Not Fun to Watch

The Steve Jobs email exchange that perfectly captures Apple’s strategy

August 23, 2013
Obsession
Mobile Web
August 23, 2013

In late 2010, Android phones were just overtaking the iPhone in US market share, driven largely by Americans buying cheaper smartphones running Google’s operating system. Apple still maintained a revenue advantage, but privately, executives at the company were fretting about the notion “that it is easy to switch from iPhone to Android.”

That’s the upshot of a new, revealing email exchange, first noticed by GigaOm, which was released today by the US government in its lawsuit against Apple over e-book pricing. Like other emails that have emerged in the case, these provide a rare window into the internal strategy of the world’s largest technology company.

On the evening of November 22, 2010, senior vice president Phil Schiller was watching television and dashed off this note to Steve Jobs (then the CEO), Eddy Cue (then the executive in charge of iTunes), and Greg Joswiak (vice president of marketing):

I just watched a new Amazon Kindle app ad on TV.

It starts with a woman using an iPhone and buying and reading books with the Kindle app. The woman then switches to an Android phone and still can read all her books.

While the primary message is that there are Kindle apps on lots of mobile devices, the secondary message that can’t be missed is that it is easy to switch from iPhone to Android.

Not fun to watch.

This is the ad—”What if you switch?“—Schiller was probably referring to:

As Apple diversifies the types of electronics its sells, its strategy has increasingly come into focus: Provide hardware, software, and media that works best when all of your devices are made by Apple. In other words, lock people in. Movies purchased from iTunes, for instance, work seamlessly on your iPhone, iPad, and Mac, but don’t try to playing them on devices made by competitors. (You can, but it’s not worth the trouble.)

In the case of this Amazon ad that had Schiller so alarmed, the point is that e-books purchased from Apple’s iBookstore, which had launched earlier that year along with the iPad, only work on Apple devices. But if you buy your e-books from Amazon, you can read them on any device for which there’s a Kindle app.

Jobs responded to Schiller’s email later that night:

What do you recommend we do?

The first step might be to say they must use our payment system for everything, including books (triggered by the newspapers and magazines). If they want to compare us to Android, let’s force them to use our far superior payment system. Thoughts?

Steve

Sent from my iPhone

What Apple ended up doing, the following year, is insisting that Amazon and similar retailers give Apple a 30% cut of e-book purchases made through their apps. Amazon responded by removing in-app purchases altogether, meaning people could read—but no longer purchase—books in the Kindle app for iPads and iPhones. That remains the case today.

Apple’s “you only need us” strategy has been enormously successful, thanks to the simplicity of its products, which encourage people to keep their media within Apple’s ecosystem. But with even more competition for smartphones and tablets, the question posed by Amazon’s ad—”What if you switch?”—likely remains just as scary to Apple today.

You can annotate any of the text above by hovering over a paragraph and clicking the quote bubble that appears in the right-hand margin.

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