January 25, 2007, 12:54 pm
What is in a Name? The New Apple
By Lisa Agustin
On January 9, Apple launched its latest must-have, the iPhone, along with Apple TV, a device for delivering video content downloaded from Apple’s iTunes service to consumers’ television sets. The same day, the company announced a name change from Apple Computer to Apple, signalling a strategic shift that focuses less on personal computers and more on consumer electronics.
The latest issue of Knowledge@Wharton considers the question of whether Apple’s new strategy will succeed, and how well it will do when competing alongside Samsung, Sony, and Microsoft in the quest to dominate the digital living room. Apple’s talent for design will most certainly be a plus in this regard — not only in terms of the cool-looking hardware it’s known for, but also its ability to make technology user-friendly:
Apple’s design skills go beyond new gadgets to encompass softare design. One of Apple’s real design feats was making it easy for consumers to buy music legally wtihout excessive digital rights managment [DRM] software. [According to Wharton professor Eric Clemons:] “Apple’s iPod and iTunes store are quite tightly coordinated to make theft of content of illicit transfer of content cumbersome. It’s surprisingly easy for consumers to forget why there are restrictions and where the restrictions came from.”
Ironically, this “tight coordination” may also be a stumbling block for Apple:
…Consumers could eventually chafe at Apple’s attempts to vertically integrate is products–and thereby lock customers in– instead of working with other devices. Vertical integration refers to efforts to own multiple parts of a product chain. For instance, Apple operates its iTunes music sales channel, controls the [DRM] software and sells the devices to play content…It’s unclear whether this vertical strategy will ultimately win out with consumers, who may demand support for multiple standards.
While digital convergence has yet to be achieved, from a consumer’s perspective it will be interesting to see the range of products that are sure to emerge while the battle to rule the digital living room wages on.
Vertical integration has always been Apple’s whole game. They’ve always sold the Mac and the OS. It’s at the core of both their profit strategy–loss leaders (iTunes) sell higher-margin products (iPods)–and their design strategy. People who like Apple products tend to appreciate the elegance of design and integration that they are able to deliver.
Some consumers are bound to object and resist. Apple counts on that too. They need a kind of cludgy, democratic, cheap “other” to compete against. Otherwise there is no way to differentiate the Apple experience. But I think the consumer electionics plan is a good long-term play for them.
Why? Because the people who stand the most to gain from Apple’s elegant design are not tech-savvy computer geeks. It’s people who enjoy the benefits of the digital age without wanting to really know how it works under the hood. If you can build your own PC from parts, there’s probably less than a 10% chance you’re interested in buying a Mac. (
Posted by EB on January 25, 2007 at 2:00 pm
That last comment was cut off–
But if you just want an easy music player or a sexy-cool phone, there’s obviously a much greater willingness to consider an Apple-branded products.
Posted by EB on January 25, 2007 at 2:03 pm