Comparing iPhone Purchase Plan Options

With the roll-out of the iPhone 6S and Apple's introduction of their iPhone Upgrade Program, there has been some confusion about what the iPhone Upgrade Program really means, and what the best way to buy an iPhone really is. Here, I attempt to clarify the former, and crunch the numbers on the latter.


iPhone Upgrade Program

Apple's iPhone Upgrade Program is for people who want to get the newest iPhone every year, at a predictable cost. You pay $32/month ($384/year) for the latest iPhone base model (or $37-45/month for upgraded models), which includes AppleCare+, and every year you can upgrade to the latest, greatest iPhone.

The thing that is confusing a lot of people is that this is technically a 24 month contract. But it has a "give back the phone and start over" option that kicks in at 12 months. After paying on your phone for a year, you have the choice of keeping your old phone, completing the 2 year contract, and then owning it, or giving back the phone, getting a brand new one, and starting over with a new phone and a new 24 month contact.

So if you buy an iPhone 6S today, you'd pay $384 over the next 12 months. Then, if you're not impressed with anything in the iPhone 7, you could keep your 6S, pay another $384 over the next 12 months, and then own your 6S outright by the time the 7S comes out. Or, after that first 12 months, you can give your iPhone 6S back, get an iPhone 7, and start a new 24 month contact, leaving you with the same "keep it or trade it in" decision when the 7S comes out.

This is very similar to how many of the carrier payment plans (like AT&T Next) work, except that carrier plans can be spread out over 20, 24, or 30 months, with varying upgrade timelines. The main value difference between Apple's plan and the carrier plans is that Apple's comes with AppleCare+ included in the price.


Total Cost / Benefit Of Different Buying Options

When we consider what the "best" way to buy a phone is, we're really looking at the total cost of ownership of the phone, balanced against the total benefit we get from the phone. The benefit we each get from always having the latest phone versus a slightly older phone is hard to quantify, and will likely change year to year based on what new features are introduced. But it's pretty easy to quantify the cost of ownership, so we'll start there. And once we know the cost of ownership difference, it should make the yearly decision of whether or not to upgrade much simpler.

Total cost of ownership of an iPhone (or anything else) includes the total amount you've paid to own it, minus the amount you can sell it for when you're done owning it. The table below shows the total yearly cost of ownership, averaged over a 4 year period, for each of the different buying options, three trade-in frequencies, and for each type of iPhone (entry-level 16GB, mid-level 64GB, and upper-level 128GB). Note that there are two versions of "Buy Cash," the first assuming you sell the phone for full market value, the second assuming you sell it to Gazelle or another convenient buy-back option for less than full market value.


Scroll to the end of the post if you want to see how I did the math.


TLDR Summary

  • If you plan to upgrade every year OR plan to get AppleCare+, Apple's iPhone Upgrade Program is the best way to go.
     

  • If you plan to upgrade every other year, and aren't interested in AppleCare+, you save about $60/year over Apple's plan by going with a 2-year payment plan from AT&T or Verizon (or ~$30/year savings if you upgrade every 4 years). This is probably where most people fall.
     

  • Buying cash only makes sense if you plan to upgrade every year, or plan to always stay a model or two behind. But even then, it's the highest-hassle option, and any savings can quickly disappear if you don't get a good price when selling your used phones.
     

  • Subsidized plans are a horrible idea. Almost no one should use them.


Which iPhone Should You Purchase?

Obviously, most of the decision on which specific model you want to buy will be dependent upon how you use your phone, what size screen you like, and which colors you prefer. But looking at the data here should give you a much better idea of how much extra per year you'd actually be paying for different memory options. Even though the purchase price of the phone is a $100 difference between each memory level, after accounting for resale value and how often you upgrade, the per-year average is actually much smaller.

Upgrading from 16GB to 64GB is a pretty consistent ~$50/year cost if you upgrade every year, ~$38 if you upgrade every other year, or ~$19 if you upgrade every 4 years. Upgrading from 64GB to 128GB is a about the same price difference for a slightly larger data increase, but only useful to a smaller set of users. Considering the pain of running out of room and having to delete things if you take a lot of photos or use a lot of apps, the upgrade to 64GB will probably make a lot of sense for most people. The folks for whom the 128GB upgrade makes sense probably already know who they are.


Which iPhone Payment Plan Should You Use?

To help you make sense of all the numbers in the table, I'll summarize how each of the payment options works, and who which one is most likely to be the best option for which kinds of users.
 

  • Cash Upfront
    The most straight-forward way to buy an iPhone is to pay the full cost of the phone every time you buy one. No carrier subsidies, no payment plans, just plop the whole $650-850 on a credit card and it's yours to do with as you please. If you don't upgrade every year, this ends up costing the same as most of the carrier payment plans. It can also be the least expensive yearly cost of ownership option, with two significant caveats.

    Obviously, the first caveat is that you need to be financially well-off enough that you can devote that much money toward a phone purchase, not only when you initially buy the phone, but also every time you upgrade, as you'll need to buy your new phone and transfer your data before you can turn around and resell the old phone to recoup part of the cost.

    The second caveat is that the cost savings from this method is dependent upon getting a fair market value each time you resell your old phone to upgrade to the new one. If you're an ace at selling used phones on Craigslist or eBay, this option can save you quite a bit over most of the other options. But if you rely on buy-back programs like the ones provided by the carriers, or on sites like Gazelle.com, at far below market value, this actually becomes the most expensive option.

    Who should buy this way?
    If you plan to upgrade every year, you don't plan to get AppleCare+, you're good at reselling your old phones, don't mind that extra hassle, and you have enough of a financial cushion to afford the buy-in price, this can be the cheapest way to buy your iPhones. If any of the above don't apply to you, this option probably isn't worth the hassle.
     

  • Subsidized Carrier Plan
    While most people couldn't tell you what a "subsidized carrier plan" is, this is actually how most of us have bought our iPhones in the past. The carriers give us an unnaturally low price on the phone, lock us into a 2-year contract, and inflate our monthly bill enough to make back the difference over time. For AT&T, the difference between a subsidized and unsubsidized plan is $25/month. So your $200 subsidized iPhone actually costs you $800 over the two years of your contract, significantly higher than the $650 it would have cost you to buy it unsubsidized.

    Even worse, most carriers don't even drop your phone bill back to its normal level, even after your 2 year contact ends. So if you think you're saving money by keeping your $200 subsidized phone for 4 years, you may be woefully mistaken.

    Who should buy this way?
    This is the most expensive way to buy an iPhone. It is also the least flexible, as you're stuck in a 2-year contract without the option to upgrade if a really amazing new phone hits the market while you're in the middle of a contact. Almost no one should buy their phone this way.

    Fortunately, most of the major carriers are starting to phase out subsidized phone plans, in favor of payment plans. (More on those next.) What I haven't been able to determine yet is why carriers don't seem to like the confusing subsidized plans that appear to be cheaper to those not in the know, but end up making them more money in the long run. If anyone knows, I'd love to understand their thinking better.
     

  • Carrier Payment Plan
    Carriers are moving away from subsidized plans, but they still want to provide a low cost way for people to buy in to a new iPhone. So most of them are offering payment plans, where you don't pay anything up front to purchase the phone, but instead pay the full purchase price in installments over 20-30 months. This gets you most of the benefits of the buy-it-cash method, but with lower up-front cost. But there are catches.

    Verizon's plan breaks the cost of the phone into 24 equal payments. This makes it very similar to the Apple plan, but without the AppleCare+. However, Verizon does not offer the ability to upgrade mid-contract (yet), so there is no option for upgrading every year. (Note: I left the calculation for a 12-month upgrade in the chart just as a benchmark against Apple's plan, should Verizon eventually add this feature.)

    The AT&T Next payment plan gets a little trickier. It does offer a 12 month upgrade option, but it breaks the cost of the phone into 20 payments rather than 24. This means you're paying 60% of the cost of the phone in the first year and the remaining 40% the second year. That doesn't make a difference if you're upgrading every other year, but it means you're paying an extra 10% of the purchase price of the phone every year if you're upgrading ever year. This eliminates most of the savings yearly upgraders would otherwise get over the Apple plan.

    If you rely on lower-than-market-value buy-back options for selling your old phones, you do run the risk of carrier plans being a bit more expensive than what is shown in the table (which assumes selling it for market value). If you upgrade every year, you never have a phone to sell, so it's really only every other year (or longer) upgraders that this would be an issue for. This usually comes down to a difference of about $100 in sale price if you're upgrading every other year, or $50 if it's every 4 years (or an annual average difference of $50 or $12). So, seller beware.

    Who should buy this way?
    If you plan to upgrade every year, Verizon won't let you and AT&T's plan is only ~$20 less per year than Apple's plan, without the $130/year added value of AppleCare+. If you plan to upgrade every other year (or less often), and you don't plan to buy AppleCare+, a payment plan from AT&T or Verizon will save you ~$60/year over Apple's plan.

    Note 1: Sprint & T-Mobile: I wasn't able to find reliable data on Sprint or T-Mobile's payment plans. If you get decent service form them in your area, you may want to crunch those numbers for yourself and see how they stack up. You can download my spreadsheet at the bottom of the post, to get you started.

    Note 2: AT&T Unlimited: If you have an AT&T account that is grandfathered into unlimited data, and you use your phone even moderately, it's a really, really bad idea to sign up for ANY plan that will move you off of unlimited. If you have one of these plans, always buy your phone from an AT&T-owned AT&T store, NEVER from an AT&T Authorized Reseller. I've known WAY too many people who were straight up lied to by them, and they will often boot your off of Unlimited even if there was a way you could have stayed on it. Go to a real AT&T store and make double and triple sure that whatever payment plan you choose will not interfere with your unlimited account.

    Note 3: For Bargain Shoppers: A few people pointed out that they do like to upgrade every year, but not to the newest model. Instead, they buy a 1-year old iPhone used every year, and sell their 2-year old used one to offset the cost. If you're good at selling used phones for fair market value, this comes out to about $200/year, definitely lower than any other option. If you rely on below-market-value trade-in options, it climbs to ~$300/year, more expensive than the carrier contracts that give you a brand new one every other year.
     

  • Apple Payment Plan
    Apple's new iPhone Upgrade Plan is very similar to the payment plans provided by the carriers, but without the hidden tricks. The main differences are the simplicity of Apple's plan, and that AppleCare+ is included in the price.

    AppleCare+ normally costs an additional $130 each time you buy a new phone, so this can be a pretty significant savings if you upgrade every year, or a modest savings if you upgrade less often. Apple's plan is also much simpler than the carrier plans, which is a plus all on its own.

    Who should buy this way?
    If you plan to upgrade every year, or if you plan to buy AppleCare+ for your phone, Apple's iPhone Upgrade Plan is currently the best way to go. It gives you the best value for your dollar, as well as the simplest plan.
     

I hope this helps clarify things and give you a better idea of which option might be best for you.

For those who want to see how I did my math, and potentially help me spot any errors I might have made, feel free to keep reading...

Continue reading

Looking for my next big career move

I'm ready to find the next big step in my career. Somewhere out there is a company with complex, user-centric problems they desperately need someone to fix, and I'm that guy. Now I just need the help of my friends and colleagues in introducing me to my new coworkers. Let the matchmaking begin!


What do I do?

  • I'm a product manager. Different companies use different titles for this, but I'm the guy who works with the business unit, customer support, development, design, etc, and defines a plan on how to meet whatever business objective we're shooting for.

  • I have also done a fair share of project management (coordinating with developers, designers, etc, to execute on a plan that has already been defined), community management, tech writing, and web development. While I'd prefer not to go back to doing any of these full time, I'm more than happy to find a product management position that lets me dabble in these a bit as part of the job.

  • You can find more background info on my LinkedIn profile.


What am I looking for?

  • I am at my best when I'm working on consumer-facing products. Business-to-business would be my next choice, with enterprise coming in lower on the list. I love knowing that what I'm building will be used by millions of people and make their every day lives better, in some way. Give me something I can believe in, and I'll work my ass off for it without ever feeling winded.

  • As a student of economics, I believe that incentives have a more direct correlation to behavior than good intentions. I'm not interested in any environment where the product and the business model don't share the same incentives. Give me a company that makes their money providing something useful to the world and I'll be a happy camper.

  • I have worked for startups, giant corporations, and agencies. I'm open to anything from a small to large company or agency, as long as it has a healthy work-life balance and treats employees like an asset to invest in rather than as a resource to burn through.

  • I live in Fremont, and would like to keep my commute down to about 45 minutes. East Bay would be ideal. Somewhere between San Jose and Mountain View would be great. I'd be willing to commute to the city, if it's a great company and close to BART.


Any help you guys can lend in helping me figure out where my next I want to spend my next decade would be greatly appreciated. Thanks!

Tesla’s First Birthday

One year ago tonight, little miss Tesla Fae entered the world, and my life will never be the same.


There are dozens of events that can "change your life forever." The party you went to where you met the friends you spend the next few decades relying on. The job you took that defines the direction of the rest of your career. Meeting the amazing woman you're lucky enough to eventually marry. But all of these are events that mainly impact you and how you travel your own path.

Having a child is different. Suddenly, I'm not just responsible for myself. There's this whole new person in the world who wouldn't be here without me. And it's my job to help her make sense of all this craziness, and find her own path through the woods. It's exciting, and inspiring, and terrifying.

I feel like we lucked out with Tesla. She has been a source of pure joy, since the moment she was born. She's always happy, always inquisitive, and always an inspiration. Her bouts of anger only last a moment, and then she bounces back to the bright-eyed explorer we've come to know. As her mom said today, we're learning as much from Tesla as she's learning from us. She's already an amazing person, and I can't wait to see who she becomes.


With great children comes great responsibility. I know the most important responsibility I have in the coming years will be giving Tesla the support and guidance she'll need to become who and what she wants to be. I know I'll make mistakes, and I still have a lot of learning and becoming of my own to do. But I'd like to make a few promises to her (and any siblings she may later have), that I will always strive to uphold.

  • I promise to give you a stable, supportive childhood, so you'll always feel safe to explore the world around you, as well as the world within you. I will do everything I can to shield you from the kinds of insecurities that slowed me down, including working my hardest to shed the ones I still cling to, so you have as positive a role model as possible. And I will do everything I can to help you find and follow your own passions.

  • I promise to surround you with positive examples of relationships (both romantic and friendly), so that you will always recognize the right kinds of relationships to pursue on your own, and be able to avoid the other kind. I will love your mom the way I want your future spouse to love you, and I will teach you to be the kind of friend you'll want to find in others.

  • I promise to teach you all I know of the world. I'll teach you about people, so you can seek out the good ones and deal effectively with the rest. I'll teach you how to work hard and how to manage your money, so you'll never be dependent upon someone else to guide your fate. I'll teach you about beauty, and how to find it in the simplest things and in the unlikeliest places. And I'll teach you how to find other teachers along your road, who can show you wonders I haven't even dreamed of.

  • Most importantly, I will love you. Always and unconditionally. This doesn't mean we won't get annoyed with one another from time to time, or argue over bedtimes, curfew, or politics. But even at the worst of moments, I will love you more than I love life itself. And when I lose my final grasp on life itself, I will be happy knowing that a bit of me (hopefully the best bit) will live on in you.


Happy first birthday, Tesla! Thank you for everything you've taught me, so far. I can't wait to see you grow into the intelligent, loving, bad-ass, wonderful woman I know you are. I love you more than you will ever know!


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Mother’s Day Without Mom

It's been five months since my mom passed away. Part of me feels like it was just yesterday. Part of me feels like it's been an eternity.

While cleaning out her garage the other day, I ran across a folder in which she kept several hard-printed copies of the True Appreciation blog post I wrote about her back in 2005. I'm so glad I got a chance to make sure she knew exactly how much I appreciated her. I hope I live my life in a way that everyone I appreciate knows how much, but I doubt that's true. I get frustrated. I get distracted. I get lost in my own chaos sometimes. But when I think of my mom, I am inspired to make sure the people I love know how much better my life if because of them.

She was a giver. Everything she had (and everything she was) she gave to her children, her grandchildren, her husband, her friends and her community. She would get frustrated, angry, or hurt sometimes too. But she was always forgiving and loving above all else. People meant the world to her.

Thanks to FaceTime, she did get to see Tesla once. But she never got to meet her, never got to kiss and hug her like she was so looking forward to. And she never got to meet my brother's son Logan, or whatever little ones he and I have in our futures. She would be so happy about both of them. (Although probably a bit disappointed that Tesla still hasn't developed her mother's mono-dimple. Sorry, mom.)

I don't really know what I'm trying to say here. I guess just that I miss her. And that my world will never be the same without her in it. And, really, that my world will never BE without her in it. She is a part of me, in everything I am and everything I do.

I love you, Mom. I miss you.

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RIP WebTV – The Internet For The Rest of Us

Today, we mourn the passing of a truly amazing product. After 17 years of faithful service, WebTV (later known as MSNTV) has officially shut down for good. WebTV had a huge impact on my life, both personally and professionally, so I thought I'd take a moment to talk about what I loved about WebTV, what I'll miss, and what I'll never forget.


I also recommend reading Brad Hill's farewell to WebTV article. He experienced a different side of the company's story than I did, and his article is a great read.
An Inside View of the WebTV Revolution That Didn't Happen
- By Brad Hill (no relation)


My Introduction to WebTV

I first discovered WebTV in 1997. I had just gotten my AA, couldn't afford to go on to a four-year university, and wasn't really sure where my career was headed. So when I met a cute redhead who told me about this great customer service gig in the bay area, I called in a favor to couch-surf with a friend for a while, moved down from Sacramento, and took the plunge.

[Aimee and Tash, I will never be able to properly repay you. Thank you!]

I joined the company a few weeks before it was acquired by Microsoft, but the negative impact from that didn't really start to manifest until a year later. That first year, WebTV was the quintessential startup environment. The CS team was housed in the same ratty garage on Alma St in Palo Alto that the company had been founded in. The building was crammed with young, idealistic 20-somethings who had their eyes set on changing the world, one user at a time.

It was a magical time for me. I was surrounded by great people, most fresh out of college and aching to make a dent in the world. We started out answering phones and responding to support emails from extremely passionate users. Within a year, we had outsourced the first-level calls and everyone on the team has chosen a new area of expertise to sink their teeth into. Some began running the Previews beta testing program, some went into data analysis to spot trends and feed the data back to the product side of the business, and some transferred to other teams like Usability or Engineering.

Me? I went into training and documentation. Shortly after starting there, I had camped out in front of my TV for a week and — with just a WebTV, a Laura Lemay book, and a Geocities account — taught myself HTML. So as we began to outsource front-line CS, I built a CS Agents intranet that would let anyone from any of the three call centers get to any of a few hundred support issues (the bulk of which I helped write) within three clicks. I took Andy MacFadden's incredible "Greater Scroll of Dialing Wisdom" document (still the best developer-written documentation I've ever read) and distilled it down to a Lesser Scroll for advanced connections agents, wrote a IRC chat FAQ and a scad of internal documentation, and flew to call centers in Florida, Kentucky and Salt Lake City to train the next wave of customer service agents, who would be the first point of contact with our wonderful users.

I even recreated a vitrual version of the WebTV Classic, Plus and DishPlayer services, using service screenshots tied together via imagemaps, so the CS agents who didn't have a WebTV box at their desk, or had to share one, could still follow along with users while explaining how to get connected. Now that the service itself is going dark, I have posted an archival version of this for posterity.

Those were the days. We would get calls from 70 year old users who were literally crying because they were so frustrated at not understanding how email worked, or how to get into a scrapbooking chat room. With patience and a healthy supply of metaphor, we'd explain it in a way they could grok, and send them on their way. And a few months later we'd get a call from the same user, complaining that the HTML in the website they were hand-coding on Angelfire wasn't working the way the expected it to. If we ever doubted for a moment the potential for a simple user experience to empower normal people to do truly mazing things, WebTV users would quickly set us straight.


WebTV's Original Mission

The original idea behind WebTV was simple. Provide an inexpensive, easy-to-use option for normal, non-technical people to get online. "The Internet for the rest of us" wasn't just a tagline, but a mission statement. If $2,000 for a PC seemed absurd, you could drop as little as $99 on a small device that plugged into your TV and gave you access to email, bulletin boards, IRC chat, and a rudimentary web browser, with as little pain as possible, for just $20/month. Add another $70 to replace the remote control with a wireless keyboard and you were off to the races.

While younger users (like me) might quickly outgrow the system and move on to PCs, the core WebTV users turned out to be the older or less technologically inclined half of the population, who didn't want to over-complicate their lives with too much tech, but still wanted to keep in touch with their out-of-town children, share baby photos through email, and connect through bulletin boards and chat with others who loved the same things they loved. Rarely have I ever met users who were so passionate about a product as WebTV users. To many of them, WebTV was the internet. And the fact that the WebTV service has stayed alive as long as it has is a testament to their devotion.


WebTV Plus, DishPlayer and TiVo

But getting the web to run on a TV was just the start. The bigger long-term bet was on integrating the web with TV, to create a seamless hybrid of the two. WebTV Plus took the integration one step further, allowing you to plug your cable signal into the box, and providing an extremely easy to use interface for searching TV listings, keeping track of your favorites, and even tying the shows you watched to related websites.

WebTV Plus was ahead of its time. Many of the innovations it pioneered (including the ability to click through to purchase or get more info on an item directly from a TV commercial) are things that today's technologists still strive to include in the next generation of set-top boxes.

And with the DishPlayer box (essentially a WebTV Plus built into a DishNetwork satellite box), they took it one step further and included one of the first-ever digital video recorders. DishPlayer and TiVo were in development at the same time, with offices just a few blocks from one another, and launched within a few months of one another. It still kills me that the DVR race played out the way it did.

At launch, DishPlayer had all the same functionality as TiVo, a much more intuitive user interface (most people forget the initial learning curve TiVo users faced), the ability to play games like Doom and You Don't Know Jack (hey, it was the 90s, these games were pretty cool back then), and the entire internet to boot, for essentially the same price. Sadly, Microsoft really didn't understand what they had on their hands, and put almost no money into marketing DishPlayer. Meanwhile, their pluckier startup competitor with a clunkier UI, far less features, and a cute animated mascot marketed the crap out of their product, and now TiVo is a verb and hardly anyone remembers DishPlayer.

Would TiVo be a verb today if WebTV's founders had said no to Microsoft's $425 million offer and run full steam ahead the way TiVo did? And would it have taken another 10 years for set top boxes to start infiltrating the living room like they're finally starting to do now? The world will never know. But I'll always have my suspicions.


How WebTV Fell, but Refused to Die

For the first year after the acquisition, Microsoft mostly left WebTV alone. They knew they had something amazing on their hands, but didn't really understand it, so they let us continue working our way. Besides the obvious flaw of not believing in DishPlayer enough to properly fund its marketing, Microsoft started to dig its teeth into daily operations.

Emily, the CS manager we all loved and adored, left the company and was replaced by a devious, soulless shell of a human being Whose Name Shall Not Be Mentioned. My own manager, Steve Kroll (who I would have gone to hell and back for) finally left the company in frustration, and was replaced by an old-industry manager who literally couldn't even type, much less grok the technology industry. And the two of them proceeded to replace all the passionate, knowledgable startup staff with business types who didn't know the product and didn't care about the users. I was lucky enough to find a new startup gig and left the company the day before our group moved into Microsoft's new Silicon Valley campus. By the time Soulless and Clueless had been fired (a few months after I left), they had already cost the company at least a dozen of its best CS employees and laid waste the the team's morale.

Some of the other organizations might not have ben hit as badly as CS. And indeed, there were a few of the old WebTV crew who spent the next decade of their career quite happily at Microsoft, both moving to the Xbox and Hotmail teams (or to the Seattle mothership) and doing their best to keep the WebTV service alive and kicking for as long as possible.

After the move to the Microsoft campus, the product remained on the shelves and in active development for several more years. They rebranded it MSNTV, upgraded the browser, migrated the email to run on Hotmail servers on the back end, and even came out with a box that supported broadband. Eventually, despite continued demand for the WebTV/MSNTV service, demand for new hardware decreased to the point where they stopped selling it. Despite the lack of new hardware, the service continued to live on for many years beyond.

The fact that today's shut-down is happening 17 years after the acquisition, and 16 years after the Dark Days should stand as a testament, not only to the herculean efforts of Andrew Levin and his team, but of the incredible staying power that was built into WebTV's business right from the start.

Today, we live in a world where most "products" on the web are subsidized by the advertising companies who use them to harvest ad targeting data from their users. No matter how beloved a product is, if it ceases to be sexy or cool, or provide enough ad-targeting intel, it gets the axe. (Google Reader users, you may now rant.) But WebTV was an old-school business. They made a product that served a need, and charged a fair price for the service. This gave them product a much sturdier foundation upon which to stand.

If I recall correctly, WebTV had a base of close to a million users at its peek. This number doubtlessly dropped steadily over the years. But with the majority of the service already up and running, the service could likely be run on a skeleton crew of maybe a dozen people plus server costs. I don't have access to any internal numbers, but by napkin math, at $20 per month per user, you would only need about 10K users to cover costs. Beyond that, you'd be looking at another $2.4 million in revenue for every additional 10K users. So even at only 10% of its peek user base, you'd still be looking at a business unit that generated around $22 million per year in profit.

It's hard to kill a product that refuses to stop generating income. I sincerely wish every entrepreneur today would take this lesson to heart. (Someday I'll write a post on the history of Half.com. It's a very different product from WebTV, but the lesson is identical.)


WebScissors and the Legacy of Jos

I made a lot of friend in my time at WebTV. Easily the friendliest and most prolifically talented of them was Jos Claerbout. He was one of those guys who just radiated friendliness. You couldn't meet him and not instantly adore him. And his brain simply wouldn't stop producing. He thought objecting oriented programming should be easier to learn, so he wrote the funniest, most useful object oriented programming tutorial I've ever seen: Don't Fear the OOP: Why coding Java is just like writing a trashy Western novel. He saw users having trouble making their own websites? He built his own tool, WebScissors, to make it easy for them to import images to their WebTV scrapbooks.

Sadly, he shared so much of his heart with the rest of the world that it gave out on him far too soon. Jos's death had a huge impact on everyone who knew him. His father, Jon, put together a beautiful site on The Life of Jos Claerbout that crystalizes many of our thoughts and memories of him.

Before he died, I had been talking to Jos about working with him to upgrade the user interface for WebScissors, and add the ability to view HTML source code. So I was deeply honored when Jon and Andrew Levin (who was maintaining the site on Jon's behalf) invited me to help maintain WebScissors for posterity, and add the features Jos and I wanted to bring to our users. To this day, WebScissors 2.0 is alive and well, and we have no intention of letting it go any time soon. It will outlive the WebTV service itself, as a testament to Jos's creativity and dedication to his users.

And it may even continue to be useful, as today's tablet users often face similar browser limitations to those that WebScissors necessary in the first place, all those years ago. Time will tell...


The Legacy of WebTV

WebTV was an amazing product that was far ahead of its time. It taught me the importance of usability, and how a simple interface and a few visual/textual metaphors could bridge the gap to make complex technology accessible to the masses. It taught me the importance of community, and how deeply users will love your product if you fight like hell to make it serve their passions. And it gave me the curiosity, inspiration and opportunity to start a career that still gets me excited to this day.

But the true legacy of WebTV is its people. WebTV alumni have gone on to play key roles in creating some of the most ubiquitous technology on the market today. I've lost count of the number of WebTV alumni who have worked behind the scenes at Apple to continue the mission to bring the internet to the rest of us. Andy Rubin, Andy MacFadden and their team are behind the Android smartphones that appeal so well to the masses. And quite a few of alumni have remained with Microsoft, contributing to the Xbox platform and other products within the company.

And let's not forget the users. Never, ever forget the users.


As WebTV fades to #191919,* I will always cherish the people it introduced me to, and the lessons it taught me.


* WebTV Trivia:
It can be really hard on the eyes to read contrasting text on a true-black background. Especially on a low-resolution TV screen.
So all of the "black" screens in the WebTV service actually used the shade #191919 instead of true black for the background color.

Lego TARDIS

Lego TARDIS Instructions
My latest Lego project was to build a Lego TARDIS. Like you do.

I started by scouring YouTube for instructional videos from people who had already built their own. Rifraf's design was my starting point. I loved the way he did the walls, but the top was a bit bulkier and the base less symetric than I preferred. So I melded it with a roof design from another video (which I can't find anymore) and tweaked it so that it would work with a solid core, to keep the wall pieces more stable and well aligned.

Of course, ordering parts from BrickLink can be expensive for small logs (mainly due to international shipping from multiple suppliers), so there are significant economies to scale from building more than one at a time. So I built a whole fleet of TARDISs, giving some away as gifts and making the rest available as kits for those who want to build their own, without having to go through the parts-sourcing hassle.


Build Your Own Lego TARDIS
If you'd like to build your own Lego TARDIS (or assemble one you got from me), I have put the Lego TARDIS instructions on Flickr. If you don't want to scour BrickLink for all the parts, you can buy the kit on eBay.

How to Fix the Live-Tweet / Spoiler Problem

For those who want to experience a media event from a particular person's perspective, live-tweeting can be great. A fan of a TV show might enjoy reading along with the reactions of an actor from the show, a media personality they like, or even one of their friends. But unless steps are taken to manage one's message, live-tweeting can also be one of the worst violations of Wheaton's Law in social media, pissing off all of your followers who don't like spoilers. The good news is that this is a fairly easy problem to fix, simply by using a parallel feed for live-tweeting events.


Why is live-tweeting such a bad idea?

Quite simply, unless your Twitter feed is specifically set up for live-tweeting, the odds are quite high that the majority of people who follow you do not want to read your live tweets. For anyone who is interested in the event you're covering but hasn't had a chance to watch it yet (either because it hasn't aired yet in their time zone, country, or online distribution platform, or because they simply don't have the time to schedule their life around live events), your need to live-tweet contradicts their desire to experience it fresh and spoiler-free when they do watch it. And for those who aren't interested in the event at all, your live-tweets essentially hijack your followers' feeds with irrelevant noise, which again translates to a bad experience for them.

As an example, let's look at Syfy's live-tweets of Warehouse 13. As part of the marketing for the new season, Syfy had the characters from the show live-tweeting several episodes. Given that the network has dozens of shows and even more movies on their channel (and many of their followers are drawn to their Twitter feed for Craig Engler's great "how the business really works" tweets), we can safely assume that it is a relatively small subset of their total followers that are fans of any given show. Let's be generous and call it 25%.

Let's further assume that, with an international following, a relatively small percentage will have the opportunity (much less have the time) to watch the show when it airs live in the same time zone as the live-tweet. Some will watch a few hours later when it airs in their time zone, some will watch the next day when it airs online, and some will watch a week or more later when their personal schedule allows. Let's again be very generous and assume that 20% of the fans watch live. Thus, 5% of the total users would be both fans of a given show and watching it live.

That would mean that 75% of the Syfy Twitter feed's followers will be annoyed at the flood of tweets that are irrelevant to them, 20% will be seriously pissed off at having the show they love spoiled for them before they've had a chance to watch it, and only 5% will be happy to have been able to properly enjoy the live-tweet experience. It doesn't take a genius to figure out that providing a negative experience for 95% of your followers in order to provide a positive experience for only 5% is a bad move.


But what if I give advanced notice to mute/unfollow me before I start?

Typically, when the recently-spoiled masses chew out the live-tweeter for spoiling things for them, the live-tweeter's response is to point out that they did make a warning tweet before they started. Something like "we're going to be live-tweeting for the next hour, so if you don't want to be spoiled stay off Twitter or un-follow us for a while." Setting aside the inherent presumptuousness of saying, essentially "I'm going to do something I know is bad, so it's your responsibility to avoid it," this kind of warning tweet simply doesn't work.

Twitter is, after all, reverse-linear. Unless they spend the whole day constantly refreshing Twitter (yes, I know some do, but they're the minority, particularly outside desk job hours), people experience your Twitter feed in reverse order. So if you spend an hour live-tweeting a show they love, they won't see your warning tweet until after they've had to wade through an hour's worth of crap, and already had the joy sucked out of their viewing experience. And they can't simply skip your tweets, as they have to sift through them in order to see all the other tweets in their timeline that are interspersed with yours.

Live-tweeting on a non-dedicated Twitter feed is simply a bad thing to do. Please, please don't do it.


Ok, but some people LOVE live-tweeting. How do we make it work for them?

It is absolutely true that some people love live-tweeting. Some tweeters love doing it, and some followers love reading it. That's great! If everyone involved is enjoying it, more power to them. The trick is simply making your live-tweets opt-in rather than opt-out by doing them on a separate Twitter feed.

Let's return to the Syfy example. Instead of using the main @syfy feed to host live-tweet events, Syfy could create a separate @syfy_live feed. Whenever they want to host a live-tweet event, they could then use the main feed to let people know that they can follow the secondary feed to play along with the event. That way, anyone who wants to see the live-tweet content can easily follow the live feed and bask in the instant gratification, while anyone who doesn't want to be spoiled (or simply doesn't care to have their feed flooded) doesn't have to be inconvenienced.

This setup also has the benefit of allowing Syfy to better judge how many people are actively engaged with the live-tweet events, as they can watch the follower count for the live feed go up and down with each event, rather than having to guess what portion of the main feed's changes (positive or negative) are related to the live-tweeting. Using separate feeds for live events really is better for everyone involved.

Craig, on the off chance that you're reading this, please let me know when you decide to implement something like this. I love almost everything you do with the Syfy account, particularly the "how the industry works" educational tweets. I was very sad to have to unfollow to avoid the flood of spoilers, and I would really love to be able to follow again.


But can't people still be spoiled when the live-tweet feed gets re-tweeted?

Yes, of course. But if that happens, the sin that is committed is by the retweeter, not by you, and unless they retweeting you en masse, it's going to be a far, far smaller problem than live-tweeting on your main feed. We can't solve the problem universally without Twitter building filtering tools into their product (which, as an advertising company, they have little incentive to do). But we can at least minimize the problem as much as possible by putting some thought into how we use our primary Twitter feeds and when we move special content to secondary feeds.



Hmm. Wouldn't this work for other high-volume live events, too, like sporting events?

If we could convince sports fans to have separate feeds for their game-day tweets, that would be utterly fantastic! Seriously, I might cry from the pure joy of it. But there the number of sports fans who annoy their followers with this undecipherable (to the rest of us) gibrish is far larger than the number of people who live-tweet TV shows and other live media events, so I figure it's best to start with an easily solvable problem, and work our way up to the more daunting problems.

Besides, when was the last time you tried to get a sports fan to listen to logic regarding how they consume their sports? Especially while they're watching the game? Up. Hill. Battle. :-)

My Once and Future Blog

It has been close to two years since I have written here. And yet this blog is only a few days old. How does that work? Essentially, the blog here at rayhill.com is an import of a subset of my old LiveJournal blog posts. But only a subset, as much of what I used to blog about was specifically meant for the tiny audience of close friends I had there, and probably not appropriate for my current audience.

But I suppose the more relevant question is why it has been close to two years since I've written anything long form. The answer is simple: Twitter. Initially, I dismissed it as an obnoxious service I would never want to use (which, when it was primarily pushed via SMS, was true). Then I experimented with it a bit, to see if there was anything I was missing. For the first few months, I only tweeted in haiku, both for the challenge of it and as a half-assed criticism of the format. Then I started following enough people to make it interesting, and I was hooked. And as I got more used to it, my LJ posts became less and less frequent.

Sadly, as useful as Twitter can be for getting a shallow view of what a wide breadth of people are up to, it's absolute rubbish for conversations of any kind of real depth. Once in a great while, a conversation started on Twitter will be spun off to a blog comment thread, where it can be hashed out in full prose. More often, a conversation gets chopped up and spewed through a 140 character limit filter, losing most of the meaning and resulting in as much confusion as communication. But mostly, the truly worthwhile conversations simply don't happen at all on Twitter.

But I'm a writer. I have things to say, opinions to share, and questions I can only answer by writing my way to their conclusion. Not having a place to write is just not healthy for me. So, after a much longer gap than I should ever have, I'm ready to write again. And since the things I have to say these days are far less personal (and probably more interesting) than the crap I used to blather on about, I figured it was time for an actual blog of my own, rather than just an LJ account.

Besides, I have my name as a domain name now. It would be silly not to use it.


[Now I just need to decide if it's worthwhile to cross-post it back to LJ, or just poke the few people who are still using it to add this site to their RSS habits.]

My Thoughts on the Netflix / Qwikster Controversy

I wrote this in 2011 when Netflix announced that they would be renaming their DVD service to "Qwikster" and separating it completely from the existing Netflix site. I wasn't actively blogging at the time, but I ran across this again and liked what I had written, so I've back-posted it here.


Core Focus – What problem are we trying to solve?

It has been said that if Union Pacific realized they were in the transportation business rather than just the railroad business, we would today be flying on Union Pacific Airlines. Rather than maintaining a strategic vision of the problem their company existed to solve (getting people and goods from point A to point B), they focused too closely on one particular solution to that problem (railroads) and were thus unprepared to respond when changing business climate made their chosen solution less and less relevant.

More recently, we saw Blockbuster repeat the same mistake. They incorrectly believed that their success was based on running an efficient DVD rental business, when in fact it was based on solving the problem of convenient access to high quality video entertainment. As improving technology made new methods of content distribution possible, they clung to their existing brick-and-mortar solution for far too long. And by the time they did try to explore other options, their years of inaction had given their competitors too much of a head start for them to stand a chance of catching up.

In order to understand the path forward for Netflix, we must first understand their core competence. As a consumer brand, the best way to do that is to ask not what products or services Netflix provides, but what problem they solve for their users. What need does Netflix fulfill that makes people love them as much as they do?

I would argue that Netflix's value to their customers is the same one that they wrestled away from Blockbuster: delivering convenient access to high quality video entertainment. If we keep this fundamental goal in mind, and focus our tactical decisions on achieving this goal, the rest of the questions become much simpler.


Brand Integrity – What's in a name?

Naming a company or product is easy. Building a brand is very difficult. Yes, you have to give your company/product/service a name. But more than that, you have to make that name mean something. Not a literal meaning, but an emotional meaning.

A brand name with a literal meaning can be useful in explaining the potential value to the first wave of customers. But as a brand evolves over time, the literal meaning is quickly replaced by what the brand means to its customers. And that meaning is defined almost entirely on how the brand makes people feel, based on their (and their community's) interaction with it.

When you consistently solve users' problems and make their lives easier, your brand will come to mean something special to them. "Netflix means entertaining the whole family without spending a fortune." "Netflix means dinner and a movie without having to go brave the weather." "Netflix means independence from an oppressive $50-80/month cable bill." "Netflix means never running out of new movies to keep my kids entertained and happy." These are the kinds of meanings Netflix users have blessed the brand with over the years.

When you have a brand this strong, introducing a new brand can be very risky. If the new product or service solves a different problem (like eBay vs PayPal, or the myriad of P&G brands), multiple brands that are expected to mean different things to different people certainly make sense. But if the new product or service simply solves a slightly different subset of the same problem (like Google's many search-related sub-brands), it usually makes more sense to keep the existing brand (and all the good will that comes with it) and differentiate the new functionality in context.

This risk only increases when the new brand is being applied to the product or service with which the users originally fell in love. Changing the name implies that the company no longer has faith in the re-named portion, and that it may no longer retain the qualities that defined its brand to begin with. It introduces friction, confusion and fear. It makes people worry. "Do they dislike this product enough that they want to take their name off the label?" "Are they just planning to sell it off to someone who's going to ruin it?" "Does the brand name even mean what I thought it did anymore?" Obviously, not questions one would ever want people to ask about a brand.

To determine whether a new brand or a sub-brand makes more sense, we must return to the original question of what problem you are solving for the users. If Netflix means convenient access to high quality video entertainment, instant vs mail order, movies vs TV vs games, and physical media formats are all just variations on that original problem and should therefore be represented as sub-brands.

Netflix Instant means instant access to (a somewhat limited selection of) great content in an instant.
Netflix [_____] means access to an endless library of content, delivered to your door in just a few days.
Netflix Games * means being able to play any game you want, for as long as you want.

Netflix still means everything it has ever meant. The sub-brands just help you tell a more tailored story to different types of users.

* Though Netflix does not currently deal in games, I include it here both in anticipation of that someday happening and to help illustrate these suggestions more abstractly than just to the two current services.


Convenience Is King - Streamlining User Experience by Platform and Preference

While the Qwikster re-branding has gotten a lot of press, the more passionate complaints across the blogosphere have been of a much more practical nature. Yes, the essence of what Netflix means has a great emotional impact. But the loss of convenience from having to go to multiple websites to do what they can now do in just one place has a much more pragmatic impact on people's lives.

To determine the best course of action, we must again return to the question of what problem Netflix is there to solve. If the goal is to delivering convenient access to high quality video entertainment, convenience is a vital part of the equation. This means getting them from interest to immersion as quickly and effortlessly as possible.

If you look at the path people take to get to the Play button, a few distinct experiences emerge. Users who don't yet know what they want to watch need a way to browse what's available, seeing recommendations and details about different titles that may increase their interest. Once they find something they like, they need a way to express interest in the title – this could be clicking a Play button, adding it to a queue, rating it, or marking it as something they already own. When they decide they're ready to start watching, they need a way to select a title – either from a browse page, queue or other entry point. Finally, when they have finished watching a title, they need a way to choose what's next.

How they navigate between these stages – and what content/functionality they are presented with – can be customized based on what we know about them. First, we know what platform they are on: are they accessing Netflix through a desktop browser, smartphone, tablet, set-top box, or gaming console? Second, we know which services they are currently subscribed to. Finally, we might know a bit about their personal preferences from past behavior.

Given this, it comes relatively straight forward to extrapolate how to guide the user through the process.

  • One entry point per platform
    For those accessing Netflix on a web browser, there should only be one website. For those accessing Netflix on their smartphone, tablet, set-top box or gaming console, there should only be one app per platform (and be as similar between apps for the same platform type as possible).

  • Browsing vs Selection
    Once in the system, users should be given the option of either browsing (and/or searching) the total collection of what is available to them or seeing a list of the titles that they have previously expressed interest in.

  • Streamlined Browsing (Requires BU Collaboration)
    When the user doesn't know yet what they want to watch or play, they also won't know which format it's available in. So browsing can easily be separated between TV/movies and games, but within each top-level category should allow browsing by intuitive filters such as genre, recommendations and past behavior, as most of Netflix's browse interfaces currently do. This is the portion that will require the most collaboration between business units, as the Instant and DVD groups must agree on that format in which the basic title info is presented, and then provide separate call-to-action hooks for each of the services that title is available for (Instant, DVD, Blu-Ray, teaser to look at the tie-in game, etc). But any extra coordination between business units will inherently pay off with a much more streamlined user experience.

  • Streamlined Selection (Allows BU Experimentation)
    Within the selection branch, it will likely make sense to have separate selection screens based on the specific services that a given user subscribes to. This can allow the various business units to have a fairly wide berth of innovation around how best to display their own content. The Instant team may choose to go with a tiled box art view with category links for narrowing large queues by mood (or who marked it, for family accounts, eventually). The DVD team may choose to reuse the mood/user filtering sidebar, but present the results in a priority-ordered text view. And the Games team may choose to use the same priority-order view as DVDs, but use a sidebar that allows filtering by platform, genre and game rating. Further customizations can be made based on platform (browser, tablet, console) and interface (mouse, touch, remote), to make it as easy as possible for a user on any given platform to quickly and easily find something great to watch/play.


Summary

People love Netflix. If they didn't, they wouldn't be reacting this passionately to recent changes.

Netflix means convenient access to high quality video entertainment. As long as a new service still addresses this core mission, it should retain the core brand (or a sub-brand thereof).

Convenience is king. While there are certainly logistical changes that can be made to both the user interface and back end processes, convenience to the user should always take precedence over the convenience of various business units.

Charity auction of Eliza Dushku’s Clothes & Memorabilia

As some of you know, I've been working with Eliza Dushku on a charity auction. She's cleaning out her closet after a wardrobe makeover, and trying to raise money to benefit Camp Hale, the non-profit summer camp her family is involved with.

Well, it's finally live! There are fancy red carpet dresses, stylish clothes and shoes, scarves and jewelry, screen-worn TV/movie costumes, signed DVDs and memorabilia, and more. Check it out!

If you know anyone who's a fan of Eliza's, or who might just want some sexy dresses and nice pants, please help us spread the word.

Thanks!

Suck it, Michael Bay!

You think you know how to bastardize the Transformers? bah. Your movies are terrible, I'll grant you that. But if you really want to make people cry and poke out their eyes, you've got nothing on these folks. What better way to ruin the Transformers than remix them into an upbeat, peppy anime.


[Blame Rae for finding this one, not me.]

Introducing Edutopia Groups!

This is for all you teachers, librarians, parents and education-watchers:

This Tuesday we're going to be launching our new Edutopia Groups community, as a place for educators to gather and discuss "what works in public education." We have invited some great educators to facilitate the groups for us, and we're really excited to watch the groups will up with insightful conversations.

Today we're inviting in our existing members and friends & family for a sneak peek. If you're interested in how to fix our education system, please come on in and join the conversation! And if you know someone else who'd be interested, feel free to invite them in.

Anyone want to beta test for OnLive?

OnLiveAny gamers out there want to test the latest cutting-edge gaming hardware? OnLive beta testing is about to begin and they're recruiting testers.

What is OnLive, you ask? Cloud gaming. All you need is a browser plugin or a mini-console, your own controller, keyboard or mouse, and you have on-demand access to a huge library of games. OnLive sends the signals from your controller over the web back to their custom-built gaming servers, it plays the game there (with more processing power than you'd ever have at home), and sends you back a video stream of what's going on in-game.

Plus, since they're bending video streams like crazy, they let you eaves drop and watch other people playing their games - live. Want to check out that new Star Wars: The Force Unleashed game, but don't know anyone who owns it? Just click into the game and pick from dozens of people who are playing it to watch over their shoulder. Or, while you're playing, click a button to record "brag clips" to post on your blog or twitter feed.

"But wait!" you say. "It'll never work! It would take years to develop the tech to get video streaming to the point where you could push that much video over the web seamlessly." And you'd be right. It'd take about seven years, actually. Luckily, Steve Perlman (of WebTV fame) has always been about a decade ahead of the curve. He and his crew have been working on this since 2002 and are finally ready to lift the veil this winter. Should be exciting!

Lets just hope he doesn't sell this company to Microsoft like he did WebTV. Apple, TiVo and YouTube are still struggling to catch up with Perlman's business plan from a decade ago, that Microsoft didn't understand and let fall by the wayside. I'll still never forgive them for the epic marketing fumble that lead to Dishplayer's obscurity and TiVo's ubiquity.

“Do you want do date my avatar?”

When Felicia and crew showed their new music video for The Guild at ComicCon, the crowd went wild. For the next few weeks, it was available only through XBox (since Microsoft sponsored the video and seasons 2 & 3). But as of today it's all over the web: YouTube, Amazon, iTunes, you name it.

Please spread this around to every geek or gamer you know, and rate it on as many of the above sites as you can. Still Alive was great, but if any gamer video deserves to go viral, it's this one!

And congrats to the whole cast and crew of The Guild. The video looks fantastic and season 3 is going to rock the web.

It comes from the deep…

Have all our preparations for the zombie apocalypse been distracting us form the true threat?

  • There's a huge mysterious blob floating off the coast of Alaska that is made op of organic material and is stripping the flesh off animals caught in its grasp (they're finding just bones & feathers) and stretches about 15 miles long.

  • And now San Diego is being hit with an invasion of hundreds of jumping jumbo squid. "Some divers report tentacles enveloping their masks and yanking at their cameras and gear."

Pissing off Poseidon is never a good idea.