| The new Apple TV and forthcoming iPhone stand to have a revolutionary impact on the consumer electronics and communications industries. This report provides a concise, actionable analysis of the impact those products will have on the markets for consumerelectronics, home networking services and mobile broadband services. Our SWOT analysis examines the role that these devices will play in the evolution of Apple Inc.’s highly popular iTunes store; and the competition they pose to cable operators, telcos,wireless service providers, and other CE vendors.
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INTRODUCTION
IPHONE
Product Specs
Competitive standing
Strengths
1. Strong brand recognition as a result of successful iPod sales
2. Innovative industrial design
3. Multi-functional feature set
Weaknesses
1. Steep Price Point
2. Requires wired connection for music download
3. Wireless service dependent upon a third party
Opportunities
1. Expand the iTunes store to allow for wireless downloads
2. Offer bundled services via joint marketing efforts with AT&T
3. The ability to support new forms of advertising
Threats
1. iPhone sales cannibalize iPod sales
2. Apple/AT&T fails to convey value and generate demand in the iPhone
3. Litigation could result in Apple losing the iPhone trademark
APPLE TV
Product Specs
Competitive standing
Strengths
1. Early position in digital home convergence
2. Strong brand name and market penetration
3. More versatile than cable alternatives
Weaknesses
1. Available content less than cable and DVD rental services.
2. Content in a format ill-suited for the big screen.
Opportunities
Leverage video podcast content as a competitive differentiator
Threats
Competition from Sony
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Apple May Need to Support Cross-Platform Ads, Report Says
SILVER SPRING, MD, Jan. 18, 2007—Apple Inc. should consider supporting new forms of cross-platform advertising if it ends up having to lower the price of its new devices, particularly the forthcoming iPhone, market research firm Pike & Fischer concludes in a new report.
Apple in early January introduced the iPhone, which combines the functions of an iPod digital media player and a WiFi-enabled smartphone, and Apple TV, a set-top box that enables consumers to wirelessly transfer PC-based video to their television sets. The price of an iPhone will start at $499, while an Apple TV box costs $299. Both are considerably costlier than standard cell phones and set-top boxes.
Currently, Apple’s iTunes media store allows consumers to buy and download ad-free music, TV shows and movies to iPods, desktop computers and other devices. But the ability to support new forms of advertising may prove important for Apple to hit its sales goals for its devices, according to the Pike & Fischer analysis. While Apple’s pricing power is stronger than that of any of its peers, the company in the past has acknowledged the potential barriers to selling a super-premium wireless device, Pike & Fischer says. The report recommends that Apple, its partners and the advertising industry look carefully at the opportunities enabled by tight integration between the iPhone, the Macintosh personal computer, the iTunes digital media store, and Apple TV.
“While customers who are able and willing to spend $500 on a cell phone aren’t likely to accept advertising being included in downloaded or even streamed content, those users and many others would be more likely to put up with that advertising if it meant the equipment costs could be reduced significantly,” says Tim McElgunn, Chief Analysts for Pike & Fischer’s Broadband Advisory Services.
Apple needs to add some other key functions to its services and new devices in order to ensure success, according to Pike & Fischer Senior Analyst Tim Deal. “Those include wireless content downloads to the iPhone, expanded on-demand and premium content on iTunes, and the capability to transmit high-definition video over Apple TV,” Deal said.
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Scott Sleek
Scott Sleek, Director of Pike & Fischer's Broadband Advisory Services, oversees the day-to-day operations of our market research services and leads the development of analytical publications and briefings. As part of his duties, Scott serves as Managing Editor of our online newsletter Broadband Daily. Scott also oversees the development of all Research Reports & Briefs and manages the Trackers & Projections database. He regularly tracks subscriber growth, market penetration and revenue growth in the markets for high-speed Internet, packet-switched telephony, interactive TV, wireless data and other forms of broadband communications and entertainment. Scott also fields all requests for customized research and works closely with customers to fulfill their market data and analysis needs. Scott has more than 20 years of experience as a writer, editor and researcher. Contact Scott at 301-562-1530, x291 / ssleek@pf.com.
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