The iPhone has a 10% market share of phones. About two thirds of the phone market are "dumbphones"; cheap, with no support for software and no significant software market. Nokia's marketshare is propped up by dumbphones (which they make no profit on). These are the dominant type of phone by numbers, but their lifetime is dwindling as smartphones take over. Nokia lost an enormous amount of money last year, because they are trying (thusfar without success) to break into the higher end smartphone market with their Windows Phone 7 initiative. Among smartphones, Apple has a high market share but not as high as Android. This is partially because Android itself is deployed on a very diverse array of phones, ranging from low end phones that are mostly bought by people who want a dumbphone or a feature phone all the way up to high end phones like the Galaxy SII and Galaxy Nexus that directly compete with the iPhone.
In some respects, Apple "wins": their phones are consistently the best-selling phone models in the smartphone bracket. They have by far the bulk of the industry's profit. They have excellent margins. They have a bigger software ecosystem. They're first for developers. They're achieving excellent YOY growth. Each successive model is launching bigger and staying bigger. I think you would find that very few Android manufacturers would not rather be in Apple's position. The suggestion right now is that only Samsung, some of the lower end commodity Chinese companies, and forkers like Amazon are actually achieving significant profit on Android. Apple also has great synergy between their phones and tablets, and the iPad is significantly more successful than Android tablets.
In other respects, Apple does not win: They certainly can't beat the entire Android ecosystem on unit volume, and that will never change. This is going to become even more evident as developing markets like China get bigger and bigger. They intentionally compete at a "premium" level, which is going to limit them from the lucrative entry-level stuff. This is partially because Apple is not and cannot be a commodity company, even though they do exercise strong supply chain control.
Apple's corporate vision (under Jobs) has been very well explained over the years by many different sources, most recently in the Walter Isaacson biography of Steve Jobs. Their business model is maintaining a profitable synergy between software, hardware, and user experience; competing in few product lines and doing it well.
You might disagree with Analysts. I don't particularly think Nintendo would benefit from releasing software on iOS, but I also don't have a solution for Nintendo because I think they face a number of structural challenges that they're not well attuned as a company to be able to respond to. If the size of the overall videogame market shrinks, or if people do become socialized not to pay full price for games, or if their digital initiatives are poorly executed, I think those failures will cost Nintendo dearly. The Wii U in particular is going to be a huge risk in my opinion. I don't think they could survive the transition to a software-only company without losing a lot of their competitive advantages, but I also see challenges for their hardware in an ongoing sense. More globally than in Japan, but there too.
But I don't think there's a need to be flippant and say "lol 10% marketshare apple sucks am i right??? analysts are numbskulls!!! pwnt!!!!"--Apple's success is not a collective hallucination of market analysts, it's very real, it's measurable, it's concrete.
Nice post.
Nintendo can survive only by innovating, as they always did. When they followed the leader, like they did with the Gamecube, they ended up having a constantly underselling console.
The Wii was crazy from the very beginning, but it created a fresh way to play games, even if - and that's reality - the Wiimote didn't live up its expectations. In fact, it was pretty underwhelming eventually and only some selected Nintendo games proved the contrary.
The mistake they did with the 3DS, outside launch line-up and price, was to not prove to the mass market that 3D without glasses was a must experience for everyone. They thought that the hype and the DS crazy records would have propelled the system without efforts. Like Sony thought with PS3. And now Nintendo was forced to drop the price and to insist on 2D games with mostly 2D capabilities and on franchises like Mario in order to sell the handheld at a decent pace. Not too different from what Sony did with PS3. It's incredible how people do not learn. Additionally in the west 3DS is still, unsurprisingly, selling underwhelmingly.
The big problem of Nintendo and its handheld in the end is not only the presence of smartphones, but it's their own inability to take advantage of the only thing that make 3DS unique in comparison to everything else on the market: 3D without glasses. And it doesn't matter if this was a dead end of not. They made a system betting everything on this effect alone. Period. They can't now duck off easily. The fact that in commercials you can't show that it's a big limitation. The fact that only one person at a time can see it also is a problem - especially with kids that used to watch the Gameboy when one was playing and the others were watching. The fact that many people gets tired from playing and cannot see the effect without getting all confused is a problem.
Nintendo should have taken all of that into account while developing the system. They behaved, once again, like they behaved with the N64: in a arrogant, too self-confident way. And they are now paying a very high price.
Wii U will need much, much more than just a copy of iPad as controller. Nintendo needs to prove they can create the hype. That they can make games that are interesting. They need a Wii Sports-like launch game. It's quite good that Iwata admitted all of that. He seems to be aware of the situation and the recent announce that all Wii U games will be downloadable is a sign that maybe something has changed - for the better.
My point is: Nintendo made big mistakes that could have been avoided and for that they had for the first-time ever FY figures in the red. They totally deserved it if you ask me. Analysts now are playing on that, betting how long it will take to see Nintendo out of the hardware business and make games for Apple. They are dumb, because if it is true that Nintendo itself is to blame for their situation, it is also true that too many times people were saying that Nintendo would have run out of business. When they made the N64 with cartridges. When they released the Gamecube. When PSP was announced and DS already was seen as dead even before coming out. When Wii was announced against X360 and PS3.
Guess what: Nintendo is s still around. And now only: they made so much money with DS and Wii - unprecedented in the history of Nintendo - that Sony and Microsoft would kill for having obtained just the half of these profits.
So, structural changes of not, they have all the know-how and the resources to overcome them. Let's see if they can surprise us, once again.
