Thoughts on the iPhone Business ModelThis news is intended to be a small analysis of the new iPhone business model, and especially its relevance with the functions and opportunities opened by the recent release of Firmware 2.0. This is the result of discussions inside and outside Hardmac Editor Team, as well as with developers.



With the first version of the iPhone, Apple intended to first test the market, and get as much money back as possible from exclusive partnerships signed with 4 carriers AT&T, O2, Orange and T-Mobile. If one could agree that as a new comer Apple wanted to be careful (financially but also for its image), and offered the iPhone with bundled advanced wireless services supported by renowned carriers, with the new version supporting 3G such strategy should be revised. One can also imagine that Apple thought it could change the 12 years-old existing system and establish a new one more profitable for mobile designer/manufacturers; it failed.



Yes, Apple changed the iPhone business model with the release of the iPhone 3G, but not entirely and deep enough to really benefit from it, for Cupertino of course, but also for customers, developers and even investors!

Let's look at the first business model, Apple was getting money back from royalties on the subscription plans. Is this policy still being used with the iPhone 3G? I guess nobody really knows for sure as this is part of confidential agreements. However, one would agree that the price of the iPhone dramatically decreased since its launch, and especially after the introduction of the new version. Couples of months ago, as sales of the first generation iPhone were not really rocketing up or as high as expected, Apple decided to dramatically decrease the price of the iPhone. Even during the last WWDC Steve Jobs agreed that the price was a limiting factor for broader adoption of the iPhone. So, here comes the new cheaper and better iPhone 3G... well Apple still has exclusive partnership in the main/key countries (USA, UK, France and Germany), and in many other ones, where only one carrier having a 3G network is selected to distribute the iPhone 3G...



One could have thought from the WWDC keynote that Apple understood that its iPhone business plan was not optimal. Indeed, high price is a limiting factor, and now with Firmware 2.0 the AppStore IS the true money making factor for Apple, as well as for developers.



If you consider that the Firmware 2.0 can be installed on iPhone 2G and iPhone 3G, you will agree that the number of potential customers will not be only limited to the new iPhone 3G owners. Indeed, one will have access to games, applications, music and probably short movies in a near future by simply clicking on a button. Of course MobileMe is also linked to it and be a catalyzer of the AppStore usage by customers and further increase revenues generated by the online store.



Now one should consider that there is a huge number of unlocked iPhone 2G, which will not easily get access to the firmware 2.0, so no access to the AppStore, so iphone owners but not AppStore customers, so no revenue for Apple, or for developers and investors. If one look a step further, many of those owners might be using a jail-braked or SIM-unlocked iPhone, and would be willing to get access to the AppStore, but of course they have no clue how to do it. Will they ever know how?



Indirectly Apple is responsible of this entire situation and is losing money because it did not realize that making the iPhone opened to all carriers will now make it fully adopted and a massive source of revenues. Apple needs to stop its exclusiveness policy, as it is harmful for the company, customers, developers and investors. Let's imagine we have a SIM-unlocked iPhone by default, the customer will get the specific and/or best subscription plan offered by his local carriers. It will then indirectly push carriers to make the best offer possible. Here the customer wins. But Apple will win too, as if it is not bundled to a specific carrier, all mobile phone owners are potential customers as they will not be forced anymore to drop their on-going subscription plan to get a new one locking them to a new carrier for at least 24 months, or at a ridiculous cost. So, more potential customers, more iPhone owners, more visitors of the AppStore, more revenues for Apple, developers and happy investors.



To summarize, with the iPhone 3G, the best business model for Apple would be to have the new model available for all customers, SIM and carrier unlocked. This would be a business model where all parts, from Apple, to customers, including developers and investors would win.



So, how to adapt to the current situation? Well try to get your iPhone legally from those countries (as Belgium) where Apple and carriers are forced by the law to sell the iPhone 3G unlocked then use it as you can with the carrier of your choice. For sure you will not be able to get easy access to the AppStore, and data and web surfing might be expensive, but this is Apple's and carriers' fault, they decided to limit their potential revenues by locking the business model to a rather restrictive number of people.

(Via HardMac.com.)