[LINK] Appified?

[David Boxall]

From: 
<http://www.smh.com.au/business/software-sends-profits-down-the-youtube-20110904-1jsb5.html>

Software sends profits down the YouTube
September 5, 2011

Stuart Washington

I have been showing my kids music film clips from YouTube on television. 
It's pretty easy. The iPad downloads the stuff over the home Wi-Fi 
network. Then you use a cable to hook the iPad into the back of the 
television.

Then you listen to the music.

And in the background, if you listen closely, you can hear the sounds of 
the business models coming crashing down.

There goes the profit margin for the record industry. My kids are 
listening to this stuff for free.

And as the music plays there is another small incursion into the 
ad-driven profit margins of commercial free-to-air television. We're 
watching television all right, but we're not watching commercial television.

And, while I'm at it, all forms of traditional commercial media are 
suffering as my kids watch YouTube on television.

We aren't sitting around listening to the radio, watching movies or 
reading newspapers. Our time is being diverted by free content 
downloaded from the internet.

(We also aren't sitting around playing board games and enjoying more 
carefree pursuits, but I will leave the topic of poor parenting to 
another day.)

In a recent article in the Wall Street Journal, the co-founder of 
pioneer internet browser Netscape, Marc Andreessen, went much further 
with this kind of analysis, boiling his argument down to the pithy 
one-liner: ''Software is eating the world.''

Andreessen spells out a collapse in the costs of providing services over 
the internet. Such radical reductions allow software challengers to 
emerge in all sorts of industries previously seen as the preserve of 
traditional ''real-world'' companies.

In the challenger camp - and companies Andreessen discloses he has 
invested in through his venture capital firm Andreessen Horowitz - are 
online coupon business Groupon and online telco Skype.

Andreessen's argument is familiar because we have seen it happen before 
our eyes.

He cites the by now familiar examples of Blockbuster's video hire 
business knocked over by online order business Netflix, and 
bricks-and-mortar bookseller Borders knocked over by online bookseller 
Amazon.

Andreessen also gives the almost obligatory nod to Joseph Schumpeter and 
his much-celebrated observation about entrepreneurs and their penchant 
for creative destruction - old businesses making way for aggressive 
young start-ups.

(Funny how the entrepreneurs always focus on that remark of Schumpeter. 
They never seem to give much weight to some of Schumpeter's other 
observations, such as his prediction about the end of capitalism, 
because the society produced by capitalism fosters values that do not 
allow capitalism to be sustainable.)

John Hempton, an indefatigable blogger, fund manager with Bronte Capital 
and fraud buster, agrees with Andreessen's argument, and raises the 
notion that the world is becoming ''appified''.

I know, it's a terrible word, but it attempts to convey software doing 
jobs as an ''application'' that used to be done by something in the real 
world. For example, using the map function in an iPhone rather than 
leafing through the Gregory's.

In a recent post, Hempton inspects the case of hardware firm Cisco 
talking about 50 billion devices in the world needing to be connected to 
the internet - but failing to convert that astonishing figure into sales 
of the hardware routers it manufactures.

The reason? Because software is ''appifying'' Cisco's hardware business 
- software is doing the job that its routers used to do.

''If the output of your hardware is information or the manipulation of 
information then you are going to get eaten. If the output is something 
else then you are not,'' Hempton writes.

And that's also Cisco's business model you can hear crashing down in the 
background of the YouTube music my kids and I are listening to.

And just for the record, we were listening to Gotye's Heart's a Mess. I 
might buy the record from iTunes.

Not all business models are collapsing.

-- 
David Boxall                         | "Cheer up" they said.
                                     | "Things could be worse."
http://david.boxall.id.au            | So I cheered up and,
                                     | Sure enough, things got worse.
                                     |              --Murphy's musing