Apple Lost the PC War, but Microsoft Is Losing the Post-PC War

Back in 1996, Steve Jobs declared, "The PC wars are over. Done. Microsoft won a long time ago."

Given this statement, why was there was no surrender when Steve took over at Apple? Apple continued making computers and developing a new operating system. Apple Computers released the iPod, and developed the iTunes Store. They branched out into their own retail business. They dropped the word computer from their name and release a phone.

If the PC war ended, why hadn't Jobs shut the doors and given the money back to investors, like Michael Dell suggested. What new war is being contested?

The Vista Legacy

All of this came into focus for me while reading about Steven Sinofsky, Microsoft's "Windows Chief", talk about Windows 7. He basically pledged that Windows 7 would be an extension of work started with Vista. There would be driver compatibility, and things would continue to work the same, but with "new features" added to make it a "major revision".

As I sat at my computer thinking about the wonderful success that Vista has been over XP, I asked myself what Vista features were going to be its legacy. The legacy is not speed, security, compatibility with existing hardware, or developer support. The PC world, for whatever reason, looks on XP as the best of all these. They don't even like to use Vista in their own comparisons to Leopard. Instead they use XP to showcase how great PCs are.

The true legacy of Vista is digital right management (DRM) and content control. Microsoft is brokering deals with the MPAA and the RIAA and the media companies behind these organizations by using promises of content control in Vista. This is how Microsoft is getting music companies to sign up to Microsoft version of iTunes.

Amazon and others are pushing for no DRM on MP3s, but that isn't Microsoft's game. They are willing to turn on the broadcast flag, which isn't even required by the FCC, in their effort to show the big media providers that they are in the game and are a friend to the studios.

The old PC wars were about computer prices and software development. Apple lost that war. They ended up killing their own clone program because the clones were draining sales from Apple. Software development was down, and Steve Jobs had to sign a deal with Bill Gate for continued software support for Office and Internet Explorer on the Mac.

It's All About Content

The Internet and media have a lot in common. They are both sources of useful content for computers that is not user generated.

Most old software was about letting users write, design, compile, sort, or store data that they put together. The Internet allows people to pull in documents, pictures, sound, and music from all over the world and handle much more information than they could ever create themselves. At first Microsoft, with its control of the Internet through Internet Explorer, looked like it was going to be the champion. Then Apple came in from a different angle with iPod/iTunes, and they have essentially stolen the show from Microsoft.

Whether Jobs knew back in 1996 that the next battle would be not over software or hardware, but over media and digital content, is not clear. What we can see is that the company he has been creating has built access to these sources little by little.

The iPod completely surprised everyone, both in popularity but mostly that a "computer company" would go out on a limb to make regular consumer electronics. Without it and the companion iTunes Store, Apple wouldn't have developed its connections with the music industry. Later, when digital video started to unfold, it was Jobs' personal connections to Pixar and Disney that helped bring the movie and TV studios to iTunes.

Each of these steps captured territory that could easily have gone to Microsoft. Windows was and still is the dominant operating system, and it holds monopoly power over the PC world. Microsoft clearly didn't see the threat that a revitalized Apple, with Jobs at the helm, was going to be.

Playing Catch Up

Microsoft is now the company playing catch up. It released its version of an MP3 player, the Zune, to compete with the iPod. After 18 months on the market, it has climbed its way to 4% of the market by taking market share from Creative, not Apple.

In the smart phone market, where Microsoft has had its Windows Mobile phones for years, Apple came out with the iPhone and smashed Microsoft's sales numbers in less than a year. Once again Apple made Microsoft look backward and behind the times.

We can see that Microsoft is becoming desperate for success. Gates and Balmer are already talking up the next big thing - because every other big thing they launched is tanking. They talked so much that poor Sinofsky had to come out and set the record straight about the real release date for Windows 7 (2010, not 2009). He has to carry on the legacy of Vista, and so far he doesn't sound interested in making the false promises of his predecessor or bosses.

The old PC war may be lost and over, but this new war is starting to heat up. There are more players this time. We've got the computer industry and the media, sure, but there are also Google, Amazon, Napster, and Walmart on the sidelines. Apple has maneuvered for a strong position, but the fortunes in any war are ever changing. Who knows what alliances will be formed and which truces will be broken as this battle moves forward.

Will consumers end up as the winners or losers? This is the big question. Copy protection is fine as long as it doesn't make criminals out of regular citizens. It is my hope that these companies can find a fair and reasonable position that will work for us all.