Major Player

2011.01.01   prev     next

As of last July, Apple had, and had had for several years, a very lucrative business in the portable digital music player market — the iPod. The iPod had been challenged several times over the years by Microsoft, Dell, and others. But the last serious attempt to unseat the iPod was the Zune — four years ago. The Zune is still available, but seems to hold consistently at about 1% market share. Today, no one even tries to challenge the iPod. They’ve all given up.

As of last July, Apple had been in the smartphone market for a full three years. After entering that market (a healthy, vibrant market already), Apple captured about a quarter of the market in less than a year, and after three years held about a third of that market. And Apple had a thriving, mostly piracy-proof app market going on the iPhone. And Apple had the iPod Touch, which ran most of the same apps as the iPhone, and was selling about as many units as the iPhone.

As of last July, Apple had been in the tablet market with the iPad for a little over three months, and had transformed that market from the puttering, unsuccessful malaise it had experienced for nearly a decade, into a thriving, million-plus-per-month market. And Apple held something like 95% of that market. And the iPad ran the iPhone apps, and had its own app market based on the same technologies as the iPhone’s.

As of last July, Apple’s desktop and laptop computer business, while still a minority of the overall PC market, was much stronger than it had been since the decline of the original Macintosh in the mid-’80s. As of last July, Apple’s strong presence could be seen on virtually any college campus or at any Starbucks — places where people on the up-and-up are more likely to be found. And Apple’s computers all ran the same processors as Windows PCs, and all could run Windows as an option.

As of last July, Apple had the most comprehensive and successful online music, TV show, and movie business: iTunes.

As of last July, Apple had a beautiful and highly profitable set of retail stores, in prime locations, by which current and future products could be sold directly to the consumer without any Windows-centric entities getting in the way.

As of last July, Apple had their own, custom designed technologies for the physical composition of their products (unibody machined aluminum), batteries (superior to everything else in the industry), and processors (A4; custom designed to best suit Apple’s own products). All of this custom Apple technology was spread across tremendous economy of scale, so it didn’t add much to the price of the products. And none of this custom technology was available to any of Apple’s competitors — it was made by Apple, for Apple’s products only.

As of last July, Apple made comfortable profits on all its products, selling virtually nothing at the razor-thin margins that are common among Apple’s competitors.

As of last July, Apple’s market capitalization was in the top ten (top five?) out of all traded companies in the world, in any business. (Today it’s in the top two.)

As of last July, Steve Jobs had been named “CEO of the Decade” by Fortune.

Lost in the ’90s

Last July, John Naughton wrote a Guardian article titled: “If Apple wants to be a major player it needs to start behaving like one.”

“If?”

“Wants?”

What planet, one might wonder, is this guy living on?

I wish I could say that Naughton’s attitude is unusual or freakish among industry pundits, but sadly that is not the case. Many of these pundits, it would seem, can’t get their heads out of the 1990s, when Apple was a struggling also-ran on the verge of collapse. To these guys, when Apple seems to have a big success (or two, or three, or five) it is interpreted as some sort of gesture by Apple that it wants to be a major industry player.

And what, according to Naughton, must Apple do, if it wants to be a major player? As gathered from his article’s content, Apple apparently must react more quickly to the “problem” of the iPhone 4 dropping bars on its signal meter when you hold it a certain way — regardless of whether that bar-dropping actually correlates to the ability of the phone to make and receive calls.

Is that a metric of success? If I told you that XYZ corporation reacted extremely quickly when their product erroneously displayed a minor problem in the upper-left corner of the screen when held a certain way, even though it didn’t actually cause any problem in real use — would you say, Oh boy, XYZ must be a really successful company! They must be a major player! No. You wouldn’t have any idea whether XYZ was an insignificant bit player in the industry or the biggest player on the field.

I really think all Apple wants is to make great products and be able to sell them directly to consumers. But Apple is, beyond any reasonable doubt, a major player in the tech industry. Heck, Apple might be the major player.

Update 2011.10.08 — Just discovered this quote from Harvard’s Clayton “Disruption Theory” Christensen, from January, 2006, one year before the iPhone was announced:

Watch out there, Naughton. I think this guy still has you beat.