Reports of Apple's pitch to print media companies hint at a business model

Source: Sydney Morning Herald

The tablet computer Apple (AAPL) is rumored to be readying for launch next year is much in the news this week. On Monday, the blogs were aflutter over a three-word phrase ("impending Apple slate") in a two-week old address to the New York Times' staff by executive editor Bill Keller.

On Tuesday comes a report out of the Sydney Morning Herald that actually contains a couple pieces of news — albeit thinly sourced.

1. That Apple has sent specifications of a device "small enough to carry in a handbag but too big to fit in a pocket" to Australian media companies to see whether they would be interested in publishing on it.
2. That similar talks with Amazon (AMZN) over the Kindle e-book reader  broke down after the media executives balked at giving Amazon 70% of the revenue. "By contrast," writes the Herald, "Apple's model has been to give developers 70% of the revenue and to keep a 30% cut."

It's unclear from this report whether the Herald's sources know something about Apple's business model, or whether the paper is just looking at the cut Apple offers developers on the App Store and assuming that the same would apply to book, newspaper and magazine publishers putting content on the tablet.

This assume, of course, that there is a tablet and that it will ever see the light of day. As always with rumors about a new Apple device, we'll believe it when we see it.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Image: Apple Inc.

Every Wednesday, Lee Clow, creative director of Apple's ad agency TBWA/Chiat/Day, flies from Los Angeles to Cupertino to meet with Steve Jobs, a weekly get-together that's been going on for years.

Meanwhile, in Redmond, Wash., Steve Ballmer barges into the office of Mich Mathews, head of Microsoft's central marketing group, giving her high fives and shouting again and again "I'm a PC!"

Those are two of the scenes Devin Leonard re-creates for the New York Sunday Times business section in "Hey, PC, Who Taught You to Fight Back?" a 3,000-word feature that may be the best thing written to date about the competition between Apple (AAPL) and Microsoft (MSFT) unfolding on our TV screens.

"It’s an ad war," writes Leonard, "one destined to go down in history with the cola wars of the 1980s and ’90s and the Hertz-Avis feud of the 1960s."

Among the highlights of Leonard's story:

• 

  Source: The New York Times

  According to TNS Media Intelligence, Apple spent $264 million on television ads in 2008, 71% more than Microsoft. In the first six months of 2009, however, Microsoft responded with $163 million worth of commercials, more than twice Apple’s spending.

• The Get a Mac campaign had been ridiculing Microsoft for a year before Ballmer decided he needed to strike back, barging into Mathews' office to give her the green light. In Feb. 2008 Microsoft picked Crispin Porter & Bogusky, best known for its cheeky Burger King ads, to lead the campaign.
• Bob Reilly, Crispin Porter's executive creative director, was initially apprehensive. He didn’t even own a PC; he worked on a MacBook Air. (He has since bought himself two PCs — a Sony Vaio and a Lenovo ThinkPad.)
• Advertising is not part of Microsoft’s DNA. Bill Gates, “never really seemed to get marketing.” Case in point: "The Wow is Now" campaign for Vista. "It was a bad product," says Jeff Musser, a former McCann Erickson creative director who worked on the Vista campaign. "I didn’t really hear anybody saying, ‘Wow.’ ”
• There were also cultural issues at Microsoft. On Madison Ave., they say that the more hands that touch an advertisement, the worse it becomes. Microsoft felt differently. “They thought the more people saw it and gave an opinion, the better it would be,” Mr. Musser said. “That’s how you develop software. It’s not how you develop great creative.”
• At first, Crispin Porter was reluctant to attack Apple, but that changed last summer. "As the tone of their campaign became more and more negative, we were like, 'We gotta do something,'" Mr. Reilly said. 'That’s where the whole notion of ‘I’m a PC’ and putting a face on our users came about. We have a billion users. That’s who our cast is, whereas Apple is just two fictitious characters.”
• The war is heating up again. After a three-month hiatus, Apple launched three new ads last week to accompany the arrival of Snow Leopard. The launch of Windows 7 in late October will be preceded by another Crispin Porter ad blitz.

You can read the full piece here.

See also:

• Apple taps "Puddy" to attack Windows 7
• How Microsoft put Apple owners on the defensive
• All about Microsoft's 'Lauren'

I've long been fascinated by the shifting circles in the New York Times' "sector snapshots," those charts in the Business Section that show the relative sizes of companies in a particular field — and which ones are leading, slipping, lagging or improving relative to the S&P 500.

On Wednesday, the Times ran the snapshot I'd been waiting for – the one that shows where Apple stands vis a vis its competitors in technology hardware & equipment.

The version that appeared in my morning paper showed HP (HPQ) and IBM (IBM) in the first, or leading, quadrant (up for the week and the year) and Apple (AAPL) in the third, or lagging, quadrant (down for the week and the year).

But the best thing about these sector snapshots is that they are available in interactive form on the Times' Web site, and by Wednesday afternoon, Apple had shifted from lagging to improving, thanks to the fact that Apple's share price didn't fall as steeply Wednesday as the S&P 500.

Check it out for yourself at nytimes.com here. You can track dozens of companies in nearly 30 sectors. Here's how you do it:

1. Make sure the sector you're interested in appears in the Category window in the upper left hand corner.
2. Click on the company you want to track in the right hand column to highlight the circle that represents its market capitalization.
3. Move the Time Period slider to see that company shift — like a planet against the fixed stars — on a daily, weekly, monthly, quarterly or yearly basis.

But if it's Apple you are tracking, you have to move fast. This stock is as changeable as a baby's bottom, and could be anywhere by the end of the day.

Joe Nocera buried his lead.

The New York Times columnist — and former Fortune editor — waited until the end of Saturday's 1,700-word "Talking Business" column about the health of Apple's CEO and the secrecy that surrounds it to reveal that on Thursday afternoon, several hours after he'd gotten his final “Steve’s health is a private matter” from Apple's public relations machine, he got a call from Steve Jobs himself.

“This is Steve Jobs,” he began. “You think I’m an arrogant [expletive] who thinks he’s above the law, and I think you’re a slime bucket who gets most of his facts wrong.”

Jobs, according to Nocera, said he would share some details about the health condition that made him to look so thin and haggard at his last public appearace — and triggered two share-punishing rounds of speculation on Wall Street — if Nocera agreed to keep the conversation off the record.

Nocera agreed, and reported only that nothing Jobs told him …

"contradicted the reporting that [Times reporter] John Markoff and I did this week. While his health problems amounted to a good deal more than 'a common bug,' they weren’t life-threatening and he doesn’t have a recurrence of cancer."

The "common bug" is a reference to the explanation for Jobs' weight loss that Apple's PR department put out in June — an explanation that Nocera feels fell somewhat short of the truth. Markoff reported on Wednesday that Jobs had had an unnamed surgical procedure earlier this year related to his loss of weight, and Nocera adds that he had learned that Jobs was having ongoing digestive difficulties stemming from the cancer surgery he had four years ago — the details of which were first reported by Fortune (see here).

All this leads Nocera to the broader point he wants to make about Apple:

"Apple simply can’t be trusted to tell truth about its chief executive. Under Mr. Jobs, Apple has created a culture of secrecy that has served it well in many ways — the speculation over which products Apple will unveil at the annual MacWorld conference has been one of the company’s best marketing tools. But that same culture poisons its corporate governance. Apple tells analysts far less about its operations than most companies do. It turns low-level decisions into state secrets. Directors are often left out of the loop. And it dissembles with impunity." (link)

So, yes, Nocera thinks Steve Jobs is an arrogant [expletive] who thinks he's above the law.

But Jobs may have the last laugh. Twice in his column, Nocera refers to things that happened during Apple's (AAPL) third quarter conference call on Tuesday afternoon.

In fact, the conference call happened on Monday.

UPDATE: The error in the printed edition of the paper has been corrected in the online version.

When Bill Gates and New York Times (NYT) publisher Arthur Sulzberger Jr. unveiled the Times Reader in April 2006, they demonstrated the program to the American Society of Newspaper Publishers on a tablet PC — a piece of hardware Gates was very excited about at the time.

Tablets still haven't quite caught on, but the software — which syncs to the Times' servers and delivers an easy-to-read, paginated version of the paper that can be browsed offline — developed a loyal following. At least among Windows users; more than two years later, there still isn't a version that runs on the Apple (AAPL) Macintosh.

But there will be. On Tuesday, Rob Larson, VP for digital production at the Times, showed off sample pages of Times Reader for the Mac and announced that a beta version will be available later this month. See here.

Larson also stuck around to answer questions. The service will be free while it's in beta. After that it will cost $14. 95 a month (about a quarter the price of a print subscription). If you have a home delivery subscription, you'll get the Times Reader for free.

It's a Cocoa application that uses Apple's Safari and Microsoft's (MSFT) Silverlight plugin to render the pages.