What will Apple’s verse be?

Apple seems to be at a bit of a cross-roads at the moment. Attending a Mobile World Congress wrap-up event in Cambridge last week, Zeitgeist listened carefully to one of the key speakers, William Webb, casually toss off the following epithet; “Since Steve Jobs died, so has all innovation… Everyone was catching up with Apple, then they did and Apple ceased to innovate.”

As a brand, the company is still strong. The above TV spot is one of the more effective pieces of advertising on the box right now. As a service, the story is less clear. So much ink has been spilled over the years writing about the imminent arrival of a fully-fledged Apple TV service, that the most recent rumours with Comcast did little to raise expectations. Variety called a deal between the two companies “improbable”. Elsewhere, Business Insider said yesterday it was time for Apple to launch a music subscription service – the chart below will make tough reading for the iTunes side of the business, with negative growth in 2013.

Strategic clarity seems to have escaped the company of late. Are Apple’s greatest days behind it then? We say, don’t bet on it.

The Pitfalls of Brand Personification

In a quest to be all things to all people, brands can sometimes lose their way. They become lost in a miasma of dilution as they try to stretch their brand equity to appeal to every consumer, or branch out into new markets. Some, like Virgin, have managed this fairly successfully – let’s forget for the moment about Virgin Brides – while others, such as Cisco (which we wrote about recently) have fared less well. Virgin’s equity relies in part on the man behind the company, Sir Richard Branson. His affable qualities have appealed to both consumers and investors. The balance he maintains is a delicate one, driving the essence of the brand without ever overwhelming it.

In the world of luxury, companies have often used brand ambassadors. The watchmaker Breguet has long claimed that luminaries such as Napoleon, Churchill and Marie Antoinette wore their brand. Each of these characters had their flaws of course, not least the megalomaniacal Frenchman. However, when the person personifying the brand is also at the rudder of the ship, the situation can prove more complex. This was evident in March this year when master designer John Galliano was fired from his creative directorship at Dior, as well as from his role at his eponymous label.

Similarly affected by ramifications at the top has been Lagardère Group, run by Arnaud Lagardère, who inherited the company from his father. As well as owning a range of media assets, it also has a 7.5% stake in the defence contracting firm EADS. Recently the 51 year-old has taken up with a 20 year-old model by the name of Jade. A cutesy video for a glossy magazine shoot made its way online (see below). Any semblance of dignity the man maintained – already in question prior to this video – was lost. This may decide future business directions at the company. Arnaud is a keen sports enthusiast, at one point mulling a bid for the rights to the Tour de France. Any such wishful thinking must now be considered just that as shareholders are keen to refocus on existing assets. His overt publicity has cost him dear; Arnaud may now be at risk of losing some of his control over the company. Writes The Economist,

“Executives at EADS are dismayed to see their future boss behave like a nincompoop. “In Germany any manager who shot such a video would be finished in business,” says a person close to the company.”

And so we turn to Apple, which has been recently hit with the news that Steve Jobs will be stepping down from his current role. He will remain at the company as chairman of the board, and his ideas and personality will affect the company’s direction for several years still, but after that the company’s direction, and its brand equity, will be at a crossroads. The company has, even relative to its own stellar performance, recently been enjoying great success, briefly becoming the world’s largest public company. In managing this feat, it overtook Exxon Mobil. As The Economist pointed out, however, “oil remains a vital raw material” (though not for a great deal longer, admittedly), whereas Apple’s appeal is in “delighting customers”. A company that serves such a fickle master so directly is in danger of losing said appeal at any given moment. Last week, an editorial in the FT pointed out that an Apple without Steve Jobs at the helm will be a less irascible but also a less happy place, and hence perhaps less appealing to customers. The New York Times echoed such sentiments that weekend, with an article headlined “For Apple fans, departure of Jobs is personal”,

“…[P]eople love Apple products in a way that they do not love other products they use every day. And Mr. Jobs as chief executive has been uniquely connected to Apple’s creations.”

The article details personal consumer reactions to the news, which range from tearful incredulity to concern over future business inspiration and product innovation.

All of which goes to show that having an impresario at the top can benefit a company hugely for decades. Could Steve Jobs have made Apple as popular, while taking a slight back seat, a la Bill Gates, Howard Stringer, Howard Schultz or Jack Welch? Probably not. If he had, Apple wouldn’t be the company it is today. But one thing’s for sure, what it is today will not be what it is in the future, when Jobs’ influence has left and the company has to decide which path to take.

Nintendo’s Nemesis & Evolution

“All is unceasing and rigorous competition in nature”, said the Marquis de Sade. Rivalries come and go, it is the victor who must with each success continue to innovate and ultimately change, enduring the onslaught of new competitors. Yahoo vs Google, Microsoft vs Google, WPP vs Google and more recently Apple vs Google and Apple vs Amazon vs Google; in similar circumstances, we have gone from Sega vs Nintendo, to Sony vs Nintendo, to Apple vs Nintendo.

Apple themselves have pushed beyond their preliminary battle with Microsoft to a place where they now court multiple rivals in all the different markets that they affect with products like iTunes, the App Store and Apple TV. Steve Jobs, in September last year, said that the iPod touch was being released with gamers in mind after having had much feedback from the public as to what they used the device for. This was part of the reason why the iPod touch was cameraless, unlike its smaller, cheaper cousin. Nintendo must have known it was only a matter of time until their paths would cross…

Zeitgeist has very fond memories of inadvertently reshaping the bones in his thumbs while playing the Mario Brothers trilogy for hours and hours back in the day. The Nintendo Entertainment System, their first console, was fantastically successful. Somewhere along the way, however, the company got a bit lost. The turnabout it managed thanks to the Wii (and to a lesser extent the DS) is extraordinary; Sony and Microsoft saw share of their respective PlayStation and X-box platforms gradually erode to give Nintendo a position of dominance, becoming the market leader less than a year after its launch; PSFK named it one of their top ten brands of 2010. In the last week though, Nintendo have reported an earnings drop – its first in four years – hurt by slow sales of the Wii and possibly effected by piracy as well, according to Le Monde. Just as Apple are encroaching on Nintendo’s sovereign territory, the reverse is also true, as Nintendo have been offering Netflix movie rentals for a while now. Will the DS soon be facing off against the iPhone, iPod and iPad? According to Le Monde, in 2008 Apple’s iPhone represented 5% of the gaming market, Nintendo 75%. Today the iPhone’s share is 19%, Nintendo’s 70%. It is the casual nature of its games that made the DS and Wii appeal to a market that other consoles never even considered. Now though, those casual gamers are equally at home playing on an app on their iPhone, as well as on Farmville on Facebook. Variety says, (emphasis added),

“More than 32 million people tend their virtual crops each day, and the game has a total user base of 80 million. That’s roughly seven times the number of people who play the online smash ‘World of Warcraft’.”

Of course, rivalries like this will become increasingly common in this sector, as technology platforms – what the great Lawrence Lessig calls “layers” – continue to converge, allowing for excellent, mutiple functionality on one product (look at the iPad as an example). Somewhat counterintuitively, customers may not readily embrace this convergence, as behavioural economics tells us that people put more trust in a product that performs one dedicated task well; they assume anything else will be somehow diluted. Neither Nintendo or Apple should fret, exciting times are ahead. There is speculation in the Le Monde article, among others, that Nintendo should take the fight to Apple by releasing its own phone. Zeitgeist would find that a real treat. Almost much as much of a treat as the original Japanese advert for Super Mario Bros. 3. Enjoy.