In one of the worst-kept secrets in recent memory, Apple announced the iPhone — its combination cellphone and music player — at Macworld on Tuesday, to rapturous applause and adoring coverage from gadget lovers. Apple chief executive officer Steve Jobs did one of his trademark keynote speeches, filled with ultra-cool photos and an interactive demo with the new device, as well as celebrity walk-ons from Google CEO Eric Schmidt and Yahoo co-founder Jerry Yang. All of the gee-whiz adoration from Apple fans and gizmo-lovers aside, the key question is: Will the company’s newest venture disrupt the cellphone industry in the same way the iPod disrupted the digital music market?
At first glance, the answer seems to be yes. The main differentiating factor for Apple is not necessarily the functionality of the new device, but the design and usability — in other words, not so much what the iPhone does as how it does it. Unlike most cellular “smart phones,” which have all sorts of buttons, switches, tiny screens and cumbersome built-in keyboards, the Apple phone is an almost featureless expanse of screen, with only a single button at the bottom.
Numbers and letters can be typed with a virtual, on-screen touch keyboard, and images (and Web pages) can also be resized dynamically by “stretching” them using just two fingers on the iPhone’s touch-sensitive screen.
In a similar way, the iPod changed the nature of the MP3-player business overnight, by applying ease-of-use and aesthetic design principles to a market previously dominated by ugly and awkward devices. Apple took a business that was controlled largely by engineers and applied an artistic design sense, and it seems to have done the same with the iPhone. In other words, the Apple phone bears as much resemblance to a standard phone as a Maserati does to your neighbour’s Ford Focus.
Obviously, not everyone can afford a Maserati, and not everyone is going to want an iPhone either. At $499 (U.S.) for the version with four gigabytes of storage and $599 for the 8GB version, it’s not cheap — and that includes the discount that comes with a two-year contract from cellular provider Cingular.
The iPod, however, was also relatively expensive when it first appeared in 2001 ($399), and that didn’t stop millions of people from buying one. And iPod prices kept dropping as Apple’s economies of scale — in particular, lower component prices — kicked in. If the iPhone does likewise, it could make life uncomfortable for Palm, Nokia, Motorola and Research In Motion, which has been trying to broaden its reach into the consumer electronics market.
One potential hurdle for Apple is that millions of people already have cellphones, and a large proportion likely already have iPods too. When the iPod came out, the digital music market was still relatively small. In order to win a large share of the market for the iPhone, Apple will have to persuade people to dump the phones and iPods they already own and spend $500 on a new gadget (in addition to whatever monthly data charges they face from their provider).
Another factor that could hold back demand for the new device is that business users — who would be among the most likely to spend $600 on a new phone — will likely not be attracted to the idea of a virtual on-screen keyboard, after having gotten used to typing with their thumbs on the keypad of the BlackBerry or Palm’s Treo.
Corporate users are also likely to be unmoved by the offer of free “push” e-mail service from Yahoo, and the iPhone doesn’t include support for the Outlook Exchange mail servers used by most firms. Those quibbles aside, there is no question that the iPhone is a shot across the bow of the entire cellphone and PDA market. Just as it did with music, Apple has changed the rules of the game.