Monday, April 29, 2013

iTunes Ecosystem In Terms of Stickiness And Filter and the Uncompromising 5” iPhone

Source:  Appleinsider.

There is no doubt that monetizing apps, ads, and services is easier and greater percentage on Apple’s iOS than on Android even though Google’s mobile platform has the lion’s share of the market in terms of units sold.  Apple retains the grown in terms of profit with over 70% of the mobile profit and similar numbers in terms of app and ad sales.

So, I found this Appleinsider post to have a lot to say about stickiness.  Once you’ve spent years using one platform and invested in it in terms of apps, music, and other media, it’s hard to make that switch to a new platform and having to start all over again.

Without DRM, it’s easy to do that with music but iOS apps will not work on Android devices and iTunes video like TV and movies will only work in Apple’s iOS and OS X ecosystem.  It’s no wonder the analyst in the post changed his mind at the last moment and opt out of the latest and greatest from Samsung.

So far, there is very little that Samsung can compete with Apple, Amazon, or Google on the whole ecosystem front.  And I specifically mentioned Samsung because of its drive to differentiate itself from the rest of Android competitors and position itself as an alternative to Apple.

Market Filter

However, there is one other thing that the whole stickiness issue could well work on Apple’s favor in ways that we don’t know if it’s good or not.  Certainly, Apple’s iOS devices like the iPhone plays in the keep end of the mobile market:  the high-end part of the mobile pool.  That is where in all likelihood where mobile users are willing to spend money and experience mobile computing and entertainment beyond those in the general mobile market where Android dominates but are less likely to take up purchasing apps, music, and media.

And with more Android users willing to leave Android and go over to iOS than iPhone users are willing to migrate over to Android and iPhone users generally more loyal and satisfied with their iPhones, it could create a market filter of users on one end who are willing to broaden their mobile experiences through all that the iOS ecosystem provide and another general mobile market who use their devices as it and are less likely to spend money for apps and media.

This isn’t an indictment on Android or Samsung or to say that Apple can just sit on its butt and think that its ecosystem will save it.  It is only a snapshot of the mobile market as it current stands.  Android owns the market share in units sold with Samsung leading the charge as the world’s biggest phone seller while Apple now dominates in terms of profitability.

5” iPhone

The analyst in the AI post mentioned the hole on Apple’s iPhone lineup which is a 5” iPhone.  I generally did not buy into Apple’s line about its unwillingness to make a tablet with a smaller than 10” screen but look at where we are today with the iPad mini.  So, last year when Tim Cook carefully phased his argument that the 4” screen on the iPhone 5 was the best screen Apple made for one-handed use and other attributes like resolution, colors, and brightness as a whole, I knew he was not excluding a bigger iPhone whether it will be used as a phone or more as a true mobile device.

At the most recent financial call, Tim Cook said Apple would not ship a 5” iPhone until certain factors and compromises are addressed.  He called them “trade-offs”.  The most important thing was that he did not dismiss the notion outright.

Basically, he did two things.  Apple will ship an iPhone with a 5” screen or whatever it picks to be the best for Apple’s users when it’s ready and it’s the best device they could make without major compromises.  Meanwhile, he poked at his competitors by suggesting their 5” or great devices were filled with flaws and trade-offs that Apple was unwilling to make.

Once Apple does ship an iPhone with a bigger screen, look out.  It could be the last piece of Apple’s mobile lineup that will solidify its hold on the high-end market.

Sure, 2007 was an important year because it was the first year that Apple released the iPhone.  The following year, the 3G iPhone was huge.  We got the Retina Display in the iPhone 4 but most will agree that the 4S and the 5 were mere incremental upgrades.

However, a 5” or bigger screen iPhone could give Apple a boost in the mobile market mobile warriors have been waiting for.  And it would be a huge deal to Apple fans, its investors, and super-charge the mobile market not seen since 2007.

And if you thought Apple’s hold on the mobile market was strong now, in a year or so, the 5” iPhone and with even stronger iTunes content and services, Apple may begin to choke off more profits from its competitors, even Samsung.

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