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The Olympics have ended. The athletes are heading home. Songs for Tibet is off of the iTunes main page, but it is apparently still available for sale. The iTunes music store is once again accessible from China.

Maths over at Music2dot0 did us all a real service by expanding my Bipolar Apple post into a broader discussion. By the way, apart from excellent coverage of the realities and the posturing of all sides as the music industry evolves, Maths has the additional upside of having a very international view of the related issues. A superb blog and well worth a regular read if you follow the music business, and not just because he agrees with me.

Paul Resinkoff makes some wise noises at Digital Music News. He walks the line between two points of view: he urges Apple (NASDAQ:AAPL) to weigh its response carefully.

Eliot Van Buskirk over at Wired, on the other hand, represents the "common wisdom" on the issue. He thinks I am urging Apple to "censor" its content in order to appease the Chinese government. He takes me to task for suggesting that Apple become a censor on behalf of the Chinese. He misreads my point, and misses the larger picture around this particular incident.

What Really Happened

One of the reasons I usually hesitate to post on something right as it is happening is that it is impossible under such circumstances to have the benefit of perspective. As it turns out, I should have waited on posting on this - not because it would have changed my point, but because I got my psychological terminology wrong and, more important because the post would have been made stronger had I included some important chunks of information.

I won't recount what all of those chunks were, but do take a look at Joe MacDonald's piece for the Associated Press here.

A read through the story makes it clear that this was not a simple matter of Apple-carries-album-Chinese-slam-door.

The salient points:

  • The album was featured on the front page of the site - a choice I would wager was made by Apple, not by the activist organization that produced the album;
  • The album went live in the days leading up to the Olympics;
  • Pro-Tibetan activists have been attempting to leverage Beijing's hosting of the Olympics to draw attention to their cause;
  • The activists told the Associated Press that they had contacted athletes directly and provided free downloads to the athletes and urged them to play it in Beijing as an act of solidarity.
  • The activists then issued a press release telling the world that this was, in effect, a protest, and that at least 40 athletes in the village had downloaded the tunes.
  • The site was then blocked, fifteen days after the album went up.
  • The Games ended, the athletes went home, and the site was unblocked.
  • The album is available for purchase here in Beijing under the same conditions as everything else on iTunes - got a foreign credit card that bills to a foreign address, and the songs are yours.

If this were a simple matter of censorship because of some content, access to the site and the album would not have been restored. It seems clear that the content itself was not a problem - what set the Chinese government off was the concern over a potential protest in the Olympic Village. Apple was a target only to the extent that it was seen by the Chinese authorities as aiding that protest.

The implicit message the the government seems to be delivering is this: carry objectionable content in your overseas sites if you must, but use those sites as a springboard for protests within China, and they will be blocked.

Regardless of your stance on the rightness or wisdom of Chinese regulators taking this stance, as a businessperson you have to take notice where China seems to draw a line over which it does not want companies cross.

What you do with that information is another matter entirely.

To Cave or Not to Cave is Not the Question

The moral quandaries many companies face in doing business in China, whether they come from the hearts of the managers and employees or from the voices of their customers and home governments, are a part of doing business here. They vary from company to company, but they exist and cannot be ignored.

For example, many foreign-operated websites operating in China collect and retain information that could identify the individuals who come onto their sites. After the experiences of Yahoo! (NASDAQ:YHOO), Google (NASDAQ:GOOG), and MSN (NASDAQ:MSFT), any company seeking to operate a site that collects such information had better deal with the issue of what to do when the government issues a warrant for that information in advance, not after the door opens and the PSB is standing there.

Or, something else happens that calls into question the morality of doing business in China.

(Or, for that matter, what to do when somebody from some government agency makes it known that your company registration problems can disappear in return for some cash, a computer, a car, or a college education. Or when a reporter tells your PR manager that he's happy to run a story on your press conference - for the reasonable sum of RMB1,000.)

But many companies do ignore these issues. A frustrating number of executives, activists, pundits, and others attempt to portray doing business here as a choice: either you check your morals at the airport when you arrive, holding your nose and hoping a some congressional committee, journalist, or activist doesn't find out; you do business in China your way and risk getting thrown out; or you stay out of the market completely.

There is considerable debate as to whether Apple played an active role in assisting the efforts of the pro-Tibet activists, or the activists simply gamed the iTunes system, duping Apple into playing a role it would rather have not played. It almost does not matter.

If this was an effort to throw a sneaky punch at China, Apple risked its business in China without the upside of brownie points from its fans and others elsewhere because it never owned up to its role.

On the other hand, if this was a case of Apple's systems being gamed by activists who used the company as an unwilling accomplice, Apple looks foolish, and risks its business in China, and calls into question whether this will happen again, all while getting no credit for it.

What is worse, none of the above affected any kind of measurable change. It was a net negative for Apple. As such, it needs to ensure that something of this nature does not happen again.

But that does not mean giving in to perceived, implied, or overt demands that go against the nature of Apple, its executives, or the people around the world who use its machines and want very badly to see the company as an unalloyed force for good.

The Middle Road

I am an idealist.

I believe - I know - that it is possible for companies to make money in China and be agents of positive social change. Doing so, however, demands corporate resolve, transparency, superb communications skills, and and a healthy understanding of Chinese politics and culture.

I believe those two goals are not contradictory but rather are mutually supporting, and that in playing that positive role you will win points in China with the government, the people, your shareholders, and your customers elsewhere.

But companies can best affect change when they are trusted and thoroughly integrated into the fabric of Chinese economy and society. Not only does that give you access, it also ensures that when you behave in a way that could be interpreted as anti-China, you are given the benefit of the doubt by both the people and by policy makers.

That influence is built over time - not necessarily a long time, but it doesn't happen in a week or a month - and in a systematic fashion.

Unfortunately, most companies miss this. The process of gaining access alters them, defeats their resolve, makes them pliant.

Apple need not follow that route to ensure its success here.

Apple is already deeply embedded in the Chinese economy, but because it is mostly through manufacturing intermediaries, Apple has been largely invisible to policy makers and the people. That began to change with the popularity of the iPod and the growing number of Apple resellers around China, but the Apple Stores are really going to drive home not only that Apple has cool stuff, but that it is making that cool stuff right here in China.

If Apple can do that, all while proving that it is a responsible employer, pays its taxes, turns its back on corruption, and does good in the community, it will have more than adequate foundation to become a driver for social change without endangering - and indeed enhancing - its bottom line.

The one no-go place is publicly embarrassing, threatening, or insulting the country. You go there, and you damage your ability to drive real progress.

Nota Bene

There will always be people who question the value or the morality of doing business in China. When their arguments are sincere, intelligent, and thought-provoking they form a critical check on the often unbridled enthusiasm about China. Whether those voices come from within the company or without, they deserve their due and balanced consideration not just in the PR department, but in the rooms where major decisions are made about a company's future.

Woe to the company that ignores them. They deserve sincere, intelligent, and thought-through answers, regardless of what the decision may be.

As Paul Resinkoff suggests, Apple, for its part, would do well to consider those voices now. And if your company has not yet, it should as well.

Source: Apple's China Debacle: The Corporation as an Agent of Social Change