Apple’s Media Ambitions

Apple has been making a lot of news lately that will have more of an impact on traditional media perhaps than it will even on the consumer electronics industry.

That is saying a lot about a company that last night reported record quarterly earnings.

But this morning I thought I would share with you some signs that I am seeing that this giant hardware/software/everywhere company is encroaching on some sacred ground -- charging media companies to purvey content to consumers.

Unfortunately even smart media executives don’t seem to be reading the tea leaves right. Many are in denial about any further damage that Apple products and services could cause, say, the record industry.

But there is no doubt in my mind that Apple has eyes for an increased presence in the media business even beyond selling 99 cent songs in its iTunes store.

This does not come as a surprise because Steve Jobs was also one of the masterminds behind Pixar, an animation company that he eventually sold to Disney. And few can argue Steve Jobs’ savvy when it comes to understanding the mindset of media executives and the fickleness of consumers.

When Apple changed its name from Apple Computer to Apple the move apparently meant more than just words.

What is Apple and what are they up to in the media end of their business?

I think Apple is a consumer electronics company and increasingly an entertainment company. This gives Apple a distinct advantage over cable companies, cellular carriers, record labels and even radio stations -- yes, I think Apple will be offering some “radio” competition ahead. Let’s see if I turn out to be right.

The popular line is that Apple makes its money by selling electronics and Jobs never forgets that.

True enough.

But now I want you to keep an eye on Apple’s media ambitions -- that is, they increasingly control mobile devices and they make it clear to me that Apple wants to control the content and revenue as well.

Notice how Google rushed into Apple’s domain when Apple board member and Google CEO Eric Schmidt went Benedict Arnold on Jobs then proceeded to produce Google’s android answer to the iPhone.

Schmidt is no dummy. He sees what’s going on -- maybe had his fill of it as an invited friendly Apple board member.

Google has to have more of a presence in the electronics business because Apple is getting into the content and revenue side.

Now with Apple claiming over four billion iPhone apps sold to date, the company has announced its intention to sell mobile ads in their apps.

Imagine the business Apple would leave on the table if it didn’t.

Let’s run down the ways Apple will make its presence known to media executives who will soon find themselves behind the eightball if for no other reason that Apple owns the electronic devices on which consumers are enjoying content.


Soon makers of apps -- and there are hundreds of thousands -- will be able to sell advertising that resides within the open application through the Apple store gateway.

It’s good advertising, too, because unlike competitors, mobile consumers will be able to touch to see an ad without leaving the app they're in. This seamless operation may make “click through” rates better.

Oh, and Apple keeps 40% of the revenue while app makers running ads (often advertisers and consumer companies themselves) keep 60%. Apple could argue that it is tantamount to 60% more money for app makers. And it is. But it also represents 40% more money for Apple and they don’t even have to hire a sales force.

I remember my mentor Jerry Lee in Philadelphia once had radios manufactured that only played his radio station. He gave them to advertisers to play at their retail establishments and businesses. It wasn’t really legal. You can’t make a radio that just plays your station, but ...

Apple is kind of doing just that today when in essence they sell the predominant mobile devices to play the content they distribute and from which they will soon profit.

Books, Music and More

The iPad will have a reader that will put the Kindle to shame and Apple gets a piece of each book the publishers sell.

That’s 30%.

You already know about the 30% record labels begrudgingly pay them for selling songs on the iTunes store.

TV shows and movies -- more money from the content providers for making their shows available on Apple devices. Get a calculator, more profit sharing for Apple on content they don’t spend a dime to produce.

But there is more coming.

TV Channels on iPads and iPhones

Apple is reportedly working on a plan that could involve subscriptions to allow owners of their mobile devices to choose which TV channels they want to watch. This would be an improvement over cable TV because the shows could be served up on-demand (I know, so can cable), but instead of having to choose a basic package or premium plans, Apple customers could cherry-pick the “stations” or “subjects” they want.

Cherry-picking should be a trademarked term by Apple because that’s how the company frees consumers from having to buy entire albums to get one or two songs that they really like.

Imagine this in television.

Imagine if all these new channels linked effortlessly to Apple TV, Steve Jobs' "work in progress".

Radio on the Cloud

I would not at all be surprised to see Apple launch a new type of radio that was akin to constant music discovery channels once its Lala-based cloud technology enters the iTunes store. Apple bought Lala not for its name but for its technology.

Streaming content that doesn’t have to ever be downloaded because it's always available on the cloud would be a game changer.

Jobs knows that consumers -- especially early adopters -- want on-demand content. Can you see a driver riding around in a Ford automobile using its fabulous Sync entertainment system to bring their iTunes library, music stations, Pandora and God knows what on demand?

And Pandora?

I think Apple is working on their answer to Pandora's 40 million plus fans using the newly acquired Lala technology.

Of course, Jobs will not be the one creating the content. That’s not really his thing. He can come up with a good operating system or two but Apple is going to generate more revenue from the sweat of others while taking a healthy commission on each sale.

Worried about piracy?

No need.

Apple will continue to use its own Fairplay proprietary system and let the record labels worry about piracy. His devices happily play pirated music, but you'll note only Apple-approved apps work on Apple mobile devices.

Other electronics companies can come out with phones and tablets and the like but unless they own critical mass, Apple remains in the drivers seat distributing and profiting from others content.

How is it that Apple has out distanced Sony, made fools of the record labels (not that they weren’t that already), rearranged the cell phone business, given terrestrial radio their eventual walking papers and at the same time sold lots of electronics?


Jobs is doing what I’ve been imploring media companies to do -- look away from investment banks and look to the consumer revolution that is going on.

It may not be a Tea Party.

It’s an “i” party.

The radio industry flubbed its chance when all it could come up with is HD radio. That flopped and foolish radio people are still trying to bring it back from the dead.

Jerry Lee may have had the right idea when he was making his own illegal radios that only carried his one station.

Not the part about carrying one station.

The part about controlling the radio that his station was heard on.

Now, in its own way and without the burden of FCC regulations, Apple is going to make life tough for media companies that don’t play ball with his products.

If I’m a television, radio, music or publishing company, I am getting in on this even if I have to cough up 30% and pay royalty fees.

After all, media executives are the ones who let Jobs steal their businesses while they were out high-fiving each other over their fleeting success of consolidation.

Now Apple gets to play monopoly in the entertainment business like it or not.

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