Squarespace Domains 

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Apple’s New iPad Campaign: ‘We Hear You’ 

Rene Ritchie, on a just-launched iPad commercial campaign:

“We Hear You”, Apple’s new iPad Pro campaign, reminded me immediately of “Get a Mac”, the classic series of ads that had John Hodgman as PC and Justin Long as Mac show how Windows pain points could be easily, often delightfully fixed simply by switching to a Mac.

A few thoughts:

  • At just 15 seconds each, these spots are tight, in a good way.
  • The target is clearly getting people to switch from Windows PCs to iPads.
  • Each spot shows the iPad in multitasking mode. Usually with something work-related on the left, and iMessage on the right.
  • They show Numbers in the first spot, but Microsoft Office apps (Word especially) are the primary examples of doing “work”.
  • I find it interesting that the framing for each spot is a tweet, printed out and held on screen as a poster.
Financial Times: ‘Apple’s Stalled Talks With Ron Howard Flag Content Confusion’ 

Matthew Garrahan, reporting for The Financial Times:

The iPhone maker has been stalking Hollywood for more than a year, talking to leading industry players while it tries to formulate a cogent video strategy. It has considered a range of acquisitions and targets including, most recently, Imagine Entertainment, the Hollywood production company owned by Ron Howard and Brian Grazer, according to several people briefed on the discussions.

The talks were serious enough to involve Tim Cook, Apple’s chief executive, and Eddy Cue, its senior vice-president of internet software and services. The talks included a possible “first look” distribution deal of Imagine movies and television shows, as well as an investment by Apple — or even a full purchase. But, as with many other potential deals involving Apple, the discussions fizzled out.

Would have worked out just great if only Apple had hired some investment bankers, I’m sure.

Apple Moves WWDC Back to San Jose

Here’s an announcement from Apple that I wouldn’t have guessed in a hundred tries: they’re moving WWDC back to the McEnery Convention Center in San Jose.

The dates for WWDC 2017 are June 5–9. But the ticketing process isn’t until March 27. Like in previous years, it’ll be a lottery-type application system.

I had the chance to speak with Phil Schiller about this yesterday. The call was scheduled a few days in advance, but as usual with Apple, I didn’t know the topic. I spent the intervening days trying to guess. Moving WWDC back to San Jose truly didn’t even enter my mind. But now that I’ve had a day to think about it, I can see the logic.

First, announcing early really helps people who have to travel long distances to attend, particularly those from outside the U.S. In recent years, Apple has announced WWDC dates in April — as early as April 3 in 2014, and as late as April 28. Announcing the dates now, in mid-February, should help people save on airfare. It’s another sign that Apple is slowly getting more open. (Let’s see if they announce the dates this early next year too. It’s possible they only announced this early this year to brace people for the venue change.)

For people who will travel only if they get a conference pass, the timing doesn’t change as much. But even a few extra weeks is an improvement. And in recent years — particularly since the demise of Macworld Expo — WWDC is more than just the developer conference. It’s become the communal heart of the Apple world’s calendar. I know more people who come to WWDC without passes for the conference than who attend.

The San Jose Convention Center is the original home of WWDC — that’s where it was held from 1988 through 2002. (WWDC 2002 was the year Steve Jobs held a funeral for Mac OS 9 during the keynote.) San Jose is way closer to Apple headquarters. San Francisco is about an hour drive from 1 Infinite Loop. The San Jose Convention Center is only minutes away from Apple’s new San Jose campus, and is much closer to their Cupertino headquarters than San Francisco. Schiller emphasized to me that this is a big deal: more Apple employees from more teams will be present, simply because they won’t have to devote an entire day to being there. (This could be a particular boon to WWDC’s developer labs, where attendees can get precious face time with Apple’s engineers.)

I asked whether the move to San Jose changed the number of people who’d be able to attend. Schiller said it did not — attendance will be about the same. (To my knowledge, Apple has never revealed exact attendance figures, and Schiller didn’t offer an exact number, but it’s somewhere around 5,000.)

My first WWDC was 2006, a few years after the move to San Francisco, so I’ve never been to one in San Jose. The rap from my friends who did attend WWDC back when it was in San Jose is that San Jose was a bit of a sleepy town. It’s a work-oriented city, where it gets quiet after 5 pm. But WWDC was, compared to now, sparsely attended back then. WWDC didn’t sell out until 2008 (the first year of the iPhone App Store).

Schiller seems confident that there’s going to be a lot going on outside the convention center. Apple is working with the city and San Jose mayor Sam Liccardo to stage events around the downtown area throughout the week.

WWDC is the biggest event of the year for the Apple world. But for the city of San Francisco, it’s just another conference at Moscone. In fact, by Moscone standards, WWDC is actually kind of small. Oracle’s OpenWorld conference has over 60,000 attendees — 12 times the size of WWDC. Update: Salesforce’s Dreamforce conference had 170,000 attendees last year.

WWDC will be the biggest thing going on in San Jose that week. I don’t have a feel for San Jose — the only time I’ve ever set foot there was for Apple’s 2012 October event. I could see it going one of two ways: either dreadfully dull, or, something akin to SXSW in Austin, where the conference and its attendees more or less take over the entire convention center area downtown. In San Francisco, WWDC attendees are a small school of like-minded fish in a big pond. In San Jose, they’ll own the pond. WWDC’s presence can expand outside the confines of McEnery in a way that it can’t expand outside Moscone.

One last factor, unstated by Apple, but very obvious to anyone who knows how to comparison shop for hotel rooms: downtown San Jose is way cheaper than downtown San Francisco, and the surrounding area has a ton of good hotel rooms at very affordable rates. In San Francisco nice hotels are very expensive, and the hotels that aren’t expensive are not nice. In recent years, a lot of people who come to WWDC have been booking hotels down closer to San Jose simply because they’re so much cheaper.

So here’s my take:

  • For Apple, this is a win. They’ll cumulatively spend thousands of fewer hours driving up and down Highway 280. They have the potential to involve their soon-to-open new campus in the event somehow. They have more influence and control over the area around the convention center, rather than just inside it.

  • For attendees, it’s hard to say. For those on a budget, it’s surely a win. San Jose is way more affordable than San Francisco. (But the hotels closest to the convention center in downtown San Jose are running around $350 a night — no savings at all compared to Moscone-area hotels in San Francisco.) For those more concerned with the social scene, it’s too early to judge. If it resembles the social scene from the previous era of San Jose WWDCs, it’ll be a bust. If you’d asked me in recent years whether it’s worth it to go to WWDC even if you’re not attending the conference proper, I’d have said yes without hesitation. I really don’t know if that’s going to be true now that it’s in San Jose.

The word that comes to mind is nostalgia. For most of the regular WWDC attendees in my circle, San Francisco and Moscone are all we know. There’s an established familiarity to the places (hotels, restaurants, bars) and the schedule. Even if WWDC works out great in San Jose, there is a lot that I will miss about WWDC’s years in San Francisco. But WWDC is only moving, not ending, so it’s a very different nostalgia than that for Macworld Expo.

WWDC in San Jose hearkens back to what was truly a different era for Apple. When the last WWDC was held in San Jose in 2002, the original iPod was only six months old, and I was three months away from starting Daring Fireball. An investment in Apple stock in 2002 would have increased around a hundredfold if held through today.

Apple doesn’t like to explain itself. I don’t know why Apple moved WWDC to San Francisco in 2003. But my guess is that they sought more media attention. Apple went to where the attention was. Today, the attention comes to Apple. They could hold WWDC in the middle of a desert and it would still sell out in an instant and there’d be the same convoy of media trucks outside the hall the morning of the keynote. If a large corporation can be described as a homebody, Apple is it. And San Francisco is not Apple’s home turf.

Schiller has been at Apple (and on stage at WWDC) throughout this entire run, and he seems ready to go back. “It feels like WWDC is going home,” he told me. 

Investment Bankers Urge Apple to Spend Money Hiring Investment Bankers, News at 11

I cannot believe that Bloomberg published this story by Alex Webb and Alex Sherman, “Apple Struggles to Make Big Deals, Hampering Strategy Shifts”. The entire story consists of quotes from investment bankers arguing that Apple should hire investment bankers to make more large acquisitions. Really, that’s it.

But Apple has struggled for years to pull off bigger deals because of a series of quirks: an aversion to risk, reluctance to work with external advisers like investment banks and inexperience in closing and integrating large takeovers, said people who have worked on acquisitions with the company. They asked not to be identified speaking about private merger and acquisition deliberations.

The only proof offered that Apple has struggled in any way to make any acquisitions is that they haven’t made more acquisitions. There’s no mention of any companies that Apple pursued but failed to acquire. Not one.

Apple’s biggest deal in its 41-year history was the $3 billion purchase Beats Electronics in 2014, followed by the $400 million acquisition of NeXT Computer in 1996. In Facebook Inc.’s 13 years, it has made three acquisitions of at least $1 billion, including its $22 billion WhatsApp purchase. Google, founded in 1998, has done four such deals, while Microsoft Corp. has completed at least 10, according to data compiled by Bloomberg.

The comparison in the above paragraph completely rests on the assumption that more and bigger acquisitions are a good thing in and of themselves. No mention is made as to whether these acquisitions were actually good for the companies. (Apple’s $400 million NeXT acquisition worked out OK.)

Instead of closing big deals, Cook has so far focused on growing Apple’s services businesses, including Apple Music, the App Store and iCloud. That’s beginning to work, with the company recently forecasting that annual revenue from those operations will top $50 billion by 2021.

But even here, some analysts and investors argue for a big acquisition, especially in online video streaming. Apple has started distributing videos through the Music service, and pooling other providers’ video in its mobile TV app, but it has no service akin to Netflix or Amazon.com Inc.’s Prime Video.

Apple can’t buy Prime, but they could buy Netflix. But Netflix has a market cap of just over $60 billion, and Apple has a service “akin” to Netflix called Apple Music. Netflix has over 90 million subscribers. Apple Music hit 20 million paying subscribers in December. At the Code conference this week, Eddy Cue claimed Apple Music hit 20 million paying subscribers faster than any other subscription service he’s aware of. And at this point they’re only just preparing to scratch the surface of including original video content.1

Apple would probably have to offer at least $75 billion to buy Netflix. At least. It would cost a fraction of that to turn Apple Music into a serious video service.

On Friday, Sanford C. Bernstein analyst Toni Sacconaghi said Apple needs at least one big acquisition in online video.

No they don’t. All they need to do is negotiate with studios and TV networks to get movies and TV shows currently in the iTunes Store (as purchases) licensed for Netflix-style “pay $10 a month and watch what you want” streaming.

To reach its $50 billion target, the company must find an extra $13 billion in services revenue over the next four years — beyond what it can generate itself. Netflix Inc. ended 2016 with sales of less than $9 billion, so even buying that business may not be enough, the analyst said.

Even a $75 billion purchase of Netflix may not be enough. Who said that with a straight face? These fuckers wouldn’t be satisfied unless Apple drunkenly spent every goddamn penny of their cash.

“They’re going to have to pursue something bigger than a Beats-like acquisition,” said Erick Maronak, chief investment officer at Victory Capital Management, which holds Apple stock among its $55 billion under management.

They might, but they do not “have to”. What exactly is the result going to be if they don’t? (I am reminded of Trip “Claim” Chowdhry’s declaration in March 2014 that Apple would “disappear” if they didn’t “come up with an iWatch” within 60 days. Seriously, he said that.)

When AT&T Inc. agreed to purchase Time Warner Inc. for $85 billion in October, the telecom company was concerned Apple might make a competing bid, people familiar with AT&T’s thinking said at the time. Apple had held tentative talks about a year earlier, but when the AT&T deal emerged, a person familiar with the technology giant’s thinking said it wouldn’t be able to pull together a competing proposal quickly enough.

Translation: If only Apple had hired the investment bankers who fed this story to Bloomberg they could have bought Time Warner.

Apple’s deals team is composed of about a dozen people under former Goldman Sachs banker Adrian Perica, and most acquisitions take place at the behest of the company’s engineers. Product managers usually meet every month with Perica’s team members to identify targets with attractive technology or talented engineers, according to a person familiar with the process.

Microsoft’s deals team is not significantly bigger, and it still hired investment bank Morgan Stanley for its $26 billion acquisition of LinkedIn last year, beating rival bidders including Salesforce.com Inc. and Facebook.

Translation: Microsoft has its own in-house team but they still hired a big investment bank, so why can’t Apple let these banks get their fair share of Apple’s cash?

Apple often refuses to work with investment bankers appointed by the seller, preferring to deal directly with company management, according to people who have been involved in such negotiations. Apple also dictates terms and tells targets to take it or leave it, betting that the promise of product development support later and the chance of appearing in future iPhones are alluring enough, the people said.

That was the case when Apple acquired Metaio GmbH in 2015. Bankers appointed by the augmented-reality firm to negotiate weren’t allowed in the room, and while Metaio executives felt the offer was low, Apple’s vision for the technology convinced them to sell, according to a person familiar with the discussions.

This anecdote really strengthens the case that Apple is doing itself a disservice by not hiring outside investment banks, and that the company suffers from “inexperience in closing”. Not.

Apple’s current M&A strategy works well for acquiring startups developing new technology that can be added to existing Apple products. It bought 15 to 20 companies per year over the last four years. But buying larger companies presents a different challenge, particularly if there are rival bids. Bankers often diffuse tension between bidders and targets, but Apple’s approach can make that process difficult. […]

For Apple’s acquisition of Beats, neither party used an investment bank. Apple struggled to integrate the team, and when the initial Apple Music offering emerged from the combination, it got lukewarm reviews. Later versions of the service improved. However, Apple’s lack of a successful track record integrating big acquisitions puts off sellers, according to a person who has negotiated with Apple’s deals team.

Yes, I’m sure a large team of investment bankers would have helped “integrate” Beats within Apple, and the bankers would have made Apple Music — which, again, has over 20 million paying subscribers and is growing fast — a better product at launch.

Apple’s Beats acquisition suggests the opposite of this article’s central thesis: Apple is better off not working with investment bankers even for a $3 billion deal. 

  1. Now that they’re getting into original video content, it does make me wonder whether “Apple Music” was a shortsighted name for the service. Then again, they built a nice business selling movies though a service called the iTunes Music Store. ↩︎

BlackBerry Drops to 0.0 Percent Worldwide Market Share, Windows Phone at 0.3, According to Gartner 

We’re down to two mobile OSes: Android (82 percent) and iOS (18 percent).

SoundSource 3 

Rogue Amoeba:

From SoundSource’s menu bar icon, you can instantly configure the audio devices your Mac uses for Input, Output and Sound Effects. In seconds, you can adjust the volume for each of your audio devices or switch between connected devices. SoundSource can also enable the soft play-thru of audio from input devices. Use the Play-Thru window to monitor any connected input, such as a microphone, right through your headphones or other output.

SoundSource is a superior sound control in a tremendously convenient package. It tucks out of your way in the menu bar until you need it, then provides easy access to swap audio devices, adjust volumes, and more. It’s the sound control that should be built into MacOS, now available from Rogue Amoeba.

$10 (cheap!) but even better: if you have a current license to any other Rogue Amoeba product, you get a license for SoundSource free of charge.

Peter Kafka’s Interview With Eddy Cue at Code Media Conference, Previewing ‘Planet of the Apps’ 

Nothing groundbreaking, but a nice preview of Apple Music’s two upcoming original shows: Planet of the Apps and Carpool Karaoke.

I see a lot of griping on Twitter that Planet of the Apps looks corny / phony / cheesy / whatever. Of course it does. This is mainstream reality TV. This is not a documentary about what it’s actually like to create a new app or app-based service. It’s reality TV.

Matthew Panzarino:

For developers cringing at this — this is just how it feels to have your industry boiled down to a digestible TV nugget. Welcome!

Rene Ritchie:

Planet of the Apps: Not intended for “us” but for the mainstream. Or, now “we” know how cooks have felt about Hell’s Kitchen for a decade.

It need bear no more relation to actual app development than The Bachelor bears to actual dating.

The Macalope: ‘No, Apple Is Actually Pretty Good at Design’ 

The Macalope, responding to Ian Bogost’s “The Myth of Apple’s Great Design”:

The Macalope has made this point before but it’s one Bogost seems not to get: Apple products are never perfect, because we do not live in a world of perfect celestial spheres. What Apple usually manages to do, though, is make products that are so great during most usage that they make you forget the imperfections. So, if you believed Apple’s products were perfect then, yes, Bogost is right. That was a myth. But the Macalope has used products from Apple competitors and, in most cases, speaking personally, they’re worse.

The Macalope nails it. Bogost’s argument wasn’t that Apple is actually bad at design. His argument was simply that Apple’s products aren’t perfect. It’s a nonsense argument.

“Fuck-You Money” 

Alistair Barr and Mark Bergen, reporting for Bloomberg:

For the past year, Google’s car project has been a talent sieve, thanks to leadership changes, strategy doubts, new startup dreams and rivals luring self-driving technology experts. Another force pushing people out? Money. A lot of it.

Early staffers had an unusual compensation system that awarded supersized payouts based on the project’s value. By late 2015, the numbers were so big that several veteran members didn’t need the job security anymore, making them more open to other opportunities, according to people familiar with the situation. Two people called it “F-you money.”

Talent retention is one of the hardest problems in the whole industry. Pay employees too little and they’ll leave. Pay them too much and they’ll leave. And if they get bored, they’ll leave.

Piezo Generates More Money After Leaving the Mac App Store 

Paul Kafasis, Rogue Amoeba:

Our charmingly simple audio recording app Piezo was originally distributed in both the Mac App Store and via direct sales, but it has since left the App Store.

After seeing Kapeli’s chart, I was curious about the App Store’s impact on Piezo’s sales. The restrictions and limitations of the Mac App Store ultimately led us to remove Piezo on February 12th, 2016. We’ve now been selling it exclusively via our site for a year. This has provided about as perfect a real-world test case as one could hope for. Piezo’s removal came with minimal publicity, the price has remained constant at $19, and we’ve had no big updates or other major publicity for it in either 2015 or 2016.

This is a really interesting case study. They saw a small decrease in unit sales, but an increase in revenue because they were no longer paying Apple’s 30 percent App Store tax on any of the remaining sales. As Kafasis concludes:

I certainly won’t state that every developer will have this same success if they remove a product from the Mac App Store and distribute it exclusively through their own site. Your mileage will undoubtedly vary. In our case, however, it’s clear that we were serving Apple, rather than Apple serving us.

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The Talk Show: ‘Corporate Stiffy’ 

For your weekend audio enjoyment, a new episode of America’s favorite three-star podcast. Special guest John Moltz returns to the show. Topics include: 🐩💭, iPad vs. Mac for productivity (and why the iPad isn’t a self-sufficient platform), nostalgia for System 7, speculation on this year’s upcoming new iPhones, and more.

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On Apple’s Capital Return Program

Eric Jackson, writing for Forbes:

I have been a staunch critic of Apple’s capital return plan since it started in 2012. I think it signals to Wall Street that Apple is out of growth ideas, which is preposterous even though it’s now a $700 billion market cap company. […]

I think I remember some Wall Street analysts defending the dividend component of the Apple capital return plan in 2012 because it would “bring in a whole new class of investors to the stock.” Congrats on attracting a few more widows and orphans retail investors. […]

The whole capital return program has been a lot of work on Apple’s part to basically do a little bit of stock buyback.

He quotes from my 2014 piece, “Just Do Something”, which you should read now to refresh your memory. Jackson ends the quote from my piece (in which I admit that a years-ago acquisition of Tesla at least made some sense, and argue against Apple having bought WhatsApp, on the grounds that they already have iMessage), and writes:

I agree with Gruber about WhatsApp (and the Tesla discussion) but the rest was wrong then and is wrong now. And as time goes on, history is demonstrating the folly even more of this precious Apple type of thinking.

I don’t see how history is demonstrating the folly of this. Apple is doing fine, and they’re not sitting still. Since 2014, they’ve added “second biggest watch company by revenue” to their portfolio.

You can look back and say that Apple could have bought Facebook for $100 billion back when they were privately valued at $50 billion. I don’t think that would’ve been a good fit, though. A Facebook owned by Apple since 2011 would not be the Facebook we know today. There’s no integration between Apple and Facebook — the only thing similar about them is that they make a lot of money.

Instagram is more of a maybe. It might have only cost Apple $1 billion (which is what Facebook paid for it), but if Apple had bought Instagram they almost certainly would have kept it iOS-only. If you recall, Instagram released their Android version on 4 April 2012; Facebook’s acquisition was announced just five days later. Phil Schiller deleted his Instagram account a few days later.

You can’t buy Beats for $3 billion and then say you can’t (or shouldn’t have) buy Netflix. If Jimmy can work at Apple, so can Reed and Ted.

I agree with this, partly. But maybe Apple does too. Regretting not buying Netflix might be one of the reasons they bought Beats. But 2014 was too late to buy Netflix. Look at Netflix’s market cap from the last four years — by 2014 (the year Jackson wrote his early piece encouraging more M&A from Apple) Apple would have had to offer at least $30 billion for Netflix. Maybe more. The lowest their market cap dipped to was around $20 billion. The time to buy Netflix was 2012, when they could have gotten them for maybe $4-5 billion or so, roughly the same scale as what they paid for Beats in May 2014 ($3 billion).

An argument about whether Apple should have bought Netflix needs to have started in 2012, not 2014.

Should Apple do more dividends or use the cash to do M&A?

They should immediately cancel all dividends, wipe out their debt, and (without saying they will) start doing smart, focused, and sometimes expensive M&A.

Investors want to pay for growth. Apple needs to articulate how they’re going to grow. They snoozed on Facebook, Instagram and Netflix when they were younger. Those opportunities are probably gone.

I would strike the “probably” from that sentence.

Here’s the thing. I don’t disagree with Jackson. But I don’t think Apple does either. I think they’re constantly and aggressively hunting for small companies to acquire. I strongly suspect they acquire more of them than we know about — they confirm acquisitions, but seldom announce them.

I don’t think Apple’s dividends are holding back their M&A in any way. There is no company they should buy that they can’t because they don’t have enough money.

But I’ve never been a fan of Apple’s dividend program. Dividends are something big traditional corporations do. Apple certainly is big, but they’ve never been traditional, and never should be. Their success is entirely rooted on the company having a different viewpoint.

I prefer their old strategy, of simply letting their cash pile grow and grow and grow. And it has grown, even after they instituted the capital return program in 2012 (dividends, stock buy backs, and debt). This tweet from Horace Dediu visualizes it nicely.

Lots of people say “A publicly held corporation can’t just keep accumulating cash, they have to give it back to the shareholders.” But that’s not true. They’re still growing their cash hoard — they’re only giving a portion back to the shareholders. But the thing is, I don’t think Apple has been rewarded for this capital return policy. Their stock is up since 2012, but I think it would be right around the same price in the alternate universe where they’d just continued hoarding all their profits.

So what if no other company has ever accumulated so much cash? The cash itself — and the accumulating interest earned through investments by Apple’s asset management subsidiary Braeburn Capital — is a monstrously powerful weapon that they can threaten to use at any time. Apple’s cash is its Death Star. The bigger it grows, the better.

But ultimately, Apple needs to do what it has always done. They need to invent their future, not buy it. 

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