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The difference between this idea and the defunct I-opener is that geeks make up a much smaller proportion of the potential market for the camera than they did for the I-opener. Who cares if 10% of the cameras get cannibalized? They probably only have to be recycled 2-3 times for Ritz to turn a profit.

... the XBox business model was set up such that MS actually loses money every time they sell a unit. They plan to make the cash back via a license fee attached to all games sold by major developers

That model has been tried before.

Actually, other game consoles have used this business model to varying degrees. However, the difference today is that the consoles are much more powerful computing platforms, and therefore much more attractive for hacking. Hence the iOpener comparison.

The problem Microsoft is going to have in fighting this, is that it will now be fighting its customers directly, rather than competitors. The downsides of squashing (or acquiring) a competitor only become apparent when the U.S. Justice Department sues you. The downsides of fighting with your own customers are much more serious and direct; and the legal footing is much weaker.

Suing individual XBox owners in court isn't likely to happen, or have much effect if it does (unless the courts happen to rule against MS). Certainly, Adobe-style DMCA tactics against companies selling mod chips and the like may be possible, within the U.S. at least, but that's unlikely to act as much of a barrier against hacking.

The bottom line is that companies need to start taking the realities of this sort of thing into account. They can't just sit in their conference rooms surrounded by lawyers and wail and gnash their teeth. Their notion of intellectual property ownership and control is simply at odds with reality, and if they don't recognize that, reality will do it for them, in the form of profits and their stock price.

They were using the Netpliance iopener for email to inexpensively keep in contact with family and friends. Netpliance had some major financial problems and discontinued the 800 number support, which left my relatives high-and-dry after they became hooked on email.

I've modified their iopeners to run Linux. I set them up with Blackbox as the window manager because the iopener is rather underpowered. The iopener's function keys have iconic labels instead of F1-F12: a weather key with a cloud on it, a news key with a newspaper on it, etc, so I've configured bbkeys to run Netscape and pass the appropriate command line arguements to display the correct URL or email option. (I would have used Mozilla, but it's email support was too slow - 20 seconds to display an email vs 2 seconds in netscape).

Last year my mom traveled the country visiting relatives with her laptop and scanner and digitized all the family photos she could lay her hands on. So, as an added bonus, the iopener is also an electronic picture album and runs CHBG as a screensaver when the system is idle. The grandparents really love this feature.

Sure, I could have done this using Windows, but the non-upgrade price of Windows(since the iopener's originally ran QNX) would have been about twice the cost of the hardware I purchased to convert the iopeners.

The price at its launch (on July 16, 1999) was not $99 as you claim, but was, instead, $399 as shown in this CNet announcement. At the time, Netpliance was calling it the "Ipad." By December of 1999, they had dropped the price to $199 as shown in this PC Magazine news story.In July of 2000, Netpliance announced that they were raising the price of the i-opener from $99 to $399 as shown in this Netpliance press release and in this CNet news article. At the end of August, after dismal sales, Netpliance lowered the price to $299 as shown in this CNet news article. I believe that they sold more i-openers at $99 than at all of the other price points combined.

Next time, get your facts straight before claiming that I am wrong.

here

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(IIGS( Scott Alfter (remove Voyager's hull # to send mail)
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Netpliance posted their quarterly report not too long ago. In it are figures describing the number of subscribers they've gotten so far, and a line item for "appliance subsidies". Divide it out, and you get about $400 per subscriber. Add the $99 iOpener charges the customer, and you get $500/machine.

Schwab

Problem is, nobody in their right mind is interested in making hardware. Look at Apple. NeXT. Be. To a lesser extent, many of the top- and second-tier PC makers. All companies who overextended themselves making boxes, only to find themselves hopelessly under- or overstocked. Either way, they lose money. Worse, they'd be stuck building an unproven product with a bad track record for a company with a bad reputation. You don't need an MBA to realize your upside potential sucks.

If you want i-opener-like hardware at cost, Merinta will sell you the iBrow, the unit Virgin Connect is using, without the contract. Just don't hold your breath for Netpliance to do the right thing.

Browsing through the netpliance site, I came across two pieces of information that together make me worry...

From their development job listings:

Data Mining Developer

• 4 years UNIX, Oracle experience
• 2 years data modeling, relational database design, and data mining
• 4 years programming experience in C, Java, Perl

From their add-ons FAQ page:

Q: Can I connect external storage devices, such as a ZIP drive, via the USB port?
A: Not at this time. Everything on your i-opener is backed up on our network. (emphasis added)

So... someone with an iOpener contract: does Netpliance mention the fact that your data will be backed up on their network, or contain any mention of the fact that Netpliance may be mining either your backed-up data or data recorded about your network usage (browsing, email) habits? It occurs to me that this may be one reason they are so adamant about requiring people to use their ISP service with the iOpener...

Browsing through the netpliance site, I came across two pieces of information that together make me worry...

From their development job listings:

Data Mining Developer

• 4 years UNIX, Oracle experience
• 2 years data modeling, relational database design, and data mining
• 4 years programming experience in C, Java, Perl

From their add-ons FAQ page:

Q: Can I connect external storage devices, such as a ZIP drive, via the USB port?
A: Not at this time. Everything on your i-opener is backed up on our network. (emphasis added)

So... someone with an iOpener contract: does Netpliance mention the fact that your data will be backed up on their network, or contain any mention of the fact that Netpliance may be mining either your backed-up data or data recorded about your network usage (browsing, email) habits? It occurs to me that this may be one reason they are so adamant about requiring people to use their ISP service with the iOpener...

Well, I take it from the press release from Netpliance themself:

"In response to recent reports of the unauthorized reconfiguration of its i-opener Internet appliance, Netpliance, Inc.
(NPLI) announced that it has implemented hardware changes to prevent reconfigurations of i-opener Internet appliances produced after March 20, 2000"

As to what exactly they've done, no one knows until they get one and open it up to see what's different. Many have had theories, but until someone gets one, who knows. The most severe to me would be completely yanking the IDE port and connecting points on the motherboard so no one could try and solder on a new connector.

I know of someone that ordered one a couple days after the March 11 post here on Slashdot, and hasn't yet received it. They said it'd take 7-10 days, but my guess is they've put a hold on shipments while they re-tooled their manufacturing process to do these "hardware changes." Perhaps they're even getting ready to ship these new ones now that they're charging people's credit card and adding the internet service. But really, it's all speculation. Feel free to disbelieve...

"The Company believes the reported unauthorized reconfiguration of the i-opener Internet appliance has not had a material impact on its operating results or general product availability."

So really all these people saying we are going to hurt/sink/kill/etc Netpliance are not correct, and this is from the company themselves.

remember my first time on Unix, I was in grade 9 in high school. The OS was actually called QNX on a 8086 machine called the Icon that was made here in Canada.

Am I senile or maybe mixing this up with something else, but is this not the same, but updated QNX that sits on a flash card on the i-opener made by Netappliance...

Interesting how OSs hang on over time...

I think they can be selling them at a loss. I think they are selling them at a loss.

Why?

Well, a quick look at their website gives a few indications:

This page talks about the "market situation." They expect the market for "internet appliances" to grow to over 50 million units by 2002. At the previous poster's estimate of $216 gross profit per unit, that'll get them $1.08B with only a 10% market share!

They are surely willing to sell these units at a loss in order to establish themselves as a leader in this emerging market.

As for the average life expectancy of the device being set at 2 years, I really think that's unreasonable. They have a USB port on the back, which would be a great place to plug in the "i-opener broadband adapter unit." And their embedded software allows automatic updates over the network, so any existing i-opener could automatically reconfigure for broadband over the dialup network. Pretty slick.

Finally, none of this even talks about what kind of money netpliance makes whenever somebody presses the pizza button. Or makes an online purchase through the i-opener consumer portal. Do you really think a pizza business doesn't pay royalties on pizza sales via i-openers? What about when 50 million people have internet appliances? I think most people would rather order pizza from an online menu than try to get it right over the phone. And most pizza places would be happy to get printouts of orders, rather than having to take them down over the phone.

If I had a nickel for every pizza delivery in the USA...

Anyway, it's pretty clear to me why netpliance wants to stick to their original business plan. Get in on the emerging internet appliance market. Make royalties on all the pizza, book, and DVD sales. Sell access on top of all that. Getting caught up in one-time, dead-end sales of maybe $300 or $400 isn't where it's at for them.

Why not help them figure out the right way to run Linux on the box? Look, they'll even pay you to do so. Who would have thought :)

I have been perusing this thread briefly, and I'm astonished at how outraged some people appear to be at Netappliance's decision: I think they ought to take one step back at look at this from a more rational perspective:

The quoted $99 price is obviously a massive loss-leader, as I'm sure is the higher $199 price that they 'reduced' from. This is trivially obvious to anyone who has ever bought PC components (flat panel displays are not cheap; even mediocre quality 10" 800x600 versions). Even deep bulk discounts have to be played off against the system integration costs. In fact, even Netappliance acknowledge this fact in their S-1 filing with the SEC (page 3, under Risk Factors).

The business model is familiar: sell for a loss (or, indeed give it away), and then recoup from the recurring cost of the service. This model is at least as old as the disposable razor-blade, and will be familiar to many who read this forum as the same one used to sell cellular telephones, AOL (400 free hours! etc....), and so on.

So what's the problem? Well, so far as I can see, there are really two objections here, which I'd characterise as 'Naive' and 'Not So Naive'.

The Naive objection

The 'Naive' objection is 'I paid $100 for this, I own it, and if I don't want to use their internet service, I don't see why I should have to pay for it'. Usually, these objections include appeals to the illegality of the action. This is in line with the razor-blade model, where Gillette doesn't mind too much if you buy a single Sensor Excel razor and never buy another blade.

Of course, it's not illegal effectively to bundle a service contract with a purchase (at least, not in my jurisdiction, and I'm pretty certain it isn't in the USA either). If, at the time of purchase, you sign up for a years' worth of their ISP service at $21.95 a month, you've entered (of your own free will) a perfectly legally binding contract. This is the cellular phone model: if you don't pay for your service contract, Netpliance will chase you in the courts, and you will lose.

Summary: the Naive objector understands the razor business model, but not the cellular phone model.

The Not So Naive objection

The 'Not So Naive' objection is 'I paid my $99 for this, so I own the box. I'm quite happy to pay a few hundred bucks over the course of the year in ISP charges, it still works out a good deal, and it's a neat toy! Why would they want to stop me throwing NetBSD on it?'.

The reason why Netpliance don't want you to buy the box and not use their service is more subtle. Their business model doesn't just depend on recurring subscriptions (blades, airtime...) but also on their ability to attract advertisers, sponsors and other value-added services. Their ability to do this is predicated upon the ability to establish a large user base for their service.

As such, they're going to need to demonstrate that supporting their company is going to result in a significant number of imprints for their advertisers and so on. In their S-1 filing, they acknowledge that their success will depend almost entirely on branding and high-quality content.

Summary: the 'Not So Naive' objector hasn't read Netpliance's business plan...

What does this all add up to? Well, it's all quite obvious: Netpliance doesn't want you just to buy an i-Opener, they want you to use it, and with their services. If the product, as was previously shipping, was going to compromise their business model in some way (and the weight of the evidence here is that it probably was!) then they have a common-sense responsibility to emend it.

Yes, it sucks that we can't have our cake and eat it, but I don't think it's fair to rag on Netpliance for doing right by their shareholders. If I were them, I would do the same thing.

Potentially Interesting Resources:

• Gillette disposable razor business model in the context of high-tech industry
• i-Opener specifications
• SEC S-1 Filing for Netpliance

I looked up the specs of the i-opener and compared the component prices with my wholesaler. While I can't reveal the breakdown, the total cost for the components is around $160-200 (assuming 1000 lots).

They sell the box for a loss but make it up on the $21/mo service fee. This is exactly the same business model the video game manufacturers use. The super-advanced 3D graphics chips in the PlayStation are cost way more than the selling price, but Sony makes it up in license fees for the games.

Hence why Sony is attacking Bleem so ferociously, and the same reason Netpliance is beating on their corresponding "open hardware" hackers: it destroys their business model.

TANASTAAFL indeed.

Sure, Netpliance have banned modifications to their i-opener product but in light of this page, they are in fact innovating. I don't know what you feel, but an officially endorsed Open Hardware Platform is MUCH cooler than any cheap hack that is bound to run out sooner or later, and in this case has.
btw. I have an i-opener. Took it out of the box, it looks sweet :)

Well, I can think of a great reason: QNX is great for simple things, but many users want more! And Linux can provide this... take a gander at the browser FAQ page for the i-opener: It doesn't support Java, Real G2, Flash, or Acrobat. Linux provides all of these things and more: such as proper word processing, games, the list goes on an on. If you can get that for $99 I say "whoo hoo!" to that!

Of course, there is the question as to whether everything will run quickly under linux with gnome/E. The system seems to be on the low side of possible (180 mHz processor, 32 megs RAM, 2 megs Video RAM (from linux-hacker spec pages)) -- which means it will run, but it won't be what we are used to with desktop machines. But it's enough to want me to go check it out!

It caught my eye also. I've squeezed Linux into about 12K before, so could probably fit it there. 32K RAM is tight for web browsing, of course.

There's no network port. I could talk to another Linux box through the parallel port, or the modem if it's not a proprietary modem (I can make a modem-to-modem interface if I can tell both modems to not expect a dialtone or ring).

The i-opener uses the Trident CyberBLADE i7 graphics chip -- I haven't checked the level of Linux support for it. I also don't know how standard the signals from the mouse on the keyboard is.

What's the reason a lot of people get a computer today? To get on the internet. It was one of the driving forces behind the iMac and the resurgance of Apple.

For people like you and me, the PC is here to stay. For people like my Aunt & Uncle, both sets of grandparents, and a couple cousins, the PC and iMac do not make sense for what they desire, easy to use email. Face it, there are more people like them than us.

All of them are now using an internet appliance, i-opener, to access the net. It is a $300 system, flat-screen with the "smarts" integrated in a single, compact unit. The keyboard has an integrated mouse which is very easy to use(my grandparent's used to get online using a PC I built for them, they had lots of trouble with the mouse, and would get confused if they overshot and clicked on a background window). It stays on all the time, periodically calling up to get email, local weather, and news. Because of this, they don't have to tie up the phoneline to read their mail or check the weather and news. A green LED lights up on top to tell when email has arrived. The system is set up to be very easy to use. The function keys don't say F1-F12, they have little pictures, such as a cloud to check the weather, and an envelope to do email.