Ballmer: Apple's iPhone will be a niche player
That's right, Steve - and it's a good thing too
Analysis So did Microsoft CEO Steve 'Monkey Boy' Ballmer actually claim Apple's iPhone strategy is "flawed" or "bust", as a fair few bloggers picking up on his USA Today interview suggested? Not quite.
In fact, Ballmer admitted the iPhone will make Apple "a lot of money". Which is the whole point, isn't it? However, it's an understandable mistake. Pundits have been filling acres of column inches in print and online on the iPhone's potential for, and in almost every case they've used the iPod as the metric to measure the iPhone's success and failure.
But they're missing two key factors: first, the way the iPod and the demand for it developed, and, second, how the phone market works.
Apple released the iPod back in November 2001. It was expensive and it was only of use to Mac owners. Yes, it was smart looking, it had a great user interface and it had a hard drive to hold what was then an enormous 5GB of songs, but its high price and limited market opportunity did not bode well.
Why didn't Apple release the player with Windows software? Why not price it more aggressively? Because the first iPod was a toe-dipping exercise to see what demand there might be for such a device. Apple management clearly believed consumers would want one otherwise the iPod would never have been released, but what was the potential? The first iPod can be seen as a test.
Apple knows it has a very dedicated fanbase, many of whom are fairly well-heeled and will buy anything with the Apple logo on it, no matter what. Releasing the first iPod allowed the company to test the market, and to test its attempt to buy the music player for the rest of us. Early iPod adopters - this reporter included - were essentially unpaid beta testers. As early adopters always are.
They also fund development. Apple's high initial price paid for the development work undertaken to produce the second-generation product, an iPod design fuelled by all the feedback from the first versions. Somewhere in Apple is an Excel spreadsheet that shows if the company released the iPod when it did, to whom it did and at the price it charged, Apple would probably make enough money to cover the development of a device more favourable to a broader market.
By which time, of course, greater volumes and greater integration reduced the manufacturing and other costs, allowing the price to fall a little. Again, spreadsheets allow any company to adjust the price and see how it can best balance uptake and revenue to best meet its financial and marketshare goals.
And Apple's doing it all over again with the iPhone. Expensive, check. The potential purchaser base isn't quite so limited this time, but the high price more than compensates for that. But it's a first generation, early adopter-focused product. But unless it's phenomenally bad, it will sell in sufficient numbers to cover the development cost of this generation and the next.
The spreadsheet never lies.
COMMENTS
touch screen phone with software was here already
sony has the technology already . You can use your finger instead of the stylist. Palm tero has a large library of software. Ipod is a mp3 player that's why many people can download the songs from apple and play them on almost anything without conversing them. My stepson does it with his Sony W810i and Iwith my Konka A26M. Application such as net surfing is now on nearly every cellular phone coming out last year. I hope this phones not another Apple Newton...fantastic technology with no market
Right on, Fred
Happy owner of a 4Gb iPod Nano for 1 and a half year, I have never even used iTunes or the store. I'm in Linux anyway... Almost all my tracks were ripped from my CDs. There's a bunch of not so kosher tracks in there, but let's not talk about that... And as far as I know the situation is pretty much the same with my iPod-enabled friends. Many of them running Macs, BTW.
Cheers
J
Interesting comments
I like Ballmer's comment:
> But if you actually take a look at the 1.3 billion phones that get sold, I'd
> prefer to have our software in 60, 70 or 80 per cent of them, than I would to
> have two or three per cent, which is what Apple might get."
Yes, Steve, I'm certain that you would.
Is it just me, or does that sound more like the ambitions of a saboteur?
As for Harris Upham:
> A large part of the iPod's success came from the iTunes music store- a
> revolution in music retail.
This is what we call 'wrong'. A very large majority of people with iPods don't even have accounts on the iTMS, and an even larger majority have bought a total of less than ten tunes. It is a good talking point but it in no way explains anything about the success of the iPod.
It's a shame, because I agree that the iPod's smash success does not necessarily mean that the iPhone will do the same, at least to the same degree. But I think your reasons are claptrap.
-fred
iPhone misses the magic
A large part of the iPod's success came from the iTunes music store- a revolution in music retail. I bought an iPod in January 2002 (still works fine, thanks!) thinking that they weren't going to take off, and I wanted one before they disappeared. Glad to see I was wrong, but the more I think of it, that disappearing act certainly could have been the reality without the easy access to the iPod's consumables- tracks.
I can't really see the iPhone duplicating the iPod's success until Apple shakes up the airtime sales system and cavalierly informs the network operators of their new pricing scheme. That doesn't strike me is being very likely, but one can hope.
Another idea- much as iTunes had the ability to rip CDs, perhaps the iPhone will (eventually) have the ability to bypass the mobile network operators and gain phone network access via VOIP or similar technology.
Bottom line- the lack of an advanced technology music player wasn't the problem; the lack of a technologically savvy music industry was. The iPod couldn't fix it alone without a dramatic change in the industry as represented by the iTunes music store.
While improvements are always welcome, we don't currently lack technologically advanced handsets. We could all benefit from the iPhone Airtime Bazaar, if you will....
Actually, it's not an Excel spreadsheet
it's probably Appleworks. 8)
