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The Core of the Apple Problem

by John Gaffney on Thursday, August 13, 2009
The Core of the Apple Problem

I have a lot of respect for Jason Calacanis, which is of course the obvious signal that I’m about to trash him. Not really though. I need to point this out first because he threw some well-placed bricks at Apple’s Plexiglas house at yesterday’s digiday:APPS conference, and it was ballsy and brilliant. In fact, after going to more Internet events over the past 15 years than I can count, it was arguably the most energetic conference presentation I’ve seen this side of David Verklin when he inevitably gets up and takes his jacket off.

I digress. Calacanis’ Apple coring is worth revisiting because it was fundamentally flawed. Those flaws have everything to do with mobile content and its development (or lack thereof) So Jason, with sincere respect, here’s right back at ya.

Apple is wielding its power on app, music, and browser distribution in ways Microsoft never dared to get away with. And it would be nice to personalize this problem by demonizing Steve Jobs as Calacanis did. But it misses the general point.

Apple is not Steve Jobs. Apple reflects Steve Jobs’ design and marketing sense a lot more than it reflects the current closed business model. Tony Faddel, for example, who previously ran the hardware division that makes two of Apple's three key product lines: the iPod and the iPhone. He cut his teeth at Philips, where he learned the hard way how Microsoft-style leverage works. Though Faddel has since stepped down from his position at Apple, if was going to email anybody about Apple’s closed system iron curtain, I would email him.

Calacanis’ talk tried to inspire the troops gathered at digiday:APPS to tell Apple that we’re not going to allow him to become the tastemaking, tech-breaking czar that he wants to be. But he talked as if the people who go to conferences actually make the difference; as if the digerati made the Internet what it is. Not the case. Internet technology and marketing was made in the big rooms; the Internet was made by the 18 million People who go to People.com every month.

If you tried to tell those people that Apple was out to screw them, they would shrug and get back to texting. Despite their obnoxious behavior, there never was a consumer revolt against Microsoft. No reason to think there will be one against Apple.  And app developers can certainly draw a line in the sand against Apple’s fascist practices. There certainly is an opportunity there. But markets and technology are immoral. Leverage and money tends to win. Developers will follow the eyeballs and the money.

I loved Calacanis’ rage against the Apple closed rather than open source machine. He seemed to think Google could break it. But here again, there’s a block. Google can make a better phone, it can match the apps and the interfaces with online products, it can even play in the very tough game of content exclusives. But Google doesn’t have music. iPhones have iTunes. That is the content monopoly that represents an epic Stairway to Heaven like presence.

The music issue needs to be solved, and Google more than any other company may have the intelligence, legal staff, and money to initiate and prove an anti-trust case there. And there just might be a frustrated record company or two who will join them.

Bottom line, and I know this isn’t cool to say, the only way Apple will loosen up and take the walls down is to put legal and regulatory pressure on it. The current FTC and FCC will be more willing to do it than the last administration. The big problem is that the regulations this country put into place to guarantee fair competition have been gutted by lobbyists.

Example: there is a law called the Robinson-Patman act that regulates what is supposed to be a pillar of retail competition, which is equal wholesale pricing. The law basically says that a supplier can only discount goods based on volume. Guess whose lobby shredded it? WalMart. WalMart is as closed a system as Microsoft was or Apple will be. Unless anti-competitive practices are applied to the software business Apple is on its way to 100 percent of the music business. That’s called a monopoly and its illegal because the economy suffers in a monopoly. Apple is on its way to well north of 50 percent of the smartphone market and stands to dictate an unreasonable amount of the app market.

I’d like to think, as Calacanis does, that morality and the other better angels of the Internet economy will be satisfied. But Apple is currently embracing the demonic concept of leverage, and leverage has created various creatures from Carnegie to Vanderbilt to Ford to Rockefeller to Gates to Jobs.

(For a peek at the video version of what Calacanis said, see our sister publication DM2Pro.com.)

Tags: digidayAPPS, Jason Calacanis, Apple, Steve Jobs, product development, mobile, iPhone, iPod, John Gaffney

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Comments (4)

August 14, 2009, 07:18 AM
Alan Brody: Going after Apple is like going after Disney. Not a cult - more like a religion and the public is NOT on your side. (Definitely not like going after Microsoft). Gaffney is right that the audience can't do much to fight the Apple monopoly - they're too good and too entrenched. But marketers owe it to the rest of us to show competitors how to stand up to the Church of Jobs. (Check my blog on iBreakfast.blogspot.com)

August 13, 2009, 04:54 PM
Kate Berg: RE: "There certainly is an opportunity there. But markets and technology are immoral." Don't you mean "amoral"?

August 13, 2009, 04:31 PM
Lily: I don't know why people get obsessed over apple so much. It's all glitz. They are nice size company but never have dominated in anything other than music dowloads (not that I'm saying that's not a big market). I find it surprising how much of a cult it is.

August 13, 2009, 04:31 PM
mark donovan: " Tony Faddis, for example, runs the hardware division that makes two of Apple's three key product lines: the iPod and the iPhone"

I believe you meant Tony Faddel, who used to work at Philips, did run the iPod gorup, but resigned at the end of 2008.

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