My estimate of last quarter’s iTunes gross revenues suggested a spending rate of $40 per iTunes account. It would make sense to consider how that figure changed over time. The following graph shows the pattern:
You can read each bar in the graph as the total “ARPU” or average revenue per iTunes user.
I overlaid a graph showing the total number of accounts as reported by Apple to the (retroactively) estimated revenue structure. Account totals are measured with the right axis and ARPU with the left. Note that I also broke down each component of iTunes as currently defined (Music, Video, Apps, Books, Software and Services.)
The time frame covered is from Q2 2007, or the quarter prior to the iPhone launch. A few patterns emerge:
I join forces with Pixxa, makers of Perspective, to present a workshop on the future of presentation.
After giving dozens of talks in the last year using an iPad with Perspective I’ve learned a few things. Having also spent years using Powerpoint to try to do the same thing, I’ve experienced first hand how slideware has gotten in the way of great storytelling.
So we teamed up to understand how stories come alive using data and drew inspiration from Aristotle, Welles, Tufte and Rosling to build a new theory of presentation.
We believe that we have summoned up enough cohesion in the theory to put it forward to an audience and tell the story of storytelling; practicing what we preach, so to speak.
Here are some of the questions we are putting forward:
- How and why are presentations different from one-on-one interactions?
- Can mobile technology help tell stories better than the Powerpoint metaphors?
- Is motion and interaction effective, and if so how can it be choreographed and directed?
- Does “camera position” affect the focal point of a story? In other words, should the presenter think of the camera as a character in the story?
- Can presentations be built more quickly and can the presenter obtain confidence without rehearsal?
- What are some of the constraints of venue and legacy AV equipment that perpetuate ancient dogma? How can the presenter eliminate or mitigate these constraints?
At a minimum, the workshop is designed to recruit and equip a new cadre (no more than 50) with a new algorithm of presentation built on rhetorical, theatrical and cinematic foundations.
We call the workshop Airshow. June 9th, 10am to 4pm, the day before WWDC, in San Francisco. Sign up here.
“So paradoxically, the opinion of those who are highly paid should be treated with suspicion while the opinion of those subject to peer review should be treated with respect. It brings to mind the difference between highly paid fortune tellers and pundits whose methods are obscure vs. poorly paid graduate students whose methods are open to all. Whose opinion is worth more?”
To read more see Horace Dediu on the bad habits of Apple analysts and why Tim Cook shouldn’t be fired – The Next Web
To anyone who has visited the current “campus”, it’s obvious that Apple has outgrown it some time ago. It’s also obvious given the increase in headcount and operational expenses over time as can be seen below:
(I added Q1 2013 estimate based on company guidance.)
One can understand why, from a practical point of view, they want to consolidate what amounts to at least twice as many people back into one place.
But there is also a more subtle reason and it has to do to a fundamental distinction:
Although Samsung and Apple are acclaimed as the leaders in profit capture for smart (and otherwise) phones, what is not lauded is how much they spend on capital equipment used in the making of these phones.
In 2012 Samsung spent around $20 billion while Apple spent about $10 billion (excluding leasehold improvements or Apple stores but including real estate).
Compare these figures with Intel at $11 billion, Google at $3.2 billion, Microsoft about $2.8 billion and Amazon $3.8 billion (including presumably new distribution centers.)
What each company spends on differs depending on its business model, but as the graph above shows it’s easy to see that there is a class of “big spenders” who spend so much that it makes it hard to imagine just what $10 billion/yr could actually buy.
To get an idea of just how big that figure is consider that
LG Electronics has acquired HP’s WebOS for an undisclosed amount. When last it changed hands WebOS was part of Palm which was purchased for $1.2 billion in 2010.
Palm has thus been effectively divided into several smaller pieces distributed as follows:
HP will own:
- Support of existing Palm users
- Palm back-end assets including source code, infrastructure and talent
- webOS patents
LG will own:
- Stewardship of the Open WebOS and Enyo open-source projects where the source code resides
- Associated talent
- WebOS websites
- License for IP related to webOS
LG announced that it plans to offer an “intuitive user experience an Internet services across a range of consumer electronics devices.” In an interview, the CTO of LG said that given the current situation with Android, LG does not plan on making smartphones running webOS but will use it in televisions and other devices such as cars, signage and appliances where there are no embedded OS’s. “We’d like to secure a software platform across all devices.”
I’ll be speaking at the Harvard Business School Technology and Operations Management Digital Seminar Series on ”The evolution of value chains in a computing markets measured in the billions of units per year.”
2013 will see two billion phones shipped into a market of over 6 billion points of network connectivity for over 4 billion consumers. In addition to phones, there will be a few hundred million more tablets and mobile computers shipped. It’s very likely that the majority of these devices will be “smart”, meaning designed to be a part of an ecosystem of software, content and services. Contrary to the common assumption that larger markets sustain more competitors, this immense and rapidly growing market has become profitable for only two device vendors. The reason is that the windows for competitive advantage are fairly narrow and although production can be ramped more quickly than ever, the resources needed are available to few. The frequency and amplitude of market flux benefits only those who can operate at scale and punishes those who can’t. Close observation of the investments of these “superpower” competitors shows an extraordinary level of capital purchases of manufacturing equipment, regardless of their nominal position in the value chain. These capital expenses have been growing in proportion to in the frequency of product launches. I present data showing a correlation between manufacturing equipment CapEx and ecosystem success and put forward a hypothesis that this relationship is causal. I also discuss the implications for ecosystems owners with regard to the processes, resources and priorities necessary to succeed in this evolved value chain.
The event is open to the public and taking place March 7th, 3:00PM to 4:30PM in the Cotting Conference Room.
Apple’s products are the envy of the world. They have been spectacularly successful and are widely imitated, if not copied. The expectation that precedes a new Apple product launch is only matched by the expectation of the replication of those products by competitors.
This cycle of product mimicry was succinctly summarized by Marc Andreessen regarding a rumored Apple TV product:
And once the television launches, everyone will scramble to copy it. ”There’s a pattern in our industry, Apple crystallizes the product, and the minute Apple crystallizes it, then everyone knows how to compete.”
This idea that the basis of competition is set by Apple and then the race is on to climb the trajectory of improvement is so well understood that it’s axiomatic: “It’s just the way things are.” Apple releases a product that defines a category or disrupts an industry and it becomes obvious what needs to be built.
But what I wonder is why there isn’t a desire to copy Apple’s product creation process. Why isn’t the catalyst for a new category or disruption put forward by another company? More precisely, why isn’t there another company which consistently re-defines categories and repeatedly, predictably even, re-defines how technology is used.
Put another way: Why is it that everyone wants to copy Apple’s products but nobody wants to copy being Apple?
Note that I don’t suggest that there isn’t a capability to copy. It may or may not be possible, but capability comes after desire and without desire there can be no capability. What I’m suggesting is that there isn’t a desire to “be like Apple”. If there were a desire, we would be seeing a massive search and debate into what makes Apple successful. Management consultants would be pounding the pavement pitching the “Apple way”. Wall Street would be sizing up companies to a standard of “Apple-ness” and rewarding those who conform and punishing those who don’t.
None of this is happening. I can think of two reasons why:
- Apple is not to be imitated because it’s not worth copying. I.e. Apple is not a successful company.
- Apple is successful but Apple cannot be copied because its success is a magical process involving sorcery.
A short interview for iCon where I’ll be presenting tomorrow. The interview originally took place on January 9th, 2013.
Jasna Sykorova: You have focused on mobile devices for some time now. What made you to start to give a special attention to Apple related data?
I began to look at Apple in 2005; long before they were in the phone market. I had an iPod and liked the Mac but I did not have particular reason to think about the company. You might find it strange that it was the launch of two very peculiar products that caused me to change my perception of the company. They were the iPod Shuffle and the Mac mini.
These are not seen as important today nor were they back then. But they signaled to me that something dramatic was happening: the company was shedding its “premium” image. This and the earlier move of iTunes to Windows signaled [to me] that Apple was serious about the mass market and the minimum price that a person would need to pay to become an Apple owner.
This was pivotal to me also from the point of view of disruption theory. If a company takes the fight to the low end it means it protects itself from a low end disruptor and may even enter new markets. So if the thinking is that Apple would disrupt then it would have to get into new categories. I then asked myself what it would target. I told myself (again, in 2005) that Apple will do three things:
- build a phone
- disrupt the PC market
- enter the living room.
1 and 2 are well understood to have happened and 3 is nearly here with Apple TV.
Each of these were tremendous opportunities and it’s been fun watching it happen over the last 7 years.
By the way, my expectations were right not because of any insight into the company. I had not studied Apple much at the time. All my expectations came from understanding the psychology of a disruptor. Nor does it mean that what Apple did was deliberately planned. It’s possible to predict what people will do even if they don’t know what they will do themselves.
Can data tell stories? Can you judge just by data?
In the latest quarterly report Apple changed how it reports product revenues. In previous quarters the iPhone and iPad were reported including accessory revenues while iPod accessories were reported under “Music” revenues.
“Under this new format revenue from iPhone, iPad, Mac and iPod sales is presented exclusive of related service and accessory revenue […] revenue from all Apple and third party accessory sales is presented as a single line item [Accessories.]“
Apple provided a document showing re-classified product summary data. By measuring the difference between original revenue and re-stated revenue per product we can determine how much service and accessory revenue was being attached to each product.
I did this for two quarters as a sample:
The analysis shows that the iPhone has been receiving about $15 of accessory attached value and the iPad about $25. Interesting trivia, but how is this insightful?
Consider the impact on this analysis of revenues/unit shipped: