December 3rd, 2007
Apple: Is this really a dangerous moment?
Macworld is right around the corner. Apple’s business has never been
better. Yet everyone is looking for the storm clouds.
The big question: What’s really worth worrying about? Indeed, the larger
Apple gets, the more worrywarts emerge. The high wire act only gets
higher.
Fast Company says the following:
This is also a dangerous moment for Apple. In a way the company has
never seen, the barbarians are massing at the gates. From hardware to
software to services, major competitors with serious R&D and marketing
budgets are laying siege to the House of Jobs. As Apple moves into new
markets, it has made powerful new enemies, some working in concert.
Nokia, for example, is banding with telecom companies to offer its own
touch-screen hardware in an effort to sway subscribers from the iPhone
and Apple’s exclusive partner, AT&T. MP3 players from the likes of iRiver,
Microsoft, SanDisk, and Toshiba are getting slicker all the time, targeting
the iPod at a fraction of the cost. Vivendi Universal scuttled a long-term
licensing deal to offer its music on iTunes and is talking with other music
companies about building a download store of their own. Likewise, Amazon
has created its own iTunes antagonist, Wal-Mart has been low-balling its
way into the market, and subscription music sites such as Rhapsody are
spending mightily to win consumers over to vast Web-based music
catalogs available for a flat monthly fee. Even the tree huggers are coming
after Apple, threatening to sue under a California consumer-protection
statute if certain allegedly toxic chemicals aren’t removed from the iPhone.
Bottom line: Jobs’ Macworld spiel better be worth about $100 billion–the
difference in Apple’s market cap from a year ago.
Then again we’ve heard these worries before. Let’s assess some risk:
Everyone has a touch screen: This threat is real if you believe that the only
reason people buy an iPhone is the touch interface. I don’t believe that.
One thing is certain though–touch screen technology will be in every
phone. It’s not a big differentiator. Threat level: Nil.
MP3 rivals: We’ve heard this before. Some folks love the new stuff from
SanDisk. I still see plenty of iPods out there. Threat level: Minimal.
Content: NBC pulled its content from iTunes today, but Fox is apparently
willing to wheel and deal (Techmeme). These content deals–on the video side at
least–could be worrisome. Look for Apple to budge a few inches on this
one to keep the content flowing on iTunes. Threat level: High, but Apple
can afford to budge given it owns the music industry. Music will also be a
commodity.
Open standards: This one could be tricky for sure. Fast Company says that Apple’s ecosystem is based on “a hermetically sealed system.”
If a customer buys one Apple (all resources) device, she’ll buy two, three, even four more–at a premium price–rather than dilute the experience with other
brands. In an age increasingly defined by interoperability and technical
collaboration, Jobs still refuses to license Apple’s operating system. He
won’t allow music and videos downloaded from iTunes to be played on
other MP3 players. He won’t permit music downloaded from competing
stores to play on the iPod. And in enforcing his exclusive deal with AT&T
for the iPhone, he went so far as to disable or “brick” the device of anyone
who dared “jailbreak” it for use with another carrier, or who downloaded
third-party applications for features Apple hadn’t built in. Today, there are
an estimated 250,000 iPhones that haven’t been hooked up with AT&T, and
even Apple’s COO, Timothy Cook, assumes they have been unlocked and
attached to another carrier. That means almost 20% of iPhone customers
want the hardware but not the closed ecosystem built around it.
All of that’s true, but the big question is this: Will being hermetically sealed be an issue the larger Apple grows? For now, no one cares. And at last check Microsoft and other proprietary companies have done pretty well. Threat level: To be determined.
Rising expectations: What the Fast Company riff and other recent developments–Leopard’s problems for instance–reflect rising expectations about everything that is Apple (market cap, customer service, quality, the next bit hit). The bigger you get the more people bitch about you. Ask Facebook. Threat level for Apple: Very high.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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