Here's what I see:
Around every quarterly report from the major cell phone service providers who are partnered with Apple, we always see the same 2 basic commentaries: 1) great year with lots of sales of iPhone and 2) subsidizing iPhone is very expensive relative to all of the other phones. In short, they love the revenues that iPhone helps deliver but hate how much they have to pay Apple in the subsidy relative to how much other smart phones cost them.
Well, yeah. They want to make as much profit as possible. Unlike most Android phones, people go in to stores specifically looking for the iPhone. They have to stock it, and that means they have to pay what Apple wants.
Apple charges more than the average Android OEM, meaning the end price will be higher. But then you have competitive forces that drive that end price down by cutting margins for volume (that's carrier's margins - specifically
not Apple's).
They don't like that they don't have all the control. No surprise at all. Apple doesn't need to change anything there, though. Apple markets directly to consumers even though most consumers buy the iPhone through a third-party distributor (i.e. the carrier). The carriers are forced to stock iPhones because Apple markets directly to their customers and their customers want it.
That's why the carrier-made ads you see never advertise iPhones.
Then there's this growing sense of "where's the beef?" in terms of the classic view of Apple's big innovations reputation. Think about it. How often have we heard that there is very little money for Apple in the iTunes store music sales... that iTunes exists to help sell hardware?
Now, why digital radio? It's already led by some pretty strong players in Pandora & Spotify. There's still completely free* radio over the air. There's also Sirius for the subscription hounds wanting commercial free. Is radio really that important to the masses anymore- especially in devices that you can load with all of your favorite music commercial free? Some might argue about "discovery" but can't we discover new music we like with 30-second previews of any song in the iTunes store? Or from our friends playing something we like? Or from free radio? Or when we hear the tune on television, at the mall, etc?
From Apple's perspective, a radio service would be great if:
- It was a really good radio service exclusive to iOS. That would increase iOS' appeal.
- It helped people discover music from iTunes. That would amplify any help iTunes gives to hardware purchases.
- It keeps iTunes relevant. Spotify in particular is growing rapidly; people like their business model. If they continue they could pose a threat to iTunes and any halo effect it has on Apple's other products. Also, Spotify isn't iOS exclusive; a good cross-platform music experience weakens iOS' competitive advantages.
- No, 30-second previews aren't enough
- Free radio? Oh, like... uhm... what Apple is rumoured to be doing?
We also note that the bulk of Apple's business is heavily dependent on iDevices, especially iPhone. Since the bulk of who actually directly pays for the iPhone is not the classic customer (us consumers) but this handful of cell service partners, it is obviously paramount to keep that very big cash cow as happy as possible.
So, what do you do when you hear the cash cow grumbling about the relative expense of iPhone vs. other smart phones they also carry? Being Apple, you don't cut the cost of each phone to be more competitive and kill the Apple margin. So what else can you do? Well, being Apple, you could turn the internal innovation machinery on to focus on how to make those partners more revenues from iPhone.
Apple doesn't need to do anything in particular to keep the carriers happy. The carriers want commoditised hardware unless it's exclusive to their brand. Apple wants the opposite.
The carriers business model relies on attracting and retaining subscribers. They will buy whatever handsets they need to in order to do that (that's why they'd prefer commodity handsets - so they have all the bargaining power).
Lots of carriers were opposed to Apple's terms when the iPhone launched. Competitive pressure shut them up.
How can AT&T, Verizon, etc make more revenues? The easy way is to get the masses to burn more data because with the tier limits in place, burning into higher tiers yields more money for them.
What has been the heralded iDevice "big things" from Apple over the last few years: Siri, iMessage, Maps, iCloud, Facetime, etc. Now, here comes iRadio. What do they ALL have in common? A high dependency on internet data burn. Each doesn't work (or work very well) without a live connection to data.
No, what they all have in common is that they all
use the internet.
All of those are things people want. People want Maps (whether Apple's or Google's), they want iCloud, they want iMessage, they want Siri (it did sell devices even if few people use it), they want FaceTime.
What are you suggesting? That Apple should not have done any of those things and made an offline-only iPhone? That would also mean getting rid of Safari; which is probably the biggest data burner on the device (once you include images and streamed videos).
It's not just about hardware and software any more. It's about hardware, software
and services.
If Apple didn't include WiFi, you may have a point about some conspiracy with the carriers. As it stands, no.
iRadio seems poised to be a monster in terms of data burn. Stream all that music from "the cloud" seems to be a great recipe for getting average data burn per customer up so that we are generally paying up for the next level(s) tiers.
Internet radio has been around for a while. It's pretty reasonable, actually.
Here's my personal recommendation:
http://somafm.com. If you like ambient, chill music you'll love GrooveSalad. I used to write down the artist names, but there were too many. Now I just put on GrooveSalad.
I love internet radio.