Thinking about the iPhone.
So I think I’m sold on the phone. It’s not perfect, but it is everything Apple said it would be. (You can’t say it lives up to the hype, because people created such unreasonable expectations for the Jesus Phone.)
Didn’t disagree with much in Tim Wu’s Slate piece on why the iPhone isn’t revolutionary. Wu mentions the ability to make calls over Wifi — which is a feature on the new Samsung from T-mobile. That is the kind of feature you’d expect a truly revolutionary device to have. You’d also expect it to do things like let you use tunes from your music library as ringtones, but I suspect AT&T nixed that revenue-stream-killing feature. (On the other hand, now that I think about it, would it really be a good idea to have Mims interrupt your Johnny Cash to signal an incoming call? What if you were listening to your ringtone song already when a call came in? Maybe Apple knows what they’re doing here.)
If you’re an optimist, the more intriguing possibility is that Apple’s iPhone is a Trojan Horse. The iPhone is fatally attractive to AT&T, since it gives the firm a chance to steal tens of thousands of new customers from rivals like Verizon. But Apple may be betting that, once it has its customers, they’ll be more loyal to Apple than AT&T. With its foothold in the wireless world, Apple may be planning to slowly but inexorably demand more room. If iPhone 2.0 is a 3G phone that works with any carrier and supports third-party apps, then industry power will begin to move away from the carrier oligopoly and toward Apple and other Silicon Valley firms. Now, that would be a revolution.
With Visual Voicemail, activation through iTunes, etc., it’s clear that Apple really twisted AT&T’s arm to get a user experience they were satisfied with. That in itself is a huge shift of power from the carrier to the device manufacturer, and it’s only going to continue if (when?) the iPhone is a huge hit.
I read another article that questioned Apple’s stock rise since the January iPhone announcement. I can’t find the link right now, but the argument was something like this: The increase in Apple’s market cap is about a third of Nokia’s total market cap. Even the best projections for the iPhone have it moving 10% of Nokia’s units in 2008. Apple and Nokia both run company-wide profit margins around 13%. Ergo, investors are being ridiculous.
I don’t think that’s a strong argument. The iPhone is at a much higher price point than the $50-$150 Nokias most people buy. Apple is selling ridiculously expensive cellphones to customers who may have never paid for a phone directly. The iPhone is also likely to increase revenue in Apple’s other businesses, and I wouldn’t be surprised if Apple is able to scratch out more than a 13% margin once manufacturing ramps up.