Where will Apple be in 10 years?

Everything changed for Apple the day that they released the iPod. Because at that moment Apple shifted away from the pure computer hardware and software maker it had been since its inception, and shifted towards a consumer electronics maker. Now, it was only a small shift in the beginning, and few really noticed it at the time, but as the years have passed we have seen more and more iPods sold, and thus the shift has become larger.

And yet, another shift occurred shortly after the first iPod was sold. That change in direction was, of course, the ITMS. When the store went online for the first time Apple moved in the direction of becoming a media company. And so now that the new year barely a month away many have wondered what new and innovative products Apple will release in the coming year. But a better question might be, in which direction will Apple move? Because once you know the path then predicting the products will become much easier. To that end here are the three broad paths that I see set out before Apple at this time. Which one will they choose? Only the main man in Cupertino knows for sure but here is where they could be a decade from now.

Apple as a computer company

Ultimate goal: Defeat Microsoft and Dell
Points in favor of this future: Switch to Intel, creation of Mac Mini
Points against this future: iPods, ITMS, Front Row

In this scenario Apple stays true to its roots. They are a hardware/software company first and everything else second. The iPod, ITMS and all other products and services exist only to get people to purchase Macs. Traveling down this path we see that there are only two logical goals: displace Microsoft and become the dominant operating system producer and displace Dell to become the dominant hardware manufacturer. Anything else is a waste of time because Steve Jobs isn’t going to work his heart out for 10 years just to own %4 of the market and forever stay a niche player. He is going to want to expand and it will be at the market leader’s expense.

Of course, this choice would require that Apple begin to devote considerable resources towards the commercial sector. In fact, Apple would have to emulate, to some extent, Microsoft’s approach to selling, servicing and supporting their software. Additionally they would need to emulate Dell’s approach to hardware support. Companies buy in bulk, don’t care about style, are deeply influenced by price and require massive amounts of support. This is quite a different business model from what Apple is used to and if they want to be successful then they would need to create another division that was completely devoted to the commercial sector. Then they would have to pour money and resources into it just to get it off the ground. Make no mistake, attempting to break the strangle-hold that MS and Dell have on this market would be both very expensive and time consuming. So if Apple were to go after this market they would have to go in body and soul or not at all.

The switch to Intel processors can be seen as proof that this is the route they will take in the future. By using the same chips as Dell, HP and others the “megahertz myth” goes away. Additionally their supply problems should no longer exist. On the software side-changing architectures will allow them to emulate Windows programs at nearly the same speed that they would run natively on a PC. This could be a factor in swaying businesses and the high end gaming crowd.

Factors against this theory are the continued success of the iPod and the ITMS. These venues can and will draw off support and resources that would otherwise go to the commercial endeavor.

Apple as a consumer electronics company

Ultimate goal: Compete with Sony, Sharp, Phillips, Kodak (and many others)
Points in favor of this future: iPod, ITMS, Aperture, Mac Mini, iLife suite, ROKR phone
Points against this future: Switch to Intel, no moves outside current market space

In this scenario Apple, realizing the success of the iPod, decides to press on and see what other types of consumer electronic devices it can revolutionize. By using the power of its brand (Apple has one of the strongest brands in the world, right up their with Coke and Nike) it promotes its own type of easy to use, feature rich, consumer oriented electronics. Now, because this market is so large it would be impossible for Apple to even hope dominating it. So, they would need to adopt of strategy of releasing their own unique products as well as partnering with other companies and bundling products.

First on the list would be a truly video centric iPod. After that a cell phone styled after the iPod, with the same ease of use. In this they would need a carrier since it would be too much for them to try and break into that market as well. After that they need to look into developing a line of signature Apple digital still cameras and digital video cameras. Kodak and Panasonic come to mind as possible partners. Apple could develop a low end line for consumers and bundle iPhoto and iMovie with its still camera and video camera respectively. Then for the professional line bundle Aperture and Final Cut. This would allow customers to purchase a camera from a trusted company (Panasonic) that was both stylish and easy to use (think iPod) and came with powerful, easy to use, cross platform software (from Apple). Of course this would mean porting the iLife suite over to Windows…there wouldn’t really be away around that.

Following the iPods, cell phones and cameras would have to be video games and consoles. Currently video games are a multi billion-dollar enterprise that makes more money each year than Hollywood. So, breaking into this industry could be very profitable. Of course Apple would have to compete with Nintendo, Sony, Microsoft and the entire PC gaming industry which means the competition will be very fierce. Apple would have to release its own console, create its own game studio, convince other developers to make games and then try and woo consumers away from the offerings of its competitors.

This would probably be the hardest market to gain entry into. Witness Microsoft, they have lost money on every XBox and XBox 360 sold to date, and yet they still press on hoping one day to beat Sony and become profitable. Apple would need a whole lot of cash on hand to make a go at this.

Factors in favor of this consumer electronics future are the continued success of the iPod (70% market domination and climbing), the ROKR phone, the iLife suite and Apple’s desire to make the best products possible.

Factors against this move are the upcoming switch to Intel. That is a massive shift in priorities and resources that could be better spent elsewhere. Additionally Apple has always maintained that they are primarily a computer company.

Apple as a media company

Ultimate goal: Become a distributor of music and movies, replacing traditional studios and business models
Points in favor of this future: iPod, ITMS, Mac Mini, Front Row, Podcasting
Points against this future: Switch to Intel, ROKR Phone, industry inertia

In this scenario Apple decides to court music and movie creators in the hopes of becoming the biggest distributor of online media in the world. Think of it as the ITMS on steroids.

To do this Apple would first need to convince every major studio to sell its TV shows via the ITMS. After that Apple would need to lock in Hollywood and get them to sell their movies via the ITMS as well. Then, once the market shifts to the point that it is impossible for a studio to survive without the ITMS then Apple begins to court music artists, agreeing to private deals that would permit their music to go straight to the ITMS and cutting the traditional studios out of the picture. After that they tackle TV and then movies. They wouldn’t have to completely wipe out the competition, just carve a large slice of the market for themselves.

To make this work they would need to revamp the ITMS (taking cues from Amazon.com), create a separate application for dealing with video (leave iTunes for audio), create a video centric iPod and a video enabled multimedia device or hub (somewhat like the Windows Media Center, only not sucking as hard).

Additionally they would have to wait until the market was ready for such an upheaval. Imagine purchasing all of your music, TV shows and movies online and then watching them all on one device that was hooked into your entertainment center.

Factors in favor of this are the continued success of the iPod and the ITMS. Also the Mac Mini could be a media center prototype. All that is needed for it to become a reality (albeit a not terribly functional reality) would be to load Front Row onto a Mini.

Factors against this are the tremendous obstacles Apple would have in both the studios and the traditional methods of purchasing digital media. And while Apple could eventually surmount these obstacles it would take many many years before the market was ready for such a change. Buying digital media might be the future but that future is still a long way off.

In conclusion, Apple will more than likely choose some combination of the above options. Maybe releasing a digital camera line but forgoing the video game market. Perhaps they will court artists as individuals but leave the TV and movie industry alone. And maybe they will decide that defeating Microsoft might not be as important as coexisting with them so that they can focus their efforts on other fronts. The future is bright no matter which course Apple chooses and that will be very welcome news to their stockholders as well as their customers.