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For six years, the Internet Nexus served as my technology blog, but I've since started blogging at the SuperSite Blog instead. If you're looking for the blog, please head there. --Paul

Sunday, January 25, 2004

More Whoppers from Jobs

In an interview with Business Week, Apple CEO Steve Jobs reminisces about 20 years of the Mac (though he was gone for over half of that) and talks about the success of the iPod. Needless to say, there are some serious whoppers. However, I do give the unnamed writer of introduction to the interview credit for getting the Mac's market share figure a lot closer to reality than most reports ("Apple's share of the worldwide PC market slipped to an all-time low of 1.9% in 2003's fourth quarter." Actually, it's 1.88 percent, and that's based on PC sales figure for all of 2003, not just for the fourth quarter.)

Steve: First of all, Apple is the most creative technology company out there -- just like Pixar is the most technologically adept creative company. It's interesting, isn't it?

Response: It's not that interesting unless you're the CEO of both companies and you're trying to draw some parallel to the success of both companies. Jobs cannot be credited with the success of Pixar, however, as anyone with knowledge of that company would admit. Jobs should be credited with helping prevent Apple from going bankrupt, and I do give him full credit for that: Few Mac advocates understand how close it was. On the other hand, I take exception to his opinion that Apple is "the most creative technology company out there." Microsoft is arguably far more "creative," in the sense that it is making exciting new markets and products. And besides, half of the so-called new features in Apple's latest OS were stolen directly from Microsoft.

Steve: Also, almost all recording artists use Macs and they have iPods, and now most of the music-industry people have iPods as well. There's a trust in the music community that Apple will do something right -- that it won't cut corners -- and that it cares about the creative process and about the music.

Response: This is all true, but of course it's perception. Microsoft, to use an obvious comparison, isn't any less ardent in its desire to help people enjoy music. Arguably, the music industry itself is a niche market, one that Apple can honestly brag about, but let's be serious. This isn't a lot of people we're talking about here.

Steve: Also, our solution encompasses operating system software, server software, application software, and hardware. Apple is the only company in the world that has all of that under one roof. We can invent a complete a solution that works -- and take responsibility for it.

Response: These comments are literally insane. Apple's "solution," such as it is, encompasses Apple-only products. Microsoft has built a complete DRM solution that bridges software and hardware (both PC and non-PC) in ways that Apple can only dream of. This is a lie of the highest order, since he's obviously pitting "Apple's solution" against competing solutions. Apple doesn't have a solution. It has lock-in.

Steve: [The] transition to this new world of digital music [is] what's determining our growth. We've had some strong competitors over the past two years, and we've managed to come out on top.

Response: Unless Apple's music business rises by a factor of ten, it will never compete with the Macintosh from a financial perspective, thus the concept of "growth" is untrue. Apple's music business is growing. Apple's (much bigger) Mac market is shrinking. If the current trend simply continues, Apple will be a much smaller company a year from now, and again two years from now. People aren't suddenly deciding to buy Macs.

Furthermore, Apple has not had competition in the online music store business for "the past two years." The first iTunes Music Store competitor, Buymusic.com, didn't appear until August 2003, or five months after iTunes debuted. Since then, more viable competitors like Napster have shown up. It's unlikely that Apple can control a market in which its lock-in strategy doesn't give it a leg-up on the competition. In other words, the choice model of the wider PC industry will kick-in eventually. The PC world isn't like the Mac world, where everything comes from one company.

Steve: The people using [Microsoft's digital media] technologies have yet to be successful.

Response: I assume he's really just talking about the online music stores here, but there are many companies making Windows Media-compatible software, hardware, portable devices, online services, and other products, and many of them are successful. Arguably, the market for Windows Media-compatible products is very many times the size of the market for all of Apple's products combined.

Steve: Whoever enters this market now, is going to enter a market that's not in its infancy.

Response: The online music store market is very much in its infancy.

Steve: And they'll enter a market against a competitor that has a 70% market share -- and surprisingly, that competitor's name will not be Microsoft. It will be Apple. Now, I understand that there's no guarantee we'll stay on top, but that's the situation.

Response: Yep, that's the situation. It's a situation so many companies have found themselves in before, including WordPerfect, Lotus, IBM, and, most tellingly, Netscape. The Netscape comparison is particularly good, because Netscape actually had 95 percent of what was a market in its infancy, and it was all taken away.

Steve: [The history of the Mac and PC, and the relevance it has to the music business is] ancient history ... I don't think of it that way. I just don't. I got back to Apple six-and-a-half years ago. The hand was dealt [by then].

Response: In the sense that the Mac no longer competes in the market with the PC industry, yes, it is ancient history. But the Mac was once the number one selling computer system, just as the iTunes Music Store is now the number one online music store. History has a way of repeating itself, especially when the details are all so similar: A single tech supplier trying to foster vendor lock-in in a market where any competitor can make similar products, but at much lower prices.

Steve: We've done a really great job of building great products for the best 25 million customers any company ever had.

Response: Ah yes, the never-changing 25 million users figure. Could you imagine how shareholders would react if, every year, a company like TiVo claimed that its user base never changed? That figure never goes up, and it never goes down. The number of Macs the company sells goes down every year, and its usage and market share figures drop every single year, but that 25 million figure just sits, nice and static. Curious. Actionably curious.

Steve: Hopefully, more customers will decide they want the world's best computers, too.

Response: Well, Dell is the world's number one personal computer maker for a reason, Mr. Jobs. They do make the world's best computers, and are able to transfer their market power into lower prices for customers too. That's what you get in an industry with choice, and no lock-in.

Steve: HP looked at the choices they had, and they thought what we were doing was the best in the industry, and they expressed an interest in working with us. The more we discussed it, the better it sounded. Look, we don't make our own printers. We use HP's printers. They're better at making printers than we are. HP decided that we're better at making portable music players and online music stores, and there is no shame in any of that. I think it's pretty smart.

Response: Sure, you're the CEO of the company getting the best part of the deal. What about HP's users though. Are they getting a good deal? Will the "hPod" work with all of HP's existing products? What about Protected AAC?

Steve: [Referring to the iPod] It's very exciting to be able to apply Apple's innovation, engineering excellence, and marketing skill in a market where we don't have that 5% market-share ceiling to see what we can do.

Response: Like the "25 million users" factoid, Jobs still refuses to drop the "5 percent market share" lie. The Mac's market share hasn't seen five percent in several years. Right now, the figure is 1.88 percent, much less than half of 5 percent. Arguably, there are more people using Linux than Mac OS X right now. That's just going to skew even more in favor of Linux over the next several months.

[ Posted at 12:15 PM | Permalink ]