Apple Shoots Itself in the Foot

by on August 16, 2004

There has been a string of stories about hackers cracking the copy-protection features of Apple’s proprietary suite of music hardware and software. The most momentous was the news that Real had figured out how to place its own copy-protected songs on iPods, without any cooperation from Apple.

I think Apple’s response was incredibly short-sighted. Steve Jobs, Apple’s CEO, appears to be of the attitude that he can single-handedly conquer the digital music market. Aside from one-sided rebranding agreements, Apple has refused to let anyone under the iTunes tent.

Apple, clearly, has not learned from its own history. This has clear parallels to the biggest platform battle of Apple’s corporate lifetime– the battle with Microsoft for dominance of desktop computing. There, as here, Apple pursued a strategy of trying to build everything itself. Microsoft, in contrast, licensed its technology freely to all comers. In the process, Microsoft built a thriving and competitive ecosystem of PC hardware manufacturers, each of which had to pay Microsoft tribute in order to run Windows. Apple, meanwhile, spent most of the last two decades trying to invent everything in-house, and Steve Jobs strangled Apple’s one tentative attempt at platform openness in its cradle when he returned to Apple’s helm in 1997. As a result, Macs today have a dismal 3% market share and have been relegated to being the niche favorite of creative professionals and yuppies.

Apple looks determined to do the same thing with its current commanding lead in the music market. Microsoft and Sony are veterans of brusing platform battles, and they’re coming with war chests of billions of dollars to take Apple’s cozy music monopoly. Apple needs all the allies it can get in that battle. It should be locking in favorable terms now with anyone willing to take its side, not snubbing potential allies at every opportunity.

Steve Jobs has never shown himself to be a great strategic thinker. He’s a smart guy who thinks it’s cool to run a computer company and a movie studio. But he lacks Bill Gates’ appetite for world domination. and paradoxically, that makes him more–not less–of a control freak. The problem is that peaceful co-existence is rarely an option in the technology business. Either your platform comes out on top, or someone else’s does so and you get relegated to obscurity.

Fortunately, Real appears to be doing to Apple what Microsoft did to IBM in the 80’s– pry their platform open against their will. If Real wins the coming legal battles, the iPod and iTunes will be open whether Apple likes itor not. That just might be a blessing in disguise.

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