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Older article: The Future of Retailing


16/1/2015 - A Word From Marketing on Master Quality Audio

This quote is from a What HIFI discussion with Bob Stuart about Meridian's new Master Quality Authenticated (MQA) system for rendering high-res audio in a space-efficient form.

Bob Stuart: "Nobody asks for low quality. MP3 was because the Internet had low bandwidth at the time. There was no such thing as a low-res and high-res vinyl record. Over 50 years, for the average consumer, the quality of the sound has gone down and down."

No such thing as a low-res and high-res LP? Really? I've heard a hell of a lot of variation between LPs. This is principally because of the variability of the recordings, the quality of the master tape used to make the stampers, and possibly there was also a conscious decision made on the part of record companies in the 1950s and into the early 1960s to EQ their recordings to compensate for radiograms often having boomy bass and insufficient treble. How else can one explain the sharpness and bass-lightness of many older records? I've heard this on CBS, DGG and even Mercury from that time.

In the late 1950s, however, Decca undertook to record the entire Wagner Ring Cycle with Solti and the Vienna Philharmonic. They built a completely new studio for this in Vienna, and succeeded in capturing such good sound that it has been the benchmark version for decades, reissued on CD and remastered several times.

That's not to say that all LPs from the 1960s are poor, but there are plenty of examples. The other day I put on a nice looking 2LP set of the Bach Orchestral Suites, Telefunken, with Harnoncourt conducting the Concentus Musicus of Vienna. The box claims this recording won a Deutsche Schallplatten Preis and a Grammy Award. It now sounds thin and unrewarding despite being well performed.

Examples are easy to find. Take that mainstay of the demo room from back in the 1990s - Earl Klugh. The album Two of a Kind that he did with Bob James has better sound than the other Earl Klugh albums in my collection.

Direct-to-disc recordings from Sheffield Lab, Eureka, and other companies ( Direct Disk, Crystal Clear) gave us improved clarity, presence and dynamic range. Mobile Fidelity gave many recordings a working over and reissued them on heavy pressings which vinyl fans loved.

So, getting back to Bob Stuart's rather sweeping statement, the one bit of it that I completely agree with is that lossy MP3 was seized upon due to the inadequacy of the internet at the time, as well as the smaller onboard memory of the early portables including iPods. The marketing was very much along the lines of how many tracks rather than how good it sounded.

But LPs were and remain a pretty variable commodity. Then that last bit about "Over 50 years, for the average consumer, the quality of the sound has gone down and down." No, it hasn't. CD in the early days wasn't as good as it is now, but it was for the vast majority of consumers preferable to their noisy LPs. This was partly due to the lack of surface noise, but also the stronger output, better stereo separation, signal-to-noise and dynamic range.

Then along came SACD. This is still around, but has not had the enthusiasm heaped on it that we now see accumulating on this wonderful new thing called HD Audio. SACD is HD Audio. Always has been. So was DVD-Audio. Both stalled in the marketplace. Having two competing systems is never a good thing. But also, unless you had a really top class system, the improvements in SACD may have been difficult to hear for "the average consumer". Players were also more expensive for some years, until gradually the universal player became commonplace - they could (and still do) handle all the major audio formats, CD, SACD, DVD-A and DVD, plus nowadays Blu-ray.

Apart from lossy MP3 variants, the public has been well served by CD and by subsequent things if they chose to use them. Downloaded or streamed audio has also improved to the point where iTunes is now 128k, and I can have Jazz Radio at 256k, Spotify at 320k. This is not "down and down" as Bob Stuart alleges, but there have been poor branch lines.

MQA (Master Quality Authenticated) will be a success, I'm sure. Meridian's MLP (Meridian Lossless Packing) is widely used under license, and there's no doubt MQA will be too. But I had to take issue with those sweeping statements, as much in the service of the marketing department as was "perfect sound forever" about CD all those years ago.

SEE ALSO HD Audio Update - Doubts Expressed on the HiFi & Home Theatre page.



Time For Top Gear Hifi?

For years I've been observing the ways things are sold, and the advance of technology in the selling business. I've touched on this next thing before, but really, it's time! Time for what? Time for a home entertainment technology show along the lines of Top Gear.

The phenomenal success of Top Gear owes much to the personalities involved, but that need not be an insurmountable hurdle for a show about hifi and home theatre (as well as other aspects like multi-room and home automation) to cope with.

We've also seen great rating for shows about home improvements, which adds confidence to the proposal that this would be a popular show. It can be done in a studio (or someone's well set up listening room) as a panel show, which makes production relatively easy and not as expensive as shows which require a lot of location shoots - which Top Gear does.

The basic format is not hard to come up with. A main segment would be the product shoot-out between (for example) several amplifiers, surround receivers or speaker systems. The panel will include three experts - perhaps one from a hifi magazine (well respected editor or reviewer), one with retail background, and one with nuts & bolts industry experience on the manufacturing, wholesaling and marketing side.

We, the viewers, will see them listening, watching, assessing and explaining the pros and cons of the group they are covering this week, and while we may not be able to fully hear or see the subtle differences, even with a good home setup, this is not a problem. We can't feel how a car handles either by watching Top Gear, but we can get their firsthand commentary and be taken along for the ride, so to speak.

Just like the car industry, there are new models coming through year after year (in fact every week or so!), and things will always be evolving. Part of the show may be telling the viewers just what the implications are of the impending upgrade to something like 4k screens, just when we're all getting used to the 2k standard offered by Blu-ray and HD TV.

There's plenty of scope for variations in the type of gear being covered. Stereo, Surround, Projectors, Flat Panels, Speakers, Subwoofers, Online Music Services, Wireless Technology, Home Automation, Systems large and small. There is plenty of material, enough to be going on with forever. Magazines cover this market, just as car mags and bike mags cover theirs. But nothing trumps video these days, and all the pieces are falling into place for new content to be most welcome - it's accessible so many ways, and all that "air time" has to be filled.

What's needed is either a TV channel to be involved (risky as they would probably skew the production too far towards "low common denominator" audiences) or a private film/tv production company to do the groundwork and sell it on to the TV or cable people. What do you think? Comments to me via email (see website home page) or via Facebook.



October 2013 - Out Of Thin Air

We've started minding our (now one year old) grandson a couple of days per week, and I couldn't help but wonder what entertainment technology is going to look like as he grows up. At the moment he's happy with the usual toys, and things to chew on. But just as my son quickly adapted to the emerging world of home computing and the games it offered, little Zac will be the beneficiary of the latest technology as it appears.

Being of a certain age, I can't help looking back before looking forward. My grandparents had no mechanical entertainment in their homes when they were kids. If you wanted music in those days, you made it yourself or went to a live venue. My father was born at the end of World War One, and his childhood included the emerging wonder of the wireless, which got going in the 1920s and amazed everyone. The electrical revolution which spawned radio also led to new forms of gramophone, with electric motors and valve amplifiers replacing the acoustic horns and Swiss Thorens clockwork motors of the WW1 era.

I was born just before the TV era commenced here, and the golden age of radio was still in evidence. Valves were giving way to transistors, making little portables viable, and they really took off. Tape recorders for home use appeared too, but it was not until I reached adult years that the cassette took off in a big way.

The rush of developments at the end of the 20th century took us all into the current world of digital music, home theatre, projection, large flat HD screens, multi-room transfer systems for both audio and video, and amazing access to recordings and movies via the internet.

Zac has been born into a quickly evolving world - we now have the google glasses, the cloud, the internet anywhere, and faster connections arriving by various means - even up to 5gb wireless one day! Just as the old wireless conjured voices and music out of thin air,so Zac will enjoy things which appear wherever he is. Devices will be increasingly part of a home's build rather than stuck on, or wearable. The wrist-band flexible OLED screen isn't far off.

The home of the future will sense where you are and bring whatever you're listening to or watching into that room without you having to do anything. Movies will become holographic and not need glasses at all. Soundtracks will be genuinely surround, uncompressed and not limited to five or seven speakers, but any number - active parts of the walls and ceilings.

Will he end up with a device implanted in his head so he can talk to anyone anytime without that clumsy old phone? Scary thought, but who knows how far things will go in his lifetime? Genetic engineering might one day tamper with our basic construction and turn part of our brain into a multi-media device, and internalise communications and entertainment. But that may be for Zac's children.

For now, best keep ourselves focussed on today, and enjoy what we have. When he's a bit older I'll amaze him with my collection of ancient gadgets, LPs, Reel To Reel, Valve Radios, HO Scale Trains, CRT TV, and so on. Then he'll amaze me with the latest gadgets as he grows up, possibly following in his dad's footsteps to become a product developer.



Drumroll - Our Video - The Unboxing!

A while back I suggested that there should be a TV show along the lines of Top Gear (see up the page, I've bumped it up!), not for cars this time, but for Home HiFi and Entertainment gear. Given that we now have HD channels and better sound possibilities, a panel of reviewers looking at the sort of stuff we're all interested in should have an audience.

Even if you can't get the full experience via the home screen and sound system - just as you can't feel what that car is doing on Top Gear - you get the benefit of the panel's observations and comments, and have the feeling of participating in the event.

We may be inching towards that new age, which I have been foreshadowing for a number of years now, but inching (millipeding? millimetering?) is the word, as today's example shows. I give you What*HIFI's short video unboxing the Sony KDL-55W905A TV!

This is not the most exciting show you're going to see today, but it's a harbinger of things to come, perhaps.

You see, I not only contend that Top Gear Hifi has potential as a free-to-air or cable show, but I'll go a bit further. Every retailer should have the facilities for good still shots of what they're selling, plus a basic video production setup. It's no longer prohibitively expensive to do these things, and while you might not equal the quality of a TV station, you'll be able to beat the many at-home guys who are doing this right now, every day.

Being in the publicity line of work, I know it's often possible to get shots off the manufacturer's website or photo gallery (dealer-only-access). But there are also plenty of times when you can't, and you often need a hi-res shot for magazine use. Web use is easier, as small pictures suffice. Given the quality of digital cameras now, they are not the limiting factor. A photo booth with lighting is. So, a bit of space, lighting and some backdrops are the main requirement.

For video, you can probably get away with on-location in store shots to some degree, but again a well-lit space and somewhere to sit the product while you point to it and explain what it does and what connections it has are the main things. The presenter has to be articulate and presentable too. If there's someone on staff with the style and confidence to do this, you're on a winner, as hiring talent has its own set of problems.

The finished product can be uploaded to You Tube and then linked to via your website, e-letters and any other means - facebook, twitter and so on. It's all there to be used, so every shop should think about it seriously. It gives your store a higher profile, and reinforces that you're a must-visit proposition. Or they may just order from you online.


Easy Does It - The Pitfalls Of Entertainment Technologies

Buying hifi used to be easy when you just needed a couple of source components (CD or turntable, maybe a tuner), and amplifier plus speakers. The connections were simple, and anyone could do it.

Even home theatre started out being fairly similar, except for the extra speakers and subwoofer. Digital inputs and Dolby Digital Surround started to throw a few curly ones at the novices, but eventually they got the hang of it.

A few uglier scenes followed the introduction of HDMI, when some components didn't play well together, but that too seemed to settle down in due course, and HDMI became the line in the sand that everything had to cross in order to avoid looking old. At first having 2 HDMI inputs was good, but now it's not good enough unless you have about four more than you really need.

But now, for many older citizens it must feel as though they've been flicked through a worm-hole in the time-space continuum, and emerged in a parallel universe where a different language is being spoken, and they are bewildered by the multitude of ways that you can wirelessly or ethernet-ically send things from room to room or halfway around the world.

Even if you yourself are sent halfway around the world your most treasured files can be accessed via "the cloud", and things can be slung from home to where you are via various tricky programs. The publicity makes everything seem easy, with TVs so smart they know more than you do, and can provide almost anything on demand.

Of course there's a measure of hype about much of this, and the very telling aspect of whatever retail environment you go to shop in is this: does the shop have a wireless network operating, and can they show you how all this gear works?

It's easy to have a few throwaway lines that put people at ease when they want to believe that everything is made easy once it's wireless. There's a burning desire in the hearts of so many shoppers to have wireless everything, but particularly speakers, so telling them that something is wireless is half the battle towards gaining acceptance of a product.

Using wireless routers for the computers and tablets around the home is so much an everyday thing that people tend to assume that running a multi-room entertainment system must be fairly easy, and a smart automated home just needs a few more bits added.

So here are a few words of warning. The support for your new and oh-so-smart products is of more importance now than ever. These new systems are marvellous, but as I found in my own installation, even one bad bit of Ethernet switchgear can throw things awry, and it takes experienced operators to track down the real issue. If you're shopping at some box-mover who doesn't have an up-and-running system to show you, chances are the staff don't have the experience and expertise to ensure a good setup and set-to-work, or after sales support.

Secondly, the distributor backs the retailer, but in a lot of cases they are just too big to care. The specialist suppliers, like specialist retailers, put a lot more effort into trouble-shooting, fixing up teething issues and ongoing support.

If you're thinking of full-scale home automation you're going up another level or two, and this is where commercial standard networking comes into the picture. The demands made on the network go up markedly when you progress from multi-room music and streaming a bit of video, and things are happening all the time from numerous parts of the house, all weighing on the efficiency of the network to handle it.

It makes more sense than ever to choose your retailer with care, and make sure that the systems you get involved in are robust, thoroughly tested and well supported.



Modern design by wmkarchitecture of Eastern Creek

The Big Squeeze

With all the disruption to business models that's flowing from the growth of online selling, it's time to have another look at where the future lies for the importation, distribution and retailing of the sorts of consumer durables we here at Home Entertainment Australia know and love.

Years ago I said that the distance between the manufacturer and the consumer would shrink. This has happened quite noticeably with the growth of direct selling by companies like Sony, Bose, B&O, Apple, Samsung and various others.

Retail margins have been squeezed to breaking point on televisions, but so have the margins back at wholesale and manufacturing levels. We've seen Fujitsu, NEC and Pioneer vacate the TV marketplace here, while profitability remains elusive for the remaining players. Panasonic is rumoured to be planning to exit from the Plasma TV market in a few years, and there's no shortage of producers posting losses on LCD/LED sets either.

Some Hope Remains

But there remains a niche market in the higher levels of the Audio & TV marketplace for the retailer. Brands which are not so mass-market, brands which require better training of staff in order to demonstrate and explain them, brands which command a premium and for which there's enough of a market to justify the whole string of resource inputs, from importation through warehousing and onwards to marketing, then backup and warranty matters.

These are things that buyers may still read up on before taking a closer look and listen, but they are still things which customers are more comfortable buying after a look, listen and touch session. It can't be done satisfactorily in a department store or open plan environment, and certainly not in any mass-market box-moving chain store setting.

Costs vs. Sales

But just as difficult are the economics of running a boutique store, a specialist store, where the merchandising must be of a higher calibre, demo stock available across a wide range, the listening rooms plentiful and fairly sound-proof, the staff knowledgeable and the sales maintaining enough margin to justify all the inputs.

Time and again sales staff know that they can be undercut after the demo by what has become a cut-throat market, with online sellers or other retailers prepared to take a customer's decision to buy and work the price down in order to get a no-effort sale at whatever it takes.

It will get to the stage where wholesale and retail will have to be more "telescoped" or merged. Maintaining both the wholesale margin and the retail margin is now very hard, so savings in one or the other, or both, is the result. How will this look, as that blending develops?

The Vision Thing

My own vision draws upon the models we see around us, extracting bits of each to arrive at a new blend of warehousing, display and retailing. This might be dismissed as fantasy, or unrealistic, but I remain driven towards this imaginary model each time I try to reconcile the forces now distorting or "disrupting" - the current favourite word - things as they stand .

Start with a large white industrial unit, the exact size doesn't matter. Sort of a big tin shed with some public access doors and windows would do, subdivided internally. It needs to have good access for bulky goods delivery, warehousing and dispatch, and adequate car parking. The objective is to have one location which optimizes rent, customer access and movement of goods. It might have to be carefully located where property values allow, and if there's only one in Sydney, somewhere between Silverwater and Parramatta for cost and central location considerations.

Inside this large shed, a proportion is devoted to warehousing and technical support.

There would be an administration suite of offices within the building.

Between warehousing and retail lies a backroom area which is growing and has to be encouraged - the online or mail-order sales section. All products can be packed and dispatched daily, on receipt of orders via the website, by phone, mail or email.

Promotion of products should be via audio-visual presentations, and a basic in-house video and commercial photography capability should be established. See "Time For Top Gear Hifi" below. At least use You Tube for video promulgation, then these can be linked to in the business's own online publicity at no extra cost.

A "supermarket" section would have rows of product ready for cash & carry to the checkouts. Pricing has to be keen, and hence the combining of wholesale and retail.

Listening rooms and home theatre rooms would be adjacent, but they will be minimally decorated, purely functional, and audition time limited strictly during peak periods.

Where installation and "custom" solutions are offered, these should be standardized as much as possible, right down to purpose-designed cabinetry, and wherever possible sub-contracted out to known installers who will do a good job and absorb the workload of the minutiae of post-sale install and set-to-work.

A cafe is also a great idea, and I'd love to incorporate a museum section of "hifi through the decades". This makes it more of a "destination", rather than just another shop.

Get Big or Get Out?

There's a critical mass below which this integrated plan will not work. It may be feasible as an independent importer/retailer, but it would be more so with the backing of a larger importer. Being able to offer a range and to have that range readily available at competitive prices with a minimum of fuss is what counts. Efficiency in the total operation is crucial to the cost structure remaining profitable.

Ikea and Bunnings are two of the places you can go and see proven models humming along. In some sections they offer things that only they carry, while in others they have run-of-the-mill things. They rely on large range, good pricing, self-service, minimal décor, easy parking, quickly in-out.

Home entertainment products need to be a step up from there in presentation, but not so far up that the numbers of customers shrinks to Tumbleweed Junction scarcity. The halcyon days of the 1970s and 1980s may be over, but there's still a case to be made for a stratum of retailing that sits above the chain stores like JB/Good Guys/Harveys, but not so exclusive as to limit the demographics that flock in.




Made In Japan?

Salesmen are still asked often about hifi gear "Where is it made?"

There's been no change to this answer for ten years. The vast majority of consumer electronic equipment is made in China, Taiwan, Malaysia, Thailand or Indonesia, with China still the major source.

A more relevant question might be "How good a factory was this made in?"

The quality of the components and the methodology of assembly, followed by quality assurance (testing) are all part of the mix which sees things turn out well or not so well. The production line might have a human element, or it could be fully automated. In this age of worldwide communications via the web, Sonos components rolling off a production line in China will communicate with HQ in America automatically, giving a full diagnostic report before they go in the box. Sonos is a highly reliable product, and suffers not a jot by being made outside of the USA.

That's not to say there have been no proplems. Without mentioning names, I know of one popular hifi brand which has never been made in Japan over the past 25 years, and during the 1990s had more than its share of breakdowns. Another brand which went from Japanese build to Chinese after 2000 had some embarrassing failures too, but more recently has become highly reliable again.

Then again, back in the 1970s and 1980s I had various cassette decks which had problems despite being made in Japan. I'm actually old enough to remember when Japanese products were really cheap and nasty. They really only started to achieve their great reputation from the 1970s onwards, and by the 1980s were producing some very good gear. Turntables by Technics and amplifiers by Luxman are still sought after despite their age. By the 1990s the Japanese were right up there, with audiophile quality CD players and fantastic amplifiers from companies like Accuphase. But they came at a very high price.

As wage rates increase, the pressure to build offshore becomes compelling. In an international market, with everyone knowing what things cost here and overseas, price is sensitive and must be controlled if manufacturers want to remain competitive. This has long ago spelled the end of electronics manufacture in Australia, and for the most part in England and Europe, as well as the consumer electronics segment of the USA. Japan still has production facilities for various products, and you can still buy the more premium products in Japan which are made in Japan. Some of these will find their way to the Hong Kong or US marketplace, but you'll see little of them here.

My interest in pursuing this line of discussion was kicked off again recently when confronted with a customer who demanded that I show him nothing made in China, because they oppressed their workers. There's no doubt that workers in China will have poorer conditions than in western nations, but the overall drift of the Chinese economy is upwards, and the middle-class is growing. The additional demand that the system be compact but sound as though it was large is something we're used to. No problem if you use good quality satellites and subwoofer, and a main component which combines sources and amplifier.

So what system can one recommend to such a customer? It has to be Naim and Focal.

The Focal speakers are (mostly) made in France, while Naim have been one of the holdouts in the UK who still manufacture there. They would have been on the brink of moving offshore, I imagine, before the two merged. Yes, Focal and Naim, both strong companies in their own right, saw advantages in the merger and will benefit from technology spin-offs in both directions. It will also help Naim to remain "Made In UK". Add a turntable? Fine. Rega (UK) or Linn, or Project (EU) can do that for you!

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Empires Rise and Fall

Old Empires are said to be at their most dangerous at the point where they are collapsing, as they thrash around the geopolitical landscape. Historians might point to the Austro-Humgarian Empire, or the Germany of the Kaiser, which rippled on all the way to WW2. That may not be true of all of them, since the Soviet Union went down with minimal fuss twenty years ago, and the British Empire faded out over fifty years, still waving the flag and with a pink gin in hand as the ship went down.

Techno-empires come and go with greater or lesser impacts too. As Steve Guttenberg has pointed out, Sony was once what Apple is now, a dominant producer of innovative and cutting edge technology, posting amazing sales. He lists a number of their products which fell flat, although I might disagree with the reasons why some of that happened.

Minidisc didn't fail because MP3 players were better; those things weren't really a force in the market until later. The crucial thing with MD was that to most people it sounded just as good as CD, and was recordable well before CD was. I had an IT friend who cheerfully transferred his CDs to minidisk and gave away the CDs, perhaps a little precipitately, but such was his audiophile assessment of the utility of MD. My view was and remains that MD was a threat to CD, and it seemed to get insufficient industry support at a critical time.

This has not stopped it from remaining useful, and used machines fetch far better prices than a lot of other superseded technologies.

As we see Microsoft going to the market with Windows 8, we're reminded that it too was the biggest success in the computing world through a virtual stranglehold on operating systems and office applications. Before that, IBM dominated business computing.

Of course you can only go on charging exorbitant prices for operating systems and applications in a world that has insufficient alternatives on offer. This is no longer the case, and Windows 8 will be cheap compared to those releases of yesteryear.

Bill Gates was a bit slow off the mark in recognizing around 2000 that it was all about the internet, after being rather uninterested in 1995. With Windows 8 and more emphasis on tablets, phones and mobility, they are getting on message again. The major record companies were on notice from the late 1990s that a new way of distributing music had to be embraced, but didn't do it.

So a company that got all the messages and acted upon them has become not just a computer company, but a multi-media force to be reckoned with. Apple's annual income is in the order of $36 billion, and many of the others are still in catch-up mode several years after the iPad succeeded in changing the game so decisively, as did the iPhone and the iPod before that. There is an area that Apple didn't quite get, but are apparently still working on, and that's streaming music services, perhaps in the form of Internet Radio. We'll be watching that development with interest too.

In the meantime, here's Ars Technica's report on the Windows 8 Launch event, with some hands on, and pictures.


Why Wireless Speakers Have Mostly Failed

Are these speakers wireless? One of the most often asked questions of sales people, and in this age of wireless everything, a reasonable one. We may be on the verge of being able to reply "yes, they are fully wireless, and yes, they are quite good'. To date, that hasn't been the case.

When they say wireless they really mean no wires, neither speaker wires or power cords. It has been possible for a couple of years to get speakers like the Sonos PLAY:5, but it does need power, and it also needs you to have another piece (the Bridge) connected to a home network and to have set up the Sonos operating system on your computer. It's a good system but understanding it and having the right network setup is a "bridge too far" for some. Just yesterday I had two customers in a row who couldn't get their heads around the way the system works, and I don't usually have that much trouble explaining it. Sonos' push for mass market penetration will hit that hurdle a few times, particularly in stores where the presenters don't fully understand it themselves.

Why can't it be simpler? Well, there are several aspect that most people gloss over in doing that favourite mental leap of the browsing customer: imagine a product and expect it to appear. There are three critical parts of this new product - not exactly new, they have been marketed since the 1990s in some form or other - and they can derail the operation if not up to scratch. Power, Data Transfer, and Sound Quality.

To be truly wireless a speaker needs to have a substantial rechargeable battery pack and to be able to operate for at least four, and preferably six or more hours without a recharge. Having to have a power point out in the yard is not going to cut it for everyone!

The battery has to be able to drive not just a teensy speaker akin to a desktop multi-media toy, but a larger speaker with 6"/15cm - 8"/20cm woofer to generate some bass. This is the power-hungry part of the spectrum.

Getting the sound from inside to outside, or from one room to another, needs to be done without "drop-outs" and in a form that reconstructs the music to a good audio standard. If the system drops out as often as some mobile phone companies (no names!) poor coverage entails, you're sunk. If the music arrives at poolside sounding like a WW2 PA system, you're sunk again. Modern wireless systems have reached a point where the audio quality is not too bad, at least for this subsidiary purpose if not for your main listening.

The final hurdle is the speaker system itself. One of the reasons people continue to urge us to supply wireless speakers is that they've seen them in use as rear effects speakers in those one-brand surround systems for under $1000 - sometimes well under! Yes, it has been possible to construct cheap, lightweight, plastic eggshell rear effects speakers that have a limited role for some time. But you're not going to sit and listen to music on two of those. Building a decent speaker is still not a cheap exercise, so the quality of all the "speaker bits" remains critical and adds to the cost of the whole system.

You might be getting the impression that I haven't been too impressed with wireless speakers to date, and you'd be right. There have been exceptions in the sense of some of the better Bluetooth linked devices and Yamaha's proprietary wireless system, but these are mains power connected as a rule. Arcam's RCube is a good example of a respectable audio product that meets all the necessary criteria for wirelessness - except for those times when it refused to play for me, and embarrassed me in front of customers! But it has generally been praised for good audio quality and having dock plus wireless streaming capability.

New entrants to this area will continue to be featured on our Products page (see also the new B&W A7/A5). I've done something on the Cantons, and notice that even Dynaudio are doing some, but at a higher price, of course.

In the wireless speaker race, much has been requested, but less has been delivered. If it's to be done properly it is not cheap. But I think we're about to see a lot more of it.

Content Is King

Getting music and movies to your home via the web is now a fact of life. There is plenty of evidence that people are moving quickly towards watching web-sourced video on their large screens that a while back would have been watched more on PC or laptop screens. While there remain some practical issues regarding downloads (more about this below), the big players have already moved on, and how the content is organized and who collects the fee for its distribution is now the main game.

Samsung has announced that it is going to get into the content business by buying up companies who are already doing it rather than start up new ventures. They say it's to drive hardware sales rather than for revenue directly, but there must be some money in it for all the others to be so interested in streaming music and movies in a frenzy of activity.

Apple is rumoured to be looking at a streaming service - no wonder, when others like Spotify and Netflix are leading the pack in that area.

The remaining bump in the road for us in Australia is the monthly download limit, which has freed up considerably but still has some way to go, along with speeds in the regions, before the brave new world of "everything available anytime" becomes reality. Netflix has had similar issues in Canada according to this story, and have had to adjust the compression rate of downloads to suit Canadian consumers! This has an obvious downside for the picture quality, but that's how it is.

Everyone can say glibly that our rather expensive NBN will fix all this, but progress so far has been slow, and there's a long way to go before it becomes the cure-all. At the same time, many of us are juggling the mix of mobiles and copper pair landline phones, with a large slice of Telstra/Foxtel high speed broadband while we await further developments. I'm not quite ready to ditch the phone landline, but it's going to be trashed anyway, one day. The broadband cable will be fine until NBN shows up at the door, in perhaps five years time.

Mobile service via Telstra is pretty good, but I remain amazed at the poor coverage by Optus and its clients like Vodaphone and Virgin. Wireless would be dead in the water if that's all there was!

Data via wireless remains way too expensive to be useful as a home service. All the bits and pieces of our communications system, new and old, are circling like space junk, and gradually some will fall away and burn up, while others will go on to greater things. But everything is just a gadget without the all-important content. Content is King.


Online Movie Services

"Australia is in the dark ages when it comes to online video on demand services, with users tied to redundant cable TV subscriptions or forced to pay high prices for new content."

So says Campbell Simpson in his article "Australia: a video on demand backwater" at Good Gear Guide.

It's hard to argue with that summation. He points out that there's been a revolution this year in music services, costing from nothing up to $10 or $12 dollars a month. Netflix is $8 per month for all the movies you want, but you can't yet get it here legitimately. To set it up, you have to fudge it through a masking site that costs $5 per month, then you can be like Americans and enjoy the same level of service for the further $8 per month, total $13.

Renting just two movies a month via iTunes or other local pay-per-view services costs up to $14 depending on the individual titles and whether standard or HD quality. So the big question is why are we a backwater? If they can crack the music brick wall, even though it took a while, what's the holdup with movies? Is it something to do with local rights, or is it our smaller population?

I have to be brutally honest and say that I'm not about to pay even $4 per movie to do a retrospective Oz Film Festival at my place. Too many of them are more Dead Dog than Red Dog, and I'd end up Waking In Fright at the accumulated waste of perfectly good cash. If the makers of these long-forgotten films are holding out for more money, forget it. The best chance most of them have of being watched at all is as part of the all-you-can-watch monthly plan of companies like Netflix. The Cars That Ate Paris will rust in the scrapyard until then.

Here's Campbell Simpson again re Foxtel:

"Like the iQ-based service, On Demand on the Web and Xbox is subscription-based, but here's the problem - there's no subscription purely for online. To use the On Demand website, you have to be a fully-fledged Foxtel customer with an installed cable connection and set-top box.

So, for example - If you don't want to pay Foxtel's $45 a month minimum, plus $16 for the Movies package, plus $10 per month for HD, plus a $150 one-off HD fee, plus a $100 setup fee, you're not able to use the On Demand service …"

So the situation is that we have plenty of online music services now, including Spotify, but the sole movie provider is Quickflix ($15/monthly) for unlimited in standard definition only, and not great quality, while new releases are still at $6 for 48 hour rental.

I know this will change in time, but it is a mystery why these things take way too long to happen. In the meantime, I'll review some movies from time to time, such as "South Solitary" with Miranda Otto. Click that link to go to the Movies page.

Focal Maestro - I've heard them, love them!

What Will You Buy Online

Where are we up to with the online revolution? What are people prepared to buy remotely and what do they still want to see, touch or have explained by a store?

You can now buy "virtually anything" online. But what are you comfortable buying? For me it's certainly books, music and video, and known quantities in devices like watches, cameras, phones, an iTouch or iPad, computer gear that I've researched, or other electronics that I know will do the job - provided it's from a seller I have trust in. My wife buys a line of cosmetics that aren't widely available.

But good amplifiers, speakers, projectors, any high performance audio or video item are in another category. I want to know what they do, how they look and sound. Customers often want to actually hear them installed at home with their own system to confirm that they are an improvement over the old stuff, and that the sound is what they like. One man's "incredible accuracy" can be another's "bright as hell", or his "warm and comfortable" can be your "dull and lifeless".

Dealing with a reputable store is still a superior way to buy premium products. One might ask why should you pay more for that process? The simple answer is that it costs heaps more to provide the venue, the display stock, the staffing and the backup. Why should a retailer even carry those items if in return for going to the extra expense of the stock, facilities and staffing he gets the same return as the guy operating out of a warehouse purely as an online entity?

Asking a bricks & mortar seller to match an online price is common these days, but it's hardly fair. The time may come when we all have to buy some other way if we make it impractical for stores to do demos and look after us in the many ways they do.

You can take my word for this, though: the Focal Maestro is the best $59,000 speaker I've heard! It is truly magnificent and can do just about anything. Order with confidence!



Share A Meal, Share An Eyeball

What is a really "core" line of business? Food. The aggregation of our grocery stores into two dominant companies, the roping in of petrol, the creeping "home brand" takeover of so many products, are all indicative of the will to control a surefire money spinner. Years ago I registered that marketers were talking in terms of "share of stomach". There's a certain amount of it out there, and you can go after a slice of the pie, or grow the pie - and in doing so grow the pie eaters into obesity and diabetes.

The other sure bet in the daily round of activities of the human species, at least in countries with electricity, is the daily consumption of TV, or these days any screen, including computers: desktops, laptops, tablets and phones. This is a market that might segment into what you might call the "share of eyeball", since viewing has become not just (as in the olden days) a movie or two a week, but an essential daily dose of Facebook, YouTube, and whatever shows you want whenever you want them.

It was an arresting moment for me to find that, in order to sign in to Spotify recently, I needed a Facebook account. A year ago I didn't have one, and wouldn't have thought it any great loss. This exemplifies the same sort of push to aggregate businesses with a common purpose. In this case not to get all your food shopping done at one store, but to get all your entertainment consumed through a cartel of content providers.

While Foxtel still has the cable TV thing sewn up, it is feeling expansionary and is even offering startup accounts with no fixed period contract - for those of us who are "having trouble committing". This reflects some anxiety on their part that market penetration or share of eyeball isn't what it could be, and I've said before that some freeing up of their plan system would be a good thing. Offering just the starter pack is something, but ultimately they'll have to move towards an "all you can eat" package for a much lower monthly fee. The music people have all worked that out already.

They've also worked out that the most powerful force in marketing these days is the peer social network, what we used to call word of mouth. No better recommendation than that, whatever it is you're selling. What is going to be interesting to see, is whether the alliance of Facebook and Spotify, the two leaders in their respective fields, eventually gives the newcomer a dominant role in online music consumption here, where a few others have a head start. It seems likely that they will succeed, and it is part of the new online paradigm that social networks add octane to business models.

But the really big question being asked all over the web now is what impact the online library model is having on Apple's iTunes, and in due course how a service like Netflix will impact on Foxtel, not to mention the bricks & mortar rental shops. I'm sure the pay-per-view model's days are numbered, just as surely as Foxtel's high monthly charges will become unsustainable with a year or two of Netflix starting up. Perhaps their fixed term contracts are already done for. Everyone knows that technologically what has been done with music can be done with video, the dam will burst one day. Then our main problem will be avoiding becoming obese lounge lizards as we summon a show to the screen via the iPad app, and a pizza to the front door.

Give Up The Internet For A Year?

You've heard of people deciding to go without a mobile phone or to not have TV in the house? Go without meat, give up something for Lent? Here's a new one, and it's pretty thought-provoking: Paul Miller, a tech writer, has decided to give up the internet for a year. Not technology as a whole. He can still use an ordinary mobile and a computer, but nothing that uses the internet for so much as an email. He's getting a PO box and a dumbphone.

He doesn't know if he's going to make it through a whole year, but that's his challenge, and he'll be writing about it for The Verge website - but he won't be sending in his copy via anything more techo than a key drive. Already the comments on that linked page have a run the gamit of "what an idiot" through to a long interchange around Christianity and porn. It will be fascinating to see how long this lasts, and whether there are lessons to be learned about how we use the internet valuably instead of simply wasting time. It will at least make me reflect on my own usage and evaluate each area. There's no way I'm giving it up, but I'm prompted to make a checklist of the pros and cons.

Thinking way back, the first time I made a copy of a game program on my Commodore 64 I said to myself "Uh-oh, this is amazing, and the whole computer thing will turn into the Tree of Knowledge." In those days it was just bulletin boards! If you have to sum up briefly what the internet now means to you, it probably boils down to Information or Entertainment. How Paul Miller is going to do his research in order to write about up-to-date developments is the first thing you have to ask. Everyone used to depend on monthly specialist magazines for updates they now get 24/7.

Humans are obsessive creatures. Whatever we devise, we always want to take it further, and then a bit more, and find out the limits of what's possible. Having invented the wheel, "personkind" did not stop until the motorcar was fully developed, whereupon we made the Prius! Not everyone regards this last one as progress. The internet started out as a way for sharing academic or military info in simple form, and has gone on to become the World Wide Web, the conduit for all things. It can be used for good or evil (sorry about that, Google Guys), and our use of it can be frivolous and time-wasting, or productive, meaningful, even self-improving. We may not save the world, but we can dream of making something happen that would never have happened without it, even if it's just publishing some art or literature, music or musings, on our blog.

That obsessiveness has taken the internet into every nook and cranny of our existence. Paul argues that it has gone places it maybe shouldn't, although that remains to be defined. Not content with having access via our phones, Google now proposes to augment our view of the world by having an internet-enables set of glasses that add a Heads-Up-Display to our vision, picking out landmarks and tagging buildings. Is this a step too far? What about the social network phenomenon? At what point do we decide that enough is enough, and stop putting ourselves in the shop window for all the world to gawk at? Then there's the identity theft angle.

So what impact is this crazy man's project going to have on you and I? Well, I'm going to follow his scribblings and see what comes of it, but I'm also going to do a little audit of my own usage and see which bits are out of control, which habits need to be dealt with and put in the sin bin, or at least limited. I spend way too much time reading other blogs and commenting, and too much time looking at Ebay and tempting myself to buy stuff I really could go without. So there's a start. But I value the easy access to information too much to even consider going without. Let's face it, we're all hooked.

(To be continued)

In One Hot Tech Area I'm A Phony

Or should that be non-phony? It's a fact of life these days that the bulk of techno-babble online tends to be about phones. Maybe I'm looking in the wrong places, but I think it's just one of those things - people are all on-the-go so much that the phone keeps them in touch and also helps pass the time when stuck somewhere like an airport terminal, or doctor's waiting room, etcetera.

As a business tool it is essential for many of us: keeping on top of a whole list of commitments, the daily round of question and answer, seeing and replying to emails while being out and about, whether you're a mobile rep or a suited executive, flitting from office to office, meeting to meeting, it's all just part of the day. Then there are the social aspects, the music on the go and possibly even some games.

Depending on your age group and job, the need for a really gung-ho smartphone will vary. I have to declare that it just doesn't work for me. I spend most of my working hours in front of a desktop computer whether working from home or the office. In both cases I have a landline within reach. To make it worse, mobile reception at work is lousy!

I suppose I could get an iPhone or a Samsung Galaxy S, Nokia 808, or an HTC Multiple Orgasm, or whatever name they have for this week's model. But I'd be doing it for all the wrong reasons. It'd be to look with-it, keep up with the mob, show off my immediate access to Google Maps or somesuch. Perhaps a bit of FaceTalk. But to be perfectly honest, it's all a bit of a yawn. Unless I actually have a business reason or come into a lot of money, I won't be spending upwards of $50 per month to look smart. My basic Optus plan is perfect for a stick-in-the-mud flip-phone user who hardly ever makes or gets a call. $9 per month includes the first $5 of calls, and I don't go much over that. Sad, isn't it? But in the end, this site is about "Home" Entertainment, which has little if anything to do with phones apart from the fact that they can make good remote controls these days!

I just have to accept that it's one of my blind spots. Sorry about that. But fortunately there are plenty of other things to talk about here. No problems finding uses for the iPad - in fact had to buy one for the wife as well, or I'd never get to use mine!

UPDATE: I've been using a Samsung Galaxy Ace for a while now. Has it changed me? No, still a bit of a yawn unless I'm stuck sitting somewhere (doesn't happen often) and there's good reception and I can read a bit. Maybe the mooted Apple iPhone for el-cheapos and third-worlders will happen and I'll discover a whole new paradigm, but at their usual prices it's just not workable for me. Apps I can get other ways.

NBN - The Ultimate Consumer Show?

There's no doubt that going to a good hifi store (now even rarer than before) and hearing for yourself what the gear can do is the way to shop. Not so easy if you live away from capital cities, and not all capital cities are well served either.

Infotainment like Top Gear succeeds on several levels, but one of its strengths is the comparative testing they can put cars through, giving you the opportunity to look and listen while they go through the pros and cons of several vehicles aimed at a particular market segment.

I can't see such a show working for good or even high-end hifi or home theatre gear as a free-to-air TV production, as it isn't mass-market stuff, much as we wish it were. But once there's enough broadband access around the country to facilitate a "live" show in good picture and sound quality, this becomes possible. While you still can't really hear the sound quality differences or see the subtleties of each screen or projector, having a trusted trio of reviewers take you through the process and give you the benefit of their judgements would be a meaningful session. Even better if you can watch at a mate's place who has a really good setup.

Compelling viewing? That depends on the people doing it. The approach has to be good, the products well selected and the conclusions not open to ridicule. It has to have both entertainment value and integrity. Magazines who already cater to this demographic have to be thinking about this now so they are ready to launch when the NBN makes it all possible. The shows might also be sold through Foxtel, but as I've said elsewhere, they don't have the market reach that the NBN will, and their pricing makes it difficult to achieve higher penetration than they have now.

So far the NBN itself has been targeted by claims that it is an overly expensive way to give people more movies and online games, but has no serious purpose. The medical side is overhyped, as you still need a doctor's time on tap for consultations. Institutions will use the extended bandwidth, households will use some, but in all honesty a lot of city folk already have enough for daily activites.

Bringing the regions up to a useful standard of connection is a good aim, and having some applications apart from basic entertainment makes it more worthwhile. Delivery of special interest programming is something that will help make the NBN worth the expense - we hope - and gives enterprising publishers (who must think about video production too) an avenue to pursue. The options are not limited to quality hifi and home theatre products, of course, but I use these because they are the primary concern of this site. The concept is open to all sorts of things, and magazines already have the product expertise on tap. They need to cross-breed this into the video entertainment arena.

I know I've been banging this drum for years, but it still appeals to me as a development whose time is upon us.

Innovation Fatigue

New iPhone, iPad, HomeTheatre Receiver, TV, you name it, every year? Is there a danger of consumers getting Innovation Fatigue?

I know it's mostly old fogeys like me who come into the shop telling you they've had their stereo for thirty years but now they reckon it's time to get a new one. The real world has changed while they were doing the decades, and we are now constantly skating close to being two moves behind all the early adopters when it comes to rapidly evolving gadgets.

Ipad 3 is due for release in March, iPhone 5 is on the starting blocks too, and so-called Smart TVs get smarter by the month, despite delivering more brain-dead "unreality" shows. I can, if I so wish, now have toll-free phone calls via the web on what used to be just an MP3 player. Video Projection has just moved to 3840x2160 pixel resolution ahead of any release format to match it. If we have our heads in the right place (in the cloud) we can access anything from anywhere.

Some aspects of progress can be characterized as frivolous, but there are genuine problems that need solving, and there's a chance that current developments include some positives that will really help, not just change for the hell of it. The buzz term now is Ultrabooks, and I sincerely hope that they do deliver longer battery life hence real, extended usefulness away from a power point. We've been through this before with phones and digital cameras. The early models were woeful, and gradually improved. It took years. Speed is not everything, but power is.

The iPad has worked because it addressed basic issues like ease of use, quality of screen and battery life. Sometimes it's the basics that matter most, not the leading-edge stuff.

Retail's Survival Plan

The closure of bookshop chains, and clothing chains, appears to be accelerating. We are used to discount electronics & whitegoods chains (other than JB!) contracting or disappearing entirely. Lowering margins has cruel implications for your sales versus profit equation, making you work harder to sell more but get the same net profit!

Online sales are in the news all the time, but we all realize that the leakage of sales from bricks to clicks is a gradual process, not an overnight sensation. But plans have to be made to diversify into the new selling space, and to be able to offer a deal that attracts people on price, quality and reputation of goods and seller.

Surprises are still in store (literally) for the unwary or habitual online shopper. I recently saw a computer monitor online that looked like a good fit and a good price. A bit more research revealed the same item on sale at a city store for less, and possibly also avoiding a $25 delivery charge. The cost differential in total could have been 20% in favour of the store. The last camera I purchased was researched online but I ended up in a city store, paying the advertised price, which was no more than if I'd ordered it from overseas.

The public cannot, however, continue to expect retailers to invest in shop fitouts, rental and staffing in order to be a demonstration facility that then misses out on either the sale entirely, or the profit margin required to fund the business. Just take a couple of items as examples: loudspeakers and musical instruments. I wouldn't spend any significant amount of money on either without trying them out, nor should anyone. You can outlay thousands on these things, and they have to be right. Where are you going to do that when you've sent the retailers to the wall by shopping them out?

Sony, Apple, Bose, B&O - have all gone into their own stores. Apple make it hard for anyone else to sell their products profitably (even though shops clamour to do so), having margins around 9% unless you're a huge reseller. The message is that stores are still good, but their future is tied to having brand exclusivity or even their own lines of product that are not in every similar store. Apple's concept of slick presentation and knowledgeable staff (up to and including "genius" level) has been so successful it is now to be used by J.C. Penney, with some help from the mastermind who did it for Apple.

Any retailer who cannot organize themselves into a range of stock which is profitable and not cruelled all over town and on the net has got problems. If possible, I'd suggest that there are several main elements to survival in the evolving retail environment.

Firstly, presentation and staffing needs to be appropriate to the product and to the price being asked. There's no point showing products in a palatial setting unless the customer is prepared to pay for all that. If you're selling low cost items at low margins then maybe Bunnings is going to be your template. The Good Guys use a minimalist approach, and offer a reasonable degree of assistance.

Secondly, don't offer stuff which is everywhere, because you're going to be undercut on price, and margins are your lifeblood. If you can, organise imported or locally manufactured lines (yes, that's difficult) that aren't available everywhere. Develop your own contacts in China if that's what it takes to have attractive products at the right price!

Thirdly, get money for your services as well as your consumer durables. Expertise is an asset, and while it generates goodwill to give it away for nothing, don't do it all the time. My air conditioning is never serviced for nothing, and they even charge just to turn up.

Last, reach as many people as you can via your website. Not everyone can get to your shop, and having something mailed out or couriered is a boon to many. Getting a website organized to make shopping easy is the main challenge facing retailers in the next few years. It might even bring people physically in the door, as I found with those purchases mentioned above. Failure to do all these things mentioned above will see sales shrink along with gross profit margins, and early retirement - or reskilling - awaits the unwary!

The Internet Has Your Number

by Geoff Forgie (2009)

I am as keen as the next person to maintain my access to the internet in the event that I move house or go to another district altogether. Like many others, I've come to spend hours reading about current affairs or watching small, low quality videos for their entertainment or information value. I consume slideshows on all manner of topics, like the excellent one I saw recently about the assembly of the Space Shuttle. Blogs give me laughs and links to all sorts of views about politics, and anecdotes relating to the human condition.

It has got to the point where I spend as much or more time at the computer screen as I do watching TV, including DVDs on the big plasma screen. It has to be a good show to drag me away from the relatively small BenQ monitor. I read quite a few articles on a daily basis, and see referred videos of all sorts. Newspapers are taking a back seat to the online editions.

Modern life is driving us to connect to all sorts of sites, some of which ask for more information about us than we really should be giving. It's one thing to have Amazon knowing what CDs and DVDs you've bought, and suggesting some other titles you might like. It's quite another to have nut cases sending you threatening emails, which has happened to some people on certain "social network" sites. The readiness of people these days to start up a Facebook page is interesting. We may want to share stories and info about ourselves with others, but I think it's getting a little out of hand. Harvesting information about you is a growth industry. It can be done at a relatively benign level for marketing purposes, but it can develop into a more sinister force. Identity fraud is a big growth area for criminals, and can be extremely damaging to the victims.

Update: See further article about privacy here.

Despite the negatives, you can't escape the fact that internet connectivity is going to be everywhere, and we are all going to have to live with it, and get used to doing more and more through that medium. Our next TV will have an Ethernet connection, our phones have it already. Even though our fridge is not yet connected, you know they're still working on that one. Cars will soon have multi-function screens to cover DAB+ Radio, GPS/SatNav, Rear-view Camera - and it's odds-on that internet browsing will be there too.

Video Cameras now boast "easy You Tube upload" as we increasingly seek to share our lives with the whole connected world. We communicate more readily this way than with our neighbours over the side fence. If you want to check on who's coming around your house when you're not at home, just dial into your ISP-enabled hidden camera and take a look from wherever you are. Link it into your computer and store video of whover trips the movement sensor. The time you can spend browsing the various archives of video clips and shows is unlimited, to the chagrin of the TV broadcasters and cable companies, who want your eyes on their product. Watching shows when you want to rather than when they are scheduled is now everyday routine.

Newspapers have established online presences for their mastheads, but the revenues from their paper editions is shrinking fast while their online activities do not bring in enough replacement business to keep them viable. My regular newspaper now has extremely thin Positions Vacant and Cars For Sale sections. I'd suggest that they get in touch with me and together we can create an internet site that keeps the readers coming back for more - you can see how the papers are putting more technology into their TV guides these days, and it follows that they need to do more with that online. I think we at www.homeentertainment.com.au could be a help to them!

The new "fast broadband" network which is proposed for Australia will, if it happens, change the rules for what can be done. With far greater carrying capacity you should be able to have not just faster downloads but cheaper rates per gigabyte. Otherwise we'll be hard pressed to afford the riches available. I'm hopeful though, that it will not only happen but will happen at a price that opens up new possibilities for the average user, not just the well-off. Home entertainment will then be able to go to a new phase of availability, with (I hope) everything that's ever been recorded or filmed able to be downloaded for a fee that is low enough to encourage daily use. This would serve the copyright holders as well as the consumers, as it would make piracy redundant.




Retail price Maintenance

by Geoff Forgie (2007)

A Time of Change

Retail has been undergoing major changes for the past decade with the growth of the internet. In the commodities marketplace there are the producers on one side, and the consumers on the other, with facilitators in between. Thinking about the decline of small business led me to look again at the impact of the abolition of Retail Price Maintenance. It is an interesting story, involving various stake-holders. On the surface it was a win for consumers, but underneath there are forces at work which might be classified as negative for employment and for range of choice in products. You might say it has underwritten the concentration of power in the hands of large retail companies, and may lead in time to the contraction of the number of players down to producers (who may also be merchandisers) and consumers. Some companies are already producers and merchandisers in one entity.

A Bit of History

The Trade Practices Act 1974 (the Act) was framed with the aim of enhancing the welfare of Australians through the promotion of competition and fair trading and consumer protection. Among its targets was unfair pricing. It is strange to consider now that there was a time when the maintenance of retail prices was normal, and that the ACTU had to wage a campaign of threatening suppliers to break down the price maintenance scheme which prevailed prior to the 1970s.

Bob Hawke recalls how it was: "For decades up to the early 1970's consumers in this country had been exploited by Australian manufacturers' ruthless use of the system of resale price maintenance. Under this system, goods were supplied to retailers on the condition that such goods were sold at the price fixed by the manufacturers. If the retailer attempted to sell at a lower price supplies were refused. As ACTU advocate I had argued to government and in the Arbitration Tribunal against the iniquity of this practice but without avail.

When as President of the ACTU I began the association with Bourkes' Store we had the opportunity of taking retail sales maintenance head-on. Manufacturers refused Bourke Stores supplies because the store insisted on selling at prices lower than those fixed by the manufacturer. Dunlop was one such manufacturer and with the support of our affiliates I told Dunlop that we would stop their business unless they left us free to set lower prices than they insisted upon. After a brief confrontation Dunlop capitulated. This was the end of the pernicious practice of RSM. In the event Australian consumers have been saved scores of billions of dollars. This was the triumph of collective action over collusive action.

http://evatt.labor.net.au/publications/papers/151.html

It's A Numbers Game

There are two perspectives, as usual. From the viewpoint of Hawke and the ACTU, and no doubt many citizens, it was an attractive proposition to suggest that goods could be made cheaper by doing away with those pricing arrangements. To this day, many people believe that retailers have large margins and that discounts of 10% off RRP are hardly scratching the surface. The truth is that many items sell through on a gross profit of 27.5% (typical for CDs, DVDs) or 25-30% on electrical goods such as hifi, while TV (plasma, LCD, Recorders, Set Top Boxes) might be as low as 10-15%. White goods and computer equipment could be even lower. One well known portable music player has a margin of about 9%. The operation of a store - not a big chain but an owner-operated outlet - is difficult enough on 25-30% margins, even without discounting. Why so? Because the combination of wages, rent and advertising will eat up a 25% margin before you start to pay the other incidental expenses of running a business. It is easy for those other expenses to eat up a further 5%. A 30% margin on gross sales is not excessive. It is what you need to run a typical small retail business turning over $1 million to $2 million per annum.

If you discount a product by 10% you have reduced your margin from 30% to 20%. Your rent, wages and other costs remain the same, so how do you benefit from this? Increased sales? Sales have to go up a lot to for you to get ahead. For example: say you normally sell 10 of a particular product per month at $100 each, for a total gross income of $1000, and a gross profit of $300. Next month you have a sale and sell them at $90, making $20 on each one. Sales must go up from 10 units to 15 units just to make the same profit of $300. It is only sales in excess of 15 which see you making more money in that month. Will a 10% discount get you that many extra sales? That is always the burning question. Mostly, it will not.

Any Mug Can Play

There are no "driving tests" you have to pass before becoming a retailer. No special skills to demonstrate. This is why so many retailers who lack the necessary skills can become loose cannons, and do damage to themselves and to other retailers in the same line of goods. By going the discount route they believe they are tapping into a sure-fire winner, but really they are simply tipping profits down the drain, converting profitable sales to unprofitable ones for themselves and their competitors alike. "Tough!" you might say. It's a competitive world and it's survival of the fittest. Let's look at the outcome of this competitive environment.

The big chain stores get preferential pricing from the manufacturers. They probably buy stock 5-10% cheaper than the independent retailer, or more in some cases. That doesn't mean they all routinely sell the stuff at 5-10% less! Pricing policy still varies from chain to chain. They can demand better pricing because they do the larger quantity of sales. If you are a manufacturer or wholesaler of a broad market appeal product, you need to get it out there in as many outlets as possible, and have the sales figures to show the boss at the end of each month. Just selling initial floor stock to a large chain can make your day (or month) as a sales representative.

Your friendly local family business gets no such across-the-board reduced pricing. They may get it on some things, sometimes. But they are operating at a disadvantage on price most of the time. You may have noticed that such stores are disappearing, as are the less canny chains - the ones who believe that pricing is everything and that they'll discount their way to fabulous success. In the end, the ones who remain will be the chains who give the impression of being cheaper, but who maintain their margin by a judicious balance of good buying, careful discounting, and effective promotions. There is another secret to their success - they pay lower rent than the smaller operator. Shopping centres want big anchor tenants and give them better deals on rent. Small operators pay the highest rate per square metre. There might be no great visible disadvantage in this, to the average punter. What are the downsides to this trend?

Ever-decreasing Circles

The main one will be reduction in choice of products. This reduction has been quite visible in our supermarkets for some years. Brands which do not offer the right price or incentive programs simply disappear from the shelves. Manufacturers and importers who cannot meet pricing targets set by the larger, stronger chains may also disappear. The failure of businesses to thrive is another downside. Relentless downward pressure on prices means more business operate in the danger zone, closer to going under.

A related problem will be the prices given to primary producers for their goods. Your milk is now likely to bear the brand of the supermarket rather than the dairy company. Returns to farmers are going down just as are those to the family-owned retail store. The underlying message to all businesses which do not have a niche product to themselves (and can thereby set their prices at a profitable level) is to get big, or get out.

At some point you have to face the fact that competition is actually being reduced. There are now only two principal retailers involved in supermarkets, and one of those is on the market, admitting that they are coming second. These big players also control a lot of other chain stores, and are becoming a force in the petrol and wine markets as well. Choice magazine had this observation:

"Coles and Woolworths have recently launched new 'private label' (aka house brand) ranges, and announced plans to increase the number of these lines in stores. Judging by the experience of retailers overseas, it's a smart move. Private labels increase profits for the supermarkets. They also provide retailer identity - the consistent product labelling a constant reminder of where you buy your groceries.

But for shoppers, supermarkets as we know them may never be quite the same again. You'll probably find that with these changes will come some savings, but commentators predict that some of your favourite, smaller brands may also be swept from the shelves to make way for private label products. If you shop at Coles or Woolworths, chances are you've already noticed some changes."

http://www.choice.com.au/viewArticleAsOnePage.aspx?id=105149

Predatory Pricing is the name for the use of discounts by a larger business to disadvantage a smaller competitor for as long as it takes to send them out of business. After that, prices rise again. The abolition of Retail price Maintenance opened up this avenue for anti-competitive behaviour. All of us can rationalise that we got a better deal on something because price competition was a factor in the market. You have to look a bit deeper to see the cogs working under the superficial "have we got a deal for you?" banners, and who is pulling the levers or pressing the buttons.

Another manifestation of this effect is the tendency of retailers to select their stock lines on the basis of residual profitability rather than ultimate quality. Once profitability has been destroyed by the cowboys discounting the most popular lines, the thoughtful retailer turns to other lines which may still have some profit in them. If he doesn't, he may as well just close the doors.

Conclusions

It is easy to be cynical about the real impact of the removal of retail price maintenance schemes and the championing of this process by the unions thirty years ago. The big battalions are still winning, and the small independent operators are struggling.

When it comes to the pricing of a really important new commodity - gigabytes of download per month: who is guarding this? The brave new world of video downloads will be stillborn if the rates do not come down soon. Our broadband internet service now costs us more than mobile phone services for a family of five - with neither used to excess. Each of the major service providers have their own way of packaging the download deals, but it all ends up being expensive - particularly for small business, which ends up paying far too much for this essential service.

I am forced to the conclusion that the abolition of retail price maintenance gave a short term thrill to the general public, and a long term open slather for idiots. In the long run it has not served the consumer well, or helped the employment situation - which in turn is the foundation of the consumer's ability to spend. This disincentive to small business was compounded by the 1980s changes to tax rules (such as fringe benefits) which had been a form of support or subsidy to small business. By the 1990s small business was bleeding badly, and it was no longer viable as a way to improve your lot in life. The added burdens of the GST and the accounting standards required in general were the last straw for many.

There has been a drift away from small & medium retail, just as there is a drift away from manufacturing - for cost reasons - into more service industry jobs. Big retail will survive a while longer, but in the longer term the distance between the producer and the consumer gets smaller. Ultimately, you can't tell Sony you can buy it cheaper down the street if it is only Sony who sells the stuff. Just as it is very hard to get past the base price of gigabytes of download unless there is an alternative service. Our dependence on internet services is going to increase as the retailers are squeezed out. See article on the Future of Retailing.

Apple have hit on two ways of handling this problem. One very effective one is to leave no room for discounting - a retailer working on 9% has no room to discount. And secondly, Apple are retailers too! Behold the future, here now.

Copyright 2007

Opinion Piece: Why Pay Retail?

For some time it has been out there - people say "I never pay retail", and seem offended if asked to do so. Consumer electronics, along with whitegoods, has gone down the discount road to such an extent that it might be irretrievable - at least for independent retailers in those lines of goods.

This attitude goes hand-in-hand with the user-mentality that leads quite a few to (i) get their listening to - say speakers - at a properly set up shop with listening facilities, rather than try and do it at a noisy megastore's open plan sales & display floor, then (ii) ask around every other retailer for the best price on their chosen model.

Specialist hifi retailers have for decades gone to extra trouble and expense to have auditioning rooms, and to have staff available to set things up and to advise customers on what might be a good short list of products to try out. There was a time when this investment was repaid via fair profit margins that were enough to cover the overheads, and even to allow for the shop's improved fitouts, over time.

Now those specialists have to match the lower pricing while still maintaining the more expensive presentation and facilities. There have been plenty of examples of stores closing down, or retreating to a warehouse in order to operate a virtual shop via the internet, selling on price. Those that remain in physical stores may now be questioning the wisdom of any further upgrades or large investments in shop fit.

Apple, Sony, Bose & B&O are all examples of manufacturers who sell direct to he public through "one brand" stores. They have the wholesale and the retail margin added together in order to pay their overheads, and nobody is going to beat them in the price matching game. One way for them to make sure their retail outlets aren't going to undercut them on price is to make sure there's only a very thin margin at the retail end, not enough to play the discount game with. If there's to be a promotion with special prices, they adjust the wholesale to help them out a bit, but not too much. Of course, the bigger retail chains have more clout, and can ask for and get better buy prices than the independents.

Specialist independent retailers have to make some tough decisions about whether to continue stocking items which are on such a thin margin that one problem wrecks not only the profit on that one, but makes selling several more essential to break even. Flat panel TV is pretty much in this category, along with computers, MP3 players and phones. Seeing other retailers advertise a product at near or below their cost price is enough to make retailers ask themselves why they even bother to stock an item.

"The labourer is worthy of his hire" is an old biblical saying, but over time things keep changing. Many aspects of shopping have become more efficient, but at the same time we see choice shrinking into the closed world of "home brands" in supermarkets, and "one brand" shops. Shopping online for "known quantities" is reasonable enough - books and CDs were among the first products to benefit from this, along with ticketing for shows. But how many of us would buy a loudspeaker on spec - without an audition? Cheapies maybe - but not your best gear - costing quite a lot in some cases. I'd be wary of buying an amplifier that way for the same reason, unless it was a relatively known quantity. You would have to have some pretty good reference points to do such a thing, or an ironclad money-back guarantee!Perhaps that's the way it will go. Buy it, try it at home, send it back in original (resaleable) condition if not happy with it. But for credit against something else, not refund.

Otherwise the "try it here, buy it elsewhere" brigade will have a field day.

The Future of Home Entertainment

By Geoff Forgie (2006)

The most enduring aspect of video and audio is that it must interface with the human being via eyes and ears - and that might change at some point too. The rest of the "big picture" keeps changing, and hitching the electronics hardware wagon to the computing horse means more change, more often.

At the moment you can still rely on the fact that you need some method of displaying images, and you need to accompany this with sound. Where the programs come from is in the process of changing absolutely. Almost gone are the days of record companies and movie makers dumping their products onto bits of plastic (CDs, DVDs, whatever) and shipping them around the world, warehousing them, sending them out to retail shops where they are displayed and sold.

The success of Apple's model for retailing downloaded music directly to your replay device has carved the niche from which the rest will spring. Broadband has opened the door for this to proceed. Dial up could never cope with the demand for download speed, but with broadband, and now even faster ADSL 2 and cable broadband services, video is up for grabs as a downloadable commodity.

Over the last six months the links between internet enablers and content owners have been intensifying. It is obvious that they know where everything is headed, and alliances are being forged. They need each other, since programs (content) have traditionally been the preserve of specialist companies (studios), while the playback equipment has been produced by electronics manufacturers. A third group has evolved - the internet enablers, such as Apple (no longer just a computer company) Google, Yahoo, and Microsoft (a bit in catch up mode). Companies like Cisco Systems are also in the "enabler" group, since they are a networking specialist. Cisco has been very active in acquiring linked companies. It would be a mistake to think of them as just a networking specialist. They have shown that they understand the need to be involved in the display devices in the home with their KiSS networked DVD players.

Music, TV and Movies will all be sent to our homes by fast broadband. Your library will be unlimited, as all the content providers will license their programs to the enablers for distribution. Charges will have to be attractive - lower than the cost of hiring a DVD - which is really bad news for rental shops unless they find a new angle. You will probably be able to retain the downloaded copy on your system for some days, after which it will become inoperable - unless hacked!

Bigpond Movies is the first example of this phenomenon in Australia, but at present they have an uninspiring collection of material. Hopefully it will grow in quantity and quality. Access to overseas based libraries is limited if you don't have an "international" identity, like a USA credit card and address to use.

Radio is in the process of fragmenting as well. Streaming & Podcasting are freeing us from the straitjacket of radio broadcast timetables. You can listen to a program when it suits you. The number of podcasts (downloaded MP3 files of programs) is increasing daily. You can already load up your computer or portable player with programs of your liking, to listen to whenever you like. Free-to-air broadcasting will continue, but for how long? I hope for some time to come, as there is a special magic for me in being able to pick up so much from the ether with so little fuss. Radio works so well, and is so cheap and easy to access.

There remains one major hurdle to be overcome in the technical realm - the rollout of optical fibre cable becomes more expensive as it approaches the individual home. It is likely to remain at the end of the street for the time being. Until fibre-optic is all the way to the home, the highest speeds of data transfer will not be achieved, unless a wireless alternative is forthcoming.

There is also a hurdle in the business realm - but Apple have cracked the nut with their online stores. Until the content providers fully embrace this brave new world of direct distribution, the potential will not be realised. I would have thought that executives faced with the prospect of selling product free from the normal burden of physical distribution would grasp it with both hands. The costs are down and the volume should be huge. Take a little bit of money from a vast number of people - it's a sure recipe for riches.

Record companies have been very slow to adjust their thinking, but are now realising that this is the world they face, and they have to deal with it. A few uppercuts from the peer to peer file swapping brigade has probably helped them to recognise that it will happen with their participation or without it, DRM or no DRM. If you can't beat 'em, join 'em. Most of us are happier to have legal copies of software if we don't feel we are being ripped off.

Artists can now go it alone if they want to. Orchestras who have trouble getting a record company excited about their latest recording of Shostakovich's Fifth Symphony, might just release it themsleves as a licensed download. Who needs record companies when your adoring public is right at your virtual stage door, waiting for your next release?

The other development which is poised to happen - and it is a flow on from content providers being a bit anal about letting stuff get out there at the right price - is that the manufacturers of players and recorders get a bit sick of having the content people bossing them around. Manufacturers might just get more and more into the recording and film business, so they are not held up in introducing better machines by the content providers crying foul. When you think about it, companies like Sony and Philips have been into both hardware and software for years. The time may well come when Samsung and LG get so fed up that they intensify their activity on the program production front too. They already have so much tied up in hardware that it makes huge sense.

Hold onto your seats. The future is closer than you think.

Digital Radio In Australia

By Geoff Forgie (c2005, rev.2009)

Why Digital DAB Radio?

We know that TV has gone digital, and that it provides better reception, more channels, and widescreen pictures, some in HD. But why go digital in radio, which already works well, particularly the FM stereo variety?

The answer is partly technical, but also involves increased capability and better service.

The technical part is that the electromagnetic spectrum is very crowded, and there is limited room for expansion. As a result new stations now pay very big bucks for an FM license. But the real crunch comes when you cannot fit any more stations into the available spectrum. The answer is to increase the number of stations by going digital, which allows a lot of stations to share a carrier bandwidth. The frequency to be allocated will have to offer a mix of benefits. Some work well over distances but do not penetrate hard buildings well.

For the Consumer

Provided that you have plenty of re-broadcast points and coverage is good, the listener could, theoretically, drive around Australia and not have to change stations, since your favourite station could be sent right around the network. This may happen with Radio National and News Radio, but may not happen for Local stations.

But if you like to be able to seek another music station with the same flavour as your regular one, stations can be sought by genre. You should be able to seek another pop station, sports, or current affairs station. You would even be able to search for a jazz station - if such stations existed in Australia!

Some models will be able to do tricky things like Pause and Rewind!

You might have noticed that an FM radio with RDS (Radio Data System) technology can show the name of the station, and can even have a line of text go across the display window. With digital radio this data facility is enhanced, such that you can get all sorts of information (traffic, news, weather) in text form, and probably pictures as well. This would have to be handled carefully as an in car service, or it will cause accidents!

Reception on the move would also be free of the "picket fence" effect you get with FM.

So, to summarise, the benefits are going to be more station capacity, better reception, added information capability, search functions, and (this is only a "possible") portability of your favourite stations.

At present, ABC News Radio is interrupted by Parliamentary Broadcasts on any sitting day. Under a Digital Radio scheme, there could be a separate channel for Parliament, leaving News Radio to do what an increasing listener base wants. This is reflected in 2GB now offering a 24 Hour News Service on its Digital channel.

When Can We Have It?

Transmissions are starting in May 2009 around most capital cities. The ABC and SBS will ramp up during June & July. Regions will folow in slower time, as happened with Digital TV.

What Receivers Are Available?

There are some nice ones from Pure and Roberts, both of the UK. Sangean is also on the ball and have various models including a component size tuner to go with your hifi stack. It's also Wifi enabled, so can stream from your hard drive or go online for internet radio station! Great value at around $600.

Pure have two models with wifi (the Evoke-Flow and Avanti-Flow, the latter having iPod dock inbuilt) and a number of smaller simpler radios with DAB+ and FM, plus time/alarm functions. They also have a small in-car model called Highway, which can also be a pocket portable with earbuds.

Further details of all the Pure radios can be found on their website. Sangean are here.

Ongoing Technology Studies

The ongoing technology questions are outlined in a Ministerial Speech which was delivered some months ago but has received little or no coverage in most media. Scroll down to a bit past half way "Technology choice".

Note: sound quality might be about the same as FM but there is no guarantee that it will be as good, and certainly none that it will be better! The Minister seems to be admitting this in the discussion of the 128kbps limit in that same paper.

Why Get So Excited Anyway?

It's only radio, after all. These days if it hasn't got moving pictures, it is not in the race, right?

Sure, these days you can have more sophisticated communications than mere radio. You can now have colour screens on everything, and get all sorts of information that way.

But radio is still a most useful medium. It can be informative or entertaining while not requiring you to look at it, and this makes it an ideal companion while doing other tasks. You can even listen while driving without being arrested for it.

Radio will remain important as a mass medium for the foreseeable future, and the changes which will occur as a result of going Digital will make it more user friendly, and also expand what is on offer.

For Further reading go to Digital Radio Australia

Map of Digital Radio Coverage in Sydney

Older Articles

The Future of Retailing

Radio: The Next Big Wave