Is Apple too powerful?

The new iPod nano is a tour de force, the Swiss Army Knife of mobile entertainment. I'm sure there's some obscure gadget from Japan that packs more features per cubic millimeter, but I've never heard of it, and chances are neither have you. This one's a major consumer product, just in time for stimulating the economy this holiday season. Speaking as a technophile, I want one of the new nanos for the same reason I want a Dremel with 300 different bits: just because.

I'm also impressed by the new price point on the iPod Touch. Apple frequently overhypes its announcements, but the $199 price point in the US truly is a milestone that should lead to much higher sales. The improvements to iTunes and the App Store look promising as well, and I'm especially intrigued by Apple's effort to make paid apps more prominent. More on that in a future post.

But the thing that surprised me the most about Apple's announcement wasn't the features of the new products, or the absence of a tablet or an iPhone Lite. It was something Steve Jobs said when he talked about the video camera in the nano:

"We've seen video explode in the last few years," he said, showing a picture of a Flip video camera. "Here's one, a very popular one, four gigabytes of memory, $149, and this market has really exploded, and we want to get in on this."

Think about that for a minute. "There's a big new market, and we want in." Not, "we're creating something new" or "we can vastly improve this category." Just, "we want a cut."

It sounds like something Don Corleone would say. Or Steve Ballmer. But it's not what I expected from Apple.

Now, it's logical for Apple to put video cameras into iPods. A friend of mine worked at one of the companies producing cameras-on-a-chip, and he's passionate about the potential for building vision into every consumer product. It's not just an imaging issue; when the device can see the user, you can create all sorts of interesting gesture-based controls that don't require you to ever even touch the device. Instead of point and click, the interface is just...point.

So it's been inevitable that video cameras would eventually be built into things like the nano. For Pure Digital, the makers of the Flip, this ought to be a tough but normal competitive challenge. The first step is to make sure your camera works better than theirs (check). Next, since music players are becoming cameras, you might want to build a camera that can also play music.

But that's where the situation becomes abnormal. Because even though Pure Digital was recently purchased by Cisco, giving it almost limitless financial resources, it's more or less impossible for its products to become equivalent to the iPods as music players. Not because they can't play music, but because they aren't allowed to seamlessly sync with the iTunes music application.

The issue of access to iTunes has already been simmering in the background between Apple and Palm, with Palm engineering the Pre to access the full functionality of iTunes, Apple blocking that access, and Palm breaking back in. To date I've viewed it as kind of an amusing sideshow, and I didn't really care who won. I figured the folks at Palm had plenty of time in the past to build their own music management ecosystem, but they (including me) didn't bother, so there wasn't any particular moral reason why they should have access to Apple's system.


Apple the predator

The situation with Pure Digital is vastly different, in my opinion. Pure Digital pioneered the market for simple video cameras. It identified an opportunity no one else had seen, and built that market from scratch. In a declining economy, it created new jobs and new wealth, and made millions of consumers happy. It's incredibly difficult to get a new hardware startup funded in Silicon Valley, let alone make it successful. For the good of the economy, we ought to be encouraging more companies like Pure Digital to exist.

But there's no way for a small startup like that to also create a whole music ecosystem equivalent to iTunes. Yes, third party products can access iTunes music. But not as seamlessly as Apple's own products, and as we've seen over and over in the mobile market, small differences in usability can make a big difference in sales. So Apple gets a unique advantage in the video camera market not because it makes a better camera, but because it can connect its camera more easily to a proprietary music ecosystem.

In other words, iTunes is no longer just a tool for Apple to defend its iPod sales; it's now a tool to help Apple take over new markets.

In the legal system they call this sort of thing "tying," and it is sometimes illegal. For decades, Apple complained that Microsoft competed unfairly by tying its products together -- Office works best with Windows, Microsoft's file formats are often proprietary so you can't easily create a substitute for their apps, and so on. I was heavily involved in the Apple-Microsoft lawsuits when I worked at Apple in the 1990s, so I know how passionately we believed that Microsoft's tactics were not just unethical, but also harmful to computer users and the overall economy.

So it's very disappointing to see Apple using tactics it once bitterly denounced, and declaring that it's decided to take over a market because "we want to get in." If Apple can use iTunes as a weapon against Pure Digital and Palm, what's to stop it from rolling up every new category of mobile entertainment product? Where's the incentive for other companies to invest?

I saw first-hand the stifling effect that Microsoft and Intel's duopoly control had on personal computer innovation. PC hardware companies learned not to bother with new features, because Microsoft and Intel would insist that anything new they created be made available to every other cloner. And software investments were restrained by the belief that Microsoft would use its leverage to take over any new application category that was developed.


Good fences make good neighbors

There's a danger that Apple's behavior will have the same chilling effect in mobile electronics. So I believe Apple should allow any device to sync with iTunes content, the same as an iPod. But not because it's morally right or even because it's legally required, but because it's the best thing to do for Apple. Here's why:

The two biggest threats to a very successful company are complacency and consistency. Complacency is more common -- a company that's very successful starts to relax and loses the hunger and drive that made it a winner. I think we can safely assume that won't happen to Apple as long as Steve is around. But the second risk, consistency, is more insidious -- behavior that's appropriate and accepted for a spunky startup gets punished when a big company does it.

This is what tripped up Microsoft. The same aggressiveness that served it well against IBM got it a series of lawsuits and intense government scrutiny a decade later. Even though Microsoft eventually won those suits, its execs were distracted for years, and it was forced to dramatically change its behavior. It has never been the same company since. I think Microsoft would have been much better off had it proactively adjusted its own behavior just enough to pre-empt legal action.

That's where Apple is today. It has to realize that it's no longer the underdog. It's the dominant company in mobile entertainment, and the fastest-growing major firm in mobile phones. It's already under a lot of legal scrutiny for the way it manages the iPhone App Store. If it also leverages iTunes to take out small competitors, and especially if it's dumb enough to say things like "we want in," it will guarantee unfriendly attention from government regulators -- a group of people who actually have more power to hurt Apple than do most of its competitors.

The Obama administration in the US is making noises about enforcing competition law more vigorously, and look at how the EU is picking on details in the Oracle-Sun merger, allegedly to protect local companies (link). If they'll do all that to help SAP and Bull, what will they do to protect Nokia?

Apple, you don't need the special connection with iTunes to keep on winning. You've already proven that you're much better at systems design than almost any other company on Earth. The huge iPhone apps base is exclusive to you, and that won't change. By opening up iTunes, you take away an easy excuse for regulators to pick apart your business, a process that would be distracting, expensive, and could result in much more dramatic restrictions on your actions.

Ease up a little on the gas pedal, Steve. It's the best way to keep moving fast.

41 comments:

Ian Rosenwach said...

Good post, I wrote something similar hear about allowing 3rd party apps to run in the background on the iPhone - http://ianrosenwach.com/index.php/2009/09/google-latitude-the-iphone-and-apples-values/

Kontra said...

Yes, "Apple's evil"…except for all the others.

Before Apple introduced the iPhone…

Anonymous said...

"[Non-Apple music players] aren't allowed to seamlessly sync with the iTunes music application. […] The issue of access to iTunes has already been simmering in the background between Apple and Palm."

The Palm Pre is masquerading as an iPod using Apple's USB Vendor ID. This is basically a hack.

As a matter of fact, anyone is allowed to seamlessly sync with iTunes using the iTunes XML library file. RIM's BlackBerry Media Sync can transfer your DRM-free songs and playlists from iTunes to your BlackBerry, for instance.

http://na.blackberry.com/eng/services/personal/media.jsp#tab_tab_music

You can transfer music and video from iTunes to your Nokia device using Nokia Multimedia Transfer.

http://europe.nokia.com/get-support-and-software/download-software/nokia-multimedia-transfer/how-to/transfer-from-itunes

DoubleTwist can do it, too. It supports hundreds of devices, including the Pre.

http://www.doubletwist.com/dt/Home/Index.dt

Michael Mace said...

Thanks for the details, anonymous. I understand that a vendor can write a separate sync app to put iTunes music onto their device. But if I understand the situation correctly, they can't sync directly from iTunes the way that an iPod can (please correct me if I got that wrong).

In my opinion, that's a significant barrier to the competition.

Kevin said...

First, Apple does not block other companies from accessing all the non-DRMed content in iTunes; they simply process the open and accessible XML files in the folder. Their competitors don't have to build an ecosystem; they can just build an app that interfaces the iTunes content to their device. Blackberry and other small 3rd-party companies already do so today.

Second, Apple's situation is completely different from MS. In short, MS built a platform (Windows OS) for use by almost all hardware mfrs, but then prohibited those mfrs from bundling other software, or risk losing the OS (which effectively ends their PC business). That's how "tying" came into play.

Apple doesn't build a platform for anyone. One might argue that iTunes is a platform for media companies to distribute their content, but 1) Apple doesn't offer its iTunes platform for any hardware mfr to bundle, and 2) Apple doesn't block any media company from offering their content to other "platforms." Either way, there is no tying argument to be made.

Based on these two plus at least 3 more (too lengthy to discuss here), I think you oversimplified and thus misdiagnosed the situation, and arrived at a faulty conclusion. Apply your argument to other industries (try Walmart's ecosystem) and you'll see how messed-up it is.

Apple may be too powerful, but this is not the way to beat it. Flip can either make a better and smaller dedicated camera, or it can put its better camera in a multipurpose device while teaming up with someone else's ecosystem.

Kevin said...

Are barriers to competition illegal?

Even if Apple didn't intentionally block the Pre from syncing with iTunes, who is responsible for ensuring that each iTunes release works properly with the Pre? Is it Apple who should test and correct? Why? If it's not, does Apple have to give a pre-release version to Palm to ensure it works before releasing? Doesn't that just sound ludicrous?

Michael Mace said...

Thanks for the comments, folks. Interesting stuff.


Kevin wrote:


>>MS built a platform (Windows OS) for use by almost all hardware mfrs, but then prohibited those mfrs from bundling other software, or risk losing the OS...That's how "tying" came into play

Um, actually there were a lot of different things that Microsoft did, but I don't want to rehash the whole case here because my point isn't that Apple's necessarily breaking the law; it's that Apple is doing and saying some things that remind me of Microsoft and are not in Apple's best interest, in my opinion.


>>Are barriers to competition illegal?

Depends. But I didn't say that what Apple's doing is illegal. It might or might not be, but especially in competition law, something isn't illegal until a judge rules that it is. The laws in this area are open to a lot of interpretation.

What I said is that Apple's policy is unwise, because it creates the impression that Apple's beating up on a smaller company and gives government regulators an excuse to step in.


>>Even if Apple didn't intentionally block the Pre from syncing with iTunes, who is responsible for ensuring that each iTunes release works properly with the Pre?

That's Palm's responsibility, IMO.


>>Is it Apple who should test and correct?

No, of course not. But what's happening in this case is that, Apple is deliberately changing iTunes to prevent the Pre from syncing. That's a very different situation.

halostatue said...

…but Palm is deliberately using the iTunes syncing mechanism by lying about the type of device that the Pre is. As noted, other devices are able to be synced with some fairly inexpensive software (doubleTwist is free, and Palm could see about bundling it for Pre users; The Missing Sync for the Palm Pre is $40). So what we have is a situation where Palm is abusing a standard (the USB standard) and wasting engineering efforts to do so when they could use different engineering efforts to solve the problem for users without any issues. If Palm used the way that everyone else does, Apple wouldn't be making changes to prevent the Pre from syncing.

What is different about the type of syncing that they're talking about is that it's not directly possible using the XML file method (so far as I can tell) to sync media back from the external device to iTunes (that is, if I buy a song on the Pre, I can't bring it back directly in, the same way that I have to use a helper app for Amazon song purchases).

Aside from that, the sync program is invisible to the user once installed.

What more do you want?

ken1w said...

You argument is not consistent with the big picture.

Way before Apple released iPhone, there were many mobile phones with still cameras built in. This probably hurt the pocket camera makers. They could not compete by adding phones to their cameras, because they lacked the expertise and resources to build and sell mobile phones. Did they give up or expect to receive charity from the mobile phone makers? No, they built better cameras.

Apple itself is an example of a counter-argument. In the late 90's, Microsoft had all the advantages. It had all the major PC makers except Apple in its hip pocket. How could Apple possibly compete? Well, they almost failed, but it was through overcoming such adversity that Apple 2.0 has become the great company it is today. If it was smooth sailing for Apple through the 90's (because Microsoft and PC-making partners never grew to dominate), there is no return of Steve Jobs (and no Mac OS X, iMac, iPod, or iPhone); Apple would still be making Newtons and beige Performas running Mac OS 9.9. And you can use Microsoft versus IBM as a counter-argument example for the 80's.

If Palm is going to be a great company (for its own 2.0 run), it will survive and thrive against Apple by being more innovative and nimble, as Apple starts to get caught up in its own momentum and growth. If Flip maker Pure Digital is going to be a great company, it will make even better video cams that have features that Apple could never hope to squeeze into an iPhone or iPod. They probably do already. Great companies are not created by feeling sorry for them and giving them charity.

turn.self.off said...

i would say i am just as worried about apples connector that keeps poppingup everywhere from cars to stereos.

yes, apple is walking a very fine line here as their popularity grows.

bonelyfish said...

The difference is that one can live without iTunes, but its quite impossible to live without Office at that time. Moreover iTunes stops people taking its advantage, but Windows puts penalty to competitors. There are many companies that have the chance to replace iTunes (even today) but sadly they just screwed up.

Rob said...

I'm getting a bit off topic here, but I find it fascinating to hear people talking about the palm sync with iTunes.

I hear words like 'masquerading', 'lying', 'abusing a standard' where Palm is acting like an ipod to sync with iTunes.

It's interesting to me that people are getting so emotional about a device simply trying to act in a compatible way with the de-facto music management system.

ianal - but my understanding it that there are a lot of legal protections for people to ensure compatibility (like providing ink for printers).

As far as the USB standard goes. USB was set up to enable compatibility between similar devices 'This enables every device driver writer to support devices from different manufacturers that comply with a given class code.'. The Pre initially declared itself as a Palm device (USB hub) that implemented the "com_apple-driver_ipodSBC" . That should be enough for compatibility if apple worked with a device that implemented the correct driver. Apple has gone further and started saying that it is only willing to work with a device that also says it is made by apple. Arguably - this is against the USB requirements (hence Palm's complaint). I don't know how that will resolve, but it doesn't seem that Palm is a clear-cut baddie here.

As a user - I certainly love the iTunes sync!

Rob said...

I couldn't resist an addition to my last comment.

Is Apple learning the Microsoft ways of FUD?

http://en.wikipedia.org/wiki/Fear,_uncertainty_and_doubt#Contemporary_examples

Tim Nash said...

"Even though Microsoft eventually won those suits"

The reason Microsoft is still under US court supervision and been fined in Europe is that it lost those suits.

"Apple is ... already under a lot of legal scrutiny for the way it manages the iPhone App Store."

It isn't, because the FCC lacks any legal authority in this area. For more background on this http://lowendmac.com/nash/09tn/apple-google-fcc.html

"Oracle-Sun merger, allegedly to protect local companies"
Mergers between strong companies always attract attention in the US and Europe to see where they are likely to distort competition, as this usually results in a price rise.

"By opening up iTunes, you take away an easy excuse for regulators to pick apart your business"

When Apple 'persuaded' the music companies to drop DRM, it gave anyone who upgraded their music an easier way of exporting their iTunes library to other music management software. That was the whole point of the Norwegian action. Few have taken advantage of this but maybe, for most, the alternatives aren't worth the effort.

As people can buy music from other retailers like Amazon and import it into iTunes and export it easily, it will be difficult for regulators to pick apart Apple's business in this way. So there is no good reason for Apple to give up billions in annual revenue.

Anonymous said...

The basis of this blog is really saying that iTunes is a monopoly and that as such something should be done about it.

Once laid out as such though it is clear where the flaws are in the argument. Enough said. Windows was essential as an OS and a word processor needs an OS - why does an MP3 player need itunes? And how much more open do you want it to be?

I think iTunes does have a dominant position - and I think it is right that people watch carefully to see if it abuses that position - but there is so far no evidence that it has done anything similar to Microsoft.

I also find it hilarious that you think flip invented video in the pocket - I've never used a flip and no-one I know uses one - but they all take videos using their mobiles (cells). I think the flip guys came along at the zenith of a shrinking market for single function video devices. If you carried a video camera before a flip is great, but otherwise it doesn't make much sense.

I think that Apple said three years ago they wanted to get a piece of the Mobile Phone Pie - they looked at the market and said we can do beter than the others lets give it a try - not very Don Corleone.

I hope you keep up your thinking about dominance in the market place and keep an eye on such things - but think at the moment you are a little too early.

Anonymous said...

Maybe you are just looking at this the wrong way.

There are no barriers to Cisco, having even MORE CASH than Apple until possibly this quarter, (or as you put it "unlimited resources") from spending a great amount of that free cash on developing a free cross platform software application for PC and Macs, developing a music, movie and other content store selling the content with and without DRM, negotiating and cutting deals with the egomaniacs running movie studios, TV networks and recording labels, buying the data center space and bandwidth to deliver the content and ensure the DRM works with the appropriate security and privacy and making the Flip work seamless with that content in how many countries other than the USA, home of the free.

The same way nothing stopped Cisco from assessing that it was getting value for money when paying $590 million for Pure Digital just last March. Get on with it.

They might want to re-think that kind of investment when funds run low in the future. Or even if they don't run low.

In effect they were acting in a similar vein as a venture capitalist and hoping that one in twenty of their acquisition hits big time covering up for the other 19. They just did not get in on the first day as a start-up VC and had to pay more. Maybe they shouldn't have.

Thankfully it is not a bail-out decision and they are not to big too fail (whatever that means).

Anonymous said...

In comparison, I can't remember Apple ever acquiring a company for more than the $400 million it acquired for NeXT. Most of their acquisition in the last decade have been in single tens of millions. The biggest failure was the $60 million for school related database company. It was only in the last year with the PA Semiconductor acquisition that Apple spent more. There are a few more but nobody can remember the names nor the amount as they were too small. But as a result we have Final Cut, Logic Pro, iTunes, iMovie, Motion, Color, Final Cut Server and more and the acquisition record looks decent enough. The Salinas based Cassady & Greene's assets and engineers were for very little money and they re-worked their SoundJam application software into iTunes as Apple engineers. (After all it was located in my birth place of Salinas.) And Apple has never charged for iTunes the software application, including the PC version.

Steven Levy documents the roles of Jon Rubinstein, Tony Fadell and Phil Schiller in working three teams to come up with the various aspects of the initial iPod and perhaps it is something for Cisco to follow. I liked it when he revealed the embarrassment of Jobs and Apple they were the last to even have a CD burning capability in their product back in the 1990s as music in MP3 formats exploded on the scene.

The Appeals Court documents the role and awful behavior of Microsoft has it has upheld the conviction of Microsoft as an illegal monopoly. It is a decision the Supreme Court declined to hear as an appeal. It is a fact of history.

Perhaps Cisco could pay too much to buy the Zune division from Microsoft and add a video camera, phone pedometer, app store, frameworks to develop the apps,...? I heard Skype was on the block and that was last sold for billions.

The software frameworks of OS X that the iPhone and iPod Touch must utilize and build on go back to investments and human endeavor made back as far as the 1980s. Pre-Cisco? Dunno.

I give Apple management full marks for having the sense and some leadership ability not to go out and spend huge sums of investment money foolishly on businesses they really should not be getting involved with unless they have a more thorough inspection and road plan on how to proceed. Flip cameras were hot sellers when Cisco negotiated the deal without a gun to their head but maybe not so hot when you can get a pretty darn good camera in your cell phone, music player, toaster, garage door opener, lawn mower, noodle bowl and left chopstick (as compared to the right chopstick). Going back and reading some of the Cisco and Pure Digital management interviews at acquisition time provide some light relief. And that was just six months ago before the ground shifted a bit.

On a technical note, I am reading the new iTunes 9 application is less a traditional style "application" than ever before as it acts with the WebKit opensource framework through XML instructions (with a few Apple tags) to format for the iTunes store display one sees and someone got the display to work in a WebKit browser.

And that raises something else, Apple giving away WebKit to open source. It is used by how many other companies as their cell phone browser of choice over the other browsers available. Being open source, Flip could make use of it somehow. I guess.

turn.self.off said...

one thing to note about webkit is that it was based of khtml, a gpl licensed web engine developed for the kde desktop.

Avi said...

Mike, nice thought-provoking stuff. You left out that iTunes isn't just the dominant music management app, but that ITMS is the leading music retailer.

While I agree that a camcorder in the nano will impact Cisco's business, I was waiting for your comments on how app developers will take the diverging hardware requirements between the iPhone and iPod touch now that some have cameras/GPS/compass/OpenGL 2.0 support, and some don't.

Mike Cane said...

Apple still has to wake up to the fact that iTunes should be a platform. They'd make more money that way, have fewer headaches, and it'd really make the world a better place for everyone:

Should Apple Turn iTunes Into A Platform?

Apple would make more from server sales, iTunes platform software sales, and consulting than they could on their current course.

jseliger said...

Good fences make good neighbors

Take a look at Frost's text for Mending Wall: there's a strong implication that the "fence" of the title keeps the separation between people that's necessary for harmonious social functioning. Under that scheme, Apple's walled-in approach is better for the company and consumers, which seems to be the opposite of what's otherwise implied in your post.

SD said...

in a way Apple may be right...put yourself in a situation that you created something and someone else is using it without even bothering to tell you that they want to use it or are using it.

Michael Mace said...

Thanks for all the comments! It's an interesting discussion.


I think we haven't yet completely clarified what parts of the iTunes experience you do and don't get when you use a non-Apple device. I'm an iTunes user, but unfortunately don't have a non-Apple device to test it with. Here are the questions that I'd love to see answered. If you use a non-Apple device to sync iTunes content:

--Can you see that device within iTunes? In other words, when you plug the device into USB, does it show up automatically on the left-hand side of the screen in the iTunes window, where an iPod would appear?

--Can you specify from within iTunes which playlists get synced onto that device?

--Will the sync happen automatically when you plug in the device and iTunes is running, without the need to write a separate sync app?

Thanks in advance.


The other general point I want to make is that we all need to differentiate between the political process of competitive regulation and the legal process. Most of you are arguing points of fact and law about whether Apple's behavior is in fact illegal. The thing you need to understand is, it doesn't matter. The antitrust laws in the US and Europe are so vague that, within very broad limits, enforcement depends far more on politics than it does on the actual behavior of companies. That's why the US can swing from aggressive antitrust under Clinton to almost no antitrust under Bush to (apparently) more aggressive antitrust under Obama, without any change in the laws.

To a certain extent this happens in all areas of the law, but in competitive regulation the swings are especially big.

Regional politics also plays a growing role, as we're seeing in the Oracle/Sun case. Not too many years ago, European authorities would never have questioned a merger being conducted in the US (and vice-versa). That gentleman's agreement has broken down, with the result that both parties are now periodically trying to regulate the other's domestic market.

I am not saying that I approve of any of the above, and in fact I think it's a hideous mess. But it's the real world, and the result is that when a company reaches a certain size and visibility, the competitive regulations on it are driven as much by politics as they are driven by the law. A big successful company has to keep itself not just in compliance with the law, but above the appearance of any wrongdoing. That's where I believe Apple is failing, and in my opinion it is a big risk to Apple's future.

Michael Mace said...

ken1w wrote:

>>Way before Apple released iPhone, there were many mobile phones with still cameras built in. This probably hurt the pocket camera makers. They could not compete by adding phones to their cameras, because they lacked the expertise and resources to build and sell mobile phones.

Not a great analogy, in my opinion, because the issue isn't only expense. There's an established distribution channel for music, controlled by Apple, that most people are accustomed to using. Apple limits access to that channel. Here's an analogy that I think fits the situation more closely. Say that a big movie studio also owned most of the movie theatres in the country, and refused to run other companies' movies. But the other studios could always build their own chains of theaters, so is that captive chain of theaters an unfair barrier by the big studio?

Look up US vs. Paramount Pictures if you want to know the answer.


>> If it was smooth sailing for Apple through the 90's (because Microsoft and PC-making partners never grew to dominate), there is no return of Steve Jobs (and no Mac OS X, iMac, iPod, or iPhone); Apple would still be making Newtons and beige Performas running Mac OS 9.9.

Ouch! I worked in the Performa team for a while.

But I think you're right.


>> Great companies are not created by feeling sorry for them and giving them charity.

I actually agree with you about that, but remember my point was not that Apple was necessarily breaking the law, but that its behavior was likely to invite government attention. The two things are very separate, at least when it comes to antitrust.


Tim wrote:

>> Microsoft is still under US court supervision and been fined in Europe

Actually, if we really want to get picky, I think the score card looked something like this: Microsoft and the US federal government settled their case, Microsoft beat the US states' antitrust case on almost every count, and Europe forced some fairly substantial fines, although Microsoft could and did pay them easily. Even if you call all of those losses for Microsoft, the penalties against them were minor enough that in my opinion you'd call it all a win for Microsoft. That's also the perspective I heard from every lawyer I talked to at Apple and Palm.


>>"Apple is ... already under a lot of legal scrutiny for the way it manages the iPhone App Store." It isn't, because the FCC lacks any legal authority in this area.

You make an interesting point about the FCC's authority, Tim, but again my point is the politics of the case. Besides, the FTC is the authority that Apple should really be worrying about, and they don't usually preannounce the things they plan to investigate.


>>there is no good reason for Apple to give up billions in annual revenue.

You honestly think Apple would lose billions in revenue by opening up access to iTunes? I doubt they'd lose a cent.

Michael Mace said...

Anonymous wrote:

>>The basis of this blog is really saying that iTunes is a monopoly and that as such something should be done about it.

Not correct. My point is that Apple is doing things that look like anticompetitive behavior, and that's creating unnecessary political risks for the company.


Anonymous wrote:

>> I can't remember Apple ever acquiring a company for more than the $400 million it acquired for NeXT. Most of their acquisition in the last decade have been in single tens of millions. The biggest failure was the $60 million for school related database company.

How quickly we all forget Taligent and Kaleida (or anyway some of us would like to forget). But maybe that doesn't count since it was while Steve was away.


Avi wrote:

>> I was waiting for your comments on how app developers will take the diverging hardware requirements between the iPhone and iPod touch now that some have cameras/GPS/compass/OpenGL 2.0 support, and some don't.

Yeah, that is a troubling one and it deserves some thinking. But my off-the-cuff reaction when I saw it was that I'm not sure Apple really cares about inconveniencing developers in that way, at least not until they have more serious competition in mobile app platforms.


jseliger wrote:

>>Take a look at Frost's text for Mending Wall: there's a strong implication that the "fence" of the title keeps the separation between people that's necessary for harmonious social functioning. Under that scheme, Apple's walled-in approach is better for the company and consumers

Nice one, Jake!

But then who is moving in darkness, Apple or Palm?

And does that make me an elf?

Anonymous said...

First of all, you need to get out more...to Japan. Apple products are low-tech and low-density in comparison. But then, it isn't about how many gates you can cram into a given volume; it's about user experience.

That point aside, your worry about Apple as some sort of overwhelming competitor with a magic freeze powers is short-sighted thinking. Taking the long view, one sees that stiff competition generally benefits the consumer. Chill competition? I think not; that's a quitter attitude.

Does Apple set a high standard? Sure, but artificially low standards due to fear of failure are what gave us our dismal public schools. Translating this backwards and broken thinking to industry is a bad idea unless your goal is to put the last remaining US industries on the GM path to success.

So limiting access to a company service to that company's devices is somehow an unfair barrier to entry? On what planet?

I applaud Palm's efforts to re-enact the IM wars for the entertainment value of the battle and, IMO, Palm's intelligence in trying to use Apple's power against itself. I certainly do not begrudge Apple for fighting back. If this approach gives Palm time to build its own service, great. If they intend to try to mooch off of iTunes forever, that's fine too. The competition of the developers leads to innovation and the market will decide if it is a good idea.

The legality of Apple's actions isn't being questioned by any law professors I know (and they do like to raise such questions.) What have you heard?

Andrea Denaro said...

mmmm I don't believe that add a camera to the ipod was a good idea.

Here I explain why http://www.andreadenaro.com/why-apple-is-making-wrong-choices-with-the-ne

Anonymous said...

Michael wrote:
How quickly we all forget Taligent and Kaleida (or anyway some of us would like to forget). But maybe that doesn't count since it was while Steve was away

Let not play too loose here.

Taligent and Kaleida were not acquired. They were joint ventures between Apple and IBM. They spent and wasted money on it but there was no acquisition or pre-acquisition valuation process of assets and products.

They were "done" before Steve Jobs returned. And so there have been acquisitions on the magnitude of the Pure Digital purchase by Cisco.

They was again prove design by committee is often a failure. Sort of like politics?

Anonymous said...

Anti trust case
Judge Thomas Jackson had a two part finding in the US vs Microsoft case. The first part was the finding of fact (Microsoft was a monopoly and had abused its power) and that was not changed by the Appeals Court. It stands for the rest of history, legal or political.

The second part, the remedy, was changed by the Appeals Court judge and in the process the DOJ and 20+ states proposed a settlement that the court endorsed.

The EU has continued with the punitive fines because its Commissioner Kross has found that Microsoft has not changed its abusive type behaviour that violates its competition laws. It did not open access to nor document its APIs to developers/programmers and it as "tied in" the IE browser to the OS with the exclusion of other browsers when some PC manufacturers could not ship the other other browser without violating the terms Microsoft laid down to them for them to get Windows at OEM prices.

Commissioner Kross at least has the back bone to effect change unlike the US Appeals Court judge, 20+ States Attorney Generals and the DOJ. There has been no need for a political remedy as the law as it stands is enforced (vs having a law and even a court finding of fact and then choosing an ineffective remedy decided by political appointed Attorney Generals) Ii is interesting that she still has the will to enforce the rules of the EU competition laws as a head of an authority while at the same time we see several "failures" or diminishing of enforcement standards in the US enforcement agencies; i.e. this DOJ backdown with Microsoft, the SEC failure with banks and finance scandals, the sheriff's department of Antioch with a child molester/kidnapper,...

It was a political remedy effected in the US under the Bush Administration pulling off the DOJ but,... it is a legally authorized authority enforcing its existing rules and finding in the EU. Now that says something about the US recently. Money talks in some circles.

Anonymous said...

A simplification for Michael: third party devices using the USB standard need to locate and take the information in the iTunes XML plist files (known to reside in certain folders under certain names but changing as iTunes goes through its historical versions), sort through them as needed to files of songs or playlists, and then take an instruction from the user to copy them or do something with them. In other words, they have to build their own sync application to do that. The files and lists are there.

Finally, I borrow the appreciative words of a commentator on an article revealing some of the very new iTunes LP and iTunes Extras coding details at roughlydrafted.com as it expresses what I could not:

"The most interesting thing about this to me is how terrific Apple’s long game is and the lack of cynicism. They have a strategy on how to execute that they manage in conjunction with their ability to successfully execute the pieces over time along with their various commitments. They aren’t just hurrying out a bunch of garbage in fear that other companies will beat them to it. They get to it when they can do it right. It reminds me of the Japanese car companies and the philosophy of “constant improvement” which can only be executed over time on a sturdy high quality base."

It is first rate engineering steadily building on previous work to improve its earlier work. Management recognizes that and is not taking the short term approach in that regard. How refreshing.

Michael Mace said...

Anonymous wrote:

>>you need to get out more...to Japan.

Yeah, I haven't been there more than a couple dozen times.

That's why I put the comment about Japan in the first paragraph of the post.


>> Chill competition? I think not; that's a quitter attitude.

Tell the government, not me. They're the ones who (in my opinion) Apple is at risk from.


>>So limiting access to a company service to that company's devices is somehow an unfair barrier to entry? On what planet?

Planet DC and Planet Brussels. If the government decides that the service is in effect a standalone business that dominates the market, they could decide that tying other products to it is illegal -- especially when you are using those products to take over new markets. Keep in mind that Steve himself described the video camera market as a separate market that Apple wanted a cut of. Not a wise turn of phrase, in my opinion.


Anonymous wrote:

>>Taligent and Kaleida were not acquired.

I know. I was reacting to the line about "the biggest failure." Hard to say what was Apple's single biggest failure ever, but I'd put Taligent/Kaleida right up there.


>>design by committee is often a failure. Sort of like politics?

Amen.


Anonymous wrote:

>>they have to build their own sync application to do that.

Thank you. That's how I thought it worked in the first place.

It's a significant competitive barrier, IMO.

I'm not saying it's illegal, but it is significant.


>>It is first rate engineering steadily building on previous work to improve its earlier work. Management recognizes that and is not taking the short term approach in that regard. How refreshing.

Agreed. Apple's product planning and execution is superb. That's why it can safely ease up a bit on the iTunes connections without taking on a great competitive risk.

ken1w said...

@ Michael Mace

Thanks for responding to my comments, and for the further elaboration on your own article.

Anonymous said...

Yes, Michael, me too. Thank you very much for responding to my comments too. And Please allow me to share some more with you as they might surprise you.

The biggest failure of Apple's?

It was not Kalieda and Taligent use of a $1 billion of financial resources and incredible engineering time for nought.

The biggest failure of Apple was the Board of Directors forcing Steve Jobs out of the company and into the wilderness.

Given the sheer accomplishments in the last dozen years even before Apple had returned to financial stability, it is hard to imagine what would have been if Jobs and his team had been around earlier. The value is immeasurable.

Here is something no one in media has probably noticed:

Cisco or Apple?

Differences in Total for Mergers and Acquisitions

$54,170,150,000 in 135 acquisitions totalling (starting from 1993)

$507,926,000 in 22 acquisitions (starting from 1988)

Difference? Three zeroes on the left side, near the dollar sign.

$53.6 billion and 114 M&As

A clear two methods/models of doing business.

Cisco was listed first.

http://en.wikipedia.org/wiki/List_of_acquisitions_by_Cisco_Systems
http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple

Here is a second something no one in the media has noticed:
The great Warren Buffetts and other financial wizards, advisors and superb "value investors" are nowhere to be seen on the Apple story. Was it no on their home ground and in front of their faces? They did not have one chance to get in when the company was incredibly cheap in 1997 or so and 2003 or so. They could have done for a third time in March. Meanwhile, the Palm share price has gone almost the same distance since last December as has Apple in the last ten years if you look at price growth. But I am never going to argue with the share market but I will recognize a business being well-managed for its size and performing to its strength. Share value will be there (eventually). The business will be there always. Maybe that value creation is the story versus the genius of any one particular business leader/investor.

Anonymous said...

Here is all you need:

What are the iTunes library files?
http://support.apple.com/kb/HT1660
"iTunes Music Library.xml

This file contains some (but not all) of the same information stored in the iTunes Library file. The purpose of the iTunes Music Library.xml file is to make your music and playlists available to other applications on your computer. In Mac OS X other iLife applications (like iPhoto, iDVD, and iMovie) use this file to make it easier for you to add music from your iTunes library to your projects."


How to re-create your iTunes library and playlists
http://support.apple.com/kb/HT1451


OS X USB Device Overview
http://developer.apple.com/mac/library/documentation/DeviceDrivers/Conceptual/USBBook/USBOverview/USBOverview.html
"This chapter provides a summary of USB device architecture and describes how USB devices are represented in Mac OS X. It also presents a few specific guidelines for working with USB devices in an application. For details on the USB specification, see http://www.usb.org."

Start writing your sync application! It doesn't have to use Objective-C. AppleScript would even do something here. :-) I worked with my neighbours 40,000+ collection of Greek songs and the library files to sort out her duplicates once. I used Terminal and VI editor.

Anonymous said...

Random selection of copied comments from discussion at another site: "Palm - who is blatantly breaking their USB Vendor Agreement by spoofing Apple's Vendor ID on the Pre - has filed a complaint against Apple for improper use of their Vendor ID."

http://www.reddit.com/r/apple/comments/94c4h/palm_who_is_blatantly_breaking_their_usb_vendor/?sort=top


+++
It doesn't lock out competitor devices. In fact, it exposes the entire library as an XML file so third party device software can interact with the library. It also offers a rich API. There are also other tools Palm could have licensed if they didn't care to write their own.

+++

As the hardware vendor, you would create a driver that listened for your USB product ID and vendor ID on the USB bus, and when detected, spin up and sync the playlists you want. To the end user, the only difference would be not having the prefs pane in iTunes but in, say, Control Panels on Windows or System Preferences on Mac.

+++

Apple's not stopping you. The library is in an open directory structure on your drive you can drag and drop files from, and uses a documented XML data file to list the library files' metadata and point at track paths, giving access to any software that wants it.

+++

Apple does provide exactly that.
They provide an XML data file listing all files with metadata and track location on your drive, so any software can read that XML, easily expose the library to you any way they choose, and then copy/delete files on that third party's storage.
The whole point is that Palm did not have to falsify the vendor ID, break USB conventions, etc., and confuse the mom and pop crowd.

+++

I'm baffled -- should Canon be mad at HP that HP's document management tools only look for HP printers? Should Nikon Capture accept Panasonic cameras as being Nikons?
What Apple is doing is checking, in the software, that it's talking to a device it's designed for. Software verifying USB device support is okay.
What Canon, HP, Nikon, etc., do with USB, is check that it's talking to a device it's designed for. Software verifying USB device support is okay.
What Palm is doing, is lying: claiming to be an Apple device. Hardware spoofing the USB vendor ID is not okay.

+++

Yeah, how dare Apple spend millions of dollars developing and marketing iTunes and the iPod platform, and then just not allow their competitors to profit off that work. It's almost like they're some type of "business" attempting to "make money."

Saga said...

Bravo !

Anonymous said...

Hardly a headline anywhere:

Palm Smacked Down In USB Dispute With Apple

Posted by: Arik Hesseldahl on September 22

http://www.businessweek.com/technology/ByteOfTheApple/blog/archives/2009/09/palm_smacked_do.html

Writing for the USB-IF, Traci Donnell, the organization’s executive director, wrote that “Palm’s allegation (if true) does not establish that Apple is using its Vendor ID contrary to USB-IF’s policies.” In short, Apple, by limiting access to iTunes to Apple-made devices only, isn’t doing anything wrong, at least not according to USB-IF policies.

However, Palm’s July 22 complaint letter also contained this: “Palm will shortly issue an update of its WebOS operating system that uses Apple’s Vendor ID number for the sole purpose of restoring Palm media sync functionality.” Here Palm is saying it plans to issue software to the Pre that allows it to masquerade as an Apple iPod when talking to iTunes.

Under USB-IF’s policy, “Palm may only use the single Vendor ID issued to Palm for Palm’s usage….Usage of another company’s Vendor ID is specifically precluded.” She then gives Palm seven days to “clarify its intent.”

F1reman said...

Well now, just look who bought shares in Palm thinking the Pre was a good bet....

Cheese Lover Bob said...

Nice article. I think the iTunes team would want to be able to let any device sync with iTunes. Think about it—their team would be working on the standard music player for the world. How great would that be?

Kevin said...

@Cheese Lover Bob: Apple is running a business. "Being great" is quite useless if it doesn't fit the vision and purpose of Apple, and doesn't bring in enough revenue to further grow the company.

@Michael Mace: The Blackberry sync app for Mac/PC does a fine job of syncing iTunes media, replicating the look and feel of iTunes (at least on the Mac). It uses the Apple provided API, namely, the XML Library file. That's what a real company does. Palm comes off as a bunch of amateurs and talkers.

Leslie Grandy said...

"That's hard to do technologically (because you can't interrupt a voice conversation during the handover for more than a fraction of a second). Besides, it doesn't solve a significant customer problem -- the voice network isn't the thing that's overloaded."

I read your post after it was included in a Tweet from someone I follow. (As a fellow blogger, I thought you might find this insight helpful.)

I wanted to address the extracted quote above. I worked at T-Mobile where I managed a product team which supported mobile phones that used UMA for seamless handover from wifi to cell and vice versa. The technical part was actually not hard. The problem was converging business agendas of wireline phone, cellular and cable providers. And simplifying the consumer's ability to connect the dots across the various providers they might wish for different services or electronics.

Fixed mobile convergence is not a technology problem. It's a bundling problem. And, yes, it's a business problem. A la carte choices for consumers are hard to support across service providers. Integration for a seamless service experience across multiple vendors is costly - for companies and for consumers. However, without a seamless service experience across hardware, software and network, the effort to convergea consumer's brand or product choices is aggravating and difficult for most average families. Everything's a piece of cake for the consumer if there is an installer, or if you buy all your products from one manufacturer. But even with UPnP, DLNA, UMA, wifi as standards, there are consumer experience hurdles to connect the dots that have prevented convergence from accelerating.

For a while, 3 screen service bundles have made fixed mobile convergence a challenge. Those providers need to mobilize.

With Cisco's help we launched several low cost wifi routers to facilitate the convergence with UMA and home wifi for low cost VOIP and seamless handovers between home and mobile usage. As much as everyone slams carriers for being walled gardens, the home has been a business fortress protected by soft bundles and non-integrated consumer services. Routers came back, because the wireline providers made the unbundled service price without voice calling too costly for consumers to break.