Got iPhone? Far more of my readers and those of all 17 of the Villagers’ websites have Macs, iPhones, and iPads than Windows PCs or Android phones. That’s understandable. So, how do Apple’s notoriously higher prices actually harm competitors?
First, Apple’s products– in each category from mainline iPhone, iPad, and Mac; all the way to Services and Wearables– are priced higher than most competitors. Yet, in the past year, we’ve seen continuing sales from 3rd party retailers on Apple’s main hardware.
That’s where Apple begins to put the hurt on all competitors. Price. What else?
Second, Apple’s products have a degree of stickiness not found on Windows PCs or Android smartphones. That Apple ID and Messages and iCloud and built-in apps create a walled garden ecosystem that makes it difficult for many customers to move elsewhere, but the mowed lawns and painted homes compare favorably to the highly visible messes that line the streets of Windowsland and Androidville.
During Tim Cook’s reign at Apple over the past decade– he was ruling for a few years before co-founder Steve Jobs died of cancer in late 2011– has been one of milking the current product line for all it could possibly be worth all while attaching barnacle-like accessories to each Apple ID.
Go down the list. Apple Pay, Apple Watch, Apple Music, AppleCare, Apple News+, Apple Arcade, and soon Apple TV+
Now, Apple is giving away a one-year membership to Apple TV+ content; like Apple Arcade, priced at $4.99 a month. In marketing parlance, Apple controls all the territory between the ceiling and the floor, leaving the rest to competitors.
That means in every product category– the three main hardware products in iPhone, Mac, and iPad– as well as the Wearables group of Apple Watch, AirPods, Beats headphones, et al– Apple brings home most of the available revenue in each group and an outsized amount of the industry’s profits.
That leaves competitors to fight like dogs on the leftovers.
Well, what about the mid-range products, like those from Samsung and other smartphone competitors, or even Windows PC notebooks with touchscreens? Priced just under Apple’s products, do they not command a growing slice of the pie.
No. And the pie is not growing. Both PCs and smartphones are in decline. Apple puts the squeeze on the mid-range with products manufactured three years earlier, engineered to be worthy competitors of the latest mid-range PCs, tablets, and smartphones, and, thanks to annual iOS updates, actually perform better with each passing year.
Apple’s prices put the hurt on all competitors because it controls both the ceiling and the floor. Which company would you prefer to own? The one with the greatest market share but with no profits? Or, the company that owns a healthy market share and most of the industry segment’s profits?
Can you guess where Apple fits?