February 28, 2005

No Liner Notes

I remember the first time I saw the Grateful Dead on T.V. I thought it was a joke. I'd never heard their music before, I'd only seen the t-shirts and album covers. Surely this was a band of evil miscreants with dyed black hair down to their needle-scarred forearms and pcp-laced breath. I was wrong. The year was 1987 and they had the only top-40 hit of their career, “Touch of Grey”, playing on MTV (Asked by an interviewer if they were mad at longtime fans accusing them of being sellouts Jerry's reply was a non-ironic, “We've been trying to sellout for years, nobody's been buying!”) Were it not for MTV, though, I would have had to see a poster of the band on a friend's wall or browse onto it in the racks of a record store (not out of the question). The WSJ article transcribed below tells the story of images of bands becoming increasingly rare again, as MTV shows fewer and fewer videos and as LP's are replaced with CD's with smaller visual footprints which are, in turn, replaced by digital downloads. Lesson? See more live music.

Written while groovin' to Spiders (Kidsmoke) from the album “A Ghost Is Born” by Wilco

A '75 Flashback for Digital Music
Plus, Turning Off Home Phone Saves Bucks but Adds Stress
February 28, 2005

The digital-music revolution proceeds apace, with all its associated wonders. But oddly, in one sense the music of 2005 feels like 1975.

Back before the original incarnation of MTV -- an age in which the Walkman was gaped at like the black monolith in 2001: A Space Odyssey -- one of the great mysterious music moments was finding out what that band with the new song stuck in your head or climbing the pop charts looked like. If you were a kid, this revelation often came through a peek at an older brother or sister's Rolling Stone or People, staying up late to see Saturday Night Live or Don Kirshner's Rock Concert, or going to the mall and staring up at the records in the new-release racks.

However you got to this point, the reaction was usually the same: “That's what Fleetwood Mac look like? No way!” Jace can't ever remember a band looking like he'd thought they would, and the disparity between reality and what he'd imagined was often startling, to say the least.

After MTV became a phenomenon in the early 1980s, this “no way” moment basically ceased to exist for popular acts: For more than a decade, to hear Madonna, Def Leppard, Duran Duran and other artists of that time was to see them, too -- and many a music fan had the odd experience of realizing some new hit songs just weren't as compelling on the radio or on the stereo, which stripped them of their accompanying videos.

What changed? The biggest thing was that MTV and VH1 cut back dramatically on the number of videos they played, finding they got better ratings and more attention for game shows like “Singled Out” and reality numbers like “Real World” and “Newlyweds.” Today, there are video channels such as the Fuse and the just-relaunched MTV2 trying to fill the music-television niche that MTV once owned. But for whatever reason, none of them has achieved the reach or importance that MTV had -- and that's meant that for many, popular musicians are once again heard rather than seen.

Oddly, the other factor in reducing musicians' visual presence has been the Internet itself -- and it's reduced it in ways that 1975's music fans would find startling, despite the fact that they rarely if ever saw a video.

1975 was the age of the LP, which meant umpteen hours of poring over album art, lyrics, liner notes and whatever else came with a favorite record -- a process generally begun even before LP hit turntable, as you tried to puzzle out which songs would be good based on lyrics and titles alone. (Supergeeks of a certain age will even remember that you could get some idea of a song's sound by looking at how dense the grooves within the track were. A long, basically blank stretch within a track meant trouble, particularly if it was part of a bloated rock opera with passages marked in Roman numerals. We mean you, Rush.)

One thing that drives CD haters particularly insane is the way standard CD packaging crunched artwork and accompanying material down to a much-smaller footprint. But at least that material still existed -- with digital downloads, the most you typically get is a small image of the album cover displayed when your jukebox software plays that album's songs. With digital downloads, album art is now barely bigger than a postage stamp, and liner notes and lyrics are basically gone.

Yes, some artists and labels have tried to present that material in different ways -- download U2's “How to Dismantle an Atom Bomb,” for instance, and you'll get the contents of the CD booklet as a PDF. But as with many efforts to read for pleasure in the digital age, sitting in an office chair scrolling and magnifying PDFs is a far cry from sprawling on the rec-room couch with an album jacket. (This is even worse for jazz buffs: Jazz albums actually have liner notes with something to say.)

But wait, you say -- virtually every band with a record deal now has its own Web site. Try that in 1975!

True -- today anybody with a Web browser can dive into a new band's bio, discography and photos with a few mouse clicks, and more and more bands offer sample MP3s and other goodies. But the difference is that's material you have to go out and get -- it doesn't come to you the way MTV did. Does that matter? It may: For many people, music is something they absorb while doing something else, rather than something they actively want to interact with.

It'll be years until we know what, if anything, this loss of visuals will mean for bands trying to forge their own identities in a winner-take-all music world where big labels have less and less patience for acts that aren't proven sellers. In the meantime, as listeners we're probably even worse at deciphering lyrics than we used to be. And those of us of a certain age may find ourselves in a time warp, saying things we thought we'd said for the last time back in the Reagan administration: “That's what the Killers look like? No way!”

Posted by Pedraum at 05:49 AM |

February 25, 2005

Hip-Hop Poster History

Gmf Fan5 Cold

I'm a lover of hip-hop history. Yeah, I grew up in the burbs of the W.C. but I did break-dance at the mall with my crew. No kidding. I had white gloves, silver pants that zipped open to black on the sides, and a piece of linoleum I carried under my arm (we each had gear to wield...it could have been worse, Joe was stuck with the boombox). Anyway, I've recently had the pleasure of getting a couple of books that have been a terrific source for the real history of hip-hop. One the my favorite parts of these books is the old-school flyers re-printed. It's a nod back to the days when hip-hop was all about dancing and witty rhymes rather than frontin' and what not.

Written while groovin' to Vapors by Biz Markie

Posted by Pedraum at 03:31 PM |

February 24, 2005

My Car Hit A Deer, Can I borrow A Knife?

A creative knife block or a threat veiled as a housewarming gift? You be the judge.

Posted by Pedraum at 11:46 AM |

Window Standpoint

What do you get when you record a few minutes of background noise and play it be a static digital snapshot? More than you'd expect. I found myself being drawn into these scenes more than I'd have expected to be.

Written while groovin' to Naked As We Came from the album “Our Endless Numbered Days” by Iron & Wine

Posted by Pedraum at 11:07 AM |

Office Space Super Friends Mashup

This works surprisingly well. But, as my friend Drew says, “anything Office Space based is bound to be [funny]”.

[use headphones if you're listening at work/in mixed company]

Written while groovin' to Warning Shots (Feat Sleepy Wonder And Gunjan) from the album “The Cosmic Game ” by Thievery Corporation

Posted by Pedraum at 08:44 AM |

February 23, 2005

Don't Dive for the Ball

I'm normally not scared of heights but playing tennis this high above ground just doesn't seem right.

Written while groovin' to Tramp from the album “Sweet Tea” by Buddy Guy

Posted by Pedraum at 08:58 AM |

February 21, 2005

He Cuts the Record...

...with so much class. Let your fingers do the walking.

Written while groovin' to De Camino a La Vereda from the album “Buena vista social club” by Buena vista social club

Posted by Pedraum at 09:41 AM |

The Gates


It's been over a week since I visited The Gates in New York City and I thought it was about time I shared with you some ramblings about it. I think it's cool. I can't get over the fact that it took $21million to produce. Yeah yeah, it doesn't cost the City or the attendees anything, I know. But have you seen what's going on in the world? OK, spend $5million on the art project to create a beautiful space for the public and donate the rest to charity. $21million for the thing is hard for me to swallow.

Having said that, it really is a beautiful sight. I walked through a stretch of Central Park on Sunday morning and stopped to sit on a bench for a while, I just wanted to soak in the saffron glow all around me. Voices which started as the background hum of a any typical NYC crowd started to separate into distinct threads. I pulled out my notebook to jot down what I overheard. This is what a few people said..

“How generous of them...”
“What are they made of, nylon?”
“Would you take a picture of us kissing in front of one of them?”
“You know, they'll receive no money for any of this.”
“It's so cool!”
“I wore all orange; orange hat, orange scarf, orange socks.”
“It's saffron.”
“It's all the same sh*t.”
“Omigod, there's more over there.”
“Yep, they go through the whole park.”
“Wow, it's just part of the park.”
“Don't tell me it's gonna be the same orange color all the way down!”
“Imagine all the measuring and what not that went into this.”
“How'd they do that?”
“No way, they have bus tours.”
“It's harrible, just harrible.”

UPDATE: I'd wondered what The Gates would look like in the snow...now I know.

Written while groovin' to Theme To Pinata from the album “Digital Ash In A Digital Urn” by Bright Eyes

Posted by Pedraum at 02:34 AM |

February 18, 2005

Don't Be Evil?

For a company that claims not to be evil, Google sure does show up prominently on this map. Wait a second, so does Apple.

Posted by Pedraum at 04:13 PM |


Microsoft teaching parents to be hip to their kids' jive. Word to your mother...[ahem]...dog.

“It's important to remember that the leetspeek community encourages new forms and awards individual creativity, resulting in a dynamic written language that eludes conformity or consistency.”
Posted by Pedraum at 04:00 PM |

Top 100 Gadgets

How many of these did you own? I counted 9 in a quick pass. Oh, and there are a few Apple products in there too.

Written while groovin' to Tin Pan Alley (Aka Roughest Place In Town) from the album “Blues At Sunrise” by Stevie Ray Vaughan And Double Trouble

Posted by Pedraum at 03:56 PM |

Get Local

My former colleague Marty Himmelstein is not just brilliant but prolific too, apparently. Remember, Vicinity Corporation was responsible for the first truly proximity-based Yellow Pages on the Internet (Yahoo! Yellow Pages). In those days (1996) this was a big deal, now we take it for granted. Marty had a lot to do with this. Oh yeah, and that local search thing in Google (find Pizza near 94303)? Vicinity had a working version of that in partnership with Northern Lights by 1998 if memory serves. Recognize.

Written while groovin' to Rise from the album “Greatest Hits, So Far” by Public Image Ltd.

Posted by Pedraum at 07:35 AM |

February 13, 2005


It is, indeed, the greatest city. After finishing up some meetings this morning I dropped off the bag at the hotel and started walking until I hit Central Park and The Gates.

Ten things overheard while chilling @ The Gates forthcoming.

A cab ride later I'm in SoHo at the Apple Store. This place is sorta Mecca for the converted...and they have WiFi which I leech as I write this.

Posted by Pedraum at 11:55 AM |

February 12, 2005

Two Loves


Two great loves of mine, rock music and fonts, are nicely intersected on Rockage's Music Fonts.

Written while in NYC...and yes, I plan on visiting The Gates tomorrow.

Posted by Pedraum at 09:33 AM |

Scare of the Dark?

Don't be.

Posted by Pedraum at 07:46 AM |

February 09, 2005

Two New Services

For those that don't already know about these two new services I present you Amazon's Visual Yellow Pages(do a search for a business in Palo Alto, CA) and Google Maps(Jerry, did you have something to do with this? You did whether you realize it or not actually). Both have a special place in my heart given my start in Silicon Valley for a company that provided the first Maps, Driving Directions and Yellow Pages for Yahoo! The year was 1996 and the idea of going public wasn't yet an understood quantity (oh that it could have stayed that way). Almost ten years later the above services act as bittersweet vindication that our sales pitches were more than just hot air.

Written while groovin' to Enslaved from the album “Greatest Hits (1998)” by Motley Crue

Posted by Pedraum at 08:23 AM |

February 07, 2005

Software Is The User Experience

The latest issue of Fortune has a nice piece about Apple. A short snippet below and a link o the whole thing for those of you who don't subscribe...

Software is the user experience. As the iPod and iTunes prove, it has become the driving technology not just of computers but of consumer electronics.
— Steve Jobs

Written while groovin' to Quattro (World Drifts In) from the album “Feast Of Wire” by Calexico

“How Big Can Apple Get?”
By Brent Schlender

Back from near oblivion, Apple is setting the pace in a new digital universe where computing and entertainment merge. We asked Steve Jobs how he did it (hint: It's the software, stupid) and what's next.

“My God, there really has been a genie locked in that bottle! Apple's innovation and creativity have been unleashed in a way that they haven't been in 20 years. Look at the results. This isn't a company about 5% market share; this is a company that is capable of competing with world-class competitors and achieving market shares of 65%, 70%, and even 90%.”

Steve Jobs, the silver-tongued king of Apple Computer, is explaining how the world's opinion of his company has risen with the triumph of the iPod. We're in our third phone conversation, following up on a 2 1/2-hour interview in the Apple boardroom a few days before. Jobs is obviously feeling good, and with good reason. Overnight, it seems, Apple has broken out of its box as a boutique computer maker and emerged as a force to be reckoned with in consumer electronics, music, and who knows what else. “The great thing is that Apple's DNA hasn't changed,” he says. “The place where Apple has been standing for the last two decades is exactly where computer technology and the consumer electronics markets are converging. So it's not like we're having to cross the river to go somewhere else; the other side of the river is coming to us.”

Apple's recent achievements, in fact, make it look as if it is walking on water. Its stock price, which languished during and after the dot-com crash, suddenly more than tripled last year. (It recently hit an all-time high of nearly $80 a share.) In January, Jobs crowed that Apple had posted the highest revenues and profits in its 28-year history for its fiscal first quarter ending Christmas Day. Propelled by sales of 4.6 million iPod portable digital music players, revenues zoomed by 74%, to $3.5 billion for the quarter, putting the company on track, by analysts' estimates, for a $13 billion 2005. Meanwhile profits more than tripled.

The DNA may not have changed, but the external transformation is dramatic. No longer is Apple's business limited to computers—though it did sell more than a million Macs last quarter for the first time in four years. Today the company's ever-expanding products encompass multimedia applications for creative professionals and consumers, the thriving .Mac (pronounced dot-mac) Internet subscription service, and a popular line of easy-to-use wireless networking gizmos to link computers and stereos and other devices in the home and office. And, of course,the iPod. The company has even become a player in retail with its 100 Apple Stores: chic glass and anodized aluminum temples that fuse fashion, technology, and reverence for personal creativity into something Jobs likes to call the “Apple user experience.”

In his first extended interview since undergoing surgery for pancreatic cancer last summer, Jobs eagerly explains how Apple has pulled all this off and drops hints about where the company is going and how big he expects it to get. (For excerpts from the interview, see 'Our DNA Hasn't Changed'.) But as the conversation unfolds, Steve doesn't talk about the next gotta-have-it gizmo or ultracool ad campaign or trendsetting industrial design. None of those, he says, is Apple's core strength or primary competitive advantage. Instead he's going to talk about software—the central strand that runs through all of Apple's success.

Steve being Steve, he's doing this partly because he's selling something. This spring, Apple will unveil Tiger, an update of its OS X operating system that, at $129 a pop, will generate hundreds of millions of dollars of high-profit sales. (More about Tiger later.) Even so, for Steve to credit software for Apple's success sounds so hopelessly dweeby, so Bill Gates, that it seems hardly worth muting your iPod for—until you consider the new business model it has helped Apple spawn. Indeed, the whole iPod phenomenon is, underneath it all, one big interwoven software creation. The iTunes jukebox that coordinates the mind-meld between your iPod and your Mac or PC is just the most obvious chunk of code. The iTunes Music Store, which accounts for 62% of all music download sales on the web, is likewise a software machine, purring away in both Apple's corporate IT systems and your computer. And the iPod itself, like the Macintosh, is a marvel of software engineering.

It's that prowess in software that is Apple's greatest hope for sustained growth as it dives into markets dominated by leviathans like Sony and Microsoft, and that could propel it into other realms of consumer electronics. As we'll see, software wizardry is how Steve brought Apple back from oblivion and even breathed new life into the Mac, which turned 20 years old the day we sat down to talk. Software, in a word, is the genie in Apple's multibillion-dollar hardware business.

Think back about just how irrelevant Apple seemed even two years ago. Its share of the personal-computing market had shrunk inexorably throughout the 1990s to a tiny 2%. It had slogged through nearly a decade of dwindling influence and financial pain. The consumer-oriented Mac couldn't run many of the programs that PC users—especially those in business settings—needed. Corporations, which buy the bulk of computers, were at best keeping a few Macs around to handle creative tasks like photo editing and document design.

By the late 1990s, Apple was making even its most loyal users doubt the point of sticking with the company. Its operating system was an unstable patchwork, and programmers were growing ever more reluctant to write for Macs or adapt their PC programs to run on the machines. Apple knew it needed help. It turned to a man who had started it all: Steve Jobs. Since being pushed out in 1986 of the company he had co-founded, Jobs had gone on to start another computer company, Next, and to take over what would become the animation powerhouse Pixar. Apple bought Next in 1997, and in came Jobs with a plan to remake the company with software.

But software takes a long time to build, and at first he had to scramble just to keep the place afloat. He pruned the product line in his first full year as CEO, causing revenues to sink some 15%, to $5.9 billion—little more than half of Apple's peak sales in 1995. One of his first moves surprised Apple partisans—he turned for help to his longtime rival Bill Gates. The two struck a deal under which Microsoft bought $150 million of Apple stock and promised to keep supplying Microsoft Office and Internet Explorer for the Mac, programs that made Apple's computers at least somewhat compatible with the PC world. (Microsoft's stake in Apple is now worth well over $1 billion.) At the same time, Jobs used hardware to create buzz. In 1998, Apple launched the iMac, a fun, jellybean-colored machine that—while little different internally from its predecessors—quickly became a fashion statement.

But in truth, he was using the Microsoft deal and the iMac to buy time. Jobs' big bet was on Mac OS X, a new operating system based on his work at Next. Unlike the old Mac OS, this one would be based on Unix, an operating system that had been poked, prodded, tested, and improved over decades by some of the largest companies and universities. He told Avie Tevanian, who led software development, and Bertrand Serlet, the head of the OS X team, to treat it as a moon shot. In 2001, after three years of labor by nearly 1,000 geeks, Apple delivered the software equivalent of a cross between a Porsche and an Abrams tank: an operating system with sleek, animated graphics and an abundance of useful and novel features built on top of industrial-strength code. OS X made it easier to write applications, made programs run better, and allowed for much easier plug-and-play of camcorders and other consumer products.

OS X gave Apple the foundation it needed to build new generations of machines. But to get most of its 25 million or so Mac customers to upgrade, Jobs needed sexy applications. As part of his deal with Gates, Microsoft had agreed to adapt Office and Explorer for OS X. Jobs had assumed that this vote of confidence would inspire third-party developers to come up with software for, say, editing home videos on a computer or managing photos or digital music. But a 1998 meeting in which Jobs asked Adobe Systems executives to develop a Mac version of their consumer video-editing program changed his mind. “They said flat-out no,” Jobs recalls. “We were shocked, because they had been a big supporter in the early days of the Mac. But we said, 'Okay, if nobody wants to help us, we're just going to have to do this ourselves.' ”

So Apple plunged into the OS X applications business. It bought a languishing project from web software company Macromedia, and in less than a year turned out two programs that capitalized on the iMac's ability to connect to digital camcorders: a video-editing program for professionals called Final Cut Pro and a simplified version for consumers called iMovie. Apple's Applications Software Division, which sprang from the project to become what is now a 1,000-engineer-strong group, has been on a roll ever since.

Consider iLife, a bundle of programs that comes free on every new Mac or can be purchased separately for $79. Its five applications turn the computer into a home studio: iMovie, iDVD (for recording movies, digital photo slide shows, and music onto TV-playable DVDs), iPhoto (for managing and touching up digital pictures and making slide shows), GarageBand (for making and mixing your own music), and the iTunes digital-music jukebox. iWork, aimed at people who like to make presentations and put out newsletters, is equally slick: It consists of a PowerPoint-like program called Keynote and a flashy word-processor/page-layout program called Pages.

The steady stream of software not only kept the buzz alive but also helped Apple create a tidy new line of business. Gradually users began to notice that the company was delivering truly innovative programs and continuously improving them. Today Apple gets people hooked with free online updates and then, every year or so, offers to sell them a full overhaul loaded with new features—and more and more users are willing to pay. OS X has already gone through four versions, named Cheetah, Puma, Jaguar, and Panther. It's a tactic that Microsoft and other software makers have tried with much less success—Windows users in particular have grown leery of the chronic computer crashes and conflicts between programs that its upgrades cause. Apple engineered ways to minimize such problems.

The upgrades also fuel Apple's computer hardware business, which still accounts for 60% of annual sales. Jobs sees applications like iLife as the centerpiece of his marketing strategy, which is to differentiate the Macintosh from Windows PCs by positioning it as a complete multimedia machine. Right out of the box, the Mac with iLife gives users (especially the creative types) everything they need for creating, editing, managing, and playing digital content. While comparable applications are available for Windows machines, matching what Apple initially throws in free costs hundreds of dollars, and the various Windows programs don't interact easily with one another. “Everyone in every corner of the software business could learn a lot from iLife,” says Bill Joy, the legendary computer scientist, now a Silicon Valley venture capitalist.

The best example of how clever software plays the pivotal role in unlocking huge hardware opportunities for Apple is the saga of iTunes and its progeny—the iPod and the iTunes Music Store. Their lightning evolution demonstrates how, when the coders really get rolling and follow their noses, one technological breakthrough leads to another in a virtuous cycle that Jobs, the marketing whiz, can exploit to create “user experiences.” It's how the iPod coalesced into the hottest product the media and electronics world has seen in years. And the delicious irony is that Apple's enormous success in digital music came out of nearly missing the boat.

“I felt like a dope,” says Jobs, thinking back to summer 2000, when his fixation on perfecting video editing on the Mac distracted him from noticing that millions of kids were using computers and CD burners to make audio CDs and to download digital songs called MP3s from illegal online services like Napster. Yes, even Jobs, the technological visionary of his generation, occasionally gets caught looking in the wrong direction. “I thought we had missed it. We had to work hard to catch up.”

He moved fast, ordering Mac hardware designers to incorporate CD-ROM burners as standard equipment in all Macs. But what about the “jukebox” software necessary to manage what could conceivably be thousands of songs on the computer? Windows PC users already had several jukebox programs to choose from, but only a handful of Mac developers were tinkering with them. One was a company called SoundStep, founded by a then 28-year-old software engineer with an MBA named Jeff Robbin, who had left Apple literally the month Jobs returned. His program, SoundJam, wasn't ready for market, but Jobs bought the company anyway, primarily because Robbin had impressed people while at Apple before.

The alacrity and breadth of what transpired over the next 13 months are hard to believe in hindsight. Robbin and a couple of other programmers started over from scratch and pounded out the first version of iTunes in less than four months. That was just in time for Steve to show it off at the annual Macworld trade show. The application simplified the importing and compression of songs, but more important, iTunes was a powerful and ingenious database that could quickly sort tens of thousands of songs in a multitude of ways, and find particular tracks in a trice.

Even before iTunes was out the door, Jobs, a music nut himself (he favors Dylan and the Beatles), recognized that although storing and playing music on a computer was pretty cool, wouldn't it be even cooler if there was a portable, Walkman-like player that could hold all your digital music so that you could listen to it anywhere? He asked Robbin to pitch in on the portable-player project, a much more complex undertaking that required not only modifying iTunes but also building a tiny new operating system for what was basically a miniature computer, and designing a user interface that could sort and navigate music files on it with the same sophistication as iTunes on the Mac. It was another crash project that yielded the iPod just nine months later, in November 2001.

Only after playing with iPod prototypes did Jobs and his geeks realize that the whole iPod “platform” was still missing something, namely an online store for buying downloadable songs. They knew there had to be an easier way to get music for your iPod and your computer than by laboriously “ripping” audio CDs into your computer. But talk about a software challenge: An online store would require building an e-business infrastructure that could automatically both serve up the songs and take care of billing and accounting for conceivably millions of purchases. Plus, they'd have to construct a “storefront,” either as a website or preferably by modifying iTunes yet again so that the store was incorporated right in its screen. And then they'd have to persuade big record companies—firms like Sony and Universal Music were paranoid about downloads—to buy in to make the concept work.

Still, less than 18 months after the rollout of the iPod, Apple's iTunes Music Store opened for business in April 2003. “We had hoped to sell a million songs in the first six months, but we did that in the first six days,” says Eddy Cue, the corporate IT specialist who led the project and is now a vice president for applications. In the meantime, Robbin's crew developed a version of iTunes for Windows PCs, expanding the potential market for iPods and the iTunes Music Store to, well, the entire world—as well as delivering a huge, huge ego boost. The company that had once begged to get PC software adapted to the Mac now found itself supplying some of the hottest software in the PC world. By the time Apple announced its financial results in January 2005, it noted that to date it had sold more than ten million iPods and 250 million songs.

The crudest way to measure the impact of Jobs' software factory is by the numbers. He estimates that this year Apple will generate $1 billion in revenue from selling applications and updates, plus other software-related revenue generated by the iTunes Music Store and its .Mac online subscription service, which has 600,000 members. That's almost double last year's take and doesn't count the boost software provides by helping sell iPods and Macs.

More important than direct software sales are the growth opportunities Apple's “user experience” prowess might open up. Owning a 62% market share of the online music market, for instance, augurs serious sales growth. Even though that market is still in its infancy—downloads accounted for less than 2% of U.S. music sales in 2004—the iPod platform, for example, kicked in revenues of $1.4 billion in Apple's first fiscal quarter, nearly as much as it did in the previous four quarters combined. Merrill Lynch analyst Steve Milunovich predicts that the iPod business alone will hit $6.2 billion in fiscal 2006, roughly as big as all of Apple when Jobs took over. (Of course, the iPod's growth will eventually flatten as the devices lose their fad status. Yet the gadgets are so useful that it's easy to imagine them becoming as ubiquitous as the Walkman—of which Sony has sold 340 million.)

With the iPod and iTunes Music Store, Apple has changed the rules of the game for three industries—PCs, consumer electronics, and music. And as new as its influence is, Apple appears to have nothing to fear from major rivals. Its software skills have consumer electronics companies at a major disadvantage that could take years to overcome (see “Saving Face at Sony”). Says Nathan Myhrvold, former chief of Microsoft Research: “Once audio and visual experiences become a combined hardware-software-network thing, the consumer electronics guys are fish out of water.”

Apple has cast a shadow over Microsoft too. Jobs likes to say that the upcoming Tiger version of OS X will have everything that Bill Gates and Microsoft are promising in Longhorn, the often delayed major upgrade of Windows, now due in mid-2006. “They copied the original Mac with Windows 95,” Jobs gloats, “and now they're going to be copying us again.” (Microsoft declined comment.)

We promised earlier to tell you about Tiger. The software's most notable feature is Spotlight (that's a Spotlight icon at the top of this page). It's Apple's entry in the race to deliver a hot new capability called “desktop search.” The idea is to be able to automatically scan your computer's hard drive to find files, e-mail, documents, pictures, music, and the like, much as Google scours the Internet. Desktop search promises to free users from a major headache: having to remember how files and folders are organized and particular pieces of information are stashed. Google is at work on a similar product, as an add-on piece of software; Microsoft plans to integrate desktop search in Longhorn.

Tiger is also loaded with features that Apple has included just because they're cool. An icon called Dashboard unlocks a bevy of handy Internet-enabled applications called widgets—windows that pop up at the touch of a key to display movie listings, the weather outlook, stock prices, a dictionary, a currency converter, a language translator, and the like, and then melt away just as quickly so you can get back to your work.

When you look at the brief history of OS X, and hear software experts like Bill Joy call it the best operating system in the world, you begin to realize what a remarkable accomplishment it has been for Apple—not only to build it but also to migrate millions of users to something so radically different with relatively little pain, and to improve it so dramatically and with such regularity that it has turned the endless nuisance of software support into a profit machine. The technology is so solid that Apple is beginning to sell Macs into markets that never before would even consider them, like the military and university supercomputer centers. Most tantalizing of all is scuttlebutt that three of the biggest PC makers are wooing Jobs to let them license OS X and adapt it to computers built around standard Intel chips. Why? They want to offer customers, many of whom are sick of the security problems that go with Windows and tired of waiting for Longhorn, an alternative. And besides, Apple has buzz now, and Microsoft does not.

Regardless of whether OS X starts showing up in PCs, it looks like Apple, a company that has had its share of ups and downs over the years, has finally mapped out a durable growth path. Sales will likely reach the $13 billion mark this year, thanks largely to the updraft from the iPod and the new $99 iPod shuffle. But there also appears to be a swelling of demand for the Mac product line, helped by the new budget-priced Mac Mini. If Apple can double its personal-computer market share in, say, the next two years (which still wouldn't put much of a dent in the sales of other PC makers), it would be well on its way to becoming a $20 billion company. And that doesn't even take into account what else Steve might have up his sleeve. Apple now has more than $6.5 billion in cash, ample to fund R&D, which last year consumed about $500 million.

Jobs is always coy about where Apple technology might pop up next, but occasionally he'll drop hints. At the recent Macworld trade show, he declared 2005 to be the year that high-definition video hits the mainstream, and touted the HD editing capabilities of a new version of iMovie. He also notes that a new generation of Wi-Fi networking gear is in the offing next year, which will offer enough bandwidth to finally make it possible to stream high-quality video from Macs to TVs. (In the short term, look for Apple to use its wireless technology to let HDTV owners display slideshows of digital photos stored on their Macs.)

Jobs also talks about alliances that will expand Apple's influence. “We're partnering with Motorola for doing things on cellphones, partnering with HP on the iPod, partnering with car companies and with the record companies. And we definitely will be partnering more and more.”

There is one immense uncertainty hanging over Apple, however. Last July, Jobs was diagnosed with a rare islet-cell neuroendocrine tumor on his pancreas. In most cases, pancreatic cancer quickly turns lethal. Fortunately, this particular type can sometimes be treated with surgery, and experts say the procedure has a relatively good five-year survival rate—approaching 50%. [After presstime, FORTUNE spoke with the chief of surgical oncology at the Stanford University Medical Center, where Jobs was treated, who stated that in their experience the “cure rate” (instances in which the cancer is successfully removed, never to return) for the type of procedure Jobs had is between 80% and 90%. The “survival rate” cited in the previous sentence is for a broader set of procedures, and hence is overly pessimistic. FORTUNE regrets the error.] Jobs had part of his pancreas removed in late July, returned to work six weeks later, and has been cancer-free ever since. He says he’s feeling better than ever.

That illness only serves to remind investors and fans how crucial Jobs is to Apple. Jim Collins, the management guru who wrote the bestseller Built to Last, calls him the “Beethoven of business.” Jobs may not be a programmer or a designer or an engineer or an MBA, but he has matured into a shrewd business strategist. And his perfectionist's penchant for the aesthetics of the user experience is the DNA that makes Apple such a distinctive and creative enterprise. Apple has to hope this particular genie won't disappear.

(Sidebar Quotes)

Steve Helps Himself

Your typical corporate CIO must be wondering, “Why aren't there some nice new exciting applications for me?” Nothing has really changed in his world, while on the consumer side there's all this cool new stuff like iTunes and the iPod and iPhoto and iMovie. That's where the real innovation is now, and Apple is driving it.
— Bill Joy, co-founder and former chief scientist at Sun Microsystems

Triumph of the iPod

I remember sitting with Steve and some other people night after night from nine until one, working out the user interface for the first iPod. It evolved by trial and error into something a little simpler every day. We knew we had reached the end when we looked at each other and said, “Well, of course. Why would we want to do it any other way?”
— Jeff Robbin, lead software designer for iTunes and the iPod

Apple Casts a Shadow

Software is the user experience. As the iPod and iTunes prove, it has become the driving technology not just of computers but of consumer electronics.
— Steve Jobs

“'Our DNA Hasn't Changed'”
By Fortune

Five questions for Steve Jobs.

How has the iPod changed Apple?

It feels great. We're having fun. Most of us can't wait to get to work in the morning. But it's not like Apple has somehow morphed into a mass-market consumer electronics company. Our DNA hasn't changed. It's that mass-market consumer electronics is turning into Apple.

Do Apple and Pixar have anything in common?

I've always said that Pixar is the most technically advanced creative company; Apple is the most creatively advanced technical company. At Apple we come at everything asking, “How easy is this going to be for the user? How great is it going to be for the user?” After that, it's like at Pixar. Everyone in Hollywood says the key to good animated movies is story, story, story. But when it really gets down to it, when the story isn't working, they will not stop production and spend more money and get the story right. That's what I see about the software business. Everybody says, “Oh, the user is the most important thing,” but nobody else really does it.

You're about to turn 50. Has middle age made you more patient?

It makes us look further ahead, but it doesn't make us more patient. You know better what questions to ask. There aren't enough good people to do everything you want to do. So now we chew on things for a while before we decide to have the A-team go after something. That's not the same as being more patient.

So do you think young people are different?

You or I move into a new house, and the first thing we do is call the phone company to get our land line turned on. Kids, they just move in with their cellphones. Stereos are the same: Kids aren't getting stereos; they're getting speakers for their iPods. That's become the audio market. People are buying iPods and Bose speakers instead of a JVC or Sony stereo system. And those guys have never come to us and said, “Could we work with you on the iPod?” Some companies are prisoners of their point of view.

Why is Apple in vogue?

We live in an era where more and more of our activities depend on technology. We take our photos without film and have to do something with them to make them usable. We get our music over the Internet and carry it around in digital music players. It's in your automobile and your kitchen. Apple's core strength is to bring very high technology to mere mortals in a way that surprises and delights them and that they can figure out how to use. Software is the key to that. In fact, software is the user experience.

Posted by Pedraum at 06:21 AM |

February 03, 2005

You're Gonne Be Seeing A Lot More Of This...

...and by 'this' I mean this.

Written while groovin' to Toxic Girl from the album “Quiet Is The New Loud” by Kings of Convenience

Posted by Pedraum at 09:20 PM |

February 02, 2005

For the Homies

For my Russian homies that built the e-commerce foundation for the world's largest retailer company comes this gallery of old school Soviet calculators.

Written while groovin' to Bellona from the album “Last Exit” by Junior Boys

Posted by Pedraum at 02:16 PM |

iPods for Softies

Apparently the tell-tale white ear-buds of the iPod are being spotted lots in Redmond. On a recent trip to NYC (you must see the Broadway production of Fiddler and you must eat at Prune--thanks Drew) the ear-buds were evident all over the place. But on the Microsoft campus? I know for a fact that this drives senior management there crazy.

Written while groovin' to Dj Spooky - Mindif (Trio Version) from the album “Re-Brahim - Abdullah Ibrahim Remixed” by Abdullah Ibrahim

Posted by Pedraum at 02:11 PM |

February 01, 2005

More Cowbell

It's been a while since I watched this fabulous clip of Will Farrell on SNL. Thanks to Drew for reminding me of it.

Posted by Pedraum at 01:02 PM |