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  • Is Apple Running Out of Ideas?

    October 2nd, 2008

    So I saw an article in BusinessWeek, entitled “Apple: A Product Plateau?,” which suggests that maybe our favorite fruit company is running out of bright ideas. Of course, the media used to claim that Apple was about to go out of business, and you saw what happened to those predictions.

    Of course, a lot of years have passed since the tech pundits regarded Apple as a one-trick pony. In passing, I wonder why Microsoft didn’t earn that title, since the products and services they’ve tried to deliver outside of their core application and operating system software categories have failed to earn big profits. Or any profits for that matter.

    But I never said that Apple and Microsoft are regarded as being on equal playing fields, even though some call Apple the Microsoft of the digital media player business.

    Well, now that Apple has, as Steve Jobs put it, created three legs of the stool — the Mac, iPod and iPhone — where do they go from here? As far as BusinessWeek is concerned, just enhancing the existing product lines ought to be sufficient. There’s no need to introduce a totally new product initiative for Apple to continue to show tremendous sales growth and lots and lots of profits.

    Of course, figuring out what Apple is up to can be a frustrating endeavor. When the iPod was still doubling sales each and every year, the pundits felt that it would ultimately be supplanted by cheap imitations. The scenario was meant to mimic the way Windows triumphed in the operating system market. Apple was the closed system, and all the other companies were licensed by the Microsoft format du jour to deliver compatible products.

    Then again, when all those pretenders failed to make much of a dent in the iPod’s market share, Microsoft took it upon itself to double-cross its partners, take a rebadged Toshiba media player and turn it into the Zune. Not that the Zune has done any better as an integrated platform, but you can’t say that Apple had the wrong idea in dedicating itself to that vision.

    Just as the media player segment seemed to be heading towards a saturation point, Apple demonstrated yet again that it wasn’t out of ideas. Thus arrived the iPhone, and again the critics suggested that Apple was making a foolish move. After all, there were hundreds and hundreds of millions of wireless handsets out there already. They were largely commodity devices, often sold at very cheap prices to entice you to sign up to a long-term contract with a wireless carrier. When the contract was up, they’d let you buy another phone, and you’d take the old one, which probably barely worked at that point, and consign it to the recycle bin.

    Certainly selling the iPhone for $599 seemed to be a boneheaded move. Combine that with even the cheapest AT&T wireless contract, for example, and you’d be out a couple of grand over the next two years. Well, of course, Apple dropped the price by $200, and then, with the second generation model, succumbed to the standard carrier marketing approach. Sell it cheap, and let your wireless service subsidize the remainder of the money over the contract period.

    That’s what gives the telecoms the questionable right to charge you those exorbitant early termination fees, although they are mostly pro-rated now in the U.S.

    But now that the iPhone 3G is available virtually all over the planet, what does Apple do for an encore? If you believe BusinessWeek, it doesn’t matter. Just refine the products they have, and live long and prosper.

    However, Apple doesn’t always adhere to conventional wisdom. You see there is a fourth leg on that stool that isn’t talked about all that much, and that’s the Apple TV.

    True, it hasn’t caught fire thus far. Steve Jobs has called it a “hobby,” which hasn’t stopped Apple from revising the software and dropping the price. They appear to be in search of a strategy that works, and you shouldn’t expect them to just give up and discontinue the product.

    Where might they go? Well, some talk of adding TiVO-style features to integrate Apple TV with your high definition set to record your cable or satellite shows, but there are already lots of set top boxes that do that pretty well already, right? Even the ones without the TiVO brand name may even get TiVO software in the near future. Comcast is rolling out those updates now, and Cox Communications is right behind them.

    Other suggestions have Apple not just integrating the DVR features, but a DVD player as well, perhaps even Blu-ray. Suddenly it becomes more of a fully-featured media center device, but it may not be that simple.

    You see, the so-called media center PC, which such a loaded Apple TV might begin to resemble, hasn’t done all that well in the marketplace. So where’s the incentive for Apple?

    Where indeed!

    You see, seven years ago, there were lots of portable media players out there. They didn’t make a big splash in the market. But then a certain company in Cupertino, CA felt they had a better idea, and they created the iPod.

    Don’t think that history can’t repeat itself, even though BusinessWeek would apparently prefer to see Apple rest on its laurels.

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