Apple and the next category killer
Despite a range of technical challenges, sales of the iPhone 4 are already through the roof (1.7MM and counting) and Apple appears to have triumphed again. I bought the phone last week, and aside from the frighteningly real issue around left-handed usage, I am very impressed with the new features and functionality.
That said, I am much more interested in what comes next. I believe that right now, Apple has an opportunity to really dominate the mobile space. The driver would be a lower spec, carrier-ambivalent, version of the iPhone. Its a strategy that Apple have employed before (see the iPod Nano), and 2011 might be the time to try it again.
My recent upgrade cost $440 all in, including a $200 upgrade fee that AT&T were not prepared to waive. Even without that fee, the cheapest iPhone 4 comes in at over $200, and comes strapped to a contract starting at $59.99 per month. This is a price point that puts this product out of reach for many of the 300MM Americans that do not own one already. Perhaps more importantly, the sheer technical sophistication of the iPhone is way beyond the needs of most of these non-owners too.
So what features should the pared-down iPhone retain - voice and web and text, clearly, as well as seamless video and music. A single camera, with a 2MP lens, would be sufficient, as would a staple selection of the best apps pre-installed. And it wouldn’t hurt to throw in a couple of proprietary features, like Face Time, that only work iPhone-to-iPhone - if anyone can make network effects work with a hardware device its Apple.
The two most critical elements for me are form and accessibility. What this iPhone looks like, and how it feels, will be critical to its success. It needs to be smaller, lighter and designed with a broader audience in mind (the iPhone 4 is almost oppressively geeky). In the past, Apple have crossed the geek-barrier by using color, although I am not sure that would translate to the phone.
The second key feature is multi-carrier accessibility. AT&T can’t provide decent service in New York City, yet alone across the rest of the country, and its critical that customers for any pared-down phone have the ability to choose the carrier that best covers the area they live in.
The final question for me is price. Can Apple build a killer phone with a total outlay for a new customer of less than $50? It could well mean carrier subsidies, and these are harder to command if there is no associated exclusivity.
Lots of open questions for sure, but if Apple get the product right, I believe they could command over 50% of the US handset market by 2013.
