Apple's iPhone, iPad & the market for Microsoft's Xbox One & Sony's PlayStation 4

Posted:
in Current Mac Hardware edited January 2014
This holiday season, shoppers voting with their dollars will shake out winners (and likely some losers) in the vast market for consumer electronics. However, fierce competition is prompting some efforts to twist market statistics into bizarre distortions of fallacy on behalf of the losers.

Xbox One PlayStation 4

Good time to be a gamer

There currently doesn't seem to be much interest in inventing distortions in the console video game market, where Microsoft's new Xbox One and Sony's equally new PlayStation 4 have just gone on sale.

Despite previous generations of the two company's platforms having rather fiercely duked it out in the market before, this season the competitive spirit seems a bit more jovial than cutthroat. On Twitter, the two firms recently passed complements and fraternal well wishing back and forth.



There appears to be room for both companies to sell lots of new gear. Over the last 7 or 8 years of the previous generation systems, the two firms sold roughly equal numbers of their consoles, with current cumulative totals of each having both reached 80 million units in the last month.

How big is the total market for video games? That depends on whether one can include the more family oriented Nintendo Wii U, or a number of other consoles ranging from what are essentially toys to previous generation devices that sell for far cheaper but no longer get the big new game releases reserved for premium consoles where enthusiast customers are more like to spend their money.

Back in 2006, when I contrasted Microsoft's strategy of selling only its then-new Xbox 360 with Sony's efforts to continue selling its older PS 2 at a discount alongside its new, higher end PS 3, the very notion of comparing sales numbers of two different generations of consoles was met with contempt from Xbox fans.

Such rules do not apply to Apple

The precision in accounting rules required to be taken seriously by customers in the video game console market stands in stark contrast to the way the mainstream media, and even the tech blogs, are reporting sales of iPhones and iPads, fueled by statistics crafted by Gartner, IDC and Strategy Analytics.

It's now impossible to mention the iPhone without pointing out that 81 percent of all smartphones now run Android, or reference the iPad without also noting that a similar majority of tablets involve Android.

However, Average Selling Prices of smartphones, premium phablets and iPhones make it very clear that there is a far greater difference between what Apple is selling (at an average of $635, more than what the high end PS3 cost when brand new) and what Samsung, LG and Motorola are trying to sell in their high end flagship offerings (at an ASP of $443, closer to the price of the original Xbox 360 without its ill-fated HD-DVD drive).

Further down the road, among the very low end devices that are still categorized as being a smartphone, vendors can only fetch an ASP of less than $215, on par with a long-in-the-tooth PS2 in 2005 or an even cheaper retro Atari package or children's game that has little relevance to the premium console market.

Dumping all these products into a single category would provide a very worthless picture of how well any of the market participants are performing, muddling vendors that are attracting high end customers to a premium experience in among discount sales of largely irrelevant devices that may ship in volume, but have no real impact on the market in terms of what platforms developers will target for exclusive, premium gaming software.

The other huge difference between Apple's iPhone sales and the last batch of video game consoles is that Apple is earning industry-leading profit margins, while both Microsoft and Sony were selling hardware at a loss just to create an installed base. Cheaper video games, including Nintendo's Wii systems, were sold at a profit from the start. Conversely, cheaper Android smartphones are not profitable enough to keep the majority of vendors from losing money (below).

Canaccord Genuity

iPad market now larger than Microsoft Windows in 1998

Tablet metrics from Strategy Analytics present a similarly obscured window into the iPad market. Apple's critics love to cite these numbers, but comparing the iPad's former "market share" in 2010 with the current numbers being advertised today create a false impression of the direction and trajectory of the market.

"Android has seized the tablet market with a crushing force" in China. AAPL share drops to 28% from 49% yr ago. http://t.co/mT6OabV49L

-- Dan Lyons (@realdanlyons)


Apple doesn't now have just a quarter of the tablet clout it had just three years ago, as such "market share" figures try to suggest. The ecosystem for tablet apps continues to be targeted almost exclusively at iPads, even as iPad sales, and therefore app demand, have ballooned. Apple has now sold more iPads to date than Microsoft and Sony have sold of their leading last generation game consoles over a period twice as long

Apple has now sold more iPads to date than Microsoft and Sony have sold of their leading last generation game consoles over a period twice as long (170 million iPads in four years, versus 160 million Xbox 360 and PlayStation 3 units over 8 years).

They are not in the same market, but that does illustrate the size of Apple's premium tablet platform, clearly unmatched by large volumes of $40-100 Android tablet shipments.

Additionally, enterprise and education markets report iPad adoption rates that are above 90 percent, higher than all versions of Windows were a similar four years after the launch of Windows 95.

Microsoft's share of the 1998 PC OS market was reported to be 86.7 percent, according to a CNET report of IDC figures. In a market of 89 million units, that gave Microsoft software licensing on about 77.1 million machines.

Apple sold 71 million iPads in its fiscal 2013 ending in September, making its sales of iPads today nearly as large as Microsoft's total sales of Windows licenses in 1998 (and possibly larger for the calendar year, if holiday quarterly iPad sales beat last year's by 6 million units).

It's also notable that back then, Microsoft was selling four different OS versions, ranging from the DOS-hosted Windows 3.11, 95 and 98 to Windows NT. Apple ships iPads with one OS version, and supports iOS 7 on every iPad sold after the original model.

One can argue that Apple shouldn't have such dominant sales, or advocate against it or for rivals, but a false portrayal of reality in the market does not achieve those goals. If IBM had paid a market research company to advertise market metrics that falsely portrayed OS/2 as having made serious progress against Windows in the mid 90s when it clearly wasn't, such a distortion of reality wouldn't have turned IBM's OS/2 fortunes around.

Or, alternatively, if market researchers back in the late 90s had traveled the world looking for shipments of electronic devices ranging from calculators to Palm Pilots, anything with an "identifiable processor," it would have been easy to publish statistics portraying Microsoft's "market share" as perilously slipping in the global market for "digital devices."

However, such nonsense numbers wouldn't have had any impact on the undeniable fact that Microsoft still dominated the PC computing landscape, the same way Apple dominated music playback almost ten years ago and the way iPad is dominating mobile computing today.
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Comments

  • Reply 1 of 43
    But really, who cares? As long as Apple is making enough money on the devices to keep making them and improving them, I don't care how many people use them vs. Android.

    This is about investment, not technology. There are lots of other investments to put your money in, so just move on to something less volatile.
  • Reply 2 of 43
    512ke512ke Posts: 782member
    Thanks for this article. I would argue that the misunderstanding of Apple combined with a willful manipulation if the data is creating an ideal situation to buy the stock.

    I'd rather buy the successful stock all the idiots are proclaiming is dying rather than the hot stock of a company that's actually not making any money.

    No stock escapes reality forever no matter how hard many people are working to mislead.
  • Reply 3 of 43
    Man bites dog stories will always be the bread and butter of the popular press–especially the press that wants to be MORE popular. Thanks, DED, good analogy.
  • Reply 4 of 43
    The purpose behind the numbers being pushed is to create a market which doesn't yet exist. Most people want to go with the herd as consumers, and most developers do also. Where the herd is is where you can be confident that you're not making a mistake.

    As has been noted in the restaurant business, if you want to know which restaurant to eat at, look for the restaurant with long lines. Apple certainly gets the benefit of long lines -- you don't think long lines at an Apple store is an accident do you?
  • Reply 5 of 43

    So the Playstation 4 is broken on launch day (and wobbles when set on a desk), the Xbox One will RROD just like every other Microsoft product, but when it does work it will be visually and audibly monitoring you 24/7 due to the always-on, always-plugged in Kinect…

     

    And Apple’s supposed to be worried? With either an iPhone or iPod touch in every pocket? When the A7 is three-quarters of the way to matching the capabilities of last generation’s consoles and the A8, next year, will be, what, a quarter of the way to this gen’s? In two years’ time, Apple devices should be able to put out more graphically intensive games than either of these consoles, but the people who buy the latter will be stuck with them for at least five more years, if we listen to their respective companies!

  • Reply 6 of 43
    Yay another article trying to push an alternative highly biased opinion on sales figures against other biased opinions. In a few more days we can have another article describing how none of the figures are accurate anyway.
  • Reply 7 of 43
    froodfrood Posts: 771member

    All these made up statistics lying in order to not show just how well Apple is doing and just how poorly its competition is doing.  This is pure Apple hate with the obvious intention of manipulating share prices.  Why not just look at the numbers that are not influenced by reporting nor manipulation on the stock market?  The companies own reported and audited financials?

     

    Apple's revenue is still growing- from 157 bil to 171 bil- but at <10% year over year where Google and Samsung are in the 20%+ range...

     

    Despite the 'record sales' and still growing revenue, Apple's income is down from 55.7 billion to 50.2 billion where Google and Samsung are still showing healthy increasing profits from year to year.  Even in your own chart above Apple's operating income is lagging last years where Samsung has already surpassed last years entire income in only 3 quarters (and missing the holiday season fourth quarter at that).

     

    I can understand the stock market being influenced by the lies the 'lamestream' tech media is presenting, but why do the actual financials line up with what they are saying?

  • Reply 8 of 43
    Wonder what it would take for Apple to "move" iPad into PC category. Perhaps iOS version of XCODE would stop this "media tablet" nonsense from the research firms.
  • Reply 9 of 43
    arlorarlor Posts: 528member
    As an investor, the fact that your investment target can make a lot of profit is great.

    As a customer, I don't understand why you would celebrate profits at Apple's level.

    Some people will say that Apple needs the money to innovate. But profits come after all the costs of innovation! All of the engineering, design, parts, etc. research that Apple conducts are on the cost side of the ledger; they come before the profit calculation.

    I think that's why Apple is trading lower than it should. A lot of investors are wondering what Apple intends to do with all this money that it's NOT spending on innovation. Some investors think Apple should just give them the money (dividends, buy backs). Other investors think that Apple should trade profit margin for market share and customer goodwill (and even greater future profits). Since Apple's predisposition until recently was to do neither, many investors were confused and frustrated. Even now, Apple's decision to buy back shares doesn't necessarily help; the company will give back some of its cash horde now, but it's still piling up cash as fast as ever and has made no commitment to its investors about what to do with it all.
  • Reply 10 of 43
    slurpyslurpy Posts: 5,317member
    Can't believe you posted a tweet from Dan Lyons. I'd almost completely forgotten about that lying, deceitful, despicable troll, who has built an entire career on attacking Apple with lies and predicting their demise. Even though he's been proven wrong with pretty much every single prediction he's ever made, major online publications still hire him as a "tech expert" and blogs publish his columns. His writing is mind-numbingly hateful and disingenuous.
  • Reply 11 of 43
    gwmacgwmac Posts: 1,799member

    Anyone catch the latest PS4 Vs. Xbox on Southpark that also makes fun of Black Friday and Game of thrones? Gotta love princess Kenny. Hilarious

     

    I currently have a PS3 and it was a good decision. If you want to watch some add on features like Netflix, Youtube, etc..on the Xbox then you need to pay for a yearly Xbox live account but that is not needed on the PS platform. I do not want to keep sending money to a company just to be able to watch Netflix.Without that annual $60? tribute to Microsft your console is basically bricked.  That alone was reason enough for me to choose a PS3. I will probably get a PS4 as well but no big hurry. I have enjoyed the games on my PS3 and will continue enjoying them another year or so before I get the PS4. I also think the PS4 does a better job with more 1080P native games and like the controller better. 

  • Reply 12 of 43
    Now, cue a beefed up A7 Apple TV with steam support and a steam controller
  • Reply 13 of 43
    newbeenewbee Posts: 2,055member
    Quote:
    Originally Posted by Arlor View Post



    As a customer, I don't understand why you would celebrate profits at Apple's level.

     A lot of investors are wondering what Apple intends to do with all this money that it's NOT spending on innovation. 

    Customers "celebrate" Apple's (today) profits because that means they will have the necessary funds to do more (future) innovation, without having to create debt, the way so many other "wise"  companies do. A solid foundation of profit goes a long way to ensuring a solid future ..... something too many "investors/gamblers" and, yes, sometimes trolls, eagerly forget.

  • Reply 14 of 43
    Originally Posted by dnd0ps View Post

    Now, cue a beefed up A7 Apple TV with steam support and a steam controller

     

    Ew. 

  • Reply 15 of 43
    Both Sony and Microsoft are reporting within the first week of launch excess of 1 million units sold.

    Great news for AMD! [Yes, I have stock and will expand my position].
  • Reply 16 of 43
    Yay another article trying to push an alternative highly biased opinion on sales figures against other biased opinions. In a few more days we can have another article describing how none of the figures are accurate anyway.

    yet another troll post whining about something they purport to have no interest in. In a few more days we can have another troll post whining about something else. Yawn
  • Reply 17 of 43
    slurpee wrote: »
    Can't believe you posted a tweet from Dan Lyons. I'd almost completely forgotten about that lying, deceitful, despicable troll, who has built an entire career on attacking Apple with lies and predicting their demise. Even though he's been proven wrong with pretty much every single prediction he's ever made, major online publications still hire him as a "tech expert" and blogs publish his columns. His writing is mind-numbingly hateful and disingenuous.

    Yeah, but fake steve jobs was hilarious.

    one trick unicorn
  • Reply 18 of 43
    dasanman69dasanman69 Posts: 13,001member
    the Xbox One will RROD just like every other Microsoft product....

    Actually they've taken measures this time to prevent the RROD.
  • Reply 19 of 43
    Quote:

    Originally Posted by Arlor View Post



    As an investor, the fact that your investment target can make a lot of profit is great.



    As a customer, I don't understand why you would celebrate profits at Apple's level.



    Some people will say that Apple needs the money to innovate. But profits come after all the costs of innovation! All of the engineering, design, parts, etc. research that Apple conducts are on the cost side of the ledger; they come before the profit calculation.



    I think that's why Apple is trading lower than it should. A lot of investors are wondering what Apple intends to do with all this money that it's NOT spending on innovation. Some investors think Apple should just give them the money (dividends, buy backs). Other investors think that Apple should trade profit margin for market share and customer goodwill (and even greater future profits). Since Apple's predisposition until recently was to do neither, many investors were confused and frustrated. Even now, Apple's decision to buy back shares doesn't necessarily help; the company will give back some of its cash horde now, but it's still piling up cash as fast as ever and has made no commitment to its investors about what to do with it all.

     

    Apple is investing roughly $20+ Billion in 2014 for R&D, Manufacturing innovations and expansions, alone never mind the new product segments it will be targeting.

     

    To date, Latestpatents.com reveals Apple has been granted 1720 patents for 2013 and at the rate of the past 2 months they have a strong possibility of reaching 2000 patents for the year 2013.

     

    Within those patents are mind numbingly innovative new manufacturing processes for the next decade or more no one can copy. Then the advances to their embedded and desktop systems, not to mention future Entertainment solutions and it is quite clear Apple's best days are ahead of them.

  • Reply 20 of 43
    dasanman69dasanman69 Posts: 13,001member
    dnd0ps wrote: »
    Now, cue a beefed up A7 Apple TV with steam support and a steam controller

    Sinus problems?
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