Why Apple Must Fail For Anyone Else To Win

This is how it is:

http://twitter.com/#!/mikecane/statuses/41664864451702784

And this is why it is like that:

How Steve Jobs ‘out-Japanned’ Japan

Alan Deutschman, Reynolds professor of business journalism at University of Nevada-Reno and author of “The Second Coming of Steve Jobs” — the definitive unauthorized biography of the Apple CEO — notes that from his early twenties on, Jobs had a fascination with Sony that bordered on obsession.

“It was very nearly fetishistic, in fact — he even had a collection of Sony letterhead and marketing materials,” laughs Deutschman.

Boldfaced emphasis added by me.

“Deutschman laughs.” But what has he done other than write a book about someone he could never be?

How many people laughed at Steve Jobs? Probably not to his face, probably not with outright malice, but with a sense of “That poor guy won’t go far”?

There was Jobs. A college drop-out. No degree. Exactly the kind of person — and personality — the Suit World spurns.

In short, just like this guy, who is given the Suit Treatment here:

And yet who was the needy one in that relationship? The Suit: the King! The therapist had his business going before the King showed up and would have continued just swell had they never met. Again: Who was the needy one?

Hewlett-Packard once had the chance to own what became the Apple computer. They turned it down.

Now HP must compete against what they in effect created — just as Western Union had to compete against Alexander Graham Bell, just as IBM has to compete against former employee Larry Ellison and Oracle.

The biggest mistake is not seeing that despite your power, your company is actually the needy one.

IBM for one amazing moment understood that. When they visited the offices of Digital Research and a small outfit called Microsoft looking for an operating system for their computer.

More of why Apple is winning:

By way of example, Deutschman tells the story of how Sony entered the color TV marketplace, noting that in the Sixties, when color TV was going from 3% to 25% of the market, Sony was one of the few electronics companies that didn’t sell a color model. “People were telling Ibuka, ‘You have to come in to this market, everyone will take your market share,'” says Deutschman. “And Ibuka refused, saying, ‘No, we will only do great products. We will only do high quality goods. We will only do breakthrough technology.‘”

As a result, the company found itself in a precarious financial situation, losing out to its primary rivals — until it came upon the aperture-grille technology that Sony unveiled in 1966 as the core of the Trinitron TV. A full 25% brighter than its rivals, Trinitron became the best-selling color TV for the next quarter century.

“At the time, Sony was committed to not releasing a crappy product just because the market was there; they waited until they had a truly revolutionary innovation, combined it with great design and then profited from it for long, long time,” says Deutschman.

Boldfaced emphasis added by me.

That highlights the weak spots of both Android and HP.

Android is just a component within the larger Master Plan of Google. And as we’ve seen with Wave and other Google initiatives, there is no one in charge of everything. So things remain half-assed, constantly in beta, and contain inconsistencies across the board. Like a jigsaw puzzle left on a table, unfinished and neglected and with pieces that don’t even fit the damn puzzle!

There is not one chance in hell that any company using Android is going to threaten Apple. None. All of those companies are dependent upon Google to put in pieces their own — the licensees’ — clients ask for. Google will never, ever move as fast as those individual companies could if they owned the OS. Google doesn’t have to move fast to satisfy the customers of others. Why should they? So any licensee that introduces its own APIs to patch what Google left out will only further fracture the platform.

As for HP, it might be in an even worse position than Google with Android. HP spent over a billion dollars to acquire Palm. Don’t you think everyone in that company is now feeling the pressure pressure pressure to make that investment pay off? And not just pay off — but most likely pay off as quickly as possible? It would be the absolute wrong thing for HP to do, to succumb to that money pressure. But HP also answers to Wall Street, probably moreso than Apple with its sky-high stock does — does HP have the guts to take hits to its stock for the long term?

After seeing the stiff animatronic performances of both Bradley and Rubinstein, my confidence in their ability to deliver something amazing has been tempered. Bradley is Mr. Suit and Rubinstein thinks he’s not Suit, but he is. Someone has to have the grand overview of webOS. Someone has to have the final say in making sure it constantly improves — not only with me-too things to accommodate the external market, but creations birthed inside HP that will create new markets and get customers excited. Who is that person? Bueller? Bueller?

So, Apple seems unstoppable, no?

No.

Look at Sony. Look at Microsoft. Two behemoths that once encompassed the world and that made everyone stare in awe and fear.

Today they are both just about pathetic jokes.

Microsoft is showing glimmers of waking up, seeing the potential of its Kinect device and the excitement it’s managed to generate.

Sony? Sony just might be a lost cause. It’s determined to sue into bankruptcy anyone who hacks its game console.

So, yes, it’s entirely possible for Apple to fall and fail.

My own opinion is that a crack in Apple’s invincibility has already appeared. Despite the bleatings of too many people, the 30% vig Apple is demanding for in-app purchases is just wrong, period. It ignores the needs of all of Apple’s partners — and yes, even those who compete are partners — and reeks of smug and self-defeating ego. It’s not the kind of stance anyone ever expected from Apple. It’s the kind of move a tinhorn dictator would pull. It is, in short, what we’d expect from a Suit.

Apple suddenly takes on the position of someone powerful, not understanding it’s actually the needy one in relation to its developers, its partners, and especially to outside publishers.

Every large company has repeatedly shown it’s never, ever a good idea to underestimate how fast a market can turn on you.

Borders had three years to save itself. And wasted that time.

What could happen to Apple in three years if it continues with its 30% vig greed grab?

I think this is a lesson Apple has forgotten:

Apple used to understand that. Jobs himself explained that’s how the original Macintosh wound up with typefaces! He made those connections no one else did.

No company stands alone today.

No company can afford to.

Not even Apple.

Everything is connected now.

23 Comments

Filed under Apple: The Company

23 responses to “Why Apple Must Fail For Anyone Else To Win

  1. Really… really good article with some great points. I would much prefer a WebOS tablet to an Android one but why do I have the strange feeling that HP is going to drop the ball on this? They’ve never really been a company on the cutting edge of anything.

    As for the Android tablets, once they’re all running Honeycomb, what is really going to separate one from another besides maybe the size of the screen. There’s only so much design-wise that you can do with the form factor. It’ll become you have on Android tablet, you have them all. Then they’ll be forced to compete on price.

    • mikecane

      Yes, devices from different companies that running the same OS from one company collapse to commodity status quickly. There’s really nothing to distinguish any Windows PC from any other aside from raw hardware bling, such as PCs beefed up for gaming.

  2. James Katt

    It is NOT the 30% cut that is wrong, it is the requirement that you can’t charge less selling the subscription elsewhere than the App store that is wrong.

    • mikecane

      No, the 30% is wrong. It’s not like people are using Apple APIs to create eBooks or magazines. They are being forced only to use a transactional method.

      • foljs

        Without the 30% and the “don’t offer less elsewhere” requirement, what’s to stop someone

        1) Giving his app for free on the App Store (i.e only giving Apple $100 for a developer account).

        2) Making huge bucks by selling content and unlocking app features in exchange of money on their site?

        So, the guy gets to profit by 1) the iOS devices Apple created. 2) the iOS SDK, API and toolset Apple created, 3) the App Store infrastructure Apple created, and Apple gets what exactly?

        There this impression (I don’t know where people get it), that Apple should be grateful in this case, anyway, people the apps are a lure for people to use iOS devices.

        Well, Apple doesn’t want the iOS devices to be their revenue stream. They want the App Store to be their revenue stream too.

      • Ravi

        I agree that the 30% is wrong, but the pricing requirement makes it worse. If content providers charged more on iOS than they did elsewhere the wrongness of the 30% cut would out in the open for everyone to see. By insisting on “most favored nation” pricing (while providing something close to “least favored nation” costs), Apple is trying to fool consumers into thinking that Apple’s revenue grab in in the consumer’s interest. And, as we can see, some of them are falling for it.

      • Sam Kass

        “It’s not like people are using Apple APIs to create eBooks or magazines.”

        This statement is… the opposite of true. There are tons of interactive books and magazines being developed with Apple’s APIs. And many more developed with Adobe’s APIs that are then “compiled” onto Apple’s APIs. Apple created an entire new product category (the “media tablet”, as analysts call it) that is redefining the subscription industry and bringing new customers to a formerly dying industry. And in return Apple asks for less than half of what traditional publishers take.

        Yes, internet folks want everything immediately for free, but quality costs.

      • mikecane

        Most eBooks are ePub, period.

      • Tim

        Dont get snarky, it’s irritating, and doesn’t change the fact that Sam Kass’s point is quite true.

        I’d like to see a reply to foljs’s point. Apple’s policy closes a loophole.

      • mikecane

        I don’t reply to every point. I have my say. People in Comments have theirs. That’s usually enough. This isn’t a fucking high school debating society.

      • Tim

        Funny, it’s feeling kind of like high school to me.

  3. Peter

    Very interesting article. I’m not sure I’d count out Microsoft or HP…

    Microsoft is learning the hard way that it must innovate or die. Windows Phone 7 has some interesting-looking stuff in it. Microsoft Surface (affectionately known as “The Big-Ass Table”) is also doing some interesting things which may scale down to tablets. Microsoft’s problem has mostly been managerial and you’re starting to see some shake-ups there.

    HP has a long history of innovation, mostly destroyed by Carly Fiorina. But HP does understand innovation in the printer realm. So it isn’t a completely foreign concept to them (unlike, say, Dell). I’d give them an okay chance–Rubinstein is ex-Apple and webOS is pretty impressive. I wouldn’t necessarily judge them by their public speaking skills–hey, not everybody can be a Steve Jobs.

    As for Google, Google was the first company to step in and give the phone developers what they needed: a way to make something like an iPhone. They’ve succeeded wildly–Android is either #1 or #2 in smart-phone market share. Honeycomb (Android 3.0) is looking very impressive on the Xoom tablet. And while you might cry “Fragmentation!”, I’ve yet to hear any complaint about Fragmentation from people who actually own Android phones. It’s more of a FUD technique at this point.

    I agree that Apple has gone too far with the subscription issue. Keep in mind that all the American companies may start complaining to the FTC and/or DOJ and the European companies to the appropriate EU agencies. I think Amazon can easily show Apple as a competitor in eBooks (Kindle vs. iBooks) and if Apple ever comes out with their mythical music streaming service, this could easily show Apple as trying to compete unfairly.

    So one good way to fight this might just be to say “Enough.” If you can’t make money selling your wares via an iPhone App, don’t. If what you’re doing has to be in an App, make it for Android and RIM and WP7 and webOS and tell people the reason that you didn’t do an iPhone App was that you didn’t want to raise your prices 30% just to pay for Apple. Try making a web app which is optimized for iPhone (that doesn’t cost anything) and sell your wares that way.

    Apple is the bully and will push everybody around. When everybody stands up to the bully, they back down. Trust me, if you can’t read your Kindle books on your iPad come July 1st because Amazon decided that they can’t make money on the iPad, Apple’s going to be the one that looks bad–not Amazon.

    • mikecane

      HP is an admirable company but a webOS tablet is something very different than commodity-box PCs. They have something to prove and the introduction was a huge misstep.

      As for MS, I was just thinking about WinPhone7 or wtf it’s called last night and realized it’s flawed from the start, touting that Live Tiles stuff. Live Tiles = persistent connection. That means a WiFi tablet (or iPod Touch-like device) would remove that selling point. Then what’s left? A Zune!

      • anon

        In case you are interested in facts, live tiles are updated periodically (right now minimum interval is 1 hr, which should go down).

      • mikecane

        Yes, I’m interested in facts. Don’t get snarky. One hour? What good is that for an email Live Tile? Or Twitter? Live Tiles sounds like a good idea in theory, but the realities of battery life tend to kill such Star Trek-like ambitions.

  4. The vig won’t hurt them. It costs most publishers (and this applies to software also) many times that – some estimate $150-$200) – in new subscriber acquisition costs.Apple is offering up 100M+ potential new subscribers. And, you forget that until Apple, Amazon was taking 70%.
    Apple knows exactly what they’re doing & why – You don’t.

    • Ravi

      No matter how how high their subscriber acquisition costs are, publishers pay them *once* over the life of the subscription. Apple’s 30% is forever.

  5. Dave B.

    30% vig alone will dent apple much. iPad is successful without it. Dosn’t effect the consumer much. However if this attitude prevails at Apple, then they won’t make the right decision on something that really IS important.

  6. nangka

    who is (are) the greedy one(s)?

    apple created something that devs can sell their products _without_ even incurring any marketing costs.

    just because it’s big doesn’t mean apple has to be generous. hell m$ charges a bomb to just have devs register with them!

    just because apple is making so much money doesn’t mean it has to provide free services.

    in any case, the sticking point is not the 30% but the user data for the publishers, who are the greedy ones trying to sell them for more money.

    if you understand apple, its priority is always the consumers, for it knows it is them who make apple money. content providers (publishers & app devs) are secondary.

  7. AdamC

    The subscription method only pertain to magazines and publishers – one very small part of their business. Apple is about computer especially mobile computing now and where do these high horse riders figure into the picture. Did they complain when Amazon charged the sky – just a bunch of pathetic jokers who can’t deliver their jokes right.

    Btw google will kill them faster by giving their contents away free.

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