Dan Lyons takes off the mask and throws down the gauntlet with Apple
I have no doubt in my mind that Steve truly is the cunning monopolist Dan Lyons says he is, but his debut article as Steven Levy’s successor at Newsweek turned out to be a drive-by foot-shooting of dubious arguments and logic.
First, Dan sets up Vudu as an example of the little company trampled underfoot by Apple. “Vudu was winning rave reviews… now Apple is selling or renting more than 50,000 movies a day, and Vudu is laying off staff.”
Rave reviews? Hardly. I thought the content selection on the Vudu was disappointing, the walled-garden approach (i.e. you can’t do much with it once you’ve bought the content) was off-putting, and it suffered from most of the same plagues that put pretty much EVERY other startup set-top box manufacturer — from Akimbo to Moviebeam — out of business. Oh, and not Laptop, CNET, nor MacWorld gave the Vudu anything higher than a 3.5 out of 5.
“[Apple] operates the only store that can sell music, movies and software programs for [the iPod and iPhone].”
Movies perhaps; music, definitely not. There’s plenty of free video and paid video content online, but no certainly no shortage of DRM-free MP3 music stores (like competitors Amazon, Rhapsody, Napster, and even Microsoft’s Zune Marketplace) that sell content that works on the iPod and iPhone.
“Apple sets prices and takes 30 percent of the money.”
On applications. If they’re not distributed for free (which Apple does for no cost). And on music and movies, Apple’s margin is far, far less. It’s been said that Apple gets less than 10% of music, for example — that kind of content is generally a break-even or, at best, mildly profitable effort to sell iPods. In fact, that’s the record labels’ biggest contention with iTunes: Steve won’t let them turn up the price because he wants music to be affordable so iPods seem like a better ecosystem value.
“One iPod accessory maker… gripes that Apple takes up to 75 percent of the sales price, leaving him with zero profit on some of his products when he sells them in Apple stores.”
I used to do technology retail. In fact, my first job was as upgrade / accessories manager at a CompUSA. If Apple gets 75% of the sale price of an accessory at retail markup, the anonymous company in question is probably getting a pretty good deal. Most accessories are marked up more than just 400% — multiply that by four or five, and you’ll enter a reasonable ballpark. Even for stuff like speakers, whose margins are far lower than cases or cables, those numbers don’t sound completely off to me.
“The problem is that if Apple squeezes too hard, some partners may go out of business, harming the ecosystem.”
My editor instincts tell me: this is a great place to give an example. But he doesn’t. Probably because he can’t. I’m racking my brain and even did a little googling to give Dan the benefit of the doubt, but I’ve got nothin’.
“… a woman has filed a class-action lawsuit because her new 3G iPhone won’t always attach to a 3G network, which provides faster wireless Web downloads.”
What Dan doesn’t mention is that Apple gets two, sometimes three class-action lawsuits filed against it every week. I wish I was kidding. Unfortunately for Apple (and the woman who stands to lose a lot of money on lawyers’ fees), for the most part, the issue in question has a lot more to do with AT&T’s early, raw 3G rollout, which tends to lack network capacity. Remember, a class-action lawsuit is no different than any other kind of lawsuit: it’s just one person (or group of people) who think they have a case and decide to sue.
Maybe it’s just me, but I think Dan did a much better job at cutting to the heart of what makes Cupertino tick when he was doing so with subversive parody. Trust me, there are many, MANY things to groan about Apple over — its obsessive control in all aspects of business, its reluctance to try genuinely new markets and products, the way it handles media — but these complaints are not those things.
Update: Dan (kind of?) responded to some feedback, but didn’t really back up anything I mentioned. Although I will grant him, it does get a lot harder when you have to say real things about the companies you cover.
I'm an editor and technology critic in the midst of founding a new web startup: 
Are we sure it’s AT&T’s network? There has been some complaints in other countries. Also, I haven’t heard other AT&T 3G users with different handsets complaining. Maybe they’re having probs and no one’s noticing, but it’s not out of the realm of possibility that there’s some firmware or hardware issue with the Jesus phone.
Pretty sure at this point. Part of the issue is capacity vs. overdrawn power on the part of the iPhone 3G, which is being fixed. But some independent nerds did some hardcore wireless testing against the iPhone, and it came up in solid shape (forgot to add the link to the post): http://www.gp.se/gp/jsp/Crosslink.jsp?d=444&a=440573
Great article, Ryan. I too admired Dan’s work as FSJ, but if this is indicative of his best foot forward at Newsweek he’s got some work to do. Dan has some gigantic shoes to fill to take up the mantle from Steven Levy, and although it’s in vogue now to take potshots at Apple, he’s done much better than this.
If this is the kind of editorial we’ll be getting on gdgt, sign me up now. Excellent critique, keep up the great work
Solid argument here, Ryan. As the above commenters said, if we start to see more of these on your site, that’d be outstanding.
Apple have 30% on music sales aswell. Perhaps the big giants in the recordinginsdustry have better deals? I have an indipendent label and I give 30% to Apple for every sold song on iTunes according to my contract..
Great points. iTunes might’ve ruled the roost for awhile, but Amazon has created a great competitor. I prefer the iTunes interface for searching for music, but buy it on Amazon to save the dime and have it DRM free. The lesson from this, however, is that any music monopoly Apple had was because they did things well. There was plenty of room in the market for competitors, but they needed to either beat the price or create a better interface, neither of which was easy to do.
And yet another “I drank the koolaide comment from the apple faithful”..When will you guys get a clue about the company you so worship.
[...] Filed: Tech Interesting feedback on my first Newsweek column, “One Bad Apple.” The column argues that Apple has become what Microsoft was 10 years ago — a Bigfoot to smaller companies, throwing its weight around and treating its ecosystem partners not very well. A hardcore Kool-Aid drinker inside Apple sniffs that, “Your column didn’t piss me off, just because I think you are wrong.” A Kool-Aid drinking fanboy writes that the article was so frigtarded that “at first when I read it I thought it must be written by someone who doesn’t know very much about Apple or technology.” Ryan Block of gdgt says I’m an idiot. [...]
Thank you ryan. The world isnt such a bad place with apple.
Lyons has become a class A bottom feeder when it comes to Apple ever since he lost his fifteen minutes of fame with FSJ. I have several pieces on his tactics (click on my name if interested – I don’t want to pimp links on your blog) and am proud that Dear Old Dan saw fit to make an ass out of himself by not recognizing a parody blog in his Culture of Enablers article – which oddly enough, he thinks is a good argument.
[...] Real Dan Lyons Comes Out Swinging Jump to Comments Dan Lyons first column for Newsweek went up this Saturday and its about (what else?) Apple. He calls out the company for acting like a monopolist. Ryan Block has posted a rebuttal to Lyons’ column here. [...]
Very good points.
BTW – Dvorak really schooled you on the last TWIT;) Never again…
He did? I don’t remember John having much cogent to say, he just tried to grouch me into submission (which I don’t think he did!).
“[Apple] operates the only store that can sell music, movies and software programs for [the iPod and iPhone].”
Further untrue, of course, if you account for plenty of old geezers like me who have filled their iPods with stuff from their massive, massive CD collections. Apple didn’t sell me any CDs.
Good post.
Great piece, apart from “racking my brain” instead of “wrecking my brain” :)
30% AppStore cut is cheap if you look at what you’re getting: access to a captive audience channel, and they take care of all the complexities of billing, international sales, returns, pushing software updates, etc. Anyone who says otherwise hasn’t tried marketing and distributing software.
I was rather disappointed with Lyons’ article. After the excellent satire and, sometimes, insight he provided with FSJ, I hoped he would provide similarly well thought-out and unique analysis, but instead he wrote something that doesn’t seem any different than the stock nebulous “analysis” pieces Newsweek, Businessweek et al. push out on Apple.
His use of Vudu as an example of the darkside of Apple’s rise puzzles me. If Vudu is a failing business because of AppleTV + iTunes, than I ask — so what?
The AppleTV is a fundamentally better product. It has an incredible media library to select from: iTunes music, movies, TV shows, and podcasts; Flickr for photos; YouTube for video; and your own personal music, video and photo libraries, and it makes it really simple to set up and use.
AppleTV is powerful because it is an all-encompassing solution. You can listen to your music library, watch your video library, see your photos, buy from an incredible selection of music and select from a quite good selection of TV shows and movies, all on your home theatre system. It makes your computer and home theatre play together almost seamlessly, and that’s powerful.
Vudu lost because it cannot provide an equally valuable product. It cannot give consumers the same incredible choice of music, video and podcasts that Apple can. The “trade-off” is you must work within Apple’s ecosystem, which is what Lyons is really afraid of. But like anything, when you decide to use iTunes and buy an iPod, iPhone, or AppleTV, you are deciding that the incredible value Apple’s ecosystem provides is worth giving up some mobility. If consumers decide the tradeoff is no longer worth it, Apple will not do as well as it has, and other media “stores” will take their place.
Lyons is concerned that Apple, given this power, will use it to abuse other companies or their customers. With the iTunes Store, however, Apple has been fundamentally fair, both to media owners and consumers. Apple takes a relatively small cut of media sales, and has fought to keep music and video prices simple (but has had to relent on movie prices with newer releases costing more than older titles).
There are concerns with the new App Store, as many developers have explained, but these concerns seem more to be growing pains of a new model than a sinister plan for domination cooked up in Jobs’s office. Perhaps because Apple is concerned more with hardware sales than media sales in the iTunes Store, but Apple has acted to help the consumer rather than harm.
So, I hope Lyons does bring back FSJ, because he does a much better job with satire than standard analysis.
I used to work for a major speaker manufacture and I can tell you that the mark-ups are insane. My employee discount was that I would get their speakers for 100% above landed cost. I purchased some speakers — that retailed for $99 — for just $26. That makes the landed cost $13 – a markup of over 750%!
Not just you.
Good dissection, Ryan.
Don’t worry about it Ryan, FSJ just wants to fark your girlfriend. Really, really bad.
Other music stores undercut Apple on price sometimes based on big labels wanting to keep an ecosystem, and offering those stores a better deal.
They were so scared of big bad unauthorized copying that they gave Apple the keys to the kingdom, without even knowing it.
““Apple sets prices and takes 30 percent of the money.”
On applications. If they’re not distributed for free (which Apple does for no cost). ”
Developers set the price of their applications on the App Store. Apple just take 30% of whatever they set, as far as I understand it.
Apple keeping the prices low for the iTunes Store also means they take less margin from each sale. And, seriously, do you think the music companies would have done a better job than Apple with the iTunes Store? The answer is clearly no, they wouldn’t.
I was awfully disappointed in this piece. I wonder if it doesn’t have some heavy Editor’s hands on it. It really boils down to the usual (mostly fictitious) gripes about Apple with a few shaky cases thrown together in an attempt to build a “narrative.”
It’s the same stuff they do in political journalism – always trying to connect things to make other things. But sometimes those things just don’t exist, and you can do a lot of harm doing what amounts to lying, or falsifying at best.
Dan, you’re better than that!
Plus add to that his attempt to be-little his detractors by calling them kool-aid drinking cultists (a metaphor that really REALLY shouldn’t be used considering the seriousness of its origins, i wish the tech world would drop it). Maybe, gasp, maybe he is WRONG (i think he is).
First, the woman isn’t likely to lose any money on attorneys fees, because those attorneys usually take such class-actions on contingency. At the end, when Apple ponies up a $100M pool of money for coupons, the attorneys will ask for 25% of that in legal fees. That’s why class actions are so lucrative for attorneys.
Second, there’s nothing illegal or wrong about being a monopolist. Every company wants a monopoly, that’s the goal: acquire more and larger shares of your market. Illegal use of monopoly power is where you get into trouble, a la Microsoft.
“Unfortunately for Apple (and the woman who stands to lose a lot of money on lawyers’ fees)…”
Class actions are almost always financed by lawyers, who actually shop for plaintiffs by advertising for them. The woman probably has nothing to lose (and little to gain, compared to the attorneys).
The iPhone 3G has been criticized for dropping 3% of calls, but that is actually much less than the average, which is closer to 10%.
A just filed lawsuit cannot be a “class action.” Before a suit becomes one, the plaintiffs’ must establish that a class (meaning hundreds or thousands of persons affected) exists. Next, a judge must agree that such a class exists and that all would benefit from having their complaints tried together. At that point he will or will not certify the lawsuit as a class action.
A recent example of a failure to gain class action status against Apple was the complaint filed by two photographers over the jargon ‘millions of colors’ regarding Apple monitors and screens. They said the term of art was misleading. However, their lawyers were unable to scare up many, if any, other consumers who believed they had suffered economic damage as a result of ‘millions of colors’ being a term of art. The lawsuit did not become a class action.
very nice piece, maybe a little short but I really enjoyed reading it
(esp. “a drive-by foot-shooting of dubious arguments and logic.” :D)
@ Martin. Actually, in common usage, either ‘racking my brain’ (usually taken to mean torturing oneself to figure something out) or ‘wracking my brain’ (taken to mean destroying one’s memory to find a lost tidbit; wracking being synonymous with wrecking) are acceptable. Wrecking is right out.
[...] Read Jim Goldman’s whole piece, it beautifully shows how Lyons’ journalism vis a vis Apple is just horrid. Still bitter about giving up FSJ too early, I ’spose. Ryan Block also agrees that although he believes that Jobs is the cunning monolopist that Lyons has … [...]