“Every member of Apple’s ecosystem — hardware, services, content — is in the business of helping other members of the tribe generate higher margins.” —Jean-Louis Gassée
From Gassée’s Apple No Longer Is an iPhone Company, in this week’s Monday Note:
Apple’s iPhone Game Plan is in plain view, repeatedly explained by its executives to Wall Street analyst in Earnings Release conference calls and other public pronouncements: Let the iPhone stay in its natural element—the Affordable Luxury segment, analogous to Audi for cars or Burberry for clothing—and, from there, play the ecosystem game.
Today, iOS worldwide market share stands above 16%, while Android is close to 80%, with a smattering of “others” rounding out the total. Even if iPhone market share continues to decline, Apple won’t engage in the race to the bottom embraced by many Android OEMs. The iPhone will prosper by sacrificing volume to profitability, just as Macintosh prospers with a minority market share.
Easier said than done, you might rightly say. And that’s where one needs to step back and consider Apple’s overall money-making strategy in a broader context: The Ecosystem Game.
It’s a game where every member of Apple’s ecosystem — hardware, services, content — is in the business of helping other members of the tribe generate higher margins. The iPhone sells Watches, Watches sell iPhones and AirPods, which sell Music, which sells HomePods. tv+ and Arcade sell Apple TV4Ks that, in turn, make Macs and iPads more helpful in offices and homes, and so on. It’s not a network effect in the academic sense, but I’ll still use the term for my lack of a better economics vocabulary.
My take: Well put. Life is in the margins.