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Fast Company: Apple marginalized in every market?

updated 01:05 pm EST, Wed December 24, 2003

Apple\'s innovation

MacNN reader Ted Benson writes Fast Company has an intriguing article (by Carleen Hawn, January 2004) about Apple, Steve Jobs, and why the most consistently innovative company in the world is . Not every salient point is raised (intellectual property is not discussed), nor is every statement inarguable (Napster and Dell/Musicmatch "offer consumers more choice" apparently because they provide streaming music, while iPod 'works only with the iTunes service', a partial truth at best). But the article is very thought-provoking, and implies that Apple's business model generally dooms it to never be more than a high-end-niche player, forced to innovate simply to stay out of the red. Example: 'the iPod contributed substantially all of Apple's 2003 estimated operating income of $24.8 million.'"

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12/24, 01:32pm | report spam | close Reply |
We Shall See

Isn't it a bit early, perhaps, to make bold predictions of Apple's eventual failure in the digital music market? Granted, as this article and several others have pointed out, Apple has been marginalized in many markets created partially by Apple's own innovation. But that trend isn't necessarily going to continue. All in all, however, I hope Apple's leadership is listening to this sort of criticism, that they've learned from the mistakes of the past. So far the iPod/iTMS combo is faring much better than most expectations. Here's to additional music products at MWSF in January.

In business it is very difficult to lead. It is much easier to follow.

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12/24, 02:56pm | report spam | close Reply |
Apple's Economic roa map

Apple's Economic road map of staying in business by out innovating everyone may be a blue print for our own economy.

As many market segments get marginalized by being done cheaper over seas the US's only avenue for maintaining our stardard of living is to out innovate the world.

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12/24, 03:10pm | report spam | close Reply |
Easier to follow...

"In business it is very difficult to lead. It is much easier to follow."

Well said. I imagine that's why every other online music store is going with WMA. I think it's interesting. If, in the future, the iTunes Music Store becomes a niche player, next to the others, it'll be tough to blame Microsoft. Microsoft doesn't seem to be in any position to force the other stores to sell WMA. They've apparently made the decision on their own for reasons I can't fathom. I don't understand why not one of the other stores has opted to sell AAC songs, especially since they'll play just fine on Windows.

Chris

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12/24, 03:26pm | report spam | close Reply |
WMA - their only option

The iPod is the only portable MP3 plater that supports AAC with DRM. There are over 40 that support WMA with DRM.

I'm sure that the store couldn't sell any format without the RIAA approving of it's DRM plan, and right now WMA is their only option... unless they want to roll their own DRM. But then they wouldn't play on any portables.

The real market to be in is WMA portables. If you're a large company who can make an innovative and hip product and be the iPod of the WMA devices then you've got a serious, serious money maker. You don't have to open a money-losing store to rake in the profits, you ride on all the interoperable store that are out there already. If Sony decides to jump in like this and ditch ATRAC and go WMA, then Apple is doomed.

If they can get other stores using AAC/FairPlay they might avoid being marginalized. Apple needs to license FairPlay to another store, and quick. They also need to consider licensing FairPlay to another portable manufacturer because the other potential AAC based stores are going to want their customer to have at least a little choice in portables.

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12/24, 03:46pm | report spam | close Reply |
Microsoft still rules

Microsoft still rules when it comes to business. Apple may innovate, but continual mismanagement is the #1 reason why Microsoft is HUGE and Apple is paltry.

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12/24, 03:51pm | report spam | close Reply |
MS influence

"Microsoft doesn't seem to be in any position to force the other stores to sell WMA. They've apparently made the decision on their own for reasons I can't fathom. I don't understand why not one of the other stores has opted to sell AAC songs, especially since they'll play just fine on Windows."

Huh? A fathom is too deep; you need to look at the surface.

The reason that they are chosing WMA instead of AAC is because of Microsoft _IS_ exerting their influence.

Microsoft is doing everything they can to push everyone to use WMA.

In some cases Microsoft is using their clout to force the use of WMA.

In other cases where their power of influence is not so strong, Microsoft is financially rewarding the companies for using WMA.

AAC is a free open standard. If it were not for Microsoft, then everyone would be probably be using AAC.

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12/24, 03:51pm | report spam | close Reply |
Fairplay

Steve doesn't want to licence the Fairplay DRM like he didn't want to licence the Mac OS. This is why iTMS and iPod's market share will be around 5%-10% in two years.

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12/24, 04:02pm | report spam | close Reply |
licensing

" Steve doesn't want to licence the Fairplay DRM like he didn't want to licence the Mac OS. "

Yeah licensing the MacOS to other hardware manufacturers worked out so well for Apple.

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12/24, 04:03pm | report spam | close Reply |
iPods vs the rest

" The iPod is the only portable MP3 plater that supports AAC with DRM. There are over 40 that support WMA with DRM. "

Yeah, and the iPod outsells all 40 of them combined.

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12/24, 04:58pm | report spam | close Reply |
FairPlay ain't Apple's

Apple doesn't own FairPlay, folks. It's not their's to license out.

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12/24, 06:17pm | report spam | close Reply |
Typical

I found this article to contain the typical misunderstandings about Apple. The theme of the article can be summed up as "Why isn't Apple as big as Microsoft?" The article fails to ask if perhaps Apple is satisfied being a profitable, highly innovating company at its present size. The article was written from the notion that business is supposed to take over the world. I do not think that is the point of Apple. Jobs needs to keep the shareholders happy, which he does by showing a profit. Beyond that, Apple seeks to change the world through its innovations. This is an art more than a business, which turns a profit to boot. I find that inspiring, and wish more American companies acted as progressively.

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12/24, 08:39pm | report spam | close Reply |
Growth and burst

With the exception of the big reorganization under Sculley's watch. Apple has had to got through very few rounds of layoffs. Sure they have reduced staff in some areas but for the most part their growth has been stable and predicatble. I though the goal of business was to create jobs and serve customers. Apple is doing just that. They are providing stable jobs for really bright people and have the most loyal customer base of any company in any industry. 2, 3 or 5% it really doesn't matter. if I had the market cornered on just a half of a percent of the PC market I for sure would have the biggest house in town. Why isn't anyone asking why Porche isn't bigger? The boxter was their iMac but it didn't turn them into GM. It just set a stage for comapnies like honda Audi and BMW to come in and sell their knock off two seat roadsters to the masses. It is just the curse of being cool. Everybody wants to be cool but not many people can afford to. Everybody wants an iPod but most will settle for a knock-off and never know the difference.

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12/25, 03:28am | report spam | close Reply |
Re: Typical

I always wonder that myself. Why can't this country be content with a company that makes products, churns a profit, but doesn't aim to grow to ridiculously huge sizes? Somehow, if you're not growing, you must be failing... but isn't there a middle ground? Isn't making a profit good enough? Everyone gets their products, the innovation continues, all employees get paid, costs remain the same... what's the problem with this?

Is our entire economy so focused on investors making money that we can no longer comprehend what success really is?

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12/25, 07:55am | report spam | close Reply |
Re: Re: Typical

I could not agree more - where does this idea that if you are not expanding you must be failing come from? Why do some see everything as so black and white?

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12/25, 09:29am | report spam | close Reply |
Here We Go Again!

Here we go again!

For some reason Apple attracts a disapportion share of analysis despite its market share. Apple sticks in the analyst's craw for they have predicted Apple's death many times over the past years.

Of course, Steve Jobs with his personality attracts his own share of attention.

In response to Carleen Hawn main question; "Can Apple dominate the market in which Apple is the main innovator?". - I'll ask "Does Apple have to dominate its market to be successful?". Obviously, the answer is no. By any business metric, Apple is a successful company.

Now the stock market is a different situation. Despite all its innovation and success Apple's stock is low compare to its high in the eighties a few years ago. Some analysts questioned Apple's business model and others questioned the stock's P/E ratio. I'm not a technical analyst: but I think this does not matter.

There are many businesses that do not dominate their markets but these businesses are successful by any yardstick.

The point that is important to me is that Apple bring in more revenue than it spends and Apple make products that make my life easier and more successful; that's good enough for me. And good enough for its customers.

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12/25, 10:36pm | report spam | close Reply |
Saying

Apple should dominate to be successful is like saying:

Sony should be the dominant in audio and video.
Forget: Yamaha, Canon, HK, et al:

I guess everyone should be driving Mercedes, BMW, or Jaquar...
and they should dominate the entire auto market.

It is the typical and generic Windows / PC notion of business.

Sick.

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12/26, 12:29am | report spam | close Reply |
Microsoft doesn't rule..

...they sit like a big fat Jabba the Hut and suck in all the creative ideas from the little guys while raking in all the profits they generate. We all know what happened to Jabba the Hut. ;-)

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12/26, 01:55pm | report spam | close Reply |
Right on!

I follow the handheld world too, and the big questions that keep getting asked are "Will smartphones drive out handhelds?" and "Will PocketPC drive out Palm?" The questions themselves are silly. Business is not a winner-take-all competition. It's the opposite - it's about giving customers options. (How many different brands and styles of soda do we REALLY need?) Microsoft is not a typical business, however, and their business model is indeed built on dominating a market segment. Remember, they only turn a profit in the Office and OS segments, plus a leetle bit in server software. Everything else they've ever done, including MSN, PocketPC, XBox, IE, and WMA, has lost money. All of those initiatives are funded by their Office dominance. They're hoping to catch lightning in a bottle again and create a new, wholly-owned market before the cash flow from the Office/OS monopoly begins to fall apart, which it will. It may take five years, it may take twenty, but all monopolies fall apart eventually. Too bad they never learned how to make a profit by selling a quality product instead of just working to make sure customers can't buy anything else. Apple has.

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12/26, 03:08pm | report spam | close Reply |
Woman & Holiday Blues

Clearly she is either the most pessimistic person on the planet or she is in some holiday funk ... it's not that she's wrong but her basic tenemant is that Apple has competition and isn't #1 in market share in everything they do ... she seems to be confused about the free enterprise system - EVERYBODY has competition and NOBODY is #1 in market share in everything they sell - and that is NOT the only criteria for being in business or in a business segment ...

Microsoft's Market Share in the videogame market - 15%
Microsoft's Market Share in phone OS market -

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12/27, 12:49am | report spam | close Reply |
Size != Success

The thing that bothers me about this article is that it assumes that increasing market-cap is an absolutely desireable thing for all companies. This is a flawed assumption, since markets are inherently zero-sum, they can't increase forever. In my opinion, it is perfectly fine for Apple to assume a "Red-Queen" type of business model as long as they can back it up (Red-Queen is actually term used in biology referring to a passage from "Through the Looking Glass" in which the Queen of Hearts says to Alice that you have to keep running just to stay where you are). We need companies in the marketplace that only care about innovation, so we can compensate for companies like Microsoft and Wal-Mart, who are slowly killing their respective markets in their unrelenting search for the next penny. Understand I'm not saying that profits are bad or that money does matter. Just remember that as much as the economists would like to forget it, there's more to business than inflow and outflow of capital.

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12/29, 09:52am | report spam | close Reply |
Oh come on

A lot of people are saying some good stuff about the state of our culture in that if you aren't growing you aren't succeeding. It's a good point, but let me be devil's advocate. IMHO, the nature of capitalism is to WIN i.e. to beat out everyone else and make the most money. It's how the system was designed. The reason it was set up that way was because (A) competition drives innovation and (B) competition creates consumer choice. However, the failing is that BECAUSE the system is based on competition, it might end up that one competor gets really good and beats out all the others (microsoft). Thus, the antitrust laws had to be created, in an attempt to stop this kind of thing from happening.

The reason I say all this is to explain that the nature of the game is competition. People will say that apple has survived this long with their innovation strategy as it is, so it must be ok to keep going with it. As if apple is some kind of non-profit company that can keep putting out innovation but doesn't need any payback for it. I guess from where I'm sitting, I find that position a very dangerous one to take. It may be altruistic, but it isn't very smart. The game of capitalism is ruthless, and it doesn't bode well for those that sit on their lurals. What happens if one day, apple's innovation dries up? Don't give me that look like it's impossible. A company that relies on innovation must constantly be coming up with new ideas- what happens if those ideas aren't any good? Where would apple be then?

If you don't believe me that apple isn't playing with fire, then why has mac marketshare actually DROPPED over the past few years? I just don't like the feeling, year after year, that the ONLY thing that's keeping apple alive is the shear vivatiousness of their customers. You NEED a healthy amount of growth in a capitalistic society. Not insane growth like microsoft, but just a little bit of growth to show that you're succeeding. Even if you don't believe that's a success measure- OTHER PEOPLE DO. And the more people believe the mac is a success, the more people develop for it, and the better it is for mac users. So in short, apple may be satisfied with just getting by with innovation. But me as a consumer, I'm not. SO many things would be better if apple had just a bit more market share.

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Fast Company: Apple marginalized in every market?

updated 01:05 pm EST, Wed December 24, 2003

Apple\'s innovation

We Shall See

Apple's Economic roa map

Easier to follow...

WMA - their only option

Microsoft still rules

MS influence

Fairplay

licensing

iPods vs the rest

FairPlay ain't Apple's

Typical

Growth and burst

Re: Typical

Re: Re: Typical

Here We Go Again!

Saying

Microsoft doesn't rule..

Right on!

Woman & Holiday Blues

Size != Success

Oh come on

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Fast Company: Apple marginalized in every market?

updated 01:05 pm EST, Wed December 24, 2003

Apple\'s innovation

Related Articles

Recent Articles

We Shall See

Apple's Economic roa map

Easier to follow...

WMA - their only option

Microsoft still rules

MS influence

Fairplay

licensing

iPods vs the rest

FairPlay ain't Apple's

Typical

Growth and burst

Re: Typical

Re: Re: Typical

Here We Go Again!

Saying

Microsoft doesn't rule..

Right on!

Woman & Holiday Blues

Size != Success

Oh come on

Login Here

Register for our weekly email newsletter:

Connect tools:

Subscribe

to our RSS

Follow us

on Twitter

10 Most Read

10 Most Discussed

MacNN Marketplace