Explaining Southern California's economy

Q&A: What is Amazon unveiling tomorrow in Santa Monica?

Amazon Introduces New Tablet At News Conference In New York

Spencer Platt/Getty Images

Amazon founder Jeff Bezos introduces Kindle Fire last September. What new forms will the device take? We'll probably find out tomorrow in L.A.

All Amazon has done is invite the media to an event at a hanger at the Santa Monica airport tomorrow morning. But chances are pretty good that we're going to be seeing some tablets. This won't be like the similarly mysterious Microsoft event in June at which we were introduced to the technology giant's first-ever ready-for-market tablet, Surface. Amazon already has Kindles and Kindle Fires. So what are we likely to see?

Q: Will we get a bigger Kindle Fire?

A: Nope. CNET already reported that a Kindle Fire Big isn't in Amazon's immediate future. Rather, the company will be updating the current Kindle Fire with a new model and introducing a second model. Both will be 7-inch tablets. 

Q: Does it really make sense for Amazon to treat this as a media event?

A: Apple has an iPad Mini and the new iPhone 5 coming soon. The iPad Mini will hit in October and the iPhone arrives this month. Microsoft just planted its stake with Surface and then there are all the Android tablets that aren't Kindle Fires (which is built on Android but customized for Amazon). Amazon needs to stay in the game here. 

Read More...

Microsoft won the AOL patent bidding and is now selling to...Facebook

CeBIT 2012 Technology Trade Fair

Sean Gallup/Getty Images

Visitors watch a presentaiton of fetaures of the new Windows 8 operating system at the Microsoft stand on the first day of the CeBIT 2012 technology trade fair in Hanover, Germany. Microsoft announced that its selling $550-million worth of former AOL patents to Facebook.

Microsoft recently beat out Facebook for the right to purchase 925 patents and patent applications from AOL. The winning bid? $1.6 billion. But now Microsoft has turned around and essentially flipped a large portion of that patent portfolio, and the buyer is...Facebook!

In the context of a declining stock market and problems in Europe, Facebook — and more accurately, Facebook's investors — has to be getting worried about its upcoming IPO, which is supposed to be able to value the company at $100 billion. The Instagram purchase was stage one. Now comes this big patent buy, with Facebook paying for $550-million worth of patents that Microsoft evidently doesn't really need.

That said, you could argue — as CNET's Paul Sloan implies — that Microsoft was just doing Facebook a nice, big favor by leveraging its balance sheet to vacuum up the AOL patents, sparing Facebook the need to spend any of its own cash. Microsoft is nowhere in social media, so a "long-standing alliance" with Facebook makes sense, as both companies pitch in to weaken Google. 

Read More...

Apple speaks on e-books price-fixing lawsuit

Apple Unveils Updated iPad In San Francisco

Kevork Djansezian/Getty Images

Apple CEO Tim Cook speaks during an Apple product launch event at Yerba Buena Center for the Arts on March 7, 2012 in San Francisco, California.

Apple has made its position known in an e-books price-fixing lawsuit that the Department of Justice filed against it and, originally, five big publishers, but now just two (three have already settled). And its position is pretty clear:

The DOJ's accusation of collusion against Apple is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry. Since then customers have benefited from ebooks that are more interactive and engaging. Just as we've allowed developers to set prices on the App Store, publishers set prices on the iBookstore.

The DOJ claims that Apple and various publishers colluded to get the industry to switch from retail pricing (where book sellers like Amazon set ebook prices) to the agency model, where the publishers themselves determine ebook prices. The DOJ alleges that the publishers and Apple made the switch in tandem to combat Amazon's dominance and its $9.99 price point for the vast majority of ebooks it sold.

Read More...

Apple e-book price-fixing lawsuit reveals Cupertino's weakness

ipad3 ipad apple

Photo by pablofalv via Flickr Creative Commons

E-books cost more here.

Apple and a couple of holdout publishers have been hit by a Department of Justice lawsuit accusing them of colluding to fix e-book prices at a level higher than Amazon's flat $9.99 rate for the Kindle reader and other devices. The practice, which was allegedly timed to happen when the original iPad was released, allowed publishers to set the price at as much as $14.99, with Apple taking its customary 30 percent cut.

This is from the Wall Street Journal:

The government's lawsuit, filed in Manhattan federal court, described CEO-only meetings of publishers at which the alleged conspiracy was hashed out. The suit alleged that the publishers' chief executives met starting in September 2008 or earlier "in private dining rooms of upscale Manhattan restaurants" and "no legal counsel was present at any of these meetings."

The suit describes the shift from the traditional "wholesale" pricing model, under which retailers set the price of both electronic and physical books, to an "agency" model under which publishers set the price and retailers take a commission.

Read More...

Do venture capitalists care about more than money?

Getty Images

I don't really want to do this $10 billion IPO. Really, I don't.

I'm officially arguing with Felix Salmon about venture capitalists. You can read the previous installments here and here. We've got even more fodder for debate now, based on Felix's excellent piece in the latest issue of Wired.

First off, I think he's talking about two things at the same time: 

1. Why IPOs suck for tech companies (Duh, it's the title of the piece!) — and why the IPO model, once so useful, is now broken

2. Why venture capitalists are doing all kinds of things that are borderline despicable when it comes to funding companies and maximizing their greed

I don't entirely disagree with point number one. It's taking companies longer to get to the IPO stage, and it's debatable whether companies that are already quite successful really need to go public. Also, as William Cohan has argued, investment banking has become a Wall Street cartel, with the same big firms — Goldman Sachs, Morgan Stanley, JPMorgan et al. — getting to run all the IPOs. The model that Bill Hambrecht developed — the so-called "OpenIPO" model — and used to take Google public in 2004 has fallen by the wayside.

Read More...