GOODIES TO GO! ™
July 12, 1999 — Newsletter #36

Greetings, Weekend Silicon Warriors,

Do you have things in your life that you’ve always wanted
to do but never seem to get the chance? Well, I got to do
one of those this past weekend. I sat eleven rows back from
first base at Jacob’s field in Cleveland to watch my beloved
Indians get beaten by the Kansas City Royals. Darn. My dream
was to watch a game in the stadium, not watch the team get
beat, before you ask.

Did you hear…

>AOL users have become SPAM artists’ most sought after picks?
Apparently if you have an AOL e-mail address, you will be a
prime target for everything under the sun.

>A study in Cleveland has found that bad news often travels
fastest by e-mail. Higher-ups in corporations are performing
reprimands, and worse, over e-mail because they find it
easier than facing the person. I’m sure this is true. A good
friend of mind told me the story of a co-worker who knew he
was going to get fired so he brought his kid in that day.
The boss had to do the deed with the employee’s child in the
room. I don’t know if that was necessarily good for the kid,
but it sure made the boss sweat.

>WebTV users will soon have RealAudio and RealVideo access!
Good for them. I think that’s great news.

Now onto today’s topic…

It was only a matter of time before the hardware became
cheap enough to no longer play a part in the decision to buy
an Internet account.

Do you remember when a hand-held calculator was $80? I bought
one when I first went off to college. It was a Texas
Instruments T-something and it was maybe 50 bucks. Now you
can get a calculator, with a square root key, in a dollar
pack of bubble gum (true)!

Remember when cellular phones were hundreds of dollars? Now
you get one free when you purchase access to cellular
service. The same is true with a lot of beepers. You pay for
the service, you get the beeper for free. Now, usually you
have to give it back at the end of the contract and the
contract itself must last a series of years, but you still
get the hardware for free.

Hey, business majors… want to see supply and demand in
action? This is it. When technology is new, there isn’t a lot
of product, so the price stays high. When other manufacturers
get into the fold and the market starts flooding with product,
the price comes down. Often, as in the case of cellular
phones, the price comes down to the point that the hardware
is no longer a profit-making entity in itself. It’s easier
to simply give you the thing and make the money off of the
service.

Well, it’s coming to the Web. I remember in the very early
’90s this idea was kicked around a good bit. Some smaller
computer manufacturers were discussing creating a “black box”
that would only connect to the Web, only surf, and only
retrieve and send e-mail. I thought it was a good idea. It
would be low-price and anyone could afford it. Anyone with a
grand to drop, that is. It didn’t fly.

Now it’s flying.

America Online (AOL) has announced a deal where, if you sign
up for a three-year membership to their Compuserve 2000 (an
upgraded version of their current service), you’ll receive a
$400 rebate check good for a computer from low-cost
manufacturer eMachines. Now some of you might say that that
doesn’t mean a free machine. Ah, but it does. The low-end
eMachine is only $399. I don’t know that that low-end model
will allow for applets and huge JavaScripts, but it will allow
text-based surfing and e-mail. For some, that’s all they
really need.

But how? Where will anyone make any money? Let’s do the math.
You can purchase the AOL/Compuserve 2000 package for $19.95
a month for unlimited access. There are other plans, but
something tells me this is the pup you’ll be signing up for.

Three years times twelve months is 36 months at $19.95 equals
a total investment of $718.20. Take away the $400 rebate and
that is a profit of $318.20. You business people will also
take into account that if the consumer is buying the computer
at $399, it certainly costs much less to build it. Profit is
how companies stay in business.

Will there be additional things you can buy? Sure! Will there
be additional services you can attain? Sure. But even if you
don’t take anything else other than the three years service
and cheapest computer, AOL/Compuserve will make a small
profit through the retail/wholesale conversion. eMachines
will make out better in the deal because they’re also
receiving investment monies in return for installing AOL and
Compuserve software on all of their machines.

No, it doesn’t seem like much at the moment, but remember,
this is the first time this has been tried (that I know of).
We’re only watching the barrier being broken. If eMachines
makes a bundle off of this deal, you business majors will
once again see supply and demand in action. Major companies
will start to jump into the fold and a slew of $399 machines
will flood in. Then price wars will begin. Consumer costs
will plummet and soon everyone and their uncle who owns an
Internet Service Provider will be offering free machines
with extended Internet access contracts.

I see this as a good thing. Many will see it as a concern as
it will slow lines and slow sites as more and more people
come in to surf. I don’t think that’ll be the case. The
people who offer services are in this for the long haul. They
will either add machines, upgrade machines, or die. I think
you’ll see upgrades.

There is a reason a lot of people are not on the Web. I know.
I teach these people every day. They feel it’s just too hard
to understand. The technology keeps them at arm’s length.
There is also a reason AOL is so darn huge. They are winning
the “I understand it” game. It’s easy. There’s a reason the
iMAC is so popular. Take it out of the box, plug it in, and
you’re on. (It’s not quite that easy, but you get the idea).

Look out for the server/free-machine deals that offer
everything installed, including the user’s name and all their
passwords. When a deal is set up so that my mother can buy
an account, get a computer with literally everything
preloaded, including all the phone numbers, her friend’s
e-mail addresses, and all the passwords she’ll need to pull
it out of the box, plug it in and go — that company will
grab a very large, and rather rich, older audience.

The company that takes the time to do that will be the one
in which to invest your money.

>>>>>>>>>>>>>>>>>>

And that’s that. Thanks for reading. You know, I got so much
e-mail from people saying they jump to the end of the
Newsletter each week just to read the “And Remember” fact
first. That’s great. Hopefully I can keep coming up with
things that are so bizarre you’ll keep jumping.

Joe Burns, Ph.D.

And Remember: Here’s one from the “picky, picky, picky” file.
“Lizzie Bordon took an ax, and gave her mother 40 whacks.”
Right? Wrong. It was her stepmother. Told you it was picky.

If you thought that one was silly, here’s another: Crickets
set their chirping speed according to their surroundings.
Count the number of chirps from a single cricket in 15
seconds and add 40. You’ll be within two degrees of the
temperature.