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A customer uses an Apple iPad

To understand the idiosyncrasies of Apple Inc.'s content strategy, consider the case of Hugh Hefner and his pornography empire.

Apple observers were stunned when the Playboy boss announced that an uncensored edition of the magazine was coming to iPad tablets. The idea seemed to run afoul of Apple's long-standing policy against adult content on applications for its mobile devices - a policy that so frustrated Mr. Hefner, he once opined that "Steve Jobs has a thing about nudity."

It turned out that Mr. Hefner was merely sidestepping Apple's no-pornography edict by designing an iPad-friendly version of its website, rather than an app. Another magazine publisher had figured out a way to tap into Apple's immensely lucrative user base. But it wasn't exactly in the way he wanted to do it.

So it goes for publishing and media companies around the world, who salivate at the prospect of reaching tens of millions of iPhone and iPad users, yet are frustrated by the myriad restrictions Apple places on their attempts to do so. They have discovered - as music companies did long ago - that dealing with Apple is a double-edged sword: In return for access to Apple's army of loyal customers, they have to be prepared to give the world's largest technology company a healthy slice of their revenues, and play by Apple's rules.

The visionary behind this business model is co-founder and CEO Steve Jobs, who this week shocked the business world by saying he would leave the company indefinitely for medical reasons, less than 18 months after he returned to the firm following a liver transplant.

Though he is known to engage in virtually every area of the business, it is this one - Apple's attitude toward, and its negotiations about, content - where Mr. Jobs is likely to be missed the most. His negotiating prowess and familiarity with the media landscape helped convince content giants such as Disney and News Corp. to hop on the Apple bandwagon. Should this be the end of Mr. Jobs' day-to-day management of the company, such deals may suddenly become more difficult to complete. And his sick leave comes at a time when Apple is in the midst of thorny discussions with a variety of content companies who want to devise products for, and sell subscriptions and advertising on, its iPad tablet computer.

For Apple, maintaining the appeal of its user ecosystem to content providers, while also trying to maximize its own profits, might be the most important balancing act the company has ever faced. And with its chief executive officer and savviest negotiator possibly leaving the company for good, that balancing act just got a lot tougher.

"[Jobs]had the great ambition to steer the company toward his vision, which is 'Our brand is paramount,' " said Frost & Sullivan principal telecom analyst Ronald Gruia. "That sheer determination, almost tunnel vision, is what makes Apple such a formidable competitor."

The battle for content between Apple and its chief rival Google (which entered the mobile device market via licensing Android to just about any manufacturer who wanted it) is essentially a battle between two competing philosophies on technology: closed versus open.

Whereas Android is essentially open to any developer or manufacturer, with few restrictions on content, Apple is a more "curated" experience, with strict rules, not only on what kind of content app-developers can provide, but also what users can do with their devices. Android proponents have long argued that the openness of Google's platform makes it more appealing, and that as adoption of the platform grows, Apple will lose out as a result of its more-controlling philosophy.

However Mr. Jobs argues the exact opposite.

"In reality, we think the open versus closed argument is just a smokescreen to try to hide the real issue, which is what's best for the customer: fragmented versus integrated," he said during a quarterly earnings call in October, the last time he spoke publicly to analysts and journalists. "We think Android is very, very fragmented and becoming more fragmented by the day."

Nonetheless, Android phones, in total, are beginning to outsell the iPhone, and with all kinds of tablet flavours due out soon, content providers are increasingly moving away from exclusivity agreements.

One of the more interesting examples of that trend is Disney's move into the mobile space. After the company bought animation firm Pixar in 2006, Mr. Jobs became the largest individual Disney shareholder. As such, it wasn't surprising when Disney launched an exclusive iPad app last summer. However it was somewhat more surprising when the company revealed it is partnering with Sharp Corp. to launch a Disney-branded smart phone in Japan - running on Google's Android.

"Content is important but the goal of handset manufacturers is going to be to try to get some exclusivity," said Frost & Sullivan's Mr. Gruia. "But content providers are going to try to get away from those kinds of deals."

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THE CONTENT WARS

Apple's ability to attract big-name content providers on its own terms has resulted in some interesting deals (and non-deals) with some of the giants of the media world.

The Daily

News Corp., Rupert Murdoch's media conglomerate is poised to launch The Daily, an iPad newspaper, in the next few weeks. The publication represents a close partnership between Apple and News Corp., and is expected to coincide with the launch of Apple's new subscription-like payment service. Users will pay a subscription and have new issues automatically pushed to their iPads, a payment model that will have an impact on most newspapers that have an iPad app. Some papers have been told by Apple that any app payment that doesn't go through its own payment system will soon be prohibited.

The Beatles

The iTunes Beatles deal late last year marked an amazing turnaround for two companies - Apple Inc. and Apple Corps - that had been fighting for decades over trademark issues. Apple already dominates the online music retailing world and runs the biggest music store with iTunes, but the addition of the Beatles catalogue gave the company an even bigger lead in the market.

Playboy

The world's best-known adult magazine caused a stir this month when founder Hugh Hefner announced an uncensored version of Playboy is coming to the iPad. Apple largely prohibits nudity on apps for its mobile devices, and it turns out Playboy will get around that by designing an iPad-friendly version of its own website. Content providers are increasingly moving to get around Apple's rules and the company seems happy to let them do so.

NPR

When National Public Radio in the U.S. began posting content to mobile users through its iPhone app, the not-for-profit media outlet saw it as a good way to solicit donations. But NPR and other non-profits were dismayed when Apple stopped giving their apps the ability for users to take advantage of one-click billing. Apple apparently didn't want to be held responsible for determining whether charities are legitimate. Non-profits countered that other payment services have managed to do such authentication, and that it shouldn't

Omar El Akkad

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