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.