The second half of 2000 was rocky for Apple. Slower sales (both for Apple and the industry as a whole), combined with a misunderstanding of the consumer market resulted in the first unprofitable quarter in three years. One factor in this decline was the G4 Cube, which sold poorly due primarily to its high price compared to Apple’s other products. Another factor was Apple’s decision to include DVD-ROM drives in their consumer and professional machines instead of CD-RW drives. As a result, Apple missed sales opportunities to customers who wanted to burn their own CDs. Apple began to rectify these problems in late 2000, when it cut prices on the entire PowerMac line. Apple took the next step in January of 2001, when it announced a new line of PowerMacs, with either CD-RW drives or a new “SuperDrive” which could read and write both CDs and DVDs. Apple also announced two new application: iDVD, a DVD-authoring program, and iTunes, which allowed users to encode and listen to MP3 songs, and then burn them to CDs.
All this was part of Apple’s new corporate strategy, developed in the face of a massive slow down in the Technology industry: Apple would take advantage of the explosion of personal electronic devices–CD-players, MP3 players, digital cameras, DVD-players, etc.–by building Mac-only applications that added value to those devices. Just as iMovie had added tremendous value to Digital Cameras, iDVD would add value to Digital Cameras and to DVD-players, and iTunes would add value to CD and MP3 players. It was Apple’s hope that making the Mac the “Digital Hub” of the new “Digital Lifestyle” would revitalize Apple’s sales and guarantee the long-term security of the company.
In May 2001, Steve Jobs announced that Apple would be…
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