Apple’s Golden Goose

September 23, 2007


Jobs makes surprise cuts

Less than 3 months after the most hyped product introduction of our time, Steve Jobs shocked the world when he abruptly discontinued the 4-gig iPhone model and chopped $200 off the price of the 8-gig model.

“That’s what happens in technology” was Job’s initial response to the outrage expressed by owners and critics alike. That’s what happens when a product is in trouble is my response.

Apple loyalists, who in some cases camped outside stores for days to be the first to get their hands on the all-in-one iPhone, now look foolish for being so quick on the trigger. The gall of Apple to cut the price so quickly was seen as a thumbing of its nose at its most devoted followers. Not a wise move. Even Apple legend Steve Wozniak personally blasted Apple in a recent article.

Not surprisingly, a negative PR firestorm erupted and public outcry was heard from the blogosphere to the media to the water cooler and beyond.

Jobs gives lame $100 credits

In a lame attempt to neutralize the negativity, Jobs then announced he was giving iPhone buyers $100 Apple store credits. Wow! Attempting to placate the 8-gig $600 suckers with a $100 Apple store credit is just adding insult to injury.

No cash refund, only store credit? In my experience, this never works out in my favor. Store credits usually make me buy something I don’t really want or need for more than the dollar amount of the credit. If it had happened to me, it would piss me off even more than the price cut.

How many things can one possibly buy for $100 in an Apple store anyway? Not too many. The only real product would be the iPod Shuffle at $79. But come on, the reason people are supposedly buying an iPhone the first place is the desire to have only one device that does it all. Ergo, you don’t need a Shuffle.

All this is not good news for Apple’s iPhone. Yes, they have told us the have sold 1 million phones. But that is wholesale not retail. For all we know, 500,000 phones could be sitting on the shelves at Apple and AT&T stores. And by most accounts the phones are readily in stock, as AT&T ads point out on almost a daily basis.

Also, I have never heard of a product, even a high-tech product, having its price cut so fast. Usually companies cut prices only when a next-generation model comes out that is faster, lighter and has double the memory. That didn’t happen with the iPhone nor did stiff competition arise. The only thing stopping the iPhone seems to the iPhone itself and its homage to the false idol of convergence.

If the iPhone were truly living up to anything near its hype, then Jobs is the dumbest person alive. Lesson number one in business school: You don’t drop the price on winners.

iPod Touch gets ignored.

The really interesting angle to this saga is the recent introduction of the latest iPod, the iPod Touch. Its launch has been mostly overlooked and usurped by iPhone mania. After the over-the-top iPhone hype and its dramatic price cut, the media were just not interested in giving much ink to another Apple product.

Furthermore, without any exciting new functions that weren’t already included in the iPhone, the iPod Touch has little news value. It is basically just a smaller iPhone without the phone or email access. Big whoop.

This disregard of the iPod Touch is tragic. The iPhone took the wind out of the iPod Touch’s sails before it got the chance to set sail.

iPhone – Convergence = Touch

The iPod Touch is brilliant. The iPod Touch is revolutionary. The iPod touch is everything the iPhone is not.

It you take all the convergence stuff out of the iPhone and leave in all the cool features, you end up with an iPod Touch. Not a all-in-one, but a great music player.

The iPod Touch is a high-capacity media player with a touch screen that connects to the internet and Apple’s new mobile store to buy music and watch videos.

The reason the iPod Touch is so great and the iPhone so problematic is that the two main functions of iPhone, the phone and music player, are at odds with each other.

Both a phone and music device are considered essential tools that people can’t live without for even brief periods. Both use a lot of battery power. Both are used for long periods of time during the day.

The disaster of sucking the battery dry while out for the day is easy to imagine. Out of the office and your cellphone battery dies? Disaster. Two miles out on a 4-mile run and your music player dies? Disaster.

Jobs loves to create cool things. And Jobs is a great salesman. Initially the media, the market and consumers eat his stuff up. But eventually you come crashing back to reality.

iPhone is distracting Apple

The iPhone is a distraction not an opportunity for Apple. A novelty product built on the technology whims of Jobs and another in a long line of convergence chasers.

In theory, everyone would like to carry one device, have one card in our wallet, shop at one store for everything and drive a flying car to work. But the reality is that none of these is ever likely to come true. It is not the way the world works.

Size, price, memory, and battery life always end up bursting the convergence balloon. From flying cars to media center PCs to N’Gage, Newton and the iPhone.

What Apple should have done is to put its marketing and PR muscle behind the new iPod Touch.


The golden goose.

The iPod is the goose that lays the golden eggs at Apple. Overlooking it and not giving it its proper attention is foolish. The iPod resurrected Apple from the ashes. The iPod is the leader in the growing MP3-player market. The iPod is the dominant brand in the U.S. with over 60% of the MP3-player market. Taking your golden goose for granted is unwise in the competitive and fast paced world we live in. Just ask Dell.

Apple has some serious work to do globally where its iPod is less than dominate and more than vulnerable. In Europe the iPod has only a 20% market share which includes a 40% share in Britain.

Distractions are not what Apple needs. A focus is what they need. The way to build a monster brand is to attain global dominance. Which is what Nokia did in cellphones, Red Bull did in energy drinks and Google did in search.

Clearly the time for Apple to launch massive iPod marketing programs in both the U.S. and the rest of the world is now, while the brand is riding high with ground-breaking technology and a heap of iPod killers lying in wait. But the distractions and confusion created by the iPhone are likely to slow the iPod’s momentum and keep it out of the fast lane where it rightly belongs.

Instead Apple is cooking the goose that has laid the golden eggs.