunes App Stores every week. Or, if they truly want a simultaneous release of new Mac models (MacBook Airs, possibly Mac Pros and minis), they would more likely release on a Tuesday, since that’s when most new Macs are released. But that’s far from a certainty as well.

Some folks are suggesting Apple will wait until after next Wednesday’s earnings call, but I don’t see any need for that. Every day they wait is one more day they’re not selling in the current quarter, which already started. The earnings call is about recapping LAST quarter and making predictions for next quarter. It should have very litter bearing on the release schedule of new products.

I’m not saying Lion won’t come out on a Friday, mind you. I’m just saying that assuming it will based on past releases isn’t exactly a lock.

The only surefire prediction is that Lion will be released sometime before July 31st.

> The rumored thinner, lighter iPhone could be the very-low-priced model, closer to the iPod Touch in appearance and component quality, with lower specs, less storage, and an unsubsidized price of around $300. Marco Arment penned a good piece today addressing many of the recent conflicting rumors floating around about Apple’s plans for this fall. I agree with a good deal of his post, especially the part about the newest speculation of a “Retina” iPad. I try to never say never about these things, but it doesn’t seem to make much sense for Apple, who currently can’t keep up with demand for the iPad 2, and who has no effective competition that even comes close to threatening Apple’s absolute dominance of the tablet category, to release anything new in the iPad space for the remainder of this year. They’re going to sell every single iPad they can make through Christmas regardless. They would sell even more if they could make more of the one they’ve already released. Adding a new model wouldn’t help them in any way I could see, unless the non-retina display were somehow the sole cause of the bottleneck in production. Highly unlikely.

In fact, the way the competition is looking (terrible), Apple could probably get away with not updating the iPad at all for another full year. They won’t wait that long, but they easily could and not lose much of anything.

But then we get back to this conundrum of the “cheaper” iPhone. That one still has me puzzled. Obviously, Apple wants to increase the rate of adoption for iPhones. Grow the market as quickly as possible. They started with changing from an unsubsidized to subsidized price in the US. Then they started selling worldwide in more and more countries, including now China. Then they started selling last year’s model at $100, and now as low as $49.

So what’s the next logical step? Most people seem to think it’s as simple as making the phone itself even cheaper. But can it really be any cheaper than $49? And would that make a large number of people change their minds about getting a smart phone?

Is $49 the barrier here?

There are three major sources of cost in owning an iPhone. All iPhone owners pay at least two of these. I’ll keep the figures in very rough approximate US dollars, for the sake of simplicity. (Forgive me, rest of the world. I know you’ll have an easier time translating into your currency than my US audience would converting from yours.)

1. The upfront cost of the device itself. $750 or so, if you want to buy it outright. $200-$300 if you are willing to sign a long-term contract (usually two-years). $49 if you sign up for that same contract and are willing to have last year’s model.

2. The contract. If you went for the cheaper upfront cost, you pay your carrier over the course of your contract via a minimum monthly charge. In most cases, this just amounts to a commitment to spend two years on that same carrier with that same phone, with some sort of minimum minute allotment and a minimum data plan. After your contract is up, you are free to move on to another phone or another carrier, but you are usually required to stay on those minimum plans if you wish to stay with that carrier.*

3. The monthly plan. This is where the majority of the cost comes into play. We’re usually talking about a minimum monthly bill of $80 or so for any smart phone. Most of us pay even more for things like tethering, unlimited texts, etc. Compared to a regular “dumb” phone, that’s a premium of up to $50 over what you could be paying for the cheapest plans out there, and probably around $30 more a month than most people pay on average. That’s a significant jump for a lot of people. And it makes that $49 one-time price for last-year’s iPhone seem like no big deal.

Marco’s suggestion is that perhaps with an unsubsidized cost of around $300, people could get out of the contract part of the bill, at least. But to most US consumers, anyway, that actually makes the phone seem MORE expensive. We have to pay for data regardless, so why not sign the contract and get the “better” iPhone that’s only $200?

A cheaper unsubsidized iPhone may tempt some users who don’t like long-term commitments, but it fails to grab the interest of the majority of non-iPhone owners. At least in the US. Worldwide, where people do get the concept of an unsubsidized phone, this could maybe help attract some of the people currently going for the ultra cheap Android phones out there. But I can’t see it making a huge impact, even there.

And I don’t see Apple gutting its profit margins just to grab a few more people.

The real problem to solve is the monthly data cost. Cash-strapped folks in a worldwide depressed economy, who are the majority of non-smart phone users left, always think in terms of their monthly bills, not their two-year commitments. The entry level monthly bill simply needs to be smaller. And I just don’t see how Apple solves that problem in the short term. Not as long as there isn’t a $10 or less data plan available.**

Unless Apple somehow started providing its own service, by buying carriers all over the world, or reselling the use of those networks through some sort of complicated system of partnerships, taking a hit on the cost and making it up on the hardware sales, I don’t see how they accomplish this. I don’t see from where the leverage would come with the carriers worldwide to offer cheaper entry into the smartphone world.

Months ago, I speculated that Apple could release an entirely different phone from the iPhone, something that would have limited data capabilities, at least when not connected to WiFi. An iPod touch, if you will, WITH a phone, but without 3G data, or very limited 3G data. I even took it a step further and suggested something even less capable. An upscaled “feature” phone that could do basic things like email, but not data-heavy tasks like video streaming. Something that didn’t even run iOS, at least not at the UI level. Something much simpler. No apps, even. Just phone calls, maybe email and SMS. Basic PDA functions, all syncing with your Mac or PC.

Maybe I was nuts to even suggest it, but I still think Apple would make more money in the short run selling the world’s best feature phone to the millions and millions of people worldwide who aren’t going to buy a smartphone this year or next anyway, than they will trying to sell a slightly cheaper upfront iPhone to the cash-strapped, unemployed masses, all the while fighting the carriers over the cost of entry-level data plans.

Get the masses hooked on the Apple experience with a really slick, touch screen, ultra-thin and light feature phone. Innovate in a space where no one is even trying to innovate anymore. Kill what’s left of Nokia’s business while they’re busy trying to make Windows Phone 7 work for them. Kill off most of the Android manufacturers who are currently making a lot more money on feature phones than Android phones. They’d never see it coming.

Yeah. Probably not going to happen, I know. But I still think it makes more sense than most of what I’ve been hearing on the rumor mill lately.

*Because most carriers in the US don’t allow you to use any smartphone without these minimum plans, and because the differences between CDMA and GSM make it impossible to jump from carrier to carrier easily, many US buyers opt for the contract as a small price to pay for a cheaper upfront bill. Worldwide, unsubsidized iPhones are more common than in the US.

**John Gruber suggested earlier this week that a $10 entry-level data plan for, say, 75 MB of data or so, would help grab more people into the smart phone realm. I think that makes a lot of sense. Get them hooked on that 75 MB, and it won’t be long before they start paying more for 200 MB. Especially as streaming video gets more popular. But I do think you’d have a hard time getting carriers to agree to that right now, ironically. Because the carriers can barely keep up with demand on their networks now. Even 50 MB more, multiplied by millions of users, would be a huge hit to the available bandwidth. So Apple would have a hard time selling this to carriers, I think, short term. At least until there’s more bandwidth available, the carriers would rather DISCOURAGE data use, which is why they’re all switching to tiered pricing plans. Another reason for Apple to avoid any new product that relies on as much data as the current iPhone.

> But these are just personal observations and opinions. Do keep in mind that Google+ isn’t even in public beta yet. I love it, but this might even be partly due to the intensely clubby nature of this highly-restricted invite-only test community. It’s all nerds, or first-circle nerd associates. At this early, limited stage, it’s like Google+ is a social networking service where they won’t let you sign in until you’ve correctly answered a 10-item lightning round quiz of Doctor Who, Star Wars, New Gods, and 1990’s video game trivia. > > (I posted that line to my Google+ feed on Saturday.) > > It’ll undergo nonstop tinkering before the doors are thrown open to the huddled masses. And when that finally happens, Google+ can finally be judged. That’s when (presumably) we’ll start seeing ads. That’s also when the same marketers and promoters who feel commanded by God to ruin every corner of the Internet will start polluting and gaming Google+ with schemes to get attention for their products, celebrities and scams. > > So we all have that to look forward to. Andy Ihnatko points out some of my exact thoughts since I started playing around with Google+. It’s clean; it’s full of juicy content. Devoid of all the lame-brained usual noise you have to sift through on Facebook to get to anything worthwhile. But that’s because it’s early. And it’s a nerd fest. As soon as everyone joins, the ads get turned on, and the spammers show up, you’ll be left with nothing but a near Facebook clone. Does the world really need this? And do we really want to turn over all that data to Google, any more than we want to turn it to Facebook?

> When you look at something like, go back in time when we started working on Kindle almost seven years ago….  There you just have to place a bet. If you place enough of those bets, and if you place them early enough, none of them are ever betting the company. By the time you are betting the company, it means you haven’t invented for too long. > > If you invent frequently and are willing to fail, then you never get to that point where you really need to bet the whole company. AWS also started about six or seven years ago. We are planting more seeds right now, and it is too early to talk about them, but we are going to continue to plant seeds. And I can guarantee you that everything we do will not work. And, I am never concerned about that…. We are stubborn on vision. We are flexible on details…. We don’t give up on things easily. Our third-party seller business is an example of that. It took us three tries to get the third-party seller business to work. We didn’t give up. > > But. if you get to a point where you look at it and you say look, we are continuing invest a lot of money in this, and it’s not working and we have a bunch of other good businesses, and this is a hypothetical scenario, and we are going to give up on this. On the day you decide to give up on it, what happens? Your operating margins go up because you stopped investing in something that wasn’t working. Is that really such a bad day? Sometimes I think Bezos is one of only a handful of CEOs out there who are even close to Steve Jobs’ level of understanding when it comes to vision.

People aren’t wrong when they say a possible Amazon Tablet would be the one product to give the iPad a run for its money. It would certainly destroy every other Android/Palm/RIM/whatever out there. And while I don’t think it would “kill” the iPad, by any means, a tablet that comes from one of the world’s greatest retailers, that has an established set of media stores, and is being driven by someone with the mind of Bezos has a great chance of carving its own niche of success, at least.

The trick for Bezos will be establishing that differentiation. Why buy this instead of the iPad? Will it be cheaper? Will it have access to more content? The Kindle isn’t the most elegant piece of hardware on earth, but it’s selling very well, because it doesn’t try to compete with the iPad or iPod touch. It’s a great reader—nothing more. And it’s relatively cheap. So what will make the Amazon tablet special?

This is the product to watch out for over the next several months.