Apple's Bipolar China Disorder

So here is the deal.

Apple (AAPL) starts selling an album called "Songs for Tibet" on its iTunes Music Store (iTMS), and it does it right in the middle of the Beijing Olympics. Coincidence, or passive-aggressive middle finger to China? Apple isn't saying anything about it, so we are left to reach our own conclusions.

Next, word gets around that a bunch of Olympic athletes staying here in China - reports say as many as 40 - have purchased and downloaded the album.

Yesterday, people around China began noticing that the iTMS is no longer accessible from China. A few of the more tech-minded actually decided to try to use traceroute to figure out why. They confirmed that access to iTMS was being blocked by China.

You mess with the bull...

Without getting into a debate over the politics, let's look at the business issue.

Apple is in the early stages of a much belated (and arguably long-overdue) push into China. After nearly two decades of near-invisibility, the company opened its first Apple store in China just three weeks before the Olympics. A second Beijing store is under construction, and Ron Johnson, Apple's senior vice-president of retail, said there are many more China stores to come.

At the same time, Apple is apparently deep into negotiations with at least one Chinese carrier to start selling a (fully-enabled) iPhone here in China.

And of course, Apple has finally begun making headway in the market against its rival computer, phone, and music player rivals.

By selling "Songs for Tibet," Apple has placed these efforts in jeopardy.

Apple has given the government all the excuse it needs, not only to block the iTunes Music Store, but to raise extra barriers on permits for further Apple retail stores, to throw barriers in the path of Apple's iPhone deals with state-controlled carriers, and to make the creation of a Chinese iTunes Music Store and App Store a distant dream (unless the let the carriers run it.)

Not to mention make the lives of thousands of dedicated Apple customers here in China just a little more miserable - especially those of us who count on iTMS as our sole source of legitimate (non-pirated) music.

And Apple is alienating the very market it is trying to create in all of these efforts, infuriating the legions of Chinese who believe that the situation in Tibet is far more nuanced than the media, activists, and general public outside of China understand.

...you get the horns.

I am sure there were valid marketing considerations behind the decision to sell "Songs for Tibet." I'll even grant the (specious) possibility that there was a good business reason to do so during the Olympics. If not, Apple was certainly within its rights to make a political statement.

But Apple - and its shareholders - must recognize that its own actions are sabotaging its efforts to build a market in China right as those efforts are showing fruit. Such a bi-polar approach to this market is not sustainable. Apple management needs to choose between developing China as a market or the freedom to engage in random acts of passive-aggressive panda-punching.

Making that choice, as much as real estate and labor expenses, is part of the cost of doing business in China.

Comments

[Azazello:]

Interesting reporting, but the meaning of passive-aggressive is not what you think. Plus, you are trying to steal attention (clicks) by using another psychiatric idiom 'bipolar disorder' incorrectly. Trust me, I am a psychiatrist/psychoana... -- I will spare you of my diagnosis...
cheers!

2008 Aug 20 05:45 AM

[Azazello:]

Hm. What happened to the word psychoanalyst in my post? Censorship is not the prerogative of China?
sweet!

2008 Aug 20 05:48 AM

[daniel murray:]

Censorship and the internet? Apple can thrive without products and services in China or Russia. There still remains a right and wrong no matter what's in your IRA/401.

2008 Aug 20 06:47 AM

[cotten999:]

So, if Apple doesn't offer "Songs For Tibet", then they are taking a political stand FOR China's actions?

Music is not political. It is a universal language to express emotion.

I hardly believe that China or any sovereign, would use the posting a collection of music as leverage to get the most technically advanced product into their country. If negotiations fail due to this, who is getting hurt more? Apple or China's iPhone-hungry population? I can see the newspapers now -

"China shuts down iPhone Negotiations Until Song is Removed from iTunes."

Your post served its purpose. It got its share of hits.

Congratulations.

2008 Aug 20 06:54 AM

[daniel murray:]

So the iTunes store is down in China because ?

2008 Aug 20 07:15 AM

[lucaspukus:]

I have shares in Apple & though this may effect Apples push into China, I dont really have a problem with it.
As Daniel commented before me, there is still right & wrong, & if losing a few bucks in share value means that a whole bunch of Tibetans live, I say release more albums

2008 Aug 20 07:44 AM

[sgmsg:]

Wow!

Ethics is just for American. What about Watergate...

China is a dictature where only few known by "the party" can become rich.

This is the kind of reason why Indepandency happenned in 1769.

I'm speechless about the conclusion of this reporting : "But Apple - and its shareholders - must recognize that its own actions are sabotaging its efforts to build a market in China ... is part of the cost of doing business in China."

Money is more important than morality. Rights are for us not for other.

Modern Olympics are the gate to improve or degenerate country.

Let see the cowards........

2008 Aug 20 08:04 AM

[Shorting Sh...:]

Suggesting Apple is making a political statement is a huge and absurd reach.

2008 Aug 20 08:51 AM

[Turley Muller:]

I don't think it's possible for Apple to tell the music label and artists it's not going to carry their music because Apple's afraid to offend China, while every other music retailer is selling the music. So downloading or buying from Amazon is OK? Wal-mart too? or I guess since very few people download music from there compared to iTunes, Amazon glides under the radar.

This article has a suggestive tone that Apple may premeditatedly concocted a plan to do something brash or was Apple carries over a million albums i believe. Pulling a single album would mean that Apple is selective in its content, which further implies the music it does choose to sell reflects Apple's political/social views because it refuses to sell music that conflicts.

A good deal of Music has been/continues to be based on political ideology. It's a great medium for communicating the intensity of one's beliefs and emotions. I bet half the Music out there offends a some group, somewhere. It's the artist that are making a political statement, or groups paying the artists to record the music to promote an agenda, not Apple. It just sells what record produces submit to the iTunes store.

If Apple refused to offer the album, it would be infringing on American's rights of free speech and non-censorship to satisfy a foreign country that denies those rights. The fallout in the US would be immense. Lawsuits, boycotts, record labels pulling out. All that lost to gain what? China is used to these types of propaganda attacks.

I don't think China will blame Apple, if so, then China should blame all the other music retailers. Past couple weeks, China has been facing political attacks from all directions that their shit list has gotten too long to even manage probably. They, and everyone else knew that there would be a flood of protests/demonstration... with the world's attention focused on Beijing. It will be water under the bridge I think.

If Chine shut Apple out of it's domestic business how much would that hurt Apple? In return, If Apple ceased to buy Chinese manufactured components how much would that hurt China? Who has more to lose? Neither party wants to weaken the relationship.

China always moves at a very slow pace, and Apple is not in a huge rush for an official iPhone provider. Apple is selling a good many iPhones in China already.

2008 Aug 20 08:57 AM

[FreeRange:]

Like other tech players that have had to concede to China's rules for conducting business in China (Google, eBay, Yahoo), if Apple needs to make changes to succeed there, including limiting content on iTunes in China, then so be it. Apple is a business and not a political entity. As a stockholder, I fully expect Apple to comply with Chinese rules and regulations, and to aggressively market their products in this rapidly rising, AND CHANGING, consumer market. Lets keep some perspective here. As a frequent visitor to China, if consumers want access to specific content, including banned music, books, web content, etc. I can assure you they find a way to get it. To say that this burden should be on Apple is at best ridiculous and shows a lack of understanding of the Chinese people and market.

2008 Aug 20 10:51 AM

[mollytjm:]

thank you FreeRange for your comments. they are the ones that make sense.

2008 Aug 20 11:28 AM

[moralcompass:]

For those of you who think Apple should take a moral stand, please look at this from a different angle. Apple itself, or any business for that matter, can't make much of an impact on China. By growing in China, allowing the Chinese to obtain silly things they don't really need like the rest of the world, Apple is actually spreading capitalism. How are people going to pay for an iPhone or iPod? By making money, which will require them to move more towards capitalism than communism (unless the government gives eveyone an iPod/iPhone). By growing their business in China Apple is doing more to fight communism than selling some stupid song.

2008 Aug 20 11:46 AM

[tibet1959:]

Apple is a pioneer ahead of its time. The world cares more about a compassionate retailer, one who truly takes into account the environment and human rights and people as a whole for the long term. The spirit of the hundreds of thousands of Tibetans killed by Beijing's government, the 5000 still imprisoned in Tibet and the hundreds killed since the March 2008 uprisings salute Apple for its kind undertakings and condemn those place short term profits above human rights.

2008 Aug 20 12:35 PM

[what is app...:]

They did that right before the Olympics. Why not make a "Songs for Native Americans" album every Thanksgiving?

2008 Aug 20 12:40 PM

[AppleFinland:]

Another completely useless, say-nothing POS article.

Buddy, quit it ... give it up and go do something else. You add no ... zero ... value to our understanding of AAPL.

2008 Aug 20 02:05 PM

[brewer:]

What Apple is not thinking is that they are a lapdog of the Chinese government.

If China won't allow Apple into their wireless networks, perhaps Apple will take the manufacturing business elsewhere.

Was it good for Microsoft to GIVE AWAY MS Office to all of the Chinese, while charging hundreds of times the same price to anyone else? That is simply rolling over, but they had no choice because their technology is actually WEAKER than the free stuff.

Apple is no more responsible for the content of music on the iTunes store than any record label is for the ideas or emotions invoked by the artists on their labels.

2008 Aug 20 02:42 PM

[aclark:]

You're making an invalid assumption here. Apple did not choose when to start selling this album. That is the decision of the label that represents the album, in this case, The Art of Peace Foundation.

Also, considering that there are around 10,500 athletes competing in this year's games, that only 40 (possibly less since this was only a rumor) downloaded the album makes me wonder what the actual point of your article is. It seems to me that you're decidedly ill-informed about both Apple's music business operations and the impact that this album and its' release have had in China.

It's far more likely that the store was taken down because of it's large index of free and unfiltered podcasts, with topics ranging from animal husbandry to zygote cell division, rather than the inclusion of one album when multiple Tibet related albums already exist in the store.

2008 Aug 20 04:22 PM

[At the Money:]

This is nothing more than a PR stunt by International Campaign for Tibet (ICT) and Art of Peace Foundation. The album was put on the front page of iTune store on the opening day of the Beijing Olympic Games. It would be interesting to find out how much copies have been sold so far. Unfortunately, the Chinese government took the bait and made it a headline.

Note that AP casually left out the fact that these 40 Olympians were offered to download the $11.99 album for free (technology.timesonline...). So not only “free Tibet” is trendy, it is now also free. What’s not to like?

So much for “an act of solidarity” as declared by the executive director of Art of Peace Foundation.

2008 Aug 22 12:05 PM

[At the Money:]

Some people here are suggesting that Apple has not control or the right to control what kind of music it sells on iTune. This is absurd.

Not only Apple has full control of what to sell, it also chose to place this particular album on the front page of iTune store on the day that the Beijing Olympic Games started.

2008 Aug 22 06:58 PM