The Macalope: Repeat performance


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Hey, who missed Henry Blodget?!

Really? No one? Huh. OK. Well, he’s back. Sorry?

“Come On, Apple Fans, It’s Time To Admit That The Company Is Blowing It” (no link but tip o’ the antlers to Paul Baptist).

Blowing what? It’s certainly not blowing it with its products. So, if you’re an Apple “fan,” what else do you care about? Also, did Blodget use his Caps Lock key so many times that he broke it?

It’s incendiary but the Macalope thinks you could be trying harder, Henry. B-.

But that’s just the headline. The page title is “Apple’s Prices Are Too High” because, you know, Apple’s prices are too high.

Third-quarter smartphone sales figures came out from Gartner (motto: “Yes, we really suggested Apple get out of the hardware business back in 2006 now please stop calling and asking us that”) and Blodget feels the need to get into the same argument we have already agreed to disagree on several times.

Apple is getting its clock cleaned by Samsung, which is now by far the dominant smartphone maker in the world.

Unlike when Apple had the dominant share of the smartphone market back in 2000 and never.

Apple’s smartphone sales grew at only half the rate of the market.

Right. Because most of the growth in the market is happening down at the low end, the end where there’s no profit to be had. Which explains why Apple still takes more of the profit than anyone else.

… smartphones are a “platform market”—third parties build products and services that run on top of smartphones—and in platform markets, market share is a huge competitive advantage.

See, here we are again. The Macalope has to repeat this almost every week but the benefit of selling to the high end of the market is that’s where all the money is. By definition! So the people you’re selling to are the people who are most likely to buy apps, cases, and iPhone cozies.

The Macalope’s not saying that doing that is inherently “good” or that selling to the low end is inherently “bad,” he’s just saying that the idea that developers and third parties are going to abandon the segment of the market where all the freaking money is is nuts.

Apple fans can keep telling themselves that this is just fine, that Apple doesn’t want or need to sell gadgets to earthlings of more average wealth, but what these fans need to recognize is that this is effectively a major change in Apple’s pricing strategy.

This is some world class spin coming up so you might want to buckle up.

You don’t have a seatbelt on your office chair? Well, hang on to something solid then. Like, say, a superhero hunk such as Chris Hemsworth or Stephen Amell.

In the first few years after the iPhone and iPad launched, Apple led the market not just in product quality but in product price. The iPhone and iPad were not just way better than the competition, they also cost the same or less.

Uh, no. The fact that the only way Apple’s competitors can sell devices is to make them cheap is not a reflection on Apple, it’s a reflection on them.

The simple answer is NOT for Apple to make low-end gadgets that it considers crappy. It is for Apple to use its phenomenal profitability as a competitive weapon. Specifically, the answer is for Apple to sell some of its gadgets—not the latest, greatest ones, but some—at prices that are highly competitive with local alternatives.

So, by “use its phenomenal profitability as a competitive advantage” he means “throw its phenomenal profitability out the window in order to chase market share.”

Yes, Apple is selling the iPhone 4 at a significantly lower price than the 5s, but this phone is now old, weak, and small.

Actually, Apple sells the 4s at a significantly lower price than the 5s and it sell the 4 in China for even less.

Significantly increasing its market share in key markets around the world would make Apple’s long-term competitive position much stronger.

Because having a lot of money in the bank makes you weak.

It would help Apple increase the value of its content and app “ecosystem” in these countries and, thereby, strengthen the “lock-in” of its products and services.

How does adding people who don’t buy things into your ecosystem increase its value?

But, instead, Apple is being shortsighted and choosing to maintain its already fantastically high profit margins at the expense of market share.

Apple would rather have profit than market share. For some reason this drives Henry Blodget insane. Well, at least it explains why Jeff Bezos likes him so much.

Meanwhile, Google’s Android has become the world’s dominant smartphone and tablet platform …

Yes, it has, but not nearly as much as it looks like because there are so many installations of Android outside of Google’s ecosystem.

The other counter-argument that Blodget doesn’t want to talk about is that “platform” doesn’t mean what it did back in the 1990s. Building applications still requires skill, but it’s skill that’s more readily available now (and most of the good developers code for iOS first and often only) and it isn’t the monolithic undertaking it used to be.

And if the gadget platform market behaves the way other platform markets have (think Windows) …

It won’t. You’re using an outdated analogy. Over and over and over again. In fact, the toll booth attendants on the Garden State Parkway have asked you to stop trying to pitch it to them. They don’t care and you’re backing up traffic for miles.

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