Why Apple will fall
Among the acres of newsprint about the woes of
News International at the weekend, there was one great piece
it was easy to miss: the Mail on Sunday's account of the
precipitous decline of Nokia, so dramatic it's almost a
Murdoch.
A few snippets:
- In 2000 the Nokia share price stood at €65.
Now it's €4.30;
- In 2002 Nokia was named the UK's number two
"superbrand". By 2010 it was
89th;
- Nokia's market share - once approaching 40% -
is now below 30%, its lowest since 1999.
In short, Nokia is on the
ropes.
And its relentless decline is of course the
mirror image of the apparently ceaseless rise of
Apple.
Just as Nokia has faltered, so Apple, powered
by the iPod, iTunes, the iPhone and now iPad has gone from strength
to strength.
In the FT Global 500 of the world's biggest
companies by market capitalisation Apple appears at number three in
this year's ranking, up from five last year. Nokia isn't even in
the Top 100.
Apple's market value at the end of March 2001
was $321bn. To put that in context, Warner Music which has a
worldwide marketshare in recorded music of around 12% sold for
$3.3bn, meaning the world's entire recorded music industry may be
worth less than a tenth of Apple.
Just as the value of record companies is at or
near its historic low, so Apple's is puffed up to the
max. Which is precisely why right now is a good time to
consider what will happen when Apple suffers the same fate as Nokia
and falls off its perch.
For the one thing we know for sure is that
market dominance of the kind Apple's iTunes currently enjoys never
lasts forever. The fact is, the iTunes share of more than 80% of
single track sales in the UK and perhaps two-thirds of the digital
album market is not sustainable in the long term. History shows, if
competitors don't get you then the regulators
will.
Remember when Microsoft was the biggest
company in the world? It's now down to number 10. Google, the
supposedly impregnable King of Search, now finds itself subject to
anti-trust scrutiny.
There seem no good grounds at this point for
iTunes itself to be subject to its own anti-trust investigation. A
dominant market share is not in itself justification for a
competition enquiry. iTunes continues to deliver a superlative
consumer experience. Setting aside the inevitable day-to-day
niggles, most labels I speak to seem generally positive about
iTunes as a trading partner.
As to where the likely competition to Apple -
the inevitably iTunes-killer - will come from, that is no clearer
either, although the rise of the internet-connected TV may be a
good place to start.
Whatever, the end of Apple's dominance will
surely come.
Which means for that small but dedicated band
of visceral Apple-haters, your pain will come to an
end.
To those at Apple the only thing that can be
said is, Enjoy it while you can. It will not last
forever.
Ask Nokia.