So ask the hordes of irate Wall Street analysts (most of them holding flaming torches to Tim Cook effigies and sobbing uncontrollably) after yesterday's iPhone launch. There have been, quite literally, seven gajillion of these articles.
Thankfully, there have also been a handful of non-hysterical articles attempting to answer this question using basic reasoning skills.
But you're a busy man/woman/child/manchild/warrior poet, so I'm going to save you the trouble of hacking through the jungle by recapping what I think is the best explanation of the lot.
This comes courtesy of industry analyst Horace Dediu’s Asymco blog.
(Wait, do I have to also h/t Fortune for turning me onto this? Oh, Internet etiquette, you’re exhausting.)
Anyway, Dediu’s opening move is to answer the question: Why does Apple charge so much money for its phones? (The answer being: because it can; that’s how prices work.)
It’s the operators, not the consumers footing that $550 bill, he argues:
“...The decisions operators make on whether to range a phone are driven by hard economic realities: ARPU, churn, network costs, depreciation, ROI, etc. Some clearly can’t make the iPhone fit their economic models and indeed about two thirds of them don’t. But the most prominent do. DoCoMo, the largest in Japan just did after holding out for five years. Verizon held out for years, as did T-Mobile.”
But here’s where things get interesting. Apple’s real business, Dediu argues, is not selling phones to consumers, but selling higher revenue data services to consumers via operators. In this sense, the iPhone is acting as a “data service salesperson” and the subsidized premium price is essentially its “commission.”
Furthermore, operators aren’t really footing this bill; they’re simply passing on the cost to consumers through higher data prices. Dediu speculates:
“You won’t see it itemized on your bill, but it’s likely that $10 to $15/month from a subsidized phone service plan goes toward paying for your phone. So in a way, Apple has managed to place itself on many people’s monthly phone bills... It’s nice for the same reasons operators like post-paid customers: predictability. It’s also nice because recurring services are a better business model than products...”
Is this a trick? A swindle? If it is, Dediu contends, then so is the entire Internet (my emphasis):
“The whole Internet and all business plans that are built on it depend on a subtle ‘something for nothing’ type of misdirection... The Internet runs on the arbitrage between a consumer service market where everybody consumes but nobody pays and a separate data market where nobody consumes and everybody pays.”
Evidently there’s an economists’ name for the process whereby advanced products become indistinguishable from services—servitization (nicely done, economists!)
Is it a coincidence, then, that the two companies best at implementing this process—Apple and Google—are basically the only ones making money in smartphones right now?
(You’ll notice Samsung, with its bevy of cheap phone options, is conspicuously absent from that list.)
So I suppose the real question we should be asking is why Apple would willingly, immediately abandon this successful model to compete with Samsung in a lose-lose consumer price war.
As for China (and other countries where key operators seem unwilling to embrace the subsidy model), let's wait and see on that. If the demand isn't there, Apple can always change its business model in those countries and lower the price on contract-free phones.
As one of our blog readers notes:
"I suspect that the iPhone 5c gives Apple a lot of pricing flexibility, and Tim Cook (who does not get credit for just how smart he is) has concluded that he can make more money selling retail than selling to China Mobile (at least until China Mobile agrees to pay more)."
There seem to be two kinds of people in this world – Android users and iOS users. I suppose you could argue that there are really four kinds of people but let’s be honest, Blackberry hasn’t been relevant in years and Microsoft is still trying to make a significant dent with Windows Phone. In fact, per the infographic below, the Blackberry operating system is found on less than ten percent of smartphones these days.
Full disclosure: I’m pretty strongly a part of team Android. And while I’m typing this on a work issued MacBook, have a few iPods at home, and maybe even slightly covet the iPad, I just don’t see myself ever fully embracing Apple and buying an iPhone.
And I’m not alone.
Sometime in 2010 Android overtook iOS as the smartphone operating system of choice and continues to dominate Apple today, at least in terms of sheer numbers. Per research firm IDC, by the third quarter of 2012 Android had a 75 percent share of the global smartphone market.
However, one can make the argument that Apple still dominates in terms of brand awareness. After all, everyone knows what an iPhone is – you, your mother, your kids, your grandmother, probably even your dog or cat. And while it’s true that a lot of people know and adore Android, short of the Samsung Galaxy S series, can the average person name any other Android devices? Probably not, and that speaks to the sheer power of the Apple brand, one that has successfully built over decades. Clearly, Apple is still hanging in there and I’m pretty sure it currently holds a slight lead as the smartphone operating system of choice at SpeakerBox.
So, Blackberry and Microsoft aside, which are you – Android or iOS? Check out the infographic below and then sound off in the comments.
Incredible new technology portends obsolescence for my Commodore 64.
Some Eastern philosophers believe that the closest we'll ever come to enlightenment is a state of self-assured wonder.
In other words, when we've attained enough understanding of the world to conclude -- with some degree of certainty -- that we're incapable of understanding anything more.
Perhaps I am close to Nirvana, because I've been feeling this way about a lot of things recently, most notably the stock market, parliamentary procedure in the U.S. Senate, and the continued popularity of the band Nirvana.
One other item as well: the mathematics of data storage.
(Groan...Click! That was the sound of a thousand people simultaneously changing to a different blog post. But you're still here. Which is all that matters, you data-loving weirdo.)
Okay, let's dive right in then:
When the Apple II came out in 1977 (awkwardly, as it happens, during the Golden Globes) it had a whopping 48KB of RAM -- which, at the time, was more than enough space to store the day's most popular consumer applications, including Grocery List Pro, Multiplication Wizard, and Two Blobs Rotating in a Diamond: The Party Game.
36 years later, Apple is introducing an iPad (an iPad!!) with 128 GB of RAM -- or roughly 2.8 million times as much as the Apple II.
Here's a helpful chart for understanding these values:
1 byte = 8 bits
1 kilobyte (KB) = 1024 bytes
1 megabyte (MB) = 1024 kilobytes
1 gigabyte (GB) = 1024 megabytes
And so on, and so forth.
Now, 1 byte is enough memory to store a single alphanumeric character, such as the letter R, which happens to be represented by the 8-bit sequence 01010010). Hence, to represent the complete works of Pirate Shakespeare (roughly 40 million R's), you'd need about 5 MB.
So with 128GB on my iPad, I can hold a heck of a lot of Shakespeare. But in fact, 128 GB is still pocket change compared to what's really possible today.
Just last year, Seagate became the first hard drive manufacturer to achieve the milestone storage density of 1 terabit (1 trillion bits) per square inch. That means, with a standard 3.5-inch hard drive, you could hold -- in theory -- up to 60 terabytes.
Such data density is possible using heat-assisted magnetic recording (HAMR) technology, which I'm assured by Wikipedia is much better than the Perpendicular Magnetic Recording (PMR) technology used since 2006, which in turn replaced the longitudinal data recording method pioneered in the 1950s.
But as Al Pacino likes to say at parties, we're just getting warmed up:
According to TPMIdeaLab, researchers at MIT (sponsored by the Office of Naval Research and by the National Science Foundation) have "successfully tested a way to store data on individual molecules at room temperature, paving the way for a 1,000-fold improvement in storage density, over the current limits of 1 terabyte-per-square inch."
The article continues:
"The method was demonstrated on a new type of “supramolecule,” which was created from binding atoms of two different molecules: fragments of graphene — a wonder material consisting of thin sheets of carbon atoms — attached to zinc atoms."
Well, duh! Everything's better with graphene!
One small problem here is that "room temperature" as defined by MIT scientists is about negative 9 degrees Farenheit. Which means that for now, only people living in Wisconsin will be able to enjoy the extra storage space.
But while 16 petabyte hard drives in your iPad might still be a few years out, we are (according to MIT scientists) on the precipice of quantum computing and quantum bit memory... which I think means that our next leap might finally be the leap home.
(Okay, so I have no idea what it means. Which is why I'm close to enlightenment, remember?)
It's too bad, though, that this kind of technical advancement isn't happening in other sectors of our economy.
For instance, the 1977 Geo Prism had enough storage capacity for five passengers. So, using computer technology as our measuring stick, you'd expect a 2013 Prism to hold 11.6 million passengers (or 7.6 million Cracker Barrel patrons.)
Instead, the 2013 Prism can't hold any passengers, because Geo went out of business years ago due to terrible car designs.
C'est la vie. On the bright side, your next four-door sedan might just come with a 128GB iPad in the dashboard.
As most of you know, Apple’s new iOS 6 operating system was released just about a week ago. And, if any of you have read my previous posts, you know that I am very on the fence about whether or not I’ll be keeping my iPhone when it comes to upgrade time in December. If iOS 6 was Apple’s attempt to persuade me to stay on the iPhone train, it was not very successful.
Everyone has been talking about the switch from Google Maps to the new Apple Maps, and I agree that Apple Maps is horrible and can rarely even pinpoint my location. In fact, Apple CEO, Tim Cook has even apologized for it. But, my bigger issue is why it took so long for the iPhone to be able to provide turn-by-turn and voice guidance in the first place. All of my friends who use Android’s version of Google Maps have had these capabilities for quite some time.
Then there is the WiFi problem. Apparently not everyone is experiencing the bug, but I certainly am. For the time being I can’t connect to WiFi at all. And, for some reason, I can also not turn off my notifications. Even if I switch on the “Do Not Disturb” function, my phone still vibrates every time I get an email or Facebook message.
According to a TechCrunch article, I’m not the only one unhappy with the update. The article states that:
“Apple’s iOS 6 doesn’t appear to be doing the company any favors when it comes to user satisfaction, according to a new poll conducted by mobile customer research firm On Device. The survey of just under 16,000 iPhone owners in the U.S. found that compared to iOS 5, those with iOS 6 were slightly less satisfied with their devices. The drop is small, but still noteworthy because On Device says this is the first time it’s seeing a drop in satisfaction.”
That said, you can definitely count me in as one of the unsatisfied customers. Apple has about 2 months to convince me I should stick with them. Have a recommendation for a smartphone? I’d love to hear it…
Apple TV users, rejoice! Hulu Plus is now available on the device, competing with the streaming of my not-so-favorite Netflix. (I was a loyal Netflix customer until the company decided to hike their prices overnight and botch their communication efforts.) I quit the service and turned my rental money toward Redbox and my cable’s OnDemand service. But let’s be honest – those options just don’t quite cut it. Often times I can’t find what I want to watch, or I honestly don’t have the energy to drive to the nearest Redbox. But yet I never resorted back to Netflix – maybe it’s just my pride getting in the way, but the way they deployed their pricing model just left a bitter taste in my mouth. With that said, of course I was excited to read that Hulu Plus is now available on Apple TV. I was never one to enjoy watching television on my computer (and rarely do it on my iPhone…traveling is my only exception), so I have been waiting for another service to be added alongside Netflix.
Will I subscribe to the $7.99/month service? (Which, mind you, is the same price at Netflix’s streaming service.) I’m not sure – I need to do a bit of research and see what it offers. (I’ve experimented with some other streaming services, and unless you only like to watch B/C rated movies, or short-run television shows, you can easily be fooled into something you don’t want.) But I will tell you that I’m a sucker for Apple TV and its capabilities. I refrain from buying movies in hard-copy form anymore, I love showing pictures to friends and family on the big screen instead of booting up my computer or pulling out a photo album and I of course play my iTunes through the system on a regular basis. I can do everything all through the little black box, and I love it. So of course I’m tempted to start streaming movies through it too, and I’m wondering how many other Apple TV users will agree. It’ll be interesting to monitor any dips in customer numbers amongst competitors, and to see if Netflix takes another hit in consequences from their goof last year. I can’t be the only one holding a grudge, right?
- Mary Evans
Not to be outdone by iPad's SIRI, Surface comes preloaded with Clippy, the Microsoft Office Paperclip
Noted inebriate Winston Churchill once said about Microsoft Office: "It's the worst of all enterprise software packages, except for all the others."
You said it, Churchy. How else to explain the fact that while I despise MS Word with the intensity of a thousand suns, I just shelled out 120 bucks to get the latest version on my MacBook Air.
Yes, you read that correctly: I, Jonathan Katz, have purposefully (on purpose) infected my pristine Apple computer with (and this is on purpose now) Microsoft software.
Why did I do it?
Well, for starters, I don't much care for the Pages/Numbers/Keynote suite on OS X. Yeah, it's probably better than the Office suite.
But it isn't obviously better, so the switching cost is tough to swallow. Plus, while I was using Pages and Keynote, I was spending approximately 97.4% of my workday converting files to Word and PowerPoint -- just so my colleagues could peer quizically at a jumble of unformatted characters and images (because Apple and MS file formats are only compatible in the biblical sense).
I did for a brief moment experiment with using Open Office, but this program was obviously built by communist Nazis in the Iranian nuclear commission. So I sucked it up and went for Office 2012.
Anyway, the reason I mention all this is because of Microsoft's unveiling of its new Surface tablet (a.k.a. the iPad killer).
I think I share David Pogue's skepticism that Microsoft Windows (which auto corrected to "Wiccan" on my iPhone -- I'm not making this up) can offer anything to justify leaving behind Apple's warm glow of tablet beneficence.
And since 80% of the world's tablets are iPads, Microsoft won't have its usual, most crucial product differentiator -- sweet, sweet ubiquity.
Pogue also mentions the Zune a number of times as a point of comparison (which is mean, but apt).
(Sidebar: How much longer until we put Zune in the American lexicon? As in, "Corel's launching a Photoshop alternative? Sounds like they're about to get Zuned.")
(Other sidebar: Is Corel even a company anymore? I sort of feel like I saw a commercial talking about it being driven into bankruptcy by Bain Capital...)
In any case, I'm not holding my breath until the Surface catches on. Pogue seems to like Windows 8, but my most reliable inside source says it's the worst OS ever devised.
So I'm not shelling out my hard-earned dollars until everyone else in the world switches over, and I'm spending the bulk of my day converting old Word files into the Windows 8 format.
That's certainly something to look forward to, isn't it?
On the bright side: Here's some footage of Steve Ballmer on bath salts.
So rumor has it that Tim Cook will be announcing the iPanel (i.e., Apple's smart TV product) at next week's Developer's Conference.
In true Apple form, the company could start shipping out these devices by the end of year, or -- just as likely -- there's no television product at all.
We just don't know.
That's why Apple product speculation is such an entertaining pastime (way more so than oil futures speculation).
Actually, my dad thinks Apple doesn't even need to design products anymore. All they have to do is spread the rumor they're expanding into some ridiculous new area (for example, boardwalk snacks), and then Apple fanatics will begin feverishly drawing up the plans for what iFudge should look like, what it should taste like, and if it should have LTE.
Not a bad business model, I'd say.
So, yeah. I can't offer you any new iPanel rumors. The best I can do is tell you what it should be like:
Here's what I want: simpler, easier content delivery.
See, I only really want to watch two things on TV: sports and cartoons. Yet for some reason, I'm paying for 6 home and gardening networks and two Turner stations that just show Mel Gibson's The Patriot on a continuous loop.
So if Apple can figure out a pay-for-content scheme (that includes live sports), that would be a big win in my book.
The other major issue I have with TV is that there's so much content everywhere, I never know what I'm missing.
(Yes I realize this is somewhat contradictory to my first complaint, so don't bother pointing it out in the comments section.)
Anyway, some type of Siri-like artificial intelligence that knows which shows I'd never watch and which shows I might conceivably watch (completely eliminating the former and making relevant recommendations regarding the latter) would be fairly appealing.
Here's what I don't want: social media and app integration.
Yes, I sometimes watch TV while playing with my iPhone. But that doesn't mean I want game center notifications, tweets, and text messages flashing across the TV screen every 2.4 seconds.
Multi-tasking efficiencies notwithstanding, this would not be a positive development for a society that's already chronically ADHD.
Call me old-fashioned, but I still think TV should be immersive, escapist entertainment -- like the movies. How would you like going to the theater to see Schinder's List, and there's an Access Hollywood newsticker at the bottom of the screen?
No thanks. I don't think I'm ready to have my TV become the hub of my connected world. Then where will I go to unwind from my TV time?
But I guess we'll know more in a few days...