On the whole unlocked iPhones thing
Much ado has been made over the number of unlocked iPhones there are in the world. The NYTimes just published this piece going into some detail about the grey market. The furor comes from the discrepancy between the number of phones Apple reported sold last year (3.7 million) and the number registered on it’s approved carrier’s networks (2.3 million). Since Apple makes big bucks with those networks, everyone suggests that Apple’s losing billions of dollars on all these unlocked phones.
But I think that’s all a big negative focus on what is, essentially, a positive thing. First off, Apple makes money on every iPhone sold. It’s like it’s selling an iPod. So they aren’t actually losing money on the sales. Second, it is likely that the bulk of these are going to places that can’t actually get iPhones, like China. So it isn’t even like there was the potential for people there to legally be using the iPhone, it’s a different market. So it isn’t cannibalizing their sales there. Third, it isn’t like there is an iPhone shortage, so people in America and Europe aren’t being prevented from buying legal phones. So Apple’s not losing money there. So… exactly what billions of dollars is Apple losing out on?
Beyond the actual question of money or potential money made or lost, I think the far, far more important thing to understand is that the iPhone is not just a phone - it is a platform. It isn’t a matter of selling a widget and counting the money, the installed base of iPhone users is a very significant business consideration and increasing the size of that base quickly is really important to Apple.
Right at this instant - it isn’t much of a platform. There’s not a big ecosystem to it - some accessories and what not. But with the forthcoming SDK this should change. With a developer community (hopefully a large one, but even if it is strictly controlled, this still matters) the ecosystem could explode. Developers want to reach a community of users - the more users there are the more developers have incentive to build cool things for it - the more cool things for it the more users want to get with it. See? It becomes a virtuous cycle of developers coding ever more functionality for an ever expanding user base. Look at Palm, it’s been coasting on this cycle (relatively recently broken) for years - it hasn’t lifted a finger and it was still doing well.
And Apple benefits from this in so many ways. If it keeps itself as the gatekeeper over legit apps (which I hope it doesn’t, but suspect it will), it gets a lot of leverage with app developers. As more developers spend more time with the iPhone they will spend less time with other platforms. As more functionality appears and more users want it it gets even more leverage with the carriers who will want the iPhone on their network. As more people use iPhones, maybe they’ll go and buy some apple computer since it looks and feels the same. Just like they did with their iPods, but even more so since iPhones have a lot more in common and a lot more to do with computers.
Why should Apple care if millions of people who probably don’t have coverage of an Apple approved carrier have an iPhone? I contend that Apple doesn’t really care - but it feels like it should do something because otherwise it’s current carriers will get pissed of. And that matters right now, but if the iPhone keeps selling like the hotcakes it is, may not matter for too much longer.
