Will the New iPhone Be Enough to Hold off the Competition?

Monday brought the announcement (sans Steve Jobs) of the curiously named “iPhone 3G S.” I guess the name is intended to suggest this is merely an incremental improvement on the iPhone 3G (which remains in the product family); if not, it’s an example of the foolishness of Apple’s (AAPL) rabidly minimalist naming strategy as when “iPod” could mean “iPod 5th Generation late 2006” or “iPod (dock connector)” or “iPod (scroll wheel)”.

The phone adds a number of features available in some (if not all) competing phones: video recording, a compass, and (eventually) MMS support. The camera goes from 2.0mp to 3.0mp, faster performance and supposedly better battery life. Even with voice command and supposedly 2x better performance, it still seems like a slightly enhanced iPhone 3G, not the radical leap ahead of rivals that the 1.0 iPhone brought back in 2007.

Of course, one of the problems that Apple has is that it has two models — this year’s and last year’s, both mid-market smartphones — rather than a range of products like RIM (RIMM) or Nokia (NOK). Take, for example, the camera. The iPhone camera goes from 2.0mp to 3.0mp — roughly equivalent to a Blackberry Curve (but without the zoom). But the camera on the high-end Nokia N97 is 5.0mp, as is the more affordable Nokia 6220. (Samsung (SSNLF.PK) is pushing the envelope even further).

The big news is the enhancement to the business model. The FT captured what is likely to be Apple’s main push this year, with the next iteration of the App Store:

A big innovation is that the store will start allowing developers to collect money not just when a user buys and downloads an application, but through follow-on transactions or subscriptions. Apple is likely to show off some of the most compelling repeat-purchase offerings at the conference.

The change dramatically increases the potential pay day for developers, provides Apple with an additional revenue stream from the percentage it takes on app sales, and gives users more choice – and more reasons to stick with the iPhone instead of switching to the me-too hardware reaching the marketplace.

Some of the biggest beneficiaries among developers, at least at first, will be game publishers. Six-year-old Gameloft (GLOFF.PK) already has dozens of titles for the iPhone and iPod touch, including Asphalt 4, a racing game that allows players to use the device as a steering wheel.

In Asphalt 5, players would be able to pay more for extra cars and different tracks, and suggest their friends do the same, said Michel Guillemot, Gameloft chief executive.

In other words, Apple has average hardware, superior ease of use on software, and a distribution and monetization system unmatched in North America or Europe. (Of course, NTT DoCoMo (DCM) had a comparable monetization system with i-mode almost a decade ago). The question is whether these advantages will be enough to hold off the proliferation of models by Android and other competitors.

Disclosure: None.

Comments

[rajsekar:]

I am waiting for a $49 iPhone for the holidays, or may be buy one iPhone for $99 and get one free offer from AT&T. What idiots! People were eager to get an iPhone because it was a rare gadget in July 2007. It slowly became a mainstream phone with release of 3G in June 2008 and price reduced to $199. Now it becomes a bulk commodity with $99 price range. Didn't everyone see this phenomenon with Moto Razr phone four years ago. Demand for iPhone will drop with this price cut because of psychological issue. What's the big deal if every Tom, Dick and Harry has an iPhone? People would rather use a Pre, RIM, Nokia thin phone or something else. Apple has managed to convert a Porche into a Toyota within two years and this is going to hurt them badly. In the same argument, why not reduce Macbook prices to match Dell, HP and Toshiba. Am I missing something here? Also speaking of 50,000 apps. that all analysts keep referring to, majority of them are completely useless and non-productive ones. I have downloaded nearly 200 games and apps. which are hopeless. What's the point in having a huge app store filled with junk stuff? Nothing but idiots.

Jun 11 09:04 AM

[TCK:]

By most accounts, the IPhone is still not a viable business tool as the Blackberry is superior for email, typing, etc.

With the latest moves, Apple may stay the "Gadget Company" for niche products as currently perceived.

Jun 11 09:16 AM

[mollytjm:]

wait a minute! first of all, the S isn't just there for nothing, it means SPEED. the iphone loads pages twice as fast from the web. it has an actual OS which is terrific and makes for seamless and easy back up and updating a snap..and also going back and forth between the computer and the phone.
anyone who thinks Apple is a gadget company has no idea about the expansion of technology. everything you own is a 'gadget', including your dishwasher. smartphones are new technology and they're here to stay.
Apple has made steady and steep inroads into all the markets it's entered. It has something most companies don't...it actually cares about it's customers and has the highest customer rating of all tech companies.
There's a reason. They innovate the best. They don't take 7 years and then put out Vista...and then put out a 'new' product that's actually the old product!! They fix problems, fast.
They have multiple streams of income...no one trick pony, like Palm. (now THAT'S a niche product)
They have $$$... lots of it.
They have a huge team of brilliant people who have put out a beautiful smartphone that does a lot more than any other smartphone... it's called the app store. and if you think others are going to be able to compete with it, think again... they'll be playing 'catch up' forever!
Snow Leopard is amazing..there's no OS even close...Macs with Leopard even run Windows better than a PC. Eventually the iPhone will be a full fledged computer...it's almost there now...and Snow Leopard will make it even better.
This is technology folks, not designer sheets. The prize goes to the best and FASTEST innovator: Apple.

Jun 11 09:41 AM

[Uncle Miltie:]

Here is the most telling evidence about how popular the new iPhone will be - the teens in my neighborhood. In my previous informal poll of them, every single one of them wanted an iPhone, but was held back due to the entry price. Mom and Dad didn't want to spring for a $500 (in 2007 or $200 in 2008) phone for their kid.

At $100, the equation changes dramatically. Again, polling the 8 teens in the immediate vicinity of my home produced 1 who already had an iPhone, and 7 who want one. Probing further, 5 of the 7 were optimistic that they could convince Mom and Dad to spring for a $99 iPhone, while the other two already had cash saved up from their part-time jobs.

Think that the $99 price is a mistake or an accident? Think again. I expect to see absolute sales blowouts come Christmas time, if not sooner...

Jun 11 10:32 AM

[brewer:]

$99 iPhones selling at wallmart are going to be a very big hit. Don't underestimate that!

There is no longer a cost barrier to owning one. No other company has come CLOSE to catching up, in ANY area of the iPhone's dominance (and there are many). Just adding movie capability isn't the way they went about it. That would be more like a brain-dead company like Nokia or Motorola or RIMM would do it. Apple did it better, they added tap to focus. That is brilliant, I can't do that on my high dollar Nikon, and you can bet I would like to.

Jun 11 11:25 AM

[rajsekar:]

Welcome back Brewer, I thought you joined Apple to help them during Steve's sick leave period. I was also hoping many product launches on June 8 since hard core Apple fans like you are drooling over whatever Apple churns out. As long as Apple survives with supporters like you, they can sell whatever they want. Bunch of idiots.

Jun 11 12:33 PM

[Frank Castle:]

Can we all stop saying the $99 iPhone. It's not. No one can walk into at&t/wal-mart or Apple store put down $100 and walk out with an iPhone.

You have to commit to a 2 years carrier plan which is what average of $75-100 a month (plus whatever they charge for tether / MMS) So your $100 is now $1800 if not more. How's those kids in the neighborhood affording that and better yet what parent is dropping that kind of coin?

And please RIM now has 3 models at or below $100 on multiple carriers so handheld price is not holding back the masses. In the current economy many people are questioning how they spend their money and a pricery cell phone bill is not a huge priority for many.

Jun 11 08:44 PM