Apple as consumer advocate

February 21, 2011 by Gabe | [mmd] |

I'd like to posit a thesis that I have rarely heard about Apple. Apple understands that their market potential lies in their consumer advocacy.

Apple is often criticized by media producers for their self serving decisions that often hurt pre-established business models. It started with the music industry crying foul over Apple's insistence on $0.99 per track. Later, Apple was criticized about the lock down of the iOS platform and advertising system. The most recent row is around Apple's new subscription model for iOS.

The Subscription Model

The dubiously credentialed pundits have taken a very personal affront to Apple's model. To be clear, Apple's model has four primary facets.

  1. If a publisher offers a subscription outside of their app, they must also offer subscriptions within the app and not kick a user out to a website to signup.
  2. In app subscription prices must be consistent with the prices outside the app.
  3. App users must opt-in to provide personal information to publishers.
  4. Apple receives 30% of the cost of a subscription made through in-app purchase.

Defender of the Consumer

Now you could argue that all of those rules are in Apple's best interest. It forces publishers to use in-app purchases which Apple then gets a cut of. It also eases consumers minds and encourages them to pay for subscriptions through the App Store. I argue that Apple recognizes what is good for their customers is good for Apple. Here is how I view these:

  1. Customers are less likely to be scammed by an App publishers since all of their subscriptions must go through Apple. Customers are less likely to be kicked out to a spurious site that may look legitamate but whose only purpose is to steal credit card numbers.
  2. A customer can be sure that they are paying a consistent price. There is no need to shop around looking for the secret deal they only offer through Amazon.
  3. Consumer information is protected by default. No more is the actual sales product of publishers, the subscribers personal information. The product is once again the publishers product.
  4. Apple's cut is not relevant to the consumer. They never see it. Rule #2 ensures that they are not paying an additional fee just to cover Apple's share.

I could discuss many other ramifications of these rules on the publishers and on Apple, but my primary thesis is that Apple understands where their revenue is derived. Happy and secure customers spend a lot. Whether by purpose or incident, Apple has become the world's largest consumer advocate. Their computers are devoid of "crap-ware" and "spy-ware" deigned to trick consumers and ultimately prove hostile toward the end user. Their consumer products do not require users to sacrifice privacy and incur monthly fees for life.

The Long Road

Apple has historically struggled with their role of inadvertent consumer advocate. Their first struggle with this role came when the music industry suddenly realized that the future had passed them by. They demanded immediate and complete control over digital music pricing. Apple famously said no. Steve Jobs correctly declared that consumers would not pay more than $0.99 per track. While he was at it, it also wrote an open letter to music publishers and declared that DRM was hurtful to consumers and unnecessary. Apple rightly realized that consumers would buy more music if it was cheap enough and easy to manage. Consequently they would  buy more iPods to play that music.

Next up was Apple's bout with Hollywood. Apple wanted more digital movie downloads at consumer friendly prices. Hollywood, however, had learned what the music industry failed to realize. If Apple controls your market, Apple decides you business model. Hollywood applied leverage by creating Hulu and pushing movie rentals through Amazon. They tried to create competition for their business. Some networks even pulled their content from iTunes, like NBC did with most of their prime time "creations." Apple gave more than they had with the music industry and we now have $20 digital movies in "HD" that are still not competitive with DVD quality. We did get more movie rentals, but at the same price point that cable networks charge for on-demand movies. Hardly a consumer win.

There was also a nice little exchange when Apple announced the switch to Intel processors. Steve Jobs was asked if Apple would be selling laptops with Intel logo emblazoned on them. Steve's answer was unequivocal "NO." This may not seem like consumer advocacy, but rather a reflection of Apple's ego. Let's be honest though. No consumer actually wants an Intel logo on their $2000 computer. The logo serves no purpose other than as an advertisement for Intel. What Apple customers get is a tasteful Apple logo that actually serves the purpose of telling you that your laptop in running.

More recently, Apple has been criticized for their App store policies. Some have construed these rules as anti-consumer with arguments that they reduce consumer choice. I think otherwise. In fact, the vast majority of users do not want choices but are content with safety. They want to feel comfortable actually using their electronics. They don't want to be afraid that they may download a virus or feel like they were tricked into installing malware. The App store rules are there to protect the consumer. Apps are not allowed to steal data, access private information or track users without their knowledge. You CAN NOT download malware from the App store.

Finally, with the new subscription model, Apple is further protecting their customers. Protecting them from publishers that prey on consumer data. Publishers that focus less on a product for the consumer and more on the consumer as a product.