Apple in Wireless: Strategic options in a converged marketplace

SUMMARY

The success of the iPod has redefined several markets, namely the MP3 player and digital content markets, as well as revitalised the Apple brand itself. This may in turn disrupt the computing and convergence landscape.

Apple's history shows a continuous leap in technological advancements and a new or upgraded offering on average every six months. Visiongain believes that the years 2006 and 2007 will see product offerings accelerate as Apple focuses on convergence technologies. One such product is the "iPhone", an Apple-branded mobile handset. What is Apple's strategy and HOW will it affect you? By purchasing this report, you will find out.

The iPod capitalised on the emerging digital content market that has proven elusive to other industries and iPod competitors. Apple shipped over 14 million iPods during the quarter, representing 207% year-on-year growth, and visiongain estimates total shipments of over 40 million iPods. Thanks to close synergies and integration with the iPod, over one billion tracks have been downloaded from the iTunes Music Store.

As convergence enters full swing, media companies, wireless carriers, vendors and others are searching for ways to reach new consumers and generate extra revenues - mobile phones and iPod devices support video and music download capabilities, and content owners are providing exclusive music and TV for both device platforms.

Apple acknowledges the threat mobile handsets pose to portable MP3 players in the long term. As such, it has begun to make a mobile play - initially, via the Motorola partnership. However, we argue that Apple could embrace mobile more fully and pose a greater threat to the cellphone industry itself - as an MVNO challenging carriers and a cellphone brand challenging handset makers. Find out what options are available to Apple and how your organisation can be involved.

Among others, this 80+-page report analyses:

• Apple's core products and services
• The company's strengths and weaknesses
• The opportunities that exist for its entry into wireless
• The impact of such a move on Apple and the cellular/wireless industry

Questions answered in this report include:

• How does Apple manufacture, distribute and market its products and services?
• How do these products and services interact or overlap with the cellular
• industry?
• What is the Apple's strategic vision and future product roadmap?
• As a digital content retailer, Apple is leading the market - can it transfer
• this success and its brand across to wireless? What strengths would Apple be
• able to leverage with potential entry?
• What opportunities and threats would Apple's entry into mobile create?
• What impact would this have on both Apple and the industry?
• How would becoming an MVNO change Apple's business model?
• What impact will French legislation have on Apple and DRM in general?

Why you should buy this report:

• Mobile operators - Find out how to maximise the value of hosting an Apple-branded MVNO on your network. Also discover what kind of competition Apple would offer were it to become an MVNO.
• Handset vendors - Assess Apple's iPod strategy and the likely impact of that the iPhone device would have on your business. Find out what specifications Apple would demand from a mobile phone.
• Content providers & media companies - Learn what opportunities exist in partnering with Apple. Gain insight into Apple's general strategy and how it compares to yours

TABLE OF CONTENTS

Chapter 1 Executive Summary

• 1.1 Success in innovation
• 1.2 iPod and iTunes have redefined the market
• 1.3 Apple's changing business model
• 1.4 New technological advancements at Apple
• 1.5 iPhone on the horizon
• 1.6 Wi-Fi and VoIP-enabled iPods

Chapter 2 Products and services analysis

• 2.1 Apple is surrounded by an entire ecosystem
  • 2.1.1 The iPod is penetrating home and in-car connectivity
    • Chart 2.1: US cars with iPod connectivity, 2006-2011 (%)
    • 2.1.2 How the iPod shaped the MP3 player and legal download markets
    • 2.1.3 iPod's simplicity is its major appeal
• 2.2 Despite low R&D, Apple enjoys greater ROI
  • Table 2.1: Comparative R&D expenditure by company ($ billions), 2003-2004
• 2.3 Impact of French DRM legislation on Apple
  • 2.3.1 The US response
• 2.4 Possible regulation in the US
• 2.5 Other disputes
• 2.6 Product overview
  • 2.6.1 Hardware
    • 2.6.1.1 AirPort Express
    • 2.6.1.2 AirPort Extreme
    • 2.6.1.3 iBook G4
    • 2.6.1.4 iPod
• Chart 2.2: iPod shipments, 2001-2006
  • 2.6.1.4.1 iPod's evolution
    • 2.6.1.4.2.1 iPod Photo
    • 2.6.1.4.1.1 Fifth generation iPods
    • 2.6.1.4.1.2 Future models
  • 2.6.1.4.2 The iPod mini
  • 2.6.1.4.3 iPod Nano
  • 2.6.1.4.4 iPod Shuffle
  • 2.6.1.4.5 iChat AV and iSight
  • 2.6.1.4.6 iPod Hi-Fi
  • 2.6.1.5 MacBook Pro
• 2.7 Software
  • 2.7.1 iLife
  • 2.7.2 iTunes Music Store
    • 2.7.2.1 Impact of Apple's iTunes on the music market
    • 2.7.2.1.1 Device-service integration
    • Table 2.2: iPod sales before and after iTunes launch
    • 2.7.2.1.2 Value
    • 2.7.1.1.3 Portability
    • 2.7.1.2.4 DRM and personal use rights
    • 2.7.1.2.5 Alternative to illegal file sharing
    • Table 2.3: Pros and cons of iTunes
    • 2.7.1.2.6 Audiobooks
    • 2.7.1.2.7 Content
  • 2.7.2.2 iTunes 4.9 and podcasting
  • 2.7.2.3 iTunes has shown online downloads can succeed
    • Chart 2.3: iTunes downloads, 2004-2006
  • 2.5.13 QuickTime
  • Table 2.4: QuickTime features
• 2.6 iPod applications and accessories
• 2.7 Apple's manufacturing and supply
  • 2.7.1 In-house vs outsourced work
    • Table 2.5: Apple's manufacturing partners by product
  • 2.7.2 iPod components
• 2.8 Market expansion
  • Table 2.6: Global iTunes statistics
  • 2.8.1 Pan-European
    • Table 2.7: iTunes European penetration
  • 2.8.2 Japan
    • Table 2.8: Vehicles offering iPod integration in Japan
  • 2.8.3 Australia

Chapter 3 The iPod

• 3.1 A lost niche?
  • Chart 3.1: Apple revenues by product, 2005
• 3.2 Phone functionality remains a whole in Apple's convergence picture
  • 3.2.1 Why the iPhone will succeed
  • 3.2.2 Taking on the wireless carrier market
  • 3.2.3 iPod and VoIP
• 3.2 Podders
  • Chart 3.2: iPod ownership by age group
  • Chart 3.3: iPod penetration by household income
• 3.3 Latest device releases
• 3.4 Future models
  • Chart 3.4: iPod market share
• 3.5 Competition
  • 3.5.1 DNET DM751
  • 3.5.2 Play Station Portable
• 3.6 Does Apple have sufficient scale and know-how for an iPhone?
• 3.7 Positioning the iPhone with the iPod

Chapter 4 The handset market

• 4.1 Current market landscape
  • 4.1.1 Loss of brand value
  • 4.1.2 Combating brand erosion
• 4.2 Mobile video and TV
• 4.3 Competitor line-up
  • Chart 4.1: Shipments of mobile phones with built-in MP3 players, 2004-2010
  • 4.3.1 ROKR
• 4.3 iPod's and iPhone's odds
  • Chart 4.2: Global sales of portable stand-alone MP3 players, 2003-2010
    • Table 4.1: Apple's strengths and weaknesses
    • Table 4.2: Most popular MP3 player models, December 2005

Chapter 5 An Apple MVNO?

• 5.1 Apple's likely market positioning
  • Figure 5.1: Niche MVNO positioning in the MVNO business model
  • 5.1.1 The reseller model
  • 5.1.2 Pure/full MVNOs
  • 5.1.3 Niche MVNOs
• 5.2 he benefits of MVNOs
• 5.3 Rationale for becoming an MVNO
• 5.4 Set-up costs to become an MVNO
• 5.5 Factors affecting the success of MVNOs
• 5.6 The importance of MVNO branding
• 5.7 Lessons from Virgin Mobile UK
  • 5.7.1 Why Virgin failed in Singapore
• 5.8 MVNO landscape
  • Table 5.1: MVNOs in the US
  • Table 5.2: Most attractive markets for new MVNOs
• 5.9 Apple could leverage multiple benefits with an MVNO
  • 5.9.1 Appealing to music and video consumers
• 5.10 Step 1: MVNO partnerships
  • 5.10.1 Helio
  • 5.10.2 Disney Mobile
• 5.11 Choosing the right carrier partners
  • Table 5.3: Most suitable countries for an Apple MVNO
• 5.12 Retail outlets and service pricing

Chapter 6 Recommendations

• 6.1 For handset vendors
• 6.2 For applications providers & media companies
• 6.3 For mobile operators

Appendix A Lead author's profile

Appendix B About visiongain

Appendix C Report evaluation form

Companies listed:

• 3GPP
• 7-eleven
• Alltel
• Amp'd Mobile
• AOL
• Apple
• ASHA
• Asustek Computer
• Blu-ray Disc Association
• BMG
• Center for Digital Democracy
• Chrysler Group
• Cingular Wireless
• Cisco
• Creative
• CSG Systems
• Debitel
• Dell
• Disney
• DNET
• DVD Forum
• EarthLink
• EMI
• Firstgate
• Helio
• Hewlett-Packard
• Hitatchi
• Hon Hai Precision
• Intervalz
• Inventec
• Jeep
• KDDI
• LightSurf Technologies
• Linear Technologies
• Microsoft,
• Motorola
• MTV
• MySpace
• Napster
• New York University
• NIDOCD
• Nokia
• NTT DoCoMo
• O2
• Official Charts Company (OCC)
• Orange
• PortalPlayer
• Qualcomm
• Quanta Computer
• Razer
• RIM
• Rogers Wireless
• SanDisk
• Sharp Electronics
• SK Telecom
• Skype
• Sony
• Sony Ericsson
• Sony Music Entertainment
• Speak Out
• Sprint Nextel
• Telmore
• Tesco
• Texas Instruments
• The Carphone Warehouse
• T-Mobile
• Toshiba
• Universal
• US Patent and Trademark Office
• Verizon
• Virgin Mobile
• Visage Mobile
• Warner
• Wolfson Microelectronics
• Ztar