A crazy week finally coming to an end. Good things happened this week, signed the lease of another floor of beautiful office space and interior work begins today. Will take at least 5-6 weeks before the Herman Miller chairs arrive from Michigan and the Barcelona chairs and other furniture arrive from Milan. It is a great space and we're lucky as this space was only listed in the market last week. We will have lots of space for collaborating. Innovation is about attacking the white space, literally we will be creating lots of white space for innovation. I think this additional office will end up looking like an Apple Store.
Talking about Apple, I remember my first Sony Walkman, it was 1970 and I don’t remember when it officially ceased production when replaced by portable CD player. I think around 1985 so we are talking about a 15 years product lifecycle. I think in year 6 the Walkman eventually being fully commoditized and the market was flooded with low cost and differentiated players. They are still leveraging the Walkman name, Here’s the good part, when they launched its line of smallest flash-based music player in 2003, the players used Sony's proprietary ATRAC format and won’t play MP3 format. So it is an MP3 player that doesn’t play MP3. They were available in a number of capacities, up to 1 GB and that’s pretty impressive. The first of these Walkmans was the NW-MS70D which had an impressive capacity of 256 MB. They were not bad products, but totally out of touch with the digital culture. What about iPod? No question it will eventually fade away like other great innovations, but when will that happen?
On Oct 23, 2001, Steve Jobs announced that “listening to music will never be the same again,” and that marked the big comeback of Apple. Apple may not have invented the digital music player but it did turn the MP3 player into a popular culture phenomenon. The first iPod holds 5Gb of music – about 1,000 songs and costs $500 (or £349). I remember a story about how a tech guy posted a story in 2005 about how he proposed to his girlfriend via iPod. He bought his girl an iPod Nano with his proposal engraved on the back - the best part of the story? She said yes.
This is year 7 since the first iPod launch, Apple will still continue to sell millions of units every quarter, at least they will sustain good unit sales and revenue growth for a while. But the company is seeing the end of this product platform and the strategy would be to milk this for 3 (or 4 max) more years. Don’t expect any major innovation for the iPod. The iTouch is probably the last big change.
The iPhone will take over as the focus and expect Apple to come up with different models, IPhone Nano or iPhone Business or iPhone Air? Convergence would force multi-function devices to specialize and the iPhone is in its second year of a 5-6 year of innovation cycle. Apple will leverage their technological innovation and ride the cost curves in the next 24 months to bring a new level of value to customer. Apple will not solely compete on the high end but also the lower middle market. Let me make a prediction. Expect a $750 MacBook in 18 months (there's rumor about a $800 Macbook but I don't think that will happen, Apple has not reason to push that under $1,000), a $150 iPhone and free iPod (or subsidized), just subscribe to iTunes on a monthly basis.
The other growth platform would be movie download, existing Apple owners are twice as likely as others to use an online movie download service that extends to the home TV. If Apple TV drops below $200, the demand will jump and push sales above $10mm.
I think the iPhone will become the smart controller of home entertainment including music on your computer or Apple TV and control playback from anywhere in and around your home. Or even as remote control for your coffe maker. Here's one new application for the iPhone. How about iDating?
