“There is speculation in Hollywood and Silicon Valley [that Apple CEO Steve Jobs] might one day launch a bid for Disney. The idea is not as outlandish as it might seem. Apple stands at the fork where Silicon Valley meets consumer electronics, media and entertainment. The company has a reputation for trailblazing innovation, but the key to its success has more to do with marketing and industrial design than technical innovation,” Keith Woolcock writes for The Telegraph. “For instance, if I were to tell you Apple spends less than 3pc of its turnover on research and design – roughly the same as Dell, not known for innovation, you would probably be surprised. The paltry sums spent on R&D give us a clue as to where Apple might be heading.”
“The miracle of digital electronics is the pace of innovation quickens and prices collapse. Jobs knows this and will understand that while Apple might be riding high its long-term future needs something more. He is facing the same dilemma that consumer electronics companies like Philips and Sony faced decades ago. You might start off making high returns from sexy gadgets and music systems, but eventually competition will drive prices down. As Apple’s low R&D spend highlights, there is very little rocket science behind what the company does,” Woolcock writes. “The classic way for consumer electronics companies to handle the wafer thin returns that hardware earns is to either sell consumables, such as tapes, ink cartridges and film, or go into content. Sony, for instance, owns a huge film and music catalogue. Philips used to own Polydor, the music company. Just as digital electronics has revolutionised consumer electronics, it is now reshaping the content industry.”
“Music, films and television programmes are being stored on memory disks and silicon chips. Apple has taken a giant step towards content by launching its iStore music service, which only last week announced that it had downloaded a billionth song from its library. Music continues to be at the centre of Apple’s drive into our living rooms. On Tuesday the company launched a Hi Fi system that looks as though it were crafted by a higher order intelligence and delivered to earth on a sleek space ship,” Woolcock writes. “Last year’s launch of the video iPod suggests Apple might see its future in the movies. Jobs’s seat on Disney’s main board puts him in a great position to plan such a move. Whether he buys Disney or not, I bet film and video soon get main billing at Apple. What was that line from Toy Story: To infinity and beyond. It might just be.”
Full article here.
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