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These are the conclusions of James McQuivey, a Forrester analyst, according to a report titled “The End Of The Music Industry As We Know It,” issued on Tuesday.

“The gold medal for 2007 (in music discovery) should have gone to Slacker,” McQuivey wrote. “(The) portable device provides instant access to radio-formatted music that can easily convert to a digital download with the click of a button. This model combines the simplicity of the radio experience with the power of music ownership.”

That’s a fitting title because the report reads like an obituary. Tower Records, a music mecca for decades, has already closed but McQuivey argues the real deathblow to the industry will come when Wal-Mart Stores, Best Buy, and other large retailers begin scaling back shelf space for CDs.

“Artists who used to pretend that their platinum album success was really about their “art” will no longer have that luxurious pretense because labels won’t sign them unless they agree to a barrage of sponsorship opportunities,” McQuivey wrote. “There will eventually come a day when Chips Ahoy will contend with the Keebler Elves over who can be the official cookie of the Taylor Swift world tour.”

“This move will permanently signal the end of the music business as it was once known,” McQuivey wrote. “From that point on, more music will be sold digitally than on CD, reducing CD sales to just $3.8 billion in 2012.”

The analyst also sent a message to ad-supported music services, such as SpiralFrog and Qtrax. The ad-supported model should stay “on the radio where it belongs,” he said in his report. Social networks are better places for selling ads against music, and they also allow users to share songs virally.

Sharing is vital, according to McQuivey, because it makes new music discovery easier, which the Web was supposed to help with but so far has tanked. In this effort, he sends a special shout out to Slacker, a personal online-radio service.

McQuivey, a former professor at Boston University, tells record executives to cheer up because there are ways to rise from the ashes. He says first, the industry should quit fooling around with music subscriptions and ad-supported models. People want to own their music and downloads have won. Only 7 percent of adults on the Web say they have ever tried a subscription service, according to the report.

Hey, Mr. Music Executive: scrap your preoccupation with CD sales and start looking for ways to help people share, yes share music; focus more on developing and profiting from artists; and forget about subscription services and ad-supported music.

In a final note, McQuivey suggests that music artists, who have historically looked down their noses at advertising, had better change. He says the industry should rip a page out of NASCAR’s playbook.

When it comes to artists, the labels should focus more broadly on a musician’s career, including merchandise and concerts, as well as recordings. He said it’s the artists, not the CDs that are the music industry’s true product.

McQuivey’s finding here was particularly timely. Over the weekend, PaidContent reported that MySpace is in talks with the four top labels about launching a jointly operated, ad-supported music service.

Creating good User Experiences (UX) over and over again means creating first good Employee Experiences (EX – I’m trademarking that!). That’s the lesson from Southwest airlines according to an NY Times article about retiring co-founder Herbert Kelleher:

That giant blue box stays on screen for the entire duration of the preview, obscuring a good chunk of it (even more for non-widescreen previews than what you see here). It’s really distracting.

[W]hen you look at a company like American, with its poisonous employee relations and its glum customer base, and compare it with Southwest, with its happy employees and contented customers, you can’t help thinking that Mr. Kelleher was on to something when he put employees first. “There isn’t any customer satisfaction without employee satisfaction,” said Gordon Bethune, the former chief executive of Continental Airlines, and an old friend of Mr. Kelleher’s. “He recognized that good employee relations would affect the bottom line. He knew that having employees who wanted to do a good job would drive revenue and lower costs.”

This isn’t really surprising for a service company like Southwest, but the same rule applies, I believe, to companies that make products. Employee happiness often comes from walking the walk — in other words not just making big pronouncements about how much you love your employees (Kelleher wept when talking about his employess in his going-away speech), but in seeing those through in actions big and small. And often it’s the small ones that show how you actually mean. It’s kind of like what they say about ethics – it’s what you do when nobody’s looking.

Over the years, whenever reporters would ask him the secret to Southwest’s success, Mr. Kelleher had a stock response. “You have to treat your employees like customers,” he told Fortune in 2001. “When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us.”…

Cable TV companies are famously indifferent to user experiences, and my provider, Comcast, recently showcased one example. They finally started allowing previews of on-demand movies, but check out how they managed to mess up the experience:

These small touches to how you treat employees are often the most intimate ones, and they communicate how deeply felt the relationship is (or not, as the case may be). Southwest, for example, seems to give its flight staff a great deal of autonomy when it comes to how they intereact with passengers, but bounded by some established guidelines. This has famously led to some staff singing the safety announcements and adding comedic commentary (I once heard one say “There may be fifty ways to leave your lover, but there are only four ways off this big bird!”). It also probably led to the more recent episodes of passengers getting walked off planes for risque clothing…just goes to show that what constitutes a “good” UX is different for different people.

You wouldn’t see something like this if Southwest ran a cable system.

(Credit:
Adam Richardson)

While any company can luck out with one-off good experiences, a long term systemic philosophy of treating employees right fosters a mindset that is focused on thinking about the needs of others, which ideally translates into the products the employees create for the company’s customers.

Take-Two said it expects to earn 45 cents to 55 cents per share, excluding special items, on revenue of between $325 million and $375 million in its current, third fiscal quarter.

The company, which has rejected a $2 billion buyout offer from rival game maker Electronic Arts, is also having ”
formal discussions” with other parties about strategic alternatives, Chief Executive Ben Feder told Reuters.

In May, Take-Two announced that the new game had raked in all-time records of $310 million on its launch day of April 29 and $500 million during its first week. The single-day figure shattered the previous record, set last September by Halo 3, of $170 million.

The company also raised its forecast for the remainder of the fiscal year.

EA, which offered $25.74 a share for Take-Two in April, is undaunted in its takeover bid. The company recently announced another extension of its merger offer.

Video game maker Take-Two Interactive Software announced better-than-expected earnings on Thursday thanks to recording-setting sales of Grand Theft Auto IV.

Shares of Take-Two were up 34 cents, or 1.2 percent, to $27.65 in after-hours trading.

“The board remains committed to exploring strategic alternatives and we’re actively engaged in that process now,” Feder said. “We have had and are having formal discussions with a number of interested parties.”

For the second quarter ended April 30, net profit was $98.2 million, or $1.29 cents per share, compared with a net loss of $51.3 million, or 71 cents per share, in the second quarter of fiscal 2007. Sales were up more than 160 percent to $539.8 million for the period, blowing away analyst estimates of $499.1 million.

Fred Wilson is right. Let’s scrap the term “Silicon Alley.” But in doing so, let’s acknowledge that New York’s digital industry is New York itself, not a sort of frosted-glass microcosm insulated from the rest of the metropolis. The beauty of New York’s technology industry is that it’s so connected, running through the same veins as the most influential names in some of the world’s biggest industries; Wilson made a note of that at the end of his keynote, identifying New York’s tech community as “more creative, more artistic, more connected to media, advertising, (and) business.”

Things started to turn around for New York in 2003. Nick Denton launched blog empire Gawker Media, and Delicious–which was sold to Yahoo after being funded by Wilson’s Union Square Ventures–was founded in a Manhattan apartment. The rest, as they say, is history.

Fred Wilson, with Union Square Ventures, gave a keynote address at the Web 2.0 Expo.

Click here for full coverage of Web 2.0 Expo

In 1996, Wilson started his first tech venture firm, Flatiron Partners. “We first were going to call ourselves Acme Ventures. We were going to use the Road Runner as our logo. That didn’t work out,” Wilson said with a laugh. “We started out with the Flatiron Building as our logo. We got sued. That’s a long story.”

The Web 2.0 Expo traditionally keeps its keynote addresses very short, so Wilson had only a half hour to fit in a decade and a half of New York’s digital history. Indeed, he admitted that his timeline would be incomplete. “There’s certainly no way that I was able to include every important person, every important company, and every important event,” he said.

So said venture capitalist Fred Wilson of at the Web 2.0 Expo here in his keynote entitled “New York’s Web Industry From 1995 to 2008: From Nascent to Ascendent.” A longtime leader in Gotham’s culture of digital innovation, Wilson, of Union Square Ventures, gave a short “history lesson” to the hordes of conference attendees, many of whom had come from hundreds of miles away.

New York’s technology community is still considered an afterthought in comparison to the Bay Area, and Wilson, though he has invested in companies like Delicious and Twitter over the years and runs one of the Web’s most influential venture capital blogs, isn’t yet in the league of true Valley legends like John Doerr.

And the term “Silicon Alley,” he said, is one that the city should shake off. “We are one of the largest cities in the world,” Wilson said. “We are one of the largest Internet development communities in the world. Let’s bury the name Silicon Alley.”

The keynote took the audience back, in fact, to 1979, when New York University’s Interactive Telecommunications Program was first formed. “It started in an art school, the Tisch School of the Arts at NYU,” Wilson said. “I think that still to this day defines a distinguishing characteristic of the New York Internet community.”

The timeline went on: the rise of interactive ad agencies in 1995, along with the debut of The New York Times Web site, which first launched in conjunction with the visit of Pope John Paul II to New York; the debut in the mid-1990s of digital businesses like iVillage, The Knot, and Star Media; the sale of Total New York to AOL, and the IPO of DoubleClick in 1997–New York’s first tech company to go public.

Disclosure: Fred Wilson’s Union Square Ventures is an investor in Tumblr, which employs my significant other.

The road ahead for tech innovation in New York is indeed bright, but along with the other industries the city fosters, there are difficult times and plenty of uncertainties ahead as well. And at the very least, keeping the tough times in mind, as well as the good ones, is just another safeguard against making sure that those “rock bottom” days of 2002 don’t return to the tech industry in full force.

He then went through the heights of the dot-com boom and subsequent bust, when “all hell broke loose.” One of the companies he spotlighted was Kozmo, the delivery service that was arguably Gotham’s most famous dot-bomb. “To me, Kozmo was kind of a definitive company. We invested in it, we lost a lot of money, but it was a great company,” he said. “To this date, my kids ask me, ‘Explain to me why Kozmo’s not around?’”

On a less depressing note, what Wilson also didn’t mention was that New York City has elected a tech mogul as its mayor: Michael Bloomberg’s eponymous company revolutionized the world of finance, and Bloomberg has promised to foster digital culture further with an annual Internet Week New York festival and an official early-stage tech venture fund.

Then, in 2000, the dot-com dream started to collapse. “The market broke in March and all these companies had huge burn rates, they could no longer finance themselves, and they went out of business one by one.” Still, Google opened its first New York office in an Upper West Side Starbucks that year. In 2006, as Wilson noted, it took over the historic Port Authority building in Chelsea. With 750 engineers, he said, “it’s the largest engineering operation they have outside of Silicon Valley.”

But the numbers, Wilson said, show a very different trend. In 1995, 230 early-stage companies in the Bay Area received venture backing, and only 30 did in New York. By the end of the year, 2008′s numbers should be 360 in the Bay Area and nearly 120 in New York. “We have grown here in New York by four times in 14 to 15 years, and Silicon Valley has grown by 1.5 times,” Wilson said. “We’ve gone from being one-eighth of the activity of Silicon Valley to one-third. In my mind that’s very significant.”

NEW YORK–”We are not an alley.”

Wilson’s address, overall, was an idealistic one–perhaps excessively so. No mention was made of the September 11th tragedy, which shook every industry in New York to its core, including technology, and no mention was made of the very recent Wall Street crisis that could result in a dramatic shift in fate for many tech start-ups. Judging by what Wilson said, the future is infinitely sunny.

(Credit: Union Square Ventures)

Wilson gave us the history. But when it comes to the future of technology in New York, I hope the conversation goes on. Despite the fact that the tech economy has held up in the wake of serious economic troubles so far, many people aren’t sure how much longer that will be the case. The health of the financial services industry has grown precipitously worse in a matter of days, and that’s a dark cloud looming over all of New York, not just Wall Street.

Japanese engineers were quick to pour scorn on the MacBook Air. This critique comes courtesy of Nikkei Electronics, a major Japanese electronics monthly, which did a teardown of the Air.

Here’s the seeming challenge: The Japanese PC industry must come up with a reason why their own PC suppliers–NEC, Toshiba, Sony, Fujitsu–don’t have a riveting 0.75-inch-thin notebook design on the market in the U.S. The answer, for them, is simple: a Japanese company would never approve of the design.

(Credit:
Apple)

(Actually Mitsubishi did design an Air-thin notebook called the Pedion back in 1997, but the shallow keyboard was almost unusable–and no one bought it. IBM Japan and Sharp, among others, have made ultrathin notebooks but none that wowed consumers like the Air.)

So, let’s do a teardown of the Nikkei Electronics teardown piece.

Though the English is here, let me dissect some of the original Japanese (I worked, reluctantly, as a part-time translator at a Japanese communications company in Tokyo for close to four years.) The article headline uses the phrase “muda nashi” to refer to the exterior, and “muda darake” to refer to the inside of the Air. In short, the exterior of the Air is clean, with no waste (muda nashi), but the internals are a complete waste (muda darake). My (not literal) translation: the Air looks good on the outside but is a piece of junk on the inside. This criticism seems beyond constructive to me and borders on spite. (I will explain why below.)

Let’s look at another part. “Sugoi to kanjiru tokoro wa hitotsu mo nai.” Translation: “There is not one thing (about the Air) that impresses.” Then the engineer adds: “If it was us, we could make it cheaper.” This sentiment (that the Air doesn’t have even one redeeming technological quality) shows that the person making the statement almost holds an animus toward the Air.

My question. If this guy’s company (NEC, Toshiba?) could make a cheaper, better Air, why hasn’t it done it?

Other alleged shortcomings: an engineer asserts that the keyboard has too many screws and alludes to possibly less-than-perfect hinges. The team also hazards a guess that the Air was made by HonHai Precision Industry of Taiwan.

That’s not to say the article is all gratuitous criticism. An engineer speculates that there wasn’t enough feedback from the factory (or factories) that made the Air. And, along these lines, another engineer said the design indicates that Apple’s main focus is on software and user interfaces, not the particulars of system manufacturing. These may be valid observations. By definition, any PC company that uses a contract manufacturer is removed from the manufacturing process. Certainly more than, let’s say, Compaq was in 1994 when it made its PCs within the same building complex in Houston that housed its executives. But all PC makers today outsource manufacturing, including the Japanese.

That said, the problem with the Nikkei Electronics article is that the engineers are from major Japanese PC makers (though their affiliations are never revealed). It seems clear that at least some of the team may have a vested interest in poking holes in the Air’s design because they work for companies that directly compete with Apple and are likely archrivals of Apple. Imagine asking a team of AMD engineers about an Intel chip design. The response would be nothing short of libel.

Also, the Japanese press never targets a domestic manufacturer in this way. In other words, it is not politically correct (in Japan) to tear down a device from Sony or Fujitsu or Sharp and subject it to open disdain (though I’m sure this is done internally at Japanese companies). This kind of hypercritical analysis is reserved for foreign manufacturers: Amercian, Korean, Chinese, and others. The upshot: this assessment by the Nikkei team may contain some valid points, but the premise of the article seems bogus.

Author’s note: Though I translated extensively (as part of my job) in Japan for a number of years, in this case, I have consulted with native Japanese speakers too. In short, the dynamics of pairing “muda nashi” with “muda darake” changes the combined meaning. Muda darake alone means “a lot of unnecessary waste” or an “excess” of waste. But, in my opinion, the implication is more harsh, i.e., the outside is nice but the inside is junky.

See the article in Japanese here.