We’ve got two strong legs on our chair today,’ he told USA Today. ‘We have the Mac business, which is a $10 billion business, and music–our iPod and iTunes business–which is $10 billion. We hope the iPhone is the third leg on our chair, and maybe one day, Apple TV will be the fourth leg.’
Steve Jobs has a plan.
Apple haven’t been pushing the Mac as hard as they have this last 18 months. They now want everyone to have a Mac at work and at home in the spare room. Nearly 6 months ago they introduced iPhone and later the iPod touch, both which run ‘OSX’ a cut-down version of Mac OS X. They’ll likely be transitioning more and more to the ‘touch’ operating system for use in their iPods. in effect, they want everyone to have a Mac in their pocket. Apple TV, though as woefully underdeveloped as the iPhone, could be the Mac in the living room.
While people were very quick to hack open the Apple TV devices and install extra codecs and cavernous hard drives, there wasn’t the same hue and cry about an SDK – yet in truth this is what we really need to see. The Apple TV, however, represents a much more long term play than the iPhone or iPod. These pocket devices will get you to use their file formats, their networks – H.264, m4v, iTunes which will all play very nicely on the Apple TV.
The article on FastCompany describes a lot of situations where they think Apple’s hand has been forced but I think that’s a very naive position. Apple’s early adopter iPhone “credit” of $100 was obviously planned but held back on. Likewise, the SDK was planned but all things take time and it probably wasn’t the hollers of a few self-centred geeks to make the difference. It describes how other manufacturers have a touch screen phone, which is true, but for the most part they’re disasters. It describes a world where it was hard (or illegal) to get music onto MP3 players before the iPod (despite the existence of CD rippers for half a decade) and it puts a lot of faith in subscription music – something which, despite being readily available, not many people seem to want (to be honest, does the analyst think that Apple couldn’t implement subscriptions?). The final straw really has to be the contention that the iPhone is the “remote control” for your Apple TV.
I think the lack of enthusiasm comes from cautiousness and I’m not going to suggest that said analyst has invested heavily in Microsoft, Creative, TiVo, Real or any of the other players in this market who have a lot to lose if Apple maintains it’s lead. Note I said lead. We’re not talking about a monopoly (like, for instance, the desktop operating system monopoly held by Microsoft). Yes, it’s probably correct that Apple is likely overvalued at over $180 per share but the same is certainly true of Google as well. Earnings and assets don’t need to add up to share price as the latter is more an indication of how people perceive the value to be. If you’re able to sell Apple at $190 it’s because someone values it at that price which means it’s that valuable. It’s a supply and demand market aside from the considerations of assets. How could anyone but the market put a value on the turnaround Apple has made in the last decade? In May of 2008 we’re going to be celebrating the tenth year of iMac. iPod has been out since October of 2001 and yet half a decade later Apple commands the lions share of the online music business. How could any analyst make these sorts of realistic guesses? Would he look at the Apple TV and declare it a flop or would he take into account the reception the iPod received in 2001 as an indicator?
What the analyst misses is the win-win situations. It’s true that Apple makes a lot of money from AT&T and presumably O2 with iPhone subscriptions but it’s important to realise that Apple also makes money from each and every iPhone sale. Similarly, the Apple TV may not be resounding success right now but at the same time it’s not a loss per unit (like XBox) or selling at a loss-making discount to get Amazon sales ranking (like the recent run on the Zune).
So, Mac, iPod/iTunes, iPhone, AppleTV – the four legs of Apple’s strategy. Are we sure there are only four legs on this chair? You’d like to wager on that?