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Is There More to Apple's Move to Sell 28 Cent Songs in India?

T 01 - Patently Informative
Businessweek has published an interesting report about one of Apple's recent moves in India. According to Businessweek, Apple has launched a steeply discounted version of its iTunes store, which offers songs such as Come Together and Hey Jude for just 28 cents. The report quotes Siddhartha Roy, chief operating officer of Hungama Digital Media Entertainment, an Indian digital music portal as saying that "Apple kept the Indian consumer in mind when determining their pricing here. India is just starting on the digital commerce space, and this will likely serve as an entry into a lot of other products for Apple."  


Gartner IT analyst Anshul Gupta added to this report that "Apple seems to be making a move," Businessweek then pointed to speculation that Apple could be working on a less-expensive iPhone that could appeal to Indian customers. We reported on this same rumor earlier this month.


Former Apple CEO John Scully was in India on business lately and publicly stated to the Indian press that he believed it would be Samsung who would be first to crack the smartphone market in India with $100 product. While Apple will never aim for that segment of the Indian market, their recent move to steeply cut prices on iTunes India may be more than a marketing move occurring within a vacuum.


Shifting Market Conditions


A new report published by ABI Research yesterday stated that Apple's 2012 annual shipment growth declined from 96% in 2011 to 46% in 2012. "It is clear that the iPhone's hyper-growth has ended, and ABI Research believes that Apple's market share will peak in 2013 at 22%," says mobile devices senior analyst Michael Morgan. "Unless Apple is willing to trade iPhone margins for low cost iPhone shipments, Apple's handset market share will become dependent on customer loyalty."


Another report out this week by the Wall Street Journal stated that smartphones have all but taken over the U.S. cellphone market, accounting for 89% of all phone sales to contract customers in the fourth quarter for AT&T. Apple's decision to let carriers sell its older model phones at discounts or even for free has helped get iPhones in the hands of more users.


Apple's iPhone challenge is already becoming apparent globally, where demand for cheap smartphones is huge.


Apple's success in the U.S. has been driven in part by the willingness of carriers to heavily subsidize sales of its expensive phones. But under pressure from investors, carriers are increasingly trying to change that.


The Wall Street Journal states that the number four carrier T-Mobile USA, owned by Germany's Deutsche Telekom, will stop subsidizing smartphones this year and offer interest-free financing to buyers instead.


The largest U.S. carriers have yet to follow its lead, but AT&T CEO Randall Stephenson said Thursday he commended T-Mobile for going that route. "It's something we're going to be watching," Mr. Stephenson said.


Mr. Stephenson's commending T-Mobile's move has to be concerning as Apple used AT&T to launch their iconic 2007 iPhone. It would be another headache for Apple if AT&T were to move away from their current subsidizing business model.


This trend towards killing subsidies is a big issue now in Korea as well, as the country's largest wireless company KT is calling for a ban on handset subsidies.


While market circumstances in themselves don't always dictate or translate into a particular direction a high level tech company will take, I'm sure that Apple has a plan for iPhone diversity in the not-too-distant future that will appease the markets while maintaining the iPhone brand accordingly.


With Apple introducing their first iPad mini into the market this past holiday season, they clearly demonstrated that they have the capacity to quickly respond to changing market conditions. If they introduced the iPad mini into the market at the right time, there's a very good chance that they'll launch an iPhone nano or some kind of multi-tiered iPhone offering at some time in the near future.


Apple's recent move in the Indian market to lower iTunes pricing aggressively could have been nothing more than a one-time only promotion to spark iTunes sales. On the other hand, it may have signaled their preparation for a larger move into India in the not-too-distant future with a more economical iPhone. However it pans out, it's pretty clear that Apple will professionally respond to current market pressures with a new range of iPhones when they deem the time is right.


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