They wanted to have good integration.
Right. They wanted some tight integration. You want everything to look like it belongs together and you don't want the best features of any of those things not to be reciprocated along the system. So, we took a look at the opportunity and the time frame, and the time frame was tight. We knew we had until May and this was December and we were just talking about it. The good thing is that we're pretty nimble.
The other thing is that we'd had a good response to the U10 so far like, "The U10 is pretty cool. The interface is different." It's cool that it has a big screen on such a small device. We all agreed that the pricing was not competitive, and that there were some things on the interface that weren't so snappy and some things that were confusing. We knew all that going into it, it was just that we haven't hit the home run that we had originally looked at on the U10.
How much flexibility does iriver America have make these sorts of arrangements with MTV and Microsoft?
It's pretty collaborative. What we did is I went with Microsoft to Korea. We sat down and said, "What opportunities do we have here?" You know, it takes a tremendous amount of engineering resources. It's a global product, and even though the URGE rollout was going to be in North America, the impact on the evolution of the U10 was going to be universal. So, we sat down and we looked at it. We met with Microsoft. We knew this could be a good opportunity, but it was still unclear who was the music partner. We had to ask some hard questions: How many resources is it going to take for us? Are we really going to be able to hit this date? There's always one thing, and we've all done it in product development where we sit down and we say, "Wouldn't it be great if by March 5 we could launch this thing?" And everybody's like, "Sure." And then we put all our resources together and you can't do it.
So, there's a lot of leg work that had to be done, but we went back and looked at. What does it take to make the U10 this device? Can we do it? Because if we start doing big hardware changes and things, this timeframe is almost impossible. There's no way.
So the question was, "What can we do to change the experience on the U10 in conjunction with Microsoft and this service partner where that work could be a really cool thing?"
It became clear that MTV was the partner and we met with MTV and in a lot of ways we kind of had to sell ourselves to MTV. They're saying, "Okay. We're going to go out with this service that doesn't work with iPod. Who are going to be our go-to guys for this?" Microsoft's saying things like, "Hey, at the end of the day iriver moves fast and they make cool stuff, so you should talk to them." Was iriver in competition with any other manufacturers for this spot?
I think there were a number of companies that everybody was looking at. I'm sure that – and I don't know who it was – but I know that MTV said, "Well, hey. Here's some of the ones we know. What can they do? Can we go to them?" It seems like everyone is aligning themselves with one of the major PlaysForSure download services. There's iriver and URGE, Samsung and Napster, SanDisk and Rhapsody. The upside is improved integration, but is that really healthy for PlaysForSure as a platform?
Well, it's a good plan, but even for us I still I definitely consider Napster a great partner, and Real and Yahoo and all these guys. It's still better for the consumer to be able to use whatever service they want. I fully subscribe to that.
In this case it was MTV saying, "We want to change the way people discover content and the music experience of the system." And, of course, there is no question that the MTV brand, associated with music, is pretty natural, right? It's something that wasn't a computer company or wasn't a technology, but a branded music experience that consumers know. Would you trust MTV to give you a playlist of 100 rock songs? Sure. I'll try that.
There's also been this challenge where I think that music subscriptions as an experience are cool. I think that people who have a chance to use a subscription service really dig it.
Now if your thing is ripping CDs, it's not for you, but the overall experience on subscription is really slick. I love it, and I firmly believe that it's perfect for people that are looking for just an all-you-can-eat service that let's them discover new stuff.
The part we were missing was that it's still somewhat daunting to tell somebody, "Hey, you're not going to own it, but you'll have access to two million songs."What kind of feedback are you getting so far?
The feedback we're getting from people is great, especially is on the discovery portion of that. First, it's visual like iTunes. There are some cool things about helping people discover new stuff, but the piece that is impressing people who have seen and used iTunes who are experiencing a subscription-type service for the first time, is this notion of these dynamic feeds and these playlists. It's just something that you just can't do on a per download basis.
There's something very cool about being able to just add new play lists and put them on your device. It does require a certain level of additional development on the device side, and the first time you play that device, you're not going to get that same experience. And that's just the nature of technology evolving. That's why it was so important to get the clix right, so that if I take a feed that auto-updates on a regular basis and put it on a clix, then when I put my clix in I need to get the new stuff, right? It just has to work.
Exactly, it just has to work, and that part of it I really believe is there. I think that most people who are new to a digital music experience and that give URGE a shot, I think they're going to find that it's fun.
It's fun to hear from consumers that are trying it. People are calling us and telling us they love it. Which is cool, any time somebody goes out of their way to tell you something, you know they really mean it. Something's inspired them to contact you. It's cool to hear from people that, "Hey, I got the clix and tried URGE and it's great." My wife is always the person that says, "Here's my CD. Go rip it and put it on my player for me." Or, "I'm tired of my music. Go get me new music that I like." And then to watch her sit with URGE, where she finds all the genres she likes and gets content pushed to her. She loves it. We're hearing a lot of that. People will sit and play with URGE. It's not work. With the clix and URGE are you primarily trying to get iPod users to switch, or are you focusing on people who have never owned an MP3 player before? What's the target market?
I think it's a number of things. I don't expect that one day somebody sitting at home with their iPod is going to see a commercial for URGE where maybe the clix is featured and the say, "Wow, I gotta ditch my iPod," and then our marketshare just completely changes. I have no illusions that that's gonna happen.
But people do go through devices, right? "I bought one two years ago, and now I'm ready for a new one." We see this with cellphones, too, especially given the way storage capacities change. There are people who maybe bought a 256MB player a couple of years ago and are planning to get something new. That's certainly a great target for us.
I think that with respect to the iPod specifically, I think URGE has a great opportunity to get the iPod/iTunes consumer to try a subscription service. It doesn't mean they're going to go buy clix, but they're going to try it and say, "This is pretty cool, and I just downloaded a 100 track playlist and it didn't cost me one hundred bucks. That's kind of neat. And I could mix and match songs."
I think over time that experience is going to translate to "Why doesn't iPod have a subscription? That'd be cool." With the iPod so in the mainstream it's important that you see this from a consumer standpoint or even a fan standpoint, and that they're saying things like, "I don't know why MTV won't just allow it to work on iPod." Or, "I don't know why iriver just can't get iTunes. What's iriver doing? These guys are crazy."
If I could put a switch on my device and let people buy using iTunes, we would do that tomorrow. At the same time, eventually you'd want an URGE subscription to work on an iPod, and if that was cool with everybody in Cupertino, that would happen. A lot of people just assume that Apple is not the problem.
It is interesting. Our expectation is that what we wanted was to build a good portable device that would be great if it's someone's first device or if it's their next device, and that their experience is gonna be really good. Like, "Wow! I didn't need to buy an iPod to get this thing all my friends are talking about."
I don't think we're just going to go and grab 50 percent market share this year, but the experience is exceptional and I really believe that if somebody has an iPod nano with iTunes today and the guy next to him has a clix and is showing off what he can do with it, that there's a good chance that person will say, "Wow. I wish my nano did those things." How important is design to the success of a player like the clix?
It was clear that the chic, the cool factor of an iPod had to be delivered in a sense where people would be proud to show off their device.
You know, we were in a very interesting position there, because over the last few years there's been a delicate shift for us. Our fans are like, "These guys are the no‑nonsense technology guys. They put on every bell and whistle on this thing, and they trust that I'm smart enough to know how to do it."
That's a tough one because you know on one hand we have to continue to try and support new things, but we still have to dress it up in a way that, yeah, I can still hand it to anybody and they think it is cool. And in some cases, other brands haven't had to deal with that in a similar way. But we definitely have.
I sat next to somebody recently on a flight who had an iPod video and I was messing with the clix, and this guy kept looking and he's like, "Hey, is that some kind of an iPod?"
So I explained the player to him, and as he was watching me navigate, he's like, "That looks pretty cool." And then the first thing he did was take the clix and his iPod video to look at the screen size, and he saw ours was about the same. But then he realized how bland the interface was on his iPod, and he's like, "Wow! It's very colorful," as he was playing with it.
It was great to see him playing with it, because for him, he was an iPod consumer, but he was lusting after the thing I was playing with. Speaking of the UI, how well do you think the user interface on the clix will scale once you get beyond 2GB? It seems to do a great job when you have only 500 songs on there, but what happens when you get up 20GB or 40GB and you have to navigate a collection of tens of thousands of songs? That seems to be one advantage the iPod has it with its scroll wheel.
There are lot of things that you can do to help scale that, some of them we intentionally left out on 2GB player just to avoid unnecessarily hurrying people to the end of the list of something. But there's a lot of things like alpha scrolling and accelerated scrolling that you can do that usually resolves those problems. How deep does your relationship with URGE and MTV go? Is MTV going to be promoting the clix?
Right now we're definitely still in kind of a broad mode. MTV features the clix pretty prominently on URGE and even within the Windows Media Player 11 when you look at devices, clix is very prominent there. What about on-the-air? Will the clix be featured in shows?
I think that what we expect from MTV is that it's kind of a momentum build for everybody. I expect as we move in toward back to school and as we move into the holiday buying season, I would expect MTV to start to ramp up and feature that in a more prominent way. Do they actually have to do a certain amount of promotion on the air as part of your partnership?
Well, here's the thing, I think we have to go about this in a couple different ways. On our side was we felt that if we could build the device that MTV would love, that we would ultimately secure ourselves a place where when they go out with their service and say, "Here's the device it works with," we want that to be the clix. We want them to passionately love the clix, and I think we're there.
A lot of the marketing pieces haven't been completed yet, but we think their service is really great and MTV thinks the clix is really great. And in order for the whole experience to be shown to consumers there will be some component [of showing URGE and clix together] of that for sure.
Obviously one of the reasons why we were so excited to go into something like this was MTV. Not only are they a phenomenal music brand, but they know their way around the marketing block and so it's certainly in their best interest to get their audience to check out URGE. And like I said, our part has been to build an awesome device.
It looks like Microsoft is going to be introducing a portable media player of its own later this year, how might that affect iriver and its relationship with Microsoft?
Microsoft is a great partner and we expect continued success moving forward. The potential launch of a device by Microsoft does not appear to threaten our relationship in any way. In fact, any potential effort by Microsoft in this space could further raise awareness in the industry and elevate the overall success of devices like the clix. Where are things going on the hardware side? I know you've shown off some Korea-specific devices with built-in WiBro, but what else is coming? Will we see a larger, more video-centric version of the clix that comes with a widescreen?
As you know I'm a big gadget guy, I love gadgets. I love toys. I love to play with stuff, and like a lot of your readers I'm one of those people who is bummed out when something cool comes out in another country and I can't get it.
There's definitely some exciting stuff that's happening in Asia on the networking side, and it's fun to be part of it. It's tough to be there when our market is so far behind and we won't get to play with those great toys here in the immediate future, but there's definitely a lot of promise around the WiMax stuff, stuff that's going into South Korea, and ultimately extending into Japan.
It's amazing to think if you strip everything away and just say, "You know, what if I can have a broadband connection all the time wherever I am?" That's pretty sweet, right? So now you can think, "Okay, so what kind of cool stuff would I do?" I'm going be online getting my email, steaming music and video. Maybe at that point storage isn't as big of a deal because I can stream anything from anywhere.
We're still looking to push that type of a product out with a service provider Korea, it's just a matter of the network getting wrapped up. There is a clear opportunity for us as a company to be able to develop those first and second generation WiMax-type devices. What about a widescreen clix?
The clix is pretty scalable. Not just in capacity, but in screen size and other things like. It's pretty cool to be able to make a device that has a big screen but is not a huge device.
One of the cool things with the U10 originally was, "Hey, guess what guys? We don't need to have the other half of the player." And when you do video you can get three or four-inch displays and you can watch this really slick display on a thin device.
Again, there is this delicate balance between the early adopters and the issue of where do you really get content. That's the tough thing. I think that there's definitely this continuous waiting game of "Where's the real cool content to watch on video?"
It's not yesterday's TV show for $1.99. That's not the holy grail of video. We're still a ways away from that. We're getting closer. I think that more and more people are finally getting past some of the hurdles that have held them up.
But does that mean that a super mainstream video player's where it's at? I don't know yet. Apple was able to make a pretty smart move by just completely replacing their audio players with a video player. Now for three hundred bucks what you get is a video player, so it helps build a foundation for that.
At the end of the day I still think people are buying these players for audio, and if they're video, too, that's cool. But right now to just specifically go out and buy a video player you've got to be really be into conversions and jumping through the DRM hurdles. Any higher capacity devices on the horizon?
It would be crazy for me to say that 2GB is the max and that's all we're gonna do. We're looking at whether in real high capacity flash device, you know, does a physical drive, as opposed to high capacity flash, make sense? I don't know that it does but we're certainly looking at that, and this is where it's tough, because personally I'm in that same minority group that says, "I'll take a 200 gig player with a sweet screen, and if I have to, I'll install 20 different codecs on my machine to make it all work." We know that the average person walking into Best Buy isn't going to buy that, much less know how to use it. And we need some help from the content guys to really push that over the edge there.
I think one of the interesting things with the clix and the U10 is – and a lot of people might disagree with me on this -- but I would say for the most part that the people who immediately bash the player's 15 frames per second video playback haven't really watched it. Because I don't get it. I mean 25, 30 frames per second, yeah, that's great. On an audio player that can also do video, 15 frames per second is pretty watchable, especially on a 2½-inch screen.
If all of the real premium audio devices can start playing video content, hopefully it will encourage the content guys to move. And so we're watching that pretty closely.Thank you.