Apple: Going For The Jugular... And Cutting Its Own Throat

In a graph­ic design group I recent­ly got into a dis­cus­sion about appli­ca­tion choice on the Macintosh. During this dis­cus­sion, in response to the accu­sa­tion that, with­out Apple and com­pe­ti­tion, we would “be stuck in a Windows world,’ I said the following:

Actually, Apple’s cur­rent direc­tion is the biggest pro­po­nent for using Windows. Apple is doing its best to force every­one to Windows by stran­gling the mar­ket for third-party appli­ca­tions devel­op­ers on the Mac. 

Here, flame-worthy as it is, is what I meant by that comment:

Apple is aggres­sive­ly try­ing to break what it con­sid­ers a depen­dence on soft­ware devel­op­ers like Microsoft, Adobe, Quark, and others.

Microsoft Office has been the only seri­ous pro­duc­tiv­i­ty suite for over a decade now. Office’s con­stituent apps–Word, Excel, PowerPoint–all enjoy bet­ter than 95% mar­ket share. There is no seri­ous com­pe­ti­tion. Whether WordPerfect is bet­ter than Word or the late Adobe Persuasion was bet­ter than PowerPoint is a moot dis­cus­sion; Microsoft won and owns the office pro­duc­tiv­i­ty mar­ket on both Windows and Mac platforms.

Three years ago Apple and Microsoft got into a major argu­ment about the direc­tion of Apple. Microsoft owned a big chunk of Apple cour­tesy of the $150 mil­lion Microsoft invest­ed in the late-Nineties to keep Apple alive. The dis­agree­ment got both com­pa­nies throw­ing tantrums and threat­en­ing to take their respec­tive balls and go home. Apple told Microsoft that the Mac did­n’t need MS Office, threat­en­ing to urge Mac users not to use it. Excel then Word for the Mac were Microsoft’s very first appli­ca­tions, long before they built the Windows OS, and Office for Mac still remains a major prof­it cen­ter for Microsoft. Microsoft, know­ing that Apple could­n’t replace Office with any oth­er pro­duc­tiv­i­ty tool (Corel had run WordPerfect and Quatro Pro into the ground already), called Apple’s bluff and threat­ened to sim­ply stop devel­op­ing Office for the Mac. Despite the blus­ter­ing that fol­lowed, Apple knew it could­n’t sur­vive with­out pro­duc­tiv­i­ty tools like a good word proces­sor (Word), spread­sheet app (Excel), and pre­sen­ta­tion pro­gram (PowerPoint). Without pro­duc­tiv­i­ty tools, busi­ness users and a large por­tion of the cre­ative mar­ket would be forced to defect to Windows. Apple got scared and backed down

Adobe makes the indus­try stan­dard image edit­ing appli­ca­tion. There are oth­er choic­es for non-professionals, but Photoshop owns the pro­fes­sion­al image edit­ing mar­ket. Illustrator is owns slight­ly bet­ter than half the pro­fes­sion­al vec­tor draw­ing mar­ket, and it’s share is grow­ing because inno­va­tion in FreeHand is slip­ping. Despite Adobe mak­ing the PDF spec pub­lic and sev­er­al very good com­peti­tors appear­ing, Adobe’s Acrobat is still the major PDF creation/editing soft­ware on the Mac (and Windows, but that’s not the point).

The delay in Quark releas­ing on OS X‑compatible ver­sion of QuarkXPress caused a MAJOR hit to Apple’s OS X/G4 sales. So bad was the hit, in fact, that Apple had to reverse the exec­u­tive order straight from Steve Jobs that no new Macs would be sold with OS 9 Classic Mode dual-boot. Apple had announced a cut off date of January 2002 for pur­chas­ing new G4s with Classic Mode dual-boot. Because there was no OS X‑compatible ver­sion of QuarkXPress, cre­ative pros who relied on Quark, includ­ing many MAJOR print and pro­duc­tion hous­es, said they sim­ply could­n’t upgrade to OS X or buy new com­put­ers from Apple. This turned out to be a big hit to Apple’s sales (and stock price).

So Apple pushed its dead­line back for six months, delay­ing its own busi­ness plan of migrat­ing all Mac users to OS X, which pushed back huge plans for iPod, iMusic, and MUCH more. Even after that dead­line had passed, until Quark 6 was released, Apple qui­et­ly vio­lat­ed its own edict that it would no longer sell dual-boot Macs. If you called to order a new Mac, all you had to say was that you would use it for Quark to get a dual-boot at no extra charge.

Even with the dual-boot sys­tems, com­pa­nies that relied on Quark were reluc­tant to upgrade. Why invest in new equip­ment and learn­ing a new OS if, when it came to their pri­ma­ry appli­ca­tion of Quark, the new sys­tem would work EXACTLY the same was what they already had? Further, even if they want­ed to upgrade to OS X‑compatible ver­sions of Pshop, Illustrator, FreeHand, etc., get­ting those now OS X‑compatible files into Classic for use in Quark was a pain in the neck. So, rather than deal with the has­sles, would-be OS X cus­tomers in the cre­ative mar­ket saved their mon­ey and waited.

Single-handedly, Quark cost Apple tens of mil­lions because Quark’s devel­op­ment team was lethargic.

To help defray the costs and devel­op­men­tal delay Quark caused, Apple tried sev­er­al lay­ers of con­cur­rent rem­e­dy. First, they tried extend­ing out their dual-boot dead­line. As I said above, that did lit­tle to ame­lio­rate the sit­u­a­tion. Next they struck up a deal with Adobe, bundling the already OS X‑compatible InDesign 2.x with new Macs. While some cre­ative com­pa­nies jumped at this great oppor­tu­ni­ty, many held off because InDesign was still unproven in major work­flows. Third, I think Apple did some behind the scenes deal­ings. This is just my per­son­al opin­ion based on gut feel­ing and a few very vague con­ver­sa­tions with Apple per­son­nel; I can’t back up this belief with evi­dence, but I am whol­ly con­vinced of it nonethe­less. I believe Apple sent some of its own engi­neers to help Quark port XPress over to OS X, which is a con­flict of inter­est with some of Apple’s then-current licens­ing agree­ments with oth­er vendors.

Whatever Apple tried, noth­ing helped the cre­ative market–Apple’s num­ber one mar­ket by far–adopt OS X. Oddly enough, when Quark 6 was released for OS X, sales did spike, but not as big as Apple thought. Quark had wait­ed so long to update XPress that much of the mar­ket had already decid­ed to move to InDesign. Apple was PISSED.

Sales of Macs, both new G5s and lega­cy single-boot G4s, are high, but it isn’t because of Quark, iron­i­cal­ly. Adobe Creative Suite caused a major spike in OS X sales, but sales had been mov­ing steadi­ly before that as well.

Now that the back­ground is out of the way, here’s the main point: Apple depends heav­i­ly on appli­ca­tion devel­op­ers like Microsoft, Adobe, and Quark. Because there isn’t much choice for con­sumers in OS X‑compatible appli­ca­tions, the ones that ARE avail­able add major val­ue to OS X itself. While the Mac is gain­ing pop­u­lar­i­ty in the home and col­lege mar­ket, it is still a rel­a­tive­ly niche-market oper­at­ing sys­tem. The cre­ative mar­ket is the only one in which the Mac has the dom­i­nant share, and not by too great a lead there. If the cre­ative mar­ket defect­ed, Apple would be in SERIOUS jeop­ardy of dying. If Apple had any doubts of this, the reduc­tion in sales caused by Quark drove the point home like a kick to the groin.

Without appli­ca­tions like Microsoft Office, Photoshop, and QuarkXPress, OS X, and all of Apple’s plans for the future, would be dead­er than the Commodore 64. Apple knows this all too well. And Apple hates being depen­dent on some­one else.

So, Apple is work­ing dili­gent­ly to break its reliance on appli­ca­tion devel­op­ers. Toward this goal Apple is devel­op­ing inter­nal­ly appli­ca­tions to replace all their major part­ners. Note I did­n’t say “to com­pete with all their major part­ners.” Apple is doing exact­ly what it has always blast­ed Microsoft for doing: Exploiting the fact that it owns the oper­at­ing sys­tem by bundling its new competitor-killing apps with the OS. By bundling apps with the OS free or almost-free, Apple is stran­gling the com­pe­ti­tion who, as appli­ca­tion devel­op­ers with­out the lux­u­ry of oper­at­ing sys­tem and hard­ware sales to cov­er a loss, MUST charge for their appli­ca­tions. Adobe, Quark, and even Microsoft when it comes to Mac appli­ca­tions, can’t afford to give any­thing away. Apple knows the appli­ca­tion devel­op­ers can’t afford to give away their soft­ware free, but Apple itself can, even if just ini­tial­ly to gain the mar­ket dom­i­nance, so Apple is doing it.

This is exact­ly how Microsoft beat WordPerfect and Lotus in the Windows-based Office pro­duc­tiv­i­ty mar­ket (MS Office was so cheap the oth­ers could­n’t com­pete), and how they beat Netscape in the brows­er market.

The first shot Apple fired was Final Cut Pro, the video edit­ing appli­ca­tion Apple bought a few years ago. The light ver­sion of Final Cut Pro, iMovie, comes bun­dled with OS X. For very lit­tle mon­ey pro­fes­sion­al users can upgrade to Final Cut Pro. Apple was smart enough to rec­og­nize the Desktop Video Revolution in its ear­ly stages, and knew that Adobe Première, whose only com­peti­tor to that point was the enor­mous­ly expen­sive Avid line of prod­ucts, was the appli­ca­tion to beat. So Apple beat it by giv­ing away iMovie and all but giv­ing away Final Cut Pro. So effec­tive was their stran­gling of Première that Adobe had to drop fur­ther devel­op­ment of Première on the Mac with the very next ver­sion. Final Cut Pro is now the ONLY choice in pro­fes­sion­al video edit­ing on OS X.

Apple’s next tar­get was Microsoft. KeyNote, the Apple com­peti­tor to Microsoft PowerPoint, debuted among great fan­fare. Like iMovie, it was giv­en away free with the OS. In a mat­ter of months KeyNote became the defac­to stan­dard for pre­sen­ta­tion soft­ware on OS X, even for users who also bought Office, which includ­ed PowerPoint. Now that KeyNote is the stan­dard, Apple is charg­ing $99 for it.

Acrobat was hit by Apple’s inte­grat­ed PDF cre­ation and view­ing technology.

The next depen­dence Apple want­ed to break was the brows­er mar­ket. Internet Explorer and Netscape were depen­den­cies Apple did­n’t want. Thus Apple devel­oped Safari. Free in the OS, no one could com­pete. Microsoft instant­ly stopped devel­op­ment of Internet Explorer, though I think this was as much moti­vat­ed by Gates tak­ing his ball and going home as by the fact that Microsoft knew, from its own expe­ri­ence of bundling a brows­er into the OS, that IE did­n’t stand a chance against an inte­grat­ed browser.

Simultaneous to Adobe pur­chas­ing the DVD design pro­gram it re-dubbed Encore and the lead­ing audio-editing appli­ca­tion, Cool Edit Pro, renamed to Adobe Audition, Apple began devel­op­ing com­pet­ing pack­ages DVD Studio Pro and Soundtrack. Consequently Adobe did­n’t even both­er build­ing OS X‑compatible ver­sions of these applications.

To kill Outlook/Entourage, the Microsoft Office e‑mail, sched­ul­ing, and con­tact man­age­ment appli­ca­tion, Apple devel­oped applets iCal, Mail, and iSync.

Panther, ver­sion 10.3 of OS X, includes free FontBook, a font man­age­ment util­i­ty intend­ed to stran­gle indus­try stan­dard font man­age­ment tool Extensis Suitcase and its lead­ing com­peti­tor FontReserve, which Extensis bought in 2003 to con­sol­i­date the only com­pe­ti­tion posed to Apple’s then-upcoming bun­dled FontBook.

To com­pete with Microsoft Access, anoth­er com­po­nent of Office, Apple has rein­vest­ed in the devel­op­ment of one of its old but still wide­ly used prod­ucts, FileMaker Pro. The new ver­sion of FileMaker Pro, released just a month ago and offi­cial­ly owned by FileMaker, Inc. (for­mer­ly Claris, Inc.), a sub­sidiary of Apple, now is much more friend­ly to users famil­iar with Access.

Going for the jugu­lar against Microsoft Office, Apple is reviv­ing anoth­er old Claris prop­er­ty, AppleWorks (for­mer­ly Claris Works). While the cur­rent ver­sion of AppleWorks is more of a con­sumer all-in-one pro­duc­tiv­i­ty tool, a pro­fes­sion­al grade ver­sion (whose name may or may not be AppleWorks Pro) is being writ­ten by Apple from the ground up. The goal of this new office suite is, of course, to kill Microsoft Office on the Mac. In all like­li­hood AppleWorks Pro (or what­ev­er it is to be called) will ini­tial­ly be giv­en away free. After it sup­plants Microsoft Office, AppleWorks (the light ver­sion) will prob­a­bly be bun­dled with the OS free, while the Pro ver­sion is avail­able for a mod­est upgrade price.

Once Apple breaks the mar­ket for Microsoft appli­ca­tions on the OS X desk­top, it will unveil its Adobe and Quark killers. Drawing from some of its old appli­ca­tion hold­ings, rumors indi­cate Apple cur­rent­ly has in devel­op­ment pro­fes­sion­al grade appli­ca­tions it plans to use to dom­i­nate the fol­low­ing cat­e­gories: image edit­ing (to unseat Photoshop on the Mac), vec­tor draw­ing, pre­sum­ably with Flash out­put (to kill Illustrator, FreeHand, and Flash), and page lay­out (no more wait­ing for Quark or pro­mot­ing InDesign).

Apple is dri­ving straight and hard toward total inde­pen­dence from appli­ca­tion devel­op­ers. While com­pe­ti­tion is good for con­sumers, Apple’s hard-line, stran­gle hold tac­tics won’t cre­ate com­pe­ti­tion; they’ll kill it while cre­at­ing a monop­oly for Apple on the Mac desk­top. As we’ve learned through watch­ing Microsoft stamp out the office suite, brows­er, and oth­er com­pe­ti­tion, appli­ca­tion devel­op­ers sim­ply can’t afford to com­pete with free or almost-free soft­ware bun­dled with an OS.

Apple has stat­ed pub­licly that it is con­sid­er­ing split­ting the com­pa­ny in two: One com­pa­ny for hard­ware and oper­at­ing sys­tem, one for appli­ca­tion devel­op­ment. Even if the split hap­pens, both com­pa­nies will still be Apple, with unfet­tered access to the devel­op­ments of either, and the abil­i­ty to bun­dle and give away appli­ca­tions with the OS. Whether Apple splits is irrel­e­vant to its vision of a monopoly.

Though Microsoft will take a big hit with the loss of rev­enue from Office for the Mac, Apple’s cur­rent direc­tion is ulti­mate­ly good news for the Redmond, WA giant. Consumers have proven again and again that, when their choic­es are tak­en away, they find new choic­es. If Apple chokes off user choic­es on the Mac, Windows will be wait­ing with open arms to wel­come them into a world rich with appli­ca­tion choices.

If Apple con­tin­ues on its cur­rent course, that’s exact­ly what will hap­pen. And, despite the pop­u­lar­i­ty of OS X, Apple will be right back to where it was ten and then five years ago: A strug­gling lit­tle sec­ond class cit­i­zen in the world of com­put­ers. The last two times Microsoft bailed them out. I won­der, if Apple dri­ves itself back into a hole after alien­at­ing all of its part­ners and turn­ing off the rev­enue stream to any­one else who makes any mon­ey on the Mac desk­top, who will pull them out this time?