A couple of questions arise now that Walmart is selling iPhones for $97: Will this move by Apple Inc. (Nasdaq: AAPL) to discount last-generation iPhones through Walmart help or hurt its perceived dominance as the leading-edge mobile tech company? And since most of the details of the new iPhone due out this month have already been released, thanks to a careless Apple employee, will the lower price at Walmart convince consumers that the next-generation is not really worth the $400 higher price tag?
And how might all this affect Apple’s future?
Currently, a new-generation iPhone costs $500 to purchase and then incurs monthly charges of $60 ($30 phone and $30 data). Most users are also paying another $40 to $60 per month for in-home Internet and probably use that to connect their iPhones and iPads via WiFi. That's $120 a month so that you can use your mobile device. It doesn't take long to see that $500 is not much of a bargain.
Much of Apple's market share comes from being on the leading edge of things, obviously. The company tends to introduce new gadgets before others have done the same thing and then improves on them almost annually. The iPhone has been on the market for more than three years, and aficionados of the devices regularly begin humming the iTune every June as Apple gears up for another press conference and release of a new version of the phone.
Some consumers, like myself, often ignore new releases from Apple on existing products and just upgrade every other or every third year. Economically, it makes sense, and since Apple is tied to AT&T Inc. (NYSE: T) as the only 3G and phone provider for that carrier's gadgets, adding a new line for a second device (and the included costs) makes little sense.
So for less than a month's connectivity, you can get an iPhone at Walmart now, saving most of your budget for connections instead of the device. Sure, it's last-generation, but do you really need the latest from Apple?
The discounting is likely Apple's response to Google (Nasdaq: GOOG)'s Android phones cutting into market share. Android-enabled phones are traditionally cheaper than the iPhone and are available in a variety of models and on varying cellular networks. While the iPhone is tied exclusively to AT&T, Android phones are available on all major networks in the US.
Given all this, it may soon be that more and more people start thinking that no, maybe they don't need Apple's latest. The iPod is a good example of this. When it first came out more than eight years ago, it was a $400 music player that held 1,000 songs and had a monochrome screen. But it was virtually the only MP3 player on the market. Now it's much more functional, has full color and movie-playing abilities, and costs about $150. Competitors offer similar products for much less, and the market is no longer dominated by the Apple device.
The iPad, which hit the market just a couple of months ago and has since sold more than 2 million units, could suffer a similar fate if other gadget-makers enter the fray with more functional or lower-priced tablets. Now, with both WiFi and 3G versions of the iPad available, the iPad is more vulnerable to discounting and competition.
The iPhone and the iPad cost roughly the same amount of money from Apple (about $500) and perform basically the same functions. The big difference between them is that one is a mobile phone while the other is larger and easier to read. How long will it be before the iPad begins to suffer the encroachment of Google and others?
It's becoming clear that Apple's virtual monopoly on mobile gadgets may not last long.
— Craig Agranoff is an entrepreneur and national social media consultant as well as a published specialist in online reputation management and monitoring.
robvargas: We're getting a bit far afield of the original discussion here. The post is about how Apple may be in trouble because their mobile dominance is slipping. I asserted that Apple would be fine because, before the iPhone, they were successfully selling premium computers to those who wanted to pay for quality, even though they didn't dominate the market.
And I would submit that this point is, itself, a bit afield. I don't see anywhere in my posts that Apple's demise is pending. I certainly don't see that conclusion stated or implied in Craig Agranoff's original posting.
But I *do* see historical innacuracy in Craig's posting. And I don't see anything diversionary in pointing out that inaccuracy. Let's assume for a moment that Craig is right, and Apple's "perceived dominane" won't last. How can we make that determination, *or* refute it, if we start with fundamentally flawed descriptions of the past?
Before we can discuss that alleged dominance, we have to place it in correct context. And flights of fancy like determining that the iPod was "virtually the only MP3 player on the market" do exactly the opposite.
We cannot even agree that macs are, in fact, premium computers. For one, the standards being used are highly subjective. For example, the macbook air isn't premium. Except in price. Sire, pulling it out of a manilla envelope made for an impressive commercial. Add in the power brick, and the optical drive, and suddenly that envelope is a lot more stressed.
But that doesn't mean the Air was a bad device/computer. It doesn't have to be either/or. It's a competent, highly mobile computer. But if you expect it to be your only one, then it won't feel at all premium, will it?
So yeah, I'm a stickler for accurate historical discussion, even if I'm not the one who is correct. And no, I don't find that at all afield to advocate for it.
robvargas: We're getting a bit far afield of the original discussion here. The post is about how Apple may be in trouble because their mobile dominance is slipping. I asserted that Apple would be fine because, before the iPhone, they were successfully selling premium computers to those who wanted to pay for quality, even though they didn't dominate the market. You disputed my definition of quality, and then argued that Apple is not innocent in the ways of suppressing competition.
All fine, but none of this really changes what I originally said. Yes, Apple wants to increase its market share just like every other company. But they were a successful company (under Jobs) even with only a tiny share of the computer market. People don't buy Apple because they have to; they buy Apple because they want to.
It's certainly true that, technically speaking, customers who buy non-Apple computers have OS choices other than Windows. But at an enterprise level, that's not really the case. A CTO who wants to take a medium to large company in a non-Windows direction, in terms of day to day computer usage, is probably going to be fighting an uphill battle. And that's not because everybody loves Windows and doesn't want to give it up; it's because, in terms of compatibility with the rest of the business world, using Windows is just easier.
Even when this situation was at its worst (ActiveX integrated into all sorts of third party tools, some of which work best with the much hated IE6), Apple users loved their Macs. And that's why I don't think it makes sense to assume that just because the iPhone is no longer the world's only notable smartphone, they're somehow in trouble. Fine, their "dominance" won't last, because sure, they're no longer the only game in town. But they are not a company that has ever required market share dominance to succeed.
There is a company whose operating system has dominated the landscape for a long time now, essentially compelling various manufacturers to build with that OS in mind.
So tell me, does that mean that Psystar is going to win its appeal? There's "effectively" and then there's "actually."
I'm being a bit snarky there, I admit. what I'm actually pointing out is that the monopoly status of Microsoft hasn't stopped manufacturers from selling PC's with Linux, with Solaris, with BeOS. I seem to vaguely recall, perhaps incorrectly, that NeXT Computing tried to create machines that ran both Windows and MacOS. It wasn't Microsoft that bought them.
As well, when Mac clone makers started to erode Apple's market share, they found their license pulled. The Mac clone market disappeared basically overnight, and not because people weren't buying.
...many people, including myself, find OSX easier, more intuitive, and more pleasant to use than any version of Windows.
Forgive my poor memory, but I thought I cited that very reason as just one example why the Apple architecture is a good and valid alternative to the "Wintel" architecture. I've not used it much myself. But I certainly bear the architecture no ill will. The company that controls it I hold in less regard.
Apple isn't an evil empire. But neither is it the innocent ingenue. And it never has been.
I don't think that most Apple users buy Macs because they are worried about security. While I agree that there is no objective standard by which to compare, many people, including myself, find OSX easier, more intuitive, and more pleasant to use than any version of Windows.
Anyway, "Apple's stranglehold on the architecture" is an interesting way of characterizing the situation. There is a company whose operating system has dominated the landscape for a long time now, essentially compelling various manufacturers to build with that OS in mind. And that company is not Apple.
We can argue those details, Michael, but the real point is that "better" is not as clearly decided as you seem to me to have been intimating in your post. The Mac OS is a relatively small target compared to the Windows market share. There are many security experts that hypothesize that Mac could very well experience the same number of vulnerability exploits and attacks were it as large on the market as is Windows.
There is also an argument that Apple's stranglehold on the architecture stifles innovation to some degree. It's not at all clear that the innovations in computer technology, even some put forth by Apple, would have come about nearly as quickly had the "Wintel" architecture been as closed down and controlled as the Apple architecture was and is. Apple was an early advocate for Firewire/IEEE-1394, and seemed to fight USB. In the early days of both, there was a good argument that Firewire was better. Firewire hasn't exactly failed, but USB is clearly the far more dominant technology.
Would we have been better off to follow Apple's decree? Will we be so in the future? The Firewire/USB competition, like the Betamax/VHS competition a couple of decades previous, both make it clear that "better" isn't always... well... better.
If Apple is so much better, then why is a product originally designed for the Apple architecture, Photoshop, quicker and able to render faster, on a "Wintel" PC than on a Mac? And Photoshop isn't the only example. Adobe's Acrobat is the same, with the same result.
I asked this question to a group of interactive designers, and they answered unanimously that Adobe used to make products for Apple, but as Windows became more popular, they (Adobe) started to make the native versions for Windows and the ports for Mac. A developer listening in added that, in the case of CS5, the Mac version does seem to be a native Mac application.
I've often heard Windows-using friends say something to the effect of "Yes, I know Macs are better, but I'm just not willing to pay for that quality." And then there are those of us who will.
If Apple is so much better, then why is a product originally designed for the Apple architecture, Photoshop, quicker and able to render faster, on a "Wintel" PC than on a Mac? And Photoshop isn't the only example. Adobe's Acrobat is the same, with the same result.
Please don't misunderstand. The Apple architecture is a valid alternative to the "Wintel" one. There are good reasons to buy Apple products, not the least of which is the interface Apple has provided. Apple *does* deserve credit.
But, "better"? That's not as clear as some Mac advocates would rather we believe.
So, while you wait for Apple to deign to include an app in iTunes for your iWhatever, I'll take my HP tm2t tablet, or my HTC Tilt smartphone, go direct to the software maker, and download it at my leisure, not at that of some monolithic arbiter of what I want.
You make an excellent point with LV and Gucci! When is the last time you saw them include their brands at WalMart or Marshall's or TJ Maxx? They just don't. They keep the allure of their high end brands exclusive to the high end retailers.
Apple has managed to create this cult like following of Mac Worshipers who will pay higher prices for a cooler interface (like myself). It is why their latest designs are groundbreaking (case in point, the iMac which has no tower). By placing their brand at WalMart, they have made the cult members feel like just regular cheapened members, and it could lead to a backlash.
You make an excellent point with LV and Gucci! When is the last time you saw them include their brands at WalMart or Marshall's or TJ Maxx? They just don't. They keep the allure of their high end brands exclusive to the high end retailers.
Apple has managed to create this cult like following of Mac Worshipers who will pay higher prices for a cooler interface (like myself). It is why their latest designs are groundbreaking (case in point, the iMac which has no tower). By placing their brand at WalMart, they have made the cult members feel like just regular cheapened members, and it could lead to a backlash.
Dominating is a relative term for Apple, methinks... Apple doesn't need to control a majority of the market in PCs/smartphones/tablets/laptops/etc. Just like Gucci or LV doesn't need to control the market for leather goods, the makers of high-end products (I'm including Apple in this category) just need a decent profit margin....
Now the question of whether Apple is diluting the "luxury" of its brand by selling its products at Wal-Mart -- that's another story.
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