Like a comet that passes Earth every few years, Apple Computer consistently comes out of the blue with products that alter the trajectory of the technology business and leave observers rubbing their eyes in amazement. Apple launched its latest creation, the iTunes online music service this spring. Earthlings immediately commenced downloading songs for 99 cents apiece - more than 5 million at last count.
The sheer volume of downloads quickly relegated the major record labels' services, pressplay and MusicNet, to nonstarter status and has sent Microsoft, AOL, Yahoo!, and others scurrying to field knockoffs. But the most noteworthy aspect of Apple's success is that little about the iTunes store is new. It was the same with the iPod. MP3 players had been around for years - except that they weren't, in retrospect, what the people wanted. iTunes and the iPod have made a splash for the same reason: Apple's uncanny ability to provoke lust for electronic products.
To change an industry once is impressive. To do it as many times as Apple has - popularizing innovations like the graphical user interface, the mouse, multihued hardware, and edgy industrial design - is phenomenal. For three decades, Apple has blazed a trail for the computer world. Now, the music business is watching slack-jawed.
Yet somehow, after all its time at the creative helm, Apple clutches a meager 3 percent of the computer market. The company does the inspired work of figuring out new ways to entice people to buy its machines, only to have other vendors crank out inelegant imitations for the masses. It seems unfair, both to Apple and to the hordes saddled with second-rate gear.
So
why doesn't some ambitious company with deep pockets and distribution muscle adopt Apple and hold it aloft as the trophy it really is? The corporate Daddy Warbucks would get to anoint its product lines with Apple's creative mojo, turbocharging revenue and snatching market share from its imagination-challenged competitors.
It's working for BMW. In 1995, the very, very serious automaker bought Mini, an obscure British company with a sense of humor; today, BMW is struggling to keep up with orders. Mini Coopers swarm like racing-striped gnats up and down US roadways, making so many SUVs look like the big, unwieldy bully boxes they are.
It worked for Warner Music. The stodgy label handed $20 million to Sub Pop, hoping to tap into the gritty sensibility that allowed the indie to lure bands like Nirvana and Soundgarden. For its money, Warner got 49 percent of the grunge incubator and today enjoys heaps of street cred via rising Sub Pop finds like the Shins, the Postal Service, and Hot Hot Heat.
Speculating on suitors for Apple is a time-honored parlor game. With every downturn in its fortunes, pundits note that Apple has a hoard of cash - $4.5 billion today - which makes the company's $7 billion market cap mouthwateringly cheap. The prospect of owning Apple has tantalized several tech titans. Michael Dell drew Steve Jobs' lasting ire by suggesting that Apple be sold and its mound of cash distributed to shareholders. Scott McNealy and Larry Ellison both bandied Apple takeovers in the mid-'90s.
The biggest impediment to any potential corporate benefactor is also Apple's single biggest asset, cash pile notwithstanding: Steve Jobs. Certainly, lots of credit for Apple's visual and tactile product triumphs is due Jonathan Ive, the company's VP of industrial design, but Ive - and the rest of the overachieving crew - is addicted to innovation-at-all-costs because of Jobs. His hypnotic influence reaches beyond One Infinite Loop as well. For example, the Eagles had always balked at putting songs online, but Jobs talked the band into signing on for the launch of the iTunes store. The music industry once despised Apple for its "Rip. Mix. Burn." advertising campaign. Now Apple counts all five major labels as partners.
When the board pushed Jobs into exile in 1985, Apple's innovative spirit went with him. The company nearly perished by mimicking bland PC makers like Compaq, until CEO Gil Amelio, desperate for some passion and vision, re-recruited Jobs, who quickly stunned the world with the iMac. Five years later, Apple is converting Wintel drones to Mac fanatics with its elegant new operating system, the Unix-based OS X.
But here's the thing about Apple's iconoclastic chief: Jobs doesn't give free lessons on creating a dynamic culture, and as Amelio now knows, he's hardly a model employee. Jobs pushed Amelio out in short order and went back to running Apple in his eccentric, explosive way, flouting every management rule. What big-time CEO needs a culture infusion badly enough to work with an insubordinate, micromanaging megalomaniac?
Try Michael Eisner. He's pulled it off more than once, to the benefit of Disney's bottom line. In 1993, he brought the irascible, profane, hands-on Weinstein brothers, Harvey and Bob, into Mickey's G-rated kingdom to harness the creativity coursing through Miramax. What did the Weinsteins get? Distribution.
Just as BMW's international network of dealerships put Minis in front of hundreds of thousands of new-car buyers, Disney's ties to thousands of theaters allowed the Weinsteins to transcend the art house crowd. Miramax fulfilled the potential Eisner had seen in offbeat early films like The Crying Game by bringing in $130 million in profits last year, along with the critical respect Disney could only have paid for: 40 Oscar nominations.
Eisner's other bad-boy CEO is, of course, none other than Jobs, who also runs digital animation power Pixar. In 1991, when Disney first invested in Pixar, some people saw only a handful of Lucasfilm refugees. But Eisner saw something more. He put money into the company and gave its leader, Jobs, a long leash. The result was a string of animated blockbusters including Toy Story and A Bug's Life, not to mention hundreds of millions in profits for Disney.
Now that Miramax and Pixar are household names, Eisner is embroiled in contract disputes with the Weinsteins and with Jobs, but in both cases it was Disney poking the beehive, brazenly trying to exact more work. Eisner has done quite well by harnessing talent without being put off by other larger-than-life personalities.
Or what about Sony? A deal with the Disney of consumer electronics would give Apple access to a distribution network that Jobs and Apple fanatics can only dream about. World domination, or at least a shot at double-digit market share, would be within reach. Sony would gain an edge on its margin-scraping competitors, the fruits of Apple's creative hothouse, and a devoted customer base in influential sectors like publishing and advertising. Not to mention that a deal with Apple could provide leverage against Microsoft's unrelenting attempts to make Sony one more manufacturing lackey.
Jobs, who has singled out Sony as worthy of praise, sat down several times last year with its CEO, Nobuyuki Idei, to discuss joint ventures. The talks didn't go far. Idei was reportedly impressed by Jobs' ideas but put off by his arrogance and scrapped the negotiations. Idei might want to schedule another meeting. In June, he faced a crowd of irate shareholders demanding to know how the company managed to lose almost $1 billion in the first three months of 2003.
Fact is, Idei needs a bold stroke, or his days are numbered. If Sony's up to the challenge of working with a quirky phenom, it could do worse than to adopt Apple. The formula for success is simple. Just give Jobs lots of room and a vastly expanded audience, then sit back and watch the hits keep on coming.
Now for the tricky part - convincing Steve Jobs to sell.
