Let Apple be Apple

Jason Calacanis whined about Apple’s anti-competitive practices the other day. He doesn’t like that they limit the iTunes store to iPod’s only or their exclusive deal with AT&T. He is pissed about the Google Voice application being banned from the App Store and for some reason he wants Opera on his iPhone.

He also admitted that he has given Apple $20,000 in the past few years, essentially supporting their monopoly. If you want a company to change their ways it’s probably not a good idea to keep forking over your money for their products – they’re going to think they’re doing something right.

In any event, Apple’s practices with desktop applications are anti-competitive only in the sense that they’re running a business and want to beat their competition.

iTunes

iTunes appears monopolisitc because Apple created the best MP3 player user experience and a piece of software that makes downloading music legally a breeze and suddenly (and by suddenly I mean almost a decade later) had 70%+ of the online music market. They earned their spot at the top of the market through innovation.

It’s important to note that they’re not actively stopping competitors from developing new software for OSX that syncs with a better MP3 player. No one has built that yet. Rather than whine about Apple being the market leader, why doesn’t Microsoft go build a better MP3 player? The Zune is a piece of shit. It was the result of Microsoft seeing the iPod’s success and wanting to copy it. They didn’t take time to understand what made the iPod a success was its seamless integration with the software on the computer that enabled everyone to legally download music.

Most iPod owners are not blindly loyal to Apple – in fact, most are using Windows. They’d jump ship if someone came out with something better.

The big question is: do we really want to penalize companies for innovating and creating products that are so much better than the competition that they get a stranglehold on a particular market? What’s the motivation for creating truly outstanding products if we penalize the companies that do it? We’d end up forcing companies to create mediocre products in the hope of capturing 30% of a market so that they don’t look like a monopoly. We’d end up getting a marketplace with a bunch of half assed products and no innovation.

What’s that sound like? Oh, yeah, the cellphone marketplace before 2006.

Hello Cell Phone Industry

The mobile phone market is the perfect example of an industry with a bunch of horribly designed products with terrible software. No one was innovating because the model was set in stone:

• Design a shiny phone with terrible software that makes phone calls and sends text messages really well but doesn’t do anything else even half way decent.
• Get the phone to consumers dirt cheap by forcing them to sign a 2-year contract and charging them $0.20 for text messages when the cost of a text message to the carrier is $0.00.
• Profit

Nobody was working on a great mobile software because all the money was in the hardware or the service. No one was spending time creating an application marketplace that made it easy for independent software developers to sell tiny applications to millions of people. Clearly there was no future in that – it was best to stick to the status quo and keep making millions of dollars by producing bad products.

And then Jesus the iPhone was born.

Apple entered the cell phone market intent on changing it. They built a great operating system and a great piece of hardware – that’s what Apple does best. Then they had to play the carrier game. Carriers want exclusive contracts, they want to subsidize the phone and force people into 2-year contracts and they want control over what people can and cannot do on their network.

AT&T stifles the innovation of Apple and all other cell phone makers – everyone knows this. By limiting what can happen on their network or which applications can be installed on the iPhone they hurt the value of the phone itself. I can’t wait until the iPhone is on Verizon. I will happily pay whatever the cancellation fee is on my AT&T contract and switch to Verizon as soon as I can.

Apple gave AT&T the exclusive on the iPhone because that’s how the cell phone business works. Apple had to find a carrier willing to take a risk on the iPhone. Now that they have the market share and the iPhone has proven to be the best mobile user experience out there, they can try to get a better deal when their contract expires with AT&T.

I am not trying to suggest Apple is innocent. Clearly there are some anti-competitive practices going. There are issues with the way the App Store is run. Developers get 17+ ratings because their application connects to the web. The Google Voice application being banned from the App Store is certainly an issue that needs to be explained by all parties involved (Apple, AT&T and Google). They ban applications that reproduce iPhone functionality even if they do a better job of providing the functionality. Is it fair? No. But it’s their platform and they deserve to exert a certain amount of control over it.

Of course, all the developers who are complaining are also actively working on their next application and happily submitting it to the App Store for approval. Once again: why would Apple change what they’re doing when everyone seems pretty happy? A few people whining while 100,000 developers submit applications will not change the game.

Big picture: the App Store is the first marketplace for mobile applications that has direct access to millions of people willing to pay for the best game or best utilities. Why should Apple allow people to just sell their app on a website or allow some other software developer to make an application store? They built this infrastructure from the ground up and have the resources to make sure it is as good a user experience as possible. They are winning because they innovated.

If you think it’s unfair, go spend 5 years and hundreds of millions of dollars developing a product and a platform to compete with the iPhone. When you’re done, open it up and let anyone do anything they want. Open source the code, allow any and all applications. See what happens. How much money do you think you’ll make?

Once again Apple is under the microscope because they were innovative and created a phone that people want. Exclusive deals with cell phone carriers have been going on for years – long before the iPhone was around. I am glad that these deals are being investigated, but lets not blame Apple - blame AT&T, T-Mobile, Nokia, HTC, and every other player in the market for creating a market where this was the norm.

In the end: if you hate Apple and their practices, stop buying Apple products and using their services. If you continue to buy their products, stop bitching because they’re clearly doing something to keep you around.