Wearing It Well: Can Apple Turn Wearables Mainstream?

A version of this first appeared on Re/Code

By South by Southwest standards, it was early. Obscenely early. But there we were, tromping out of our hotel into the unusually foggy morning, mere hours after falling into bed, ears still ringing from a band that had sounded excruciatingly like all the others we heard for the past 12 hours.

Hugging our coffees close (no Starbucks line at 8 am during SXSW Music!), we marched down the street and queued up outside a venue. Why were we in line so early? The sports giant Nike was taking a huge step forward in the wearables industry with the release of its Nike FuelBand. And we could be some of the first people in the country to purchase one as part of its launch program; the company sold 100 per day at the festival.

We were greeted by our own personal Nike rep, who guided us into a venue that had been transformed into a glitzy FuelBand showroom. He showed us the FuelBand, and helped us set ours up. We then went out into the world to try our hand at the “quantified self” movement, where you collect metrics of everything you do in your life. Nike’s own metric, “Fuel points,” would let us measure our activity and compare it to ourselves and friends.

Get me Jonny Ive now!
Get me Jony Ive now!

Two years later, almost to the day, I recorded my last Fuel point. I had long ago stopped caring about the metric, for a variety of reasons: The band didn’t capture all my activity, it wasn’t very accurate or sensitive to movement, and it wasn’t based on anything that brought meaning to my life.

But the main reason that was my last Fuel point day was that the damn thing had stopped working. I got the dreaded “801” code, which required a trip to the Nike store for replacement. This had happened repeatedly — six times since that day in March.

That was enough for me. I left the device on my desk and never picked it up again. I found that the untracked life wasn’t much different from my tracked life. The only difference was that I didn’t have a watch, which is primarily what I had used on the band.

I wasn’t alone in giving up on the FuelBand. And I’m not just talking about customers churning like me, though my guess is that there are a lot of us. In April, Nike announced that it was discontinuing the device, firing the entire FuelBand team and focusing on “other digital initiatives.”

Even with Nike’s big failure to capture the imagination of the active world, wearable computing is still considered the next huge growth area in technology. Credit Suisse sees it growing from $5 billion in 2013 to $30 billion by 2018. IDC says that companies will sell more than 112 million devices by that year.

It may be the right time in the technology cycle for wearables, too. Sensors of all kinds are smaller, cheaper and much more accurate. Displays are smaller, and even flexible glass looks like a possibility soon. You can imagine that a device with multiple sensors could find ways to track your fitness, as well as providing location-aware features like mapping, shopping and even banking.

Not only would wearables expand a company’s device portfolio, if it sells enough of them, but these firms will have access to all kinds of big data, with enormous amounts of real-time information that could be used for everything from personal communication to advanced location-based commerce. Big, big data.

Wearing out its welcome

So far, though, companies have failed in making wearables something people want to, um, wear. Most of the products have been either for geeky early adopters of new technology, or for hobbyists who absolutely need the data, like triathletes training for an Iron Man event. Sure, there have been technical problems, as well as a couple of health scares with the devices, but the two core issues these gadgets face going mainstream are their design and the product’s value.

Maxwell
Would you believe it’s checking my heartrate?

Designs have reflected the technical bent of products. Most look more like what you’d expect in “Minority Report” than what you’ve ever seen in a high-end watch store. And the generally bulky form factor lacks appeal for women, who have been underserved by most wearables so far. While the FuelBand may have been a bit different, it’s kinda just a souped-up Livestrong bracelet. In my informal and nonscientific customer reviews of wearables, most of them aren’t something an average customer wants. And don’t get me started on Google Glass.

Outside of the design — and maybe even more core to the problem — there doesn’t seem to be much demand for the features touted by the wearables manufacturers. If you start with the standard product-manager mantra of “What problem does the product solve?” there’s not much you can pinpoint. Most wearable devices track activity, but not really uniformly or correctly. Some, but not all, track sleep. The Samsung devices combine some fitness tracking with phone connectivity, but they’re cumbersome. And ugly.

You want to attract the attention and the interest of mainstream consumers? It had better be something people really want. And no company has been better at turning technology into desire than the big one: Apple.

Apple’s wearable moment

It’s clear that Tim Cook is betting big on a suite of wearable products. Bloomberg reports that the company has more than 100 designers working on a device. They’ve hired professionals from the fashion industry, the medical industry, the fitness industry and watch brands, as well as sensor experts by the dozens. All to work on what has been described as a luxury, high-fashion wearable device that will allow customers to communicate and track their vital information, including location and health-and-fitness metrics.

This isn’t the first time that Apple is entering a field where many companies have tried and failed. There were many MP3 players before the iPod, millions of phones before the iPhone, and even tablets before the iPad. It’s an Apple specialty to create something really valuable out of others’ failures by picking the right time, and creating an ecosystem that didn’t exist before. Apple doesn’t invent as much as it perfects.

Wearables pose a bigger challenge. Instead of a single strong compelling value (think “1,000 songs in your pocket”), the iWatch looks like it will package an assortment of features. And unlike the iPhone, which replaced three devices (phone, music player and Internet portal) with a single unit, it’s unclear if the iWatch will replace anything customers already use. At its core, the main purpose of the iWatch appears to be that it will gather data and work well with the iPhone. That will have value to some, but will it be enough to drive the industry to the estimated numbers? I can’t say that it’s a slam-dunk.

Five musts for the iWatch to be “ready to wear”

So, what would it take to make the upcoming device the breakthrough hit that Tim Cook craves? Forgive the impudence, but here are a few categories that Apple must nail if they expect to build the market:

  • It must be fashion-forward. Outside of the Nike FuelBand — and, some might argue, the Misfit Shine (I wouldn’t — I think it looks like it was issued by the CIA) — most wearables are terribly designed, at least if you consider reaching a mass audience. Apple is clearly investing in talent here, but the company needs to deliver the goods on a stylish watch that men and women wouldn’t be embarrassed to wear. This isn’t like any market Apple has entered, as the watch will be compared to classic brands like Tag Heuer, Rolex and Swatch. Jony Ive had better bring his “A” game.
  • The user benefits need to be clear, concise and limited. It has to be instantly clear why you need this device and what its main purpose is. Over the past few years, Apple has gotten away from the simplicity of its marketing pitches. There has also been an annoying habit of throwing in a bunch of half-baked products (Passbook, anyone?) well before they were ready for prime time. The watch can’t have any of these issues. My product-manager adage of “How do you want users to describe your product?” applies here. It must be crystal clear.
  • It has to work. Consumers will forgive many issues. But inaccurate recording or even fine-tuning of the algorithm will drive users nuts. In retrospect, the FuelBand’s problems with activity spelled its doom. After all, if Nike couldn’t monitor activity correctly, what the hell could it do? Apple will be held to a much higher standard than Nike. So what it tracks, and the way it tracks that data, must be baked by the time it ships.
  • Apple must be very careful with the information it tracks. Let’s face it. People hate Google Glass. Part of the hatred is because the device is extraordinary dorkified (see the first “must” on this list), but there are also privacy concerns with tons of people walking around with a camera on their head. The iWatch apparently will gather quite a bit of personal and sensitive information. It goes without saying that keeping that information private and secure will be incredibly important. But it’s also paramount that assuring customers that the rules of engagement around health data in particular are clear, and will primarily benefit users.
  • It has to appeal to an influencer community. Who will lead the adoption of the product? Apple has reportedly been targeting athletes, which sounds like a page right out of Nike’s FuelBand playbook. Somehow that didn’t work for Nike, which could be blamed on product issues just as much as marketing. Making sure that the company targets the right kind of influencers will be just as important as its marketing pitch. I’m not quite sure that tapping only pro athletes will give Apple the vast appeal it seeks. Apple will need to reach into popular culture — like that Steven P. Jobs wannabe and Louis Vuitton designer Kanye West, as well as others who lead cultural trends.

The stakes are high for Apple and Tim Cook. The iWatch will be the first foray into a category outside of its core offerings since the Jobs era ended. But it remains an open question as to whether the company has the intestinal fortitude to ship the right product, or — if it doesn’t live up to the exacting standards of consumers — to cancel the project and do something else with its billions in the bank.

Liars Poker: Why can’t anyone write a fair assessment of streaming music

I think we know the answer.
I think we know the answer to this one already.

Streaming music has been a huge topic in the music industry for good reason. It’s been the subject of many articles, occasionally one will accurately understand the issues surrounding these hot companies, but most that have no idea of how the music business works. A couple of stories I’ve seen recently made me want to wretch. Interestingly enough, they are on the opposite sides of the debate.

First, there’s this terribly reported and, in some points, just plain wrong article in Take Part by Kathleen Sharp and Scott Timberg with the click-bait title, “Is Spotify Killing Music?” The authors comingle the loss of publishing rights by the heirs of John Steinbeck and Woody Guthrie (who are in a band together – naturally) with the way that artists are getting hosed by big bad streaming companies. Not only do these two topics not belong together, they also weaken the main points of the article (which likely stemmed from a PR pitch promoting the aforementioned band).

The streaming portion of the article is a retread of the greatest hits from anti-streaming voices like David Lowery, Thom Yorke and David Byrne. The evidence it cites is flimsy, even including Lowery’s disputed $16 payment for 1.5 million plays of the Cracker song “Low” on Pandora. The authors even recruit streaming supporters for its purposes, posting a big photo of Billy Bragg with the caption:

British singer-songwriter Billy Bragg has spoken out against royalty rates and structures established by music-streaming companies.

This may indeed be true. But what Billy Bragg said was actually very supportive of streaming.

“I’ve long felt that artists railing against Spotify is about as helpful to their cause as campaigning against the Sony Walkman would have been in the early 80s. Music fans are increasingly streaming their music and, as artists, we have to adapt ourselves to their behavior, rather than try to hold the line on a particular mode of listening to music.”

Bragg went on to cite the problem is really with record labels that are paying streaming rates based legacy deals with artist that only paid a fraction of royalties on sales because of physical production and distribution costs.

“If the (streaming) rates were really so bad, the rights holders – the major record companies – would be complaining. The fact that they’re continuing to sign up means they must be making good money.”

Interestingly enough these comments from Billy don’t even up in the article. Instead we get that streaming is eating into CD sales, without even a slight mention of illegal MP3 downloads, which last time I checked, was the main reason why CD purchases are getting killed.

The next sensationally wretch-worthy item is a guest post in Billboard and his site, Tom McAlevey, CEO of Radical.FM, says this whole discussion is silly because streaming music is already profitable! His evidence? Well, Pandora could be profitable tomorrow if they pumped up the ad load to broadcast radio levels and Spotify was profitable in Sweden before they expanded around the world.

Those seem like factors why streaming music is not profitable rather than proving it is profitable today. Based on everything we know, streaming companies are struggling with profitability and the path to get there is uncertain. Pandora desperately needs growth of users to sell more ads and they must do so while keeping their listeners and investors happy with its progress. Without ad sales growth, the company will not survive. But the answer isn’t increasing the number of ads per hour, which Tom suggests. With too many ads, they’ll bleed customers.

Meanwhile, it is true that Spotify had a great deal of success in Scandinavia, but there are factors that have made the company successful–starting with the fact that digital music sales never took off there because of P2P’s popularity in that part of the world. Spotify became the hometown replacement that was so much easier to use that P2P services.

Tom also mentions that his experience negotiating with major labels back in the nineties allowed him to see the secret numbers that reporters do not have access, as a way of proving his bona fides.

I too have seen these numbers, and my assessment is that major label deals make it extremely challenging to find a way to profitability. There are many veterans in digital music who believe that no company can be profitable, ever. I disagree. There is a path forward, but it’s no easy task.

Both Spotify and Pandora are focused on growth, as Tom mentions. But there’s a reason for it. Their current size and offering aren’t profitable. Period. Both need significant growth and are pursuing it all-out. Spotify needs a worldwide audience to build an advertising channel to attract worldwide brands, as well as take advantage of its worldwide infrastructure for streaming. Pandora desperately needs to be bigger in the US and scale around the world.

Scale is another factor. For all the headlines written about Pandora and Spotify, streaming music is still a fraction of all music consumption and revenue. Spotify’s estimated 25 million free users is a rounding error of YouTube’s massive audience. Pandora is only estimated to be 11 percent of all radio listening in the US. Because all the buzz the companies generate, most people believe that both companies, especially inside the music industry, are much bigger than they are. Both are early stage and must prove themselves as mass-market products to be viable.

Granted, you could say such aggressive growth strategies are required to tap the public markets to create a massive payday for investors, and that’s fair criticism. But this doesn’t mean these companies don’t need to grow. They must grow. Or die.

Look, I understand Tom’s motivations for writing the piece and I agree with it. Digital music has great promise and streaming has attracted throngs of people who love the convenience. Many have chosen streaming as the way they’d like to listen to music. The industry needs to find a way to make the economics for all those who’d rather access music than purchase, rip and organize digital files.

But we need to focus on what’s actually happening, and not create spin and counter-spin. There are real serious issues that must be solved, like ensuring every single artist gets compensated fairly as well as creating experiences that customers find valuable enough to pull out their credit cards. Let’s focus on these instead of trying to demonize startups and misrepresent the facts.

The Good, The Bad, and The Ugly Digital Music Coverage

Take Part: Is Spotify Killing Music?

RadicalFM: Streaming Music Already Profitable

The Trichordist: My Song Got Played On Pandora and All I Got Was $16.98

The Understatement: Pandora Paid $1300 for A Million Plays, Not $16.89

MichaelRobertson.com: Why Spotify Will Never Be Profitable

Yahoo News: Roseanne Cash to Congress: Streaming Killing Music

Consequence of Sound: The Elephant In The Music Room