Hidden Dimensions - Apple's Values and the Movie Moguls

by John Martellaro
September 11th, 2006

As technology users, we are familiar with how, all too often, companies fail to properly set a balance between a product's price paid and the value given. Some hope that their customers will fall for subtle trickery or hype, and they're driven by visions of riches. Some have executives with a passion to deliver something great and hope that customers perceive the real value. That is the theme of this article.

Tomorrow, Apple is going to make a big announcement. The Wall Street Journal on September 6th predicted that it would be a movie download service. Accordingly, judgments will be made about price and value. So before we launch into movies, I'll recommend an oldie that's relevant here. In The Bridges at Toko-Ri, William Holden plays Harry Brubaker, a Denver attorney in the U.S. Navy reserves who is called to active duty. He flies a Navy jet from an aircraft carrier in the Sea of Japan during the Korean War. The movie makes its point poignantly, powerfully. Trust me. Just rent it if you can or buy the DVD from Amazon. It'll be ten bucks well spent.

The movie asks a question. What legacy do we leave behind when we strongly exercise our values? Harry Brubaker is bitter and a little scared. He doesn't want to throw away his life as an attorney, his life with a lovely wife, played by Grace Kelly, and his daughters, but he does what he is asked to do and believes in its ultimate good. It's not that he wants to risk his life fighting agents of a government that hates America. It's that he believes that there must be men who are willing to do so if asked.

Back to Apple. Apple is asking the same question of Hollywood executives. What legacy do we leave behind when we strongly exercise our values?

Life is often about awakenings. We move from one state of being, confident in our values, to another state. In the process we are amazed to consider what we once believed, and we reflect on our new understanding. I had a lot of these awakenings during my time at Apple.

For example, one day in late 2003, I had an appointment with a Federal customer in Alexandria, Virginia. I had been trying very hard to see the CIO of this organization and had been rebuffed. I finally succeeded in making an appointment with this fellow's executive assistant and clearly stated who I worked for. I was very pleased to get a 30 minute slot with him.

When I arrived, I had to sign in with security, and then I'd be escorted to his office. Right on time, the CIO got off the elevator, met me and we boarded the elevator. The conversation went like this.

CIO: So. You're John from Nortel.

Me: No, I'm John from Apple.

CIO: Apple? I thought we were going to talk about our phone network.

Me: Actually I'm here to chat with you about some exciting new Apple products.

We get off the elevator.

CIO: [flustered]. Apple? Oh, my. I don't have time for this. [Presses the elevator down button.]

Me: Sir, your assistant said we have thirty minutes.

CIO: Oh, no. I'm out of time. There's something I have to do. You'll have to leave.

He motions me into the elevator.

Me: Can you at least give me five minutes in your office? I brought some literature for you.

CIO: No, no. I'm late for a meeting. I really have to run.

I can see where this is going, so I hand him the literature as the elevator door opens. He walks me over to the reception desk and signs me out. He walks briskly back to the elevator, where the door is still open, and disappears.

I am both annoyed and amused as I drive back to the Apple office in Reston. Clearly his assistant knew I was from Apple, but it's likely there was a mix-up and she didn't get that information clearly to the CIO. I also wondered why the man didn't have the courtesy to at least sit with me and chat for a few minutes. But they were in the clutches of Microsoft, and I guessed that being seen with an Apple representative in the office area was an alarming prospect for him.

Back in the cozy camaraderie of the Apple office, I reflected on how this adventure was so out of sync with the standard operating euphoria of Apple HQ -- a continent away in Cupertino. I thought about how Apple as a company was very accustomed to generating a sense of excitement in the public eye, but out here in the trenches of the business world, there was a very different set of values. And the values were so strong that it led to extreme business rudeness.

I very much suspect that Steve Jobs has been on a path to awakening during 2006. These days, Apple has much greater ambitions than to simply survive. And to succeed in those ambitions, Apple is starting the process of grappling with the business interests of the entertainment industry.

Apple, a company with a passion for quality and user experience, meets...Hollywood executives with a passion for what? Making money. Face it, the movie industry, from the top, isn't about delivering something that has a consistent and laudable value. It's about making judgments about what will make money.

Of course, many, probably most, individual producers and directors have a passion about what they do. After all, movies are all about story telling. Story telling gets into the spirit of mankind, its hopes, aspirations, headaches, loves, and desperations. Engaging story telling has a very long history and is a worthy enterprise.

But at the very top, where Steve meets the Hollywood executives, there are other considerations. There are alliances. There are business deals on price points and release dates that affect vested interests. A different breed of men have differing values about doing business in America. So when the leader of Apple went into their den and tried to convince them about what consumers really want, he very likely didn't get all that he bargained for.

And so, it will be interesting to see if Steve had any negotiating success based on his own vision and values. What is a one-time movie really worth? A favorite movie? What's the trade-off between a beautiful boxed set of Star Wars optical discs on the bookshelf versus a copy of Hitch on your magnetic hard disk which you watch once and delete? (Unless you're in love with Eva Mendes.)

We are very well aware that the movie industry has created many, many distribution channels, competing formats, and a confusing HDTV technology. It could be compared to the early days with PCs.

Hollywood has shown every sign of wanting to juggle all of its channels to maximize its profit with no accompanying technical vision, devotion to the customer experience or recognition of consumer frustrations.

We know Hollywood is fearful of letting one company be the gatekeeper of downloaded movies, but there might be other fears and pains that Apple could exploit to their advantage. For example, Apple could point to the decline of music CD sales at brick and mortar outlets, the bankruptcy of Tower Records and Sam Goody stores, the stagnation of DVD sales, and the likely debacle of the HD-DVD vs. Blu-ray war.

More importantly for Apple, what's the trade-off between waiting until the moguls come around and Apple's timing getting into this lucrative industry and maintaining its lead over competitors? Where is the starting point? It must have been a very frustrating year for Steve. At least, I hope, he wasn't thrown out of any Hollywood executive's office.

Finally, what would be the expected Apple response to not getting 100% of what they wanted? I strongly suspect that Steve, based on his experiences with Pixar, knew that Apple would also have to take the technical initiative in order to make up for shortfalls in the negotiations. So I'm guessing that he set in parallel motion a project that would effectively be a technical, partial end run around his expected obstacles. Buy time. Once again, by keenly understanding what the American consumer really wants, a set of coherent technologies and imaginative hardware can overcome many of the limitations imposed by the Hollywood moguls.

I find the rumors about a system to transmit movies from a Mac, where movies are purchased and archived, to a display in another room compelling. No one really wants to watch Star Wars on a 100 mm iPod screen. So the rumored movement away from CompUSA to a video and entertainment partner like Circuit City, where the future of home theater is rosy, is very smart.

Apple has been getting a vigorous introduction to industries with vastly different values, just as I did in Alexandria, Virginia on that day back in 2003. This can only be good for Apple. It can only be good for Mac OS X in the enterprise. And it'll certainly be good for entertainment technology. Basically, Apple wouldn't mind doing for home entertainment what it did for desktop computing.

But as you watch or read about tomorrow's Apple announcement, keep in mind that while you may be dazzled by the showmanship, there are still things left undone. More pieces to put into place.

The real thing to watch for tomorrow is not details of the download service but rather the fashion in which Apple, and its partners Disney and Circuit City, begin to use Apple inspired video products to move to a better overall technology model for home entertainment. Even more important, will those Apple technologies, driven by their own values, be sufficient to alter the competitive landscape enough to insure financial success? Can they stand out against offerings by the consumer electronics and Windows-based industries? And create a next generation Apple legacy?

Contrary to some writers, I don't think Steve's getting ready to retire. With new awakenings, his next adventure and challenge has just begun.

John Martellaro is a senior scientist and author. A former U.S. Air Force officer,he has worked for NASA, White Sands Missile Range, Lockheed Martin Astronautics, the Oak Ridge National Laboratory and Apple Computer. During his five years at Apple, he worked as a Senior Marketing Manager for science and technology, Federal Account Executive, and High Performance Computing Manager. His interests include alpine skiing, SciFi, astronomy, and Perl. John lives in Denver, Colorado.

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• Apple's Values and the Movie Moguls - September 11th
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