Apple Takes a Bite out of Social Media: A Q & A

Apple is moving into the realms of social media and television. Is there room in these crowded markets?

Apple's September press conference has become an annual tradition marking the arrival of the updated line-up of iPods. This year was no different, but the biggest news was Apple's announcement that it will be encroaching on Facebook and Twitter's territory with a new iTunes-based social media network called Ping.

The Mark spoke with technology analyst Carmi Levy to get a sense of what these announcements mean for the industry.

The Mark: What's your reaction to Apple's press conference?

Carmi Levy: This was not about the hardware, this was all about Ping. This was all about mashing social networking into the consumption of entertainment content. Up until now, listening to music [and] watching shows and movies on iTunes has been an individual process. Ping turns that on its ear and makes it as social an event as writing on someone's Facebook wall. So in other words, Steve Jobs was right, this is like mashing Facebook and Twitter with iTunes.

TM: So just to get this clear, are they incorporating Facebook and Twitter into iTunes, or is this an entirely new social network?

CL: It's an entirely new social networking tool, but the fact that Steve Jobs mentioned Facebook and Twitter directly is very telling. Apple recognizes that it's not going to reinvent the world. What it's going to do is take an existing ecosystem, iTunes, and add social networking functionality to it through Ping, but conceivably it will also leverage the fact that the vast majority of people who buy iPhones and iPods and who use iTunes are also using Facebook and Twitter so it would not surprise me at all to see tight integration with Facebook and Twitter, as well [for them] to make it easier for users of those platforms to integrate their activities into Ping and iTunes. This is not a Tower of Babel. This is a service that recognizes that there is a broader social world out there and it wants to take advantage of that.

TM: Do you think that people are willing to be a part of another social network beyond Facebook, and to a lesser extent, Twitter?

CL: If the value added is clear, then yes, people will want to participate. But of course the value added has to be clear. It can't just be another “me too” service. It needs to take the iTunes investment that many of us have already made by virtue of the fact that we use iTunes to manage our media devices from iPods to iPhones to iPads. It adds value to that. Apple isn't necessarily asking us to invest in a new ecosystem. We're already bought into iTunes; they want to make those hours that we're already spending in the iTunes world more social.

TM: How do you think Facebook and Twitter will react to that? Will they hop on board and try to work in conjunction with Ping?

CL: Certainly there will be a response from Facebook and to a lesser extent Twitter. Facebook is a more immersive environment and it has more to lose in terms of its user base than Twitter does.

The risk to Facebook is that people will spend more time in iTunes and less time in Facebook. I would expect there to be some tweaks to Facebook's offerings in the coming weeks and months. Facebook will likely introduce some kind of entertainment component that it currently lacks. Facebook doesn't play all that well with multi-media content. You can share videos, but that's not really central to the Facebook experience at this time. I would expect to see a response because obviously Facebook needs to maintain its gravity. Just because you're the biggest doesn't mean you'll always be the biggest. Facebook will learn the MySpace lesson.

Interestingly, [technology blogger] Robert Scoble said this will kill MySpace, and he's right on the money. MySpace's star is fading fast and the one thing that differentiates it from other social media platforms is that it's so strongly rooted in sharing music. So Ping is probably the biggest threat to the continued existence of MySpace. And frankly I don't really see MySpace doing anything to pull itself out of its dive. If anything, Ping's arrival will steepen its decline.

TM: I want to talk about the hardware as well. What are your thoughts on the new iPod Nano Touch?

CL: If there is a surprise here it's that Apple still believes there's a market for stand-alone, non-app-running media players. A lot of other industry observers and vendors have given this space up for dead. They believe there's just no money to be made in it and that these devices have become so commoditized and that they're so undesired by leading-edge consumers who have all moved on to the iTouch paradigm. The reality is that there are millions of people who simply want to listen to music and watch the occasional video, and for them they don't need to spend more money on the hardware or to spend time managing the hardware. They just want something that works. The surprise is that Apple didn't only maintain the Nano, they moved it to the next level – they shrank it and added a colour touch-screen. They invested some serious resources into something that most observers would rather [we] just forget.

TM: It's funny, I was going through my drawers the other day and found a box of old cellphones and my 60GB iPod from 2005. It became completely irrelevant as soon as I bought the iPhone.

CL: That shows you just how fast the market moves. Apple still offers the iPod classic, and the fact that they didn't officially kill it was another surprise because there was speculation that it would be the end of the line for the classic, click-wheel enabled, hard drive equipped, large-capacity iPod. Clearly it lives to see another day despite the fact that relatively few people buy it and even fewer people would admit to owning one.

Apple doesn't need to spend any more R and D or marketing dollars on this thing. If it has a number of them in the channel, it'll continue to sell them. That's the beauty of Apple, that even back-of-the-bus products still have their own demand and there's a long tail of revenue for Apple if it chooses to stick with them.

TM: The other big hardware announcement is Apple TV. It's been around since 2006 but it's never really been all that successful. What are your thoughts on this renewed push?

CL: Apple TV has always been the company's bastard child. It's been the child that Apple doesn't want us to know that it has. It's been the one offering that the company has ignored, and ignored, and ignored. Despite the fact that it's consistently ignored and no resources put into it or marketing it, or building an ecosystem around it, a small, hard-core cadre of loyalists have continued to push the company to ensure that it has a future. The surprise today is that the company recognized that there is a future in this and has made some positive moves to build the kind of ecosystem around television in 2010 that it built around music with iTunes earlier last decade. If you look at the way the new device is configured, essentially it's a support system for streaming and managing streamed content. It's really today's version of a tethered video-enabled iPod of yesteryear.

TM: Do you think the public is ready to accept that kind of ecosystem for Apple TV?

CL: We're probably more ready now than we were in 2006. Apple TV has always been a victim of timing. It was, in many respects, an offering ahead of its time. The market wasn't ready to move away from media that is purchased and played or content that is downloaded and stored locally. As a result, it was one of those next-generation technologies that most consumers couldn't wrap their heads around. But what's changed since 2006 is that networks have gotten significantly faster. Almost all of us have next-generation, high-speed broadband and broadband capacities continue to grow. That makes streaming services like NetFlix increasingly viable for the majority of consumers. And the tools that manage this content have become much more sophisticated and much easier to use by a mainstream audience. In 2006, NetFlix was shipping DVDs by mail exclusively, and today they're an online streaming powerhouse and they're coming to Canada. The market is increasingly ready for this kind of service and Apple wants to be the tangible gateway through which those services flow. They have enough cash that they can continue throwing products at the wall until one of them sticks.

It's nice to see Apple staying with the game. Assuming it continues to make investments in this product line they will ultimately pay off. If not to the same degree that iTunes did with Apple's music move earlier last decade, it'll at least come close to that kind of success.

TM: Apple announced that movies will be $4.99 each and television episodes will be 99 cents. Are people willing to pay these kinds of prices?

CL: I don't see any resistance to it. I expect we'll see some adjustment up and down but these questions were asked when iTunes was launched. The market votes with its wallet. I think they'll vote in the same way with television shows and episodes that they did with music earlier.

TM: It seems like this could mean the end of channel surfing.

CL: If you're a cable or satellite distributor, announcements like this should scare you. Simply because we now have the so-called 500-channel universe, but the sad reality is that most of what's on is unwatchable. As our time becomes more at a premium and as the internet influences how we consume content, we will gradually shift away from over-the-air scheduled broadcasts to consuming our content when we want it. Services like this make it easier for us to transition to an on-demand consumption model. Consumers will perceive this as much greater value than traditional cable offerings that are simply not anywhere near as customizable and increasingly they'll see they don't get value from traditional satellite or cable offerings. So today marks yet another step along the route toward extinction of traditional cable and satellite, and if those carriers are exclusively invested in those technologies, they should be running scared.

Interview by Chris Mitchell, Technology Editor.