Wednesday, November 22, 2006

Death Wish of a Fading Rock Star?

I'm not coming at this as an Apple aficionado. It simply strikes me that people can be so arrogant and blinded by simple facts of life.

Ed Colligan is the CEO of Palm and obviously a bright person. Sure this was something he answered in the spur of the moment to a reporter asking him to comment about rumours of a possible Apple phone. Spur of the moment answers are interesting though. They tell you either what the person's gut feeling about something is if they haven't given much thought to it or what they truly think about the matter after they've thought it through considerably. In either case brushing Apple off in this manner is worrisome.

The situation reminds me very clearly of a company all hands meeting in the summer of 2003 while I was working at Roxio.

BACKROUND: Roxio had just recently bought the Napster brand and and planned to re-launch it as Napster 2.0. Of course none of the original infrastructure could be used, because the original Napster didn't really have any infrastructure so Pressplay was also acquired in May 2003 to actually run the (then) subscription-only service. Basically Roxio had put almost all its spare cash into these purchases. More info here:
and here:

In the mean time Apple was busy with a few things. Apple had started staging its multi-year strategy to regain market share and acceptance and clean up the disastrous effects of the '90s. The first phase was a massive product line cleanup and a focus on core competencies. Part of this was reaching out to part of it's core market through the "Rip, Mix, Burn" marketing and engineering campaign where the iMac was equipped with CD-burning hardware and software. Shortly after Apple introduced its iPod in October 2001 to be a Mac-only product originally. The term is now synonymous with MP3 player but at the time it had just started generating buzz. Then Apple made a marketing splash with its "hell froze over" event announcing a windows compatible iPod in July 2002. At the time Apple already had iTunes that was considered by many to be the best music management software around but they chose to release the Windows iPod with a special version of Music Match Jukebox, which at the time was arguably one of the better suited pieces of software available on Windows to get the job done. Fast forward a few more months to end of April 2003 and Apple announces the iTunes music store. With it Apple had firmly placed its stake in the ground stating that pay per download and NOT subscription models are what the user wanted. But at the time obviously the iTunes Music Store was available only for for iTunes and hence only available for Mac; hey was is Apple after all what could you expect... right?
Watch the introduction of the original iPod:
Review information about the iPod and its timeline:
Background on the iTunes Music Store:

So that's about more than enough background info to be just right. During the Q&A session at the end of the all hands meeting one brave soul asks what Roxio's take on the iTunes Music Store was since there had been some rumours of a Windows version. The response was a simple as can be: "It'll never happen." No one even paused and the Q&A session went on. To that I told my boss at the time not to underestimate Apple's position in this market. Fast forward a few months and in October 2003 Apple was announcing a Windows version of iTunes, the Windows version of the iTunes Music Store and a completely new generation of the iPod; all in time for the holiday season. Napster 2.0 wasn't even ready yet... Ooops!

Now back in the present Napster is still met with lackluster acceptance and iTunes/iPod hold roughly 85% and 75% market share in the US respectively.

Those comments about Apple were made at a time when Apple had just set in place a strategy to come back from the brink of extinction and it was just barely starting to work. Other than the ones who really wanted to believe Apple could make a comeback or to companies like e-Machines copying the iMac because it was trendy and fashionable Apple was a nobody. It almost sort of made sense for a comment like that to slip by at the time. By in our day an age? How can somebody as bright as the CEO of Palm say something like it will take Apple at least as long as us to get the right mix?

He makes some logical conclusions about how Apple might go about executing a mobile phone strategy but the only problem is that it's set 3-4 years in the past. For one you don't have to worry nearly as much about the childish bickering among the various carriers you can operate as a Mobile Virtual Network Operator (MVNO). Virgin mobile is one of the very successful MVNO's and companies like Disney have had more trouble (I think because they don't have the right mix). Here's a good article summing up the current state of MVNO's: So let's see Apple has core competencies in hardware and software (especially in integrating the two really really well), it has shown that it has a knack for finding the right mix of content and features that people will go for, has a CEO that might just happen to have good connections at Disney (read might have access to contacts to get a head start over the hurdles of setting up an MVMO), and finally runs an incredibly tight ship.

I'm not saying that's a 100% formula for success and of course in all of this discussion I took the luxury of assuming that the iPhone rumour was actually going to be true just so I could illustrate a point about Palm's position. It does seem like a risky move to take when you are already struggling as a company to completely brush off the media and pop-culture darling. I'm just picking on Palm here because the example is too easy to pick on but Palm is not alone in thinking like this (I've made my opinions on RIM quite clear in the past although not on this blog).

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