Because it’s a monopoly says Ben Thompson, speaking loosely but not legally.
From the closing of “Integration and Monopoly,” posted Monday on Stratechery:
This article is not a legal argument: in particular, I have used the term “monopoly” very loosely. What makes Apple so brilliant from a business perspective is that it has managed to, via hardware and software integration, earn monopoly profits in a way that would not normally be classified as a monopoly.
Still, it seems to me that while “integration” results in good outcomes, “monopoly” doesn’t: note the contrast between the advantages of integration I began with and the bad outcomes of late:
- The superior user experience of Apple’s integrated products somehow ended up with Apple delivering the user-hostile butterfly keyboard for four years and counting.
- Apple’s ability to leverage its user base to bring new products and features to market also meant that Apple could retard the development of NFC applications.
- Apple’s ability to drive superior profits from software-differentiated hardware is increasingly augmented by the attempt to extract rents on digital goods and/or give the company’s own services a competitive advantage.
The issue in all cases is a familiar one in technological markets, which often start in an ultra-competitive state, but quickly devolve into monopolies or duopolies as things like network effects and economies of scale takeover. We have seen similar progressions in operating systems, in search, in social networks, in digital advertising, in e-commerce — Apple pressing its advantages is hardly an exception!
The reason I find the Apple example particularly illustrative, though, is that it helps draw a line between the sort of healthy integration that is broadly beneficial, and monopoly rent-seeking that mostly goes to the dominant companies’ respective bottom lines.
My take: “Earn monopoly profits in a way that would not normally be classified as a monopoly” pretty much sums up the business model.