Wednesday, February 18, 2009

What is Apple?

Some facts:
Last quarter:
Apple Retail same-store sales were down 17% year-over-year, with foot traffic overall down 1.8%
Apple sold 71% of Macs as laptops, the highest ratio ever.
Mac sales were the second-highest ever, and only barely not tops. The Mac traditionally isn't strongest in this quarter, so it is a definite net positive.

In general:
Apple controls the world's largest music store, bigger than Wal-Mart, and can ensure the digital music market operates as-needed by the iPod.  It is top-three in the mutating "video market", though that is harder to quantify. The DVD sales/rental market is huge, but Apple has purchasable and rentable movies and TV for television, computer or mobile consumption selling in significant quantity. The Apple [on] TV is a "hobby", but also a statement of interest, alongside Mac and iPod/iPhone media distribution.

Apple has a larger Leopard Mac installed base than any console manufacturer, outside of perhaps the Nintendo DS. Apple's consumer home installed base is smaller than the total Leopard number, but surely rivals any console manufacturer. Apple's Mac "consoles" are far higher-margin, and are likely to be internet-connected, buying, creating, and running media and applications. 

Much as iPhone application and internet use dwarfs other smartphones, making each iPhone a more valuable target for developers, Mac connectivity, power, and interoperability gives Apple home productivity and entertainment footholds as yet undetected by competitors. The PlayStation 3 is a comical island, the XBox 360 the proprietary G5 Apple used to ship running a tragicomic OS, and the Wii a clever use of limited resources meeting genuine success, but not a competitor to a netbook, let alone a Mac, as a personal computer.

Apple has the largest "Application store", again a huge platform for developers, and all other smartphone platforms are rushing to catch up. Apple's advantage here may be more reminiscent of Microsoft's early moves in the personal computing industry to own the platform with the broadest hardware and software compatibility. Market forces crushed anyone else, including the Apple of the era. Owning that layer, here the function of OS X iPhone  combined with the App Store, may mean no other platform gains developer momentum. Hardware, like a keyboard or a given niche feature, will differentiate marginal competitors, but the main personal mobile device and platform could become Apple's.

So Apple is what sort of company? They own and operate methods of distributing paid and free content to every consumer entertainment venue besides movie theaters. They are therefore like a multinational radio station, music store, television channel, and 2nd run movie studio, agnostic about (and uninvested in creating) what it is playing. Apple is also a high technology company building electronics and operating systems that serve as the venues for consumer consumption of distributed digital content. (When the content includes signed code, like the App Store, Apple plays the same roles but constrains the types of content to protect its control.)

So Apple is a multinational media conglomerate without a creative or production department, a major mobile consumer electronics and telecommunications player, and the owner of the world's most sophisticated, best selling, industry-defining "convergence platform." 

The Mac playing iTunes from the Music Store is performing a computation and presentation of digital media, in this case for entertainment, for one or many, but that same Mac allowing for the creation of a Pages document is doing the same fundamental operation. The iPhone Apps are games, notepads, or even a musical instrument. The iPhone "Contents" are videos and music licensed from someone. Play the Ocarina or an Ocarina.mp3 out of the speakers and the rigid conceptual barrier between "living room" and "office" on the Mac dissolves into "iPhone."

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