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Weekly Column

Iron Man: Steve Jobs is even tougher than you think.

Status: [CLOSED] comments (131)
By Robert X. Cringely

There was a game we used to play in the office, years ago, casting a movie of our own lives. What well-known actor or actress would play you? Who would play your friends? The game eventually faded, as games always do, but at the time it was great fun. So let's try it again: who would you cast to play Steve Jobs of Apple? Certainly not Noah Wyle, the only actor to actually play the Apple CEO. I've always thought there were elements of Jack Nicholson in Jobs, but Nicholson is too old for the role. But now it is clear the role should go to Robert Downey Jr. based on his turn this week as the sardonic reformed arms merchant turned Iron Man. Maybe Downey is a little too nice to play Jobs but otherwise it fits, especially in the elaborate planning and preparations that we see coming clear at Apple. Like Iron Man, Jobs is up to something, something big.

There are very few CEOs in high tech who have been at their jobs longer than Steve Jobs. While Jobs founded Apple with Steve Wozniak and Mike Markkula back in 1977, remember he was cast out by John Sculley in 1985 and didn't return until Apple bought NeXT in 1997. Still 11 years is a long time in the top job. Bill Gates didn't last that long as CEO of Microsoft, taking over from Jon Shirley in 1990 and handing the reins to Steve Ballmer in 2000. Among the big companies only Michael Dell has been at it longer than Jobs altogether and Dell is back in his hot seat only reluctantly, returning in an attempt to bring his company back to its number one market position. Once things are fixed at Dell, if they can be, Michael will be gone again, while Jobs seems in his element and determined to stay for as long as possible.

And why not? He has taken the company from also-ran to market leadership based on quality design, not just the best price. Jobs made Porsche his archetype and has built Apple in that car company's image, selling entertainment, which always sells for more than sheer calculating ability. Apple is a lean and mean profit machine that is, more than any of its traditional rivals, poised to dominate the emerging markets for Internet-distributed entertainment and mobile devices. Industry pundits are always watching for the next new thing Jobs and Apple will come up with.

But we rarely watch what Apple is getting rid of, mainly because that doesn't happen very often. Sure, old hardware platforms are dropped, sometimes for lack of sales, but it is hard to even remember when Apple dropped or sold off any of its software businesses. Even FileMaker was dragged back inside the company by Jobs after Sculley's abortive attempt to spin off the database company.

So why, then, was Apple quietly shopping around its entire professional application business to prospective buyers at the recently completed National Association of Broadcasters show in Las Vegas? These include Aperture, Final Cut Pro, Logic, and Shake -- applications that are hardly also-rans in their segments and none of which are antiquated in the least. Final Cut, of course, absolutely dominates the video editing business. Why would Apple want to give that up?

Why indeed?

Apple's professional applications have never directly made a lot of money for the company. Rather, they were always intended to drive hardware sales in the areas of image editing, layout, and audio and video editing where PowerMacs were the dominant machines ever since the demise of Amiga. While Final Cut Pro probably makes a lot of money for Apple, the other professional apps probably just break even. Still, is that reason enough to sell them off?

Maybe, but I don't think so.

Taking a look at Apple's recent success selling Macs (up 51 percent since last year in a PC market that is otherwise fairly flat), your traditional Wall Street analyst would see that Apple is, for the first time in decades, building a broad market position, not just one based primarily on the graphics and video markets. Apple's recent hardware successes have come at the expense of Dell and HP. If that's the case, then the typical Wall Street drone would say, "Why not kill the professional apps, since they seem to no longer even be necessary for Apple's success?"

In Wall Street's quarter-to-quarter perspective, selling off Apple's professional applications makes perfect sense. Except that Steve Jobs tends not to think quarter-to-quarter so much as decade-to-decade. This is a guy with a LONG horizon, which is why he appears, frankly, to be the only one of his peers with either a plan or a clue. As Jobs did with the iPod and iTunes and now with the iPhone, he is setting the standard and most Apple competitors are mainly waiting and reacting, which is hardly a way to lead anything.

Apple has plenty of cash on hand (more than $19 billion) so they wouldn't be offering the professional apps to raise money. Nor, given the recent improvements in Aperture, for example, does it appear that Apple has at all allowed the space to languish. Only in Apple's refusal to date to embrace Blu-ray media is it holding up the pace of development in this category. More on this later.

There are plenty of potential buyers for Apple's professional apps. As the former leader in video editing Avid would love to own Final Cut, for example, if only to kill it. Sony's Vegas editing package is hardly competitive, so that company might well want all the apps to shore up its own hardware sales, not just in computers but also broadcast equipment. So too Panasonic or any of a number of other Japanese companies that might want to add software expertise to their media hardware businesses. That's why Apple was shopping the programs at NAB.

So what's really happening here? Well clues have been accumulating for months and I have already written about some of them. Apple's decision to not yet ship systems with Blu-ray drives or even support third-party or external Blu-ray drives in its professional applications has caused consternation in the $4 billion event video industry where most copies of Final Cut Pro are actually used (Hollywood is the niche market here, while weddings dominate). This has hurt Mac sales and Final Cut sales, and since Steve Jobs isn't stupid it is probably deliberate. Apple wants to slow the success of Blu-ray, probably in hopes that downloads -- especially downloads via iTunes -- become the de facto method for delivering HD content. Still, we haven't yet seen iTunes offer wedding videos, have we? There must be another shoe to fall.

To my knowledge we haven't yet seen Apple include that H.264 video encoder/decoder chip that I have written Apple is committed to using across its entire Mac/iPod/iPhone line. Could they be inside the new iMacs that were just quietly launched? That would be interesting.

It seems obvious to me, however, that there is only one real reason why Apple would sell off its professional applications and that's to avoid antitrust problems when/if Apple buys Adobe Systems as I predicted at the beginning of the year. Final Cut Pro competes directly with Adobe Premiere. While in my opinion the Apple video software is clearly better, Jobs couldn't be at NAB trying to sell Premiere -- software he doesn't yet own. Maybe there's a planned bait-and-switch, seeing who is interested in Final Cut then trying to shift them to Premiere.

The major point here is that Adobe is in play, or at least Apple thinks so. The company has plenty of cash and stock to do the deal and plenty of incentive, too. Apple's goal in acquiring Adobe would be to control first Flash and second Adobe's emerging Air application platform. Adobe announced this week a broad industry initiative to extend Flash to mobile devices, but Apple wasn't a participant. Why bother if you intend to shortly own Flash outright?

Owning Flash and merging it with QuickTime would give Apple near-total dominance of Internet video, furthering the advantages of iTunes and shoring up in the process the iPod franchise. They'd be giving up a sports car in Final Cut Pro, but end up effectively owning the road instead.

Comments from the Tribe

Status: [CLOSED] read all comments (131)

PBS can't provide a listing for your show. I pasted The Transformation Age Opening with Robert X. Cringely and using my zipcode of 30152... Nothing that is similar.

Chris | May 14, 2008 | 10:20PM

I think everyone in tech plays that movie game at some point. My own role was to be played by David Caruso (think NYPD Blue, and not CSI Miami).

Who would play you?

Nick Danger | May 15, 2008 | 3:23PM

What about the anti-trust issues of the dominant positions of Quicktime / Flash?

Paulm | May 16, 2008 | 1:08PM