Last Thursday, Apple took a bold step, opening the iPhone and releasing the SDK (software development kit) that facilitates developing iPhone applications. Jobs has now moved away from the "control" we've seen impede Apple's technological leadership over the last 20 years, but is doing so in a measured and strategically sensible manner. Here's why.
The iPhone will be an incredibly tempting platform to build on, and the SDK will attract a lot of talent. However, Apple still controls what you can install, and if you pay, takes 30% of the revenue. If its free, Apple decides. So a lot of what is developed isn't going to generate revenue, or even be available to you. As a software developer, you're therefore going to try a lot harder. Especially since you might want your slice of the dedicated $100M iFund
And as Apple generates platform revenue and value, it simultaneously makes sure the user experience can be controlled. Thereby not making the mistake Facebook has, where there's now a lot of clutter that is damaging what used to be a clean user experience. This is an especially important consideration for Apple: they owe a large part of the success of their recent generations of devices and software to superior and simpler user-device interfaces.
Sure, this revenue cut implies higher prices for paid applications. Which aligns really well with the current (high-income) iPhone user base. Perhaps this will be revisited as the platform grows, the iPhone's technology becomes more stable, and the device becomes mass-market (if this ever happens). Let's wait and see.
6 comments:
I'm wondering how issues like unlocked iPhones or bricked iPhones will affect the adoption of applications developed for the SDK?
One can draw parallels between Apple’s and Amazon’s strategy discussed in last week’s class. Having realized that its "platform" is not just the device, but its reputation, brand, its existing and growing customer base, Apple is trying to capitalize on this platform by turning the iPhone inside out!
One would imagine that Apple would still control what goes on the device, as it would now be more vulnerable to risks associated with these third party iPhone applications beyond Apple’s control. I would argue that they may need substantial due diligence on third party developers to ensure that these applications do not put its brand or reputation at risk. These risks could manifest through buggy software affecting the device, security vulnerabilities in apps waiting to be exploited by hackers, information privacy issues, etc. These risks could directly and significantly impact its numbers.
On the other hand, by opening up, Apple could considerably shorten its product development lifecycle through this initiative, there by maintaining its first mover advantage in the fast growing mobile Internet market. I guess Apple is ceding control just enough to be able accept and manage its associated risks and to maintain Apple’s lead in this market.
It seems that Apple (Jobs) is leaning on the popularity of his products to ensure future growth - recently denounced DRM and now opening his iPhone - has his network of users grown to a size that is secure enough to perhaps "let down his guard"? Or does he envision that the growth that Apple has enjoyed recently, will not last with a closed strategy.
Apple's planning on giving iPod and iPhone customers free access to its entire iTunes music library in exchange for paying a premium on its devices. Link to the news item:
href=http://www.ft.com/cms/s/0/b55a0d64-f523-11dc-a21b-000077b07658.html
The attached article speaks to Apple's dominance in the digital music business:
Ever since Apple launched its first iPod in 2001, the music industry has been kicking itself for not having secured a cut of the lucrative digital music device's revenues.
Although sales from Apple's iTunes online music store still account, by some estimates, for up to 70 per cent of the industry's revenues from digital downloads, they pale into insignificance beside the profits Apple has made from creating the device.
Now, recorded music groups such as Universal Music, Sony BMG, Warner Music and EMI are wondering whether they can effectively secure a share in the next generation of digital music hardware through revenue-sharing deals with manufacturers.
The relationship between Apple and the music industry has long been tense, with record label executives objecting to Apple's fixed 99 cents per song pricing and its reluctance to make its devices interoperable with other digital music services.
Although iTunes has so far been the most successful of the legitimate digital music services that have sprung up in response to the industry's battering by piracy and illegal downloads, it has made the music industry relatively little money. An analysis released last year suggested that the average iPod held just 20 tracks downloaded from iTunes.
The rest were largely uploaded to the device from CDs or pirated. Now, a model pioneered in the mobile phone industry may offer the music majors a stronger hand in renegotiating their fractious relationship with Apple.
In December, Nokia signed up Universal Music, the market leader, to be its partner on a range of handsets which will be launched this autumn under the brand of Comes With Music.
The partnership not only showed music companies a potential route to sharing in hardware revenues, offering them up to $80 between them for each handset Nokia sells, but also showed Apple that the iPod may face competition from a new corner.
In the past year, music companies have shifted their focus from trying to persuade Apple to change the iTunes model to trying to build up rival services.
Launches such as Amazon's MP3 store have received support from companies which had previously refused to make music available without strict digital rights management software to protect them.
Now, they are turning from competition in software to see whether they can develop a hardware rival in the shape of the near-ubiquitous mobile phone. Other handset manufacturers such as Sony Ericsson, which has already seen success with the Walkman music phone brand, are now talking to music companies about following Nokia's example.
Since Apple's entry into the mobile phone business with the iPhone, it has both more of a direct competitor to the likes of Nokia and acquired the technology which would enable it to create its own subscription business model. "Now that you've got connected iPhones and iPods you could imagine Apple getting into some sort of subscription business," says Michael Gartenberg, an analyst at Jupiter Research.
"With film rentals, they now have support for time-sensitive digital rights management software. That's one of the key things you would need to do a subscription model," he added.
The models under discussion with the music companies would also ensure that iTunes remains the route through which music would be delivered to Apple's devices, rather than seeing the online music store undercut by a new service.
Some executives admit that by talking to Apple they are also acknowledging that iTunes, for all their complaints about it, remains the best of the existing digital business models. The music industry is anxious that it does not kill off its proven source of digital revenues before another has demonstrated that it can work.
I think it will be interesting to see what is actually made available to users. As a previous comment said, Apple will have to rigorously test all independently developed content to protect their brand. Users who download these applications (free or not) are going to want to be very sure they are not going to break their phone. I do think Apple is trying to embrace the shared development model that has been so successful in the Linux world, but their brand is so important to them that they are going to have to put controls in place. That said, this could also just be a way for Steve Jobs to quiet the critics for a short time while he tries to come up with the next big thing.
Post a Comment