What next for Apple?

You might forgive Bento for gloating. It’s true that he doesn’t write much around here, but when he does, it tends to be about Apple, and he tends to be spot on. Cases in point: A prediction of run-away success in China way before it became a mainstream opinion, and a prediction of run-away success for the iPad when it was being trashed by the technoramuses, pointing out that it is an ideal device for baby boomers.

As a long-time owner of (a very small chunk of) Apple stock, the past decade has been an absolute pleasure, with Jobs et al reïmagining and then dominating a whole run of product categories with apparent ease — music players, mobile phones, tablets, and now ultralight laptops. But in this success lies the seed of a problem: While the empire that is Apple has plenty of expansion left in new geographic markets and within existing product categories, Apple is exhausting the universe of gadgets it can colonize. I now have an iPhone, iPad and MacBook Pro on me most times, and go running with an iPod Nano. My next laptop will be Air-ish. But what additional new thing can Apple sell me that I must have as soon as I see it?

Even if Apple never again introduces another revolutionary iDevice with concomitant new revenue stream, it will take some time before Apple’s growth trajectory retreats from the exponential to the merely geometric. With Steve Jobs gone from the helm, however, there’s the possibility that Tim Cook will get the blame for this shift; when in fact all the low-hanging fruit has now been picked.

Yes, it has. All the product categories Apple has revolutionized have long been on the radar screen. Microsoft tried and failed to kickstart tablet computers during much of the naughties. Apple’s Newton was ahead of its time. Walkman music players were poised to be replaced by something digital. Laptops have since the start been massive compromises between weight, power, and battery life.

What might Apple do next? Television has been mooted as a candidate; the self-described AppleTV “hobby” has been a modest success, and there are rumors that Apple might use its lessons to try to properly reïmagine home entertainment using what it has learned from AppleTV. We’re halfway there with Airplay, which streams sound and video between wifi-connected gadgets around the house, but it is not yet seamless. (I’m an early adopter of it). If it becomes seamless, and stays much cheaper than competing Sonos’ systems, and the AppleTV OS turns into something of a platform that multimedia content providers can build apps for and stream content to, then we may have a proper new product category for Apple to dominate. Price here would be crucial, but that is something which Apple’s fabled manufacturing prowess could trounce the competition on, not least when it comes to screens.

And beyond that? Where else could Apple inject itself into my daily use of technological tools to be creative or to consume others’ creativity? Might it take on premium camera manufacturers like Nikon and Canon? Revolutionize (electric) car design? Develop connected appliances such as fridges that scan and refill themselves using the web? Jonathan Ive may well be chomping at the bit to bring Apple design to any of these areas, but somehow I doubt it can happen. Nikon and Canon already produce finely honed ergonomic masterpieces that are too niched for Apple; electric cars would be too large an adventure beyond its core competency, and while a connected intelligent home surely lies somewhere in our future, it is about as useful to speculate about this as to wonder when we’ll all be installing fusion reactors in our cellars (and what role Apple would play in their design.)

A more subtle worry of mine is that Apple will continue to produce gadgets and software that encourage content ownership, despite the fact that for the upcoming generation, “purchasing” digital content is increasingly anachronistic. Apple risks losing relevance among this group if it does not adapt, and it shows no signs of doing so (yet) despite the fact that the technology for alternate forms of paid consumption is mature.

My anecdotal evidence: As a resident of Sweden (which lives perpetually a little in the future) I have been using Spotify for several years. That Swedish start-up lets me legally stream and even download any music I choose from an iTunes-store sized library for a flat monthly fee. The service is social, mobile, and has become ubiquitous in Sweden; since signing up, I have not bought a single song on iTunes. Nor do I know any Swede who has (I asked again at a dinner party last night.) I’m sure that Apple’s internal iTunes store statistics for Sweden reflect this change on the aggregate level. And now Spotify has just launched in the US.

Movie rentals in iTunes are not the future either; the Netflix model is.

So these are the fears I hold for Apple in quieter moments. Emphatically, Windows 8 is not among them — the hardware is just as important as the software, and Apple, uniquely, is strong in both. I do see a danger of Apple making ill-advised concessions to Chinese censors for its future devices and cloud services sold domestically (it already did so with the Chinese iPhone 4), but the resulting negative publicity would not have an effect on the bottom line.

Of course, $76 billion in cash buys a lot of insurance against technological riptides. Baruch, what product category do you think Apple should colonize next? (I would certainly love it if Apple reïmagined driving. They could buy Volkswagen-Audi AG (market cap conveniently $63 billion) and soon thereafter announced the beautifully designed all-electric iAud. Considering that Google is already working on autonomous electric cars, surely that raises the odds of this happening?)


6 thoughts on “What next for Apple?”

  1. Apple will continue to capitalize in the smart phone / tablet industry and continue to hold and gain market share in the pc / laptop market. Apple’s next move is going to be using more advanced batteries in their mobile devices, iPad 3, for 30% increase in run-time. Apple laptop batteries and cell phone batteries already use Li-polymer batteries.

  2. I’m pleased you are so pleased with yourself, Bento, self esteem is important. However I won’t give you any prizes for guessing Apple products will be popular in China (duh), and you ignore my much more interesting prediction that iPad will be popular with las chicas. More than that I am aghast at your use of flipping umlauts instead of the hyphen in “re-imagining”.

    But your question is a good one. Actually I think Apple has enough to do for a number of years with spinoffs of the iPad, and merging it somehow with their Mac offering to bring new categories of computing joy. There’s another few hundred million of high ASP devices to flog to fanbois like you, and whole new sets of incumbents to poop on — the final defeat of the great Wintel enemy may be in sight, and if I was Apple I would concentrate on that before I started making iCars. And what about low end smartphones? Selling a specially designed product that can be priced at $200-$300 rather than $600 to $900 would massively drive penetration in places like Chindia; that would put the boot properly back into Nokia and take away what they have left. Kicking them when they are down.

  3. I was wondering Bento what do you think about their selling strategy? Im referring to the artificial deficit of their gadgets wide across the world except for US. What seems to be the catch? Why not meet the demand?
    This is also Baruch idea of Apple penetrating $200-$300 markets seems wrong to me. Though it would seem to be a logical step to expand on to low-price segment, but i cant shake off the impression of Apple (or Job’s Apple to be precise) leaning to an elitist view of their consumers. They dont want to be associated with poor shmucks who cant afford it. That’s great and it definitely works revenue wise, but then why would they “lower” their image?
    Quite like VW-Audi AG. You wont find a cheap Audi. If you want cheap buy VW.

    p.s. great post, though I always believed that exponential growth is a subclass of geometric, but even so i get the point.

  4. One possibility is that Apple Retail will branch out into ‘personalized systems and services for consumers’– particularly if Android succeeds in commoditizing the mobile platform business. Given that Apple already has the customer service culture and a big bricks-and-mortar presence, it would be a natural evolution.

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