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Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

Copyfight

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June 8, 2005

A Copyfighter's View of the Apple Move to Intel

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Posted by Alan Wexelblat

(The following is rank speculation, referred to by a friend of mine as speaking ex recto. I have no secret sources nor access to any insider info.)

Apple's switch in hardware platforms is about the transformation of Apple into a media company. It will probably still make hardware, and it will probably still dominate certain niche market, but those markets will be ones that matter in Hollywood, like digital editing.

There are lots of reasons for this, and you should expect to see Apple beating the snot out of MS in the media business in the short and medium terms. I'm not so sure about the long term; people who make long-term bets against MS tend to come up empty. Part of the key advantage that Apple has is Steve Jobs. He runs Pixar. He can call up the head of any major studio and get in to see the right execs. They like him - he's one of them. They hate Bill, who they see as trying to muscle in on their business. If you have any doubts about this, look at the number of Hollywood films and TV shows in which characters are seen to use Macs vs those in which they use identifiable PCs. In Hollywood an enormous amount of business is done on handshake deals; Jobs knows which hands to shake and how to speak the language of the people whose hands he needs to shake. He has a track record with the music industry, too, though that relationship is a bit rockier.

The second part of this battle is for the home entertainment center. MS actually has a jump here with its PC customized for that marketplace and Apple needs a major move to catch up. Apple's wedge strategy will be the Mac Mini and Airport, but they're both too damned expensive. Would an Intel-based Mini be significantly cheaper? I dunno. What I do know is that iTunes is also beating the snot out of all comers and is a significant driver for hardware sales. If Apple doesn't have a digital movies deal in place and isn't providing movie/TV content to homes by Xmas this year I'll be stunned. The content for this service will be provided by those execs that Jobs has had lunch with.

I also fear that Apple is signing up for the Intel hardware lockdown. Hollywood, like the rest of the Cartel, is insanely paranoid about its content being "stolen." Intel is offering to wave a magic wand and pretend to make that problem go away. Apple couldn't afford to leave that card solely in MS's hands; by signing up for this, they've neutralized a major advantage Redmond used to have.

It's also true that, to some extent, they're Osborning their hardware sales. But by showing that OS X runs *now* on Intel hardware, Jobs is sending a strong "Don't Panic" message to software developers. Relax, he says, you won't notice any difference. We've got the OS running there now. The low-level guys like device drivers will have to do some scrambling, but Apple will help them.

Along the way, Apple is taking a nontrivial shot at Microsoft's PC-based gaming business. That home entertainment center needs to play games, too. Right now, very few games run on Macs. A few big names, but nowhere near the title span that PCs have. But if Macs are on Intel hardware then game companies have to do much less work to get their games over. And as additional incentive, if Apple has the "in" with Hollywood then it's one step away from the game companies' wet dream of having a major motion picture deal, with all the revenue and licensing dollars that implies. Games' core home computer market won't move off the PC, but game studios now have much more incentive and much lower barrier to entry for getting their games onto Apple boxes.

You can't look at this announcement as a bullet. It's a full broadside, and the impacts are going to be felt over a large range (see Donna's entry below for more big thoughts). It's also going to hit targets other than Microsoft; one likely impact will be on Sony, which also plays in the home-entertainment spaces and which can be seen as a partner and competitor for both Apple and Microsoft. As far as I know they haven't had anything official to say on this topic yet.

Comments (5) + TrackBacks (0) | Category: Big Thoughts


COMMENTS

1. Tom Barta on June 8, 2005 3:37 PM writes...

I doubt this has anything to do with DRM. I think IBM, and before that, Motorola, simply didn't comprehend that "it's the chips, stupid". Intel chips suck, but AT LEAST THEY UNDERSTAND IT'S THEIR BREAD AND BUTTER. IBM thinks it's a "services" company; and MOTO a cell phone company.

There WILL be major fallout from this shift, and the stock market, so far, hasn't grokked this.

LINUX is dead-- companies like Red Hat are doomed.

IBM will make no money on its stripped-down XBox chips without Apple to defray the chip fab costs by buying higher-margin G5's.

MSFT will do just fine, thank you, until a year or two down the road when Dell reverse-engineers the "Mac-Tel" BIOS (like Compaq did to IBM in 1981), and hundreds of millions of Dellintoshes start rolling out of Texas.

By this time Apple will be making enough off the iPod not to be too concerned about that.

I sold my IBM; I'm nervously holding onto my AAPL. It might put my kids through college.

Permalink to Comment

2. krimpet on June 8, 2005 5:29 PM writes...

Your speculations are worthwhile, but I really think you are blowing this way out of proportion. Apple needs chips, chips that are fast and cheap and low power and which run cool.

Apple's portable line is major revenue stream and it is withering on the vine because IBM can't come up with suitable G5 processors. Given the road-block, I'd be more worried if Apple didn't switch. I live and die by my Powerbook. an I have been waiting a really, really long time to upgrade. Switching to intel will probably mean we will see dual and quad core portables.

I frankly can't wait.

Permalink to Comment

3. Reb on June 8, 2005 9:24 PM writes...

Tom's comment on Compac's reverse engineering IBM's hardware in 1981 might remember that the data sheets went public before any copyright or patent was filed. IBM just wasn't that focused and created the 'clones' through neglect, otherwise they would have sued their pants off! Apple would put a stop to Dell or any manufacturer's play in that sense.
What most Mac devotees criticize with Intel's designs are the perception, albeit outdated, of x86's CISC and their initial failure with 64 bit designs. They now have the Tanglewood design coming in 2007 from the old DEC Alpha team which fits Apple's timetable for high end machines. It may make IT departments less resistant to Apple hardware when they can dual boot a MS OS. And this is only the beginning as far as Jobs is concerned.

Permalink to Comment

4. Roger Harris on June 8, 2005 10:03 PM writes...

I see this mostly as you do Alan. I do think the laptop chips are a big motivation but these are also what Apple needs for creating Home Mini Movie download boxes. Intel's DRM chips are on and will be on very few PCs in the next couple of years. Apple's Download box will bring folk the Movies without a new PC. Intel can sell these PCs later if they want to at all. I am guessing that all or most of Apples Mactels will be able to handle DRM content. This DRM may also be the path Apple uses to keep OSX off of regular PCs?
There is a lot I suspect and little that I know; But it is great fun playing Sherlock;>)

Permalink to Comment

5. Tom Barta on June 9, 2005 8:49 AM writes...

"Tom's comment on Compac's reverse engineering IBM's hardware in 1981 might remember that the data sheets went public before any copyright or patent was filed."

Actually, I think Apple is consciously (with iTunes Music Store, etc) moving toward a more-software-than-hardware business model. This works for MSFT, as we all know. It would not surprise me if Apple looked the other way if someone did a reverse-engineering job. Steve Jobs is nothing if not a "big picture" guy. I think he understands that eventually taking out MSFT is the only way to achieve computer nirvana for the masses.

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