Let me add my thoughts on where Apple believes it will be making money.

AppleInsider notes that profits are low on the Apple TV (based on iSuppli’s latest teardown results) and therefore it must be a market-share/customer-acquisition, game. While I do agree they had to price the hardware faintly (if only not to offend would-be customers), there surely is more to it than to say it’s short-term strategy is only about gaining market penetration. I would be willing to bet a Apple TV that Apple in fact has a business plan that is a shiny-happy, positive NPV. I can all but guarantee it. Whether it is realistic, I don’t know. Time will tell.

One must presume that Apple’s marketing folks factored in some incremental sales of iTunes content that is part of the unit contribution for each Apple TV sold. Afterall, iTunes is more or less a fixed cost at this point, and the Apple TV adds another point-of-sale. Whaddya think? Afterall, unless you are a dedicated iTunes user, the Apple TV is basically hamstrung, and quite undifferentiated against other DMAs.

Microsoft has similar tactics… if not with more lofty goals. Their Xbox is not a money maker on hardware sales alone, in fact rumor is it is quite the opposite. But they make up for it on the games/software/accessories sales. Which have very healthy gross margins baked in.

These are all networked business models. Not as simple as classical consumer electronics economics anymore.

Check out Photosynth. The MSR team just blew my mind in this video I saw.

One day, nowhere in the world will be un-explorable. The convergence of digital photography, global cartography, social networking, and webservices is previewed here.

Jobs was spot on…

…Most things you carry with you are communications devices. You want to do some entertainment with them as well, but they’re primarily communications devices and that’s what they’re going to be.

Then he made me feel confident in the work our company is doing, because, indeed…

…It’s really great when you show somebody something and you don’t have to convince them they have a problem this solves. They know they have a problem, you can show them something, they go, oh, my God, I need this.

At Walt Mossberg’s D5 conference, Bill Gates and Steve Jobs sat down together and gave an hour and half long interview with Q&A from the live audience of well-healed techtreprenuers.

Highlight reel here, gotta love geek humor (and Walt’s laugh, yikes):

[youtube=http://www.youtube.com/watch?v=QLJLIloR8tE]

I don’t always agree with Mossberg, mainly because I don’t think I am who he is speaking to when he writes about technology, but as a critic of tech world, he does generally get it right. Creating great experiences for the mass consumer is where the money is.

No other two guys in the last 30 years of business have had as profound an effect on the technology the masses use in our daily lives than Jobs and Gates. Gates by brute force ecosystem development, and Jobs through unrelenting obsession with a few great consumer experiences. The full length video of the interview is located here, transcript here. Definitely interesting to see them sit down cordially and take subtle digs at one another. But like two guys who have more in common through some shared past successes, but also just as freakish human beings, you can see there is quite a camaraderie as well.

One particular exchange that I geeked out on was about the partitioning of R&D along the hardware/software interface via standards and partner-based ecosystems versus vertical integration. It is on both sides of this strategic fence where Microsoft and Apple have had their real success respectively. Hearing Gates and Jobs stick up for their tendencies as innovation leaders, and in direct conversational back-and-forth, was telling.

Gates:

The question is, are there markets where the innovation and variety you get is a net positive? The negative is that in the early stage, you really want to do the two together so you want to do prototyping and things like that, you know, really as one thing.

And then take the phone market. We think we’re on 140 different kinds of hardware. We think it’s beneficial to us that even if we did a few ourselves, it wouldn’t give us what we have through those partnerships.

Likewise, if you take the robotics market, very undeveloped. We have over 140 tiny-volume robots using Microsoft software. And the creativity, building toys, security things, medical things, we love the innovation and the ecosystem that’s going to grow up–who knows when, but we’re patient–around that and we’ll have a great asset with this robotic software platform.

So there are things like PC, phone, and robot where the Microsoft choice is to go for the variety.

Apple, it’s great. For them, they do what works super well for them. And there’s a few markets like Xbox 360, Zune, and this year we have two new ones, the Surface thing and this RoundTable, which is the meeting-room thing, where we’ll actually, through subcontractors, but the P&L on the risk and all that for the hardware, the design is completely a Microsoft thing.

Jobs:

Let me make a comment on Bill’s answer there, which is, it’s very interesting, in the consumer market and the enterprise market, they’re very different spaces. And in the consumer market, at least, I think one can make a pretty strong case that outside of Windows on PCs, it’s hard to see other examples of the software and hardware being decoupled working super well yet. It might in the phone space over time. It might. But it’s not clear. It’s not clear. You can see a lot more examples of the hardware/software coupling working well.

So I think this is one of the reasons we all, you know, come to work every day is because nobody knows the answers to some of these questions. And we’ll find out over the coming years and maybe both will work fine and maybe they won’t.

There is no one answer of course. It depends on the state a technology is in, and how mature an experience you are delivering product for. Gates’ trade-off recognition sums it up completely. I can only imagine the spastic, forgetful, nerd-looking Microsoft robots of the year 2100, versus the sexy, vivacious iBots from Apple with the snappy sense of humor and slick fashion sense.

These billionaire guys are such icons, with such caricatures painted of them, that it’s easy to forget that they are still full of brilliantly marketable ideas. It’d be a shame if people don’t take a listen, read between the lines, and figure out where they’ll be taking us, for better or worse.

On an aside: I came off critical of the iPhone a few months back, and I generally standby my predictions still. However, I am thinking… easily my favorite new web service to come around in the last 5 years has been Google Maps, and if it turns out the iPhone’s client for Google maps is as good as Jobs is saying, I may not be able to resist.

At the risk of piling on to an overcrowded topic, I think it’s worth noting that the Zune guys pulled off a major coup. I don’t think anyone could have reasonably expected Softy to come out with a device that dethroned the iPod, but the fact that they have now officially changed the conversation is what matters.

As people nitpick the device, the UI, the early depth of music selection, I think they largely miss the point. Until today, you couldn’t find an alternative to the iPod in terms of a vertically integrated experience. It was always also-rans (SanDisk, iRiver, Rio, Creative), which built nice product, but were burdened somewhat by cumbersome Playsforsure technology, and bulky and quirky on-line services. These also-rans were forced to differentiate-by-design, which is a losing battle when your market leader is, for better or worse, the de facto leader in ergonomics and industrial design. Even Sony, who one might think… ok let’s not go there.

What Zune did was offer a complete experience for end-users, and added a wireless interface which has amazing option value to both consumers and Microsoft. They didn’t try to battle iPod on design, in fact I think they were skillfully unassuming, and picked a design that is at the very least, non-threatening, and non-polarizing. Keeping the focus on the new features, and the promise of a total solution. Preliminary evidence that Zune was successful was the study published by ABI research that shows even iPod users consider the Zune a viable alternative. How much switching materializes remains to be seen, but if Softy wanted to change the conversation (all one can reasonably expect) in the portable jukebox market, I think the bottom line is, mission accomplished.

I am not waiting in line to pick up my Zune, but rest assured, when the time comes to invigorate my gadget repertoire, the Zune will be on the short list.