Competition in smartphones will be intense next year, now that the giants of the business have finally recovered from the shock of being outpaced by Apple and responded with iPhone-wannabes of their own. So how can Apple capitalise on its 18-month head-start?
Part of the answer lies in today’s confirmation that Wal-Mart will start selling the iPhone this weekend. To go mass-market with the device in 2009 Apple needs much wider distribution, and they don’t come with any wider reach than Wal-Mart. Gene Munster of Piper Jaffray, an iPhone bull, is anticipating sales of 45m units next year, up from 15.7m in 2008: by winning over Wal-Mart, Apple has moved a big step closer to that number.
The other necessary steps will be to turn the iPhone from a single device into a product line – and, even more important, a platform.
Apple’s own text-book handling of the iPod provides the perfect model for this. By creating new versions at different price points (the nano, the shuffle, the touch) Apple succeeded in expanding and segmenting the market for media players. Combined with the iTunes store, this has now become the de facto standard in digital music platforms.
Will the iPhone follow a similar path? The Wal-Mart news failed to answer one important question: whether Apple is planning a new, lower-priced version of the phone (rumours had Wal-Mart selling a new 4-gigabyte version for $99, but in the event it will sell the existing 8- and 16-gigabyte models for just $2 less each than other retailers.) Now, with Steve Jobs backing out of Macworld in two weeks’ time, expectations are low that Apple has any important product news up its sleeve in the short term.
From one point of view, this makes sense. The iPhone only recently had its first big price cut, accompanying the launch of the subsidised 3G model. There’s still a big potential market to be built at the existing price points: a cheaper “iPhone nano” could cannibalise that.
Yet there are other considerations that could make it hard to emulate the expansion of the iPod line, which came through new form factors and with different (lower) levels of capability. After all, the device is defined in the popular imagination by its brilliantly coloured, 3.5 inch screen: how do you produce an iPhone that isn’t an iPhone?
As Apple wrestles with this conundrum, it has at least made greater headway on the platform front than even the most fervent Apple fans could have expected. The App Store was an break-out hit in 2008, so much so that the “iPhone+App Store” combination already bears some comparison with the wildly successful “iPod+iTunes”.
The difference this time around is that Apple’s rivals can see the danger and are responding faster – though as companies like Sony and Microsoft showed with their own woefully inadequate attempts to create digital music platforms, it can be very hard to make up lost ground.
