"I wish I'd thought about the model of subsidizing phones through the operators," he said. "You know, people like to point to this quote where I said iPhones will never sell, because the price at $600 or $700 was too high. And there was business model innovation by Apple to get it essentially built into the monthly cell phone bill."
Apparently he didn't realize cell phone companies had been doing that for nearly a decade before the iPhone.
This behavior that you find shocking, I find completely normal and predictable.
"There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item."
The iPhone was too expensive even when subsidized. I've said this before and will say it again: Jobs' real genius, besides making a smartphone that actually fun to use, was getting carriers to subsidize it to below $200 (up front, of course; they made it up on the mandatory data plans). Turned out that is the price point that people will actually consider buying a smartphone for personal use, and it created a whole new market which had not really existed previously: the consumer smartphone market.
2) Another fact that supports Ballmer's point that the phones were too expensive is that Apple dropped the price by several hundred dollars a few months after launching it.
So, yes, there were two year contracts, but no smartphone was $0 down or close to it at the time.
And that's not a settled answer. The two giants in mobile, Apple and Google, have diametrically opposite approaches. Apple has the entire verticle, from SOC to the OS. Google controls primarily the OS and application stack. Both are incredibly successful. Microsoft could never have been an Apple. But they could have been a Google. They could have had Android, and I don't think they would have complained if that was the case.
>Ballmer said the mistake was getting into handsets and tablets too late.
What is he talking about? Microsoft was in the handset and tablet business since the 90s. Their offering didn't resonate. They were also always afraid of cannibalizing their Office and Windows business. Their actions in the 90s and early 2000s also built up a lot of ill-will, so nobody was rooting for them.
>Apple Inc.'s iPhone would never sell because it cost too much? He now wishes he'd realized how Apple was going to make it work -- through mobile carrier subsidies.
That's also part of the problem. Ballmer was obsessed with Apple and while he focused on Apple, Android took over the market.
[PS] On the other hand, he did gamble on long-term things like Azure, so it's not like he made all the wrong bets --but it seemed like an obvious bet to go with something like a Courier, specially after all the buzz it created.
Still do.
I think he means to directly make the handset as the earlier offerings were on the PC model (Microsoft does OS, Manufacturer does phone).
> That's also part of the problem. Ballmer was obsessed with Apple and while he focused on Apple, Android took over the market.
In a lot of ways, I think the crux is they wanted the same profit Apple was getting and forgot that's not how they won the PC industry. Android succeeds in numbers because it is now the default free phone or the phone offered for non-contract folks. Android basically because the dumb phone replacement. Microsoft probably would have better off going for that market and making their money off apps and services. Other than Samsung and Google, the phones I see are the cheapies. I know LG makes a good phone, but the Android LG phones Walmart has are not them.
I still think RIM (and Verizon if the book Losing the Signal is to be believed) made a huge error in the Storm and should have hit the low-end phone market with the messaging (ok, they did need the big software improvement but the Passport looked good from a keyboard UI point of view). Apple really didn't execute its iPod strategy in the phone market and left a lot of room at the bottom.
CE Pocket PC et al suffered the same problem as Symbian and everything before iOS: they didn't have the App Store, and as such it was a pain to get software for the devices other than through the OEM. And OEM bundled software is always terrible.
Huh? Software could be installed by downloading a file and clicking on it. In many ways was a simpler and more pleasant process than interacting with App Stores. The problem wasn't with finding or installing anything, it was with monetization. App Stores and always-online model made it trivial to charge people and show them ads.
Overall, I remember my Windows CE PDA with fondness. Using it was a positive experience, which I can't say about any smartphone I owned.
But not manufacturing hardware under their own brand. MS had software for Dell and HP hardware - I have a couple of Windows CE Pocket PCs in a bin somewhere ...
Yeah. Solid reasoning there, Ballmer...
They were a thing long before the iPhone.
But then again, hugely successful people almost never say: "yeah, I was an idiot who just didn't see it".
And he was very successful in terms of increasing revenue and working the markets.
I'm reminded of the time back in the early 90s when president Bush (Sr.) was amazed at grocery store technology, having likely never shopped for his own groceries for decades [1]. It was really embarrassing and highlighted how he struggled with relating to common people. Executives who live lives of privilege like this need to recognize that their lifestyle is a potential blind spot. Anyone who has worked in a company where the rich top brass made all the product decisions (instead of the lower-level normals) knows what I'm talking about.
1: http://www.nytimes.com/1992/02/05/us/bush-encounters-the-sup...
And, over the years, I've seen companies make various decisions with respect to paycheck timing and other similar administrative details for various reasons including greater consistency across the company. And there's often a hue and cry, some of it from lower paid employees who are genuinely inconvenienced by the change. And I'd be willing to bet that, in just about every case, the execs who made the decision didn't even stop to think that someone might care about minor cash flow changes.
- While I hate it, it's extremely clear that if you're in the mobile space you'll make more money doing free+IAP than charging up front. While some things could change this structure (built in support for time limited or account trials, and better paths to upgrade), it seems like it's here to stay on the consumer side.
- Kind of similarly, the innovation of SAAS+PAAS is in many ways that its cheaper + easier to pay by the month than to hire people in house and or sign them up for a six figure bill and 20% support+maintenance in perpetuity.
I'm always amazed at how many are actually throwing away money by accepting a 'subsidied' phone which forces you to take a contract 2-3 times as expensive as you would actually need it.
Even if you see it as 0% financing, in my quick calculations it always worked out to be more expensive than just buying the phone outright.
Even ignoring personal anecdotes, a perfect example is SaaS: many corporations happily pay a monthly fee even though in total it's far more than it would have been to purchase a similar package outright.
More important decision would have been "consumer" vs "business". Even if they invested in phones earlier, it would have made no difference if the company was still run by salespeople focused on business seat sales.
The [old] Microsoft was not able to see mobile as anything other than another way to sell outlook.
This is best evidenced by their pre-iPhone smartphones, most of which were little more than PocketPCs with keyboards and cellular hardware tacked on.
It's hard to come up with any technological innovations from inside Microsoft in 80's and 90's. Microsoft strategy was to buy out companies that seemed to build something new and either integrate the software or bury it. Gates and Ballmer were both smart and ultra-aregressive ruthless businessmen. Technology was always secondary to business.
Few examples of their failures and corrective measures: The internet and the browser, Java and Smartphones. In each case they were hopelessly late and their reaction was buying spree, failure and repeat until success.
What? Ok, first, do you think they've ever innovated anything? During the 2000's? What exactly?
Wasn't Windows NT, for example, innovative? The kernel is still powering the Windows operating system.
Internet Explorer was a hugely successful browser dominating the market.
Innovation isn't only creating something from scratch. One can also create innovative products by acquiring the basis for that and developing until it is successful.
Of course they're approach has been to "repeat until success". And they quite often get there.
MS hired VAX VMS team to write their second system. It was basic engineering and basically next better version of VMS from scratch.
>Internet Explorer was a hugely successful browser dominating the market.
Only because monopoly power. IE6 delayed new innovations from emerging.
Mostly because it was shipped with Windows and many people wont change it (Non tech). Furthermore, setting aside the anti-trust case, I would rather say they did not capitalize on that start they got IMHO.
leverage people's current ipod music investment into the iphone. no buttons. slick design.
"felt like phone as an app on my new ipod."
really easy to use for non-tech people.
Yeah, no. Before streaming by and far the most amount of people didn't buy music in iTunes. They either torrented it or (if technically challenged) simply bought it physically and then ripped it to iTunes.
Minor nitpick, but ripping from CD to iTunes in the early days was a nontrivial process for the technically challenged. I'd argue that audiophiles were the group most likely to have done this, i.e., to get lossless music files. (The resulting file sizes were monstrous, of course, and this eventually led to some storage issues. But I digress.)
I'd argue that the technically challenged were the vanguard of buying music files on iTunes. The tech-savvy were torrenting, and everyone else found the iTunes store a really easy way to click and download music. In fact, I distinctly remember snarky comments back in the day about how paying $0.99 per track on iTunes was "a tax on technical illiteracy."
May Apple and Nike introduce Nike+iPod, including an in-shoe sensor to track the wearer's workout on their iPod nano
Colorado Rockies pitcher Jason Jennings shows one of the iPods he and his teammates use to scout opposing batters during the 2006 season
September iTunes begins selling full-length feature films
iPod nano gets a new aluminum design available in five colors
Apple unveils a wearable new iPod shuffle with built-in clip
October Apple announces the new iPod nano (PRODUCT) RED Special Edition to benefit The Global Fund to Fight AIDS, Tuberculosis and Malaria
Number of iPods sold through 2006: 88 million
