Resnikoff’s Parting Shot: iTunes Meets China

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As the Olympic torch departs Beijing, Apple is now faced with a difficult hangover.

Last week, China terminated access to the iTunes Store, allegedly in response to the positioning of a pro-Tibetan album compilation.  The album, Songs for Tibet, was timed perfectly around the Olympics circus, though the Communist Party of China was unamused.

Now, Apple faces a critical test of diplomacy, one that could have serious implications for the company worldwide.  Acquiesce  to the censoring demands of the Chinese, and credibility could take a hit back in Europe and the United States.  Push back, and China could create serious access problems.

And make no mistake, credibility is incredibly important for Apple – and incredibly difficult to maintain as the company continues its rapid expansion.  Imagine, an enterprise-level corporation, with billions of annual revenues, enjoying cult-like cred and fawning media coverage.  But that is exactly the profile that Apple enjoys, one that helps to power serious sales.

Just saunter into your local Apple Store, and the glow shines through.  Part of it is based on reality – after all, Apple products are superior to most rivals, they are better designed, and often the strongest technological status symbol available.  But somehow, that halo glosses over any number of blemishes, including those tied to iPhones, iPods, or any number of other products.

But what about the non-product blemishes, those tied to the policies and ethics of the company?  The most devout Mac users are frequently artists, web designers, progressive entrepreneurs, and politically-aware citizens.  Exactly the type of audience that cares about far-reaching issues like the independence of Tibet, and worldwide humanitarian concerns.

And from a consumer and media relations standpoint, it can be very difficult to determine which issues resonate, and which simply dissipate.  The naive outlook is that Apple operates from the heart, that Steve Jobs consults his Zen Buddhist teachings before making a business decision.  In reality, this is a shrewd company like any other, one that is going to carefully and dispassionately weigh the pros and cons of any policy decision.  And in the latest situation, that means weighing the fallout associated with any compliance with Chinese censorship, especially as it relates to something like Tibet.

And this is just one component in a more complicated relationship between Apple and China.  The glossy iPod may be “Designed by Apple in California,” but it is most certainly “Assembled in China” (just check the back of your device).  Of course, lots of stuff is made in China, though Apple found itself on the defensive two years ago for reportedly allowing substandard working conditions at its outsourced, iPod assembly facilities.

Was it all true?  By American standards, workers were underpaid, overworked, and forced into mediocre working environments.  Just how mediocre is unclear, and Chinese standards offer an entirely different lens.  Either way, an internal Apple investigation ultimately issued a clean bill of health – and mostly wiped the slate clean on the matter.

Somehow, it never really trickled down to the mainstream consumer, at least in a meaningful way.  Just like the non-scandal surrounding backdated executive options for executives like Steve Jobs.  But can Apple hope for the same result in its latest Chinese situation?  As Apple Stores crop up in Beijing, the stakes are even higher this time around.  And so are the intricacies involved in balancing the interests of a global audience, one that traverses different cultural and humanitarian sensibilities.

Paul Resnikoff, Publisher