By Jason Snell
February 3, 2015 1:15 PM PT
Product distortion field
I believe Apple is truly a company that is always looking at the big picture, I really do. The iPhone and iPad and Mac all work together, using iTunes and iCloud and even Apple Pay as infrastructure, in a harmonious way. But at the same time, it’s hard not to look at the size of Apple’s iPhone business and wonder how the success of the iPhone affects Apple’s decision-making.
Apple has sold 346 million iPhones in the past two years. In the same period, Apple has sold 36 million Macs and 138 million iPads. Or consider revenue: Over the past two years, the iPhone has brought in $214B, versus $46B for the Mac and $61B for the iPad. Put together, the Mac and iPad bring in less than half the revenue of the iPhone.
Then there’s the simple calculation that, even if iPhones do get replaced at a much faster pace than Macs and iPads, it’s undeniable that most iPhone users don’t have a Mac 1. Your average Apple customer is an iPhone user.
For the last two years, the iPhone has provided more than half of Apple’s corporate revenue, and in the most recent quarter it was more than two-thirds of the revenue. Apple is rapidly becoming iPhone Inc., maker of smartphones and… various other devices.
It’s not unreasonable to assume that the sheer gravity of the iPhone might perturb Apple’s business priorities, at least somewhat. The Mac and iPad are strong businesses on their own, but companies with one huge profit center and other smaller profit centers tend to prioritize the biggest item 2. I’m not saying that Apple is ignoring the Mac and iPad—I really do believe that Apple is very good at seeing the forest for the trees. But I do think that the iPhone’s phenomenal success has to have some effect in company strategy.
As a small example, consider the iPad. Yes, Tim Cook is bullish “over the long arc of time”, but the iOS development priority list seems to have been focused on the features that most benefit the iPhone for the past few years. With two-and-a-half times the sales, who can argue? Rumors about a large iPad with new multitasking features and maybe even a stylus have been floating out there for a while now. Maybe that will be the impetus to roll out some features that will make iPad users particularly happy.
Then there’s the Apple Watch. This is a new product category for Apple, yes, but it’s also an iPhone accessory. The few existing smartwatches that work with the iPhone seem to work despite iOS’s connectivity features, not because of them. The Apple Watch will be the only real watch accessory for the world’s hundreds of millions of iPhone users. It also won’t work with anything but iPhones, and at least this initial iteration will require a nearby iPhone for most of its functionality.
The Apple Watch is capable of being both a new product category and an accessory to an existing product category because the product it’s an accessory for—the iPhone—provides an enormous pool of potential customers to draw from. The iPhone’s success makes it much easier for Apple to invest huge amounts of time and effort in the Apple Watch.
For the iPod to become a hit product, it had to connect to both Macs and PCs. Apple initially didn’t support the PC, then did so reluctantly (with third-party jukebox software), and finally did so through iTunes for Windows, which Steve Jobs famously likened to a glass of ice water to people in hell 3.
For the Apple Watch to become a hit product, it just needs to please a bunch of iPhone users. The iPhone market is large enough that the Apple Watch doesn’t need to stake out new ground for Apple, at least not yet. (I don’t think the Apple Watch will ever connect to Android devices, but it’s possible that one day the Watch might be such a device unto itself that it simply won’t care if you have a phone nearby, or what’s on it.) It’s going to be years, if ever, before the Apple Watch becomes a product that isn’t made for iPhone users 4.
The Apple Watch is the smart play for Apple right now. I recognize that. But I still have to lament the lack of progress in a product like the Apple TV. This is a product that’s seen very little hardware improvement in ages, with software that’s in desperate need of a rethink. It’s been passed by in every way by its competitors. The only reason I keep my Apple TV around is because it’s the only way to watch stuff I bought on iTunes and use AirPlay. I keep it around because it uses Apple’s stuff, not because it’s good.
Could Apple TV be the best TV-attached box on the market right now? Sure it could, and maybe there’s even an update in the wings that will make it that. Maybe it’s even been a priority at Apple—just not the top priority. Could you look at the iPhone numbers and choose differently?
And that’s really my point. Not that Apple’s doing anything wrong, but that the iPhone’s success is so massive that it’s got to be coloring the decisions Apple makes. When we look at what Apple does—the products it announces and the ones it doesn’t update—it’s probably worth evaluating those moves while keeping this chart in mind:
[We discussed many of these same issues in more detail on this week’s episode of the Upgrade podcast.]
My guess is that probably a majority of iPhone users don’t have any other Apple product in their homes, though that might be pushing it a little bit. Still, all of us immersed in the Apple universe need to be aware that the combined Mac-iPhone-iPad experience is less common than we think. ↩
This is arguably good business sense—go with what’s working! But I’ve witnessed solid, profitable businesses run into the ground by companies who just couldn’t justify spending resources on the lesser parts of their portfolio. ↩
Best-case scenario for Apple Watch: It becomes such a huge hit that it motivates lots of Android users to switch to iPhone just so they can use it. ↩
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[Get much more watch-related stuff on our Apple Watch page.]