Sun, 01 Jun 2008

On Apple Rumors...

The rumor sites are agog about the forthcoming 3G iPhone. Some rumors suggest that the iPhone will come with built-in GPS, others suggesting larger capacity in a smaller form-factor.

Even if the new iPhone remains at 8GB and remains the same size, "3G is enough" because the biggest bottleneck of the current iPhone is the speed of the EDGE network. With broadband comes the ability to network the iPhone with computers in your home and work networks.

I think this is likely to be a cross-platform integration, meaning that so long as your computer is running Safari or iTunes (which means either Windows or OS X), broadband 3G access means ubiquitous access to your bookmarks and your music library anywhere you can get a 3G cell signal. This also opens up the potential to be able to browse the iTunes music store from your cell phone, even outside the range of WiFi.

But another bottleneck exists on the current iPhone, which could actually just be lifted with a firmware upgrade, no 3G iPhone necessary. I'm talking about the requirement of a USB cable to sync your phone when the wireless bandwidth is there today (at least with WiFi). How cool would it be to sync your phone not only without a cable, but from anywhere in the world?

But I think limiting the iPhone to syncing with a single device is rather limiting... A key strategy for nearly every business is to sell your customers a product, and then find a way to sell that same customer another product. This strategy is simply what is responsible for Apple's recent meteoric rise on Wall Street-- they went from selling computers to less than 5% of the overall market, to selling iPods to nearly every man woman and child, to selling music tracks to selling phones, and set-top boxes...

...Set top boxes... which is where I think there is a lot of potential for Apple to expand their growth. It's not a far cry to consider than the iPhone could very well be a sophisticated remote control for your Front Row software on your Mac, or for your AppleTV, for that matter. But the AppleTV hasn't seen the kind of success that the iPod, iPhone, or even the Mac has in recent years.

In a previous post I suggested that ubiquitous uber-broadband access that would allow streaming HD content is still quite a ways off, at least over the Internet. And so I think an opportunity exists for Apple to shift their strategy around the AppleTV in order to capture more of the set-top-box market.

But as my friend Gavin pointed out, people just don't want another box in their entertainment console. The AppleTV would have to displace something to make significant inroads, and I see two simple feature additions that Apple could provide to get there.

The first of which, and the least likely of the two by my estimation, is one or more CableCard slots and/or a coax slot. The AppleTV, with its built-in hard drive, could put many a DVR to shame. Clearly TiVo has some of the best software on the market, but providers like Comcast still have a shocking number of their DVRs in American homes, sadly, including mine. This could even be sold in such a way as "miss something on your DVR? Download it from with your AppleTV"...

The second way to break into the consumer set-top-box market would be to simply drop in a BluRay drive. Clearly, Sony has the lead in this area today with their PS3s leading the BluRay revolution, and the reason they can afford to do so is because of the upside to Sony if BluRay gets a good portion of the market from licensing, movies, games, and media. They also have a financial model to make up the hardware losses with software and licensing margins, but so, presumably, would Apple.

In particular, getting revenue from iTunes music store purchases, video downloads, and monthly DVR service, the extra cost of putting in a BluRay drive might not be that much of a stretch of the imagination.

How likely is this scenario? There's a lot of speculation in this post, and I think it's very unlikely that it'll all come true, but I leave you with this final thought:

If I'm right, and Apple is still executing its strategy to move from "Apple Computer Inc." to the ubiquitous stylish consumer technology company "Apple", then the branding of the glue that ties all of these consumer devices together as ".Mac" begins to seem quite "off-message"... What you'd need, if indeed the iPhone becomes the central "remote control" of your digital lifestyle, if it becomes the device that defines the way you come to interact with data and services on both your computer, and your media center, is a service that is branded around the fact that it gives you access to "all of your stuff" no matter where you are*.

Which is my long-winded way of explaining what I think is the reasoning behind the purported rumor that Apple is renaming "dotMac" to ""...

(* So long as you're in range of a 3G data network)

Khan Klatt

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