I don't see your number for iPhone sales losses in there (you know... "hardware"; where Apple actually makes it's money?)
Apple will lose very few iPhone sales. Maybe a few million here or there. Most of the current iPhone users will not buy a $100-$300 Sony phone with iOS light loaded on it. But even if they do lose a few million iPhone sales Apple will make much more profit from the 600 million additional iOS users they gain plus $18 billion in licensing fees.
The key is not to license iOS light to phones that are high end. Only $100-$300 phones. Many who buy those cheaper phones have no possible way to buy $600-$900 iPhones anyway. I think its a win win for Apple. The only one that losses is Android and Google.
The way I see it is two options:
Apple does not license iOS: Sell 250 million iPhones $40 billion in iPhone profit
Apple license iOS light: Get $30 royalties on 600 million phones Sell 230 million iPhones $36 billion in iPhone profits $18 billion on royalties profits $3 billion on additional services revenue from additional users Total $57 billion in profit
Apple is losing out on profiting on the $100-$300 price point which makes up over a billion units a year.
Apple should just sell an updated iPhone 5c with A8 chip 8M camera sans TouchId, Apple pay, Siri, and FaceTime for $250.00 - yes the polycarbonate phone with the black colors. Call it iPhone BE for basic edition?
We are at peak iPhone. There is just a limited amount of people willing and able to spend $400+ for a smartphone.
Apple needs to address the $100-$300 phone market which is a BILLION UNITS A YEAR.
People who can't afford a $400+ phone can always buy a used iPhone if they want in to the Apple eco system for the least amount of money.
Even a used iPhone is miles better than a brand new, budget priced Android phone.
And almost none of those cheap manufacturers are making any money. Apple is making the majority of the profits. Let the losers sling it out in the mud, with their pathetic race to bottom strategy.
We are at peak iPhone. There is just a limited amount of people willing and able to spend $400+ for a smartphone.
Apple needs to address the $100-$300 phone market which is a BILLION UNITS A YEAR.
It was all fine and dandy for Apple to say it did not need to sell 'cheap' phones while iPhone units were still growing. But we've reached the limit of high end phones sales. Now its time to address the mid and low end market. The best way to do this is to license a stripped down version of iOS. Why?
1. A stripped down version of iOS still provides better security/privacy than Android 2. A stripped down version of iOS will only minimally canibalize iPhone sales. Most who can spend $400+ will buy an iPhone 3. Licensing iOS is much less risky than Apple making these phones themselves. 4. Locking in $100-$300 market to iOS is a smart strategy. It will lead to upgrades to full iOS in iPhone
Of course there are risks but these can be limited by:
1. Making sure these licensed phones are good quality and can run iOS smoothly 2. Making sure there is a clear difference between the iOS light product line and full featured iPhone to limit canibalization
Tim Cook said he isn't interested in the junk market. If Apple keep bringing out cheaper and cheaper phones then they must feel their position is under threat. If Apple aren't making the margins at the top end, then will Apple attempt to plug the gap with cheaper phones. I don't think they will personally, Apple will continue to focus on the flagship iPhone, but will it's nip and tuck approach keep it ahead of the competition.
Now Apple needs to get iOS on phones from $100-$300. To do that they should license iOS light version to selected manufacters.
If Apple plays its cards right it can get 50% market share of the smartphone market.
Apple should charge the greater of $20 or 15% license fee per phone. They could probably sell 600,000,000 licensed phones a year.
600,000,000 x $30 license fee = $18 billion in almost pure profit
Please check Apple history. Apple licensed Mac OS to third party hardware manufacturers. It failed miserably. It is part of the reason Apple nearing bankruptcy in the 90s.
Apple will lose very few iPhone sales. Maybe a few million here or there. Most of the current iPhone users will not buy a $100-$300 Sony phone with iOS light loaded on it. But even if they do lose a few million iPhone sales Apple will make much more profit from the 600 million additional iOS users they gain plus $18 billion in licensing fees.
The key is not to license iOS light to phones that are high end. Only $100-$300 phones. Many who buy those cheaper phones have no possible way to buy $600-$900 iPhones anyway. I think its a win win for Apple. The only one that losses is Android and Google.
The way I see it is two options:
Apple does not license iOS: Sell 250 million iPhones $40 billion in iPhone profit
Apple license iOS light: Get $30 royalties on 600 million phones Sell 230 million iPhones $36 billion in iPhone profits $18 billion on royalties profits $3 billion on additional services revenue from additional users Total $57 billion in profit
Apple is losing out on profiting on the $100-$300 price point which makes up over a billion units a year.
But then Apple would be saddled with making sure iOS works on different chipsets and performance may suffer being on inferior hardware.
A 'lite' version of iOS would not do what? Running on shite from htc or Xiaomi or TriStar? And these points would somehow not damage Apple's brand image or reputation?
I see both hardware and software being impacted - and to run the software the other hardware makers need access to code. Then we will have aOS and pOS and zOS copied.
If only they would have made clones running their computer OS... Oh that's right, that went well for them. I like the idea of getting iOS out there, but the reason Apple products work so well is because they control the hardware and the software. This eliminates compatibility issues and the need for patches and extensions. If you think there's too many incremental iOS updates now, imagine if there was a new iOS compatible product being launched every couple of weeks...
That program did not work because Apple only charged $50 for the license (which was only about 3% of the price of the computer) and Apple did not make sure those Mac clones were clearly inferior to the Mac.
If Apple licenses iOS it would only be on clearly inferior phones.
Software would be no problem because these devices would be running stripped down version of iOS with much simpler code.
Dear Sog, Just glancing at how well OS licencing is going for MS and Alphabet, and for whatever Linux distros are, I must conclude that Apple is doing it right. MS grew through backstabbing and anti-competitive deals; Alphabet through paid advertising; Linux not at all. Apple has grown through a superior user experience. Apple refused to even have Flash reduce performance and UX. There is no way Apple would open itself to random companies and governments weakening UX, which is the only outcome of setting iOS loose - regardless of restrictions and fees and agreements. Apple demonstrated nothing but pride in its designs. No way they will have some third party tarnish that. Apple's iOS isn't WinCE or Android - it's a foundation that ties all of Apple's services, apps, music, etc etc together, exemplified by the hardware. Apple will not choose to gain only $300 on a licence when it already gains $900. Apple doesn't really need to dilute it's brand. It needs to continue building services - which it's doing. I like the way you prompted everyone to think more deeply about Apple.
Now Apple needs to get iOS on phones from $100-$300. To do that they should license iOS light version to selected manufacters.
If Apple plays its cards right it can get 50% market share of the smartphone market.
Apple should charge the greater of $20 or 15% license fee per phone. They could probably sell 600,000,000 licensed phones a year.
600,000,000 x $30 license fee = $18 billion in almost pure profit
I think if Apple is going to go this route, they should just make the phone themselves. Licensing the OS would be a pain and would degrade the iOS experience no matter how hard they tried to prevent that from happening. Android is a mess for precisely this reason. Too many vendors. Too many components to test. Wildly different specs from model to model. Etc. I think we've hit peak iPhone, so I don't think you're off base to suggest a cheap "lite" model. But I'd rather see Apple build it.
I've said this before, but it's worth mentioning here: Since Apple already consumes the bulk of smart phone profits with their flagship range, the SE is a chess piece to further that lead.
The SE represents how Apple is now working downwards to squeeze out near-competitors and almost-good-enough competitors by significantly raising the performance and feature bar of that pricing tier. Comparably priced phones by competitors are significantly slower, poorly designed and run old software. Those competitors don't have the volume or profits to bring their cheap models to relevancy. They have relied on these phones being "good enough."
As far as strategy goes, it protects their flagship from insincere competitors and further erodes into the "me too" market of products that are frequently little more than poorly spec'd copies of apple's designs.
It also provides two insights into the market which have affected Samsung's high end sales. Firstly that flagships are no longer needed by the bulk of the population, rather they're more for power users and enthusiasts. Secondly: that everyone doesn't want a phablet, and compromising technology shouldn't be the result of wanting a more portable smartphone. Samsung incorrectly assumed that users would always ride the treadmill for the latest product, that's not the case. It's the same way that every consumer doesn't need a Mac Pro, yet once upon a time it wasn't unusual to buy the fastest spec'd computer available for one's home.
One final note, the SE is useful for the app store ecosystem because it's great for app developers. The high performance specs on the SE make it cheaper to develop quality/high end titles that take advantage of a wider selection of apple hardware, this saves money by not having to develop parallel versions for older/slower devices. It reduces fragmentation at a time when Android's fragmentation, and Google's attempts to fix it, are frequently criticised.
What? The person I was responding to said that Apple can just sell used $300 phones. I said alot of people just want to buy new phones. Same with cars. 90% of the time it makes more finanical sense to buy a used car. Regardless people still buy new cars.
It wasn't a criticism. I buy used cars. I just thought it a bit odd you were downplaying the significance of the strength of the market for second hand goods.
I think if Apple is going to go this route, they should just make the phone themselves. Licensing the OS would be a pain and would degrade the iOS experience no matter how hard they tried to prevent that from happening. Android is a mess for precisely this reason. Too many vendors. Too many components to test. Wildly different specs from model to model. Etc. I think we've hit peak iPhone, so I don't think you're off base to suggest a cheap "lite" model. But I'd rather see Apple build it.
I don't want Apple to make a $200-$300 phone. That will cheapen the iPhone brand. It will also lead to massive canibalization.
What I want is for Apple to select one or two hardware makers to make a cheaper phone that runs a light version of iOS. Apple would have full control of the internals of the phone to make sure it would be able to run iOS smoothly. There would not be thousands of different hardware configerations like Android. There would be only one or two non iPhone iOS devices made a year. Apple would then charge a royalty of about $20-$50 per phone. I'm pretty sure some of the top phone makers would jump on the chance.
For example Apple could have HTC build this phone:
5 inch screen A8 equivalent CPU 32 GB 2 GB RAM Fingerprint sensor $300 retail price $45 royalty to Apple iOS lite - ApplePay, AppStore, AppleMusic, ect
Such a phone would not canibalize Apple's iPhone. First of all it would not be branded as an iPhone but rather an HTC. Second it won't have top end internals and hardware features like the SE, 6s, or 7. It will simply be a phone for people who only have $300 to spend and don't want to buy a used phone.
The good thing is you get more people to enter into Apple ecosystem. People who would never have done so in the past. And after a year they probably can sell their phone for $100 and buy a real iPhone. You are getting people hooked on iOS. Also you are generating incredible royalty income for very little effort. All the risk is transfered to HTC to build the phone to spec and hold inventory.
I see very little risk in licensing iOS light and many rewards.
1. Grow iOS user base 2. Grow services revenue 3. Grow a group of customers that will love iOS and upgrade to an iPhone 4. Weaken Android/Google's user base 5. Grow a powerful revenue stream of royalties worth $10-$30 billion 6. Keep iPhone as a high end brand
its absurd. the margin on iOS licensing to HTC for that wouldnt equal what they make from their own hardware sales, which is where apple makes its money as its a hardware company. you can chicken little all you want, but they've been doing it this way for a long time, and are still boss of multiple industries -- digital media players, PCs, cell phones... i have no reason to believe they won't continue to adapt as they have thus far.
you're worried about playing the numbers. good businessmen worry about delighting their customers.
We are at peak iPhone. There is just a limited amount of people willing and able to spend $400+ for a smartphone.
Apple needs to address the $100-$300 phone market which is a BILLION UNITS A YEAR.
People who can't afford a $400+ phone can always buy a used iPhone if they want in to the Apple eco system for the least amount of money.
I hope he's just trying to squeeze some trolls out of the woodwork like he did on 4/1...
But it to your point, I thought the SE would drive prices of the 5s down a little but it seems like they're actually slightly high. They're all going for Well over $200 for decent examples, some even close to three. If you can even find a 64gb. I wouldn't even be looking for one if my wife's 5 hadn't been stolen. Ugh.
Then I thought you know I wonder what the S5 is going for. To my amazement the prices were comparable, until I noticed they were all listed as new!! So I filtered by used, and they were a little lower, but I also noticed they were being sold by fishy online retailers using stock images and claiming ridiculous numbers like "18,483 sold limited stock" and the like. Guess we know where all those droids "shipped" to.
Well I've got two items ending later today, guess I'll be paying $220 for a 3yo phone.
"The way I see it is two options". You're not seeing very far.
I don't your point.
Do you seriously think someone who buys iPhones every two years will all of a sudden buy a $300 Sony phone with a stripped down version of iOS? I don't at all.
Those who buy $100-$300 phones have no way of buying $800 iPhones. So why not make an iOS product available to them?
And those who spend $600-$800 on iPhones will not be tempted to buy a $300 iOS HTC phone. Yes it will run iOS but the hardware will not be the same quality and will have many features left off on it.
This is like saying the iPhone SE will canibalize a huge chunk of iPhone7 sales this year. No way.
$100-$300 iPhones are sold in the secondary market when someone upgrades. Apple does not get a slice of the pie but it says a lot about the high quality of the hardware that the secondary market has so many older models selling. And, they are full blown Apple hardware to boot and those people are part of the ecosystem to bring in even more profit without lifting a finger.
$100-$300 iPhones are sold in the secondary market when someone upgrades. Apple does not get a slice of the pie but it says a lot about the high quality of the hardware that the secondary market has so many older models selling. And, they are full blown Apple hardware to boot and those people are part of the ecosystem to bring in even more profit without lifting a finger.
That is true. But there is a huge chunk of the population that refuses to buy used phones.
Stats don't lie. Every year about a BILLION phones under $400 are sold. If all those people wanted used iPhones they would buy one. Its obvious the majority of the market wants to buy NEW phones.
Thus Apple should give EXCLUSIVE licenses to hardware makers to make phones that run a stripped down version of iOS. These phones would run for $200-$350 and would address a market that Apple has totally ignored.
For example in Japan they can give the exclusive license to Sony. Sony would then build and sell a phone to Apple's specific specs. Even sell Sony A9 chips. In China it may be HTC or even Xiaomi. The point is it would be exclusive to a country. And the phones would be designed for that country (Japan does not like large phones). Hardware makers would beg Apple for those exclusive licenses. In return Apple would get a royalty of $30-$45 per phone and increase its iOS user base.
Ferrari does not sell $30,000 cars nor license themselves to a company that would.
Since Apple has most of the mobile industry profits anyway, and they could have more by following your suggestion, but they control the end to end experience with hardware and software, that would be lost if they licensed iOS to others.
Apple had better be careful with iPhoneSE sales in China. If it negatively impacts China Gov phone companies, China may ban Apple from importing the SE. Whoops it is already in China after manufacture there. So Apple will have to export all SEs from China.
Ferrari does not sell $30,000 cars nor license themselves to a company that would.
Since Apple has most of the profits anyway, and they could have more by following your suggestion, but they control the end to end experiance and that would be lost if the licensed iOS to others.
Not gonna happen
I would not compare Apple to Ferrari.
i would compare to Apple to BMW or Mercedes.
Mercedes does sell its engines to other companies like Nissan. BMW/Merc also sells their chassis platform to other companies also. These phones won't be branded as iPhones or Apple phones. But iOS powered phones. Just as Nissan cars with Merc engines are not called Merc cars.
Yes hardware profits in the sub $400 range is limited. But services on those platforms is a HUGE opportunity.
A company like Sony, LG, ect would get a huge boost in profits selling iOS licensed phones. Not Apple level profits but nice profits because they would be selling a differentiating product compared to the thousands of Android models. They will basically be the exclusive seller of sub $350 iOS devices.
Keep in mind besides Apple there still is about $6 billion in profits in the phone business. That is still huge. Sony, LG, ect would love to get a bigger piece of that pie and selling an iOS device would do that.
Dear God you've found another horse to flog.
So your big idea is a manufacturer who is making very little to none profit on its own handsets with a free os, pay a freeking large fee to make a handset they will definitely lose money on. Yeah win win for them.... not.
Most people don't want to buy a 2 year old phone. Especially since that phone has ZERO warranty.
People like to buy new stuff. If not no one would buy new cars.
I disagree with your point about old iPhone hardware. A $300 Android phone hardware would destroy the performance of an iPhone4s or even iPhone5. Its Android that makes these phones run like crap not their CPU/Ram/GPU. Put iOS on a high quality $300 HTC/Motorolla phone and it would out perform even an iPhone5.
Yes a used phone will never be on my buy list.
Google wouldn't allow iOS on any android phone. Google would no longer get spyware info, so it would be very negative on Google income.
Comments
Running on shite from htc or Xiaomi or TriStar?
And these points would somehow not damage Apple's brand image or reputation?
I see both hardware and software being impacted - and to run the software the other hardware makers need access to code. Then we will
have aOS and pOS and zOS copied.
Sog's worst idea yet
Just glancing at how well OS licencing is going for MS and Alphabet, and for whatever Linux distros are, I must conclude that Apple is doing it right.
MS grew through backstabbing and anti-competitive deals; Alphabet through paid advertising; Linux not at all.
Apple has grown through a superior user experience. Apple refused to even have Flash reduce performance and UX. There is no way Apple would open itself to random companies and governments weakening UX, which is the only outcome of setting iOS loose - regardless of restrictions and fees and agreements.
Apple demonstrated nothing but pride in its designs. No way they will have some third party tarnish that.
Apple's iOS isn't WinCE or Android - it's a foundation that ties all of Apple's services, apps, music, etc etc together, exemplified by the hardware.
Apple will not choose to gain only $300 on a licence when it already gains $900.
Apple doesn't really need to dilute it's brand. It needs to continue building services - which it's doing.
I like the way you prompted everyone to think more deeply about Apple.
I think if Apple is going to go this route, they should just make the phone themselves. Licensing the OS would be a pain and would degrade the iOS experience no matter how hard they tried to prevent that from happening. Android is a mess for precisely this reason. Too many vendors. Too many components to test. Wildly different specs from model to model. Etc. I think we've hit peak iPhone, so I don't think you're off base to suggest a cheap "lite" model. But I'd rather see Apple build it.
The SE represents how Apple is now working downwards to squeeze out near-competitors and almost-good-enough competitors by significantly raising the performance and feature bar of that pricing tier. Comparably priced phones by competitors are significantly slower, poorly designed and run old software. Those competitors don't have the volume or profits to bring their cheap models to relevancy. They have relied on these phones being "good enough."
As far as strategy goes, it protects their flagship from insincere competitors and further erodes into the "me too" market of products that are frequently little more than poorly spec'd copies of apple's designs.
It also provides two insights into the market which have affected Samsung's high end sales. Firstly that flagships are no longer needed by the bulk of the population, rather they're more for power users and enthusiasts. Secondly: that everyone doesn't want a phablet, and compromising technology shouldn't be the result of wanting a more portable smartphone. Samsung incorrectly assumed that users would always ride the treadmill for the latest product, that's not the case. It's the same way that every consumer doesn't need a Mac Pro, yet once upon a time it wasn't unusual to buy the fastest spec'd computer available for one's home.
One final note, the SE is useful for the app store ecosystem because it's great for app developers. The high performance specs on the SE make it cheaper to develop quality/high end titles that take advantage of a wider selection of apple hardware, this saves money by not having to develop parallel versions for older/slower devices. It reduces fragmentation at a time when Android's fragmentation, and Google's attempts to fix it, are frequently criticised.
you're worried about playing the numbers. good businessmen worry about delighting their customers.
The Dumbest Idea In The World: Maximizing Shareholder Value
But it to your point, I thought the SE would drive prices of the 5s down a little but it seems like they're actually slightly high. They're all going for Well over $200 for decent examples, some even close to three. If you can even find a 64gb. I wouldn't even be looking for one if my wife's 5 hadn't been stolen. Ugh.
Then I thought you know I wonder what the S5 is going for. To my amazement the prices were comparable, until I noticed they were all listed as new!! So I filtered by used, and they were a little lower, but I also noticed they were being sold by fishy online retailers using stock images and claiming ridiculous numbers like "18,483 sold limited stock" and the like. Guess we know where all those droids "shipped" to.
Well I've got two items ending later today, guess I'll be paying $220 for a 3yo phone.
Since Apple has most of the mobile industry profits anyway, and they could have more by following your suggestion, but they control the end to end experience with hardware and software, that would be lost if they licensed iOS to others.
Not gonna happen
Apple had better be careful with iPhoneSE sales in China.
If it negatively impacts China Gov phone companies, China may ban Apple from importing the SE.
Whoops it is already in China after manufacture there. So Apple will have to export all SEs from China.
So your big idea is a manufacturer who is making very little to none profit on its own handsets with a free os, pay a freeking large fee to make a handset they will definitely lose money on. Yeah win win for them.... not.
Google wouldn't allow iOS on any android phone.
Google would no longer get spyware info, so it would be very negative on Google income.