On Twitter, Ben Bajarin, and others, recently argued that the value in tech tends to inevitably shift from software to hardware and, finally, to services.
Hardware to software to services. Apple is in a unique position to capture content. ~ Ben Bajarin (@BenBajarin)
Ben, you’re essentially saying Apple is beginning a new business model around iOS. ~ eric perlberg (@eric_perlberg)
I’m not so sure.
I think Apple’s business model is similar to the Disney World business model. There are boardwalks and amusement fairs aplenty, but there is only one Disney World. It it the crème de la crème of amusement parks. Similarly, there are smartphones and tablets aplenty but there is only one “Apple World.” It is the crème de la crème of mobile computing.
Disney World does not charge per ride. Rather, they charge a single admission fee to allow admission to their parks. Similarly, Apple does not charge for its platform. The iPod Touch, iPhone or iPad is the price of admission to their ecosystem — the “ticket” to “Apple World.”
Hardware As A Ticket
Pundits often ignore the value of Apple’s ecosystem. They compare Apple’s hardware to the hardware of Apple’s competitor’s and, finding it wanting, proclaim it to be “overpriced”. But if one includes the Apple ecosystem in the cost of the hardware, then the premium charged by Apple for their hardware is more than justified.
Without a doubt, Disney World generates huge amounts of money from the sale of foods, concessions and hotels, but it is the Disney Park that draws the customers. Similarly, Apple makes huge amounts of money from the sale of apps, music, TV and movies but it is Apple’s entire ecosystem — not just their content — that draws the customers.
Microsoft sells its software licenses to Original Equipment Manufacturers (OEMs). They, not the consumer, are Microsoft’s true customers. Google gives away its services and sells consumer eyeballs to advertisers. The advertisers, not the consumers, are Google’s true customers. Apple, on the other hand, sells their hardware — their “ticket” to their ecosystem — directly to the end user.
Microsoft, Google and Apple all want the end user to have a superior user experience. But since Apple sells their hardware directly to consumers, it is easier for them to stay focused on that task. With Apple, the customer and the end user are one and the same. Apple’s desire to help its customers is perfectly aligned with Apple’s desire to help its end users. One might call this a Strategy Bonus. Microsoft and Google, try as they might to please the end user, have a customer layer between themselves and that end user. Apple does not.
Different, Not Best
Am I saying Apple’s business model is superior? Not at all. Throughout my life, I’ve enjoyed going to my local boardwalk and I would be unable to do that if the Disney World model were the only amusement business model available. On the other hand, it took a unique man with a unique vision to create a unique place like Disney World. It’s a one of a kind, world class, amusement experience. And the world would be a lesser place without it.
Similarly, it took a unique man with a unique vision to create “Apple World”. I’m glad the world has Microsoft and Google. But the world would be a lesser place without the unique vision that created Apple. It’s the Disney World of tech.