Over the past few weeks, there has been a lot of buzz about Apple either building or watch, or why they should build a watch. The links to the various analysts and pundits abound, but the best discussion about what an Apple watch could do is covered by Tog. Does it make sense for Apple to do a watch? Particularly when compared to the frenzy that previously was generated about a rumoured television? A watch is actually right up Apple’s alley.
The Argument For A Watch
Consider what Apple has focused on since 1997, and specifically since 2001 when the iPod first arrived: personal computing devices. Apple has largely eschewed the enterprise market, only adding features to the iPhone, iPad and Mac to make them reasonably useful in an enterprise world. Most of the focus, though, has been helping people do things with computing devices. A digital watch that integrates with the rest of the iDevice universe fits right into that ecosystem.
The main arguments for Apple making an advanced smart watch are actually more business than technical. I don’t believe there is any doubt that Apple can build such a device, and the uses for one are myriad (Tog’s overview is quite good on that topic). But the financial benefits could be significant. First, Apple should have the supply chain to be able to make them for a pretty low cost, and build in a fairly healthy profit margin. Making electronic watches is generally well-understood, and making them smart is becoming known art.
Another aspect is that, as something of a fashion accessory, there will be people that will want to own more than one of them, and as new ones are introduced, people are likely to buy them even more frequently than they upgrade their other iDevices. Granted, this won’t apply to most of the customer base, but it will apply to enough that it should appear on the bottom line. Having something you can sell in multiples to a single customer is good.
The last element is that, if the watch is compelling enough, it will also drive sales of iPhones and iPads. Much like the iPod helped to increase sales of the Mac, an Apple watch that “works best” with an iPhone or iPad will drive sales of those devices. Of course, if the watch is only useful when coupled with an iPhone or iPad, then obviously the two would be tightly coupled.
Should It Be Useful Standalone?
While it might complicate the product, an argument could be made that an Apple watch should be somewhat useful by itself, and even provide some limited interaction with non-Apple devices. Go back to the iPod as a lesson. The first iPod only worked with a Mac. Sales were okay, but not fantastic. There was no way the iPod was going to dominate the MP3 player market if it was a Mac-only device. Once the iPod also supported Windows, sales of the device exploded. At it’s peak, the iPod owned about 85% of the MP3 player market (and about 90% of the hard drive based player market). That could only have happened with an iPod that supported Windows.
An Apple watch that is still useful with Android gives Apple a way to get customers outside of the iPhone base, and convince some of them to switch over. Again, the iPod did the same thing. People tried the iPod, liked it, and some decided that the Mac might also be worth a look. I’m not sure that Mac sales would have started to rise the way they did without the iPod. It isn’t to say that the Mac wouldn’t have seen increases in marketshare without the iPod. I just believe that it would have been slower. An Apple watch that works in some way with Android (but better with iOS) gives Apple a toehold in the Android world, and a potential lever to gain marketshare by prying away some Android customers.
But Does It Make More Sense Than A TV?
All this talk about a watch re-opens that question about whether Apple should be doing a TV instead. I think a TV would be a mistake for Apple, and an expensive one. Certainly, a TV would be more profitable in absolute dollars. They sell for a lot more money. Apple has the capability to design such a thing, and the supply-chain resources to manufacture them. Apple can make a TV, and it probably would be a good one.
But, financially, an Apple TV doesn’t make a lot of sense. People don’t replace TV’s all that often. Logic problems with this GigaOM piece aside (they completely ignore the usual “it’s new, so everyone will buy one” phenomenon that occurs with new technology), it appears that anywhere from 5 to 8 years is the norm for replacing TVs. That’s a long time between replacements. People don’t keep their PC’s that long. It 2-4x longer than most people own their smartphones. Sure, TV profit will be high per unit, but given the slowing uptake of new TVs, and the long replacement cycle, it isn’t exactly attractive financially.
The other challenge with a TV is that it isn’t the only piece of the puzzle. A new TV has to be integrated into a home theatre in multiple ways. First, there is the integration with various providers. Sure, there are standards, but unlike mobile phones, it appears that the various TV carriers all fudge the standards a bit for their own purposes. A DVR that works with one network won’t necessarily work with a different one. So Apple would have the challenge of either integrating with dozens (or hundreds) of TV distribution systems (including IP-based, cable, satellite and over-the-air), or convincing them all to switch to a real, single standard. It will be a tougher battle than dealing with mobile phone carriers.
Then there’s the fact the TV has to live and work in environments that also include some or all of: game consoles, home theatre sound systems, and media playback devices. Even if you can buy and play games on your new Apple TV, people with an XBox, Wii and PS/3 are unlikely to abandon those platforms anytime soon. The XBox, in particular, already provides a lot of what a “smart TV” has, giving the owner the freedom to choose whatever TV they want. Unless the Apple TV is beyond amazing, I’m not sure it will do anything to slow down or displace game consoles.
Apple Should Stay Personal
Pretty much everything Apple has done in its products has been about being personal. Certainly there has been more emphasis on social aspects and sharing, but the devices and the software have been about working one-on-one with the individual using the device. The iPhone, iPad and iPod have been about acting as portals to different places: content, friends, news, information, entertainment. A TV isn’t a personal device. It is a shared device. It isn’t about one-on-one, it is about one-to-many. It is like the Mac in many ways, but the Mac doesn’t mean as much to Apple’s success as it used to.
A watch, however, stays true to the one-on-one philosophy of Apple’s core products. Apple’s focus has shifted. The Mac is no longer the centre of the Apple universe. It isn’t that the Mac is unimportant. It is still crucial that Apple keep the Mac useful and relevant. But the centre of the Apple ecosystem is now the iPhone and iPad. Those two device represent most of the revenue, and the heart of the future, of Apple. A TV doesn’t build on that to the same extent that a watch would. A watch makes sense. It fits within the tapestry that is Apple product.