Think different?

Will Steve Jobs’s death mean customers stop forgiving Apple’s faults? The days of a blemish-free brand and a soaring stock price might soon disappear.

Jeff Beer 0

In the west German city of Bonn, there’s a small, family-run café called Apfelkind (“apple kids”), with a logo that features a round red apple with a silhouette of a child’s face in it. When owner Christin Römer tried to register the trademark in October, she got a cease-and-desist letter from a certain tech giant based in Cupertino, Calif.

Why would Apple, one of the world’s most valuable companies, be concerned with a little café in the middle of Germany? For any other major corporation, such a move would trigger a tweetstorm of bullying accusations, perhaps a tarnished brand image, and a half-hearted executive apology. But not this time. Apple’s most ardent fans are the same snarking creative class usually first in line to turn a David-and-Goliath dispute like this into a PR nightmare, so the reaction to its hectoring was decidedly muted.

As his obituaries noted frequently, Steve Jobs was a master performer who hypnotized audiences with tech tricks and digital wonders. His gifts of persuasion have been called a “reality distortion field,” wherein Jobs was able to convince others that his point of view was the best and only way to go. Under his guidance, that power allowed his company to gloss over its unsavoury attributes and focus on its beautiful products.But Jobs wasn’t just a spin doctor, he made sure there was substance behind the hocus-pocus. He was the visionary taskmaster who drove Apple’s gargantuan success. At one point last summer, Apple’s cash reserve of almost US$76 billion surpassed the U.S. government’s total operating balance of just under $74 billion. In 2010, iTunes accounted for 70% of all digital music sales in the U.S. A recent study by comScore said the iPhone held 27.3% of the U.S. smartphone market. And the tablet market? Right now, it might as well be called the iPad market.

But unlike most giant corporations, Apple’s image has remained largely unbruised, thanks largely to the combined might of Jobs’s salesmanship and quality control. It’s not that there aren’t criticisms about its history of secrecy and hostility toward suppliers, potential partners and competitors. But Apple can somehow feud in the courts with the likes of HTC and Samsung yet still be seen as the golly-gee cool kid in the eyes of consumers. It dominates entire sectors, yet still markets its soul as the creative, rebel underdog in the Los Altos garage.

But now that Jobs the magician has left the stage, will the accusations that Apple can be a bully, a copycat and a control freak start to stick? A shift in perceptions might be aided by the emergence of credible competitors to Apple’s beloved product—witness Spotify, Android and Kindle Fire. Its growing size and increased competition were always going to make it hard to maintain Apple’s infallible image. Without its chief conjurer to rely on, the trick might prove impossible.

Further, the company’s record is now so impressive, observers don’t just expect magic but miracles. To meet Wall Street’s expectations, Apple has to break records each quarter. “When they’re not making as much money, people will be a lot more sourpuss on them,” says Stephen Baker, vice-president of consumer electronics analysis at market research firm NPD Group.

Apple’s already showing signs of breaking its stride. Samsung announced in late October its Android-powered smartphones had surpassed Apple in global sales, moving 27.8 million units compared to 17.1 million iPhones. Furthermore, Apple’s overall fourth-quarter revenue of US$28.27 billion was more than $1 billion short of forecasts; it was the first time Apple missed analyst sales forecasts since 2008. “It all comes crashing to the ground if you can’t keep the customers happy,” says Josh Bernoff, senior vice-president of idea development at Forrester Research. “The stock will go down, the complaints about anti-trust will go up and this whole idea that Apple is this benevolent owner of this wonderful playground we all play in will start to fade.”

Apple’s unspotted record seems particularly remarkable compared to its arch-nemesis. In 1998, Microsoft’s Windows controlled 95% of the operating-system market. That, combined with a streak of hubris, brought a decade-long antitrust battle between the company and the U.S. Justice Department, as well as 20 state attorneys general. It didn’t cost the company in actual stock price or value, but many hold the view that the legal troubles took Microsoft’s focus off innovation, costing it untold potential profits, specifically in search engines, and permanently damaging its reputation. Apple now faces similar criticisms of its business practices: both iPods and iPads offer consumers just one option for buying music, movies and software, Apple takes a 30% cut on all content it sells, it completely rejected Adobe Flash, and the company has an authoritarian app approval process. Apple has also been the subject of regulators’ scrutiny, both over restrictions on programming languages used to create iPhone apps and its App Store’s overall dominance. Yet consumers appeared unfazed, particularly compared to Google’s antitrust headaches in the search business or Microsoft’s past battles. “Microsoft and Apple are similar in that they’re global companies with the same ruthless pursuit of monetary goals, but the perception of Apple is still very different,” says Marcus Giesler, a marketing professor at the Schulich School of Business. “Microsoft has been a faceless corporation, while thanks to its cooler image, people have been willing to cut Apple more slack.”

But that version of Apple’s image may finally be fading. It’s been years since “Mac vs. PC”: recent Apple spots aren’t much more than a slick product demo with a soundtrack.

And the products demonstrated in those ads might also be losing their whiz-bang appeal. Jobs acted as if he pulled magnificent toys from the air. Weary of the iMac? Here’s the iPod! Not so psyched on the Shuffle? Here’s the iPhone! The gadgets had the added zip of emerging spontaneously from Steve Jobs’s magic workshop. But that’s not exactly how it works, is it? Copycat is a strong word, but most of Apple’s beloved products drew on existing technology.

Take the iPhone, for example. LG was winning awards for its full touch-screen Prada phone ahead of Apple’s entry into the smartphone market and claimed Apple copied its design. Both Microsoft and SanDisk had Wi-Fi–enabled media players before Apple. It’s clear Apple combines its own technology with lessons from what others had done to make superior products. Microsoft was often vilified for dominating the OS market with Windows, a product accused of utilizing many features others had first, but Apple has avoided criticism on a significant scale.

When someone did defy Apple, retribution could be swift. Publisher John Wiley & Sons put out an unauthorized biography of Jobs and saw all of its manuals removed from Apple Store shelves. That kind of pressure, wrote James Rainey in the Los Angeles Times, coupled with the public’s love for all things Apple, forced many in the media to write about the world as Apple saw it.

Apple may have lost its best advocate just as it faces increased criticism for acting like, well, a large company. Four months before political cartoonist Mike Fiore won a Pulitzer Prize for his work, his NewsToon app was rejected by Apple in December 2009, with the company citing rules about making fun of public figures. When ridicule swirled on the web, the company reversed and allowed the app without any comment from Apple PR.

More serious is the growing criticism of Apple’s manufacturing partners in Asia, specifically Foxconn. The Taipei-based manufacturer, who also does work for Dell and Hewlett-Packard, suffered a rash of worker suicides and had one worker die after a 34-hour shift. In a New York Times op-ed, author and performer Mike Daisey, creator of the one-man play The Agony and Ecstasy of Steve Jobs, wrote that Jobs’s magic has its costs. “With Apple’s immense resources at his command he could have revolutionized the industry to make devices more humanely and more openly, and chose not to.”

Apple won’t be able to avoid the finger-wagging headed for any tech company doing business with companies like Foxconn, particularly when CEO Tim Cook, as Apple’s former COO, is directly tied to such a partnership. Further, there are questions about whether Cook—or anyone else—can maintain the pace of innovation set by Jobs. An unnamed source, who does business with Apple, told Bloomberg Businessweek in January that during Jobs’s first leave of absence “the creative tension disappeared, replaced by a play-it-safe ethos.” That might not immediately affect existing products like the iPhone and iPad, but the real test will be when Apple rolls out its Next Big Thing (Apple TV, anyone?). “I question whether anyone can envision and realize social and behavioral change the way that Jobs did. Without Jobs at the helm, Apple’s massive margins have got to wane at some point,” Bob Braverman, an industry analyst, wrote in a report.

That doesn’t mean Apple can’t remain successful, if decidedly less flashy. It will still reap revenues from corporate hardware contracts, iTunes and the App Store. But then it will be less cultural phenomenon, more corporation. “I don’t think it’s ever going to be an ordinary company,” says Bernoff. “But it may cease to be as extraordinary as it is now.”

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