Last week Apple launched the new version of their movie-editing software, Final Cut Pro X (FCPX). This led to a firestorm of criticism by professional video editors (see here, here, and here). Even Conan O’Brien decided decided to chip in :-). The main complain is that it lacks sophisticated features used by broadcasters and video professionals and that are available in earlier versions of the software. FCPX doesn’t even open projects built using earlier versions! On the positive side it is slick and easy to use.
Apple is consolidating its strategy
I suspect that two things are happening. The first is that Apple is consolidating their strategy around mobile computing, the iCloud and end-customers. The price tag for the new FCPX is an indication (US$299.99 versus around $1000 for the earlier version). The move by Apple away from “professional” markets has been happening for some time now and across multiple products. It happened with Aperture, which is now basically an upgrade for those using iPhoto, and a nice one at that, but distinct from Lightroom+Photoshop. Earlier this year Apple decided to discontinue its professional xserve rack mounted server. This year’s Macbook Pro notebook was the first to receive several new high-end features (Thunderbolt and 6Gb/s SATA) that have yet to appear in Apple’s high-end Mac Pro desktop aimed at professionals. This is not a surprise as Apple is now selling 2.4 times more notebooks than desktops.
Focusing on the consumer market makes good business sense for Apple because (a) it fits with their capabilities, which are about making complicated things simple to use, whereas a lot of professional software is by nature complicated and intricate, (b) they can cross-sell many more copies of the software to people upgrading from iMovie or iPhoto than they can to a niche audience of professionals, and (c) it fits well with their major strategic thrust on the iphone/ipad/icloud platform, which is consumer focused rather than enterprise focused.
Video consumption is changing
While video professionals are blaming Apple for not listening to their needs, there is a bigger trend that is happening here. Apple is responding to anticipated changes in the marketplace. Just as with the newspaper and book publishing industries, there are big changes happening with video production and broadcasting. An increasing number of videos are being made by “advanced amateurs”. This is driven by the proliferation of inexpensive video cameras, as well as new platforms for online video distribution. When I think about my own personal consumption of video, I am amazed how little television I watch anymore. I do watch the occasional movie, but an increasing amount of my video consumption is on Youtube, Vimeo and other sites sent to me via Facebook, twitter and email. Are these videos as well-made as those by professional broadcasters? No. But are they good enough for the general public? Often, yes. For these people, the new Final Cut Pro X is a terrific tool for the most part.
Beyond traditional video, there are other interesting developments, such as animoto that takes the pain out of making simple music videos. There is software like Toontastic that lets you make animated skits and apparently even the Gans family is now into it. Each minute of our free time we spend watching these things is probably a minute less spent watching professionally-produced video content.
I’m not saying this to defend Apple. As David Pogue pointed out, in the case of FCPX, Apple Blew It. Some of my friends are in this business and I can’t help feeling concerned for them. As one of them wrote to me, “the industry has gone nuts over this ‘upgrade’. it’s really bad and sad”. I think Apple should have launched FCPX as a different product, instead of discontinuing Final Cut Pro. But the knee-jerk reaction among video professionals right now is leading them to be angry about some some video editing tool. Fair enough. But they need to assess the bigger question: where will their industry be in 5 years, and where do they want to be in their careers?
Core Economics 
I would like you guys to stop blogging so often about Apple. This is an economics blog, not an Apple blog. There is (believe it or not) rather a lot of Apple crystal ball-gazing and technology comment on the Internet already.
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Thanks for the comment, Tom. I suppose it happens because Apple is of interest to people who are interested in the economics of innovation.
In this particular post, I am hoping to link Apple’s recent actions to strategic decisions at the firm level and technological changes at the industry level. This is quite different than most “Apple-oriented” blogs out there which are focused on the specifics about Apple’s products and where it went wrong.
Thanks for reading our blog and for taking the time to write. We do cover a broad range of topics and while that includes Apple, we also recently covered Qantas, Cisco, credit default and Greece, Harry Potter, the philanthropic organization CAI, and cloud-based econometrics software.
Best regards
kwang
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Kwanghui I think you’ve been rather nice to Tom. As a reader I don’t read every single post but I think you’re entitled to post whatever you want to post about and should continue to do so.
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I read what your writing Kwanghui about the possible consolidation strategy targeted towards the consumer market but it’s still somewhat – nonconstructive.
Can’t we counter that view with the argument of adopting a software verisioning strategy instead? Or they could have sold-off FCPX to someone else like Sony if it was no longer a fit with their consumer focus?
It’s almost as if Apple is “cutting off its nose in spite its face”.
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Hi David – great to hear from you. Hope you’re doing well.
You have a good suggestion. I did suggest a software versioning strategy in the final paragraph, i.e, with FCPX as a separate pro-sumer product instead of a replacement.
The spin-off idea is another possibility. Apple did it once before with Claris, thereby divesting itself of Filemaker Pro. http://en.wikipedia.org/wiki/Claris
I don’t know if they are considering such a move these days.
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“But they need to assess the bigger question: where will their industry be in 5 years, and where do they want to be in their careers”
No they don’t, they need to work on software that does the job, today.
As far as I can tell this is like producing publishing software with no option to print to paper. Sure, print is in decline – but that’s of little help when you need to send that brochure to the printer tomorrow.
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Kwang – apologies if my comment gave offence. That was not my intent.
Of course you and all the other bloggers here can write about whatever you please, as DavidN says.
I confess I have been somewhat irritated by the recent focus on iCloud due to the fact that, by comparison to most of Apple’s offerings, it is so un-innovative and uninteresting. That’s my problem though.
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Hi Tom, no need to apologize. No offense taken.
iCloud is more of a sync tool than a cloud, but I’m afraid of opening a whole other can of worms…
kwang
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