Thursday, January 10, 2013

Cheaper iPhone, All About iTunes

Apple has dominated the "luxury" side of the mobile marketplace with high priced smartphones and tablets.  And while Apple leads market share on the tablet side at the moment, the iPhone is losing share to the lower cost market, especially in the international arena.  Sure older model iPhones have come with lower prices, but Apple sees the need to offer cheaper models "in a bid to grab more customers in developing countries". 

Some have argued that lowering prices on iPhones and Mini iPad tablets are resulting in a lower profit margin for Apple, but I believe that they are negating the value of further increasing the subscriber base to the infrastructure, namely the iTunes and App Store.  Others, like Amazon and have priced their Kindle product line with lower margins specifically to gain customers to their own store.  And they have the added advantage of the Amazon Prime subscription service to bring more value to the consumer and more revenue to the company. 

Apple's entree into cheaper products to grow the customer base should be followed by a similar approach to Amazon, a premium subscription service that brings added content at a monthly cost.  And while more customers could mean more purchases on the iTunes Store, companies and Wall Street both love to see a consistent, regular revenue line, that an iTunes subscription service offers. It is the iTunes and App Store that has the best opportunity to grow at double digit rates, bringing more and more revenue to Apple.  Cheaper iPhones may be the first step, but other lines, like the Apple TV box, and iPod, and yes iPad should definitely follow.  More products sold to more consumers means more sales on iTunes.