Emerging Media: The Big Apple

During the keynote, Jobs pitted the iPhone against smartphones—Palm Treos and Windows Mobile devices with built-in keyboards. But smartphones aren’t really the target.

The first week of analysis was filled with comments like "It’s a closed version of OS X." "OK, it’s a semi-open version of OS X for blessed 3rd party apps." "It’s not going to have much of an impact on smartphones from RIM or HTC or . . ."

The thing is, so much of the analysis missed the point. Smartphone manufacturers are flattering themselves by thinking that Apple is competing with them. Apple is competing with phones, period.

To really understand how Apple thinks, you just have to watch the speech. In it, Jobs brags that Apple has now gone from the 7th largest music store in the U.S. to the 6th. Next target: Target. Before long, Best Buy, and eventually top-dog Wal-Mart.

So many of the smaller competitors in digital distribution are focused on long-tail audio/video publishers, indie artists, and user-generated content. Apple has co-opted a good chunk of that as well—for free—and they're called "podcasts", much to the competitors' chagrin. They’ve tried everything to displace Apple, especially subscriptions instead of individual songs, giving you all you can eat as long as you keep your payments up. Consumers by and large have said "no." Microsoft tried a broad, industry-wide standard—PlaysForSure—and then had to about-face and try an iPod killer with their proprietary Zune.

But that’s once again where these so called "competitors" in "digital music" are flattering themselves—they think Apple is competing with them. Apple doesn’t even really consider Zune, Napster, URGE, Rio, or Creative a competitor. Why? They consider Wal-Mart a competitor. They consider Best Buy a competitor. Big-box distributors of CDs—that’s their competitor.

When I was coming up in the industry, Microsoft was the 800 lb gorilla that was going to eat your lunch. The oft-repeated refrain I’ve heard from too many VC’s is "what makes you think those guys at Redmond won’t just clone what you’ve made?"

Well, it seems like Apple’s the new monster (perhaps Godzilla in this case?) that will eat your lunch. Thought of making a digital convergence phone? Apple’s got that one covered, thanks. Thought of bringing digital assets into the living room? Why bother, that’s Apple’s territory (never mind the millions of digitally connected Xboxes in market).

Next time you’re writing your business plan for how you’re going to take out old media with your revolutionary digital technology, perhaps take a play from Apple’s book. Don’t gird your loins for a fight with the other bit players (pun intended); look at what it’s going to take to displace the brick-and-mortars, the ancient, grooved-in distribution channels that have been pushing product forever.

Oh, and pick a category Apple hasn’t already taken.