Saturday, September 26, 2009

Third Wave Crashes: The End of AT&T lock-in

(Part I and II here.)

The Third Wave of iPods makes them true pods, multi-use "containers" for each of our growing digital "i"s. Apple's proven skill integrating software and hardware for "the rest of us" will turn the Nano from a music player into the equivalent of the "feature phone" of portable media players. A blessedly simple digital companion, without the risk and complexity of internet connectivity and 3rd party developer support, that is never a poor value (if also never "cheap.") a strategic wedge Apple can use to enter any relevant market that arises. Portable projectors are just one that come to mind.

Apple has proven they want the Touch to be a volume product on the low end, and on the cutting edge of processing and graphical power at the high end, at the risk of lowering profit margins. With the iMac rumored to shift markets to the high end, Apple has constructed a beautiful synergy. The Touch, in this generation or the next, becomes the ultimate companion to the Mac.

An obscure feature called Home on iPod, dropped from Panther development and buried in Apple's patent portfolio, sheds light on Apple's product strategy. The digital hub paradigm has ended, as consumer taste in computers has demonstrated a desire for ubiquitous computing, internet connectivity and media consumption, over fixed (or partially mobile) computing. As the iMac evolves, the television/home theater is the most similar product set still in demand. The evolved Touch most closely matches the "netbook", but cannot offer (for most) the still-necessary functionality of a full laptop.

So why do AT&T or Big Cable care?

If a user's Home folder becomes independent of a single Mac, the "computer room" disappears, as does the "family computer", and the combination of a Touch, iMac-TV, and the iTunes Store become the competition for a hodge-podge of Windows laptops, smartphones, cable boxes, and netbooks out there. Wherever one has a Touch, they have their entire computer, in a limited state. Add a Mac, and gaming, media, and "my desktop" act just like they do at home. (A rumored "tablet" would help make the Mobile Home a compelling replacement for any portable computer in the house.)

Finally, with the advent of 3G to WiFi bridges (like the MiFi), any Touch becomes ubiquitously connected, just like the iPhone. With a choice of "networks", like Skype, higher data capacity, and a far thinner case, why buy an iPhone? Watch for a mass abandonment of any device with "phone" in the title in the longer term, as a general purpose computer is much more useful. Phone calls will come with them.

Thus, the Third Wave of iPods has begun, and the creative destruction of the home theater, with the logic of OS X replacing the brainless flat-panel, is happening at the same time. Apple is ideally, perhaps uniquely, positioning itself to capitalize.

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