They also spent $467,000,000 on advertising in 2007.
What's missing?
Apple also understands that they need to deal with regulations. Quoth their Annual Report:
The Company is subject to risks associated with laws, regulations and industry-imposed standards related to mobile communications devices.
Laws and regulations related to mobile communications devices in the many jurisdictions in which the Company operates are extensive and subject to change. Such changes, which could include but are not limited to restrictions on production, manufacture, distribution, and use of the device, locking the device to a carrier's network, or mandating the use of the device on more than one carrier's network, may have a material adverse effect on the Company's financial condition and operating results.
Mobile communication devices, such as iPhone, are subject to certification and regulation by governmental and standardization bodies, as well as by cellular network carriers for use on their networks. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates, which may have a material adverse effect on the Company's financial condition and operating results.
They also get the whole "DRM" thing:
The Company relies on third-party digital content, which may not be available to the Company on commercially reasonable terms or at all.
The Company contracts with third parties to offer their digital content through the Company's iTunes Store. The Company pays substantial fees to obtain the rights to this content. The Company's licensing arrangements with these third parties are short-term and do not guarantee the continuation or renewal of these arrangements on reasonable terms, if at all. Some third-party content providers currently or may in the future offer competing products and services, and could take action to make it more difficult or impossible for the Company to license their content in the future. Other content owners, providers or distributors may seek to limit the Company's access to, or increase the total cost of, such content. If the Company is unable to continue to offer a wide variety of content at reasonable prices with acceptable usage rules, or continue to expand its geographic reach, the Company's financial condition and operating results may be materially adversely affected.
Many third-party content providers require that the Company provide certain digital rights management ("DRM") and other security solutions. If these requirements change, the Company may have to develop or license new technology to provide these solutions. There is no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner. In addition, certain countries have passed or may propose legislation that would force the Company to license its DRM, which could lessen the protection of content and subject it to piracy and could also affect arrangements with the Company's content providers.
Notice something missing here? Apple operates the largest music and video download service in the world. Their ability to provide that service is dependent on the willingness of network operators to not interfere with Apple's customers who rent their movies on their AppleTV instead of say, using their Digital Cable or Satellite Set Top Box.
In other words, while they admit they're dependent on third-party content, they refuse to acknowledge their reliance on "third-party bandwidth."
Meanwhile, tomorrow the FCC will meet to hear about net neutrality issues, again. Apple, and in particular Steve Jobs, has shown an ability to move entire industries to make more consumer-friendly choices. You can get most TV shows and movies on iTunes now. Who would have imagined that even 4 years ago?
Yet, Apple's continued ability to innovate is completely tied to the goodwill of say, Verizon, who may want to save more bandwidth for their own VoD "rental" service, or another network operator using some kind of "reasonable management" when iTunes downloads reach a critical mass, especially once more people start renting or buying HD content.
Which brings me to the most shocking number of all:
$20,000.
That's how little Apple has spent on lobbyists in Washington during the 2nd half of 2007. What's more shocking, is despite launching iPhone, and making preparations to launch the improved AppleTV last month, here's what they spent their $20k on:
H.R. 1908/S.1145, The Patent Reform Act of 2007; Section 115 of the U.S. Copyright Act: Compulsory Licensing of EU Copyright Directive.
That's from their year-end 2007 Lobbying Disclosure Act report. They didn't so much as make a single contact with the FCC during the last half of 2007.
Last January, Apple Computer became just "Apple," because they were starting to sell more than computers. You would think they would be interested in protecting their new revenue streams, and the networks that allow them to be such innovators in content distribution to all consumers.
Time to ante up, Steve.
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