Focusing squarely on the all-important upcoming holiday season, Apple Inc. spent roughly 90 minutes at its Tuesday media event introducing a slew of new products: two new iPads, two updated laptops, a new desktop computer, and a handful of new and free software releases. With each announcement, the company also offered some insight into its new product strategy under CEO Tim Cook.
1. Apple’s “revolutionary” pricing isn’t new, but it’s smart
For months, rumors indicated Apple would liberate its iWork and iLife programs in conjunction with the release of iOS 7, but Apple did one better on Tuesday by redesigning those apps and offering them for free (with any new purchase of an iOS or Mac device), and also releasing the new Mac operating system, OS X “Mavericks,” as a free download for the first time. “We are turning the industry on its ear,” Cook said at the event. “We’re doing it because we want our customers to have our latest software and access to the greatest new features.”
This is indeed a big deal for Apple: With the exception of its Final Cut editing software ($300), this is the first time Apple is offering all its proprietary software, including its 20 first-party apps and two major operating systems, for free. But in reality, Apple is actually playing catch-up with its Silicon Valley rival, Google, which is famous for its many free web services, including Gmail, Google Maps, and the company’s Android operating system for mobile devices.
In Apple’s defense, Google doesn’t own any non-web applications comparable to iWork and iLife, and the closest competing apps built by Microsoft (Word, PowerPoint, Excel) are not cheap. Apple also knows that software helps sell the hardware, which is the main source of its income: In its third-quarter earnings report, Apple noted that 85 percent of its $35.3 billion in revenue had come from hardware sales, namely from the iPhone, iPad, iPod, and Mac.
2. The new iPad lineup is about one thing: profit margins
Apple is and has always been about building luxury products -- even the original Macintosh cost roughly $5,616 in today’s dollars (after adjusting for inflation), which isn’t cheap in any decade. But the new iPad lineup finalized on Tuesday shows just how much Apple cares about profit margins, and how little it cares about everything else.
Apple has previously compared itself to BMW, which is an apt analogy, considering BMW also sells quality goods at excessive prices. This unattainability is part of Apple’s charm as a company -- its products are elusive, and thus, sought after -- but this only really benefits Apple, not consumers.
Look no further than the cost breakdown of its iPad lineup, announced yesterday: The latest full-size iPad starts at $499, which is nothing new, but Apple raised the price of the new iPad mini by $70, reduced the cost of last year’s iPad mini by only $30, and decided to keep the two-year-old iPad 2 at the same price as a new iPad mini ($399).
Apple could justify the price of its two iPad minis, but selling an iPad 2 from 2011 for $399, which features old technology and a substandard display, is basically forcing customers’ to settle for the smaller tablet at the same price, or fork over an extra $100 for a newer, better iPad. And when any poor soul decides to spent $399 on an iPad 2, Apple enjoys huge profits. It’s a sound business strategy for Apple, one that has already been applied to the iPhone line: The iPhone 5s is getting more attention thanks to the cheap-but-basic iPhone 5c, but it only helps grow profit margins, not market share.
3. It’s the Tim Cook Era, but it’s also the Jony Ive Era
Apple CEO Tim Cook has felt the world on his shoulders since the death of Steve Jobs in late 2011. Analysts doubted Cook could replicate or replace Jobs’ genius or his ability to push others, both inside and outside Apple, to execute his visions. But if there’s one fact made evident by Tuesday’s media event – and even Apple’s iPhone event in September – it’s that Cook is merely the business side of Apple; the vision belongs to lead designer Jony Ive.
Ive, easily one of the foremost designers in the world, has been an important fixture at Apple since the company’s rejuvenation in the early 2000’s. His daring designs for the iPod and “sunflower” iMac helped Apple set itself apart from competitors -- especially during that critical reconstruction period after the departure of CEO John Sculley -- and his close spiritual relationship to Jobs is widely documented. But that’s why Cook was intelligent enough to give Ive the reins to Apple’s future last October, putting him in charge of directing human interface across the company’s hardware and software designs.
Since Ive assumed his new role as human interface (HI) director, Apple has introduced a completely redesigned mobile operating system (iOS 7), a much more efficient and user-friendly Mac operating system (OS X Mavericks), and a slew of iPhone and iPad models that embody the concept of addition through subtraction. But more important than his minimalist design tendencies, Ive has become a consistent figurehead at Apple when the company’s needed it most, and a steady reminder to stay laser-focused on refining and improving products without changing their essential DNA. A lesser leader may have steered Apple in another, different direction focused on change for the sake of change. But that’s what makes Tim Cook the right CEO for Apple, and Jony Ive the right leader for Apple: It just works.