Monday, 28 April 2008
To lock or unlock - that is the question!
So as the buzz starts to rise in volume about the next incarnation of Apple's iPhone, lets take a look at the clever strategy of Steve Jobs relating to this ground-breaking device so far. When launched the first iPhone was innovative on a number of levels. Most people focused on the touch screen interface, or just bemoaned the lack of a faster cellular network connection and better camera. Another innovation was the revenue sharing agreements that Apple struck with the network operators that it selected in each geography. Patents have since shown that Apple considered forming its own Mobile Virtual Network Operator (MVNO) but once it decided against this path, it needed to use existing operators to get their new device launched. So it decided to lock the iPhone to give exclusivity to the selected operator on day one - and drove a very tough revenue sharing bargain which would have been impossible as a new handset entrant had they not had the success of the iPod before it.
But I don't think Jobs ever saw the locking as more than an initial sweetener - unlocking an iPhone is neither illegal nor can it be prevented. In fact it simply drives more interest in the device! The network operator's lawyers may have got concerned about this and indeed Apple has made the right noises in public about it, but Apple's own (normally very efficient) legal team have tended to sit home sipping tea! More than that, now that iPhone is established, I think we will see fewer exclusive deals as the subsequent iPhones are launched. The revenue sharing Apple gets from service plans is significant but not a core part of its strategic intention as I see it. It wants to sell as many iPhones with as much publicity as possible because that will also drive revenue in its other hardware lines, the iPod, and Mac computers. A large proportion of switchers to Mac already have an iPod or iPhone.
As subsequent iPhone models are launched, at lower price points and more flexible service plans, more people will buy it and other Apple products - this will re-enforce the strategy that iPhone was never intended to be a standalone product.