As we approach Apple’s WWDC event for this year, I am reminded of an article I saw on Engadget earlier this year titled, “Apple reportedly considering iTunes store for Android phones“. It was a surprising article given how Apple likes to lock customers into both its hardware and software ecosystem. However, it was one the of the smartest and boldest moves I’ve seen Apple consider in some time. While it’s possible that Apple could announce this at WWDC, it’s highly unlikely.
Recent events (i.e. acquisition of Beats)
I realize that Apple has a lot of resources, but something tells me that their hands will be full trying to assimilate and recognize the value from their recent $3B Beats acquisition. Sure, I still think the smartest thing Apple could do long-term is to roll-out cross platform support for their iTunes music software. However, in the short-term, they need to figure out how to integrate Beats with what they have, make it work within their own ecosystem, and then they should start looking into making their transformed music service onto other platforms.
Hardware rules the roost
Apple is a hardware company. They make the most profit from selling phones, tablets, and computers. If they were to push their software to other platforms, they would give users a reason to consider switching hardware platforms, which could end up having a direct impact on their revenue and profit. This is another reason why I don’t think you’ll see many of Apple’s core services available on other platforms. If you want to have the Apple experience, you have to do it on their terms, which means you have to use their hardware.
On the other hand, their chief competitors in the mobile space, Google and Microsoft, are software and services companies. Google and Microsoft use hardware as a means to funnel users to their software and services. While they have their own preferred hardware platforms, they are just as happy to have their software available across every type of device in the market. For them, the profit margin is in the services and software, not in the hardware.
Time to harvest
So while I don’t think Apple will be pushing iTunes out to any other platforms anytime soon, it needs to be an element of their long-term strategy. The hardware game is a tough business. Margins usually start out high on new product categories, such as smartphones, but over time, margins will drift downward. I suspect that Apple is already seeing this with the iPhone, particularly as the smartphone market matures. I suspect they will start to see similar pressures with their iPad line of products as well.
Software, on the other hand, is a high margin business that relies on scale. Apple already has a large installed base of users to generate cash from. Apple would be best served to start looking at how to migrate their most popular software, such as iTunes, Siri and others, to these competing platforms. It will allow them to stay engaged with existing users who may choose to switch, and it would allow them to address a much larger user base.
The bottom line, Apple is sitting on a huge opportunity with their software given their installed user base It time for them to start harvesting it.