‘Every product Apple makes used to be out
if the reach of all consumers. Whether they are luxuries or necessities is only
a question of timing”, Horace Dediu
Perhaps the biggest factor that weighs in
Apple’s favour is its war chest, $100bn and growing. To facilitate iCloud, the
last grand project we know of that was overseen by Jobs, the construction of a
$1bn data centre at the opposite end of the United States neither dented the
company’s finances nor distracted from its smooth running. This is an
investment that generates no direct revenue, except from an undisclosed (and
quite possibly disappointing) number of iTunes Match subscriptions. But, as CFO
Peter Oppenheimer explained during the company’s March earnings call: ‘We just
really wanted to increase the customer delight from the entire ecosystem and
platform of our iOS devices and the Mac.’
‘Every
product Apple makes used to be out if the reach of all consumers. Whether they
are luxuries or necessities is only a question of timing”, Horace Dediu
Minus the fluffy kittens, what Oppenheimer
is well aware of is that iCloud is potentially the most effective technology
yet conceived to offer users an empoweringly broad range of new services while
locking them comprehensively into a walled garden. Dilettante tech consultant
and Apple-watcher Ben Brooks (brooksreview.bet) wrote in May 2012: ‘A widely
adopted, seamless, fast, robust iCloud is the greatest threat to Apple’s
competitors- and this time around I think Apple knows it’.
Another worry for those competitors is the
ability to throw cash at components on an unprecedented scale. Under Cook,
Apple has adopted exactly such a strategy: a soft of supply-chain denial of
service attack, where the capacity to produce parts is bought up in advance,
securing Cupertino’s manufacturing schedule and potentially disrupting others’.
CFO
Peter Oppenheimer
In the first-quarter financial call for
2012, CFO Peter Oppenheimer announced: ‘During the September and December
quarters, we executed long-term supply agreements with three vendors through
which we expect to spend a total of approximately $3.9bn in inventory component
prepayment and capital expenditures over a two-year period’. That’s the sort of
buying power few can match, especially without significant worries about sales
to back it up.
Apple is in the luxurious position of being
able to spend big money wherever and whenever it chooses. On current
performance – and given the enviable margins on Mac and iOS products, many of
which are sold directly to customers online and in apple Store, keeping profits
in the family – it’s new markets unlikely to fail to recoup its investment.
Even if it did blunder, the amounts involved, within the scale of the world’s
richest company, would be worth the scalp of a VP at worst.
The strongest rumours of unannounced
component investment now surround flat panels. This year’s MacBooks are
expected to introduce Retina displays, matching the visually pixel-free
resolutions of the new iPad and iPhone 4/4S; only a few suppliers can produce
such screens in volume. The same suspects are in the frame for the putative
Apple television, regarded by an increasing number of pundits as the next big
thing – the iPod for Apple’s next decade.
The connected TV market does seem ripe for
the taking. Terrestrial broadcasting, with its rigid schedules and limited
choice, belongs in the past. Cable and satellite services, with their long
contracts and disruptive physical installation, present frustratingly
ring-fenced options. Internet-based services, leveraging general-purpose
broadband connections from content-agnostic providers, lack only the
involvement of content owners.
This
year’s MacBooks are expected to have Retina display at the pixel-free
resolutions of the Pad and iPhone. Only a few suppliers can produce such
screens in volume
Apple, with the strong ties to the
entertainment industry forged personally by Steve Jobs, both as head of Pixar
and a major Disney shareholder and through the long-term process of negotiating
iTunes contracts, is ideally – uniquely – placed to facilitate change, and has
experience of doing so in a way that generates market-leading critical mass for
its own offerings.
It’s undoubtedly a huge market that’s
overdue a discontinuity. The question is whether a hardware product – an actual
television set, as opposed to the internet- connected Apple TV box that now
sells in modest numbers and is described by the company as ‘a hobby’ – is the
right way to address it. While the opportunity may be tempting, nothing about
the way TV sets are currently designed, made, distributed, sold or bought fits
Apple’s modus operandi.
TV shoppers buy specs, not build quality –
the antithesis of the ‘i-’ phenomenon. They keep the same set for years,
lacking any compelling reason to upgrade between decade-long tectonic shifts in
technology. They have existing boxes and services to plug in, demanding the
kind of messy backward and sideways compatibility that Apple has been ruthless,
since 1997, in cutting off. And they window-shop in electrical showrooms, where
they can compare rival products.
No wonder Jobs gave short shrift on past
occasions to the idea of making a smart TV. Yet he told Walter Isaacson, his official
biographer, that Apple had ‘finally cracked it’. What exactly had been cracked,
and what the cracking entailed, is anyone’s guess. The incorporation of Siri as
a control medium, avoiding the need for unintuitive buttons and menus, is a
commonly touted possibility, though not one that will appeal to the family
buyer who despairs of getting the kids to shut up in order to watch the TV,
never mind operate it. Gesture-based control and touchscreen remotes are
already options on mass-market sets from the likes of LG.
