updated 12:50 am EDT, Sat August 4, 2012
Says company gets 'free ride' on Apple's $1B advertising budget
Apple Senior Vice President of Worldwide Marketing Phil Schiller, who took the stand very briefly at the Apple vs. Samsung trial on Tuesday was interviewed again on Friday, including cross-examination by Samsung attorneys. Schiller gently rebuffed a question that would have revealed the company's plans for the next iPhone, but did disclose some information on iOS product sales, advertising budgets for Apple, and reiterations that Samsung had copied Apple's products.
The success of the iPod led Apple to consider entering other fields, but executives noticed that they all had cell phones -- and all hated them. A decision that had been made to investigate multi-touch technology, which "nobody was really doing anything with" in pursuit of a possible tablet was re-directed to be used to develop a phone.
Apple's own lawyer led Schiller through a series of press notices, many of them commenting on the innovated design of the first iPhone -- not just the hardware but also the software of the device. Schiller noted that when Jobs died late last year, the US Patent Office created an exhibit of Jobs' inventions and innovations. The iPhone was used by the USPTO as a prime example.
When asked about iPhone sales, Schiller joked that the company originally used an internal metric of success that said that each new model should sell as many units as all previous generations combined. In fact, this is almost exactly what has happened -- Apple sold 93 million units in 2011, which is just over all combined iPhone sales from 2007-2010. He acknowledged the "lock-in" or "halo" effect of the iPhone -- since customers are likely to have a good experience with it, they are likely to buy another one when their contract is up.
In talking about the iPhone, Schiller opined -- and later pointed to charts documenting the fact -- that the primary reason people bought the iPhone was because "people find the design beautiful," rating the ease of use as the second most common factor. He added that Apple's expertise and combining hardware and software to work smoothly together creates an entire experience "that works well for the customer." He showed summaries of customer surveys done "from time to time" by his marketing team that found 85 percent of iPhone buyers rating the appearance and hardware design as "very important" or "important" to them.
Schiller recalled the doubts that many in the press and the industry had about the iPhone's ability to succeed. He specifically noted Microsoft CEO Steve Ballmer's dismissal of the device, as well as noting some negative reviews from existing phone manufacturers and pundits, but also mentioned positive write-ups from the time, including a glowing review from Walt Mossberg. When asked a similar question about the iPad, Schiller referred to it as "a big gamble" and said that many considered the tablet a failed product before Apple entered the market, and showed that Apple was willing to take a real risk that it would not be successful.
Early reviews of write-ups about the iPad were highly mixed, with many wondering how it would find an audience that already had computers and smartphones. Many professional technology pundits either panned or were openly skeptical of its features, echoing the lukewarm reviews that the early iPod had received.
To market the products, Schiller says the company developed a concept called "product as hero," which meant that the device itself was the centerpoint of every ad. This is especially noticeable in the early iPhone ads, which show a disembodied hand running through the features and how to use them. Apple has made a DVD of all the iOS ads available for the jury to use.
Schiller mentioned how important targetted advertising and product placement in TV shows and movies had been to the company, and for the first time revealed specific figures on how much Apple had spent on advertising. The figures mentioned grew from under $100 million in 2008 to over $230 million in 2011. The iPad, separately, also got around $150 million in advertising in its debut year, and some $300 million in 2011. All told, Apple has spent over a billion dollars in advertising both products from launch to the present day, a fact he used to accuse Samsung of riding on the coattails of Apple's ability to attract publicity.
After lunch, Schiller was asked more specifically about Samsung's products, how familiar he was with them and so on. He said he was "pretty shocked" when the first Galaxy S model came out, closely resembling -- both in form factor and on-screen display -- the iPhone. Schiller said the introduction of copycat products by Samsung caused problems for Apple in terms of marketing and customer confusion. He took pains to note that he was not against competition, saying that "every day" companies create and sell products that compete with Apple, but "they create their own unique solutions, their own unique designs. We let the customers decide who's right, who has the better products. That's fair competition."
He added that Samsung's more obvious copying was not "fair competition" because it "trades off all the investment and goodwill we've created ... you're taking the hundreds of millions we've invested in our products and all the value we've created." Schiller said he was even more shocked when Samsung came out with products like the Galaxy Tab that clearly imitated the iPad. "They're just going to copy our whole product line," he said he remembered thinking at the time.
Copycat products "makes our job as marketers more difficult, it confuses the customers [and] diminishes the value ... and dilutes the way customers see Apple." Schiller said it "absolutely" had an impact on sales, because once a customer has bought an Android product they are equally "locked in" to that eco-system as they would have been if they'd bought the iOS device.
Samsung's lawyer asked Schiller mostly about design elements, trying to get the Apple executive to admit that some features of the iPhone -- such as the on-screen keyboard -- were purely functional and not ornamental, a key tenet in Samsung's defense. He was similarly quizzed about the utility of rectangular shaped devices, rounded corners, touchscreens, and reminded that a handful of modern-style smartphones existed at or just before the iPhone came out, such as the LG Prada (which offered a large touchscreen but at a premium price). The Samsung attorney seemed determined to establish that once you have decided on a non-physical keyboard, many of the other elements of the iPhone (rectangular shape, touchscreen) become obvious. Schiller deflected the statements and questions.
Apple's claim of being first to market with some features was also challenged, with Schiller being shown an email from a colleague who points out that although Apple was the first to be successful with some technologies (such as multi-touch), it wasn't actually the first. Samsung's attorney also expressed doubt that consumers were very confused between the products, since smartphones still cost hundreds of dollars and consumers presumably weigh their choices carefully before signing a contract.
Under repeated questioning, Schiller maintained that consumers could be confused between Apple and Samsung devices through some types of advertising such as billboards, where consumers "only get a glimpse" of the product. He said that while a number of Samsung phones copied the iPhone, when asked about some specifics Schiller admitted that Samsung's four-button approach is different and "not as beautiful" as the iPhone's single-button approach.
At one point while being cross-examined, Samsung's attorney embarrassingly mixed up the models of Samsung phone he was giving Schiller to comment on. Schiller used the opportunity to tell the attorney that the mistake was natural, as Samsung's lineup "was confusing."
Schiller also admitted that many iPhone users have a bumper or case around their iPhone that obscures some of the distinctive design. The Samsung attorney tried to get Schiller to answer a question about design changes on the next version of the iPhone, but Apple's lawyers objected to the question and Schiller deflected, saying he didn't want to talk about confidential products. Samsung's lawyers didn't press the point.