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Ten weeks after the Apple faithful camped out on sidewalks in a delirious Woodstock-style frenzy to be first in line for iPhones, they were threatening to take to the streets again--only this time with pitchforks and torches. They were furious because Apple Chief Steve Jobs slashed the phone's price to $400 from $600, making early adopters look like suckers.
Jobs issued an apology and a $100 gift certificate to contain the damage. But the company's other constituents will not be so easily appeased. Wall Street smelled weakness in the price cut and pushed Apple shares down 10% to $130 within two days.
More broadly, though, it looks like an anti-Apple backlash has begun. NBC Universal, chafing at Apple's insistence that every TV show is worth $1.99 to download, is bolting the iTunes store after December, going with Amazon instead. Vivendi's Universal Music Group also reportedly won't renew its contract with Apple. Movie studios are wary of doing business with Jobs. Reports are arising now that Apple wants to charge even less, 99 cents, for TV shows. Very Hollywood-friendly strategy: Drive the price of content to zero to sell more hardware.
Jobs isn't known for treating partners well. AT&T, the wireless carrier for iPhone, was entirely shut out of selling its content services on Apple's phone. Jobs scooped up that for himself, announcing plans to sell ringtones and songs directly to phone users, with no help from AT&T.
Ten years ago pundits were drafting Apple's obituary. Today, after an amazing turnaround engineered by Jobs, Apple ranks among the world's hottest brands. Revenue in the current fiscal year (which ends in September) should top $23 billion, a nearly fourfold rise since 2004.
Sales of its computers are growing at three times the rate of the PC industry, and the iPod has 70% of the MP3 player market. The iTunes online store has delivered more than 100 million TV shows and 3 billion songs, making Apple the third-biggest music retailer in the U.S.
But the flip side of Apple's success is that Apple has started to seem scary. Jobs' ambitions go way beyond making computers and gadgets. He's the most powerful figure in the music business and is maneuvering toward dominance in the movie and TV business as well.
No longer is Apple the plucky underdog out to save the world. Remember its "Big Brother" television commercial from 1984? In those days Big Brother was IBM. Now Apple has morphed into Big Brother, complete with Jobs' face beamed onto giant screens at Apple events.
Lately he's lost some of his magic. AppleTV has been a flop. The iPhone started strong but must be fading--why else cut the price? (Official spin from Apple is that it wants to boost sales during the holidays. Please. Steve Jobs isn't Santa Claus.) The next version of OS X, called Leopard, has suffered delays.
A new touchscreen iPod with Wi-Fi is less than the all-purpose device it appears to be: It holds only 16 gigabytes of data, has no camera, mapping software or e-mail handler. Apple touted the Wi-Fi as a great way to buy music at Starbucks -- from the iTunes store. The walled garden now comes with coffee. A commenter on my Apple-centric blog had this message for Jobs: "You're acting like Microsoft." In the cult of Apple, there is no greater insult.
This growing backlash may fizzle if Jobs, a brilliant but short-tempered figure known for his outsize ego and penchant for control, can tame his demons and persuade media companies to work with Apple. Right now they are scared to death of him. They should be.