The App Store Changes Apple's Mission

As Apple (AAPL) investors prepare to listen in on the Q4 conference call, I want to give you some big picture things to think about. The most important thing you will hear in the call concerns the progress of the App Store. Apple’s App Store has opened up a can of worms that will define the 2010-2020 decade. Online distribution of content and software will quickly become the only way to distribute. 24 months from now we will laugh about how we used to cut down trees to print newspapers that were hand delivered to our homes. How archaic. The fact that all major newspapers and magazines are offering apps through the Apple ecosystem cements the future success of Apple’s Tablet device as the digital solution to the bygone era of print media. This part is easy to see coming but what else should we prepare ourselves for? What’s coming in 2011 or 2012?

The fundamental purpose of Apple hardware will change. The biggest money making opportunity on planet earth is the current opportunity to build products that properly utilize apps. The key to innovation will be to figure out how to effectively merge multiple functions onto a single device. The iPhone is the perfect example. It filled so many needs through seamless integration. The Tablet will do the same.

What’s next? It will be Apple TV. Most analysts assume that Apple’s focus with Apple TV is to get movies and television shows from iTunes into the living room. They’re waiting for Apple to revolutionize the industry in the same way they revolutionized the music industry. Stop holding your breath. It’s not going to happen. I don’t think Steve Jobs cares one bit about digital movie distribution. It’s already widely available and people still don’t care for the technology. There’s a reason why after three years of Apple TV it’s still ‘just a hobby’ for Apple. The future purpose of Apple TV will be to get the App Store into the living room. Apple is about to do to the gaming industry what they did to the music industry. They will grow market share while cutting margins. Additionally, apps specially built for the television will customize our social networking interaction in the living room. Instead on being just a one way viewing device, the television will become the hub for socializing with friends and family. Living in a true global neighborhood is right around the corner.

What other hardware can be built to utilize the offerings from the App Store? You’re only limited by your imagination. Apple’s developer kit allows software to customize and infiltrate every aspect of our lives. And it’s all closed to outsiders thanks to Steve Jobs’ insistence that Apple build and control everything. The trend of relying on apps has just begun. Right now the popular phrase in commercials is ‘there’s an app for that’. Soon the phrase will evolve into ‘there’s a device for that’. The iPhone, the Tablet, and the Apple TV are just three with more to come. An Apple revolution is going to take place in 2010-2020. It will make Microsoft's (MSFT) dominance of the last 25 years look remedial. By shutting out competition to their OS, Apple is the one and only company able to build the needed hardware. For more to come check out applerevolution.com. It's coming.

Disclosure: Long AAPL.

Comments

[GetMeOnTop:]

Great article, I agree 100%

Oct 16 09:01 AM

[NoGambler:]

The Japanese hardware companies that produce boxes for dedicated gaming are already scared silly of Apple. But it isn't just the app store that threatens them.

They are also being surpassed by the input patents that Apple has been quietly filing in the past year. Couple these patents with TV, which your article identifies as a future vehicle for living room social networking, and collaborative gaming becomes possible.

I am extremely long in AAPL because of its business model. Not that the narrow band trading right now isn't calling for steely nerves...

I think your article is basically right. For Apple, app store will be the platform for their hardware.

Oct 16 10:33 AM

[mollytjm:]

wonderful article, Jason! So many analysts still don't 'get' Apple. No one has the ability to innovate like they do but the biggie is that they really care about the user/customer experience and all you have to do is use one of their devices to feel this. They have the vision and capabiity... and LOTS of $$$ and no debt. This isn't Microsoft where people wait 7 years and then get Vista and Zune. That is so 'last century'.
one day last week i left my briefcase home and had only my car keys. i didn't actually need anything else, but when i realized i didn't have my iPhone, i turned the car around and went back to get it! It's become a part of me in a way a 'phone' never has.
Long APPL

Oct 16 11:00 AM

[pk de cville:]

Apple TV ==>

Packaged as a large iMac (30"+ w/ front facing video) becomes a video cam for families, friends, and business. People will connect with each other in chairs, couches, desks, and tables through bandwidth sparing iFrame, the new little brother std to HD Video just shipped by Apple.

iFrame uses 1/4 the bandwidth of 1080 HD video.

Bring on the globally transformative expansion of video communications across TVs, iPhones, Macs, PCs AND, of course, Apple's new expression dominantly creative innovation.

Oct 16 11:31 AM

[brewer:]

I am not sure about apple tv or the tablet, but there are so many things going for aapl now that it's hard to see them as the trading stock they has been.

When will wall street see this? Microsoft is in so much trouble, but the share price doesn't show it. How many utter disasters can they have before the sell off begins?

I really don't see how win 7 can be a success, considering how little it offers, how difficult the upgrade path is from XP (if you could even call it that) and how it is priced and marketed.

Oct 16 11:33 AM

[vpwinner:]

Your strategic insight into AAPL continues to amaze me. Keep up the good work Jason.

Oct 16 11:42 AM

[jack dee:]

> 24 months from now we will laugh about how we used to cut down trees to print newspapers that were hand delivered to our homes<

i assume this is the comic relief?

Oct 16 02:27 PM

[jack dee:]

>how difficult the upgrade path is from XP <

this line alone is the proof that Brewer has no idea whats going on in the world.

MSFT and the street expect almost all sales of win7 to be commerical installs, and sales with new machines.

In general the OS upgrade path for home use is with the purchase of a new machine.
The fans, power users etc, have no big issues doing a clean install and backing up files.

But hey go ahead and FUD.

Oct 16 02:54 PM

[Constable Odo:]

On Oct 16 02:27 PM jack dee wrote:

> > 24 months from now we will laugh about how we used to cut down
> trees to print newspapers that were hand delivered to our homes
> <
>
> i assume this is the comic relief?

On the block of private homes where I live in NYC hardly anyone gets newspapers delivered anymore. Most of the people stopped getting deliveries a couple of years back. Most of my neighbors either watch the news on TV or use their computers and probably some just buy newspapers at the many stores in the neighborhood on the way to work.

Oct 16 08:53 PM

[Dialectical...:]

True, yet I read one analyst who suggested that the reason people won't be converting to macs is that they would rather upgrade their existing computer because it is cheaper. I don't buy this argument either. I agree with you that the path to Windows 7 is through new machines. But many consumers buying new machines will indeed be buying cheap Linux netbooks or full featured macs.

Several questions remain: How quickly will businesses upgrade? How many consumers sticking with low power and cheap netbooks will go the Linux route to save even more money? How many folks buying full blown boxes or full featured laptops are going to get a mac?

Win 7 will undoubtedly be better for MSFT than Vista. But they may not be able to repeat the XP days ever again. The computer world changes quickly and MSFT's model of offering expensive OS upgrades, tiered in price by arbitrary feature sets (Student, Home, Pro, Enterprise, etc.) is dead. Only they don't know it yet. Another memo MSFT didn't get? Imagine my surprise. They milked their monopoly for what it was worth and many businesses and individuals went along because they had no other choice. If MSFT wants to thrive and grow in the next 10 years, or even maintain market share, they need to start being more sensitive to what consumers actually need and what they think is reasonable to pay for what they need.

This comment is being written on a 5 year old HP running XP, by the way. I have used Windows since 3.1 and only recently began using macs. Going forward I can see no reason to ever buy a windows OS machine again. They would need to give me a reason by giving me compelling features that worked well (and fast and seamlessly) at a price that doesn't make me think they're privately snickering at how dumb I am.

On Oct 16 02:54 PM jack dee wrote:

> >how difficult the upgrade path is from XP <
>
> this line alone is the proof that Brewer has no idea whats going
> on in the world.
>
> MSFT and the street expect almost all sales of win7 to be commerical
> installs, and sales with new machines.
>
> In general the OS upgrade path for home use is with the purchase
> of a new machine.
> The fans, power users etc, have no big issues doing a clean install
> and backing up files.
>
> But hey go ahead and FUD.

Oct 17 02:14 PM

[jack dee:]

>>>How many consumers sticking with low power and cheap netbooks will go the Linux route to save even more money? <<<


thats an easy one, less than 4% have gone to linux and that does not factor in those who are buying a linux netbook and clean installing a copy of windows ....

so good luck with that whole linux thing, seems to have worked out so well over the last ten years...........

Oct 20 12:33 PM

[gino777:]

This is all speculation. None of you spitting opinions has a clue on what Apple plans are, and neither you are in a position to know because only the big wigs at Apple know. Regarding the stock too it'd be very scared to take any position because people is too much involved emotionally with it, thus its price is even more detached from fundamentals compared to other stocks. Beside, Jason article doesn't make much sense. If you read it carefully it talks about 'apps' and 'platforms' without putting them into any logical relationship. He just giggles the words around. It's pub talk. He probably wrote down at the pub anyway. Also don't forget that none of the big analysts at the banks could see this big recession coming. This is because they are all jokers. I know that because I work with them (sadly). Who's this Mr. Schwartz anyway to feel his opinion is worth a cent?

Oct 21 12:03 PM

[gino777:]

I've just seen that Jason has written a book about his opinions on Apple. Is he only trying to push the stock with his article and book?
Jason, this is an extract from your profile:
"He also sits on the board of directors for the 'I Won't Cheat' charitable foundation whose purpose is to inject ethics into America's future"

Do you call it ethical to play normal folks from the street into buying stocks you're long on?
Folks, don't forget it was people like Jason at large investment houses that got all their forecasts wrong and got the economy where it is now (after having their jobs saved by government capital injections). Some brick laying would teach them the meaning of a productive job rather spending all day betting on the market and peddling stocks.

Oct 21 12:13 PM

[JW.USC:]

No, but most of your Microshill comments are.

On Oct 16 02:27 PM jack dee wrote:
> i assume this is the comic relief?

Nov 09 03:39 PM