Win, Lose Or Draw? In Any Case, It’s A Big Gamble

By this point, three of the four pieces of the planned partnership between IBM and Apple Computer have been dissected by industry speculators in minute detail: the cooperation for network standards, the second-sourcing of IBM’s RS/6000 RISC chip to Motorola for Apple’s use in a new line of computers, and the co-development of an object-oriented operating system and object-based application development environment.

But both firms have refused to discuss the fourth part of the agreement — their cooperation on multimedia technologies. This area certainly has the potential for visibly changing the face of computing in the coming decade. But it has equal potential for making Apple an also-ran in the market it pioneered. This dichotomy and lack of clear benefit to Apple is making multimedia watchers scratch their heads.

At a recent analysts’ meeting in Cupertino, Apple chairman John Sculley disputed claims that the two firms have been mum on multimedia aspects of the deal because they haven’t figured it out yet. He says that all aspects of the deal, should it get past the “letter of intent” stage, have been hashed out in detail.

Next: THE MORE THINGS CHANGE . . .
But insiders say that those details have changed fundamentally many times in the months since the letter of intent was signed, a revelation that casts a pall over the eventual success of the collaboration.

In the absence of meaningful specifics, there’s not much to do except continue the speculation, looking where their circles might intersect.

At best, a collaboration that truly benefits both companies does indeed have the potential for creating an enormous base of media-capable computers, providing a stable platform for software developers and an attractive product for customers. In the worst case, Apple will have given up all its juiciest technologies to its biggest competitor. The key question is how difficult it will be to conjure up a deal where Apple stands to win as much as IBM.

IBM’S MAKING MONEY
It’s a little surprising to note that stodgy old IBM, unlike Apple, already has a multimedia strategy firmly in place. Also unlike Apple, IBM claims to derive significant income from selling its multimedia “solutions” in the corporate and education markets. But the company still relies on expensive hardware and software add-ons, such as the M-Motion video adapter, the Audio-Visual Connection and its difficult-to-use InfoWindow hypertext software.

However, in October, IBM is expected to introduce a new line of computers with built-in, synchronized sound and full-motion video compression/decompression capabilities via a rejiggered DVI (Digital Video Interactive) chipset, part of IBM’s co-development agreement with Intel.

Robert Carberry, IBM’s assistant general manager of systems technology for the Personal Systems Group, has already presented this strategy in detail to more than 5,000 people at various industry conferences. The company makes no bones about the fact that retrofitting its existing computers with multimedia capabilities is not only possible, but will happen.

Investments and specifications. IBM has also set up an entire multimedia division and invested a great deal of money in developing what it considers to be viable content, or titles, which will help sell multimedia solutions in its target markets. Witness its investments in AND Technology for a five-disc educational videodisc series and its induction of filmmaker Robert Abel as an IBM Fellow.

When Microsoft announced specifications for the Multimedia PC (MPC) at its Multimedia Developers Conference in November 1990, the industry was abuzz about the fact that IBM didn’t endorse it. But what IBM did announce at the time was a co-development agreement with Microsoft on two standards — the Resource Interchange File Format (riff), for identifying and tagging data files within Windows applications, and the Media Control Interface (MCI), a standard set of commands for using videodisc players, midi devices, scanners, etc., in an application.

Next: APPLE’S SCATTERSHOT APPROACHAlthough Apple has done the most so far to introduce the concept of multimedia computing to the masses, its approach to the market has been scattershot at best.

Apple does not ship any kind of standard video input or compression hardware with the Macintosh. But so far, it still ships the software tools of choice for multimedia developers. All Macintosh computers come with HyperCard, which has become a de facto standard for driving interactive videodisc applications, and Apple has always built sound output, and now input, into every Mac.

Apple was once very vocal about the future of multimedia, to the point of showing whizzy new technology demonstrations at every industry conference. About a year ago, though, chairman and CEO John Sculley started saying publicly that the company was reconsidering its multimedia strategy “because no one is making any money at it.” Apple’s Multimedia Lab in San Francisco was drastically scaled down, and the company’s early attempts to evangelize the benefits of multimedia computers were “re-organized” out of existence.

Apple’s public withdrawal from the multimedia market both angered and worried developers who’d made strategic investments in Mac products. MacroMind, for example, has since released Windows versions of Director as has Authorware. Formerly all-Mac title developers such as ABC News Interactive and Voyager Co. are either developing or have announced PC versions as well.

Then there’s QuickTime. But within Apple, the people responsible for multimedia retrenched and started working on more powerful, system-level tools to make what it calls “media integration” easier for developers and users.

The result was QuickTime, announced in June. This powerful and well-received set of system software extensions includes a new file format standard called “Movie,” which coordinates time-based information (such as sound, audio and animation) and text; audio and video compression routines; user interface standards and guidelines; and system support for the aforementioned timing mechanism as well as device and image compression managers. (See Vol. 1, No. 1, p. 14.)

Next: WHAT’S IBM GOT?
Last month, IBM announced a new 3.5″ erasable magneto-optic disc drive and format, which it plans to market widely throughout the industry. (See Vol. 1, No. 2, p. 12.)

Capable of storing 128 MB of data and retrieving it slightly faster than a CD-ROM, the new drive has obvious implications for data-intensive applications. Multimedia developers are forced today to tote around big hard drives or use less-than-reliable 44MB removable hard disks to run multimedia presentations.

Cutting a deal to build this technology into the Macintosh and giving it cross-platform compatibility could benefit IBM by providing licensing revenues and by helping it set a new drive standard. A deal could benefit both firms by giving developers a more useful (though still slow) medium for software distribution.

Another IBM nugget is its joint venture with Toshiba for the development of color flat-panel displays. The partnership between the two firms, called Displays Technology Inc. (DTI), is already selling a 10.5″ display as a laptop option for about $3,000.

Apple has long been seeking an acceptable color flat-panel display for its laptop computers, and it will need one for any multimedia player it hopes to sell into the home market. DTI’s displays are one-tenth the weight and use one-tenth the power of traditional CRTs. Buyers are paying dearly for DTI’s learning curve on manufacturing the display; each pixel on the display is controlled by its own transistor, thus one dead transistor yields one dead pixel, which is unacceptable. But as yields go up, cost will come down.

Next: NO DEAL FOR APPLE
No deal. However, it appears that Apple won’t be gaining access to either of these technologies. In a peculiar twist, insiders say that IBM is not offering Apple a license on the color flat-panel display. Though it was indeed discussed, it was not part of the negotiations when this story was written. Similarly, the erasable optical drive is also not part of the bargain — though that’s because Apple is also in the process of evaluating Sony’s new Mini Disc erasable optical disc for use as a storage peripheral.

WHAT APPLE CONTRIBUTES
QuickTime and HyperCard appear to be the only announced technologies that Apple brings to the table in its negotiations with IBM. HyperCard is an obvious plus on the Apple side of the equation — IBM’s competing software, InfoWindow, is insanely difficult to install and use. A “HyperCard PC” would be great for IBM’s image and for its customers, but it is likely to help Apple’s finances only slightly (especially depending on who’d have to make it work on the PC). After all, how much of a bargaining chip is software that is shipped free with every Macintosh?

And whether QuickTime will benefit Apple in a potential partnership with IBM, in light of IBM’s RIFF/MCI involvement, presents an interesting conundrum. The overlap between QuickTime and RIFF/MCI looks significant, and IBM does not appear to be reneging on its OS/2 and Windows multimedia development based on the upcoming agreement with Apple.

In fact, IBM recently announced that it is shipping Windows and Microsoft’s multimedia extensions to Windows (which now include image compression) to all its educational clients — in essence, supporting the Multimedia PC specification without getting the official MPC stamp of approval. IBM has told some executives privately that it is still committed “100 percent” to implementing RIFF and MCI in upcoming system software extensions.

These differences won’t amount to much if and when the joint venture for object-based system (OBS) software yields fruit. One of the benefits of an object-based system is that it contains the inherent intelligence to utilize any object as long as it has been trained to recognize the object as part of the library.

But in the meantime, if Apple and IBM believe it’s important that their media-based applications be able to run on both companies’ platforms (which is likely — see section on content, below), they’ll have to decide how to merge or bridge the differences and similarities between QuickTime and RIFF/MCI for pre-OBS applications.

This could be easier than it looks. QuickTime was designed to be extensible enough to be able to handle any data type, so RIFF and MCI, or even CD file formats and device drivers may be a trivial job.

In any case, QuickTime is still very early in its development, which means software based on it will be unable to be shipped until QuickTime is ready. In the interim, IBM is covering its bets by making sure it supports the MPC standard. Apple obviously does not have that luxury.

So there must be something else. Considering the dearth of visible chips Apple can lay on this bet, it’s safe to assume that it is waving some unannounced technologies at IBM as part of the negotiations.

Who stands to benefit from this?

Certainly IBM does. At this point, Apple at least has the benefit of still being publicly perceived as a friendlier platform for multimedia development. If it licenses its hottest new technologies to IBM before they hit the open market, IBM’s name recognition and still-formidable marketing clout stand to usurp the profits (other than up-front licensing fees) Apple could derive from such technology.

Could the specification for Fast Eddy, Apple’s still unannounced consumer multimedia player (a la CDTV or CD-I), be one of these technologies? Though the project was supposedly killed, at this point anything is possible. But it’s hard to see how creating an instant competitor would benefit Apple, which is already having a hard enough time navigating the treacherous financial waters of lower margins on its cheaper computers. Granting IBM a license to manufacture any of its potentially competitive technologies would seem akin to shooting itself in the foot with a large-gauge shotgun.

Next: THE MPC ADVANCES, UNCHALLENGED
One obvious reason that IBM and Apple want to collaborate on multimedia is to drive a wedge into Microsoft’s rapid progress toward a standard multimedia platform. In a move that Apple should have made long ago, Microsoft has rallied PC software and hardware companies around the MPC standard, and even formed the MPC Marketing Council (see Vol. 1, No. 1, p. 17) to help educate consumers on the benefits of media-based computing.

The MPC Marketing Council also is promoting and supporting MPC as a standard for software development, based on Windows and its multimedia extensions. This is exactly what IBM and Apple are doing with their joint venture for a new object-based operating system, and why it is essential for both to agree on how to make their separate multimedia extensions compatible for multimedia developers.

However, as mentioned earlier, IBM is continuing its relationship with Microsoft on support for standard file and device control formats and so far is continuing its Windows development. One can only assume that Apple does not have sufficient clout to force IBM to stop this type of support if and when an agreement is reached. Of course, there’s nothing stopping Apple from working with Microsoft to merge RIFF/MCI with QuickTime, but with present levels of animosity and distrust between the two companies, it’s not likely to happen any time soon.

SO, (WHERE) DOES COLLABORATION MAKE SENSE?
Making content compatible. It’s become a cliche in the world of multimedia that “content is the key” to the success of digital media-based products. As any multimedia developer knows, creating even one version of a title is a staggeringly complex and expensive task; porting a media-intensive title to another computing platform, with the present (tiny) installed base of media-capable computers, is simply a waste of time.

Thus the benefits of deep compatibility between Macintosh and IBM computers are formidable. A phalanx of multimedia computers from IBM, combined with a few million media-ready Macintoshes, would create an enormous, attractive base of media-capable computers that would give the MPC some very serious competition for developer attention.

Both companies seem to be aware of this fact; one widespread rumor is that they are discussing the licensing of content from Time-Warner (as is Microsoft, allegedly). If true, such a licensing agreement could signal the beginning of a separate and powerful new multimedia publishing group based on the model being pioneered by Microsoft Press today. Though sources say this is not presently being discussed, it’s certainly one way for Apple and IBM to leverage their combined clout into a profit center that would clearly benefit both companies.

The formation of a separate company to manage the entire IBM-Apple multimedia partnership is a likely result of the present negotiations. Whether this will be successful from both companies’ perspectives depends on your degree of cynicism.

Though the other three parts of the IBM/Apple agreement prove Apple is clearly not abandoning its interest in the high-end business market, its recent formation of a consumer products division has clarified its intentions to sell smaller, more mobile machines that take advantage of the growing world of digital media and the convergence of computing, communications and content.

Next: WHY NOT SONY?
Why not Sony? In fact, there are those who say Apple would be much better served by forming a partnership with Sony, which does not pose the direct threat to Apple’s present business that IBM does. Such a partnership does seem to make far more sense.

And although IBM says it also is evaluating consumer technologies including CD-I, the company has made no bones about its intention to shore up tottering market share in its traditional, bread-and-butter business computing products in all areas from mainframes to personal computers.

A divergence of interests. A cynic might say that this divergence of interests — Apple’s new focus on consumers, and IBM’s renewed focus on business –highlights corporate cultural differences that make it impossible for IBM and Apple to collaborate effectively on multimedia technologies. In addition, it’s clear that IBM stands to gain the most from this agreement: hooking its name to Apple, in the multimedia arena where Apple is widely perceived as a technology leader, lends a certain cachet to the stodgy IBM name.

At the aforementioned analysts’ meeting, Sculley acknowledged that as hardware gets cheaper and computers become more interchangeable, software will cast the swing vote in a commodity market. Thus compatibility between multimedia technologies is a vital link to new customers for either company.

But an optimist (or a skeptic, depending on whether you think carving up the pie this way smacks of collusion) could counter that such a divergence in basic market interests will make it possible for Apple and IBM to differentiate their future businesses in a significant way, while cooperating in the areas — such as creating enterprise-wide, “open” computing and networking standards — in the business market, where it makes the most sense, and where competition is inevitable.

Next: BUSINESS AS USUAL
Right now, however, the downside of the potential collaboration — especially from Apple’s vantage point — is significant. Despite a heightened emphasis on software, Apple is still, after all, in the business of selling computers. There is no “prior art,” so to speak, on whether IBM is really serious about abandoning its former “we want it all” ways and will strive to cooperate, not dominate, in the larger world of heterogeneous computing.

The converse is also true. As the unproductive Apple/Digital Equipment partnership proves, Apple isn’t exactly expert at such cooperation. It has for years based its business strategy on a proprietary architecture, unlike IBM. An ample serving of humility on both sides is in order.

It’s also important not to underestimate the fact that Microsoft has a multimedia specification, working and in place, which it is marketing the hell out of. Though the potential fruits of cooperation are formidable, developers are likely taking a “wait and see” attitude about working with any Apple-IBM venture until their joint multimedia strategy is more clearly delineated.

Their bets are covered. In the meantime, Microsoft is signing up developers right and left, while IBM has clearly covered all its bets. Despite a deepening rift between the two firms, IBM is continuing its cooperation with Microsoft (in multimedia, at least) and is withholding at least one key technology — the color flat-panel display — from the Apple negotiations.

Even if an agreement between Apple and IBM were signed today, the joint venture — as well as Apple’s present business — would be hurt in the short term by giving the MPC more lead time to establish itself as an industry standard.

But if Apple can come up with a compelling way to make this agreement work for it as well as it works for IBM, such a collaboration could yield what everyone in the market has been praying for: a cutting-edge, industry-standard platform for developing and deploying media-based applications. Unfortunately, by the time they deliver it, there will be two such “standards.” Business as usual.

- Denise Caruso