While Steve Jobs may be out of commission — perhaps permanently — Apple is quickly moving for domination in home computing and home media. They’re moving so fast that no one is going to notice their coup until it’s over.
Our Apple overlords have already achieved hegemony in the music industry. iPod sales in the United States account for 90% of hard drive-based players and 70% of all players. The iTunes store is the number-one music vendor in the United States and over 10 billion songs have been downloaded. While it took Apple the better part of a decade to reach this milestone, thanks to the iPad they’ll tighten their grip on all other forms of media in far less time.
The iPad has been out less than a year and it’s already hugely successful. Its first full year of sales will result in $15 to $20 billion in revenue – if the iPad were a standalone company it would rank in the top third of the Fortune 500. The iPad seems destine to replicate the iPod’s dominance in the tablet field.
The competition so far has come up short. The base price of Motorola’s tablet, the XOOM, starts at $600 — on hundred dollars more than the base iPad. Samsung Galaxy’s typically costs $100 more than the base iPad, and you have to buy into a contract with a wireless service provider. With the iPad 2 due out soon, it’s likely going to be more advanced than most of the competition and continue to be cheaper. My prediction: iPad 2 sales will be so huge that Apple will achieve supremacy of the tablet market in a year or so. And this is where world domination comes in.
It seems likely that for many people a tablet computer will replace their home computer. The core uses of a personal computer for the average consumer are: accessing the internet, sending e-mail, gaming, watching movies, and uploading digital pictures — all things you can do with a tablet. And a tablet is more portable and more fun to use. When I think of my own computer habits, because I can do so much on my iPhone, I’ll go days without using my home computer. In fact, I’ve heard of businesses that are now considering ditching employees’ blackberries and laptops, and giving them an iPad instead.
So now imagine we’re two years in the future and many of us are replacing our home computers (and even business computers) with iPads. You should be worried because Apple wants to control all the software on the iPad.
Apple has recently been irked that companies are using its app store and platform to make money without paying tribute. For instance, you don’t need a Kindle to buy Kindle books from Amazon. Until recently, you could download the Kindle app from Apple’s app store, and through the app, buy Kindle books. You would then view the Kindle books on your iPad.
Apple threatened to shut this whole operation down, but now they’re allowing it to occur as long as they get a 30 percent cut of sales that pass through apps sold from its store, as well as ownership of any data that may come from the sale, such as name and e-mail address. This does not apply to just single purchases — if you buy a subscription to a magazine, Apple takes a 30 percent cut of the subscription.
Apple knows that an increasing amount of media is going to be developed for the iPad in the future — movies, games, magazines, books, etc. — and they are positioning themselves to have a finger in everyone’s pies.
Now to be clear, if the sale of media was made outside of the app downloaded from the app store, then the 30 percent tariff does not apply. So Netflix does not have to pay because subscriptions are sold through its website. But given Netflix’s ambition to control home video through its streaming service, I’m sure it is only a matter of time until Apple demands tribute from them.
If you think I’m being an alarmist, federal antitrust regulators are already looking into this.
It’s pretty amazing that a company which was on its deathbed a decade ago, could now be on the brink of taking control of not only of the home computing hardware market, but also the software for it. Even Microsoft never tried to achieve this kind of vertical integration — they just wanted us all to use Internet Explorer.
I hate to say it, but I’ll probably buy an iPad 2 — only because the competition is so awful.
