10 January 2006

Challenge #1 - Partnerships

I firmly believe Apple will soon need to strike a large number of major partnerships with all sorts of companies - domestically and internationally. They cannot go it alone. Intel is an example, but is not sufficient. Those partnerships are about mutual success - each company must feel they need the other. And, Apple has to be more open about what's in it for those companies. Some of you might suggest the iPod accessory market shows Apple can do this, but I would maintain this is a very poor example of that. The partnerships are little more than hangers-on. For the most part, Apple makes the pie bigger, and these guys get a cut of it. Nothing wrong with this model for this purpose. But, the great partnerships of the business world do not work that way. They rely on two or more companies BOTH contributing something that grows their market significantly to mutual benefit.

The two major partnerships in the iPod/iTunes music world that were set in motion have been a complete failure. The first was the HP relationship. The second appears to be the Motorola relationship. Whoever is at fault, and I'm sure it's not ALL Apple, doesn't matter. These have not been a success, and yet they were important. How much of the potential in these relationships was held back by Apple paranoia we'll not likely know, but the end results are damning.

Apple is still a minnow in the world of PC's. If it is to capitalise on the infamous iPod halo effect, then it will not be able to do this without corporate friends. I'm going to suggest a few obvious (to me) partnerships. Apple will need as many big partnerships as I list here, though of course, they could be completely different companies. But the proof will not be the signing of the partnership or the CEO or Company X appearing on the stage at MacWorld (as surely one will do today). The proof is in the delivery and the end result for both companies.

Here's my list (I have tried to choose companies which could also benefit from an Apple relationship of course):

1. Nokia. Apple and Nokia's relationship today is limited to Nokia licensing components of the Safari browser from Apple. But really these two companies could benefit a lot from each other. Despite the new N91 music phone, Nokia really isn't anywhere yet in music. And, they have a big threat in the high-end market from Windows Mobile. Nokia has a generally good open approach to technology. My ringtone is an AAC file downloaded via bluetooth straight from iTunes. The wonderful Salling Clicker remote control app works on more Nokia phones than any other brand. They have little to fear from each other (unless they have ambitions beyond reasonableness). These guys really could work together if they wanted to.

Examples: the long-rumoured iPhone could be a Nokia/Symbian device. Apple could also use/co-develop the new Nokia internet tablet - for instance helping it as a great remote control for FrontRow or as a portable screen for a mini. (Another option of course would be Palm, but I think their days of importance are somewhat numbered)

2. Yahoo (or maybe Google). Yahoo needs friends. When it steps up against Google, it is increasingly finding itself marginalised in the bigger Google/Microsoft battle. There is a lot that Yahoo does that Apple doesn't, and vice versa. Sure there's a lot of overlap with Apple's .mac services versus yahoo services, but Apple's could be seen as a premium offering. Flickr integration with iPhoto is an opportunity for instance, as is music search. And, Apple's .mac services are overkill for many people. The Yahoo services could be a .mac lite for many people if better integrated into the mac experience. Google is a longer shot. I think Google is still business-immature and probably doesn't THINK it needs partners. Doing a deal with the already-difficult-to-work-with Apple would be unthinkable. The premise of any deal with these companies would be Yahoo/Google taking the advertising dollars - the relationship with the supplier if you like, and Apple taking the paid-for consumer dollar. There's enough in it for both, and a focus on what each company does best would be better than each company going for everything (which Microsoft is attempting to do to take on Google).

3. Amazon. Amazon accounts for a lot of sales of Apple equipment, especially iPods. But Amazon's physical logistics side surely offers some potential for both companies. Why can I not listen to a sample of music in iTunes and then with 1-click (after all, you guys licensed it between you!), purchase the physical CD? Apple would get as big a cut off the physical sale as they do from the sale of digital music (not much, but something), and the important thing is that iTunes is the jukebox with that integration. Of course, even better would be that you got an instant download of the digital version too to tide you over until the CD arrived, but then that would be asking too much wouldn't it? An Apple-Amazon partnership in music delivery would be very effective at putting further pressure on music labels and other content firms to develop a consumer-friendly distribution strategy embracing physical and digital distribution.

I have suggested before that Apple purchase Tivo as well. I still think this is a reasonable idea. It would give Apple a pincer movement strategy into the living room which it doesn't have today (even predicting MacWorld announcements). While Tivo is not the company it was, it has a good brand name still, and some technology that could certainly help Apple move into the home in a much stronger way (Tivo + iPod + Intel Mac + AirportVideo would be as compelling a product line up as any Microsoft effort). If Apple doesn't buy Tivo, it perhaps should buy or establish a much stronger relationship with Elgato - makers of the EyeTV/EyeHome products.

Without partnerships like these, Apple is becoming the target of far too many other companies (often much larger) across diverse fields and in some cases ganging up in an effort to seize the initiative. Apple is not big enough or important enough to withstand a complete barrage - someone somewhere will get it right. How much Apple sees this I don't know, but even if they see it, the bigger challenge is actually to find the right companies and make these partnerships work.

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