Apple’s Razor Sharp New Direction

With the iPad, Apple has clearly slashed its usual profit margins and priced the device to sell. I think this marks a fascinating shift for the company toward the classic ‘razor blade‘ strategy of providing a cheap platform to enable a steady revenue stream.  The announcement of iAd only confirms this, introducing yet another example of the minimum effort/ maximum profit scenario that the iTunes store whet their appetite for so long ago.

On top of this, by getting iPads into consumers’ hands, it helps blossom a beautiful relationship on the hardware front too.  Once people have splashed out on a decent library of apps and got used to the new dynamic of computing, here comes the new premium iPad Pro for mugs like me who will “invest” and general update models with a nicer screen, higher capacity etc. It’s the subtlest form of lock-in, surrendered voluntarily and looked on as an advantage over alternatives.

Before you know it, an iPad is a regular upgrade alongside your main machine, much like iPods have become.  The result is a tasty double-whammy of reliable revenue, all the time supported by the traditional high-margin products like MacBook Pros and their ilk.

Not a bad deal if you can get it but now that Apple have confirmed my suspicions that their attitude toward gaming is improving, I’m sure there’s much more to come… But I’ll save that for another day.

- Max Tatton-Brown

April 12th, 2010