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Across 2016, ostensibly legitimate journalists and research firms gravely warned that Apple was in trouble on every front--from low cost wearables to Microsoft's 2-in-1 notebooks, to Google's new Pixel Phone and a resurgent Samsung--as well as falling behind everyone else in the emerging, very promising field of Virtual Reality. They were all so incredibly wrong we can now have a good end-of-year laugh at their expense.
Apple's Infinite Loop campus
Take a gander at the goose in Apple's sauceThere are two measurements of success in the tech industry: one is applied to Apple, where expectations are stratospherically high and failure is always anticipated.
The other is applied to Apple's competitors, where expectations are so low that even a tremendous, embarrassing flop can be written off as a "valuable learning experience" (Google Glass) and every new failure rudely blindsides perpetually optimistic observers (Google Pixel: who could have guessed it wouldn't sell in significant volumes!? At least it was a valuable learning experience).
At the beginning of this year, AppleInsider published ￼"Apple's competition is going to have a tough year in 2016", examining the question of whether Apple even faces any effective competition anymore.
Throughout the year a variety of critics worked hard to invent competition for Apple. But no amount of advocacy or propaganda has shifted the reality that's readily apparent.
Entering 2016, Apple earned virtually all of the profits in smartphones, in tablets, in PCs and had introduced the only successful smartwatch--capable of not just stomping out Android Wear and Samsung Tizen as competitors but also taking a large bite out of premium Suisse watch sales--even as its rivals struggled in every product category.
Apple Watch in white ceramic
What changed this year? Apple's weak competitors lost more ground and suffered more failures, setting Apple up against an even weaker competitive threat in 2017.
Profits build offensive infrastructureAt the same time, while Apple is now amassing incredible piles of resources (now above $237 billion) and is returning $2 billion to shareholders each quarter, it's also investing tremendously in a proprietary software development (including macOS, iOS, tvOS, watchOS; the Continuity and iCloud glue that bind them together and its new Swift language and the development tools that power third party apps).
It's also investing billions in supply chain capacity, materials, operations and technology. And in parallel, it's building billions of dollars worth of new facilities, including its Campus 2 research and development offices in Cupertino and a global collection of other sites focused on software development, health technology, Maps, machine learning, silicon logic and other specialties.
While pundits keep asking simplistic questions about where Apple's next big i-device is, the reality is that we already have an ultra-mobile personal computer in iPhone, and mobile professional computer in iPad Pro, and conventional Macs. Apple doesn't need to introduce another device category as much as it needs to maintain and advance what it already sells.
Discussing mobile now is like discussing PCs in 2000. The important questions are about what we can build with this, and what we build next-- Benedict Evans (@BenedictEvans)
Microsoft wasn't expected to introduce a new OS every few years. Google wasn't tasked with creating a new search engine over and over again and HP and Dell churned out conventional PCs for many years without facing interrogation about the "next PC" replacement.
Apple's silicon secretsWhat drove much of the forward progress of the tech industry in the 1990s and 2000s was actually Intel's processors, continually upgrading PCs, servers and the software they ran.
Today, Apple is actually hampered by Intel's slower chip advancements in releasing new Macs. But in the iOS world, Apple has not only outpaced the industry in mobile Application Processors, but has also taken over ownership of the cream in mobile silicon.
Apple has not only outpaced the industry in mobile Application Processors, but has also taken over ownership of the cream in mobile silicon
It's done so by earning money on advanced chips and aggressively reinvesting that into further development.
When Apple first worked on the Newton Message Pad in the early 1990s, it had to invest in developing the ARM Architecture as a new mobile processor.
But it wasn't making enough money on hardware sales to rapidly and perpetually advance ARM chip development on its own. The rest of the industry, notably Nokia, began investing money into ARM chips and made them ubiquitous in phones. When Apple returned to ARM chips with iPod in 2001, they had become cheap and power efficient.
Apple spent billions investing more money into commodity ARM chip orders until the late 2000s, when it began doing custom design of its own ARM cores. Apple has not only radically advanced the state of the art, but has done so on a scale that nobody else can match.
No other phone or tablet maker sells anywhere near as many premium, powerful devices as Apple. That greatly reduces the potential for Google, a Chinese startup, or even Samsung to build a true competitor to iPhones or iPad at a similar cost structure. The chips used by Google's Pixel, for example, feature cores that are only half as fast as Apple's A10 Fusion.
And despite various attempts by Google, Microsoft and others to dumb down smartphones into less powerful devices using simpler chips at a lower cost, Apple has proven that a lucrative demand exists for very powerful smartphones capable of advanced processing features--notably including sophisticated camera imaging and secure biometrics for authentication and Apple Pay.
Across 2014, pundits and analysts were castigating Apple for not building a cheaper iPhone. Apple did eventually repackage iPhone 5 to resell it as iPhone 5c, and this was successful (despite many false reports maintaining that is wasn't). However, in the years since, Apple's own sales data has made it clear that it could perform better by focusing on more advanced and expensive models rather than cheaper repackaging.
In 2015 Apple launched iPhone 6 alongside its most expensive ever iPhone 6 Plus. Next year, Apple is rumored to be adding an even more premium option to woo high end buyers.
In direct contrast to the popular narrative of cheap commodity erasing Apple's Mac and iOS businesses, the reality is that Apple is increasingly becoming more difficult to compete against as it builds its own sophisticated custom silicon and refines its incrementally expanding software platforms.
While Apple keeps advancing its state of the art in core technologies, consider what its rivals have been doing in 2016.
Samsung's smoke screen of excessive innovationSamsung--after just beginning to recover to its 2014-level revenues after being clobbered by iPhone 6 & 6 Plus and then batted back down again by iPhone 6s an 6s Plus--rushed to market a poorly designed fablet flagship that was so dangerously prone to burst into flames that airports, metro stations and even cruise ships banned its possession on their vehicles. It was undoubtably the worst and most expensive recall to ever occur in tech.
Samsung's Galaxy karma from fomenting Bendgate
However, Samsung's fiery Note 7 conflagration was coached by the media as being a problem of the Korean conglomerate having "packed it with so much innovation" that, well, flames ensued. That ridiculous quote was actually set into type for the New York Times by Brian X. Chen and Choe Sang-Hun.
Remember when these writers excused iPhone 4 signal attenuation as a problem with Apple "packing too much innovation" into its products? No, because they didn't. They reviled Apple's innovation and branded it as an inexcusable failure because it might drop a call if you hold it wrong--versus bursting into flames no matter how it's being held.
Packed with so much innovation it naturally burns
Writing for the Wall Street Journal, Geoffrey A. Fowler and Joanna Stern insisted that while Samsung's defective design of the Note 7 carried a clear risk for fire and should be powered down and returned immediately, "there's no reason to believe other Samsung models are dangerous," shortly before citing an anecdotal story of an iPhone 7 that was also said to have caught fire in a posting on Reddit, a false equivalency of the highest order.
There's no evidence, anywhere, that iPhone 7 has an inherently flawed design that results in fire. If it did, there'd be many scores of reports, not a single photo posted to a site that provides an audience to the GamerGate and AltRight fringe--because Apple ships many times more premium iPhones compared to Samsung's Galaxy Note. There are, however, a variety of reports of other Samsung models catching fire (such as the Galaxy J5). But let's move past the selective reporting of facts by Fowler and Stern, because I don't have all day.
Pay no attention the fire behind the curtainNote instead that after Samsung released millions of dangerous Galaxy phones, then bungled its recall, handed out new batches of equally defective replacements, then pulled its 2016 Note 7 flagship entirely, reporters and research groups fell all over themselves to "report" that Samsung's explosive launch would have absolutely no impact on buyers' behavior going forward and virtually no impact on its brand.
Incredibly, CNBC and Reuters collaborated to spread the results of a single internal poll that insisted the "Galaxy Note 7 recall did not damage Samsung brand in U.S."
That poll was necessary to conduct and report because earlier, independent polls had reported that 34 percent, and later 40 percent, of current Samsung owners said that in the wake of the recall that they wouldn't buy another Samsung phone. Of those leaving the brand, 30 percent said they planned to switch to an iPhone.
With scathing results like that, why would news organizations with a clear bias against Apple feel the need to create their own data to refute the findings that exist on Apple's primary competitor, not to mention obvious reality? And why would they exclusively report only their own mind-bending findings? Also, what sort of data might they be able to create assuring the public of the safety of lead, asbestos, cigarette smoking and coal pollution?
More recently, NPD similarly issued a report suggesting that Samsung's Note 7 fiasco had no apparent impact on U.S. phone sales for the company, based on sales data.
However, it didn't quantify how much of this was attributable to Samsung offering generous cash handouts and other promotions, a very real expense necessitated by Galaxy Note 7 fires. However, it apparently remains necessary to exonerate Samsung because apart from that company, Apple has no real competition at all among smartphones that sell at a sustainable profit.
And a sustainable profit is one where real money is made, not just fake numbers like those that were reported by the Wall Street Journal in an article suggesting that China's Xiaomi was actually showing positive signs of potential profitability
Apple premium sales volumes lower than total global production of cheap devices!
Samsung is the only company apart from Apple that earns any significant profits from its smartphone sales, due almost entirely to its premium-priced Galaxy flagship models. With the primary competitor to Apple's iPhone literally on fire and pulled from the market, the only way to continue to marginalize Apple's phone business would be compare iPhone sales against volumes of low end phones shipped into developing countries. Done!
That's the same strategy IDC likes to use in marginalizing Apple Watch sales. Except that IDC can't even compare its Apple Watch estimates against other smartwatches, because that's not flattering to anyone but Apple. Instead, it has to compare $300 to $1,000 and up Apple Watch sales against Fitbit's fitness trackers with an average selling price of around $88 and Xiaomi's $13-25 fitness bands.
In 2015, Apple stopped detailing sales volumes of iPods, Apple Watch, and other hardware, including the new AirPods. That's allowed critics to claim that Apple might be hiding its failures, an idea that isn't often applied to Amazon, Google, Microsoft or even Samsung, none of which document their own sales of bands, tablets or even phones.
Selective scrutiny, broad credulityWhen Apple's chief executive Tim Cook noted that AirPods are "a runaway success" and that the company is "making them just as fast as we can" to meet demand, The Verge announced in its headline "that means nothing without numbers."
What a curious, egregious double-standard in framing events from a site that celebrates Bezos graph scales, Amazon's meaningless sales chart rankings, Microsoft's perpetual claims of "sold out" inventories, and Samsung's "quite smooth" numberless smoke signals of suggested successes.
Coincidentally, just days before skeptically suggesting Cook was lying about the popularity of AirPods, The Verge printed a Microsoft press release that claimed Mac users were rushing to buy a Surface. Rather than insisting that the claim "means nothing without numbers," Tom Warren nodded along with Microsoft's Surface advertisements, writing that they "might be paying off."
Warren wrote, "Microsoft still isn't providing sales numbers, but the company claims 'more people are switching from Macs to Surface than ever before,'" then repeated, "Again, Microsoft refuses to provide numbers but vaguely claims 'our trade-in program for MacBooks was our best ever.'"
Microsoft's Surface headline on The Verge expresses no skepticism of the the idea that significant numbers of MacBook Pro buyers are actually so disappointed in Apple that they are rushing out to those notoriously vacant Microsoft retail stores to snatch up its breathtakingly expensive Windows 10 PCs, but the site offers no similar level of credulity in the possibility that Apple's AirPods might be popular, even given the fact that Apple, an experienced high volume manufacturer, has stock-outs into January on a product it desperately wants to sell, not just advertise as a success.
Pathetic Pixel, Stagnant SurfacePerhaps writers at The Verge are just still really upset because they know that the site will have to write a new excuse for why Google's latest "Nexus," rebranded Pixel, failed to garner any real attention among buyers despite the website's valiant efforts to incessantly promote the device on behalf of Google.
Or alternatively, perhaps it's disappointed that its parallel promotion of Microsoft's Surface has been similarly ineffectual. The pricey, "Sleep of Death" premium notebooks, hybrid tablets and convertible desktops have had more praise heaped on them than a Millennial, but that still isn't resulting in total sales reaching above the $1 billion quarterly ceiling they've bumped up against for the last several years.
Before Microsoft got into hardware, all the tech media could talk about was how Apple's overall business model was doomed because of cheap commodity PCs. But now, Microsoft is supposedly going to be saved by innovative hardware designs and proprietary gadgets. Why? There's much less differentiation between a Microsoft branded PC and any other Windows PC running the same software.
Google was similarly credited with having erected a commodity platform in Android that Apple supposedly wouldn't be able to compete against, or even keep up with in terms of innovation. Those stories proved to be entirely false, but now Google's own hardware is being described as able to stand out and compete against the that same bulk of cheap Android commodity. Why?
Apple sells many times more notebooks, phones and tablets every quarter that either of its premium-commodity rivals, but the company is also tasked with not just remaining in the lead, but also bettering its own sales volumes each year by a margin greater than most of its competitors' total sales: another double standard.
Imagine a runner expected to not only beat everyone else in the race, but also beat their own best time, every time, while being derided as having a boring running style and failing to invent new ways to run each time they race. Meanwhile, everyone else gets a trophy just for showing up.
Virtual reality journalismJournalists are supposed to report what's happening, not invent a narrative they want to happen. The problem is that few modern tech writers are actually journalists. Many are casual bloggers from vendor advocacy sites with a grudge against Apple.
Journalists are supposed to report what's happening, not invent a narrative they want to happen
The New York Times hired Brian X. Chen despite his history in inventing quotations and attributing them to others for Wired, in an apparent attempt to instantiate his own desired reality (most famously, that Japan "hated" the iPhone).
The Wall Street Journal hired blogger Joanna Stern from a background at The Verge and Engadget, both of which desperately advocated Android ideology despite the software's technical failings, Google's poor management and maintenance of it, and its ultimate failure to be anything other than a "toxic hellstew" of a platform for also-ran hardware companies lacking the resources to maintain their own platform.
Bloomberg hired a rumor leaks blogger Mark Gurman to report hard news on Apple, after he scored such "exclusive reports" as the 2015 claim that the next Apple Watch would feature a camera and handle FaceTime calls (but not GPS!) and could be made from titanium, tungsten, palladium and platinum (but not ceramic!).
The FaceTime idea made no sense to anyone familiar with watchOS or even Apple's developer guidelines that outlined its "glanceable" UI as targeting a few seconds of interaction, rather than sustained video calls.
Tiny video calls of far poorer quality than the display on the phone you'd actually be using to handle the call anyway really made zero sense on any level. Essentially every other part of his report was also wrong. Yet this report was hailed for a year as being the definitive road map for Apple Watch, until everyone just forgot that everything they'd been told was completely wrong, made up guesswork.
And yet today, the majority of the most viral headlines about Apple are crafted by these same bloggers, now at major news outlets and claiming to know lots of details about what Apple is actually doing in automotive and other areas where far less is actually known compared to Apple Watch. These same figures collectively predicted that iPhone 7 would be boring, when all signs clearly pointed to major advances.
Apple's Tim Cook gets blogsplained in how to run a global enterprise by a person who reviews tech products
Tech media writers can invent attributions, stage false equivalencies and present made-up product rumors and channel checks as credible facts and get away with it, because nobody calls to mind their reports once they've collect all the clicks they can.
These fast-and-loose reporters are undermining their own credibility and the legitimacy of the media in general. They seem to feel entitled to continue without concern, because Apple is unlikely to correct them out of regard for its own secrecy. But how many times can you report that Apple is failing when it clearly isn't true?
It's hard to think of a better example of 2016's virtual reality in tech journalism than VR itself, which was hyped into a frenzy and used as a data point showing how Apple was falling behind and failing to meaningfully contribute to the important and imminently commercially-relevant business--right up to the point where VR was ultimately deemed toward the end of the year as being "the biggest loser" of the holiday season.
Post holiday sales data confirming our holiday buying study that bluetooth headphones (general category) were the big winner this holiday.-- Ben Bajarin (@BenBajarin)
The biggest actual winner so far this holiday season? Bluetooth headphones. That comes after Apple was derided for buying Beats, which now leads in Bluetooth headphones. That acquisition also set Apple up to leverage its silicon prowess to develop its custom W1 chip and release its own AirPods, which appear to be a hit.
While VR remained the "biggest loser" Bluetooth headphones were a holiday hit
After so many years of preaching PC Commodity, Android Ascendancy, Tablet Media Consumption Theory, Global Device Volume Market Share, and a basket of other propaganda tactics designed to aggrandize everything outside of the most successful and competent hardware maker, perhaps 2017 is the year for tech journalists to stop trying to effect ideological change and more honestly begin to report reality.
Apple's new AirPods wireless headphones are just hitting the market--albeit nearly two months later than intended--delivering sleek, minimalist style and powerful underlying tech that's super easy to use in an apparent homage to the company's original music offering: iPod.
What's Apple's most power efficient new computer of 2016 featuring a brilliantly simple new user interface? Beyond the 9.7-inch iPad Pro and the iPhone 7 and 7 Plus, Apple Watch Series 2 and the slim new MacBook Pro with Touch Bar, there's a new wearable featuring advanced audio beam-forming and wireless delivery: AirPods!
AirPods work with your Mac (macOS 10.12), iPhone, iPad or iPod touch (running iOS 10) and AppleWatch (with watchOS 3). They're standard Bluetooth 4 enhanced with Apple's "special sauce" effortless proximity pairing software that uses your iCloud account to seamlessly link to your notebook, then your iPhone, and even to Apple Watch while you run. They will also work with standard Bluetooth audio sources.
With iOS 10, just open the AirPod case and a panel slides open on your iPhone with a single Connect button
Apple's AirPods are light and small--a major differentiation from Samsung's own wearable, wireless headphones earlier this year, which bundled in a music player and song storage--an engineering choice that significantly inflated the price, size and weight of the product. Apple's target customers likely already carry a music player and storage, perhaps even on their wrist.
AirPods are only slightly larger than Apple's wired EarPods
Another interesting departure from the status quo made by Apple with AirPods is its personal approach to voice assistance. Using a voice accelerometer and beam-forming microphones for noise supression, the new earpieces offer a mobile, personal take on Siri that's a major divergence from the always-listening Echo living room appliance sold by Amazon (and subsequently aped by Google and now Microsoft).
Apple still needs to prove that Siri can keep up with Amazon's Alexa and Google's leadership in search--but by installing personal earbuds on its hundreds of millions of users globally, it can improve upon Siri in ways and on a scale that Amazon's single digit millions of Echos, largely limited to the United States, can't.
It might seem curious that Apple is selling AirPods itself rather than through its Beats subsidiary that also sells the around-the-ear Powerbeats3 (below) and the upcoming BeatsX in-ear headphones, both of which use the same W1 chip Apple developed for AirPods. However, AirPods continue Apple's trajectory as a music hardware innovator, beginning with iPod.
Apple's audio-powered ascent from conventional computersIn 2001, film predicted we'd make contact with aliens. Instead, Steve Jobs introduced iPod, a novel departure from Apple's conventional computer business, and a first big step into the world of music.
Apple's focus on music has gotten louder with its 2014 acquisition of Beats, which aligned the Silicon Valley tech company with the business end of the Los Angeles music scene
iPod--along with iTunes software--revolutionized the way music was listened to, and--soon afterward--how it would be sold. Apple's focus on music has gotten louder with its 2014 acquisition of Beats, which aligned the Silicon Valley tech company with the business end of the Los Angeles music scene.
Over the past decade and a half, Apple's iPod shifted millions of casual music listeners from CDs to an ultra portable digital drive, while also shifting the center of the premium market for audiophile equipment toward mobile devices, rather than fixed component stereo equipment installed in a den.
It has also all but erased individuals' huge physical libraries of sound recorded on plastic media with iTunes digital downloads via iCloud, and most recently, with Apple Music on-demand streaming, now boasting 20 million subscribers.
The advantages of mobility in music playback with iPod had a strong parallel to the same shift happening in computers, where desktop PCs were increasingly replaced with notebooks and even handheld PDA devices and eventually smartphones.
Apple linked its mobile iPods with iconically branded white headphones. While every mobile MP3 player essentially looked the same, iPods' white earbuds let everyone around you know that you were listening to music with an iPod, and therefore served as a core tenant of Apple's marketing, both in ads and by word of mouth.
Wireless headphones a difficult taskThose headphones were also one of the worst aspects of the iPod: while they delivered generally adequate sound, their easily tangled wires were a hassle. By 2004, it seemed obvious that the solution should be... wireless headphones! However, actually solving that ostensibly simple issue took a lot longer.
Along the way, Apple solved a series of easier problems: it shrank the iPod down into an incredibly thin device, then used its macOS platform software to develop a mobile computer that could not only act as an iPod, but also as a "breakthrough Internet device" and a mobile phone: 2007's iPhone.
In audio, rather than tackling wireless headphones, Apple first introduced its external iPod HiFi, a speaker system that proved to be a lackluster dud in competition with smaller, lighter and cheaper alternatives. It also developed AirTunes--later rebranded AirPlay--as a wireless method of streaming audio to external speakers from a Mac or iOS device, via its now-discontinued AirPort WiFi basestations.
Apple Beats in BluetoothApple's iOS devices, and eventually some iPods, also used industry standard Bluetooth for audio integration in cars and with third party wireless speakers.
In 2011, iPhone 4S was the first smartphone to roll out Bluetooth 4, incorporating a new "LE" standard in high efficiency "Smart" wireless that Apple aggressively adopted across its product line while Microsoft, Google and Samsung lagged behind, distracted in part by NFC.
The Bluetooth specification also enabled support for early generations of bulky, quirky wireless headsets, but these were slow to take off in popularity.
Apple planned to change that after having acquired Beats. In the U.S., Beats already accounts for a leading 32 percent revenue share of all headphones--46 percent among Bluetooth headsets and 60 percent of the premium headphone category--according to NPD.
iPod turns 15 as AirPods arrive
Not until 2016--a full decade and a half after iPod debuted--did Apple show off its own take on wireless headphones with AirPods. Why did it take so long?
For starters, Apple knew it couldn't simply float out a basic product offering (the way Jobs had with HiFi speakers in 2006). It had to offer a remarkable advance over the status quo. AirPods build upon Bluetooth with special hardware and software that makes secure pairing between multiple devices effortless.
That's a compelling feature for users who today want to move from their Mac to their iOS device to their Apple Watch. Unpairing and repairing between devices is a particular hassle with basic Bluetooth.
Macs can connect to AirPods via Bluetooth, Audio settings or within iTunes
You can move from your Mac to iPhone just by flicking up Control Center and selecting output to your AirPods
Another major issue for compact wireless headphones is battery life. Apple owns leading battery technology developed for its notebooks and mobile devices, as well as highly efficient software that seeks to conserve power as aggressively as possible.
Additionally, since 2008 the company has been diligently working to develop ARM-based silicon to do powerful work using the least energy possible. Apple's silicon savvy is most prominent in each generation of iPhone with its A-series Application Processor, but is also at work in Apple Watch, powered by a energy efficient logic package known as the S1 and S2.
A close relative of Apple Watch ARM chip is used in Apple's latest MacBook Pro to control and secure its Touch ID and Touch Bar input subsystem.
For AirPods, Apple developed W1, custom silicon to handle both efficient processing and wireless transmission. The new chip also borrows from existing iPhone work to isolate and recognize speech using beam-forming. This supports the use of Siri on AirPods as a handsfree interface for audio playback, as well as accessing information through an iPhone's mobile Internet connection.
Apple's second wearableMore than just being Bluetooth headphones, AirPods are Apple's second major wearable. Just as Apple Watch makes the most of its location on your wrist--the ideal location for putting a glanceable watch display for notifications as well a serviceable spot for tracking your pulse--AirPods use their perch in your ear canal to not just play back audio but also direct microphone pickup toward your mouth.
AirPods use their perch in your ear canal to not just play back audio but also direct microphone pickup toward your mouth
AirPods can sense when they're installed to automatically begin playback, and can function both in stereo or individually in mono. That extends their use, as you can listen on one while the other recharges.
Paired with Apple Watch, you can now use AirPods to listen to music, podcasts or other audio--as a set of wearable devices that are small enough and styled so as to pass as jewelry.
Rather than being radically intrusive the way Google imagined for its ill fated Glass headgear computer concept, AirPods look like standard EarPod headphones with the wires clipped off, and its wired control buttons evolved into a set of highly directional mics that can be activated with the bump of a touch.
Design for experienceThe first decade of basic, angular white earbuds sold with iPods and iPhones felt like basic placeholders. Apple acknowledged as much by selling a premium, optional set of "In-Ear Headphones" between 2008 and 2012, advertised as being "engineered for superior acoustic accuracy, balance, and clarity."
However, in 2012 Apple introduced an enhanced earbud design bundled with iPhone 5 it branded as EarPods, offering better sound right in the box. Rather than continuing to develop its own premium headphones, Apple carried third party headphones in its retail stores, and ultimately acquired Beats two years later.
It wasn't clear until Apple's iPhone 7 event whether the company would continue to resell wireless Beats, or offer its own Apple-branded, premium headphones. It turns out the company did both.
Because the primary leaks in Apple's operational strategy come from its supply chain, it was first discovered that the upcoming iPhone 7 would be dropping its analog audio jack.
However, not until the actual announcement was it known that Apple planned to bundle the new phone with Lightning-equipped EarPods (below), as well as offer fully wireless new AirPods along with Beats-branded alternative wireless headphones featuring the same W1 technology.
AirPods appear to earn Apple's white branding due to their minimal, iPod-esque design: EarPods without the wires, which snugly fit into a carrying case that doubles as a battery pack for recharging. Placing the individual AirPod units in the case recharges each via two electrical contacts (below), rather than using "wireless" induction like Apple Watch.
The AirPods' recharging case feels superior to Apple Watch and its induction charging disc cable, however--the AirPods' case plugs into a standard USB-Lightning cable. You can charge it the same way you charge your iPhone (and Apple TV Siri remote and third party controllers); no need to diddle with a separate, specialized cable.
It would be ideal if Apple Watch came with a similar Lightning-enabled charging device. As it stands, the Apple Watch Magnetic Charging Dock is the only accessory to feature Lightning input, and it costs an extra $80. Perhaps Apple could add an Apple Watch induction charging spot to the AirPods case to kill two battery birds with one stone, as many buyers attracted to Apple Watch are likely to also be interested in Apple's other wearable.
Given that Apple Watch was the company's first leap into wearable fashion--delivering technology tightly wrapped in a stylish design intended to be discreet yet also displayed--AirPods' very visible nature when worn (and its smart, compact carrying case) show a trend of Apple progressing along the same trajectory of smart, clean design that began with iPod: technology at the corner of the liberal arts.
I think Jobs would approve.
The September 7 Apple Event raised some troubling questions for many tech journalists and their prewritten narratives. It's almost as if they'd been caught in a huge lie and were now forced to ad-lib a toddler-like series of distractions in a bid to avoid any consequences to their reputations. They're often wrong, here's why.
iPhone 7 Plus
Troubling questions for common sense, populist pundits
Apple's outline of the Apple Watch Series 2, iPhone 7 and AirPod product announcements--and related partnerships--contained a few surprises but basically followed the overall expectations one has when attending an Apple Event.
The real surprise was the catastrophic collapse of the narratives invented by the collective tech media. Their unflattering portrayal of Apple, painted throughout 2016, ended up looking like it had been modeled after an entirely different subject when exposed to the reality presented in Apple's straightforward executive-level talent show, particularly when observing the subsequent reaction of consumers to Apple's news.
Apple's "lack of innovation" was supposed to incite an explosion of interest in Galaxy Note 7 and whet appetites for Samsung's flagship Galaxy S7
For instance, why is the Cupertino company now struggling to meet pre-order demand for its new iPhone 7 models when everyone knew the next iPhones would be totally boring even before having seen them? The tech media and Apple's most plugged in analysts were very clear on this all year long.
Apple's "lack of innovation" was supposed to incite an explosion of interest in Galaxy Note 7 and whet appetites for Samsung's flagship Galaxy S7. But it's now quite clear that there wasn't anything backing up this narrative apart from desperate efforts to erect a false balance.
Nothing new to see here!
Throughout 2016, clickbait had all nodded in agreement: nobody buys iPhones anymore because they already have one; nearly a billion people in India can't even afford one; there are two new brands--OPPO and Vivo, albeit built by the same vendor--that you've never heard about before in China, but that are addressing a market outside of Apple's (they make phones that sell for 1/3 as much to demographics outside Apple's core audience in China's vast urban cores); and everyone already knows that next year's iPhone 8 will be better, so seriously, who will be lining up to buy iPhone 7?
Well, many of the customers with preorders stressing Apple's supply chain are actually already members of its existing [nearly] one billion installed base of iPhone users who didn't buy one of the roughly 200m iPhone 6s models sold over the last year. That means they are now ready to upgrade, which is sort of predictable because this pattern has played out repeatedly over the past decade.
Apple could have simply rereleased iPhone 6s and there would still have been many iPhone 4s/5/5c/5s/6 buyers ready to upgrade to the significantly better model. However, iPhone 7 is actually a major update and so some of those preorders are iPhone 6s buyers who are flush enough to buy themselves a new phone every year.
But it appears that a significant slice of those buying iPhone 7 will be Android switchers who are sick and tired of not getting updates and patches, leaving them exposed to serious security and privacy issues; or who are done with waiting for apps that never make it to their platform or--as in the case of Pokemon Go--arrive but don't necessarily work correctly; or who are tempted to join their friends on iOS 10 so they can be blue bubble people in iMessage and outfit themselves with an Apple Watch and use AirPods or the new Beats headphones that switch between devices without dealing with the rough edges of Bluetooth pairing.
It's very clear that Apple's sales of iPhones are snowballing. This occurs even in years (like 2016) where sales didn't exceed those of the prior year. Dramatic growth is still occurring in the installed base, and that ever larger IB is expanding the pool of future iPhone buyers.
It's very clear that Apple's sales of iPhones are snowballing. This occurs even in years (like 2016) where sales didn't exceed those of the prior year. Dramatic growth is still occurring in the installed base
This is also evident with Apple Watch, Mac and iPad, where despite cyclical sales (where a quarter or even an entire year may be lower than the previous year), Apple's installed base continues to grow, feeding both future sales from eventual upgrades, and surging current revenue sales related to Services.
Whenever you read an opinion that worries that Apple's unit sales are down from a peak or even trending downward over several years, ask yourself why that sort of doom and gloom reporting is never applied elsewhere, such as when Samsung spends three years fighting to win back its sales volumes from 2014, or as Microsoft and Google wallow in perpetually bleak shipments for Zune, Surface, Nexus and Pixel hardware. Outside of Apple, there's little but giddy optimism of a comeback, however unlikely.
Those are the kinds of authors who are lying to you, and fully warrant none of your attention.
iPhone 7 is the new Black
And really, who could have predicted that at least some of the channel-robbing, inventory-abusing interest in iPhone 7 is being driven by the availability of a flashy new distinctive color that makes it clear to everyone else that you own the latest thing? I mean, this is only the sixth consecutive year that Apple has introduced an exclusive new color.
After struggling as hard to get iPhone 4 released in a white case as it did to deliver a CDMA version in 2011, Apple followed up with iPhone 5 in Slate and Silver versions featuring distinctive beveled edges; iPhone 5s debuted Gold and a new Space Grey black, while iPhone 5c introduced a series of bright colors; iPhone 6 reintroduced Space Grey as a flat aluminum look; iPhone 6s introduced a champagne Rose Gold finish; iPhone SE appeared in a refreshed, flat metallic set of colors and iPhone 7 now introduces two new blacks: a high gloss Jet Black and a new matte Black.
iPhone 7 in Jet Black and Black
One can scoff at the merits of fashion and finishes on a technology product, but it's clear that appearance drives the sale of other fashion products, and Apple has a lengthy and robust understanding of how consumers react to finishes and materials based on millions of sales of Macs, iPods, iPhones, iPads and now Apple Watch. So much so that Samsung now closely copies it.
Don't they know doom is contagious?
Why was Nintendo launching its first mobile game on iOS when everyone knows that a) Android is more popular, b) Pokemon Go was coded by a Google startup, c) there are already so many iOS Apps that nobody can possibly stand out, d) nobody uses apps anymore, e) nobody even buys smartphones anymore and f) two brands in China now sell so many basic smartphones in the PRC that Apple's market share is down in China?
It's almost as if Nintendo doesn't keep up with CNET, Engadget, The Verge, the New York Times or the Wall Street Journal and doesn't read IDC's PR reports!
Similarly, why is Nike, the world's most famous sports related brand, now partnering with Apple to make a specialized running edition of the Series 2 Apple Watch, given that we all know beyond the shadow of a doubt that Apple Watch is a huge failure with sales far below that of last year's iPhone 6s?
IDC has made it clear in its graphs and charts that it wants you to think that the two market leaders in wearables are FitBit and Xiaomi, despite the former being unable to launch a desirable watch or upsell its band users very far above $88 and the latter merely shipping millions of $13-25 bands that appear to be used about as frequently as Android tablets ever make contact with the web.
Sure, Apple Watch is vastly larger than the rest of the market combined in terms of wearable revenues and is the only smartwatch vendor to ship in significant quantities, but as IDC likes to emphasize, Apple Watch sales are down from their launch peak!
It's almost as if customers were waiting to see what the new Series 2 generation will offer; either that or there's just a mysterious collapse in interest in buying a year old product at a price point that hasn't been discounted. Call it a big box paradox.
The AirPod conundrum
Lastly, Apple introduced a new product--a pair of wireless headphones in a charging case--that stoked "outrage" in that the product is small enough to misplace or lose. This was an entirely new epiphany the tech media--and meme authors at Reddit--collectively appreciated in common.
Never before had small electronic devices posed such an obvious loss threat to affluent consumers. Certainly not this summer when Motorola introduced its more expensive and even smaller (but poorly reviewed) VerveOnes+; nor when Samsung unveiled its similarly more expensive Gear IconX buds, which aren't standard Bluetooth buds and won't work with iOS devices.
Did you even notice that Apple's AirPod pricing was about 20 percent less than similar offerings from Motorola and Samsung? No journalists seemed to. Apple's also appear to work better, and they can function as standard Bluetooth devices with Android and Windows, albeit lacking the special sauce magic that enhances the experience on Apple Watch, iOS and Macs.
This LossGate issue also wasn't a thing way back in 2007 when Steve Jobs introduced Apple's similarly sized Bluetooth headset for the original iPhone. Suddenly, however, almost ten years later we have devolved into a society of buffoons who can't manage to hold onto anything, at least if its something that's sold by Apple.
Journaling system failure
The quality of the media coverage following this week's Apple Event raises the question: are journalists operating under the assumption that their audience is universally stupid or are they just borderline basic themselves? Why doesn't the tech media seek to clearly journal events rather than writing dramatic narratives of comedy and tragedy?
After sitting through the entire Keynote, you'd think journalists would have a lot to talk about, without any need to contrive a positive or negative slant. These three basic observations also provide some illumination into the industry at large:
One, Apple's approach to fixing the worst rough edges of Bluetooth (providing effortlessly simple and secure pairing configuration that lets you move a wireless audio device between a Mac, iPhone, iPad or Apple Watch) without becoming incompatible with bog-standard Bluetooth products shows that everything in the tech world isn't simply "open" or "proprietary" in a neatly binary way but rather can be a hybrid of both.
As noted previously, Samsung's approach--despite being a major Android licensee--is not interoperable and costs more. Throwing Android at something doesn't necessarily make it magically cheaper or more "open" in a desirable way. Good luck finding acknowledgment of that among the tech media.
Hermes Apple Watch Series 2
Two, Apple is forming partnerships with others to sell its "failed"/industry leading Apple Watch: struggling also-rans like fashion icon Hermes (above) or legendary sports brand Nike. This raises the parallel question: why is Android Wear such a failure in this regard? Despite lots of highly touted partnerships and licensees, Google's Android wearable efforts have not resulted in a functional, commercially viable platform for app developers, fashion labels or sports brands.
Three, iPhone 7 features an expanding array of custom silicon: Apple's new A10 Fusion application processor with an integrated M10 motion processor, Secure Enclave for Touch ID-based encryption and advanced proprietary camera logic; the MEMS technology in the Taptic Engine shared by both iPhone 7 and Apple Watch to provide haptic feedback; and the W1 chip Apple's using in its AirPods to enhance and optimize the audio and user interface experience, from setup to control via tap gestures and automatic pause triggered by an optical sensor when you remove them.
Why is Apple--frequently derided as a marketing company that can't innovate--so many miles ahead of leading technology component specialty vendors?
Why is Apple--frequently derided as a marketing company that can't innovate--so many miles ahead of leading technology component specialty vendors? Samsung/GlobalFoundries has advanced sensors and chip designs and fabrication plants. Yet Samsung, along with world-leading chip fabs TSMC and Intel, are all three dancing marionettes in a play where Apple pulls the strings to achieve the results it needs, leveraging all three to its competitive advantage.
No other chip integrator comes close to Apple in terms of creating mass market demand for premium, advanced silicon. Apple's role here is expanding rapidly. Specialized chip designers--the firms that Apple used to buy off-the-shelf parts from--are now being incrementally replaced with internal custom silicon, whether for motion tracking, camera and image processing, wireless controllers, the 5K iMac and iPad Pro display timing controllers and so on. Apple is now doing advanced specialized work across all these fields. Surely that's noteworthy development to investigate?
Instead we're getting little more than pre-prepared remarks that could have been delivered without even attending Apple's carefully orchestrated unveiling, including naval gazing about the lack of an analog headphone jack--a subject already discussed ad nauseam and that isn't really all that big of a deal given Apple's efforts to mitigate issues users might have in the transition--as well as wasted hours contemplating Phil Schiller's' use of the term "courage" in an allusion to Steve Jobs' mention of the "courage of conviction" required to kill Adobe Flash, rather than attempt to placate journalists demanding that they should be the final arbiters of the feature lists of Apple products.
Capitalism vs the fascist media
That, really, is a core issue in the tech media, which seems to see itself as a check to Apple's market power in leveraging a populist veto arbitrarily dictated as what the people need. What journalists should be doing--rather than seeking to influence outcomes--is to inform readers of the subjects that are of importance to them. It's buyers that influence outcomes via the market.
When Jobs introduced the iPod HiFi in 2006, buyers shrugged it off into a discontinued product. When he introduced the "fat" 3G iPod Nano in 2007, buyers' lack of interest seemed to guide the company back to a tall form factor the following year. In 2010, a new square iPod nano was introduced that pushed Apple toward a wrist-mounted band with watch faces the following year. That seemed to generate enough interest to drive the development of Apple Watch.
The market seems to be working quite well without journalists erecting a propaganda smokescreen to empower them to act as the all powerful Supreme Soviet dictating how and what Apple can and should be doing. If journalists can embrace their role of asking smart questions--even tough, critical ones--and better informing their readers, the rest of us can vote with our dollars and get what we want.
Pretty clearly, individuals with resources want what Apple is serving. They don't want the Android experience that Google and its partners have incompetently delivered over the past several years, no matter how much Samsung plies the press with free kit and glowing self-praise that claims its copycat appropriation of Apple's work is somehow simply brilliant innovation.
Similarly, we don't need media sources propping up Microsoft's Surface, or breathing life support into brain-dead initiatives like the Moto X or Project Ara.
We do not need to be spoon-fed media opinions based on the objectives of Apple's rivals. And we don't need to bathe in a false narrative that Apple isn't really successful, doesn't ever know what it's doing and is at real risk of constant failure for failing to listen to the media's ideas.
So please, give us a break.
Despite some research by Foxconn with a slightly positive angle towards moving some efforts to the U.S., other Apple supply chain vendors are likely to not move, citing labor and operating costs.
According to Chinese-language qq, suppliers like Lens Technologies, an iPhone glass vendor, will not set up shop in the U.S., even if Foxconn does. Lens cites high-wage workers and reluctance amongst the U.S. workforce to accept variable schedules depending on surges and dips in product demands.
Positives to U.S. factories cited by Lens are lower power and land costs.
Another, unnamed, Apple parts vendor quoted by the report says that a complete supply chain won't exist in the U.S., making the entire fabrication process more nimble in China. An order involving molding metal components takes about 10 days in Shenzhen, but will likely take a month or more in the U.S. without a complete process in-country.
In June, Apple reportedly asked iPhone assemblers Foxconn and Pegatron to evaluate the possibility of moving manufacturing efforts to the U.S. Foxconn Chief Executive Terry Gou was said to be critical of the plan, saying that labor and other associated costs would more than double, should the plan come to fruition.
Pegatron denied to develop a plan, citing obvious cost concerns.
The study was probably spawned because of potential political pressure and taxation for Apple promised by President Elect Donald Trump during campaigning for the office. Trump's campaign promise of a 35 percent tariff levied against products like the iPhone manufactured overseas, is presumed by the President Elect to give companies a significant economic incentive to bring manufacturing jobs back to the U.S.
"To make iPhones, there will need to be a cluster of suppliers in the same place, which the U.S. does not have at the moment," Apple CEO Tim Cook said in an Dec. 2015 interview about a possible shift. "Even if Trump imposes a 45 percent tariff, it is still possible that manufacturers will decide to continue production overseas as long as the costs together with the tariffs are lower than the amount they need to spend on building and running production lines in the U.S."
A 35 percent cost increase, regardless if induced by labor and material shipping costs, or a tariff would likely passed on to consumers. Studies vary on the exact impact, but range between a 10 and 20 percent in Apple's cost to manufacture the phone, between increased labor costs, and the need to ship some components and materials to the U.S. plant.
Bloomberg is doubling down on its narrative of Apple as an incompetent, poorly managed company with a perpetual strategy of failure that can't quite pull off its iPhone Magic in everything else the company does. However, the site's facts and analysis of the TV opportunity are seriously flawed.
Yesterday, John Gruber of the Daring Fireball skewered a Bloomberg article published by Alex Webb and Alex Sherman, which similarly offered myopic criticism of Apple's acquisition savvy. Gruber observed that it "consists of quotes from investment bankers arguing that Apple should hire investment bankers to make more large acquisitions. Really, that's it."
Today, Bloomberg published another piece by Mark Gurman targeting Apple TV, complaining that the product--along with rumored upgrades offering 4K resolution and support for Wide Color--"probably?aren't enough to?turn the gadget into a groundbreaking, iPhone-caliber product," while citing anonymous sources as saying that "Apple engineers have been forced to compromise on?Apple's vision of revolutionizing the living room."
There are a series of problems with the article, ranging from factual inaccuracies to incorrect assessments about the television industry. Overall, it well represents the populist media narrative that Apple is a bungling, arrogant, ineffectual and incompetent company that can't even manage to regularly replicate its work that made iPhone the world's most valuable technology product to ever exist, and that made it the most successful and transformative tech company in the world--without any context for what real success in the TV industry might actually look like.
Apple TV not "a groundbreaking, iPhone-caliber product," also, iPhone is not groundbreaking"Early on," Gurman wrote, "the Apple TV was going to replace the clunky set-top boxes from the cable companies and stream live television. It never happened."
Gurman didn't point out that other companies actually did exactly what he says Apple tried but decided not to do; Surprise: they weren't successful.
Gurman didn't point out that other companies actually did exactly what he says Apple tried but decided not to do; Surprise: they weren't successful
A decade before Apple TV was first announced, Microsoft acquired WebTV (a startup cofounded by former Apple engineer Steve Perlman) and launched an effort into replacing set top boxes and streaming Internet content to televisions.
Later rebranded as MSN TV, the product was everything that Bloomberg portrayed Apple TV engineers as "secretly wanting" Apple's own box to be. Despite lots of investment from Microsoft and partnerships with major television vendors, MSN TV proved to be a major dud, not "a groundbreaking, iPhone-caliber product."
After years of pursuing various initiatives involving Windows Media Center and TV set top boxes with DVRs, cable cards and TV tuners, Microsoft's current video efforts now look a lot more like Apple's: direct digital downloads, rentals and media subscriptions.
Gurman next wrote that the Apple TV "team debated bundling a gaming controller with the current?model?to better compete with Microsoft Corp.'s Xbox and Sony Corp.'s PlayStation. That didn't happen either."
Across two decades, lots of people have enjoyed playing Xbox and PlayStation, and both have achieved a measure of commercial success. However, neither product line has achieved anything near being "a groundbreaking, iPhone-caliber product."
The top selling console, PlayStation 2, reached record sales of 155 million units across 12 years. PS3 sold a total of around 80 million units. Apple sold over 78 million iPhones last quarter, and over one billion iPhones since 2007. Nothing comes close to iPhone, so comparing every new product Apple makes to iPhone is obvious, lazy, cliche, meaningless sensationalism.
Gurman then jumped to voice, writing that "Originally, [Apple TV] viewers were going to be able?to shout commands from the couch to the Apple TV. Instead they must talk to?the remote control."
Amazon's Fire TV does allow users to "shout commands from the couch," but this did not successfully create "a groundbreaking, iPhone-caliber product" or market opportunity either.
According to U.S. market research published by Parks Associates last summer, Amazon media player products narrowly out-shipped Apple TV (for a 22 vs 20 percent share of the market) in 2015, but that also includes USB sticks, which made up half of the total units. So despite a major price advantage and voice-shouting features, Amazon's Fire TV box performed worse than Apple TV in the U.S., let alone globally.
Bizarrely, Gurman next complains that "Apple has essentially settled for turning the television set?into a giant iPhone: a cluster of apps with a store."
Ironically, iPhone actually is the only thing close that's ever been close to "a groundbreaking, iPhone-caliber product," yet Gurman cites this as a big disappointment and failed direction for Apple TV to pursue.
There doesn't seem to be anything Apple TV could have done to escape being branded as a failure by Bloomberg in one metric or another. In fact, there's nothing in the tech industry that meets Gurman's minimum standard for non-failure, not even the very standard of "groundbreaking" itself. Everything is all boring, uninspired failure that doesn't do any of the exciting the things that previous failures accomplished before failing.
That's not journalism, it's just circular, contradictory, cynical negativity.
The reality of Apple TV versus the iPhoneWhile it first appeared in the same year as iPhone, Apple TV has only served as an incremental force in shifting the cable TV industry because it lacked the market potential that drove iPhone to become the world's most valuable technology product.
The populist media narrative holds that iPhone revolutionized phones but complains that Apple failed to do the same for television. However, Apple didn't really revolutionize phones. It replaced the mobile phone with a handheld computer capable of running sophisticated computer software: apps.
Ten years ago, Apple didn't disrupt leading phone makers such as Nokia and Motorola in the realm of upgrading the existing phone experience by adding a new layer of value to the "press or say 4" telephone voice interface. Instead, it shipped a handheld computer, based on its Mac operating system and app development frameworks, with phone functionality. Its phone features were leading in some respects (such as the very non-phone-like Visual Voicemail) and trailed behind in other respects (iPhone was not the "best phone" in terms of making simple voice calls).
Apple TV presented a similar solution to the basic television: the original model was purely a scaled down Macintosh with an interface limited to downloading and playing iTunes video, as well as playing iTunes music and showing users' iPhoto images and home movies. Unlike iPhone, it didn't get its own App Store until much later. Apple focused on sales of iPhone because phones represented a much larger opportunity than Apple TV did, despite originally being priced more than twice as high ($650 vs. $299 for the first Apple TV model).
The demand for a sophisticated smartphone was simply far higher than any demand for a smart TV product. Apple can lead a horse to water but it can't necessarily make it drink.
Many efforts to crack the living room TV market have failedDespite a variety of TV-based experiments from Microsoft, Sony, Nintendo, Samsung, Google, Comcast, Tivo, Amazon, Roku and many others, there's never been anything in TV that approached the success Apple had with iPhone in the mobile phone business, nor anything comparable even to Samsung's lessor success in selling smartphones, nor Google's success in promoting Android as a smartphone platform.
In fact, the market opportunity driving iPhone sales itself has had more impact on the television industry (and video downloads and streaming) than any TV box or game console has. Second in line behind iPhone for having a major impact on television is iPad, which has helped drive momentum toward app-based broadcasting and the digital delivery of television, movies and other video content to mobile viewers.
Apple has sold 350 million iPads since 2010. It sold about 25 million Apple TVs prior to Apple TV 4 and has been estimated to have sold about as many new models since. Clearly iPad is a bigger TV product than Apple TV. No wonder the set top box languished in "hobby" land for so many years as Apple focused on mobile sales, where the market opportunity was.
The work Apple put into building its iOS App Store and HLS (HTTP Live Streaming) video delivery were financed by iOS devices, and later applied to Apple TV. Apple couldn't have done things the other way around, as evidenced by the fact that nobody else has figured out how to milk similar revenues from the living room--not even Microsoft, which focused its vast market power on exploiting TV for years as the "third screen."
The work Apple put into building its iOS App Store and HLS (HTTP Live Streaming) video delivery were financed by iOS devices, and later applied to Apple TV
Google TV failed spectacularly. When Google acquired Motorola Mobility in 2011, there was another rush of enthusiastic anticipation that in addition to buying up a smartphone manufacturer, it was also getting the second largest TV set top box manufacturer (after Cisco).
"If a cable TV box has the name Jerrolds, General Instruments, or Motorola on the front, it will soon be a Google box," crowed Business Insider at the time.
"Those brands represents almost a third of all cable boxes in the world, giving Google a very strong foothold in the living room," it added. "The challenge for the search and mobile giant will now be to find a way to upgrade all those boxes to support the Android Operating System."
That expectation turned out to be completely wrong. Google ended up selling cheap USB dongles as a simple way to get Android phone content on TVs in competition with Apple's AirPlay, but didn't make any real progress in monetizing the living room via TV boxes. Its subsequent Android TV was a flop, and many parallel efforts to apply Android's phone success to television set top boxes or gaming devices similarly fizzled into obscurity.
Ask a disgruntled engineer or a failed TV analyst for insight on Apple TVAnyone who works around the tech industry knows there are plenty of engineers ready to complain about executive decisions they had to work under. Not surprisingly, Bloomberg found one for its "report" on why Apple TV is no "groundbreaking, iPhone-caliber product."
Gurman's article included the line "that's not what I signed up for. I signed up for revolutionary. We got evolutionary," attributed to "one of the people, who requested anonymity to talk freely about internal company matters," ostensibly an Apple TV engineer team member.
As noted above, Apple has plenty of TV box competitors, none of whom have really revolutionized the TV box. Perhaps the reason is that there's not enough opportunity for revolution to happen. Or maybe a revolution isn't needed, and incremental evolution is serving demand well enough. Given that the TV media streaming market is being led by sales of cheap USB dongles, it would appear that most of us peasants are largely content with the status quo and aren't looking to finance a revolution in watching TV.
Gurman also cited Gene Munster (who he describes as having "covered?Apple for more than a decade?as a Piper Jaffray analyst") as stating, "Apple TV begs the question: Why does Apple do hobbies? Either do it right or don't do it at all."
However, Munster has been the pinnacle of wrong in his analysis of Apple and the television market, to the point where it is a widely recognized joke that Munster perpetually predicted that Apple would ship a television that cost twice as much everyone else's, and make tons of money on it. Munster's predictions were not only wrong over and over, but farcically absurd and simplistically unsophisticated at the core.
iPhone achieved a major market position by adding value to phones sufficient to drive Average Selling Prices of smartphones from around $100-300 up to today's $700 via iPhone 7 Plus. There's zero evidence that a slick user interface or apps platform could similarly raise the value of televisions. In fact, the demand for basic USB sticks and the limited interest in Apple TV even at a much lower price point ($149) demonstrates that there simply isn't as much commercial opportunity among TV buyers.
Add in the fact that consumers typically don't regularly replace their televisions after paying between $500-$1500 for one, and its clear why Apple largely focused upon its core competency in mobile computers, selling iPhones and iPads rather than trying to sell big, stationary televisions with a "revolutionary" interface.
More Apple TV fictionGurman's Bloomberg piece next made a series of other factually-challenged claims. It noted that Apple TV sales were down year over year, saying that "the slide reflects competition?from Amazon and Roku, whose boxes do the?same and more for less money."
However, in realty Apple TV 4 sales are slowing because it is at the end of its product lifecycle. Further, Amazon and Roku were also in business when Apple TV 4 first went on sale, already offering those same boxes "for less money." Citing them as a primary reason for Apple's slowing sales of a model last refreshed in 2015 isn't just cliche, it's nonsensical. Macs, iPhone and iPad also face competition from a variety of offerings that "do the?same and more for less money," but this hasn't caused a regular erosion of Apple's sales across the board.
Gurman also wrote that "while the Apple TV itself isn't critical to Apple's bottom line, it's central to the company's services business because increasingly the living room is where consumers buy, rent and consume media. Services represented almost $25 billion in revenue for Apple in the last fiscal year, making it the company's second biggest category?after the iPhone."
However, the content that is actually "central to Apple's Services" is not media but apps. Growth in Services in particular is being fueled by apps, not movie downloads. Many of the paid apps available for Apple TV are free downloads for customers who have already purchased those apps on iOS. It's obvious that Apple TV is in no way "central to the company's services business."
Gurman next stated that the original Apple TV, "previewed by Steve Jobs in 2006" was "designed simply to stream iTunes video from a Mac to a TV?set."
That's also false. The original Apple TV was oriented around content downloads to its hard drive, not "simply" streaming iTunes video from a Mac. It could also incrementally download purchased or rental content for immediate viewing from the iTunes Store.
"The next version," he wrote, "launched in the fall of 2010, let?users stream content from the internet." Actually, the iOS version only allowed users to stream from the Internet as it lacked significant local storage to hold a library of direct downloads.
Gurman also wrote "the latest box was announced in September 2015, a few months later than originally scheduled." However, Apple TV 4 did not have an earlier "scheduled release date." It was not announced until it was ready to ship, which was at an event alongside iPad Pro.
Gurman also complained "the latest Apple TV sells for?$149, more than twice as much as?its predecessor, $60 more than Amazon's Fire TV?and $20 more than the priciest Roku." However, Roku makes relatively little from hardware, and earns most of its revenues from reselling content subscriptions or advertising. It is a tiny business compared to any of Apple's. And despite very low pricing, Apple's market share remains roughly equal with rivals selling far cheaper solutions, whether Roku or Google's $35 Chromecast dongles.
A core misunderstanding of AppleGurman also took issue with Apple TV reselling "services like Hulu," or requiring users to "log in with an existing cable subscription." But Apple can't unilaterally change how content owners offer to sell their content. If Hulu's business model deserves criticism, it's Hulu's network owners who are to blame, not Apple. Apple obviously would rather sell standalone apps and content and make money the way it does in the iOS App Store. But unlike its own iOS apps, Apple doesn't control the content of its partner networks and subscription sites.
Gurman stated that Apple's new TV app "was to be?the main interface for accessing live shows and sports. But when the app was finally launched in December, it merely let viewers?access their iTunes video library and the iTunes Store, functions that already existed on the Apple TV."
Actually, the new TV app was released as an alternative, content-oriented framework and UI for discovering content, as opposed to the typical Mac / iOS model of presenting an app-oriented interface. It mirrors the content-first model of Apple News and Apple Music, rather than presenting a series of apps that represent different sources of content.
Apple's TV app
Gurman also took issue with Apple's inability to lineup universal support for a "skinny bundle," writing that "media?companies were willing to engage with Apple due to concerns about the rise of online services like Netflix and the cord-cutting phenomenon," despite the fact that such a skinny bundle would hasten cord cutting, not abate its rise.
He states that "media companies blamed Apple's arrogance;?Apple blamed the media companies' inflexibility. In the end, the talks fell apart, leaving Apple to?tout stripped-down bundles from Sony PlayStation and DirecTV."
Gurman's portrayal of Apple's incremental success in lining up content partners betrays a limited memory of Apple's history with iTunes content. The same scenario played out in music, where labels first refused to negotiate on downloads, then conceded only after their business began to implode. It next played out in video, where studios and networks originally refused to sell their content in iTunes until they were shown it could work. This took years of negotiation and experiment. Apple TV 4 is not even two years old and Apple's TV app has only been around for three months.
Gurman also called Apple TV's software "less ambitious than originally?envisioned," contrasting that "the current model?features an iPhone-like app grid, but designers had prototyped more novel interfaces. One idea, dubbed 'Intentions' internally, put the four tabs in the center of the screen: three for the Apple TV's main content types (video, music, and gaming) and one for everything else."
However, Apple's TV app--along with Apple Music and Apple News--shows that Apple's intent is to focus on "merchandising" content centrally regardless of its source or what app it already hides within. The Intentions interface described by Gurman in once sentence does not suggest a better alternative.
Novelty it itself isn't necessarily an improvement over Apple's "iPhone like app grid," as proven by Microsoft's Metro Mobile offerings, or Amazon's Fire Phone with "dynamic perspective," or Google's floating content windows in Android 3.0 Honeycomb tablets.
Apple TV is not restricted by margin handcuffsGurman also claims that "the?Apple TV is handcuffed by its parent's?addiction to fat margins. Apple is constitutionally allergic to losing money on a product--even if it can make up the difference by selling content."
This is false on its face. Apple TV has obviously never been designed to claim Apple's typical 38 to 40 percent margins, and Apple repeatedly described it as "hobby." Analysts have referred to Apple TV "margin challenged." That's the complete opposite of claiming that Apple TV has been watered down purely to drive high hardware margins.
Gurman also wrote that "some engineers initially believed the current?set-top box should be?capable of streaming 4K video, which offers about twice the resolution as the previous generation of high-definition TV. But 4K requires?a faster processor, which would have pushed up manufacturing costs. That would have forced Apple to accept a lower margin or charge more than the market would bear. Apple settled for a lesser chip that debuted back in 2014--and no 4K. Likewise, not bundling a gaming controller was partially a cost-driven decision."
While it's true that 4K capable hardware would be more expensive, it would also require far more bandwidth, resulting in much slower performance on existing networks, while placing greater infrastructure demands on iCloud.
Niche vendors who only materially operate in the US, such as Amazon, can offer a 4K streaming product because they don't have to deliver a good experience to a broad population of users. Its 4K support doesn't even have to work; merely advertising it will give Amazon the ability to gain favorable press whether it works or not. And as users have reported, Amazon Fire 4K "support" does not exactly live up to being a strong bragging point in reality.
A8, Xbox comparisons, Hulu and the skinny bundleWhile Gurman writing that "Apple settled for a lesser chip that debuted back in 2014" sounds incriminating today, Apple TV 4 debuted in 2015, drawing excitement at the time that its A8 chip was barely a year old, having previously debuted as the fast 64-bit processor powering Apple's premium iPhone 6.
Apple TV 4 is now approaching a year and a half without updates, but game consoles from Sony and Microsoft sit on the market for many years. The current "new" Xbox One was released nearly four years ago. Xbox 360 was on the market for eleven years using the same processor.
Along those lines, bundling a game controller would have positioned Apple TV as a game console. At its launch, there were only a few titles for the new system; positioning it as a cheap Xbox alternative would have been more disastrous than Nintendo Wii. It would also, quite obviously, driven the price up even further.
A high quality MFi game controller costs $49, a third the price of the Apple TV 4 bundle itself. A significant segment of its intended audience was primarily interested in TV apps and content, not in playing first generation tvOS games that were already explorable on the bundled Siri Remote.
Undermining his own theory that Apple is inherently arrogant and doesn't know how the television industry works, Gurman wrote that Pete Distad "joined Apple in 2013 after serving as a senior vice president of content distribution at video streaming service Hulu," noting that he could "hammer out content deals and potentially revive the skinny bundle."
That means the reason Apple doesn't have a skinny bundle yet is that not even an industry veteran from the TV network-owned Hulu could line up something that those networks currently oppose as a perceived threat to their cable revenue streams.
Gurman again cited Munster as an Apple and television expert saying, "I think they realize it is drifting sideways at this point," adding that failure to make big changes would result in "losing the living room."
Again, no other analyst has been more wrong about television and Apple than Munster. The entire Bloomberg article was written like an inside joke.
Nothing new about Apple TV, sort of like iPhone 7?The idea that Apple would ship a boring new Apple TV model this year with barely any changes apart from support for better resolution and wider color gamut is reminiscent of last years' Summer of the Boring iPhone 7, where industry wonks all nodded their heads in agreement with the idea that the next iPhone would be a real snooze-fest.
The fact that Apple faces greater and more significant competition in the living room, and that it controls a smaller segment compared to smartphones or tablets, suggests that Apple TV 5 will likely be at least as competitive in its offerings as Apple's other recent introductions.
Support for High Dynamic Range and 4K resolution are obvious guesses, but Apple's savvy in two other areas (Application Processor silicon and Metal graphics) suggest that the company could also bolster its TV offering with support for better video gaming and new user interface animation effects, while also further exploiting the company's ability to feature tight integration with HomeKit devices and wireless speakers and headphones from its Beats subsidiary.
It's also possible that Apple's recent acquisitions related to Augmented Realty, facial recognition and motion capture could also make an appearance in the next Apple TV, potentially in concert with future iOS devices or a new controller.
Apart from video games, another area of interest Apple has been talking a lot about applies to sports and health. Further integration between Apple Watch and Apple TV could lead to new assisted physical training and exercise apps, as well as HealthKit, ResearchKit and CareKit apps that could monitor the recovery of patents at home, or study physical mobility in the general population.
Apple's emerging presence in the enterprise, in addition to education, could result in new assisted learning apps and collaborative communications tools for companies with workers in multiple locations.
Of course, it's certainly possible that Apple TV never emerges beyond a token existence as Apple's product offering connected to television. But if anyone figures out how to make money from the living room by adding value to the common television, it's likely it will be the company that pioneered the market for, and then figured out how to best improve, computers, notebooks, phones, tablets, watches and Bluetooth headphones.
Apple's full embrace of USB-C has led to numerous user complaints,?many of which are legitimate. However, there's one common refrain that keeps cropping up: A conspiracy theory claiming Apple switched to USB-C in order to make gobs of cash from selling users new adapters, dongles and cables. There's just one problem with that narrative -- it's complete nonsense. Here's why.
tl;dr: Think Apple's USB-C cables and adapters are a user-hostile profit scheme? Buy cheaper alternatives on Amazon and shut up.
There are plenty of reasons to gripe about Apple switching to USB-C, just as there are justifiable reasons to be upset about the headphone jack being eliminated from the iPhone 7.
The existing full-size USB port has been around for many years, meaning virtually any user is going to run into problems connecting any of their accessories (including an out-of-the-box iPhone) to their Mac. The switch to USB-C is, at the very least, a minor inconvenience for the vast majority of users.
And so the fact that people are upset about the new MacBook Pro going all USB-C is not surprising. But why people are upset is another matter entirely.
Apple did not create USB-CThe USB-C connector was created by the USB Implementers Forum, a nonprofit organization that has overseen the Universal Serial Bus since 1995.
While Apple is a member of the USB-IF, it isn't even a part of the organization's top-level brass. Instead, the USB-IF Board of Directors is comprised of personnel from companies like HP, Intel, Microsoft, and chipmaker STMicroelectronics.
USB-C is an open standard, meaning any electronics maker can use it. Within a few years, virtually every new computer sold will feature USB-C, whether exclusively or in tandem with full-size USB-A ports.
Apple has played a major role in establishing new connectors for computers in the past. It partnered with Intel to help create Thunderbolt, and previously the company spearheaded the creation of FireWire, and both of them are open standards.
Within a few years, virtually every new computer sold will feature USB-C.
There is some speculation that Apple again played a significant part in the development of USB-C. It's been suggested that Apple has not been vocal about its part in the creation of USB-C because the company wants the port to be embraced across the computer industry, and the suggestion that it's an "Apple port" might inhibit adoption.
Regardless of how accurate those characterizations may be, USB-C was approved by an independent, nonprofit governing board that has no vested interest in the success of Apple's Mac lineup.
The reasons for Apple -- or any computer maker --?to push USB-C so strongly are clear. It's a thin and reversible port that can handle power, data and video on a single cable.
Once USB-C adoption is near universal, the painful switch from USB-A will be quickly forgotten. Until that happens, however, some early adopters may find themselves in dongle hell. Here again, user complaints are largely misguided.
Apple does not profit from USB-C
What's the profit margin gonna be on all the Thunderbolt/USB-C dongles Apple puts out for the new MacBook Pro?-- Samit Sarkar (@SamitSarkar)
Yes, Apple sells a handful of USB-C cables and adapters. Yes, they are generally more expensive than some of the other options available.
Apple's own cables and accessories have always been more expensive than the competition. And so have its products.
But because USB-C is an open standard, there are a plethora of inexpensive USB-C cable, dongle and hub options available. A quick search on Amazon shows plenty of well-reviewed off-brand cables for under $10, and known name-brand cables for around $15.
If Apple truly sought to "lock in" users to its own manufactured or licensed cables and ports, it would have designed an entirely new port to compete with USB-C.
If Apple's new MacBook Pros came with an array of Lightning ports rather than USB-C, suggestions that Apple is only interested in milking more money out of their users would carry some weight. But we don't live in that alternate universe.
Still, seeing a potential public relations nightmare as the angry Twitter mob sharpened their pitchforks, Apple slashed prices on USB-C and Thunderbolt 3 accessories this fall. The temporary discounts will last through the end of March 2017.
The outrage over the fact that Apple would make money off of its products and accessories is a strange one (Apple is a publicly traded company whose main purpose is to sell products and make money). And with a relatively tiny portion of the overall PC market, it's not like computer users have a lack of alternatives to the Mac.
Regardless, perhaps the best evidence that the switch to USB-C is not about Apple selling cables or adapters comes from the 12-inch MacBook power brick --?a truly proprietary USB-C accessory that customers must buy through Apple (at least if they want to ensure their MacBook does not burst into flames with a cheap knockoff).
The 29-watt USB-C power adapter that ships with the 12-inch MacBook can be purchased separately for $49. And if you prefer to use Apple's USB-C charge cable, it costs $19, bringing the total cost of replacement to $68.
In contrast, the 45-watt MagSafe 2 Power Adapter for the MacBook Air -- the computer the 12-inch MacBook has superseded --?cost $79, or $11 more. And since the MagSafe cable is permanently attached to the power brick, if the cable frays (which it frequently does), you'll need to pony up the full $79 to replace it.
Since the USB-C brick for all new MacBooks features a removable, replaceable cable, any fraying would require a more affordable $19 replacement. And that cost would be even less if you used a third-party USB-C cable.
It turns out that switching to USB-C made the power brick on your MacBook easier and -- most notably in the case of the 12-inch MacBook --?more affordable to replace.
Apple does not ship the iPhone with a USB-C cableThis is another valid complaint with a complicated answer. If you want to connect your iPhone to a new Mac, you either need a USB-C to USB-A adapter, or an Apple Lightning to USB-C cable, both of which are sold separately.
While only Apple can officially say why the company does not ship the new iPhone 7 with a USB-C to Lightning cable, the numbers speak for themselves.
Apple's best quarter ever for the Mac was the September 2015 frame, when the company sold 5.7 million computers. In contrast, projections call for the iPhone to sell nearly fourteen times that --?reaching nearly 80 million units --?in the current holiday quarter.
Simply put, the number of people buying iPhones vastly outnumbers the number of customers who purchase new Macs.
Switching to USB-C on the Mac, while admittedly painful for many users, is a simpler change to make, because Apple sells far fewer Macs than it does iPhones.
If Apple were to switch the default cable and wall adapter in the iPhone box to a Lightning to USB-C cable, users would be outraged, because they wouldn't be able to use the cable with their existing computers, wall adapters, car adapters and other accessories that rely on the full-size USB port. The outcry from such a change would be far louder than current complaints about USB-C on the latest MacBooks.
It's for similar reasons that Apple can't switch from Lightning to USB-C on the iPhone or iPad themselves -- an entire ecosystem has been built up around iOS devices, of which Apple will sell nearly 100 million this quarter. Lightning may very well prove to be the last input port on Apple's iOS devices, before it is replaced by wireless connectivity and contact charging and accessories, like the Smart Connector on the iPad Pro.
Consider that the last time Apple switched ports on the iPhone, from 30-pin to Lightning, user outrage lasted for years. Though that transition took place with the debut of the iPhone 5 in 2012, Apple Chief Executive Tim Cook was reminded of how annoyed users were by the switch by comedian Stephen Colbert, in an appearance on The Late Show three years later, in 2015.
"It's the same charger, right?" Colbert asked Cook about the then-flagship iPhone 6s. "Because I will stab you in the neck with a fondue fork right now."
If you listen to groupthink critics on Apple, you'll hear that the company is deeply troubled by too much reliance on iPhone sales, aging Mac Pro and Mini offerings that haven't been updated in years and a stagnating market for iPads that has fallen precipitously since Peak iPad occured in 2014. They're wrong, here's why.
Apple's Infinite Loop campus
A visit from an insane time travelerImagine it's 2007 and you've just witnessed Steve Jobs introduce the new iPhone. Suddenly a time machine appears and a person from ten years into the future jumps out. Naturally, you ask whether Jobs' intended goal to reach 1 percent of the global smartphone market ever materializes.
"Never mind!' the person from the future says. Instead he gravely warns you that, "in ten years, iPhone will account for about 60 percent of Apple's revenues! Apple will be incredibly reliant upon iPhone profits!"
"Holy cow," you reply. "iPhone will be contributing sixty percent of Apple's $19.32 billion dollars in annual revenues in a decade? That means iPhone will grow into an $11.6 billion business!"
"No dummy, in ten years Apple's annual revenues won't still be today's $19.32 billion, it'll be $215.64 billion. But that's the problem: most of that growth will come from expanding iPhone sales. Conventional Mac computer sales will only grow from today's 5.3 million per year--$7.4 billion worth--to 18.5 million Mac ten years from now, $22.8 billion worth of Macs. Apple will be bringing in $136.7 billion in revenues from iPhone! It will be so terrible. Warn your friends!"
"That's bad?" You ask. "So in ten years, Apple will be bringing in far more revenues from phone sales than anyone else ever has, while also tripling its current sales to reach $22.8 billion worth of computers ten years from now?"
"No dummy," the time traveler says. "Apple will sell $22.8 billion worth of Macs. It will also invent a new lightweight tablet computer called iPad, and in fiscal 2016 it will sell $20.6 billion dollars worth of those. So in total, $43.4 billion worth of general purpose computing devices a decade from now, plus $136.7 billion worth of phones."
"Well it sounds like Apple does pretty well with both computers and phones," you say.
"Hardly!" The time traveler snaps. "Ten years from now, nobody is buying Xserves, nobody buys the cheap Mac mini, and desktop 'Pro' Macs virtually disappear from the radar. Demand for desktops is so light that by 2017 Apple hasn't significantly updated its slowest selling desktop Macs for years.
"Instead, it will ship a premium-priced MacBook Pro that's super light and thin, featuring a Touch Bar that replaces the top row of function keys with a dynamic touch screen that suggests things you might want to type next! It's terrible, people want to see an updated Mac Pro they're not going to actually buy, not another update of a product that will actually sell by the millions."
"It sounds like you are totally deranged," you observe.
"You just don't get it!' he screams. "Apple might be making money and developing products people will actually buy, but the reality is that--in unit sales--Apple sold more iPads in 2014 than in 2017. It turns out that Apple could make more money selling people big iPhones than from small iPads. Once the big screen iPhone goes on sale, the numbers of iPads sold also goes downward, dangerously inflating the numbers of iPhones sold. It's like Apple doesn't even care about unit sales and its only focused on building products that make money!"
"What's Apple's future stock price?" you ask as you look up the company's current valuation in the Wall Street Journal, because you don't have an iPhone yet and the phone you have lacks WiFi or a data plan because they are all just too expensive in 2007.
"Sorry, I have no time left," the time travel says. "I have to go back in time even further to warn people in 1997 that Apple is getting rid of QuickDraw 3D and that Pippin and Newton PDA sales are going to go away completely, replaced by a new ARM-powered computer that does little more than play music from a hard drive. Can't wait to see the terror on their faces! Plus I need to buy some more Apple shares to finance this time machine. It's expensive to maintain!"
Newton and Pippin are both no more
This time traveler story is not actually true. However, the insanity he spews is exactly what the tech media is reporting today. From bloggers at The Verge to The New York Times to clickbait generators at Forbes, Business Insider and other surveillance-ad content mills to even analysts seeking to say something of merit about the company that will make them look smart, virtually everyone in tech is merely saturating the web with stale, vapidly ignorant observations about Apple that are purely ridiculous. The best question, however, is: why?
Balloon logicThe tired tropes of Apple's "troubling" situation are a form of balloon logic; ideas that seem substantial until you scratch the surface and realize that there's nothing really there but a thin bit of rubbery garbage stretched out around captive air.
Apple does face some significant challenges ahead in its efforts to maintain and expand its position and profitability in personal computing. However, the general consensus among Apple's critics fails to maintain a firm grasp on what these actually are.
There's a simple explanation for why analysts, pundits and journalists regularly doubt the capacity of Apple--the most consistently, commercially successful tech company ever--while exercising a doe-eyed credulity in the promises of every potential new competitor that announces itself.
Analysts, pundits and journalists needn't be consciously biased against Apple to repeat fiction about the company; they only need to be selectively informed by Apple's rivals and lack any capacity for critical thinking or any valid insight into the market.
Analysts, pundits and journalists needn't be consciously biased against Apple to repeat fiction about the company; they only need to be selectively informed by Apple's rivals and lack any capacity for critical thinking or any valid insight into the market.
Apple loves the darknessIt's not just Apple's competitors that are contributing toward the murky, delusional picture of Apple's current status. Apple itself benefits from secrecy and a public kept ignorant to its intentions and strategies by a lazy media.
It's much easier to surprise and delight audiences with products they don't see coming. That's why Apple didn't outline in advance the various features of its 2016 product introductions until they were nearly ready to sell, and doesn't print out a detailed technology roadmap of where it's headed.
Nobody was detailed well in advance on Apple's Continuity strategy for linking Macs and iOS devices using Bluetooth and WiFi, and few even comprehended the significance of this when it was unveiled. Even fewer--not even yours truly--foresaw that Continuity would also expand as a platform glue to deeply integrate Apple Watch features, or to associate new wearables like AirPods into Apple's magically hyper-connected ecosystem of devices.
Who knew Continuity would enable Apple Watch and AirPods?
By not outlining what it was doing and why, Apple gained a huge competitive advantage that it could incrementally roll out without its competition copying its moves.
Microsoft apparently thought it was matching Apple by rolling out Continuum, a way to turn a smartphone (something Microsoft is struggling to sell) into a desktop PC (something few people need anymore). Google introduced its own concept for merging Android (its mobile platform of low quality app titles) to run on ChromeOS (its unpopular Linux netbook that it struggles to give away).
The media praises both of the latter with standing ovations while failing to even grasp that Apple's Continuity is the only one of the three that offers the ability to sell new hardware by facilitating new capabilities that people will actually want, rather than just promising to do something that pundits rooted in the past can nod their heads along with, but which makes very little actual commercial sense.
Writing for The Verge nearly two years ago, Tom Warren crowed of Continuum: "Microsoft turning phones into PCs feels like the future!" Right, nothing says "future" like Windows Mobile phones and desktop PCs.
Exciting: a phone nobody buys can turn into a slow PC nobody needs, once the bugs get fixed
Before realistically examining Apple's current position in personal computing--a market that involves Macs and iOS devices including iPhone and iPads--consider how consistently backward and incorrect the general perception of Apple has been across the last several years, and--most importantly--why people were wrong.
Statistical fallacy has resulted in foolish advice and incorrect predictionsIt's not difficult to create persuasive arguments by massaging figures in the model of IDC, Gartner and Strategy Analytics, or to artfully chart out data points in the manner of say, Business Insider. However, no matter how plausible a story might seem, or how incontrovertible a series of data points appear to be, if they predict an outcome that doesn't actually occur, it's pretty clear that something was wrong in that logic.
Even a minor change in one variable can frequently result in a totally different competitive environment
Mainstream technology reporting--and even many tech-specific blogs--have been incredibly bad at predicting trends in the industry. So bad, in fact, that almost everything they predicted is, in retrospect, laughable.
One of the core problems in predicting the future path of technology is that even a minor change in one variable can frequently result in a totally different competitive environment going forward. This results in not just the wrong answers to given question, but in asking the wrong questions entirely.-- Jack Shafer (@jackshafer)
Another factor that many future predictions often fail to account for in their logic models is that while history might repeat at times, everything that happens invites a competitive response by those witnessing the events. For example, when Apple introduced the Macintosh in 1984, it triggered a series of competitive responses, most notably (in retrospect) from Microsoft Windows. When Apple introduced iPhone, something similar happened.
History repeats, but intelligent systems learn and adapt in tandem
However, Apple's executive team itself responded differently because it was informed by the past.
Much of the tech media identified one pattern (thinking that Apple's product would again be threatened by a commodity platform) but completely failed to anticipate how Apple might respond differently to this threat after having narrowly survived the previous one. History repeats, but intelligent systems learn and adapt in tandem. Evolution demonstrates how one small change can have a huge impact on competition going forward.
2007: Apple figures out smartphones and "walks right in"With Apple's iPhone recently reaching a ten year milestone since its introduction, it's particularly easy to review what people said about that product and contrast this with the known history of iPhone.
Initially, many perceptions of Apple's potential (or lack thereof) in smartphones largely aligned with the iconically misguided comment made in late 2006 by Palm's chief executive Ed Colligan: "PC guys are not going to just figure this out. They're not going to just walk in [and take over the smartphone industry]."
Colligan wasn't an idiot. He'd run Palm quite successfully from its early PDA days into the blossoming of PalmOS smartphones. Palm had also worked closely with Microsoft and with the "PC guys" of the day (notably Sony) to license technology in both directions (from Microsoft, and to Sony) and to partner in building the emerging notions of what a mobile computing platform should be.
However, Colligan ended up being very wrong about Apple, which very much did "figure out and walk in," not just with smartphones but also in tablets with iPad. Conversely, Colligan was eventually right in the sense that "PC guys" wouldn't be able to "walk in" ...on Apple.
With iOS and the App Store, Apple changed the rules so drastically that Microsoft, PC makers and even Palm itself couldn't "figure out" how to reenter the smartphone market--now redefined by iPhone and iOS.
2009: Palm itself fails to "walk right in"Palm's response to iOS, named webOS, was introduced just a couple years later but failed to launch its own iPhone-like success with Palm's Pre phone hardware. The webOS team also couldn't find traction for its iPad-like TouchPad tablets. Not even the world's largest collection of "PC guys" at HP could figure out how to put things back together again after acquiring Palm in 2010.
The failure of Palm and webOS wasn't a simple matter of Apple's people being inherently genius and non-Apple companies being full of idiots. Palm's webOS team had actually recruited away tons of talent from Apple's iPhone team, and its development was lead by Jon Rubinstein, who served as Apple's Senior Vice President of Engineering across the decade that introduced iPod and turned Mac sales around. It would be an incredible understatement to say that Rubinstein had deep insight into what had worked at Apple, and he shared a particularly close working relationship to Steve Jobs.
Despite all that, Palm's webOS earned little more than exuberant praise from the media. The ambitious project failed to return Palm to greatness, and ended up doing nothing for HP (or LG, which later acquired it). Apple talent, Apple insight and Apple executives weren't enough to cultivate an independent Apple-like success at Palm, and weren't even enough after being combined with the well funded companies that subsequently took turns trying to make it work.
However, few in 2009 predicted that Palm would fail, and many saw Palm's subsequent acquisition by HP as a strong parallel of Steve Jobs returning to Apple (Rubinstein had originally started his career at HP; also, he left Apple for Palm, announced webOS in January 2009, then in quirky homage to Jobs, was named the CEO of Palm in the summer 2009, replacing Colligan). With the prospect of HP's money funding a webOS future, the idea that Palm + HP would most likely end up in failure wasn't a very popular viewpoint.
To most, it appeared that history was clearly repeating, this time with Rubinstein playing the role of Jobs, but in a way that would destroy Apple rather than save it. That's such a tantalizing story that it gets regularly repeated. Every executive (or engineer, or even a designer) that leaves Apple is hailed the same way, despite the fact that departing Apple employees far more often than not end up with failures.
This all happened beforeRubinstein's fellow iPod Senior Vice President Tony Fadell left Apple to create the multifaceted failure of Nest, which Google acquired and lost tons of money on without being able to turn things around despite pouring in tons of additional investment. Ron Johnson, famous for designing and building out Apple's incredibly successful retail stores, similarly blew it trying to fix things at JC Penney. But there's an even greater, high-profile example of an Apple icon leaving to replicate the Apple magic elsewhere without success: Steve Jobs.
Rather than working out like Jobs' return to Apple, Rubinstein's webOS project ended up much more like Jobs' departure from Apple in 1986 and his subsequent formation of NeXT Computer. Jobs had similarly recruited away a team of some of Apple's best engineers and tasked them with building a more advanced "NeXT" successor to the Mac.
Like webOS at Palm, NeXT's engineers (two decades earlier) developed a variety of advanced, innovative ideas that were superior in some significant ways to what Apple was currently selling. But also like Palm, NeXT ended up not being commercially successful. A decade later many of its key executives, architects and other workers ended up back at Apple, along with many of the innovative things they had built outside of Apple. Much of the underlying technologies in macOS X and iOS were salvaged from NeXT.
Incidentally, Rubinstein himself had led engineering of NeXT's hardware in 1990, and was personally recruited by Jobs to Apple in 1997 to fix the existing mess of the Mac's various product lines. So of all the people who could leave Apple and replicate what was working there somewhere else, Rubinstein should have been the ideal candidate: he'd already taken many of the lessons of what had worked at NeXT and brought them to Apple.
Consider these examples (Jobs, Rubinstein, Fadell, Johnson) the next time you read about how any Apple employee leaving the company (for any reason) is destined to replicate Apple's success and destroy Apple in the process. Its the kind of lazy, contrived sensationalism that Wired now excels at.
Wired: Tesla is going to start making money, apparently selling phones
Deep pessimism for Apple, shallow credulity for Apple's competitorsMany pundits initially agreed with Palm's Colligan in 2006 that the iPod maker would face impossible headwinds in entering the entrenched, hyper-competitive smartphone industry (at least right up until the iPhone began making history).
Once Palm's webOS appeared, many loudly hailed the new platform and the company's Pre hardware as being more innovative, more visually appealing and technically superior to Apple's iOS
However, once Palm's webOS appeared, many loudly hailed the new platform and the company's Pre hardware as being more innovative, more visually appealing and technically superior to Apple's iOS (among other things, it featured support for multiple-core processors, a factual first that maintained an exclusive marketing point for a couple months).
After first being wrong about Apple's ability to move from iPods into the entrenched smartphone market, tech thinkers and journalists were again left looking foolish for imagining that anyone else could "walk right in" the same way they'd just watched Apple do it. And again, much of this was fueled by the idea that Palm's webOS and hardware were being led by Rubinstein, known principally for being Apple's 'iPod father," an incredible contradiction of logic.
Why were they so perpetually wrong at every turn? Because they didn't see or understand the full story, just the part Apple's rivals were feeding them. Among other things, they didn't know (or couldn't imagine) that the company that was profitably selling billions of dollars worth of iPhones could match Palm's (commodity!) multiple-core chip, or adopt some of the other original features Palm's webOS introduced, that Apple couldn't hire away talent itself, or more importantly, that Apple had wildly more important strategic advantages than a few novel features that were all relatively easy to reproduce.
One example: after HP acquired webOS, Apple hired away Rich Dellinger, who had developed Palm's non-intrusive banner notification system, widely regarded as one of the best features of the new platform. It subsequently introduced Notifications Center in iOS 5 (below).
If tech advocacy-journalists really knew anything about the industry they write about, they'd be out creating billions of dollars of wealth themselves, rather than writing up the latest treatise on why Apple is about to wither up and blow away.
The secret of how Apple "walked right in"While many were fully convinced by the overwhelming "facts" and excited hype supporting webOS--and by the familiar historical pattern of disruption they expected to work against Apple--the reality was that by 2009 Apple had already achieved a strong beachhead in smartphones with iPhone.
Apple was selling phones profitably with a variety of global partners after first having jumped through a narrow window of opportunity with AT&T that had enabled Apple to take a unique, strong position in customer ownership with iPhone buyers.
In 2006, AT&T (then Cingular) had just delicately emerged from a merger of American GSM carriers in an industry dominated by CDMA carriers: Verizon and Sprint. The best phones of the day (in the U.S.) made use of superior CDMA 3G networks; AT&T and its slow 2.5G EDGE had difficulty recruiting phone makers to build desirable American GSM phones. AT&T's network was also different enough from European GSM networks to complicate simply reselling these phones in the U.S.
For these reasons, AT&T gave unprecedented concessions to Apple's iPhone that helped it redefine what a smartphone could be. But by 2009, that window was effectively closed. AT&T already had a strong exclusive with iPhone that was attracting high value smartphone subscribers, so it didn't need to give other phone makers similar concessions.
AT&T gave unprecedented concessions to Apple's iPhone that helped it redefine what a smartphone could be
Verizon and Sprint both wanted an iPhone-like offering, but they weren't in desperate enough circumstances to be willing to give Palm the same leverage, freedom and commercial backing to create one. Mobile carriers also helped hobble Windows Mobile and Blackberry--which like Palm were already operating under carriers' rules and therefore had little leverage to change things.
Blackberry tried to "walk in" with its touchscreen Storm at Verizon throughout 2009, but it failed to deliver an iPhone-like draw of valuable subscribers. In 2010, Verizon next banked on Android to provide an iPhone alternative, but Android also failed to attract high value customers.
The inability of Android to attract higher end subscribers seemingly should have been obvious to any observer, but journalists and bloggers alike were fooled into thinking that there was no difference between the candidates, so they voted to support Android because change seemed like a nice idea and so much critical propaganda had assailed Apple and its iPhone as being crooked and borderline criminal, blamed with various farcical sins ranging from making money to killing workers in China via suicide. This delusion, however, lost the popular vote to iPhones.
By the beginning of 2011, Verizon had partnered with Apple on 3G iPads and was ready to launch a CDMA iPhone on its network, extending Apple the same concessions AT&T had in order to get in on iOS business that Palm, Windows Mobile, Blackberry and Android had all failed to deliver.
Apple continued to leverage its unique relationship with carriers that traded iPhone exclusivity for co-marketing and customer access. That included the ability for Apple to directly update the software of its iPhone users, and to regulate and manage how iOS apps were sold. This ended up being monumentally important, but was rarely discussed by tech commentators because nobody who did comprehend what was happening had any real motivation to spread the news of why Apple was commercially winning in smartphones.
Apple itself certainly saw no need to brag up why it was winning. The company would prefer to see its rivals busy patting themselves on the back rather than copying what it was doing. By the time Microsoft and Google realized they should be copying Apple, its tight integration in iPhones and its strict control and regulation of the iOS platform, it was too late.
Not even massively expensive acquisitions of Nokia ($7.2 billion) and Motorola ($12.5 billion) were capable of turning Microsoft and Google, respectively, into a viable vertically-integrated competitor to Apple with enough clout to seek strategic concessions from carriers. Further, the initial efforts both vendors made to create broadly-licensed alternative platforms to iOS undermined and contradicted their belated efforts to deliver a credible integrated mobile platform running on their own self-branded hardware.
Android's PC guys are going to walk right in!Prior to dumping its "open" strategy to copy Apple's integration, Google's Android promised end users "openness" while also promising carriers, app vendors and manufacturing licensees with the "freedom" to meddle in how various aspects of the platform worked. It was easy to predict that this would result in a mess, but pointing this out was commonly considered a sacrilegious departure from received wisdom.
By empowering everyone, Android empowered nobody
Pundits and even legitimate journalists were virtually all hoodwinked into believing a narrow line of propaganda they were fed by Google and Android's proponents: Android was going to be empowering to users, but also to software developers, and independent app stores, and hardware makers, and mobile carriers... all of which actually operated in competition for power. By empowering everyone, Android empowered nobody.
In the same way that 1950's Communism promised to erase the need for government--but only after installing a repressive, onerous form of government to achieve this utopia, Android portrayed itself a selfless collective of open development aiming to create innovative and trailblazing new hardware paired with software secured by "all the eyes" of the developer community, while actually delivering nothing but imitative copycat hardware saddled with insecure software that nobody in the community could actually fix--or even possessed any motive to fix.
Could not be more wrongIn 2011, Google's chairman Eric Schmidt promised that Android would quickly become the first platform that mobile developers targeted, and that developers would be better able to sell their content to Android buyers. Both were wrong.
No, it's been five years now
Google originally insisted that Android would enable third party hardware makers to be more profitable than they had been when they maintained their own proprietary platforms or licensed Microsoft's. More recently it outlined a future where Project Ara modularity would trump Apple's tight integration. Those were also both wrong.
Google also outlined a future where TV would look like a PC internet browser, where video game console titles would be built by a vibrant community of small homebrew indie developers, where Android would enable people to walk around with its search engine strapped to their faces via Glass and where advertising would magically make virtually everything nearly free. Those also turned out to be wrong.
Google not only failed to maintain any control over its platform partners, but couldn't even keep its own promise to use Android to build low cost smartphones. Last year, Google unveiled its "pure, true vision" for Android smartphones in the form of very expensive Pixel models priced the same as an iPhone but missing significant features and running slower.
The same people who acted as a dutiful conduit for all of these fictions about Android are still telling anyone who'll listen that Android is winning because of market share, even though Google and its ads and apps ecosystem has been locked out of China (the world's largest smartphone market) and that Google remains in contention with Samsung, its largest Android licensee by far, while also slipping domestically in U.S. smartphones, much of Europe, and has been isolated into minority share by iOS in technically-savvy Japan of all places.
Also embarrassing for Android is the fact that Samsung has directly worked against Google's Android Wear to establish its own rival Tizen smartwatch platform, even as Apple has devastated both with its own Apple Watch product introduction. So much for selfless Android community solidarity all lined up against Apple and its selfish pursuit of capitalism.
However, the biggest bit of evidence undermining the "grand success of Android" is that across the same period that Apple has earned nearly $1 trillion from iPhone, Google has effectively earned next to nothing from all of its valiant efforts to replace Symbian, Linux or Java ME with Android code, particularly when considering the monumental expenses Google has invested in maintaining and promoting Android.
Calling Google the leader in smartphones is like saying the U.S.S.R. won the Cold War because it afflicted the greatest number of individuals with its disastrous policies, because its ideologies warmed the hearts of a certain group of intellectuals, and because it achieved a variety of technical firsts, including Sputnik. How incredibly, briefly impressive, yet what incredible cost and misery.
Future windows of opportunityThe unique, limited window of opportunity that AT&T's circumstances offered in 2007, which allowed Apple to redefine the smartphone market with iPhone, didn't last long and won't likely ever occur again in other places. Today however, Apple is in the position of building its own windows of opportunity.
One example of that is its major effort to design and build custom Application Processors, memory and display controllers and other embedded silicon. These efforts are allowing Apple to develop products with features that are difficult for rivals to replicate or undercut on price.
Another window of opportunity Apple is pursing involves corporate partners in software, who build custom iOS apps for their enterprise clients. This includes IBM, Cisco, SAP and Deloitte Consulting.
By working with huge global enterprise developers to create new software that automates industries and creates new efficiencies in business workflow, Apple is creating new markets for its iOS devices that are unlikely to ever switch to rival platforms, the same way that Windows users were hesitant to adopt other platforms a decade ago.
Closing a window on opportunity costsBeyond seeking out ways to own or control the principle technology in its products--from pure hardware and software to integrated technologies such as Continuity and Apple Pay--Apple also carefully considers the opportunity cost of developing new products in ways many of its competitors don't.
For example, despite currently being the world's largest vendor of tablets, Apple only builds three form factors of iPad. Samsung has created a smooth gradient of tablet sizes stretching from tiny to huge, but that hasn't resulted in leading popularity or profitability. If anything, that busywork appears to have been a distraction.
Apple decisively quits developing products that are not successful
Apple also decisively quits developing products that are not successful. Some were abandoned quickly, such as Jobs' iPod HiFi speaker system. Others, like basic iPods after the launch of iPhone, were scaled back and updated less frequently. iPod touch was initially a strategic product that served as training wheels for users of featurephones, or those who were tied to Blackberry or Symbian but wanted to try out iOS without changing their phone. That "window of opportunity" has effectively closed, making it much less important to sell a product that was once very strategic.
The same can be observed of desktop Macs. A decade ago, Final Cut Pro, Logic and Aperture were seen as essential in propping up demand for the Mac as a Pro platform. However, as consumers moved to smartphones for photography and professionals showed a preference for pro apps from third parties, Apple's own offerings have waned in importance. Along with that, Apple's core revenues no longer come from powerful, higher-end desktops. Those models have fallen off of Apple's radar the same way Xserve and Xraid did a few years ago.
It may be that Apple revisits pro Macs with specifications that can't be delivered in the light, thin outline of MacBook Pros or iMacs. But it's at least equally likely that Apple just abandons high end workstations and focuses instead on selling lower cost iPad Pros to a much larger potential market of mobile professionals. Apple could also reevaluate the potential for licensing macOS to other workstation vendors to allow third parties to build higher end Mac hardware in lower volumes than Apple cares to itself.
Some of these changes may be sad to those with a nostalgic history of working with a specific product. But there's plenty of precedence for this: Apple dropped its Apple II line to focus on Macs as a platform with much greater potential (although it took over a decade to completely end sales of the Apple II).
The company similarly slashed away significant efforts in software (including Hypercard, QuickTime VR, AppleWorks and Aperture) to focus on things it excelled at. It spun off FileMaker as an independent subsidiary, and could someday do the same with Logic and Final Cut Pro.
The company long ago backed out of digital cameras and printers, and more recently has apparently given up on selling Apple-branded displays and speakers. Instead, Apple has moved into new markets where it can offer truly differentiated products--notably with Apple Watch and AirPods.
Even within successful hardware product lines, Apple has shifted its resources to focus on products that are either more popular or profitable. While iPhone 5c was successful relative to Android flagships, Apple discontinued it to focus on larger iPhones, then effectively brought it back years later in the low cost, higher end form of iPhone SE. And while iPad mini sold in massive volumes for a couple years, Apple has since focused most of its iPad efforts upon building differentiated, higher-end iPad Pro models that are more profitable and more clearly different than basic small tablets.
Some of this strategy is not obvious in reports of total unit sales. Some of it generates critical opinions and triggers emotional responses. But compared to its peers, Apple is far better positioned to survive 2017, and really faces little threat from Google's expensive Pixel, Microsoft's niche desktop and hybrid Surface PCs, or the generic commodity offerings of Samsung and other PC vendors.
Even if it loses another employee from its current cast of 110,000.
Apple chief executive Tim Cook has promised to oppose a court order that would have the company create a compromised version of iOS with weakened encryption, the result of FBI requests for help in accessing data stored on an iPhone 5c used by a gunman in the San Bernardino shooting.
"The United States government has demanded that Apple take an unprecedented step which threatens the security of our customers," Cook wrote in an open letter posted on Apple's website. "We oppose this order, which has implications far beyond the legal case at hand."
Cook notes that while Apple has done as much as it can to cooperate with law enforcement officers, the FBI's request to crack iOS encryption used by the San Bernadino shooters would fundamentally harm the security of iOS users around the world:
"We have great respect for the professionals at the FBI, and we believe their intentions are good. Up to this point, we have done everything that is both within our power and within the law to help them. But now the U.S. government has asked us for something we simply do not have, and something we consider too dangerous to create. They have asked us to build a backdoor to the iPhone.
Specifically, the FBI wants us to make a new version of the iPhone operating system, circumventing several important security features, and install it on an iPhone recovered during the investigation. In the wrong hands, this software -- which does not exist today -- would have the potential to unlock any iPhone in someone's physical possession.
The FBI may use different words to describe this tool, but make no mistake: Building a version of iOS that bypasses security in this way would undeniably create a backdoor. And while the government may argue that its use would be limited to this case, there is no way to guarantee such control.
Cook's strongly worded critique comes less than a day after a federal judge ordered Apple to aid law enforcement technicians attempting to break into an iPhone used by Syed Rizwan Farook. Officially the property of the county health department for which Farook worked, the iPhone 5c was password protected by the gunman and is set to erase a stored decryption key after ten unsuccessful login attempts.
According to Apple's own documents, it is nearly impossible to break into an iOS device running the latest operating system revision, in this case iOS 9. Apple stopped storing security keys with iOS 8 to implement an encapsulated encryption method that entangles a pass key with the device UID. Any attempt to break this strong encryption would have to take place on the phone itself.
Further, the validity of the FBI's bid to sequester Apple's help is tenuous at best. The order notes officials hope to employ a brute force attack after Apple provides a custom software image file capable of disabling or bypassing the iOS password attempt counter. If such software exists, code breakers would still need to overcome the 80 millisecond cool down period between tries.
Apple estimates it would take a supercomputer over five and a half years to crack a six-digit passcode with lowercase letters and numerals. Brute-forcing a stronger passcode could take decades. In short, iOS was built to withstand the very attack vectors proposed by the FBI.
The full text of Cook's letter is included in its entirety below:
February 16, 2016
A Message to Our Customers
The United States government has demanded that Apple take an unprecedented step which threatens the security of our customers. We oppose this order, which has implications far beyond the legal case at hand.
This moment calls for public discussion, and we want our customers and people around the country to understand what is at stake.
The Need for Encryption
Smartphones, led by iPhone, have become an essential part of our lives. People use them to store an incredible amount of personal information, from our private conversations to our photos, our music, our notes, our calendars and contacts, our financial information and health data, even where we have been and where we are going.
All that information needs to be protected from hackers and criminals who want to access it, steal it, and use it without our knowledge or permission. Customers expect Apple and other technology companies to do everything in our power to protect their personal information, and at Apple we are deeply committed to safeguarding their data.
Compromising the security of our personal information can ultimately put our personal safety at risk. That is why encryption has become so important to all of us.
For many years, we have used encryption to protect our customers' personal data because we believe it's the only way to keep their information safe. We have even put that data out of our own reach, because we believe the contents of your iPhone are none of our business.
The San Bernardino Case
We were shocked and outraged by the deadly act of terrorism in San Bernardino last December. We mourn the loss of life and want justice for all those whose lives were affected. The FBI asked us for help in the days following the attack, and we have worked hard to support the government's efforts to solve this horrible crime. We have no sympathy for terrorists.
When the FBI has requested data that's in our possession, we have provided it. Apple complies with valid subpoenas and search warrants, as we have in the San Bernardino case. We have also made Apple engineers available to advise the FBI, and we've offered our best ideas on a number of investigative options at their disposal.
We have great respect for the professionals at the FBI, and we believe their intentions are good. Up to this point, we have done everything that is both within our power and within the law to help them. But now the U.S. government has asked us for something we simply do not have, and something we consider too dangerous to create. They have asked us to build a backdoor to the iPhone.
Specifically, the FBI wants us to make a new version of the iPhone operating system, circumventing several important security features, and install it on an iPhone recovered during the investigation. In the wrong hands, this software -- which does not exist today -- would have the potential to unlock any iPhone in someone's physical possession.
The FBI may use different words to describe this tool, but make no mistake: Building a version of iOS that bypasses security in this way would undeniably create a backdoor. And while the government may argue that its use would be limited to this case, there is no way to guarantee such control.
The Threat to Data Security
Some would argue that building a backdoor for just one iPhone is a simple, clean-cut solution. But it ignores both the basics of digital security and the significance of what the government is demanding in this case.
In today's digital world, the "key" to an encrypted system is a piece of information that unlocks the data, and it is only as secure as the protections around it. Once the information is known, or a way to bypass the code is revealed, the encryption can be defeated by anyone with that knowledge.
The government suggests this tool could only be used once, on one phone. But that's simply not true. Once created, the technique could be used over and over again, on any number of devices. In the physical world, it would be the equivalent of a master key, capable of opening hundreds of millions of locks -- from restaurants and banks to stores and homes. No reasonable person would find that acceptable.
The government is asking Apple to hack our own users and undermine decades of security advancements that protect our customers -- including tens of millions of American citizens -- from sophisticated hackers and cybercriminals. The same engineers who built strong encryption into the iPhone to protect our users would, ironically, be ordered to weaken those protections and make our users less safe.
We can find no precedent for an American company being forced to expose its customers to a greater risk of attack. For years, cryptologists and national security experts have been warning against weakening encryption. Doing so would hurt only the well-meaning and law-abiding citizens who rely on companies like Apple to protect their data. Criminals and bad actors will still encrypt, using tools that are readily available to them.
A Dangerous Precedent
Rather than asking for legislative action through Congress, the FBI is proposing an unprecedented use of the All Writs Act of 1789 to justify an expansion of its authority.
The government would have us remove security features and add new capabilities to the operating system, allowing a passcode to be input electronically. This would make it easier to unlock an iPhone by "brute force," trying thousands or millions of combinations with the speed of a modern computer.
The implications of the government's demands are chilling. If the government can use the All Writs Act to make it easier to unlock your iPhone, it would have the power to reach into anyone's device to capture their data. The government could extend this breach of privacy and demand that Apple build surveillance software to intercept your messages, access your health records or financial data, track your location, or even access your phone's microphone or camera without your knowledge.
Opposing this order is not something we take lightly. We feel we must speak up in the face of what we see as an overreach by the U.S. government.
We are challenging the FBI's demands with the deepest respect for American democracy and a love of our country. We believe it would be in the best interest of everyone to step back and consider the implications.
While we believe the FBI's intentions are good, it would be wrong for the government to force us to build a backdoor into our products. And ultimately, we fear that this demand would undermine the very freedoms and liberty our government is meant to protect.
There's a new gold rush in tech, related to voice assistance and a voice-first interface for everything we do at home, in the car and while out and about. What happens if the world's best positioned, most profitable tech company fails to capitalize on it?
Apple introduced Siri back in 2011 as a key marketing feature of iPhone 4s and iOS 5. While much of the technology behind Siri was acquired by Apple, the company integrated specialized voice logic hardware support to make Siri's voice recognition work better.
Voice-first gets mocked by Google, MicrosoftExecutives from Google and Microsoft initially went on record as stating that Apple's voice-first Siri was totally the wrong thing to be doing. These weren't just upper-level executives isolated from mobile operations.
Andy Rubin, Google's lead developer of Android, insisted that he didn't "believe that your phone should be an assistant" like Siri
Andy Rubin, Google's lead developer of Android, insisted that he didn't "believe that your phone should be an assistant" like Siri.
Microsoft's Andy Lees, who was managing Windows Phone 7 development, was also quick to say he didn't think Siri was "super useful," indicating his company would avoid having its users speak commands to their phones in public.
However, Apple continued to focus on Siri as a way to drive iPhone demand. That strategy focused on making Siri both useful and entertaining, and targeted broad language support. Initially supporting American, Australian and UK English, French and German, Apple announced new support for Siri in Japanese, Chinese, Korean, Italian and Spanish within its first year.
Siri makes Apple moneySiri exclusivity on iPhone 4s drove sales by helping Apple to stand out in the increasingly competitive market for smartphones. Rivals noted this. In 2012, Google Now got introduced as the voice assistant for Android 4.1. However, while Apple's iOS 6 began bringing Siri support to every new device Apple sold, Android 4.1 was limited to a slow, incremental rollout over just the premium fraction of the Android installed base.
In early 2013, Google Now was ported to iOS and the company's Chrome PC browser, two reminders of where Google actually makes its money.
Meanwhile, Apple introduced a new UI for Siri in iOS 7 and announced CarPlay (initially branded "iOS in the Car") as a way to make Siri useful as an extension of the company's initial Eyes-Free voice-first Siri interface for automotive.
Google subsequently copied Apple's implementation of CarPlay a year later, but as with Google Now, Android Auto didn't work across all Android phones; it was only compatible in certain ways with portions of the mostly premium fragment of Android's installed base.
In contrast, just as Siri drew attention to iPhone and iPad, Siri Eyes-Free and CarPlay began attracting considerable attention among car buyers who wanted to leverage their existing iPhone to access entertainment and features such as Maps for navigation (an otherwise very expensive option on new cars).
While CarPlay brought iPhone's Siri to driving, Apple further expanded Siri use cases to wearables with Apple Watch in 2014 and to the living room with the 2015 Apple TV with Siri Remote. That same year, Apple introduced the always-listening "Hey Siri" feature to iPhone 6s models.
Last year, Apple further expanded Siri to macOS Sierra and then made Siri the primary interface for AirPods, featuring beamforming microphones. Siri is now a prominent feature appearing across Apple's entire hardware lineup.
How big are Siri sales? In fiscal 2016, Apple sold over 211 million iPhones, over 45 million iPads, over 18 million Macs and $11 billion worth of Other products, including Apple TV and Apple Watch. A total of $215.6 billion worth of products and services, virtually all of which incorporate voice-first functionality through Siri.
For everyone thinking Apple isn't getting usage data to make Siri smarter, Siri is by far the most used voice assistant than any out there.-- Ben Bajarin (@BenBajarin)
Siri rivals get massive airplay, generate little moneyApple's Siri critics swiftly tried to catch up. In addition to Google Now, Microsoft introduced its own Cortana assistant tied to Windows 10 in 2015, while Amazon released its own Alexa service connected to its Echo always-on home appliance at the end of 2014.
All three voice-first rivals to Siri offer significant advantages. Alexa, Cortana and Google Now (along with the company's latest machine learning assistant features) all offer to do some things Siri can't. Google introduced always-listening mobile hardware first, and Amazon was first to market with a home appliance that connected to a variety of outside services.
However, there's little evidence that Siri's rival voice services have measurably helped to generate significant revenues (relative to Siri). While Google's flagship Pixel phones promoted intelligent voice assistance features as a strong differentiation from other Android phones, this didn't have an apparent impact on Pixel sales, which drowned in a sea of cheap commodity droid shipments.
The most enthusiastic of Pixel estimates, from Morgan Stanley's Brian Nowak, suggested that Google's Pixel phones might sell 3 million units in its first year, generating $2 billion in revenues, and could double in 2017 to achieve 5-6 million units and $3.8 billion in revenues. If achieved, that's still barely 2 percent of Apple's iPhone business. That's around half the revenue of Apple's first year of Watch sales.
Google voice assistance didn't save Pixel from being a expensive, slow iPhone clone that can't run iOS apps
Cortana is having no success in rescuing Microsoft's stagnant Windows 10 PC market, and did nothing to make Windows Phones or Tablets relevant again. Microsoft's Surface business, carved from backs of its Windows OEM partners, similarly generates less than $1 billion every quarter. That's also less than Apple Watch, but far less than the more than $50 billion in hardware Apple sells in the average quarter.
What about Amazon? While the company avoids reporting sales numbers, Consumer Intelligence Research Partners stated in November that Amazon only sold 2 million Echo units in the first nine months of 2016.
Consumer Intelligence Research Partners stated that Amazon only sold 2 million Echo units in the first nine months of 2016
Amazon likes to talk about rates of growth, but at its current scale it would need a lifetime of years to rival Apple's hardware. Even at full retail price, that means Echo revenues for Amazon were at most $360 million across the first three quarters of the year.
Siri rivals laughing all the way to the blankSiri obviously isn't the only reason Apple has $215 billion in revenues every year. However, the narrative that Apple is falling behind in voice-first services because its rivals have some superior features (like Google's conversational processing) or product offerings (like Amazon's Echo speaker appliance) is massively delusional.
I'm not making up a straw man narrative. Writing for Time, Lisa Eadicicco announced "Amazon Is Already Winning the Next Big Arms Race in Tech!"
Time doesn't call this an editorial
Clearly this idea is not based in economic reality, as Eadicicco admitted early on, writing: "the most convincing evidence of the Seattle-based giant's advantage? Alexa, Amazon's voice assistant, is dominating this year's CES."
Previous CES events have provided "convincing evidence" that consumers want curved smartphones, 3D TVs, smartbands and non-Apple smartwatches, and mobile video game consoles based on Nvidia's Tegra K1. To extrapolate success from CES is simply asinine.
While a variety of appliance makers have licensed Amazon's Alexa voice assistant at CES, the same sort of thing happened among netbook makers licensing Windows, TV box makers licensing Google TV, smartwatches licensing Android Wear, and so on, ad nauseam.
Apple's Siri is not a BlackberryThe idea that Apple could be Blackberried out of existence by a new, superior voice-first UI technology is a delicious notion to Apple's rivals, who have no other hope of ever catching up to the company's massive scale of hardware sales. Even Apple's "beleaguered" iPad business is larger and more profitable than Amazon's Alexa, Microsoft's Surface and Google's Pixel businesses combined, and then multiplied by ten.
Even Apple's "beleaguered" iPad business is larger and more profitable than Amazon's Alexa, Microsoft's Surface and Google's Pixel businesses combined, and then multiplied by ten
However, Blackberry didn't lose its very profitable smartphone business to a hardware neophyte that had stumbled upon the iPhone's multitouch user interface as part of a skunkworks effort. Apple was already a massive consumer hardware maker before it introduced iPhone, thanks in large part to billions of dollars in revenue from tens of millions of iPod sales.
After iPhone shipped, Blackberry did attempt to leverage its own profits and resources to develop a similarly high powered, multitouch phone. However, its Blackberry Storm wasn't a good product and offered nothing new that iOS didn't. Blackberry's profits cratered as buyers decisively moved from keypad phones to iPhones, which offered to do far more than a messaging-centered Blackberry could.
There is currently zero evidence that Apple's customers are similarly shifting from Siri to other voice-based competition in a way that actually hurts Apple's profitability. The popularity of Echo among Amazon customers offers some indication that there could someday be real profits connected to a voice-based home appliance in the future, but Apple is also aware of this and better prepared to defend itself than Blackberry was.
Consider Microsoft's defense against the webFor a better example of how economic power influences the tides in technology development, consider Microsoft in the mid 1990s. Like today's Apple and iOS, Microsoft had established Windows as a solid software development platform governing the primary, mainstream embodiment of personal computers, evident in its revenues.
Microsoft's control over PCs and apps with Windows was initially threatened by Netscape, Sun and their combined potential platform of Java apps running within a web browser. Many rivals of Microsoft predicted that Windows was on borrowed time and would not recover from an erosion of platform strength caused by a shift to web apps, particularly in the enterprise.
However, Microsoft had tremendous resources buoyed by its extremely profitable software licensing. It leveraged this to develop a copy of both the Netscape web server and Sun Java, then tied both to Windows. The web aspirations of Netscape and Sun quickly faded, and Microsoft adopted their various advantages into its own offerings.
The difference today is that Apple's iOS, macOS, watchOS and tvOS aren't being broadsided by an innovative new voice-first paradigm that Amazon, Google and Microsoft freshly minted. Apple was developing Siri before its rivals even thought it was cool.
Apple's Siri advantagesWhile Apple's competitors have developed certain ideas that appear superior to Apple's current Siri offerings (in services, hardware and third party connections), Apple also has voice-based strengths of its own. Apple leads globally in the breadth of languages Siri supports and understands.
Siri also plays into Apple's strength in accessibility, as well as the company's efforts to lead in security and privacy. Siri also maintains a clear edge in the presentation of specific answers, notably sports scores and information on games, players and broadcasts.
Apple also worked to tie its HomeKit automation framework to Siri, enabling users to control lights, locks and other features with their voice before even releasing a touch-based interface in iOS 10's Home app.
Apple's Siri also has a far greater number of voice-based users than any other voice-interface rival. In fact, most of Amazon's users also have access to Siri. So when iOS 10 introduced new Siri Domain expansions for third party voice features, both users and developers were already aware of the potential opportunity.
Further, Apple's interlocking strategic developments means that developers building support for Siri Domains and Intents can also leverage the same work to build third party service extensions for Maps.
Moving from Alexa to Siri is not difficult. In contrast, moving from iOS devices and the rest of Apple's platform to new hardware running a different ecosystem, just to access another voice assistant, is a much more difficult transition for users to make.
Apple is already doing what it needs to doWhile rivals have copied Apple's work with Siri, Apple has also been quick to adopt voice-first innovations that originated elsewhere, including always-listening features and beamforming with multiple microphones. It has also erased third party connections as an outside exclusive.
Siri has also made the jump from iPhones to Apple's Macs (following Google and Microsoft bringing their voice services to PCs) and TV appliances (following Amazon's lead in voice-based TV guidance). Apple also debuted Siri across both of the company's wearable products as a key feature. In fact, there has even been some criticism that AirPods might require too much use of Siri.
In addition to expanding and entrenching where Siri can be used, Apple has also been working to improve the sophistication of Siri, particularly in its ability to remember expanded context (beyond current tasks like assigning yourself a name or saying how to pronounce names of your contacts) as well as its ability to work with third party apps and services.
Apple's 2014 establishment of a corporate office and R&D center in Cambridge (below) and its 2015 acquisition of VocalIQ--a startup that originated with the University of Cambridge Dialogue Systems Group and focused upon automotive projects with carmakers including General Motors--show a clear investment in voice-first interfaces beyond simply following others.
A report from last November detailed job listings stating, "Apple is entering an exciting phase in Siri development, and we are aiming high both in terms of what Siri can do and the software engineering practices we follow in developing it. You will be working in a team of highly talented software engineers and speech scientists to expand the capabilities of Siri."
That makes it a bit premature to assume that the barely profitable experiments in voice-first assistants conducted by Apple's rivals are winning or leading in any meaningful way, although it does allow lazy journalists to generate sensational-sounding reports.
In 2017, Siri looks to be a key area of advancement at Apple.
A Russian hacking group accused of interfering with last year's presidential election has evolved its Xagent malware package, known for its ability to infiltrate Windows, iOS, Android and Linux devices, to target Macs, according to a report on Tuesday.
Uncovered by security research firm and antivirus builder Bitdefender, the Mac strain of Xagent is similar to its predecessors in that it acts as a modular backdoor for intruders, reports Ars Technica.
Once the malware is installed, likely through the Komplex downloader, it checks for the presence of a debugger. If none is found, Xagent waits for an internet connection to reach out to command and control servers, which in turn activate specific payload modules, Bitdefender explains. As a Mac malware, most C&C URLs impersonate Apple domains.
The Xagent payload includes modules capable of searching a target Mac's system configuration, offloading running processes and executing code. More troubling is the malware's ability to grab desktop screenshots, steal web browser passwords and offload iPhone backups. The latter capability is perhaps most important from an intelligence-gathering standpoint, Bitdefender says.
While an exact lineage has yet to be determined, the security firm believes APT28 is behind the Mac form of Xagent.
"Our past analysis of samples known to be linked to APT28 group shows a number of similarities between the Sofacy/APT28/Sednit Xagent component for Windows/Linux and the Mac OS binary that currently forms the object of our investigation," the report reads.
Circumstantial evidence suggests APT28, also known as Sofacy, Sednit, Fancy Bear and Pawn Storm, has deep ties with the Russian government. Last year, the group allegedly hacked the Democratic National Committee and leaked emails through WikiLeaks during the 2016 presidential election.
Bitdefender notes its investigation into Xagent is ongoing.
Today's development comes less than a week after security researchers discovered a new Mac malware seemingly originating out of Iran. Called "MacDownloader," the nefarious software attempts to fool users into downloading the package by presenting a fake Adobe Flash Player dialog, then -- inexplicably and in this case ironically -- another window claiming to be an "Adware Removal Tool by Bitdefender."
After years of priding itself on its "virus free" Mac OS X platform, Apple is becoming increasingly susceptible to targeted malware attacks. The shift in hacker attention from Windows to Apple products is likely due to the success of iOS, an operating system used by a huge percentage of smartphone users worldwide.