Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`ESTTA569222
`ESTTA Tracking number:
`11/05/2013
`
`Filing date:
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`91204777
`Plaintiff
`Apple Inc.
`JOSEPH PETERSEN
`KILPATRICK TOWNSEND STOCKTON LLP
`31 WEST 52ND STREET, 14TH FLOOR
`NEW YORK, NY 10019
`UNITED STATES
`JPetersen@kiltown.com, AlJones@kiltown.com, ARoach@kiltown.com,
`agarcia@kiltown.com, NYTrademarks@kiltown.com, tmadmin@kiltown.com
`Plaintiff's Notice of Reliance
`Allison Scott Roach
`JPetersen@kiltown.com, AlJones@kiltown.com, ARoach@kiltown.com,
`agarcia@kiltown.com, NYTrademarks@kiltown.com, tmadmin@kiltown.com
`/Allison Scott Roach/
`11/05/2013
`NOR-5.pdf(107344 bytes )
`EXHS. TO NOR-5.pdf(4786445 bytes )
`
`Proceeding
`Party
`
`Correspondence
`Address
`
`Submission
`Filer's Name
`Filer's e-mail
`
`Signature
`Date
`Attachments
`
`

`

`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`
`
`In the Matter of Application Serial No. 85/379,097
`For the mark: CRAPPLE
`Filed: July 22, 2011
`Published: December 20, 2011
`
`
`
`---------------------------------------------------------X
`
`APPLE INC.,
`
`:
`
`
`: Opposition No. 91204777
`
`:
`
`
`:
`:
`
`:
`:
`:
`:
`:
`
`Opposer,
`
`
` v.
`
`NINJA ENTERTAINMENT
`HOLDINGS, LLC,
`
`
`
`
`
`
`
`
`
`
`
`Applicant.
`---------------------------------------------------------X
`
`OPPOSER’S FIFTH NOTICE OF RELIANCE
`
`
`
`
`
`
`Opposer Apple Inc. (“Apple”), pursuant to 37 C.F.R. §§ 2.122(e), submits of record in
`
`connection with this opposition proceeding a representative sample of unsolicited print
`
`publications available to the general public in libraries and/or on the NEXIS database or of
`
`general circulation among members of the public and/or that segment of the public that is
`
`relevant to the issues in this proceeding.
`
`
`
`This evidence is relevant to show, among other things, the fame of Apple’s marks, the
`
`specific recognition of Apple by the public, media, and industry as one of the most valuable
`
`brands, and the widespread recognition of Apple’s brand and marks by the relevant general
`
`public.
`
`EXHIBIT
`
`A
`
`
`
`
`
`PUBLICATION
`DATE
`
`PUBLICATION NAME - ARTICLE TITLE
`(SUMMARY OR RELEVANT QUOTE)
`
`
`November 1, 2001 Wall Street Journal -
`Apple Brings Its Flair For Smart Designs To Digital
`
`

`

`B
`
`November 17, 2003
`
`C
`
`February 2, 2004
`
`D
`
`April 5, 2004
`
`E
`
`F
`
`July 26, 2004
`
`January 12, 2005
`
`G
`
`February 1, 2005
`
`H
`
`April 3, 2006
`
`Music Player
`
`Time Magazine -
`The 99[cents] Solution; Steve Jobs’ new Music Store
`showed foot-dragging record labels and freeloading
`music pirates that there is a third way
`(“. . . Apple’s iTunes Music Store is TIME’s Coolest
`Invention of 2003.”)
`
`Business Week -
`SHOW TIME!
`(“Just as the Mac revolutionized the computer industry,
`Apple is once again in the business of changing the
`world. This time, it’s the world of music.”)
`
`Business Week -
`The Best Performers
`(indicating that Apple Computer had the ninth-largest
`percent increase in earnings among companies in the
`Standard and Poor’s 500 index in 2003)
`
`Newsweek -
`iPod Nation
`(“In just three years, Apple’s adorable mini music player
`has gone from gizmo to life-changing cultural icon.”)
`
`USA Today -
`Apple strikes while the iPod is hot
`(“Smash sales of Apple’s iPod digital music player – 10
`million since 2001 and 8.2 million in 2004 alone – have
`transformed the company. Its retail stores, for instance,
`are huge hits.”)
`
`USA Today -
`In iPod America, legions in tune
` (“‘This is no fad – the iPod has changed my life.’ . . .
`Rival MP3 makers hoping to chase down Apple’s
`runaway hit have their work cut out: Maverick CEO
`Steve Jobs has his foot to the company’s floorboard.”)
`
`Business Week -
`The Best Performers 2006
`(valuing Apple Computer Inc. as the best performing
`company among companies in the Standard and Poor’s
`500 index)
`
`
`
`
`
`
`

`

`April 24, 2006
`
`February 2, 2007
`
`Business Week -
`The World’s Most Innovative Companies
`(calling Apple Computer Inc. “the creative king” and
`ranking Apple as the most innovative company in the
`world; “To launch the iPod . . . Apple used no fewer than
`seven types of innovation.”)
`
`September 15, 2006 Marketing News -
`A few of our favorite things
`(indicating Apple Computer’s ranking as the tenth most
`highly regarded brand among U.S. consumers, according
`to a poll by Harris Interactive, Inc.)
`
`Server IQ.com -
`Survey: Microsoft’s Corporate Reputation Ranks
`Supreme
`(indicating Apple’s place as the 22nd-ranked company in
`terms of corporate reputation, according to a survey
`released by Harris Interactive)
`
`Fortune -
`The World’s Most Admired Companies
`(noting Apple’s “meteoric rise” to its ranking as the fifth
`most admired company in the world)
`
`Business Week -
`The 2007 Best Performers
`(valuing Apple as the 34th-best performing company
`among companies in the Standard and Poor’s 500 index)
`
`Business Week -
`The World’s 25 Most Innovative Companies
`(“Not surprisingly, Apple and Google once again
`prevailed.”)
`
`MMR (Mass Market Retailer) -
`Harris says Coca-Cola is No. 1 brand
`(indicating Apple’s place as the ninth-ranked “best
`brand” among consumers according to the Harris Poll)
`
`Fortune -
`America’s Most Admired Companies
`(“It’s an impressive hat trick: Apple not only takes the
`No. 1 slot on this year’s list of America’s Most Admired
`Companies but also tops the global survey and wins the
`highest marks for innovation too.”)
`
`March 19, 2007
`
`March 26, 2007
`
`May 14, 2007
`
`August 13, 2007
`
`March 17, 2008
`
`I
`
`J
`
`K
`
`L
`
`
`M
`
`N
`
`
`O
`
`P
`
`
`
`
`
`

`

`Q
`
`March 17, 2008
`
`R
`
`April 23, 2008
`
`S
`
`T
`
`U
`
`April 28, 2008
`
`March 16, 2009
`
`March 22, 2010
`
`
`Fortune -
`What Makes Apple Golden
`(“. . . Apple . . . has set the gold standard for corporate
`America with an entirely new business model: creating a
`brand, morphing it, and reincarnating it to thrive in a
`disruptive age.”)
`
`Wall Street Journal -
`Slow Slog for Amazon’s Digital Media -- Earnings
`Today May Provide Data On What Works
`(“Apple’s iTunes, which has more than 80% of the U.S.
`market for digital-music downloads, is now the top-
`ranked music retailer in the U.S., selling more than four
`billion songs since its launch in April 2003.”)
`
`Business Week -
`25 Most Innovative Companies: Smart Ideas for
`Tough Times
`(ranking “three-time winner” Apple as the most
`innovative company in the world)
`
`Fortune -
`The World’s Most Admired Companies 2009
`(ranking Apple as the world’s most admired company)
`
`Fortune -
`The World’s Most Admired Companies 2010
`(ranking Apple as the world’s most admired company for
`the second year in a row)
`
`
`
`
`
`
`Dated: November 5, 2013
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Respectfully submitted,
`
`KILPATRICK TOWNSEND & STOCKTON LLP
`
`
`
`
`
`By:
`
`
`
`
`/s/Allison Scott Roach
`Joseph Petersen
`1114 Avenue of the Americas
`New York, New York 10036
`Telephone: (212) 775-8700
`Facsimile: (212) 775-8800
`
`Alicia Grahn Jones
`Allison Scott Roach
`
`

`

`1100 Peachtree Street, Suite 2800
`Atlanta, Georgia 30309
`Telephone: (404) 815-6500
`Facsimile: (404) 815-6555
`
`Attorneys for Opposer Apple Inc.
`
`
`
`
`
`
`
`
`

`

`
`
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`
`
`In the Matter of Application Serial No. 85/379,097
`For the mark: CRAPPLE
`Filed: July 22, 2011
`Published: December 20, 2011
`
`
`Opposer,
`
`
` v.
`
`NINJA ENTERTAINMENT
`HOLDINGS, LLC,
`
`
`
`
`
`
`
`
`
`
`
`---------------------------------------------------------X
`
`APPLE INC.,
`
`:
`
`
`: Opposition No. 91204777
`
`:
`
`
`:
`:
`
`:
`:
`:
`:
`:
`
`
`Applicant.
`---------------------------------------------------------X
`
`CERTIFICATE OF SERVICE
`
`
`
`
`
`
`
`This is to certify that a copy of the foregoing has been served on Ninja Entertainment
`
`Holdings, LLC by depositing a copy with the United States Postal Service as First Class
`
`Mail, postage prepaid, in an envelope addressed to:
`
`Daniel Kelman
`1934 Josephine Street
`Pittsburgh, Pennsylvania 15203
`
`
`This the 5th day of November, 2013.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`/s/ Alberto Garcia
` Alberto Garcia
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`

`EXHIBIT A
`
`EXHIBIT A
`
`

`

`Page 1
`
`LexisN-exiy
`
` 0
`
`Copyright 2001 Factiva, a Dow Jones and Reuters Company
`All Rights Reserved
`
`Dow Jones Passive
`
`(Copyright (c) 2001, Dow Jones & Company, Inc.)
`
`
`{Ii I
`The Wall Street Journal
`
`November I, 2001 Thursday
`
`SECTION: PERSONAL TECHNOLOGY; Pg. Bl
`
`LENGTH: 855 words
`
`HEADLINE: Apple Brings Its Flair For Smart Designs To Digital Music Player
`
`BYLINE: By Walter S. Mossberg
`
`BODY:
`
`PORTABLE DIGITAL MUSIC players are frustrating gadgets. These hand-held devices, which play songs in the
`MP3 format, seem like a great idea, but they are hobbled by major drawbacks.
`
`Some can hold only a scant 10-20 songs on little memory cards too expensive to buy in quantity. Others include
`built-in hard disks that can hold hundreds or thousands of songs, but are large and bulky with lousy battery life.
`
`For the past 10 days or so, however, I've been testing a terrific digital music player that solves all of these
`problems. It has massive storage capacity, is small and light enough to slip into a pocket and can be run nonstop for an
`impressive amount of time. Its controls are simple and clear, and it downloads music from a computer at blazing speeds.
`
`It's no surprise that this new music player, called the iPod, comes from a company with a long history of great
`engineering and user-oriented design: Apple Computer. This is Apple's first noncomputer product in years, and it's a
`design home run. The iPod is simply the best digital music player I've seen. It costs $399, and will be available Nov. 10.
`
`The one serious drawback of the iPod is that, at the moment, it only works with Apple's own Macintosh computers.
`To fill it with music, you must use Apple's latest Mac—only jukebox software: iTunes 2. You also need an ultrafast
`FireWire port, which all Macs have. FireWire also exists in the Windows world, where it's usually called "1394," but
`relatively few Windows PCs include the port.
`
`THAT SHOULD CHANGE soon. While Apple is being coy about it, I expect the company to produce a Windows
`version of the iPod by next spring. And if the iPod succeeds, I expect it to be just the first in a new line of noncomputer
`products from Apple.
`
`

`

`Page 2
`Apple Brings Its Flair For Smart Designs To Digital Music Player The Wall Street Journal November 1, 2001 Thursday
`
`The iPod is about the size of a deck of cards, weighs just 6.5 ounces and sports a clean, simple white front with a
`roomy screen and a circular button array. The back of the unit is stainless steel.
`
`Inside is a nearly silent five gigabyte hard disk and a small but high-capacity battery. Apple makes strong claims
`for the iPod's storage capacity and battery life, but this is one of those rare products where the manufacturer's claims are
`actually understated, not overstated.
`
`Apple says the iPod can hold 1,000 songs. But the company is basing that claim on an assumption that iPod users
`will create MP3s at a higher-than-average quality level, which requires more disk space. My own calculations, based on
`the lower quality level most commonly used by listeners, shows that the iPod can hold about 1,300 songs, equal to more
`than 100 typical CDs.
`
`As for battery life, Apple claims 10 hours, but in my tests the iPod repeatedly got nearly 12 hours.
`
`Sound quality is excellent. I tested it with the included earbuds and with larger noise—canceling headphones. I even
`plugged it into an automobile speaker system using a cheap cassette adapter from Radio Shack. The iPod sounded great
`in each instance.
`
`The uncluttered, high—resolution screen displays song title, artist and album, assuming your MP3 files contain that
`information. You navigate through directories of artists, albums, playlists and songs using a wheel on the front of the
`unit that speeds up when scrolling through long lists.
`
`LIKE MOST OTHER MP3 players, the iPod must get its music from a computer, but it's cleverer and faster at
`doing so. Most other players connect to a PC using the USB port and require you to manually select which songs you
`want to transfer. But the iPod uses the far faster FireWire port and automatically synchronizes itself with the music
`library on the computer, just like a Palm synchronizes with a PC.
`
`A few seconds after you first plug the iPod into the Mac using the FireWire cable, the iTunes 2 software
`automatically copies its music library, including songs and playlists, onto the device. If you later add or delete songs
`from the music library on the Mac, the changes will be duplicated on the iPod the next time you plug it in. And this
`process is fast. I moved 763 songs onto my test iPod in well under 10 minutes. That would have taken hours using a
`USB connection.
`
`You can turn off synchronization and manually move the songs you like onto the iPod.‘ While the iPod is plugged
`into the Mac, it's also recharging. You don't need a separate power cable.
`
`If you have room left over on the iPod after transferring your music, you can use it as a portable hard disk,
`manually copying any computer file to its hard disk to back up files or move them to another Mac.
`
`The only problem I ran into with the iPod was that, in some cases, there can be a long pause between songs. Apple
`claims this will be less noticeable in shipped iPods than in my test unit.
`
`At $399, the iPod is also a little expensive. Other hard-disk-based players, like Creative's Nomad, offer about the
`same capacity for $100 less, or greater capacity for the same price. But they are inferior designs. All in all, iPod is a
`
`great product, and I recommend it to anyone who loves music.
`
`E-mail me at mossberg@wsj.com. Read these columns online at http://ptech.wsj.com. For answers to your
`computer questions, see Mossberg's Mailbox.
`
`NOTES:
`
`

`

`Page 3
`Apple Brings Its Flair For Smart Designs To Digital Music Player The Wall Street Journal November 1, 2001 Thursday
`
`PUBLISHER: Dow Jones & Company
`
`LOAD-DATE: December 5, 2004
`
`

`

`EXHIBIT B
`
`EXHIBIT B
`
`

`

`Page 1
`
`fi’texiswexiy
`
`Copyright 2003 Time Inc.
`Time Magazine
`
`November 17, 2003
`
`SECTION: TECHNOLOGY/COOLEST INVENTIONS/INVENTION OF THE YEAR; Pg. 66
`
`LENGTH: 1090 words
`
`HEADLINE: The 99[cents] Solution;
`Steve Jobs' new Music Store showed foot-dragging record labels and freeloading music pirates that there is a third way
`
`BYLINE: Chris Taylor
`
`BODY:
`
`When Steve Jobs holds forth in public, it's usually to a mob of fawning Apple—ites--the true believers who still
`develop software and accessories for Apple products. Not so last month at the Moscone Center in San Francisco. This
`crowd was more mack daddy than Macworld. Bono, Mick Jagger and Dr. Dre made video appearances. Grateful Dead
`drummer Mickey Hart was in the audience. Sarah McLachlan sang her latest hits live. What was pulling these musical
`supemovas into Jobs' magnetic field? A software product that just might save their free-falling industry: the iTunes
`Music Store.
`
`It's a disarmineg simple concept: sell songs in digital format for less than a buck and let buyers play them
`whenever and wherever they like—~as long as it's on an Apple iPod. Jobs had proved the idea back in April when he
`launched the Music Store for Mac users, who represent only 3% of the computer world but promptly gobbled up a
`million tracks in the first week of business. By October he was ready to set the Music Store aloft in the 97% of the
`world that uses Windows PCs, and the prospect of converting millions of music pirates into credit-card wielding music
`buyers was enough to make even the most jaded rock stars take notice. How did Jobs do this trick? In a word:
`simplicity——the transparent ease of use that is the hallmark of Apple's entire product line, including the Music Store. “I'm
`a complete computer dummy," McLachlan told TIME after the event. "If I can use this, anyone can."
`
`And, it seems, just about anyone is. Three days after the Moscone event, PC owners had downloaded a million
`copies of the software and paid for a million songs (adding to the 14 million music downloads already made by Mac
`users). In a year when record labels hit a sour note by suing students, grandparents and 12—year—old file sharers, Jobs had
`effectively brokered a peace agreement: he had shown the music industry how to win friends and turn a profit on the
`very Internet that was being used to steal their songs.
`
`Other inventions this year may have more altruistic intentions (like Dean Kamen's water purifier) or be more visible
`on street corners (like those ubiquitous camera cell phones). But for finally finding a middle ground between the
`foot—dragging record labels and the free—for-all digital pirates and for creating a bandwagon onto which its competitors
`immediately jumped, Apple's iTunes Music Store is TIME’s Coolest Invention of 2003.
`
`Long before the Music Store came on the scene, frantic record-industry executives had been searching for some
`way to combat their nemesis: Napster, the original file-sharing service, but to no avail. Their first online ventures,
`
`

`

`Page 2
`The 99[cents] Solution;Steve Jobs' new Music Store showed foot—dragging record labels and freeloading music pirates
`that there is a third way Time Magazine November 17, 2003
`
`MusicNet and PressPlay, were disasters, largely because the labels didn't trust their users~—or one another. High
`subscription fees and poor selections turned off would-be customers; most skulked off to the underground services, such
`as Kazaa and Limewire, which had sprung up after Napster's demise.
`
`Enter Jobs. Back in April, Apple's CEO revealed that he had spent the previous year negotiating an unprecedented
`deal with all five major labels and thousands of independents. His iTunes software, which had previously been nothing
`more than a place to store and play digital music on a Mac, would become a gateway to the Music Store, where you
`could easily find and save music to your hard drive, CD or iPod music player—mo subscription necessary, just 99[cents]
`per song, or $ 9.99 for an album. Competitors tried to match that price but couldn't come up with a service as free of
`restrictions. They said Jobs had been given a sweet deal by the labels because Apple, with its minuscule share of the
`computer market, was never going to be a real distribution threat. "The Mac world is a walled garden," said
`BuyMusic.c0’m vice president Liz Brooks. "The PC environment is like the Wild West."
`
`Then came iTunes for Windows, and suddenly there was a new sheriff in town. Not content with creating a music
`store for PC users that was a perfect clone of its Mac counterpart, including all of the 400,000 songs Apple now has the
`rights to resell, Jobs added a couple of cool new features. The best is a monthly allowance you can set up for your kids
`to govern their online purchases-—a godsend for any parent trying to curb an offspring's downloading habit.
`
`Jobs has another reason not to be concerned about the competition. "The dirty little secret of all this is there's no
`way to make money on these stores," he says. For every 99[cents] Apple gets from your credit card, 65[cents] goes
`straight to the music label. Another quarter or so gets eaten up by distribution costs. At most, Jobs is left with a dime
`per track, so even 33 500 million in annual sales would add up to a paltry $ 50 million profit. Why even bother?
`"Because we're selling iPods,‘I Jobs says, grinning.
`
`That may make iTunes the most benign—looking Trojan horse in software history. The Windows crowd can get
`iTunes free, and it offers almost all the same functionality as the paid versions of MusicMatch and Real One, two
`PC-based rivals. But iTunes is the only music application that will work with the enormously popular iPod, and it has
`features--like its powerful search function-—that are unrivaled. "Once people are locked into using iTunes, the game's
`over," says Charles Wolf, an analyst at the New York City--based Needham & Co. investment bank. "They could sell an
`extra 2 million iPods because of this." And the margins on these devices make the Music Store's arithmetic look like
`child's play. Each $ 499 iPod returns as much as $ 175 in profit, Wolf says.
`
`Such calculation may also explain why iTunes doesn't support Windows Media Audio files——a Microsoft format
`that Bill Gates had hoped would become the music—industry standard. If iTunes becomes the player ofchoice for PC
`users, it would be a blow for Microsoft's grander audio ambitions——and may well unearth the hatchet that Jobs and Gates
`buried back in 1997.
`
`For now, Jobs faces some smaller hurdles, like filling in a few significant gaps in the iTunes Music Store selection
`(the Beatles are the most glaring omission). Even so, Jobs continues to score points with consumers for making
`available songs so easy to find and so easy to download. The music industry, of course, is anything but simple. That's
`probably why Jobs, an inveterate challenge seeker, likes it. But can it grow his business? Stay tuned.
`
`GRAPHIC: COLOR ILLUSTRATION: ILLUSTRATION FOR TIME BY ULLA PUGGAARD, COLOR PHOTO:
`MICHAEL O'NEILL
`
`LOAD-DATE: November 10, 2003
`
`

`

`EXHIBIT C
`
`EXHIBIT C
`
`

`

`Page 1
`
`fi.
`
`~ LXiSNEXiS‘
`
`Copyright 2004 The McGraw-Hill Companies, Inc. www.mcgraw-hill.com
`All rights reserved
`
`
`
`:Bugmesaraeit
`
`Business Week
`
`February 2, 2004
`
`SECTION: COVER STORY; Number 3868; Pg. 56
`
`LENGTH: 4419 words
`
`HEADLINE: SHOW TIME!
`
`BYLINE: By Peter Burrows; With Ronald Grover in Los Angeles, Tom Lowry in New York, and bureau reports
`
`HIGHLIGHT:
`
`Just as the Mac revolutionized computing, Apple is changing the world of online music. If Steve Jobs plays his cards
`right this time, Apple could end up with a big chunk of the digital-entertainment market
`
`BODY:
`
`On Jan. 6, San Francisco's Moscone convention center pulses with all the energy of a rock concert. A crowd
`sprinkled with hip—hop teenagers, digerati, and aging hippies streams in to hear the annual state-of-the-Mac keynote
`from Apple Computer Inc. Chief Executive Steven P. Jobs.
`
`Every facet'of the event bears the fingerprints of the obsessive Jobs —- right down to the music that fills the air.
`This year, it's the King himself, Elvis Presley. Later, Jobs rolls the tape of Apple's famous "1984" ad that‘ran on Super
`Bowl Sunday that year —- and hasn’t been broadcast since. Only this version has been digitally enhanced. The ad's
`hammer-throwing heroine crashes a meeting of Orwellian automatons and smashes Big Brother to smithereens, just like
`before. But this time, she's sporting a new accessory on her hip: one of Apple‘s hot—selling iPod digital music players.
`"It‘s the 20th anniversary of the original Mac, and we're going to make something of it," says Jobs after the cheers
`subside.
`
`The message is clear: Just as the Mac revolutionized the computer industry, Apple is once again in the business of
`changing the world. This time, it's the world of music. Its diminutive iPod, which can store 10,000 songs in a device
`smaller than a deck of cards, is the most radical change in how people listen to music since Sony Corp. introduced the
`Walkman in 1979. Then there's Apple's online music store, iTunes. It was established only after Jobs became the first
`person to persuade all the major record labels to make their music available —~ legally -- on one Web site. Since late
`April, 30 million songs have been downloaded from Apple's store, and the trend may one day spell the end ofthe
`compact disk. "[Jobs] is a real visionary, the kind who can change industries,“ says Jimmy lovine, chairman of
`Interscope Geffen A&M Records, a unit of Universal Music Group.
`
`That's industries, plural. Over in Emeryville, Calif, 50 miles from Apple's Cupertino headquarters, Jobs's other
`
`

`

`SHOW TIME! Business Week February 2, 2004
`
`Page 2
`
`company, Pixar Animation Studios, is tuming the movie business on its ear. The company's latest flick, Finding Nemo,
`was the No. 1 box-office hit of 2003 and roared past Walt Disney Co.'s The Lion King as the highest—grossing animated
`hit of all time. That gives Pixar an unprecedented five blockbusters in five tries. (Remember Toy Story and Monsters,
`Inc?) And it gives Jobs tremendous leverage as he renegotiates Pixar's contract with embattled Magic Kingdom boss
`Michael D. Eisner. For the past nine months, Jobs has been pressing Disney for a bigger cut of the profits from its films
`-— and perhaps much more. With Eisner on the hot‘seat, Jobs is likely to get much of what he wants.
`
`Add it up, and this may be just the beginning of a brand new Steve Show. For years, Jobs's perfectionist approach
`to product development has been experienced only by Mac users. But now, massive changes are roiling the worlds of
`entertainment, computing, and communications, giving him a broader stage. Increasingly, content -- that magical
`lifeblood of movie studios, record labels, and publishers —- is being transformed into digital form. At the same time, the
`Internet and wireless networks are evolving to deliver those bits almost anywhere, at speeds never before possible.
`Couple all that with disk drives, semiconductors, and high—resolution displays that are growing ever smaller and more
`powerful, and technology is liberating entertainment from its past. How we watch movies, look at photos, listen to
`music, even read a book promises to change profoundly in the next decade.
`
`No one may have a better chance to make order out of this chaos -— and then profit from it -— than Jobs. He bridges
`the marketplace: He has a hand in the worlds of computing, music, and movies to see how they're evolving. He has the
`track record with consumers: His string of hits includes the original Mac, the candy—colored iMac, and the iPod. He has
`the pieces: Apple not only has a combination of software and hardware skills unique in the PC business, it also has
`strong product design and one of the world's best-known brands. And he has the silver tongue: When the record
`companies had dug in their heels against the Net in Napster-induced terror, it was Jobs who persuaded all the major
`labels to put their music on iTunes. "Steve's the right guy with the right style at the right moment," says management
`consultant Geoffrey A. Moore, president of Chasm Group LLC and author of the technology—marketing text Crossing
`the Chasm.
`
`If he doesn't blow it, that is. Jobs can be so enamored of his own vision -- and so bull—headed about pursuing it --
`that it has blinded him at times, In 2000, fresh off the success of the trend-setting iMac, he personally ordered up a
`glistening cube—shaped Mac that carried a sky—high price tag in part because of a fanless design that eliminated that
`annoying hum. Customers, it turned out, weren't willing to pay for noiseless good looks, and the product was pulled off
`the market in a matter of months. Such missteps could cost him dearly in the battle ahead.
`
`Retail Payoff While consumer—electronics giants develop scores of products at once and endure a few flops, Jobs's
`hands—on approach means Apple can focus on only one or two brand—new projects at a time. "Apple's problem is that it's
`just a blip by consumer-electronics measures," says consultant Paul Saffo, research director at Institute for the Future.
`"It's too big to play the Bang & Olufsen angle, but it's just a blip next to Sony or Samsung. That's a really awkward
`place to be."
`
`One advantage Apple has over rivals is its retail stores, which give customers first-hand experience with the
`company's new products. In 2001, when the entire PC industry was bent on boosting online sales to reduce costs, Jobs
`went the opposite way. He started opening swanky retail stores, now numbering 74, in high—rent locations such as
`Chicago's Magnificent Mile and the Ginza district in Tokyo. Products are displayed on uncluttered maple tables, so
`shoppers can comfortably try things they may have never done on a computer before, like create a home movie.
`Macvsavvy salespeople wait at a "Genius Bar" to answer questions, but don't hover. The stores, which turned profitable
`in 2003's third quarter, also offer hundreds of classes in filmmaking, graphic design, and more. "I love the store," says
`Tanika Goudeu, a 26-year-old documentary filmmaker visiting the location in New York's SoHo on a recent January
`afternoon.
`
`What new fare will shoppers find in those stores in the years to come? Near term, an iPod for viewing digital
`photos would need nothing more than a color screen. Then, with its design skills, Apple could create a compact
`entertainment hub for the living room. That could eliminate the usual mess of DVD players, stereos, music CDs, and
`
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`SHOW TIME! Business Week February 2, 2004
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`remote controls, and loaded with Apple's successful iLife software suite, the hub could be used for managing digital
`photos or watching home movies. A musician could even use it, loaded with Apple's new GarageBand music software,
`to create a backup band while playing lead on the family piano. Such a device might appeal to youngsters who've grown
`up digital —- interacting with technology rather than just watching it. Jobs won't comment on such opportunities, except
`to warn of the difficulty of creating products people really want to use. "I'm not saying we're not going to do these
`things. I'm just saying they are a lot more complicated than they look."
`
`Imaginary Key That goes for watching movies, too. If Jobs and his movie pals one day adopt online distribution of
`films, it's easy to imagine an iTunes-like store for downloading them. Asked if such talks are in the works, he smiles
`and turns an imaginary key in front of his mouth. Still, he doesn't deny Apple has many paths to explore. "There's no
`company in the world that's better at making complex technology simple," he says. "That's Apple's primary skill, and it's
`a skill that has never been more valuable."
`
`All this may be causing Jobs to rethink Apple in fundamental ways. For years, his growth plan was to gain a
`percentage point of PC market share each year. Now, the iPod shows there may be a better way: milk those loyal Mac
`fans for profits, and pioneer new markets to bring in new customers. "If our [PC] market share grows, we're thrilled,"
`says Jobs. But with the iPod, "we're finally getting to compete without our 5% market—share ceiling, and look what's
`happening: We're winning." Merrill Lynch & Co. estimates that the company's revenues will rise 23% in fiscal 2004, to
`$ 7.6 billion, as net income more than doubles, to $ 185 million. Half of that revenue growth is expected to come from
`music as iPod sales nearly triple, to $ 931 million, and iTunes's sales boom tenfold, to $ 220 million. "They're better
`positioned today than they've been in a long time," says Merrill analyst Steven Milunovich. "Despite its up-and—down
`track record, we're confident Apple can stay at the leading edge of innovation."
`
`Still, a stampede of competitors will be trying to elbow their way past Apple. Sony, though struggling of late, still
`dwarfs Apple with an expected $ 66 billion in revenues this year. Korea's Samsung Electronics Co., a fast—rising force in
`everything from cell phones to high-definition TVs, says it will spend more on capital investment this year than Apple's
`revenues. Even networking giant Cisco Systems Inc., not known for its consumer savvy, has gotten into the market with
`sophisticated wireless products for zapping video and music around the home. The giants are dismissive of Jobs and
`Apple. "They're a one-trick pony," says Hideki "Dick" Komiyama, president of Sony Electronics Inc.
`
`There are many who think Jobs won't even be able to hold on to his lead in music. Skeptics note that he's up
`against the same crew of companies that trounced Apple in PCs, as well as an army of newcomers, including Wal-Mart
`Stores and Virgin Entertainment Group. Microsoft Corp. is providing the software for more than 60 digital music
`players, and Dell, Samsung, and others are building the hardware. "It doesn't'take a genius to see what comes next:
`lower prices for consumers and lower market share for Apple," says Chris Gorog, CEO of Roxio Inc, which operates a
`rival music service under the Napster brand name. "Steve Jobs is right back to the Mac model."
`
`That is a serious risk. Some 20 years ago, Apple leaped ahead in PCs and then blew its lead because it insisted on
`too much control over its products. While other PC makers used Microsoft software and only made hardware, Apple
`opted to make the Macintosh operating syste