Interviews with Digital Media Thought Leaders

Video Summary: Future of Apple

Podcast Video | Posted by Phil Leigh on May 27, 2010

To Download Video (rather than stream it) click here.

Today’s video podcast narrates a PowerPoint presentation summarizing our recent Future of Apple market research report.

Although the report is 68-pages, it is also a multimedia document that includes links to videos and animations to demonstrate key innovations instead of merely describing them with text. Included is a five year revenue forecast by business sector as well profitability analysis by product line. We identify four growth engines; two already existing and two yet to be announced. Apple’s ecosystem strategy is forecast including an analysis of whether the company should license its operating system in response to Android’s open platform.

There will be three wellsprings of growth: (1) Present Products, (2) New Markets and (3) Retail Stores. Present expanding businesses include iPhone, iPad, Macs, and iTunes. Two future opportunities will be The Digital Living Room and Transactional Services.

Significantly, AT&T recently announced that over half of iPhone traffic is data as opposed to voice conversations. Not only does the statistic underscore that the iPhone defined a new product category for itself, but also implies that the iPad will do the same on the way to major success. The triumph of both products will be amplified by the touch-screen interface which shall become a new computing metaphor as significant as the mouse & icon replacement of the command line about 20 years ago.

Despite their 100%-plus price premium over Windows computers, Mac’s will gain market share for years to come. First, during the past decade many Windows users acquired a favorable impression of Apple after buying non-computer products such as the iPod and iPhone. The constructive experience leaves them increasingly interested in trying Mac computers, especially given the malware common in Windows. Second, Digital Media is becoming steadily more important and Mac’s have a tradition of superiority in such applications.

Despite comments by Apple management that AppleTV is merely a “hobby”, the market potential of the Digital Living Room of the Future is far too big for Apple to ignore. We calculate the opportunity at over $220 billion in the USA alone which is about four times Apple’s estimated Worldwide revenues this year.

Partly owing to the potential of the Digital Living Room, Apple will evolve iTunes and the App Store so that Transactional Services become an increasingly important revenue source. Two examples are advertising and a Web 2.0 version of iTunes.

Apple’s ecosystem strategy will bifurcate. Mac’s will continue to be largely self-reliant in terms of applications software. One notable exception is the Microsoft Office suite. Other products, such as the iPod, iPad, and iPhone, will principally rely upon third party developers to submit applications for the App Store. Apps are preferable to open-source licensing of the Apple OS because they avoid malware.

It’s unnecessary to license the OS as a competitive response to Android. Prior to Microsoft’s dominance, vertically integrated IBM was the computer industry’s most successful participant. When the PC was introduced with commercially available components, MS-DOS became the common denominator. This enabled clones to suck the value out of IBM hardware. During the industry’s ensuing rotation to a horizontal structure the opportunities for innovation were abundant. However, after Internet usage become common the rotation also gave miscreants plentiful incentives to create malware.

Recent experience increasingly suggests that the successful computer industry model is rotating back to the vertical. No company is better suited to benefit than Apple.

In short, Apple will be one of the most potent forces shaping the future of media. You can learn more by downloading a free three-page prospectus to our Future of Apple research report here.