Apple has for the past half-decade dominated the technology headlines, the design press, tablet sales and given the smartphone industry a huge kick up the you know what. The share price has rocketed and so have quarterly financial reports, but this could all be about to change.
They say that when you are at the top you can only go one way and small chinks are appearing in the aluminium armour that Apple has polished so carefully in the 2000′s. The iPad is of course selling well, but the Microsoft Surface has a big chance considering that 90% of the world’s computers run Windows. Indeed, consider Windows 8 on a smartphone, tablet and desktop and you can see where Microsoft is heading. I would bet that Microsoft will get there before Google or Apple in building an identical eco-system between all three form factors. And then there is the Nexus 7, a tablet so cheap and at 7″ it is the right size for a tablet (in my opinion). It could gain substantial ground before Apple releases the smaller iPad.
The Galaxy SIII is a fantastic smartphone and so is the HTC One X and the Galaxy Nexus. All are arguably better than the iPhone 4S from a hardware point of view and if the rumours surrounding the iPhone 5 are correct, they still will be. Apple needs to think bigger in terms of smartphones to keep pace because a new phone that is similar to the 4S in stature will not do what the previous models have done, nowhere near.
And then there is iCloud. Google does web integration better than Apple and so does Microsoft. I use an iMac every day and at no point does it feel the same as my iPad or iPhone- some of the features such as Photo Stream are useful, but Gmail, Google Calendar and Google Docs are my weapons of choice to get stuff done. Everywhere I turn, I see red flags for Apple and green flags for Google and Microsoft. I may be wrong and in a way I hope I am because one thing Apple does well is drive the entire industry, but those red flags keep coming back to me.
About Shaun McGill
I suspect that iTunes is, in many ways, more important to Apple than hardware and they are the only company who seem to have got the international rights issues sorted.
Both Amazon and Google only seem to have sorted the rights out for North America which is probably why the Amazon Kindle Fire has not been launched internationally and the shine has been taken off both the Nexus 7 and the Nexus Q for those outside of the US.
Apple could create an “Android” marketplace either as a standalone or as part of iTunes and make loadsamoney from Android users. They already have the rights sorted out – the delivery system is easy by comparison it would seem.
Apple uses iTunes to make money from hardware. The profit from apps, music etc. is tiny in comparison to the devices they sell. There is no way that Apple would ever offer an iTunes for Android- it would benefit Google a lot more than Apple.
Apple revenues for iTunes were over $2 billion dollars in the last quarter of 2012 and growth in revenue was up over 40% from the same quarter the previous year.
Apple gets to keep 30% (or thereabouts) of iTune sales which is far, far more than the amount they make on each hardware sale.
Personally, I think that the worm has turned and Apple now uses hardware sales to make money from iTunes. After all, they can only sell the hardware once – that one sale allows selling new and old content at minimal cost over and over again as long as the hardware exists. With the $2billion revenue in a single quarter from iTunes just on selling to Apple users, why would they not consider tapping into an increasing software/content revenue stream?
That is interesting, do you have a link to a source so that I can reference in a post?
Apple posted quarterly revenues of $39.2 billion in April. The $2 billion is still a small part and I firmly believe that they see iTunes sales as icing on the cake. They need the apps etc. to sell hardware. They are still currently a hardware company first and foremost.
Revenue is not profit.
I suspect that the profits from iTunes are dramatically greater than those from hardware sales. iTunes does not incur the costs involved in R&D, manufacturing, distribution and reseller margins. There is no way that Apple makes 30% margin on their hardware.
They only sell the hardware once. As a result, multiple iTune sales ensue – not just from Apps but also books, magazine, TV shows, films and music.
Whilst hardware may still be important to Apple, iTunes is likely to be a far more profitable business for them in the next few years and the hardware may take a back seat in the face of fierce competition that no amount of patent litigation will stifle in the long term.
“There is no way that Apple makes 30% margin on their hardware.”
They do- http://www.bloomberg.com/news/2012-01-04/apple-profit-margins-rise-at-foxconn-s-expense.html
“iTunes does not incur the costs involved in R&D, manufacturing, distribution and reseller margins.”
Well, R&D will be there plus the people reviewing the apps, the large cost of bandwidth required and so on. Also revenues of $2 billion from iTunes technically means that Apple sees 30% of those revenues and then the profit is taken from that after costs. Apple sees 100% of the revenues from hardware before costs etc. Sorry, but I firmly believe that iTunes makes a minimal profit, if any for Apple on its own.
Even 30% margin sounds low, for Apple anyway.
While iTunes is not a big earner for Apple at the moment, needless to say it will become increasingly important over the next few years as a revenue stream.
I think it sits behind all of their products and is incredibly important for them. If Apple tried to make more money from iTunes, that would likely push the costs up at the expense of customers and purchased products. It will continue to make little profit, but generate lots indirectly.