Table of Contents
I. Executive Summary
II. Company Description/History
III. Strategic Focus and Plan
V. Product Market Focus
VI. Marketing Program
VII. Financial Data and Projections
VIII. Implementation Plan
IX. Evaluation and Control
The iPad is a strategic play by Apple to dominate the online publishing and distribution ecosystem from its own device-centric platform. It contains two significant innovations:
* First, as you might expect from Apple, the user interface has been developed above and beyond that of a PC / netbook to enhance the intuitive experience of reading online.
* Second, is that the iPad presents business model opportunities to the content industry, especially publishers and gamers. Apple is offering an alternative to the de-facto advertising funded web business model and this may be its most powerful innovation.
Apple’s business model is based on pushing the value chain towards the device, while processing transactions at marginal profitability for upstream content providers. The worrying aspect for telecoms operators is, at the launch stage at least, that the connectivity proposition above and beyond Wi-Fi appears to have been added as an afterthought. The challenge for the telecoms industry is where to play in this ecosystem in a way that integrates more effectively with the user experience, and creates more compelling and value-adding propositions for content creators, publishers, aggregators, and end-users. Our team believes the iPad will have slow-burn appeal, initially to the existing Apple brand fan base, and competes most directly at this stage with the upper tiers of the netbook market. Noted commentator and comedian Stephen Fry sums up the iPad as ³a transformative device. You only really get it when you get your hands on it. If he is right, the device and its business model may prove to have much wider appeal in the long term.
$130 for a 3G modem seems deliberately priced not to be attractive. It pushes up the price of the entry level 16GB device from $500 to $630. Both a significant 25% increase and breaking a psychological barrier of $500. Potential purchasers are almost being deliberately asked to question whether they would use the iPad outside of the home and really need more than Wi-Fi access.
Targeting home use first«
The expensive price of the modem cannot be explained by the cost of silicon which we are reliably informed can be as low as US$10 for ³decent´ sized orders. This price is before 3G patent royalties which are incredibly complex to negotiate and something of a black-box. Whatever the reason for the expensive price, the message is loud and clear ³3G is an expensive option´. Why should a consumer electronics manufacturer add anything other than Wi-Fi for their portable devices? If the electronics are expensive, then access is comparatively cheap with two monthly pre-paid plans being available: $15 for 250MB and $30 for unlimited. These prices compare to current AT&T contract pricing of $40 for 200MB and $60 for 5GB and those prices are for two year contracts. These prices say a lot about the relative negotiating positions of AT&T and Apple.
Apple didn¶t comment on how these prepaid plans will be purchased; our suspicion is that they will bought via the iTunes store and not directly from AT&T. Apple also didn¶t comment on who would deal with service issues such as lack or poor coverage; our assumption is that there will be limited support from Apple. We suspect that AT&T will become just another vendor in Apple store.
«or profiting from the Hardware?
Our overall conclusion is Apple is simply executing the same ecosystem strategy as ever: derive profit from the devices and accessories; and drive the price of content and access as cheap as possible. AT&T has been reduced to a simple pipe provider and there is nothing wrong with that as long as they...