How Apple Does It

Apple is reporting a fiscal first quarter profit up 78% from a year ago. A 24.5% increase in revenue from the prior year's quarter. Shareholder value is up 65 cents a share over a year ago. You may also remember that news accounts had iTunes slipping in the second half of 2006. The vultures were circling Cupertino. Luckily Apple CEO Steve Jobs bought none of it. Jobs knows that he is in the iPod business and that iTunes exists for the iPod. Apple sold 22 million iPods for the period ending December 30th -- a 50% increase from a year ago. Steve Jobs once again had his eyes on the right prize.

If you were in an Apple store prior to Christmas, you knew they were going to blow the numbers out. Microsoft introduced its iPod competitor -- Zune -- around Thanksgiving and it is firmly in second place already -- actually, a dubious distinction in light of Apple's continued and sustained strength in the segment. The problem is second place is so far behind first place that in reality it doesn't matter at this point.

How does Apple do it?

What's obvious is that Steve Jobs is so tuned in to his youth-oriented market that this baby boomer is making pundits question why they think only Gen Y can develop products Gen Y will buy. The ironic part is that arguably the biggest media device of all time, the iPod, was developed, re-developed and expanded by a baby boomer. Either Jobs has their number or he is just lucky. Or both. This bodes well for all the older managers and owners of music media companies should they be of the mind to take a lesson. In other words, Jobs makes his living from knowing his market better than his competitors. It's not about being hip or cool. It's about being shrewd.

Lesson Number One: get to know your market better. Live with it. Understand their quirks and preferences. Too frequently traditional media executives think knowing the market means doing a research project, hiring some young brains or attending a seminar or two. No. No. No.

Lesson Number Two: Apple took almost three years to develop the just announced sensation -- iPhone (all while Jobs was denying interest in manufacturing such a phone). They studied everything. Worked in secret groups. The Apple way is said to be so secret that differing team members don't know what other team members are working on. When was the last time a radio company got to know its audience (outside of a research project or hiring a hot program director or consultant)? And when was the last time they spent almost three years building anything? Westinghouse spent more than that building the all-news format and lucky for us they did or there would be no all-news format for AM radio.

Record labels want to fight the battle of Bull Run over the CD. They will lose and expend lots of energy and wear out lots of troops. Labels simply declare themselves cool -- now they understand interactive and everything is alright. Except revenue. Except sales. Except interactive profits. Oh, and they continue to fund their lobby group -- the RIAA -- so it can continue suing potential customers.

Has anyone thought of spending the next few years on developing a record industry without the CD. Without digital rights management (DRM) -- a most certain casualty in the years to come.

Traditional media wants it on demand, the way they want it. Isn't that the same description of their Gen Y growth market? You can't have it your way until you understand how to let the market get its way. It takes time, effort and focus.

Interestingly, Apple's iPhone is still almost six months away from making its first call. It has been reviewed by all the biggies in tech. Fully 25% of my Music Industry class at USC had seen the Steve Jobs video clips within 24 hours of his announcement at Mac World. How effective is Steve Jobs, the salesman! There has been enough time to pick apart the iPhone and very few writers and reviewers have been able to. Perhaps more scrutiny will come when it is introduced to the marketplace this summer.

That means Apple did it's homework. Mission accomplished (sorry, about that term). It performed due diligence and succeeded in finding its market.

Radio, records, television, newspapers, movies will not benefit from the next generation if all they do is make adjustments and ride trends. Example: TV networks are going nowhere fast when you see them become YouTube's best buddy. TV networks are panicking not innovating.

It takes time.

It takes commitment.

It takes focus.

Apple knows this and time and again it pleases its market. The lesson is not that complex. Doing it -- now that's the trick.

By the way, Steve Jobs has become such an icon that Saturday Night Live has had him for dinner. When you get a ribbing like this vignette, you have arrived.