By Carl HoweSteve Jobs heralded yesterday's Macworld keynote address with the words, "We are going to make some history today." While the introduction of Apple TV and the multifunction iPhone certainly are a new direction for Apple (AAPL), we believe that Apple's marketing muscle will have a big effect on the rest of the consumer electronics and telecom industries will be just as profound. Just how is that? Here are nine effects we see:
1. Apple TV is a wake-up call to cable TV companies for unbundling. With high-definition outputs and iTunes' library of nearly every hit TV show, suddenly it's no longer so clear why consumers should subscribe to big packages of TV channels they never watch. With many consumers now weaned from real-time TV watching by digital video recorders, a lot of those consumers will now look at the fact that their $50 a month to their cable provider buys at least 20 TV episodes from iTunes AND a NetFlix subscription. At least some of those consumers will give up their never-watched subscriptions to the Watch The Paint Dry channel and opt for Apple's pay-as-you-go plan -- especially since Apple's shows can moved to laptops and iPods as well.
2. If it doesn't have an Apple deal yet, TiVO (TIVO) should camp out at Apple looking for one. Apple TV's price point of $299 proves that Tivo's $800 high-definition TiVO box is priced way too high. And just as cable company subscriptions will feel the pinch of iTunes-fed TV, so will TiVO subscriptions. With TiVO's future already threatened by cable company digital video recorders, TiVO needs a company who market the value of its technology in ways that it just can't afford. A TiVO application on Apple TV would do just that.
3. Nokia (NOK) and Motorola (MOT) just got Excedrin headache #15. No one wants to be in Motorola CEO Ed Zander's shoes today. After announcing fading demand for Motorola's hot product a few days ago, a product that Motorola has no chance of replicating takes the press by storm -- and it isn't even shipping yet. Motorola and to a lesser extent Nokia both now have a huge marketing challenge to go up against one of the strongest brands and technology players in the world, and it's going to take much better programs than "Hello Moto" to even compete.
4. Microsoft's Windows Mobile now looks dated. Every cell manufacturer that has bought into the Windows Mobile business model where Microsoft dictates a bad user experience and makes the phone manufacturer pay for the privilege should be looking very carefully at their Microsoft contract today. Microsoft won't have anything comparable to the iPhone for years (despite Windows Mobile now being on version 5), so phone makers will face tough choices: discount their products to offset the poorer user experience, or license more software to improve the experience over and above what Microsoft provides. Either way, it's going to get ugly. Palm and RIM stocks are already suffering and there's lots more of that to come.
5. Mac OS X software development got a huge shot in the arm. Any Mac OS X software developer just saw the market for their products expand, since the iPhone runs Mac OS X. With a common set of development tools and APIs and world-class networking code, the iPhone is likely to have hundreds, if not thousands, of add-on software applications when it starts shipping, with more to follow in years to come -- and that will only increase its attractiveness as a new platform.
6. Microsoft's (MSFT) Zune marketing just had its legs cut off. Microsoft's Zune music player captured nearly 2% of the music player market in December on the promise of its WiFi sharing capability. But iPhone has just eclipsed Microsoft's bet on Zune by incorporating both WiFi and cell capabilities, making Zune look so last year. And no one should be expecting that Apple won't extend its existing iPod line with iPhone technology. The result: Apple could host another of its famous "Special Events" in just a few months and trump all of Zune's existing capabilities with an iPod featuring iPhone's touch interface and sexy form factor at a $299 price point -- and Zune will be over.
7. AT&T's (T) acquisition of Cingular now looks like a huge advantage -- sort of. With US availability of iPhone contingent on a Cingular contract, AT&T will see customers flocking to their services just to get Apple's hardware. Expect to see entrepreneurial consumers to create a black market for iPhones by signing Cingular contracts to get iPhones, selling the iPhones on eBay, and paying for cell service for their old GSM phones with the profits.
8. Skype voice over IP client will make its way to the iPhone. One of the reasons Cingular won't benefit as much from the iPhone as expected is that many consumers will prefer Skype over WiFi networking to using Cingular calling services for many of their calls. And with the Mac OS X underpinnings, the Skype software will likely be available for the iPhone before it ships.
9. Apple will create huge competitive changes in consumer electronics. The iPhone is just one of the many handheld products we can expect from Apple in the next few years. The music and video industries will soon have to compete with full-screen iPod players, remote control makers like Harmony can expect sleek touch-screen remotes, and Internet tablet makers like Nokia and IBM can expect to see competing products as Apple incorporates iPhone innovations into its Macintosh computers. But more importantly, Apple's usability and marketing will create a new gold standard for consumer electronics that most companies will have a tough time matching. Apple will leave the low end market for others to fight over, but it will rapidly become the player to partner with or beat at the high end. Regardless of who wins those battles, the bar for successful products is going to be higher.
Disclosure: author is long Apple.
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