
Apple's New Market - chmars
http://stratechery.com/2015/apples-new-market/
======
Touche
> There is perhaps no idea this blog has litigated against more fiercely than
> the idea of low-end disruption and the inevitable doom of the iPhone.

They have been disrupted in markets where phones compete on price. Their most
successful market, by a wide margin, is the one where phones are capped at
$200. The comparison to BMW that is often made is laughable. If only BMW sold
to dealerships who then turned around and sold the car for the same price as a
Toyota. It's a droll-worthy position to be in, that's for sure.

It would be interesting to see how the U.S. market changed if there were no
subsidies. My guess is that payment plans would be more common so it wouldn't
be such a tremendous blow. But I always wonder if "good enough" Nexus style
devices would become more popular and the Galaxy Ses and iPhones a little bit
less.

~~~
m_mueller
One of our networks in Switzerland (Sunrise) has a really innovative
subscription model: They give you a cheapish subscription that's completely
independent of the phone (~25-40$/m depending on whether you need unlimited
free calls etc.) and which you _can cancel /modify with every month_. Then
they offer you a leasing contract for your phone where you choose yourself how
many monthly payments you'd like to make (payment per month inverse
proportionate to the contract duration). At the end you can have about the
same total cost of ownership as before, but you're much more flexible. The
leasing contract amounts to ~5-8% interest on the upfront price for the whole
duration and it's not dependent on how you set it up.

So, I wonder how many people will opt to just buy it up front now, when the
subsidy isn't hidden anymore. It could also have a negative impact because
some people will find it too complicated, however the widely trusted consumer
review and comparison sites all give it a big thumbs up, so I think many will
figure out why it's better.

~~~
exprL
Finnish telecoms have mostly abandoned tying the phone to a mobile plan, just
a few years after they were given that right by law. My personal guess as to
why, is that they want to offer longer financing plans than the maximum of 24
months allowed for carrier-locked phones – with plans up to 36 months common.

Apparently the seller of an expensive phone like iPhone gets a decent chunk of
money at market prices, because it's common for carriers not to take any
interest with their financing plans – i.e. the phones costs the same bought
upfront as they do over 36 monthly payments. The phone itself is in no way
locked to any specific network.

------
npalli
Strange that he thinks Xiaomi is the company of reference for this gigantic
new market, when Google has very good alternatives for each one of the
services. Whatever you might think of the Google versions, hard to see how
Xiaomi will get more traction than Google outside of China.

Homekit -- Google Nest with Android Home.

Carplay -- Android Auto, not to mention what crazy things the self driving
cars research will provide.

Apple Pay -- Google Wallet

Siri -- Google Now

HealthKit -- Google Fit

EDIT: BTW, I see that his refutation of Christensen hinges on the nebulous
"user experience". It is not clear what "user experience" or the often
repeated most Apple-like quality "design" actually entails. For a very good
analysis of the pitfalls of just using “design” as a strategy to create
market-defining products at Path, Dropbox, Square, Medium is by a designer

[http://mokriya.com/designer-duds-losing-seat-
table/](http://mokriya.com/designer-duds-losing-seat-table/)

Why Apple is successful today, when its core principles have remained pretty
much constant over the entire history is to be found outside Apple.

~~~
cwp
You should read Thompson's article "Xiaomi's Ambition"
([http://stratechery.com/2015/xiaomis-
ambition/](http://stratechery.com/2015/xiaomis-ambition/) and linked from this
article).

Basically, he argues that Xiaomi is built around serving a market that neither
Apple or Google are serving: young people that are technically savvy but don't
have the funds to be early adopters. There's a whole generation of them in
China that have grown up during China's boom. There _aren 't_ many of them in
the US, but that's not the same thing as "outside of China." Xiaomi will
probably find a lot of fans in South Asia (particularly India), South America
(Brazil) and Africa (Nigeria, South Africa).

~~~
npalli
Wasn't Xiaomi temporarily banned in India because of concerns that it is
uploading data to China? This lack of confidence is going to be a roadblock if
the end goal is take over the home. My understanding is that Xiaomi sells very
little in India (some flash sales in tens of thousands of units). I know it is
a smash hit in China. We'll just have to see.

~~~
arihant
Xiaomi was banned over patent issues for like a week before they resolved it.

The issue you are referring to, the Indian Air Force "warned" the use of
Xiaomi devices because they tracked them uploading data to China. Xiaomi
responded with an update which had one-click Mi Cloud turn off switch to stop
that from happening. They were uploading meta data for their cloud services
just like any other company. Xiaomi also announced a new datacentre in India
to mitigate this concern. But they never got banned over this.

Xiaomi sold less than 2 million devices in India in 4-ish months. But to put
things in perspective, they sold 8-9 times more than Google's Android One
phones, another program targeting the same market. They sold the flagship Mi3
only for a couple weeks and then continued selling lower end device. They are
launching Mi4 here this month, so that number will now probably go higher.

------
alaskamiller
Technology has a delayed effect. As in what was high-tech back then is low-
tech now. Computers have finally become low-tech.

Apple is top heavy, the ones in charge are the ones that scraped to the top
and didn't retire or leave. They have with them the ideas that came about and
pioneered in the 60's and 70's and are only finally now being in the position
and getting around to implementing them.

Underneath them is a cadre of management that grew up and holding on to ideas
from the 80's and 90's and only are now in a position to suggesting them to
someone else with more power and abilities and getting the okay to try them.

Apple is really a stack of computing ideas from the 50's, 60's, 70's, 80's,
and 90's. Starting with the Macintosh derived from the mother of all demos to
now we're finally getting around to implementing the idea of a central
mainframe with diskless devices accessing it.

A "cloud" with black mirrors everywhere giving you value? Oh, my, that sounds
like what Larry Ellison saw as the future with the Network Computer back in
1996.

I'm old though. Accepting this new reality that this red-headed stepchild of a
computer we used to argue about during elementary school recess about which is
better turns out to become the most valuable company in a world and is finally
in a position to push through something as magical as instant access to
computing everywhere.

That is freakin' amazing.

~~~
hrktb
I share the feeling, but at the same time Apple seems to be what Sony was back
in the day. They have central very successful products, and are spreading
their influence in numerous new markets while betting a lot on artificial
restrictions keeping users in their ecosystem.

Sony wasn't the biggest company in the world I think, and the game was a lot
more primitive back then, but I remember owning a walkman with a Cybershot, a
Sony music compo and at the end a matching laptop because all of there where
integrated. If I had the money at the time I'd bought a Handicam and a
matching TV in a heartbeat.

Sony seemed unstoppable, until the pieces just crumbled; there would be way
better laptops, the camera market evolved and there were far from keeping in
touch with the best players in the field, then the music industry moved on,
and keeping the integration going on becomes more and more compromising.

With today's Apple, while they are spreading, the same cracks seem to appear
to me.

They still have very competitive products on each market, but these are more
and more compromised as deep design decisions are made and the competition is
getting better.

As an anecdote, a year ago I broke my iPhone and decided to go android for a
few month waiting for the iPhone 6, and surprisingly to me it didn't really
matter much in my day to day use, except for the artificial limitations (no
iCloud, no iMessage) on the integration. But these limitations instead of
being a deal breaker, really forced me to go into Google/third party centric
services on my laptop/ipad/other family members devices. In a Apple heavy
household there is now one device that forces the others to change service
providers for central things like email, messaging, calendar, online storage,
and the thing is it's not really difficult nor handicapping, the pros and cons
balance very well.

Interestingly enough, with Apple Pay, Apple is starting to step on the feet of
the new Sony who've been investing in payment processing and ecosystem for so
many years now.

TLDR; I think Apple has started playing a game that put them in a position
where they have to be better than everyone else at basically everything. Right
now I don't think they are at the top of their game, especially in giving
options to their customers or software quality/reliability. So, while they
have a ton of money and are super successful, I think there is even bigger
pitfalls waiting for them ahead. Hope they don't fall.

~~~
alaskamiller
I'll tell you the secret why: Sony aggressively expanded in the 80's and got
into the media business.

The values couldn't and didn't align.

The idea is the synergy of Sony electronics and Sony entertainment would
create something amazing but the reality was Sony electronics and Sony
entertainment couldn't, wouldn't, and didn't play together.

Whatever the electronics side made, even if technically better than anything
on market, had to be locked down to appease the entertainment side.

But the entertainment side didn't get big enough to be making such demands.

Sony also didn't make the jump to digital as fast as it could so upstarts were
able to come in. I remember the transition from minidisc to MP3 player. THAT
WAS PAINFUL and did not need to happen. Nor the subsequent jumps of oh hey,
buy content again and again as different formats to fit into your playstation
or your TV or your walkman.

There's a massive treasure chest, massive inertia, massive momentum, and
again... it's freakin' amazing to me how much we clutch our little black
mirrors and how central everything has been.

I'm rooting for a Wintel underdog comback.

~~~
walterbell
_> I'm rooting for a Wintel underdog comback._

Yes, if only because Wintel has a history of relative openness and backward
compatibility.

However, the new Microsoft board is going in a different direction,
prioritizing cloud and cross-platform over Windows. Hence Win10 will be
cheap/free and continually updated by the cloud without notice, i.e. it
becomes a non-deterministic magic box. Businesses will have to pay for Windows
_not to change_.

~~~
alaskamiller
You're assuming those two things are survival traits

------
LiweiZ
I recently think one reason that makes Apple to offer larger screen iPhone is
that the Apple Watch may compensate the need for a single hand-held device
experience.

------
tim333
The Steve Jobs quote mentioned about bicycles for the mind is cool
[https://www.youtube.com/watch?v=ob_GX50Za6c](https://www.youtube.com/watch?v=ob_GX50Za6c)
. I know it's old but I hadn't seen it before. The rest of the article is kind
of intellectual mush starting from saying "litigated against" in the first
sentence when he hasn't and continuing in a similar vein.

~~~
monkbent
Perhaps I should litigate against people that say I haven't when they can't be
bothered to follow the very next link in the next sentence:
[http://stratechery.com/2013/clayton-christensen-got-
wrong/](http://stratechery.com/2013/clayton-christensen-got-wrong/)

Or this one, linked a few paragraphs later:
[http://stratechery.com/2013/obsoletive/](http://stratechery.com/2013/obsoletive/)

Here's another one, for good measure:
[http://stratechery.com/2014/best/](http://stratechery.com/2014/best/)

So actually, I have. Mush indeed.

~~~
peteretep
You know that when a dictionary calls a definition of a word "archaic", they
mean "no longer correct", right? Using "litigate" to simply mean "argue
against" or "dispute" is to confusingly misuse the word.

~~~
simonh
> when a dictionary calls a definition of a word "archaic", they mean "no
> longer correct",

I just checked a few dictionary definitions of 'archaic' and none of them say
anything about no longer being correct.

~~~
peteretep
OED lists as:

    
    
        > Belonging to an earlier period, no longer in common use,
        > though still retained either by individuals, or
        > generally, for special purposes, poetical, liturgical
    

If "no longer in common use" or "for special purposes" doesn't mean incorrect
in an entirely consensus-driven language, what does? It gives a motivating
example of "obleege", for oblige, which I note my spell-checker has helpfully
underlined in red.

~~~
simonh
Nothing about 'not common' or 'special purposes' implies 'incorrect'. There
are many perfectly good words and phrases in English that are not commonly
used or are only used for special purposes, but that in no way makes them
incorrect.

------
AdeptusAquinas
While technically the iPhone keeps getting better and better, and Apple has
all these other initiatives that make it and its ecosystem impressive, I would
doubt that this has anything to do with their massive profits.

It might be why a lot of techies buy the phone (though I'm still loyal to my
Lumia :)) but surely the primary reason remains the fact that the iPhone is a
premier fashion item and/or has most of the apps?

~~~
adamlett
> the primary reason remains the fact that the iPhone is a premier fashion
> item

But what does that mean? _Why_ is the iPhone a fashion item and other phones
are not? Why does the iPhone command such a high degree of customer loyalty
compared to its competitors?

Perhaps it's not what you meant, but when I read the argument that the iPhone
is only/primarily successful because it's a fashion item, I feels like what is
implied is that the iPhone as a product is similar to it's competitors and is
only differentiated by better marketing. Which I think is BS. But if it were
true, it would be even more astounding, considering Apple spends only a
fraction of the amount Samsung does on marketing.

~~~
tonyedgecombe
There is no doubt when the original iPhone came out it was streets ahead of
the competition, the likes of Nokia and Blackberry had become complacent,
Apple turned the industry upside down.

The competition hasn't stood still since then though, the difference between a
Lumia a Samsung and an iPhone much.

So why do people continue to pay a large premium for a small increase (if any)
in functionality?

~~~
7952
Anecdotally people seem to think differently about IPhones. They expect them
to last a few years and retain value. People are more likely to protect them
with cases and actually use the warrenty. A lot of other phones feel much more
flimsy and you never seriously expect them to last more than a year or two.
And because they are cheaper you can always just get another one.

------
Glyptodon
So... in Star Trek Terms... if they can be the ship's computer for Earth
everyone will pay loads for really nice communicators?

~~~
walterbell
HP wants to be the new mainframe for Earth, by developing memristors that they
won't sell to anyone except via hosted software.

------
kh_hk
Hey, that's Google's new market too!

 _They_ foresee a dystopian future with driverless cars, intelligent ads,
perfect synergy and communication between our brains through implants. It's
dystopic not because of what it promises, but how much control these providers
will get over public services. Pure Philip K. Dick.

Welcome Google, Apple and Amazon, the companies of the future, the companies
that help us on our most mundane and daily tasks. From waking up, drinking
coffee, conmuting, working and going to bed. Of course, this keeps their stock
value high, not doing it, but reaching for it. Cannot really blame them.

~~~
bobbles
You don't have to use their services or products

~~~
ceejayoz
Not yet. A few years/decades after self-driving cars become common, though, I
wouldn't be shocked to see manually driven cars banned or strictly limited for
safety reasons. What then?

~~~
freehunter
Then there will likely be several companies competing in the self-driving car
market? It's not like when horse and buggy went out of fashion, we all had to
rush out and buy a Ford.

~~~
ceejayoz
Apple, Google, Microsoft, etc. compete in the smartphone world but all are
privacy disasters in one way or another. I don't expect things like self-
driving cars to buck that trend.

------
squozzer
What the article doesn't explain or maybe cannot is that apple's strategy, if
correctly stated, depends upon two factors: 1) the willingness of others to
produce things that integrate with the iPhone; 2) how much trust end users are
willing to place in apple.

------
threeseed
Actually the complete opposite is happening. Apple isn't modularising. They
are unifying.

Apple has built a unified SDK for iOS and OSX that has been used in the Photos
app. This means that going forward we could see a single development platform
across all Apple devices. When you combine this with Continuity and iCloud and
it's a pretty big deal.

Seamless movement between devices that of course only works with the Apple
ecosystem.

~~~
IBM
You've zoomed in on one aspect of Apple while Ben Thompson is looking at the
company as a whole. Apple has integrated on what they perceive to be the
important parts of the value chain (which is why Apple designs chips but
doesn't manufacture them).

------
benwen
Apple Pocket Phone

[http://blog.benwen.com/opinion/product/2015/01/29/apple-
pock...](http://blog.benwen.com/opinion/product/2015/01/29/apple-pocket-
phone/)

------
BobMarz
Reasonable assertions followed by breathless hype for the Apple watch.

~~~
IBM
I didn't get that at all. In fact he seems to be suggesting what Apple's
thinking may be in terms of the Apple Watch fitting into their strategy.

~~~
BobMarz
The entire Apple's New Market section is muddled. Apple will "leave
smartphones behind" for "foundational services" which are accessed...through a
smartphone.

~~~
XorNot
Its because we're coming to the end of the smartphone boom. Processors are
about as fast as they can go within the energy and heat envelope of current
technology and displays high enough resolution that they are the start of the
VR boom. But the easy gains are gone because no one has any idea how to make a
smartphone which will run at full power for 24 hours.

