

Two brilliant moves that helped create the Apple iOS powerhouse - dalton
http://daltoncaldwell.com/2-brilliant-moves-created-apple-ios

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shalmanese
I disagree that #2 is necessarily smart, Apple is doing it because they have
no other choice. They don't have a low end competitor to bring into the market
and so their previous high end device has to fill that role.

The needs of a high end consumer 3 years ago is different from the needs of a
low end consumer today and different technologies age at different rates. The
iPhone 3GS is still using a 65nm processor which means it's using almost twice
as much silicon for the same number of transistors as an iPad 2, driving up
cost. At the same time, features introduced into later phones like better
cameras or the gyroscope would probably be worthwhile even in a low end phone.

Additionally, high end finishings like steel and glass might be attractive to
a high end consumer but low end consumers would rather take the cost savings
from using plastics.

At the same price point, the iPhone 3GS is not at all competitive hardware
wise with modern low end phones. The only reasons they sell so well are
because a) They grant exclusive access to the iOS ecosystem which trumps
performance issues and b) the modern American way of pricing phones confuses
most consumers. If the phones were priced at $649, $549 & $449, a lot more
consumers wouldn't find a 30% discount for 2 year old technology that good a
deal.

~~~
oemera
I strongly disagree. A phone which was mind blowing awesome this year will be
pretty good next year and for a lot people attractive even after two years
because you have decent hardware and the latest software. If you buy an low
budget model Android phone, you get the Android version which was released 4
years ago. I think no one would buy an 3 GS at this point if Apple would sell
it with iOS 3.

A lot of my friends have a iPhone 3 GS and they are happy with it and see no
need to change. It's not the same with Android low-end models.

Please don't get me wrong I don't want to bash Android here but I want to make
how smart this decision was / is. People are buying the old hardware ( which
was awesome) and getting it with new the software for a good price.

Maybe I should also point out that people have also seen the same product last
year and friends using it. Think about it. Would you buy a new phone which
just came out as low-end model or would you buy the product from last year for
a better price? Apple shows that the second choice wins.

~~~
watmough
Interestingly, the original iPhone 4 is a more attractive device than the
iPhone 4S because it doesn't rattle when you put it down.

I can't believe that slipped though. It's a blot on the impression of the
iPhone 4S as a solid thing.

~~~
CamperBob2
My 4s rattled a bit when it was new. I wasn't sure at first if the buttons
were responsible for the rattling, or if it was something internal. Then I
dropped it a couple of times while spinning it around in my hand to locate the
side with the button I wanted to press, and that made it stop rattling for
some reason. The front and back glass slabs now slide around a bit, though.

I'm more or less dumbfounded at the popular perception of the iPhone 4 as a
"great" industrial design. While it's definitely a great _phone_ , if they
don't return to a curved back with the next model or otherwise provide some
tactile cues that help the user sense how it's oriented as it's being
withdrawn from a pocket, it'll almost be enough to send me over the fence into
the Android camp. Failing to move to a bigger screen will certainly do that.

------
welp
Regarding #1: "Taking their beautiful hardware and subjecting it to Windows
users must have been controversial inside of the company. It just didn't seem
like something Jobs would do." -- Having read Jobs' biography, it wasn't
something he would do: he argued against it, and even said that Windows users
could use iPods "over my dead body." However, business sense prevailed, and
Jobs realised that it made sense to open up the iPod world to Windows users.

Jobs was a proponent of porting iTunes to Windows, but Schiller didn't want
this. As a result, Apple joined leagues with MusicMatch, and they made a music
player, but Jobs said it was a terrible piece of software:

"To make the iPod work on PCs, we initially partnered with another company
that had a jukebox, gave them the secret sauce to connect to the iPod, and
they did a crappy job. That was the worse of all worlds, because this other
company was controlling a big piece of the user experience. So we lived with
this crappy outside jukebox for about six months, and then we finally got
iTunes written for Windows. In the end, you just don't want someone else to
control a big part of the user experience. People may disagree with me, but I
am pretty consistent about that."

So Caldwell appears to be right in both points: it was understood that it
would bring a lot of value back to Apple, but it also took a lot of smart
people to convince Jobs to let it happen.

~~~
joezydeco
_However, business sense prevailed, and Jobs realised that it made sense to
open up the iPod world to Windows users._

Here's the Jobs quote from the biography:

 _"'Screw it,' he said at one meeting where they showed him the analysis. 'I'm
sick of listening to you assholes. Go do whatever the hell you want.'"_

I don't think Jobs should get any credit for the iTunes/Windows port. It's for
the people that finally managed to wear Steve down and get the decision made.

~~~
welp
It was my impression that that was Jobs' way of backing down and admitting
that others are right. But I may well have misinterpreted that.

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brazzy
Um... _where_ exactly can one get previous iPhone models for $99 or $0? I
recently paid EUR 200 for an iPhone 3G (not S) on ebay.

No, plan-subsidized prices do not count.

It may be true and a great idea that Apple does market segmentation by keeping
to sell older models, but it is very limited. They're only segmenting the
upper end of the market.

Which may eventually bite them when cheap Android phones become affordable to
billions of people in the 3rd world.

~~~
zaptheimpaler
Why don't plan-subsidized prices count? As long as we're comparing iPhones on
plans, I see no reason not to count them. The article compared the $0/$99
iPhones on a plan to $0/$99 Androids on a plan.

I think you have a valid point about segmenting only the upper end of the
market though. Apple has always catered more to the upper end than anything
else, but it works for them. Segmenting this end of the market is still a very
lucrative proposition for them. Also, the fact that the top selling smartphone
in the US is the iPhone meaning they're currently able to cater to the whole
of the smartphone market very effectively, not just the upper end.

I agree this isn't a good strategy when the 3rd world countries start going
strong on smartphones, but that doesn't mean it's not a good strategy now.
Perhaps when that happens they will fundamentally have to shift their focus
from catering only to the upper end of the market to a broader one, but I
don't think that will happen soon enough for them to change their strategy
now.

~~~
bosie
because plan-subsidized prices depend on the negotiator, i suppose?

the network company i am currently with offers a plan for the iphone/android
cellphones too. i can get the Samsung Galaxy Note or HTC One X for the same
price/same contract as an iPhone 4.

I am not sure i would say "inexplicably runs Android 2.2, looks like a Hummer,
& has 3 hours of battery life" about either the Samsung Galaxy Note or the HTC
One X.

edit: and since i pay around EUR 6,00 per month for my mobile
telecommunication needs (EUR 4,00 for internet, rest for voice, EUR 0,00 for
text), I am not sure I care about plan-subsidized phones either (unless they
are attached to a EUR 5,00 plan).

~~~
praxulus
On-plan prices matter to you about as much as off-plan prices matter to most
American consumers. The majority of them get phones with contracts,
particularly when you're considering smartphones.

------
nicholassmith
I think number 2 nails it. Apple doesn't do low end, they've never needed to
compete in the area as it's not their dog show. However there's a market,
there's people who dearly love the iPhone but can't justify the full price
device, or kids or someone who's transitioning to their first smart device.

So Apple has a situation. Go low end and basically go against the corporate
ethic, or allow Moore's Law to let them price the previous generation down so
they're still making a profit but allows them to fight at a lower price point.
And that's smart, as it covers the bases, and that's what Cook has brought to
the table.

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av500
Minor nit: The Archos mp3 players required no desktop software at all, they
appeared as a USB mass storage device and you could just copy your files over
- for me still the preferred way over any other "music sync" solution...

~~~
raverbashing
Correct. Most mp3 players work that way

But of course, in "corporate" they are going to require a "user friendly
solution"

It (was) usually a VB program done by people with no UX talent, on a budget an
a short timeframe and with no testing as well. Also they make file copies take
magically 3x as much time than copying using Windows explorer.

Not to mention iTunes is a better solution, because it's your music library
integrated with syncing. It's different for example than having one program to
sync and another to listen. (Similar solutions like Amarok + iPod plugin work
great as well)

------
stephengillie
One of my college professors discussed the business strategy in keeping iPods
locked-in to Apple PCs at first, and later opening the device up to Windows
users.

Early adopters were buying a device that wouldn't work with their current PCs,
and many ambivalent Windows users started buying Macs. They didn't see it this
way, but they bought into the Apple ecosystem.

For many people, longer they live in the Apple ecosystem, the more difficult
it is to leave - your non-Apple device looks different, feels different, acts
different[1], and won't dock in music players or anything else, and needs a
different charging/data cable. It's an eyesore like having a yellow door on
your black car. For the large fraction of the population that values image,
this is unacceptable, and Windows is equivalent OSX for most computing needs.
The iPod served to funnel this group into this ecosystem.

After they had acquired most of the users who would willingly switch, Apple
removed the lock-in to allow more users to purchase their device. This allowed
both device and software (app+MP3) sales to continue to people less willing to
switch from Windows.

In effect, it's also time-delayed way of creating different price points -
early adopters had to pay extra to purchase a Mac, but later adopters saved
that money.

[1]Unless it's a Samsung Galaxy Nexus?

~~~
Hoff
iTunes first supported an Apple iPod and also first supported OS X in October
of 2001.

A version of iTunes arrived on Windows 2000 and Windows XP in October of 2003;
two years. (October 2003 also saw the announcement of Panther, 10.3.)

Prior to the availability of iTunes on Windows, MusicMatch Jukebox was
commonly used with Windows, and that package was included with various iPod
devices.

The general market acceptance of OS X didn't really get rolling until the
Intel port, and that was announced during the 2005 WWDC. (I don't have that
plot handy; that's from memory.)

Here's a plot of iPod sales, and note the sales trend and the years:
[http://www.macobserver.com/tmo/article/charting_apples_growt...](http://www.macobserver.com/tmo/article/charting_apples_growth_ipods_ipads_iphones_macs_dollars/)

For more plots on sales of iPod and Mac devices (as well as iPad and iPhone),
see the Asymco site. Here's one of the many available plots:
<http://www.asymco.com/2011/07/26/apple-has-moved-on/>

And in a business, recognize too that Apple would have been foolish to
constrain the potential sales of their then-new iPod product (and now iPhone
and iPad) from the volume computing market, and that market was and remains
Windows. And first with MusicMatch Jukebox and later with iTunes, they didn't.
And they still don't. Their statements and their history of intentional self-
cannibalization among their products points to this, too.

And in general, always question what your professors tell you. Always. That's
part of what college is supposed to teach students, even if your individual
professors don't or won't.

------
mwsherman
Moore’s-Law-as-segmentation is not driven by manufacturing ease, though it
certainly benefits from that. Rather, it’s much easier to explain to new
customers.

They could introduce three new models a year (high-mid-low) and spend months
advertising what they are. Or, they could introduce one new model a year, and
market that.

Brand new, but low-end, customers already know the product because it’s been
in the market for a year or more.

------
danielamitay
Move #2 is really big at the moment. Apple is still able to create market
segmentation with it's 3-year old device.

As of last quarter, the top selling smart phones [1]:

1\. iPhone 4S

2\. iPhone 4

3\. iPhone 3GS

4\. Samsung GALAXY S II

5\. Samsung GALAXY S 4G

[1]:
[https://www.npd.com/wps/portal/npd/us/news/pressreleases/pr_...](https://www.npd.com/wps/portal/npd/us/news/pressreleases/pr_120206)

------
ben1040
Also, it seems Apple enhanced last year's iPad; new ones are starting to show
up with a newer 32nm CPU with better battery life:

[http://www.anandtech.com/show/5789/the-
ipad-24-review-32nm-a...](http://www.anandtech.com/show/5789/the-
ipad-24-review-32nm-a5-tested/4)

15-30% more battery life is nothing to sneeze at, and certainly seems like
they are committed to still selling as many of "last year's model" as they
can.

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jerguismi
"Getting back to Apple, right now you can go out and “buy” the flagship iPhone
that was originally released 3 years ago for $0 (or the one released 2 years
ago for $99) -OR- you can get an entry-level Phantek Astroglide which
inexplicably runs Android 2.2, looks like a Hummer, & has 3 hours of battery
life."

Are those like real prices, or are they contracts? I hate when people quote
prices that are actually tied to some kind of contracts. It doesn't make any
sense to compare those numbers.

(I always get my phone and contract separately)

~~~
praxulus
>It doesn't make any sense to compare those numbers

Well, it's a valid comparison, since it's apples to apples. Even the numbers
themselves can be considered valid, given that a large portion of American
mobile customers get their phones with their contracts.

~~~
dagw
Is there only one "contract" in the US? Don't you also need to know the
monthly cost and exact details of the contract you are tied into?

~~~
watmough
Well, it's a "confusopoly", but you can reckon to pay about $80 / month for
two years, plus an initial $100 - $200, for one single top of the line phone,
such as an iPhone 4S.

Over two years, this amortizes the phone cost, and if you keep paying, it's
basically just extra gravy for ATT.

------
speg
#2 is the reason why we'll be getting my Mother an iPad (2). She wouldn't
appreciate the high resolution screen, so we'll save a few bucks and she can
still FaceTime the kids.

