It would be foolish for me to argue Apple’s success with iPhone. With well over 100,000 apps, a rabid and loyal fan base, and millions of units sold, it has been a blockbuster product and cash generation machine for the company. However, Apple has missed the biggest opportunity – the opportunity to dominate the US smartphone market.
By signing a long-term contract that could last into 2012 according to Engadget, Apple has left the door open for its competitors by failing to service 75% of the US market, especially when surveys show that nearly half the people on Verizon would buy the iPhone if it were available.
The potential pitfalls of the exclusivity became evident today in an NPD research report showing Android as the number 2 smartphone OS behind RIM, the makers of BlackBerry. What do RIM and Android have in common? They are available on all four carriers and have handsets that come in multiple form factors at prices ranging from free to $299 on contract. By contrast, Apple is available on one carrier, has one model, and starts at $99, with the most people having to pay at least $199 to gain access.
While the AT&T arrangement may be a sweetheart deal for Apple, it could become the Achilles heel for the iPhone. As Android continues to proliferate the mobile landscape, Apple could find itself in an uphill battle when the exclusivity finally ends for the following reasons:
1. Mobile phones are bought on contract
People get locked into their phones for two years, at least. Even if the iPhone AT&T exclusivity ended tomorrow, many people would be forced to wait until their contract expired to get access to the handset
2. The gap between the iPhone and its rivals has narrowed
The Android Marketplace is rapidly catching up to Apple’s App Store. In fact, nearly all major productivity apps are available on both platforms, as well as most good games. In addition, the Android hardware is nearly equivalent, if not better than the iPhone. If you don’t believe it, then you have not put your hands on Verizon’s latest Droid model, the HTC Incredible.
3. It’s all about mindshare
Android is proliferating in much the same way rabbits multiply. The shapes, sizes and price points are out there to fit anyone’s taste. While I will never bet against the Cupertino propaganda machine, mindshare is shifting to the new game in town. Couple that with the fact that Android is migrating to devices other than phones like tablets, set-top boxes, TVs and appliances, and you begin to envision a world where it’s better to have an Android device over an Apple device.
Would marketshare be different without iPhone exclusivity? Results in countries where the iPhone is available without an exclusive carrier have demonstrated just how dominant the iPhone can be. Apple has turned away from that opportunity here in the US.
To give credit where credit is due, Apple is printing money these days. While you can’t argue the strategy to this point, I wouldn’t be surprised if Apple is lamenting its decision to tie itself to AT&T two or three years from now.
I totally dig the idea of cross-device compatibility and ability to support the same formats and tools. And this is where the Android is going… or at least that’s what I’d like to believe in. Being open source it’s easily picked up by many developers and manufacturers, which created rapid growth of the OS usage in the last years. The only problem we’re witnessing so far is that many devices are becoming “old” and not well supported – even though Android already came out with v 2.1 – majority of the devices are still on 1.5 and 1.6. It’s like having a high speed internet line, but using it via older 56Kbit/sec modem.
It will be interesting to see how things unfold.
Great point on Android fragmentation. Rumors are that Google may try to address the issue in the upcoming 2.2 release. Just as availability across carriers is an issue for the iPhone, fragmentation of Android is an issue Google needs to address before it becomes its Achilles heel.
[...] I have to believe that Apple felt a little sting from the NPD report. Even though Apple is printing money these days, losing market share for them is embarrassing considering their inflated egos. This week, articles resurfaced about the exclusivity deal between Apple and AT&T. If you haven’t seen it yet… you better sit down…the exclusivity was for 5 years which means the evil cult and service-deficient service provider are best buds until 2012. All I can think is, why? Apple had a huge opportunity in front of them and let it pass. Just think about how many Android handsets Verizon, T-mobile, and Sprint can get into the marketplace by then. Gregg wrote a great article this week with his analysis on Apple’s lost opportunity. [...]
[...] paid well by AT&T, because the data confirms what I pointed out earlier this month – Apple is losing the opportunity to dominate the US smartphone market through its exclusive AT&T [...]