Napster

A few weeks ago, Best Buy agreed to acquire Napster, the online file trading service that revolutionized the music industry. The ensuing explosion in digital music products and services made some people very rich, while others came and went. Napster was one of those early market leaders who survived, but didn’t thrive in the iPod era. The integrated model proved to be the killer value proposition.

A side note on my near brush with fame during the digital music revolution. I interned at Apple Computer during the Summer of 2001. It was the summer prior to the introduction of the first iPod. I remember sitting in my boss’ office for our weekly 1:1 when Apple’s technology guru busted through the door holding a hard drive in his hand. His remark was, “they’re finally small enough.” Little did I know that he was referring to the fact that Apple finally had a hard drive small enough to put into a portable music device. Two months later, the iPod was launched and my boss was named head of iPod marketing. The rest is history.

There has been a lot written about the Napster acquisition and whether it makes sense for Best Buy and their customers. Enough has been said about it, so I am not going to rehash the wisdom the move. I am here today to talk about leadership and whether this move helps Best Buy deliver on the promises that it is making to its customers. This posting offers no assessment on the feasibility of the acquisition or Best Buy’s ability to monetize the relationship.

First, a note on leadership. Best Buy is the leading consumer electronics retailer in the world. But, leading market share does not necessarily imply leadership. To me, leadership requires a clear vision of the future. It implies that you know where you’re going and that you can act with confidence and conviction. In Best Buy’s case, leadership is about the ability to peer into the future and make sense of a murky and rapidly changing technology landscape and to help make sense out of it for customers. And, Best Buy does this rather well, as evidenced by its size, breadth of product assortment and helpful blue shirts. The problem for Best Buy appears to be consistency in application.

When I look at this acquisition, on the surface, it appears to be about looking into the past rather than into the future. This is where most of the commentary focused, and who’s to blame the pundits? Best Buy did not provide consumers that leading point of view that we expect. What is the unique perspective that Best Buy brings to this market? What will they do with the asset? How will Best Buy leverage this asset to solve customer problems? Instead, the announcement focused on providing customers choice in a market that is dominated by a single player and has high switching costs. Choice, while beneficial to the customer, does not constitute a leading point of view.

So, if market leadership does not explain the acquisition, then what does? This brings me to the promises that all companies make to their customers. The great thing about the consumer electronics category is that there is always a sense of newness, which brings with it the excitement of discovery and the hope for a better tomorrow. Consumers consistently line up for the latest gadget or must have technology. In order to stay ahead in the market, Best Buy must constantly provide consumers with the latest gadgets and edit out the ones that don’t make sense. It is an implied promise in return for the customers business. Recent wins in this area include adding the iPhone and Apple and Dell computers to the assortment. However, it is hard to explain the Napster acquisition within this framework. Napster is neither new nor an industry leader in its own right. In essence, the addition of Napster does little to advance Best Buy’s relationship with its customers.

I admit that I’m struggling a bit with how this acquisition fits into the overall picture for Best Buy. The idea of leadership implies some options for what Best Buy should do with this asset, but I am sure that there are many more. I’d be interested in hearing yours.

Hail to the Redskins!

As many of you know, I am a rabid Redskins fan, having followed the team intensely since I can remember. I still hold my season tickets, selling them to my cousin each year. My wife thinks I'm crazy, but someone should benefit from my 25 years on the waiting list.

You know that you're getting old when media coverage cites games 30 years ago that you can remember watching. One that is fresh in my mind is the Cowboys' 35-34 victory over the Redskins in 1979. I remember the Redskins blowing a late lead, then moving the ball into field goal position, unable to call a time-out as time expired. I still think they got hosed on that last call, but it really shouldn't have come to that. So, the day after a great victory in the Dallas-Washington rivalry, I reflect a little bit on why the NFC East is such a great division, like none other in football.

On Rivalry

While there are many great rivalries in the NFC East, Redskins-Cowboys is the marquee matchup in the NFL. Period. It compares with Yankees-Red Sox, Celtics-Lakers and Michigan-Ohio State. The rivalry will go in cycles, like all do, but the intensity and dislike for each other persists no matter what. Of course, it is at its best when division and NFC championships are at stake, but like any rivalry of this degree, throw out the records when these two teams play each other.

There are two other reasons rivalries are so intense in this division. First, the cities have a high degree of proximity, where fans and ex-pats regularly populate the other cities on game day or otherwise. Washington, DC is probably the best example of this geographic mobility, a melting pot of NFC East fans if you will. During the week, you work side by side with each other. On Sunday, for six games a year, you stand on opposite sidelines. There's a little bit of that here in Minnesota with Packer fans, but Bear and Lion fans are distinctly missing.

Second, the teams regularly compete for the NFL Championship. The Redskins, Giants and Cowboys have 11 Super Bowl Championships between them. Toss in 8 additional appearances between the Redskins, Cowboys, Giants and Eagles and the NFC East has represented the NFC in 45% of the Super Bowls contested. No other division or group of teams comes close to this total. It is a great division to be a part of.

More Musings on the Redskins

Name the team that has won the Super Bowl the year following a Giants Super Bowl victory? If you guessed Redskins, you are correct. Ironically, they beat the same opponent in consecutive years (Broncos and Bills). Is this a foreshadowing of a Washington victory over the New England Patriots in Super Bowl XLIII? Probably not, but it’s a really eerie trend if it holds.

Both Peter King (SI) and Clark Judge (CBS) rank Washington in their Top 5 teams, along with New York, Tennessee, Buffalo and Dallas. While it's a long way from the finish, this recognition should give Washington fans hope that their team is not as bad as they envisioned, even if it is not yet as good as they want it to be.

Another shocking team consistently mentioned in the Top 5 is Buffalo. Does it feel like the early '90's all over again with the Bills 4-0? It's the first time since the K-Gun days with Kelly, Thomas and Reed leading one of the most prolific offenses in the NFL. I remember that we used to call it "disco" offense, but it seems that more teams are leading this type of attack, even though the current incarnation of the Bills are not.

I don't know if Washington could have beaten Dallas 3 weeks ago, but it's encouraging to see them go through the maturation process as a team. I like that they've been producing 4-6 scoring chances each week and not turning the ball over. If Washington is able to keep executing like this, then the next 4 games seem ultimately winnable (@Eagles, Rams, Browns and @Lions). Would anyone have predicted 7-1 after the drubbing in the Meadowlands? I'm not predicting it, but it doesn't seem as daft as it may have been one month ago.

Missing in all of the talk about the Cowboys and Redskins is the Giants. Maybe the Giants defense is that good, having held the Redskins to a sub-par day on offense in the New Jersey swamp. It will be exciting to see how the Cowboys fare at New Jersey on November 2nd.

Coach Zorn is heading the list of "Coach of the Year" candidates 4 weeks into the season. His name topped the list in at least two columns I read this morning. Jeff Fischer of the Tennessee Titans is a close second. Bills coach Dick Jauron probably deserves consideration as well. I think all are deserving, but only if their teams keep delivering.

Touchdown Jesus

There are few venues in sports that are as instantly recognized as Notre Dame Stadium in South Bend, IN. It is known as much for the mural of Jesus that rises over the north end zone as it is for the Irish’s conquests on the gridiron. This past week, I ventured out on my first road trip to this storied stadium. It was the first Notre Dame-Michigan game that I attended. The series was on hiatus during my two years of business school at Michigan. While the outcome was not what I had hoped, I had a great experience. The game was decided mainly on Michigan’s inability to hold onto the football with three unforced turnovers leading to 21 Irish points. The day was made more epic in the second half as the rain began and the intensity picked up throughout the half. Ironically, it seemed to rain hardest when Michigan had the ball.

I was impressed with the Irish fans. While they were spirited and supportive of their team, they were also much more polite and respectful than fans I’ve met from other schools. And this comes from someone sitting next to the student section. I only wish Charlie Weiss, the Irish coach, could have conducted himself with such class. True to the ways of his mentor, Bill Belichek, Charlie ordered a pass to the end zone on a fourth and two with an 18 point lead and no time for a Michigan comeback. These are the types of plays that will come back to haunt you in sports.

Finally, check out the pictures from our trip. It’s not much, but its proof we were there. Enjoy.

http://www.flickr.com/photos/kenandhil/sets/72157607316992387/

Minnesota Beer

This site just sent to me by a fellow beer enthusiast. It covers all of the great happenings in the beer community here in Minnesota. Whether you're into all-things Surly or wondering what all the buzz is about on the Four Firkins, this is a great place to go. And if you're not from Minnesota, you need to get yourself a Surly. The Furious is the best beer I've had in a long time.

http://www.mnbeer.com/

Game Over

Totally soaked after the game. ND 35 Michigan 17. We'll get them next year at the Big House.

Our Seats. Go Blue!

Game Day

Just got to ND. Go Blue!

The Road to South Bend

Hit some traffic out of Minny. Dinner in Eau Claire.

Great Sports Rivalries

I'm headed out to the Notre Dame-Michigan game this weekend. This has got me to thinking, what are the great rivalries in sports? Vote in the poll or let me know your thoughts. I'll be blogging from the road this weekend.

The Wisdom of Crowds or the Widsom of One

This is a great story that was sent to me by a co-worker at Best Buy (thanks Big Swede!) in the context of poking a bit of fun at the concept of "the wisdom of crowds". For those of you who have not read the book, the premise is that crowds more acurately predict outcomes more often than any one individual can. That is because the collective intelligence, or networked intelligence, is smarter than the intelligence any individual possess. This is particularly true as you move up in organizations and the information that you receive is filtered multiple times, for better or worse. This is essentially an efficient market theory. We all know that it works most of the time, but there are incidences where the market is egregiously wrong, such as the Internet bubble. Now for the story.

There are two set ups on this story. First, Best Buy regularly experiments with tools to leverage the wisdom of the crowds. I fundamentally believe in the wisdom of crowds as I've seen it produce amazingly accurate results on several occasions. However, it is not a tool that can be used for everything. It requires human judgment in order to be effective. Second, rumors of a United Airlines bankruptcy were rampant this week on Wall Street. This story highlights how technology and the lack of a human filter contributed to the crowds being wrong. Enjoy.

http://www.alleyinsider.com/2008/9/tribune-web-traffic-so-awful-that-one-visitor-killed-united-stock-uaua

Why Does Windows Mobile Suck?

I have this Sprint Touch mobile phone that has to be the worst phone ever. It does nothing well - not even making phone calls. You would think that a phone would at least do this well, but the Sprint Touch doesn't. It takes the basic function of making calls and managing voicemail and makes it frustratingly difficult to perform. On top of that, it does a whole bunch of other stuff poorly. I think a lot of this is driven by the OS - Windows Mobile. In addition to the inability to perform the most basic functions of a phone, Windows has brought things to my phone that I never dreamed possible, such as programs randomly freezing up, a touch pad that doesn't really work, a really crappy web browser, and long boot-up times. No wonder the iPhone continues to gain significant ground in this market. It actually works!

Sirius XM

Today, Sirius XM announced their "best of" programming packages, essentially the cross-programming that they will offer subscribers of the respective services. Sirius subscribers will get Oprah, the NHL and the NBA. XM subscribers will get Howard Stern, the NFL and NASCAR. This benefit will be available to consumers at the low-low price of $16.99/month, a $4 monthly premium to their existing subscription price. This programming offer was a pre-condition of the Sirius-XM merger. Today's announcement came to me through an industry trade journal and was no where to be found on either company's website. So, my question is, "are you sirius?"

As someone who has been anxiously awaiting this industry development I am quite disappointed with what the post-merger company has delivered. Information related to this development has been hard to come by. My hope was that the combined company would use this event to announce a bold new approach in radio. I was wrong. Short of that, I at least wanted to know what I would be getting in the "best of" package. Not only does the package fall far short of the most meager of expectations, it falls way short of the spirit of the merger. Which brings me to my next question, "what the heck is Mel Karmazin thinking?"

There are few moments in a company's life where they can accelerate growth, generate goodwill and essentially "do the right thing". A major merger such as this is one of them. The fact that there is standing demand for cross-programming and that the company is not offering something that consumers are willing to pay for is shameful. Shareholders should be outraged. Subscribers should be angry. Where is my Major League Baseball? I would pay $4 more per month just for that. Now I'm left to wonder whether $4 is worth it and how many Capitals games I'd actually be able to listen to.

Finally, after looking at both packages, and all things being equal, I believe the arbitrage opportunity is to ditch Sirius and sign up for XM. That way, you get all of what XM has to offer (MLB included) and you get truly the best of what Sirius has to offer. This assumes that you get the NFL games in addition to NFL Radio.

Tell me what you think.

http://www.twice.com/article/CA6594276.html?nid=2402

Dell vs. Apple

Isn't it ironic that 10 years after Michael Dell suggested that Steve Jobs shut down Apple and return the money to shareholders, that Dell is now producing advertising that implicitly acknowledges the strength and consumer appeal of their rival. It's amazing how far Apple has come in the last ten years.

http://www.electronista.com/articles/08/09/10/dell.slams.air.with.e4200/

It should be noted that I spent a summer working for Apple Computer.