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One Bad Apple

Now that Apple fanatic Steven Levy is gone, apparently Newsweek can tell it like it is about Apple. It's funny, sort of, how this explains my comments about Apple being a "bad" company the other day:

Apple is looking like what Microsoft was 10 years ago—a Bigfoot that squeezes smaller competitors.

A former lieutenant of Steve Jobs's once told me something surprising about his ex-boss. "Steve is a monopolist at heart," he said. "He's just like Bill Gates. He just hasn't been as successful." Well, Jobs is getting there. This summer, Apple's market capitalization surged past Google's, making it the financial king of Silicon Valley. True, Apple still holds only 11 percent of the U.S. consumer PC market, according to researcher NPD [I love how they found some unmeasurable metric to make this number look higher than it really is; Apple owns 8 percent of the US PC market and less than 4 percent worldwide. --Paul], but its influence is far greater than that market share suggests. The iconic iPod dominates its market, and the iTunes music store has sold more than 5 billion songs, making it the No. 1 music retailer in America, ahead of Wal-Mart, according to IDC. Apple's iPhone is the No. 3 smart phone in the United States, according to NPD.

Apple has started looking like what Microsoft was 10 years ago—a company that so controls certain market segments that smaller competitors can survive only by living on its scraps or staying out of its way. (Apple declined to comment for this story.)

The really scary thing about Apple is that it doesn't just make hit products—it controls entire ecosystems. Just as Microsoft controls both the operating system and the applications that run on top of it, Apple owns popular hardware platforms (iPod, iPhone) and operates the only store that can sell music, movies and software programs for those platforms. Apple sets prices and takes 30 percent of the money.

With iPhone, Apple decides which independent applications will be allowed, and it can pull the plug on any application at any time, without explanation—as happened in July to several developers of iPhone apps. "I spent four weeks trying to get through to Apple via e-mail and phone calls, and they wouldn't return my messages," says Cyrus Najmabadi, developer of an iPhone application called Now Playing, an online movie-theater guide that Apple yanked in July after receiving a complaint about the program. (Najmabadi persisted and finally got Apple to put his application back online; Apple declined to comment on the matter.)

Apple's tactics might seem like smart business: why not squeeze every penny out of every deal? The problem is that if Apple squeezes too hard, some partners may go out of business, harming the ecosystem. Bully behavior also invites backlash, as it did for Microsoft when that company rose to power in the 1990s.

So what's the point here? That Apple is "bad" and Microsoft is somehow (by virtue of not being Apple, I guess) "good"?


Microsoft has nothing to do with this story. So drop that line of attack.

It's about Apple. Apple becoming a much more dominant player. Apple exercising its market power and getting some push back from companies that don't like being abused and customers who don't like being treated like they don't matter. It's about that ugly part of Apple's broader "personality" finally becoming more obvious to the wider world. When Apple was just a minority PC maker, no one really paid attention. But when you get really successful--in this case, primarily in digital media--people do pay attention. And yes, Microsoft can tell you how that works. How it is to behave like a much smaller company when you are in fact a corporate behemoth unwittingly (or wittingly, in many cases) harming those around you.

Apple's a big company. They can't behave like they did when Jobs was trying to stave off bankruptcy over a decade ago. And really, that's all this is; Corporate immaturity. If Apple as a corporate entity can learn from the past, they'll figure this out before they end up in a decade-long antitrust case. But my guess is that Jobs' hubris won't let that happen.

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