Vector 13: Kevin Michaluk on what happened to BlackBerry
Joining me today, triumphant return, Kevin Michaluk of Rene: CrackBerry.com. And Kevin, you just got off a plane from Asia and agreed to do this, so thank you very much for that.
Thanks for having me on the show, Rene. Anything for you. You know, I'm a little bit tired, but I love talking about BlackBerry with you more than anybody else, so let's... Kevin:
Well, I need you to stay awake for like an hour, because BlackBerry, while you were away, BlackBerry was really big in the news. Rene:
No kidding, right? Every time I travel, something massive happens. You know, I'm on a beach in Italy for a vacation, and they announce the strategic review and they want to sell the company. It's just every...I'm not allowed to travel anymore; too much stuff happens to this company. Kevin:
BlackBerry should pay you to stay home. Rene:
I'm glad you could join us. I spent a little bit of time talking to Chris, but it's a BlackBerry story, and I have to bring you on and get your thoughts on it, because you, to a ridiculous extent in my head, are the personification of BlackBerry and media, sort of where the two meet. Rene:
I think that's a fair assessment, a fair assumption to make. Kevin:
Rene: You have spent the last...how long has it been? Is it five years now covering BlackBerry?
It'd be since 2006, probably June 2006, that I've been following the BlackBerry story day to day to day, and I've been a BlackBerry user since 2005. Kevin:
Rene: You charted. As BlackBerry rose, CrackBerry rose with it. You've been with them through sort of their ascent in the enterprise. You've been with them since they tried to reinvent themselves with the Storm, the Torch, with BlackBerry 10. What, to you, is the story of BlackBerry? Were they a little company that came out of the middle of nowhere, or is this just one of those tales of modern technology?
I think they were a bit of a company that came out of nowhere. If you think about the big technology companies, most of them tend to have long histories of being around because it takes a lot of capital, a lot of talents to make it in this world. Also, it's very hard to grow to a big size without some big incumbent acquiring you along the way. The fact that a company like BlackBerry did sort of pop up relatively out of nowhere, started by a couple of guys, and grow to become the size it did, and keep it to themselves and become one of the big players in the market is actually a fairly remarkable story. You don't see that often in this space. Kevin:
Rene: Especially not coming from Canada. Most of these are either traditional Japanese companies or American companies. At least to you, what was it that made BlackBerry so successful? People joke and actually the name of your site, CrackBerry.com, that it became an addictive sort of a thing. It became part of peoples' lives. What was that initial pull for you?
I think a couple things. I think BlackBerry, in the beginning, in the early days, they solved problems for people. They didn't start off making the BlackBerry smartphones of today. It took them a while to arrive on that product. They started doing other things. They made these budgies. They were building billboard systems for car companies and for factories to use. Mike Lazaridis was a smart guy. He was an engineer, and he was trying to run a small business and try to make a way for himself. Kevin:
They were the first to build a product that could deliver wireless email. Everything took off from there. That was when the switch flipped.
By falling into a couple of areas -- one was studying up on wireless technology and everything else and radio systems -- they developed a core competency in that. Then as the technology emerged with wireless networks and carriers having some bandwidth to play with, and something they helped carriers work on developing, almost, they were right there at...I like using this. Everybody uses this word intersection these days, and they were there at the intersection of a couple of things. They were the first to build a product that could deliver wireless email. Everything took off from there. That was when the switch flipped.
What happened was they grew on the back of that. I started with their wireless paging system, which took paging from short, code messages to full-out email, which was a huge thing at the time. Basically, if you wanted to have a cutting edge in business, you needed to have wireless email. That was a competitive advantage. Of course, now it's an even playing field, and everybody has it, but at the time, you wanted to be an early adopter picking that up because it literally gave you an advantage over your competitors if you could return emails from anywhere in the world within seconds, versus being tethered to your office.
I think their success in enterprise was definitely well-deserved in those early years. The big thing, when we came on the scene in the 2006 timeframe, was the shift to consumer market. They weren't a consumer company. The DNA of BlackBerry, formerly Research in Motion, the fabric, everybody talks about that, is not as a consumer company. It isn't as a lifestyle brand. It's not like what you see in mobile typically today. It's not as a social network connecting people together.
Their real bread and butter was solving problems for companies and enterprise, being a service provider in enterprise. Everything built on that, so this pull into the consumer market really happened out of lucky timing. There were no real good competitors at the moment. Palm had its day, but its day was never huge. Its day never really expanded beyond the early adopters in The States.
Rene: It was a geek device.
Kevin: It was a geek device. It's interesting because I go into a lot of meetings. Often we tell our "Mobile Nation" story, which goes back 14 years to Marcus Adolfsson founding VisorCentral in 1999, based on the Handspring Visor. Whenever we tell that story, I've learned to not mention the Visor, because all I see is blank stares back from people. They don't know what you're talking about.
We could say, "We covered from it the beginning, including the Palm Treo." Then they're like. "Oh." People will nod their heads.
Rene: For now they remember the Treo.
For now they remember the Treo. But the Visor, it's like, "What the hell is that?" Kevin:
On the company
Rene: It's interesting to me. You mentioned that their DNA was in enterprise and consumer markets. I think that when normal people -- and I use that term hesitantly -- but when normal people listen, it's hard for them to understand why a company, at the end, isn't a person and isn't the CEO. Why they have these cultures and why they seem unable to adapt?
You look at it and you say, "Oh, that kind of thing was fashionable last year. This kind of thing is fashionable this year. I'm just going to do this, and almost single-act-of-will it over." But it does seem like these big companies, with very few exceptions, can't really turn these giant ships around.
It's very difficult. You've got to remember, a company is one thing, so it's easy to talk about a company. Then you have to realize, it's actually made up of 1,000s of people who are all somewhat self-interested. You have the owners of the company, who have the power to steer a ship. If they very clear vision and they're willing to do anything, they can steer that ship. They might lose people along the way. They may have a lot of people hate them along the way, also, while they're doing those changes. But the ability's there. If you look around at business success stories, you'll see examples of that. Kevin:
But a company like BlackBerry, at that time when they shifted from enterprise to the consumer market, there was a lot of hesitancy within the company. People were hesitant to make that change. Also, they didn't have core competencies that you need. As an enterprise company, especially one that's so security-focused like BlackBerry, they weren't used to talking to the market. They would do the things they had to do as a publicly traded company. When the CEOs would have to get on a call, they would reluctantly do it. They weren't very good at it under the old management, but they could do it.
I remember the first BlackBerry conference I went to. There were probably 300 employees at this time. BlackBerry at that time was dark suits. They didn't really know how to talk with PR and media that much. They didn't really want to. I remember being told by an employee that they were literally briefed before the trade show started to watch out for these so-called bloggers and "Don't say anything to them, because what you say could end up on the Internet." We were viewed as evil.
"Don't say anything to them, because what you say could end up on the Internet."
Even marketing, BlackBerry never had a chief marketing officer for a couple years. It was sort of a function of the CEOs, who know nothing about marketing, but kind of oversee. BlackBerry was being so successful in sales, because the carriers made them successful. You've got to remember about this time that you had Palm going away, Windows mobile wasn't very consumer-friendly. People liked their BlackBerry phones and they built devices like the Pearl and Curve, and that was it. There was nothing else.
There was no Apple iPhone. There was no Android at the time. There was nothing else. BlackBerry really rode a massive wave, propelled by the carriers, and BlackBerry's success skyrocketed. This is a company that went up to $200 billion at their biggest.
Rene: They owned North America, while Nokia owned Europe, was the story.
Yeah. It was Canada's biggest company. They passed Royal Bank of Canada there for a while there, and the absolute leader in the smartphone space. Kevin:
Rene: Dumb question, because this is something in hindsight we'll look back on. Did they have to get it to consumer space? Was it just an opportunity that was too lucrative to ignore, or could they have doubled down and focused exclusively on enterprise?
That's a great question and it's a hard one to address. I guess you're not forced to do anything, maybe, if you don't want to. Kevin:
Rene: Like, IBM could care less about customer electronics.
If you look at BlackBerry's history, they've, more than serving consumers, I think, in a lot of ways, they served carriers and the demands of the carrier because in the smart phone business, the carriers are extremely powerful partners to have. If you have the product they want, they're going to put you on store shelves, they're going to put you in commercials and they're going to sell your product. Then, you just need to keep up with demand at that point. Kevin:
And, I think BlackBerry really did that. The earliest devices didn't run on regular data networks; they ran on Mobitex. That was your enterprise play. But, then, the carriers wanted to push forward data. It wasn't like they were just going to stay a mobile telephone-type world. They need to find new revenue streams, and it's kind of inevitable that that technology was going to build up.
For carriers to make that kind of investment in their infrastructure and develop those sorts of networks, they need to the products to sell that are going to, hopefully, recoup that investment, and BlackBerry was the company, at that time, that was, basically, the one the carriers could take advantage of. What's interesting was those data networks were not very -- I guess you could say that it's not that they weren't efficient; they just didn't have a lot of bandwidth at the time.
Rene: And they were hugely expensive.
Hugely expensive, so BlackBerry built up an infrastructure that was geared at being extremely efficient. I know we've talked about the NOC before, the network operations center, and that was BlackBerry's way of, "We're going to take the data you're about to send, compress the heck out of it so that instead of sending heavy amounts of data across these networks, we'll send data that has an extremely small footprint to it that helps conserve the integrity of these networks that were very fledgling at the time." Kevin:
But the carriers were able to at least get experience in this, see how people use these types of devices and really learn on the back of what BlackBerry was doing because they were using the data networks more than anybody else at that time.
Rene: I remember I had a friend who worked on networks at a carrier, and he's like, "Oh, my God, BlackBerry is so hard on our networks," and I remember telling him, "Just wait until you see IOS and Android," because those really hadn't hit Canada yet, "And they're going to hit you like a freight train."
Rene: But I think the interesting thing and I wonder if this is true - BlackBerry Messenger, BBM, is -- you've joked that that put the crack in "CrackBerry," but the running gag on that was if you worked on Wall Street or you worked in big corporate sales, you had to have a BlackBerry, and if you wanted to date somebody who did that, you wanted BBM so that you could talk to them. And then if you were friends and family with those people, they insisted you have BBM, too, and it sort of spread like a viral network for awhile.
Exactly, and that's a true story. I have friends who went to school in New York, moved to New York, and that was the first time I heard that story was from them. They wanted to pick up the rich doctors and Wall Street types, and they're like, "Well, we've got to get a BlackBerry so we can talk to these people on BBM," which I felt that to be pretty funny. Kevin:
But, you're right, the "CrackBerry" name, the nick name, it first traces back to, I think, 2000 in a Wall Street interview with, was it the CFO at the time? I think it was the BlackBerry CFO at the time, and the reporter asked him about the "CrackBerry," and that's the first cited reference, but it was very much a Wall Street name that emerged.
And BBM, yes. The other thing is the blinking red light. BlackBerry still today has that damn blinking red light on the phone, and, to me, that's always been a big part of the crack in BlackBerry because with the push services, whether email or BBM or text, everything sets off that red light. The device calls to you. You can't ignore it. Even right now, I'm looking at two phones on the table. I have a gold iPhone 5S, and I have a BlackBerry Q10, and the iPhone is sitting there dead, and this BlackBerry has just a red blinking light. Which one do you think I'm going to reach for first? I'm going to go for the light.
Rene: One of the other things I think was confusing was BlackBerry's structure. We were always used to Steve Jobs ran Apple. Google was a little more complicated because you had Eric Schmidt and the founders, but that always seemed like a father and a couple of kids. Then you had Microsoft, which Bill Gates was there for a while and then Steve Ballmer, but BlackBerry had two CEOs and, I think for a while, three COOs, and that seemed like a very large top on an organization.
Exactly. So, Jim Balsillie and Mike Lazaridis were the two co-CEOS. Mike Lazaridis is the original founder of the company, and he co-founded it with a guy named, I think, Doug Fregin. I think I have that right; I could be misplacing that name for another name. I should remember better because he's one of those silent heroes of the BlackBerry story, and then Jim Balsillie came on board in those early days, and very complementary but it definitely created a bit of an odd structure where Mike Lazaridis was the tech guy. His love and passion was engineering and focusing on the problems and building the products, and Jim Balsillie came in as the Harvard graduate, a very driven sales-type personality, very competitive. Kevin:
But went to Harvard. His roommate was Malcolm Gladwell, who's very famous these days, writes all these crazy good books like Outliers and Tipping Point. It's interesting, if you think about it if there's a guy you'd want to have as a roommate, I'd love to have Malcolm Gladwell as a roommate. As much as it seems like they came out of nowhere, these guys had some power to their backgrounds also. Yeah, there's some magic in there with those kinds of stories.
A little bit odd, right, because over the years, you'd hear stories like Mike and Jim hated being in the same room together because -- not that they hated it, but if they were ever in the same room together, they would say to each other, "Why are we both here? Why do we both need to be here?" because they bought handled different parts of the business.
Jim worried about selling phones and raising money in those early days; Mike focused on the product. They tried to keep their overlap to a minimum in the functional areas as much as possible, but I think part of that was they really felt they had a good team and, especially given the success they had, that that just kind of reinforced it.
I think what's interesting to think about now in retrospect was if Mike L. had never brought on a guy like Jim, maybe it wouldn't have happened. But also if he stayed, let's say, CEO and Jim was his number two in some capacity, like CFO, you may have seen more CEO shifts over the years. You would have seen Mike step down and say, "You know what? It's time for the founder to step back. I'm the tech guy. Let's bring in a rock star CEO."
Or maybe Jim would have been promoted up to the CEO level, and when it felt like the depth of skill wasn't there on Jim's behalf, then a bigger change would have been made to somebody who could help steer the company in a direction and set it up to be that consumer company as they shifted to it. But, instead, you had these two co-CEOs which had a great track record combined and because they kind of had that breadth between the two of them, I think it prevented them from making a big change in senior management for a long time. They're on the board, they're CEOs. It's their gig. It's very much their company, even though it's a publicly traded company, they feel it's their company.
It wasn't until less than two years ago, that finally, once the bad times had come, that they then stepped down and put Thorsten Heins into the control of the company. But a lot of people said, "They had an impossible job already by the time he stepped in."
On not taking the iPhone seriously enough
Rene: 2007 rolls around and BlackBerry is at its height, and Apple introduces the iPhone. To their credit, Google spun on a dime, they went from making Windows Mobile and Nokia Messenger, and BlackBerry type devices, just starting to make Android into an iPhone competitor. But everyone else just seemed to look at Apple and say, "You've got to be kidding me. Sure it's not a fancy touch-screen, and some nice swipes, but it doesn't even run apps, it doesn't even do cut and paste." The knock on it, especially by BlackBerry users, and I think from their perspective, a 100 percent valid is, "that's a toy, that's nothing I can use to run my business on."
Here's again where we talk about the company and the thousands of people who work at a company, BlackBerry is the company I would say, their reaction makes it appear like they didn't take the first iPhone very seriously. Now I personally know people at BlackBerry who took it very seriously. Kevin:
So much that the day it came out, said, "Oh man, this is the time to start rebuilding or building on the side something brand new that's going to be reading for this kind of era of devices built to suck back data, to be multimedia friendly, and touch friendly." There were people who did that. But Michael Lazaridis, not so much.
I think he really believed that the existing software base they built, with their Java-based OS, could evolve to handle this kind of new usage case that the iPhone I think proved fairly quickly. What happened again was these darn carriers. The day after the iPhone got announced, it was pretty much Verizon's CEO who called up Mike Lazaridis, and said, "OK guys, what do you offer me? Because AT&T is getting this thing and we're going to need it. We're going to need something to sell against it."
At that time, I think BlackBerry basically Photoshopped a couple devices together to make what was the BlackBerry Storm mockup
At that time, I think BlackBerry basically Photoshopped a couple devices together to make what was the BlackBerry Storm mockup. Mike jumped on a plane the day after that Photoshop was done, met with Verizon's CEO, and said, "In six months you can have this." At that point they started working on adapting an operating system that was never made for touch input, never made for heavy data consumption, or all the multimedia. Again, we talked about, this was a device that was meant to be official, to get the most out of everything you put in it. It wasn't a device made for high-end specs, and just sucking up performance.
Rene: Well he said that, right? People are going to care about physical keyboards, and data compression in the future, not about typing on glass.
Exactly. Yeah. Exactly. Yeah. I don't need to add anything. You're exactly right. It's funny. If you come back to me and say, "OK, let's look at BlackBerry today, and what are the big mistakes they made over the years?" Kevin:
Probably this is the first massive mistake in my opinion was at that time in 2007 if they would have on the side began building a new platform, if they would have made a decision, "OK, we've had a great run with BlackBerry OS. We're going to get a few more devices out of it while we build something else even if it takes us a year and a half, two years. Even if it takes us three years at that point."
They would have a runway before the curve platform just couldn't compete anymore for end-user device sales or enterprise sales. But instead they kept making device, after device, after device, on the BlackBerry OS platform. Devices, yes, they sold, but they created more problems than they solved.
The BlackBerry Storm comes out. Everybody kind of chuckles about the Storm. But honestly, from a sales perspective, that was a huge selling device. Verizon sold millions of those things. For a site like CrackBerry, it's really what put us on the map, because that was a device that attracted the techies and early adopters in that consumer space.
We saw the CrackBerry forums just explode with traffic. The Storm on CrackBerry, till this day, is still probably the most single-handed successful device. Our BlackBerry Storm forums are bigger than most other people's websites in terms of the amount of content that was produced over a span of 18 months. It's kind of crazy to see.
But then, again, they kept following it up, and they wanted to prove that they could do this press screen thing, this sure press, and they invent the Storm 2 to do a better job of it, but still not address the real problem. They're still doing band-aid solutions to their existing OS instead of building something that's optimized...
Rene: One of the things that always struck me as totally unfair was that Apple in 2007 had spent two or three years, arguably longer if you look at the core technologies, creating the iPhone totally in secret, and then unveiling it. Then every one existing player had to respond to the iPhone in public, and that's a much harder thing to do because we didn't get to see the really dumb devices that Apple never shipped. We got to see everyone else's. We got to see Microsoft kind of figure out how to do capacitive touch. We got to see BlackBerry try to figure out how to handle pressing the screen, which they'd never done before, and all incredibly publicly.
Exactly. I think it's something I've always admired about Apple is their ability to maintain that sort of leadership position where they're leading and not following or playing catch-up. I think BlackBerry had that until 2007. There were device leaks and things. Kevin:
We would sometimes see what was around the corner but you never had this sense of panic and catch-up from the company. It was they were doing what they did at the pace they wanted to do it. As soon as the iPhone came out it feels like they've always been catch-up and BlackBerry is the opposite. They get on stage, and they unveil the PlayBook, the first tablet from BlackBerry. It doesn't actually exist. This is like a shell casing with an LCD inside that's running a video on a loop of what will be there in a year's time or six months time. But there are no hardware prototypes that are really there that you can play with when they announce it.
They announce an idea. BlackBerry 10. They announced an idea. This happens all the time with the company. Even BBM going cross-platform. It might be kind of in the labs. But what do they do? They get on stage and say, "BBM is going cross-platform. You'll see it by the end of summer." They've been doing this year, after year, after year. Where you can argue well just the timing of their shows, and not time them specifically to product announcements, but when they're ready to announce them. But the fact that they don't do that make it always feel like they're doing these things in a very public catch-up fashion.
On the BlackBerry PlayBook and the decision not to go Android
Rene: Going back for a second, the PlayBook was interesting to me because when it was first announced, it seemed to me at least like a distraction. BlackBerry's core theme was phones, and all the time and effort they were putting into the PlayBook would probably be better for them to use to make the phones go faster. But that's easy to say from the outside. I don't know what was going on in their engineering department. Now that the PlayBook thing sort of came and went, do you think it helped them in any way? Or was it a distraction?
Well I'm glad you brought that up. I talked about BlackBerry's first big mistake which was not taking the iPhone seriously at all, and at that point in 2007 starting to rebuild. The PlayBook is kind of their second and third mistake combined. Because that became their chance to make a decision. That was BlackBerry's realization to say, OK, we're going to need a new platform here. Now the story goes that Mike Lazaridis maybe didn't even want to make the PlayBook as intense of a product as it became at launch. Where the initial conception for the PlayBook was to have an accessory for your BlackBerry phone that was like an eReader picture, like a bigger screen for your BlackBerry basically. Like whatever I do on my BlackBerry I can just view it bigger on a PlayBook. It was like a window that made it nicer for picture view, browsing your photos... Kevin:
Rene: Like a companion device like the Palm Folio was supposed to be?
Kind of, yeah. Again, I think that was announced before the PlayBook was even conceived, and we all know how that was received by the media to the tune of angry and nasty letters saying, "Get your head out of the sand." But I think that was initially what it was, kind of evolving to be. Kevin:
Then the iPad got announced, and then all of a sudden, "Uh-oh, we better turn the PlayBook into a full out table device and photo OS." Now at that point BlackBerry could have made a decision. Or they did make a decision. They said, "OK, BlackBerry OS, we've taken it basically as far as we can. We want to still squeeze everything we can out of that OS but that's not the future of the company anymore. We need to start building something new."
They acquired QNX from Harmon. QNX is this microkernel operating system. It's been around forever. Has some real good capabilities in the architecture or arguably a better architecture for a lot of types of applications because of its design where it's not monolithic in terms of nature.
It's not a linear code base where if something crashes while you're operating the system, it brings down the system. You have to restart it. Everything is siloed so the core kernel is very small. It wall never crash because they don't mess with the kernel. It's very predictable, very stable. That's what they bought. It has tie-ins to running automobiles and spaceships. It's another Canadian success story, and they bought this company. Now a kernel is much different than a polished OS. You still need to build all the apps and services and things on top of that.
Rene: It's real time. Which means that you always know how long something is going to take, it's predictable and runs nuclear power plants but It had no face basically. It had no interface.
It had no interface. But at the core of it, it was a new platform for BlackBerry to start building off of. At that point in time they had a decision. They also could have went Android. If you think about Android, you have Amazon that forked Android, made it their own, it's completely unrecognizable from Android but it gave them a platform to build with that also gives them an ecosystem as much they want to tap into it around. Kevin:
Rene: They're binary compatible with Android apps which is a huge thing.
At that time I think there were a lot of arguments starting internally even that, "OK, we can either build-up this new platform internally. We can build-up this QNX platform and call it whatever we want to, but we're doing all the heavy lifting." Kevin:
It's the decision that we're going to build a new operating system, we're going to build a new ecosystem around that operating system. We're going to do everything like we did before. We're going to own it all 100 percent and go along the way, all the way long.
Or they could say, "OK, let's take Android, let's customize the heck out of it. Let's move all of our services like BBM over to it and make our enterprise infrastructure work with it." It would be a massive undertaking too because BlackBerry had a lot of legacy things that would need to be made compatible for a new Android world.
In retrospect now I think a lot of people think, that probably would have been the way to go
But they could have made that decision at the time. In retrospect now I think a lot of people think, that probably would have been the way to go. If you look at what Samsung does and HTC and these companies do to customize the OS and make it their own, they do a lot. I think if BlackBerry would have started at that point in time, they could have made by far the best Android phone.
Rene: They could have made an Android phone that worked on the enterprise.
Yeah. Also we're talking now about putting something like BBM cross-platform. BlackBerry would have went Android in 2010, you'd be preceding the what's apps and the kicks and all these things, which basically are all clones of what BBM did and how they functioned. But BlackBerry left the door open for these guys. Kevin:
That was BlackBerry's market to claim and they just didn't the move in, and they allowed third-parties to come in and do it. Even on the enterprise side now, there's a lot of competitors in the enterprise space that arguably have better solutions due to broader support, and being more of a cloud-based infrastructure, where you don't have to put in your physical services, you can go on cloud-hosting to do it. BlackBerry would have been forced to probably adopt and build for that years ago instead of just sticking to their guns of what they had. So I'm going to bring it back to what you asked about the PlayBook. But this was the decision they could have made, right? And we can talk more on that later.
But instead they decide, "OK, we're going to do it the hard way. We're going to build the PlayBook, and we're going to build our own operating system." So they acquired QNX. They acquired a bunch of other companies also at the time. They bought The Astonishing Tribe at TAT to help them on the UI side.
They bought some smaller companies. They bought companies like Jest which were known for pulling in social data and organizing it in a really intelligent manner. They bought DataViz Documents to Go Suite to give them their Word Doc and PowerPoint apps and that kind of thing. Was Dash their navigation company they purchased? They bought a lot of companies and some people said, "Well, it's going to be a patchwork OS." It's like building a quilt, right? You build it in little blocks. You stick it together, and all of a sudden you have a quilt.
You can look at that and take offense to it. "Well, that's not a very nice thing to say," but arguably accurate and not necessarily a bad thing because even Apple or Google all buy a lot of companies and integrate those pieces into the bigger part. But in this case you felt like everything was patchwork because even again, starting with that microkernel as the base to it, they had to build on top of it with a lot of pieces now.
So they started the PlayBook as their first product, and it was a very public way to basically build this OS in the public. So when it launched it wasn't called BlackBerry 10 or BBX yet. They launched what's called the BlackBerry PlayBook OS or BlackBerry Tablet OS. It got ripped apart for being half baked. It was actually very powerful, right? To this day, if you pick up a PlayBook, the interface, the power of multitasking, and the speed and fluidity is pretty darn good.
Rene: It's phenomenal.
It's phenomenal. It really was a good experience, but it had some glaring holes in functionality. Kevin:
Rene: So here's my thing. This is the kind of thing that I think drives you nuts as someone who covers this stuff. It drives me nuts, too. Companies say stupid things like Apple, when they launched MobileMe, said, "It's exchange for the rest of us" and then it didn't work. Nokia launched their version of Windows phone and said, "The smartphone beta test is over." Then it didn't work. BlackBerry launches a PlayBook. They say, "Amateur hour is over," and then it doesn't even run...
Even better. They called BlackBerry PlayBook the first professional grade tablet. The first professional grade tablet that shipped with no professional productivity features at all. It was very much like a multimedia-type device, like Mike Lazaridis's vision. I told you about having this companion... Kevin:
Rene: Yeah, it didn't run their own email system. They do this to themselves. No one set them up for this. They set themselves up for that.
This is very interesting because I talk to guys on the marketing team more recently. They look back at it. It incensed me. They said, "Look. If we would have taken an Apple approach with the PlayBook, we could have actually made it work." Kevin:
They said, "What we should have done is gone on stage day one and said, You know what the best communication tool is on the planet, the most secure communication tool that's on the planet?" It's the BlackBerry smartphone. You can't do better than it. It is the best. So we're not going to try to compete with that. You can't beat it. It's the best. What we're going to do is build a complimentary device for BlackBerry users that works with it.
"It's not a tablet. It's a complimentary device." Yes, people would have ridiculed them a little bit for that saying, "Well, it's a bit like a Folio." I'm sure you would have seen comparisons. "Oh, they're going to fail because.. they're wasting their time limiting it to just BlackBerry smartphones." But what it would have done is set consumer expectations, media expectations, and also development expectations for BlackBerry because basically they'd be saying, "We're not launching with this thing half baked. It's fully baked, but maybe not to the feature set you want to see. But it's fully baked."
Instead, they position it as a frickin' full-featured tablet that's missing features, which now distracts the company for the next year to try to fix what's missing.
Instead, they position it as a frickin' full-featured tablet that's missing features, which now distracts the company for the next year to try to fix what's missing. So Jim Balsillie goes on TV and says, "We'll have beta email in 60 days." Do you think they even started writing that app at that point? No. That was news to the engineering teams that they were going to have this thing in 60 days.
It was obviously something they were going to get done, but it wasn't going to be done in time. So all of a sudden they're pulling resources together to try to deliver on what the CEO just promised on TV. Its stories like that which is a distraction for the company. But important to note at this time is you're still selling BlackBerry phones.
At that point BlackBerry's six phones are still on the market. The first Torch, the Bold 9700, and I think 9780, and people were waiting for another generation of BlackBerry phones because now it's been a long time since we've had one. What happens is BlackBerry has to pull a bunch of their BBOS resources onto the PlayBook OS to help solve that, and in the meantime BlackBerry's seven phones get delayed and get delayed and get delayed.
This becomes the turning point on even the cash flow and sales side for the company because now we're waiting several quarters. It's like, "Well, BlackBerry phones are supposed to be here first quarter 2011 I think it is or even less quarter, 2010," and instead they're not. Then it's the second quarter, and then it's the third quarter. So I think finally August 2011 that the Bold 9900 comes out.
All of a sudden we had the Bold 9900, the new Torch, and the big touchscreen Torch all in very close proximity. They'd made it a very big launch, but it came nine months later than it should have. Because it came nine months later than it should have at a point where Verizon's now really pushing Droid, there's a lot of momentum building there, BlackBerry felt a little too late to the game with those devices.
Had they hit nine months earlier, I think you would have seen them be...and BlackBerry said that it was received OK because people knew who it was for at that time because they almost lost so much mind share that Android and IOS were where it was at now on the consumer's side. But they probably would have done even better with it. Instead, they were starving new device sales. Carriers were wanting these BB7 phones. They were delivering.
BlackBerry was taking too long, and they're putting their resources on the PlayBook. So again the PlayBook screws them because I think it slowed down that time for them to deliver handsets to the market. That's when the media sentiment starts to turn because you have the Playbook hits half baked. Now you have delays, delays, delays on the BB7 release.
By the time it comes to market you get the people saying, "Well, too little too late. They can't get anything right. Who wants this BB7 phone? Now look how far the industry has come." Again, they still haven't launched BB10 to market or anything else like that at this point.
Rene: It's interesting because the iPhone launched 2007. It didn't have a lot of features that we even had on Treos, definitely not on BlackBerry at the time. But people liked pinch-to-zoom, and they liked the prospect of what the iPhone offered. So they were willing to wait for it, but Android was still being built up. You could see the future for there. But a lot of the technologies that had built BlackBerry seemed to be in the future problematic for them.
BB7 looked like it couldn't really run the kinds of apps that eventually IOS and Android would run. The PIN system, which was fantastic for BBM, looked like it maybe wasn't ready for a world where everyone had three or four different devices. It looked like a lot of the decisions that made BlackBerry so powerful in the beginning were coming to an end, and it would be really hard to transition beyond those.
I think that's again a very fair assessment. Yeah, let's speak specifically to the infrastructure side, right? I think you're right. I mean even on the handset side, one of the things we've always said was that specs don't matter on a BlackBerry because the whole thing was designed to get the max speed and efficiency out of whatever specs you threw at it. Kevin:
So a BlackBerry running 600 megahertz, to me the experience on the device was faster than an Android phone running 1.2 gigahertz. It wasn't an apples-to-apples comparison.
Rene: It's like Apple having one gig of RAM is as good as Android having two gigs.
Yeah, exactly. Of course, people focus on specs all the time. So it felt like BlackBerry was falling behind yet again and arguably they were on specs. But in terms of performance, yeah, the overall speed on that was very good. But the problem they had was BlackBerry threw more specs into the device because they knew they had to, and also new chip sets come out. Kevin:
Qualcomm and these companies don't want to keep selling four-year-old things. They want to move their production cycle and the new hardware, also. BlackBerry steps up to 1.2 gigahertz on the BBOS. The problem there is you use it and you're like, "Well, it's still fast." It wasn't really slow with the basic things like navigating UI and opening and closing this.
But it still also chokes, right? You could still see hour-glassing. You could still see lag at weird moments, and it was down at the architectural level. So you throw more performance into the hardware, but it was never designed to soak the performance on better and better specs. It was like once it hit a point it was as fast as it was going to get and more wasn't necessarily doing anything.
It still had problems, like you were talking about Apple. They get a lot out of one gig of RAM. You need to remember. At least you can install apps and that onto the memory, right? So if it's a 16-gig device, you have to 16 gigs for apps. On the BBOS your apps, OS, memory, your RAM all sat on the same block of memory. So if you had 512 megs of RAM on the BlackBerry or even a gig, that's where all your apps live, too.
So these apps had to be two megabytes, five megabytes in size. Your memory card was storage really. They got smarter where you could offset app assets like graphics onto that card and then the app and RAM could be much smaller and access that data back and forth. But it was, again, Band-Aid solutions to something that was never just properly architected for the modern world of mobile computing.
Rene: It was funny because Apple, to their credit, was savvy about hitting pain points in the very beginning of their marketing campaign. Their first set of ads were all about the Internet in your pocket, and they showed off Safari when a lot of other companies still had WAP browsers or proxy browsers. Then they very quickly, when the App Store launched, shifted to showing off apps when things like BlackBerry and Android were still constrained to the amount of memory held on the device. They set consumer expectations that forced everyone else to spend their time on things that Apple was already good at and not on things they could do that they were good at to differentiate themselves.
Agreed, yeah. You're right. BlackBerry had that 10 years, eight years, where they were running down their path, and it felt like they could do no wrong. Kevin:
Rene: They said everyone else had to have push email because BlackBerry did.
Exactly. They set their agenda. You could trace it back almost to the iPhone. That's the interesting thing. I guess Android would have come along one way or another, too, probably. But the thing is, even if you think about Android, the first versions of Android looked like BlackBerry, right? So Android had no qualms about it or Google with Android just said, "Well, we're going to go whichever way the consumer demand goes. We have no DNA. We have adaptable DNA." Kevin:
They learned from the media success I guess or with advertising "We follow the eyes." Now they're following the hands and that sort of thing. So they quickly pivoted, and BlackBerry can pivot the same way because the infrastructure wasn't done like that and the company wasn't set up like that.
Rene: So you have BBM which is going multiplatform now. It's interesting to me in hindsight to look back. A while ago Microsoft made this decision. They created ActiveSync to compete with BlackBerry and Enterprise. It was basically their way to attack BES. They decided to license that out, and that really pissed off Windows Mobile because it was a competitive advantage to them. But Microsoft thought that by having, for example, Apple license it and Google license it, it would give them a fighting chance against BlackBerry and the Enterprise. So they sacrificed their handset division for their infrastructure division where BlackBerry for a long time kept BBM as the crown jewel of owning a BlackBerry experience.
Absolutely. Well, I want to start answering this by saying what does BlackBerry 10 use now for Enterprise? ActiveSync. It's really weird. BlackBerry 10 in a lot of ways is the un-BlackBerry because the email no longer uses the knock the way it does in the BBS. They still leverage their cloud-based services for things like making the setup of your email accounts easier by leveraging the connections, that NOC and all the backend heavy lifting they can do. But ActiveSync is the protocol used for doing all the email and PIN and all that, same as an Android phone, same as the iPhone. So that part of BlackBerry's magic is gone right there. You look at the extent even that BlackBerry is relying on Android apps that have been ported over to become BlackBerry 10 apps. I think a big chunk of the BlackBerry world app catalog for BB10 is comprised of Android apps. So you have this device, which is losing its BlackBerry DNA and picking up other pieces to put it all together. Kevin:
On the BlackBerry ecosystem
Rene: Which is interesting because they didn't license Android and produce Android devices to begin with because they wanted to control their own stack, and now their stack is heavily leveraging parts that are not very negative.
So again, if we go back to that decision a few years ago, that what I said is Problem Number Two and Number Three, when they could have made the decision, "OK, let's just go Android. We know we're going to lose some control. We know we're going to get a little bit more into the hardware game. But if we really focus on our software differentiation on top of Android, maybe there's a long lifespan here." Kevin:
Now when you look at it and you look at BlackBerry's biggest problems with BlackBerry 10, the most of which the biggest one which in my opinion is apps, lack of this complete ecosystem, they would probably be further ahead right now because their challenge is they tried really, really hard to get developers on board to make the ecosystem story work for BB10. I really feel it just didn't.
If you go could go back to the launch of BlackBerry 10 phones, people for the most part like the UI. They liked the multitasking experience. They like things like the Hub. They like the feature set. I'm going to say it's not perfect. There are still some things. It's a little too complicated for some users. It's not as easy to use as, let's say, your basic iPhone. Once you learn the gestures and that it's very powerful.
But the ecosystem, if you build it, great. If you don't, you're pretty much screwed.
But that's all stuff you could fix over time fairly quickly, too, right? If you really feel there's a problem even with your next OS release you could probably fix a lot of that UI-level stuff. But the ecosystem, if you build it, great. If you don't, you're pretty much screwed. Now they're in this situation where they launched. They're missing some of the key apps that people want.
There's still no Instagram. There's still no Netflix. I don't know if it's coming. BlackBerry is always been about banking and Wall Street, and you're missing a ton a banking apps. You were missing your Bloomberg apps and things like that. A lot of the best apps you'd expect the traditional BlackBerry power user to want weren't there, and I think consumers are just too darn smart these days, right?
It doesn't matter what the corporate message is. If the ecosystem's not there, people will know. Because that ecosystem wasn't there, I think the carriers knew that if they put a lot of marketing might, if they really bought into BlackBerry, it could end up burning them. Carriers are very pragmatic like that. They don't want a bunch of handset returns. I don't think they honestly in some cases care who they sell.
We heard a lot last year that the carriers, and I'm talking more about the US carriers here right now, don't want it to be a two-trick show or a two-pony show. They don't want just Apple and Android, a.k. Samsung for the most part, calling the shots. They want that third player in there. I don't know if the carriers honestly cared if it was Windows Phone or BlackBerry because BlackBerry from a carrier standpoint has done very well for them.
BlackBerry did great. Carriers remember that without BlackBerry they might not be where we are today. We could still be more in the early days a little bit, and they respect that. Windows Mobile didn't do much for them over the years, so I don't think they truly cared.
But I think once the final products from BlackBerry start to hit and they say, "OK, it's good but there's a lot of missing stuff here," I don't think you saw the US carrier support to the level that I think even BlackBerry management expected a year ago right now where I was doing interviews at the their shareholder meeting last year with the CEO and the new Chief Marketing Officer.
I think they really felt they were going to get big carrier support, especially when you look that Verizon's former chief legal officer is now BlackBerry's legal officer. They were smart to let BlackBerry to build up a lot of good relationships around carriers in their new superstar management team. But looking at the last six months now, nine months, you're just not seeing that carrier support you expected.
Yes, you get it in Canada. You don't really get it in the states, and around the world there are pockets where you get it and big gaps where you don't.
Rene: What's funny is, and I think we talked about this before, everyone kept saying carriers want a third player. There's room for a third player. It seems to be shaking out that that third player is also Android. So you have Apple and Samsung and then Droid or Apple and Samsung and then Motorola because carriers figured out the same. They would play with this same discussion you mentioned at RIM or BlackBerry that we could get BlackBerry, we could get Windows, or we could start making our own version of Android basically.
Well, it's funny because this is something I always argue with people. Or not argue. You don't have to argue. You just have to make the point and people are like, "Oh, yeah. You're right." So when we look at the smartphone space, for a lot of years we talked about, "Oh, BlackBerry's number one in smartphones. They're eating Palm's lunch. They're eating Windows Mobile's lunch." But at the same time when that was happening, you still had a feature phone market that was hundreds of millions of devices a year being sold, right? Kevin:
So you had two distinct markets within the mobile phone market. Now the feature phone market was made up of the Samsung's, the Sony Ericsson's and the Nokias and the HTC's. Well, maybe HTC a little less at that point, but it was made up of all those players who are now at Android today. I even remember even in 2007/2008 seeing studies predicting future growth and adoption of smartphones, and it was pretty aggressive numbers. But I think in reality things have moved even quicker because what happened was, if all those feature phone makers say, "OK, we go Android," that's it.
Overnight it's like death of the feature phone if every phone we start building is a smartphone. Now we live in a world where every phone is a smartphone. Yes, there are some exceptions, and Nokia's still building I think lots of cheap non-smartphone devices that they're selling into markets as cheap pay-as-you-gos and that kind of thing. But for the most part we're going to live very quickly in a world where it's all smartphones.
So when you look at that market share loss a little bit for a company like BlackBerry, they're like, "Well, they fell to being number one in smartphones to now they're in this place, this place, this place." But if you actually go back to when they were first in smartphones and you look at the global phone market, they were tiny then, too.
They had no market share in the global smartphone market. They had this little segment called smartphones with a big share. But if you looked at the entire world being smartphones, they had a very low handset volume. So it's funny, right? And this is the ironic part, right?
When I go back to the first quarterly earnings reports I posted for BlackBerry on CrackBerry back in '06 and '07, and you look at the handset sales they were shipping, the number of handsets they were shipping each quarter, it was less than what they've done this year when the world's falling apart.
But in that point in time, you're like, "Oh my God, this is amazing! They sold 300,000 phones! This is going to be a huge year if they sell a few million of these things!" The future's so bright, we're growing. It was a success story. But if you look at the absolute volume numbers, it would still be dismal compared to what they're doing today, when now the world's ending and BlackBerry is about to die, right? Part of it is the scale, comparing it to the greater smartphone market and to all your top-tier competitors.
But it's funny when you look at the absolute numbers that even as they've been going down the hill, the volumes are still much bigger than those early days where they were the one on the straight path, leading the way, being number one and everything they do.
Here's your new BlackBerry
Rene: It's the same with Apple. The narrative now is that Apple's losing to Android, when Apple was way below Nokia and way below BlackBerry when they started. It's just the position at that top has been transitioning from people who make feature phones to people who make Android phones. One of the other things that I thought was interesting was BlackBerry did this transition to BB10, and people like you and people like...nerds got it. They figured out how to use it.
It had a lot of clever things, but -- and I've talked to you about this before -- I have a friend who works in a huge company at a fairly high level. They've always been a BlackBerry company. They have thousands of BlackBerry handsets deployed. A couple weeks ago, his BlackBerry 9900 was taken away from him. He was given a Q10. That's literally all that happened -- it's like, here's your old...and this happened before. He's gone through every generation of BlackBerry -- give me your old one, here's your new one...he's gone about his business.
This time, he got a Q10. I saw him the Saturday after he got it and he had no idea how to use it! He was having trouble just unlocking it, then trying to find his email. I wonder how much that was factored in -- like, people who just knew how to use a BlackBerry. Now it's still called a BlackBerry, but the experience is so different that to them, it might as well be something else.
Kevin: I really wish that I could say the example you just provided was an isolated experience. Unfortunately, it's not, especially with the Q10. It's been interesting to observe this. With the Z10, I never heard that type of story. Because I think people knew -- going from your traditional BlackBerry with a keyboard and trackpad to an all-touch device, that is going to be a very different experience. You were ready for that. Your expectation was changed.
A lot of the people who picked up the Z10, I think, were former BlackBerry users who'd already switched to iOS and Android and were now coming back to check out the new BlackBerry -- because they still have some warm and fuzzy feelings.
Or it was the part of the BlackBerry user base that was ready for that change. They wanted a more full-touch, big change, drastically different experience. A lot of the PlayBook owners, et cetera, too who were already used to that full-touch paradigm.
The problem was, when you come to the Q10, if I put the BlackBerry Q10 and the Bold 9900 side by side on a desk again and you look at the phones, you look at the hardware, a lot of people might think the Bold 9900's the newer device even.
It looks a little more glitzy, with the way it has the trackpad and that. It's still a good-looking phone, but you'd expect a simpler user experience.
I think that's the problem with the Q10 in a lot of cases now -- people are just going into the store saying, hey, I heard there's a new BlackBerry. Give me the new, best BlackBerry.
They get the Q10, or their work gives them the new Q10, which looks a lot like the older phones. They start using it and it's very different, right. The difference here is BlackBerry said, OK. We don't want to change too big...now I'm going to make a comparison between what Apple just did with iOS 7 and what BlackBerry did with BlackBerry 10.
BlackBerry had the opportunity to overhaul the UI -- add a lot of lipstick to it, a lot of polish. Make it look really great. Like, let's make awesome icons that the teenagers are going to love.
Rene: Let's unleash the Astonishing Tribe!
Exactly -- let's unleash the Astonishing Tribe! Which is something TAT would love to do. Let's unleash them. Kevin:
Rene: If people aren't familiar with them, they did a lot of the early Android interface. They've done...if you go online, you can find spectacular...they have interfaces that look like cloth in the wind. It's ridiculous.
They're like kids...they're kids living the dream, right. They just go to work and they're very creative. They think about things in a very crazy manner, which sometimes... Kevin:
I'm sure they come with a lot of ideas that are bad. Like, they're...conceptually it's like, wow, this is really creative. Then it'll never translate to a great user experience, on a scalable level. But they're creative, right, and they definitely know how to go after good-looking things to make those wow experiences that you want to have.
Instead it was the opposite, right. The leash was put on, and they said, we still need to make this thing look like a respectable productivity device. To the extent where we complained about it.
We saw the first designs of BlackBerry 10 icons. These things...to me, it looked old. Right, I was like, wow, this is your latest, greatest OS...and it looks old! Compared to their BlackBerry Bold, which launched with OS 4.6. You probably remember, even, what it looked like. It had these white icon outlines, very lightweight. It was like a laser. I was like, "Wow, it's laser-cut."
It was really cool. And to me, this new BB10 stuff looked old. We complained, and they updated it, but they still kept it very conservative. So again, even now when I power on the BlackBerry, and I look at the icons and things, I'm not expecting a big change in the user experience, because it looks so similar. But then, it's very different, right? The back button's gone, the trackpad has gone, the Menu key has gone. You need to learn these gestures, which are easy to learn if you commit to learning them, but a lot of people just expect in 2013 that you're going to be able to pick it up and know what to do. It's not the case, right? You need to learn.
To the extent that one of my older brothers, who's a professional engineer, mechanical engineer, much smarter than me, had his Z10 for a month, and he comes over to my house, and he's asking me, "Hey!" For the most part, he actually likes it a lot. He loves the keyboard on it. He thought he would never switch from a physical keyboard, and he was like, "This keyboard's amazing." He's had iPhones and iPods and things, he's tried different smartphone keyboards, and he just would never waste his time on it, because he just wants the best solution.
The 10 touch screen keyboard, he's like, "Oh my god, this thing's amazing. I wish my computer keyboard was like the Z10 keyboard. I hate typing on a computer. I'd rather type on my Z10." So really interesting. But a month later, after he had the device, he didn't know how to properly gesture into the hub out of any app! He was haphazardly doing it, where he'd go back to the home screen and kind of gesture in. He didn't know the full gesture. I gave him a walkthrough when he first got it, but I gave him a quick walkthrough. Apparently that didn't register.
And I'm like, if a guy of this intelligence level didn't intuitively figure out some of these things, to me it means it's ahead of his time still. The expectations just aren't there yet. If you think about what Apple did with pinch to zoom. I think Apple invented it, or there might have been others who had it, but Apple gets credit for it.
Rene: They popularized it, and they bought FingerWorks and a bunch of other gesture-based companies.
OK. So they popularized it. Again, not necessarily an intuitive motion. But you call it pinch to zoom, which is brilliant, and everybody learns it, and now it's a standard. Maybe something like BlackBerry's swipe up for the home screen and hook over to get into the hub could be popularized, but it isn't yet. Kevin:
There's a learning curve to it, and that makes it hard for a lot of people.
There's a learning curve to it, and that makes it hard for a lot of people. So for a lot of people, especially those who are going to BB SMS to Q10, the benefits of the new OS in terms of a better browser, better app experience assuming the apps are there, no more hourglassing, that kind of thing -- if you look at those benefits, they're not necessarily bigger than the cons to the BB OS.
I've seen this. I've seen a lot of people who tried the Q10 and they're like, "You know what? This is cool, it's great, but for what I need my BlackBerry for, I'll just stick with my 9900 or get a new 9900, and oh, by the way, I also own an iPad, or I also have an iPod, or I also have a Nexus 7." So they have a second device that does the ecosystem and app stuff that BlackBerry hasn't really delivered on BB10 to the extent we need them to. So therefore, the old BlackBerrys were kind of good enough.
Now, what we're seeing with this last press release that came out from BlackBerry talking about the shift in their focus from the consumer market -- BlackBerry's basically now said, we're getting out of consumer headsets. It's not that they're going to quit making them. It's not that they're going to quit altogether, at least overnight, doing this.
But they made it very clear they're going to quit competing with the likes of Samsung and Apple in terms of marketing dollars and building consumer mindshare around the product. They're going to keep building what they have and selling it, but they're going to target these prosumers, these professional users, which kind of go back to this historical legacy userbase that BlackBerry's been known for.
They just need to move handsets right now, and that's probably a smart move, because they can efficiently target those people. Focus on the big cities. Focus on Wall Street. Focus on the markets where you know you have these clusters of professional users who probably can afford multiple devices. It becomes more of a BlackBerry first in one hand mentality, and then whatever other devices you want because you can afford them mentality.
But what I worry is that with those X-pros, or whatever you want to call them, those prosumers, is that BB7 arguably does the job for those people too, if they're going to complement it with something else.
Rene: You want them because they don't care about the things you're not good at, but they also only care about the things you did well before, so they don't necessarily need your latest, greatest stuff. So where does BlackBerry go from here? I know the Z30 -- zee 30 for people in the US -- is just coming onto the market. They've got a renewed focus for enterprise. What kind of devices are you expecting from them in the next year? That's a big screen BlackBerry, right?
Yeah, it's going to be interesting. I mean, they said they're scaling back their portfolio a little bit, Z30's been announced. I don't know what kind of carrier support we'll see in the US. It's a five inch touch screen. It's kind of like a bigger Z10. A few bells and whistles to it, so quad core graphics, faster processor. They're making note of a couple things where it has a bet new antenna style, what they call a parallax antenna, which is supposed to give really good data transfer speeds and connectivity even when you're in lower coverage areas. Kevin:
They've improved the sound system on it, so BlackBerry Natural Sound, which doesn't sound very enterprise focused, right, it sounds more like a consumer thing. But, hey, having a heavy duty speakerphone is always a feature that any business user loves. It's kind of an interesting device. I think what they're doing is they're repositioning it, repositioning for this prosumer market. But when they would have started building this device two years ago, I think it was very much a consumer play. This was their S4 type competitor, right? Galaxy S4 competitor, HTC One competitor in the consumer space. Now, I think it's a matter of, they need to market the heck out of whatever they have in the pipeline.
I think you'll see them do a few options. Although it's interesting, because everything's in a weird state right now. Apparently they're sitting on like a billion dollars worth of Z10 in the turret. If you can't sell the Z10s, can you really sell the Z30? The Q10, people are having some issues with it, as we discussed. Well, if the Q10 can't solve the options, does a Q30 solve those challenges? I don't think so. The Q10's great, I mean, the Q10 from a hardware perspective and everything, you don't need a different phone. You just need the features to kind of get fixed up on the software level and ecosystem level that are holding people back.
I think you'll see more of the same, but better come out. I don't think there's going to be any massive surprises. I don't expect to see a smart phone with a curved screen come from BlackBerry anytime soon. I don't think of tablets. There were rumors of more tablets before. I don't think they're going to touch that anytime soon, unless there's some specific niche reason. They could turn around and make it, if somebody asks them and ordered from them at volume. But you're going to see them pivot. I mean, the big talk of late has been that BlackBerry is going to make more of an IBM type move. Right? They're going to an extra hardware business. It doesn't happen overnight, but you're going to see them shed a lot of that, which saves them a lot of money.
As soon as you're not selling hardware, they don't have marketing expenses the way they've had in the past, their engineering and development costs all that go away, all the testing costs go away. Hundreds of millions of dollars of expenses go away if they ghetto that business. That gives them a much bigger, it kills, it reduces their burn rate a lot. They still have 2.6 billion in the bank and they still have money coming in, not nearly as fast as it was, though, for the last several quarters and years.
Rene: Yeah, you lose tasty hardware profits.
Well, yeah, and that's arguably one of the things, that BlackBerry is hardware products have never been that tasty, also. A lot of their revenues come on the back of their service revenue, tied to the old BlackBerry phone. Kevin:
On cross-platform messaging
Rene: That's interesting, because the big story in the last couple weeks has been BBM going multiplatform. It was supposed to launch, I think, a week or two ago. It's been delayed. It should still be coming soon. The question is, and you mentioned this before, they own that market, they allowed slack in other platforms, so the WhatsApps apps came out, Facebook Messenger, Kick, all these different things. What's your sense of how BBM is going to do in the new multiplatform world?
It's going to be interesting. I mean, I'm fairly hopeful and I've actually, I wrote an article recently that kind of went into it, I went into the good old Google Trends side of research to see just how popular from a search side all these different services have been. I mean, that's not exactly always a 100 percent accurate representation of what the reality is out there. But for the most part, Google Trends over the years in the mobile space, when I followed it, whether it's demand for specific devices or platforms, etc., especially when you're searching for similar things within a category, tends to do a pretty good job of representing the truth. Kevin:
When you look at those numbers, you see that WhatsApp is definitely, over the last year, to have grown to a big leadership position. You see that something like Skype is always big. But Skype is more than mobile, because I think we all agree that Skype on mobile is really, really bad. It's still more of a computer play, where I think people get a good experience out of it. I mean, I'm sure people downloaded mobile, but it's just, to me it's horrendous, then I try to use it on every platform.
Rene: It's horrendous everywhere, because computers are more forgiving.
Well, exactly. I can use it fine on my Mac and that, but I mean, Windows 8, it's horrendous. Dan always misses our messages on his machine. But it's horrendous, so Skype might have popularity, but it's not in mobile directly to like this IM'ing on steroids type experience that a WhatsApp for BBM provides. After that, everything else is pretty small, right? Like, over the trend, over the term, BlackBerry is right there in terms of demand with the Vibers and the, kills the group needs. There's the WeChat. Kevin:
And BlackBerry is there. But BlackBerry is only been on one platform, so it hasn't been getting demand from everybody. It's been getting demand from sort of a subset of users. They have over 60 million users still. They can go across platform and you think about network effect. As they go multiplatform, I think you're going to see pretty good pick up. The launch didn't go according to plan, they stopped it, within, I think, 12 hours of it being officially being released. They got over a million downloads in that time.
It gives me hope that you'll see them actually do pretty well. I think that's the question, is what's success for BBM?
You look at the demand, going back to Google Trends, you look at the spike from the launch date. It's more than we've seen for any of these companies I've just mentioned, right, over time, there's never been as big of a spike. Even when the WhatsApps and that have done their big announcements and releases, it's never spiked the way we just BBM. It gives me hope that you'll see them actually do pretty well. I think that's the question, is what's success for BBM? I kind of look at it as, they have 60 million users now. If they can pick up 50 million on Android, 50 million on iOS in the next few months, heading into 2014. If they get to be 150 million, you get that network effect, it keeps growing, I think that's put them in a pretty good position.
You're also seeing that, it's interesting where BBM's done a deal with Samsung in Africa to load BBM natively on Samsung handsets. If you go through the trends data, you'll see that WhatsApp is actually number one in a lot of African regions. That's the biggest player in those areas. I think this is one of those cases where, for BlackBerry, it's an opportunity to probably do well there and Samsung is using it as a bit of a test, because if BBM can do well in those regions, which seem to be currently running WhatsApp in a lot of cases, when I look at Google Trends. If that works, you might see Samsung start to adopt it in more markets as they prove it works as a preloaded option.
If there becomes a bit of cut-in or vested interest for guys like Samsung to do that deal, again, BlackBerry is often been successful because of partnerships it's formed. A bit of a Samsung/BBM partnership could bode very well for them as they start to roll that out in more markets. They also announced this past week, just recently, that there's a desktop version of it. It didn't look very polished yet, but they showed it running on a PC. If that launches, I think that's a nice little feather in the cap.
Rene: You don't notice that until it's missing. Google Hangouts kind of destroyed their Jabber support. If I can't use it at my Mac, because I'm so much faster communicating on my Mac than I am on mobile, so if I'm there, I want it on my desktop.
I'm glad you mentioned hangouts, too, because it's one of these things where I mentioned BBM to say somebody like Phil on our team, who runs our Android central website, and Phil's like yeah, I'm a little worried that the world just doesn't need another messaging thing. He loves his hangouts, and he loves his Google mobile hangouts, but I just kind of chuckled because I'm like dude, nobody's used...mobile hangouts are confusing. That's not an IM client. It's a communication tool, but unless you're a tech blogger, you're not actually IM'ing people on mobile hangouts, at least not right now. Kevin:
The WhatsApp, to me, WhatsApp is the competitor that BlackBerry needs to target here with BBM and try to gain ground on fast. Other competitors, really I think, Apple's iMessage, especially in the US market, because I think a lot of people just think well, it's good enough, and if everybody owns iPhones, it's definitely good enough. It's more when you do want to communicate people on different platforms that iMessage falls apart. I think there's hope. I have hope that they'll be able to get downloads, assuming they don't screw up the service side. It has to be a good experience. It's already off to a shaky start.
Rene: I looked at it because we got the version from the New Zealand app store, and it wasn't compiled for iOS 7. I was like oh, no, please don't let them do that again.
That's one of those things where I very quickly passed that message on, and I said if you're halting your release right now to fix whatever you broke in Android, you'd better freaking clean up the iOS 7, too, because it just seems a little sloppy if you...now that iOS 7's out, if you don't put some of that bells and whistles on it. Kevin:
Rene: Yeah, absolutely. Putting out free BBM to everybody sounds like a great idea, but for BlackBerry to be a business...I'm Canadian. I love Canadian technology companies. I'm still upset that Nortel isn't what it used to be. I don't want BlackBerry to go the same way. Is there a business model that you can build on? If it becomes super successful and super popular, are there subscription services, are there professional services, you could build on its back?
Kevin: This is a point of contention and curiosity and debate among all of us BlackBerry followers and fans and analysts. There are two thoughts on it. One is you have your Instagram model or Twitter model, which is if you can just build a big enough network, there's intrinsic value to it at some point, even if it's not realized immediately.
There's something, right? There's something there, if you can get a billion users using it, or even 500 million users using it, or even 200 million users using it, so there's that belief. I think in terms of cash flow, though, like real revenue generation in the short term, I think part of the opportunity that the company believes in is BBM channels, which is basically launching as sort of a social network within BBM. Kevin:
One of the things people like about BBM is that it's a fairly closed network. You mentioned earlier the PIN system. The PIN system means if you have a person's PIN, that's how you add them. It's not like WhatsApp, where it's tied to address book phone numbers, which was brilliant to WhatsApp in terms of gaining growth. If you index your address book, and you just see people's phone numbers, and now they're in WhatsApp, that's really good. It's also kind of annoying, because you end up with a lot of people that you don't initially want. Good thing you can block them out and all that.
It's also annoying for somebody like me, who swaps SIM cards a lot into different phones, and all of a sudden, I have to have that original SIM card in the phone initially to download, install WhatsApp, get my contact lists back, and then switch back to a different phone number. It just drives me insane. BBM, though, people have always liked it because it can be very PIN based, and you don't have to necessarily tie your email address to it, either. That's your most used email address. It's one of those things that celebrities have loved over the years.
You get your 100 friends who are all rich and famous on your BBM group, and that's it. You're not going to get hounded by anybody. It's closed.Now, BBM channels becomes a sort of private...and the word channel is really good for it, because it's kind of like you subscribe to people you want to follow, but it's not done in a way like social networks are done today...
Rene: It's like one to many broadcasting, it feels like.
Yes, one to many is a good way to do it. However, you can also go one to one. One of the things I hate about Twitter and Facebook, Pinterest, all of them, is how front and center they put your follower count. If you want to be a part of that network, you're all treated...you're all basically there. Kevin:
If Rene Ritchie only has 20 followers, and you follow a bunch of sites set up, or people that have a million followers, the people with a million are very out there, and then there's Rene Ritchie, and I'm just picking you as an example here. It's not the truth. You have lots of followers. You have 20, and it's like oh, I feel bad about myself. I only have 20 followers. I need to get more followers. With all these damn networks, you have these issues of buy Instagram followers, buy Twitter followers, buy YouTube followers. We can buy YouTube views. It becomes this whole race to compete for numbers, numbers, numbers.
Rene: It becomes Farmville for social networks.
Yeah! It becomes very, everybody's on the same level, because when you join, a big player with millions of followers is the same account being set up initially as a player with a few follower. It's set up to -- not fail -- but it's set up...because obviously, it works, right? It's set up to be this weird relationship in the design. What BBM channels does is if you don't follow anybody or you don't have a channel, you're not part of that game. Your subscriber count doesn't matter because I don't want to broadcast to anybody. I just want to follow things that I like. It's almost like RSS of sorts. Kevin:
Then you subscribe to channels, and you follow content. It could be the CrackBerry channel. It could be the CrackBerry Kevin channel. It could be Mercedes-Benz. It could be BlackBerry's channel. It could be anything. You could start a Rene Ritchie channel, if you choose to. People can find you and subscribe, and then much like in Instagram, you can post photos and up to 400 characters of text. You can respond in the comments. People can like your posts. They're adding video to it. You can do that kind of micropublishing to it.
What I really like is that it can all be done in a closed fashion, right now, it's not broadcast to anybody else who, what you're subscribing to, which I love. Of course, I found several channels with good looking girls in bikinis and I subscribe to all those. It's great because my fiance doesn't know that I've subscribed to them, but if I was on Instagram following bikini models, and she clicked on my profile, she would see everybody I'm following. Again, the way BlackBerry is always been a private network, this is still very private.
As a channel owner, you can see who's subscribing to you. The guy who owns that channel could narc on me if he wanted to. For the most part, it's kind of closed. What's really cool, though, is as a channel opener who's broadcasting from one to many, you can also turn on one to one conversation. On my CrackBerry Kevin channel, for example, a couple of times now, I've gone to my settings, and I say allow subscribers to message me direct. I've got two hours to kill at an airport. I just want to talk to strangers, and I can do that. As soon as I do it, people discover it, and they start messaging me.
They're like hey, Kevin, are you really here? I'm like yeah, I'm really here. They're like oh, my god, this is amazing.
They're like hey, Kevin, are you really here? I'm like yeah, I'm really here. They're like oh, my god, this is amazing. I'm talking to Kevin. You think about that, and it gets really cool. If you're a celebrity, you're Lady Gaga, you can do your messages to your millions of followers. Then every now and then, you'd say OK, free chat, 30 minutes, I'm going to talk to some people. You turn it on, and you can chat with them. It allows for a more intimate sort of communication than we've seen before in any of these social networks.
At first I actually didn't have any faith in channels. I actually thought it was not that compelling. I'm like what are you doing, BlackBerry? The world does not need another social network. It's enough is enough. The more I've used it the past few weeks, a couple of these features that I've just described to you, both the one to one and also the fact that it's kind of private in terms of what you're following, I actually think it's pretty cool.
Now, I think that's where they're thinking they'll make revenue off this thing, is if they can get 200 million, 300 million, 400 million people using BBM, that becomes interesting to companies to now start paying, like we often joke, Rene, there's a service for everything if you're willing to pay 1,500 bucks a month. I'm not saying that's what it's going to be, but it becomes the kind of thing where there is maybe a value proposition where a company would want to engage with its user base in that type of relationship.
Rene: Or get analytic information from them.
Absolutely, in real time, also. When I make a post on BBM, I can see how many people have read it second by second. It's pretty cool in that respect, something that I don't think Twitter or those guys have on a message by message basis, where I can see exactly how many people I reached with that. I think Facebook does have pretty solid analytics on that, but I don't know if Twitter does. I think they're building it up with that type of mentality, which is interesting, but first they need the users. If it grows big enough, and it's on all platforms, it becomes kind of interesting. Kevin:
I think it's still a little bit buried in the BBM experience. You have to know to look for channels or look into your status updates to catch that content, but I think that's all workable. Right now, it's just about driving downloads, and if they drive enough downloads, I think they hope the revenue is there. The big thing to note is they've set up BBM basically as a standalone division within BlackBerry. It's head by Andrew Bocking, who's the executive VP of that division, who used to be on the handheld side. He was one of your head, head decision makers on what was hitting in the hardware and software.
He basically jumped over from that and is running this division. My understanding is it has its own profit/loss schedule. It's being treated with its own team of people, so it's very much independent within the company. I think part of that is just again, looking at the state of BlackBerry the company, where we're talking about things like going private, we're talking about things like shedding the hardware business and becoming a service provider, they're basically positioning all their assets as they need to so they can go ahead and be flexible. If somebody wants to come along and pick up only the hardware business or they want to take BBM IPO on its own or something like that one day, all of this stuff is easily doable.
Rene: Again, I'm Canadian. I'm rooting for BlackBerry. I think competition is good. I think the more players we have in the space, the better. So far, fingers crossed. HP has expressed no interest in buying them. Hopefully that continues.
No, and I just came back from Korea. I just flew down there uninvited, and I figured I would try to broker a deal between Samsung and BlackBerry... Kevin:
Rene: That's how rumors get started. That's going to get blogged tomorrow. You can't do that, Kevin.
Sorry, is that a...yeah, well, no, I'm kidding. The conversation may have come up a few times, that that might be a fun idea. [laughs] Kevin:
Rene: All right. Well, I want to thank you because you literally, again, you got off a plane, and you agreed to do this. I really appreciate it. BlackBerry has been one of the biggest stories in the news cycle over the last couple weeks, and I really wanted your insight on it.
My pleasure. It's going to be very interesting to see how it goes. Same as you, Canadian. I'm always rooting for...the company...realist...what the challenges it faces, and as a company. Also, the opportunities that are there down the road if they get all their ducks in a row. Kevin:
Rene: To follow the ongoing saga of BlackBerry and to follow you, Kevin, where can people find you?
Well, you visit Kevin: CrackBerry.com. You can follow me on Twitter @crackberrykevin. Some people have suggested I'm going to have to rebrand my handle soon, so if you have great ideas, let me know.