Is Apple the new Microsoft?

The tide is turning in the technology industry. Microsoft, the most feared and revered company of the 1990s, no longer inspires the awe it once did. Competitor offerings have trounced Microsoft in select vertical markets. Google is the king of the web services space, and Apple has established itself the top dog in the world of digital media. Hitherto the darling of the press, and considered by many to be a true innovator of consumer products, Apple is suddenly in the hot seat. The dominance of iTunes, the iPod, and the mixed message sent by the pricing of the iPhone have left a bitter taste in the mouth of consumers, analysts and the press alike.

Regardless of how you dice it, the American populace has a thing for the underdog. I sense a brewing, and swelling discontentment with the status quo that could lead to a groundswell of support for Apple's competition. The biggest beneficiary of the move away from Apple would be the Zune; if positioned correctly, the Zune can ride the changing tide, expose a few chinks in Apple's armor, and challenge Apple's hegemony.

Apple not only "bundles" iTunes with multiple products, it forces you to use it. At least with Internet Explorer, you could always just download a competitor and ignore IE.

Not fair, you might say. Any hardware device that syncs data with a PC as part of its core functionality has software to facilitate that syncing. True enough. But operating systems have browsers as part of core functionality, too. Doesn't Mac OS X come with Safari? Doesn't the iPhone?

And "bundling" works. Steve Jobs bragged this week that Apple has distributed 600 million copies of iTunes to date. The overwhelming majority of those copies were iTunes for Windows. And iTunes for Windows' popularity isn't driven by software product quality. ITunes is the slowest, clunkiest, most nonintuitive application on my system. But I need it because I love my iPod.

Apple's reputation of being innovator par excellence is slowly getting tainted too. As PC World's Mike Elgan eloquently states:

Apple the copycat

Ten years ago, Microsoft haters complained that Windows followed the Mac OS to market as a graphical user interface, copying the Mac's features such as folders, trash cans, resizable windows and other elements. That complaint was repeated with each new version of Windows -- Apple was the innovator in the operating system space, and got there first with a host of key features. Microsoft just came along later, duplicated features that Apple pioneered, and reaped the benefit because of its monopoly power.

But who's innovating now? The LG KE850 was winning awards for its full-screen, touch-screen, on-screen keyboard before Jobs even announced the iPhone.

The best thing about the iPhone and iPod Touch -- the warm-and-fuzzy multitouch UI with gestures -- wasn't new, either. Various labs have been demonstrating similar UIs for more than a decade, and even Microsoft demonstrated a fully realized 3G UI in May, well before Apple shipped the iPhone. Microsoft will ship its tabletop UI, called Microsoft Surface, in November, and Apple will likely enter this space with a 3G UI months or years after Microsoft does.

And Wi-Fi in a media player? Ha! Microsoft's funky Zune had that almost a year before Apple did and SanDisk's Sansa Connect with Wi-Fi was released last June. Apple even stole the name for its iPod Touch product, according to HTC, which sells a touch-screen smart phone called the HTC Touch.

Apple is in the eye of a press storm, and as an investor, this could bode well for the short term. You don't have to be psychic to see a plethora of class action lawsuits against the company in the future. Only a study of past events would make you think that an anti-trust lawsuit against Apple is looming over the horizon.

A consumer walks into a local retail outlet to buy a Christmas present for dad. The Apple iPod "section" of the store dwarfs the section where all the also-ran players are displayed. IPod is clearly the trusted standard. The consumer buys a shiny new "Fatty" iPod nano with video.

Dad opens the present and is excited. He follows the directions, installs iTunes and immediately splurges on a few dozen songs at the iTunes store. He loves it, and is an instant convert to portable digital music.

The only downside is that he works out every day at the gym, where cardio machines face TVs that broadcast sound over FM radio. Six months later, when his iPod is stolen, he goes to buy another player -- this time, he hopes, with an FM radio in it. Several competitors offer this feature, but not iPods. He's about to choose a new player with an FM radio when it hits him: None of his files -- now totaling 300 songs and 50 movies -- will play on the new player. He bought and paid for all this content, but it only works with iPods and iTunes.

Apple has an iPod customer for life. Microsoft never had this kind of monopoly power.

Let's see how this plays out...