Shooting fish in a barrel – and it’s RIM’s turn inside

David Braue
27 October, 2008
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Well, Apple has gone and done it again.

Just when the rest of the industry thought it knew how to make consumers part with their money, Apple comes along with this newfangled iPhone thing that’s selling faster than hotcakes, and an App Store for loading programs onto the iPhone thing and its cute but slightly debilitated little brother, the iPod touch.

Apparently, people have bought more than 200 million apps through the App Store after just about 100 days – that’s 2 million per day, or 23 per second. Last week, Apple also announced that it had passed the 200 million mark in terms of TV shows sold through its iTunes store (a milestone that took Apple’s music business 14 months to reach). This includes the sale of more than 1 million HD shows in the first month since they were launched.

You know, I think Apple might be onto something here.

In fact, we know Apple is definitely onto something here because on Friday, Research In Motion, makers of the iconic BlackBerry smartphones, decided that it is going copy Apple’s idea and launch its own online store – called the BlackBerry Application Storefront – in March (but not, curiously, in time for the upcoming Christmas season, which it seems to be ceding to the iPhone).

RIM joins Apple, Google (which opens its Android Market to all and sundry today), and Microsoft (whose Skymarket effort was widely reported last month) in offering its applications through a single point for payment and downloading. There’s no telling why these cashed-up companies couldn’t figure out something as seemingly intuitive for themselves, but – as seems to be all too common these days – they all once again sat around with their feet up on their desks waiting for Apple to come blend and feed them their dinner through a straw.

(To be fair, I’m excluding Google from this argument since it copied Apple’s model from the get-go and so didn’t need to be fish-slapped upside the head like Microsoft and RIM).

Microsoft did a great job building a mobile apps platform that does a lot of stuff, but its heavy leanings towards a desktop way of working meant that loading apps onto the phones has been less than, shall we say, intuitive – and impossible to do from the field.

RIM has long enabled downloads straight to its phones, but not through a single user interface; this is consistent with RIM’s business model, in which it pushes as much of the actual day-to-day customer interaction as possible out to their carriers.

Was it so difficult to figure out that people didn’t really want to treat their phones like computers, with all their faults and foibles? If nothing else, the exploding ringtone market – in which people (those who don’t know how to use Audacity) have for some reason proven more than willing to shell out more than the cost of an actual song just to get a cool ringtone for their phone – should have made this obvious.

It’s a model that seems great for consumers but a nightmare for businesses, which are used to having control over what they put on their corporate-issue smartphones. They’re also not used to paying royalties to phone makers every time they load an application onto their employees’ phones, which is more than enough reason for enterprises to favour Web apps over downloadable iPhone apps.

However the apps get onto the phone, the money is out there, kids, and Apple was first in, best dressed. RIM clearly needs to make a case for developers as to why they’d bother, and having a big installed base can’t hurt – nor can RIM’s decision to split revenues 80/20 with developers (as opposed to 70/30 in the Google and Apple stores).

Yet despite RIM’s efforts to jump on the bandwagon, I predict its effort, like that of Microsoft and Google, will be functional but far from inspiring as it struggles to be relevant. There is one simple reason for this, and it has nothing to do with the apps themselves.

That reason is iTunes.

Unlike its rivals, Apple has a ready-made delivery system that’s built into its excellent music management software – which also happens to have a ready-made payment system built in. And this payment system just happens to be powered by prepaid cards that are already, today, right now, I-can-go-out-for-lunch-and-buy-ten-of-them-at-Safeway, available all over the world.

Buying apps through iTunes is easy, a lark, a spree – and it’s a casual purpose for people who probably already have iTunes on their system so don’t need to do anything different to start buying apps. Buying apps through the other guys’ stores requires much more effort and, no doubt, a bit more technological to-ing and fro-ing.

So, while RIM makes great products, it will struggle to gain critical mass, especially since a huge proportion of its existing customers aren’t even using download-capable 3G phones.

Google has almost no market share and is struggling with the far more fundamental question of how to convince the average consumer why they would actually want to buy an Android-powered phone. And Microsoft, as usual, has so many feet in the pool that I’ll give it an A if it can even get Skymarket to work. Gossip about Microsoft buying RIM is interesting, but distracting from the real issue here.

And that issue is this: it’s one thing when Apple out-innovates its competitors, but it’s another thing when they become so institutionalised to boring corporate behaviour that they adopt the roo-in-headlights mentality and can’t even think of the bleeding obvious themselves.

It killed Palm, and it could do the same for RIM and Android, no matter how interesting they are right now. And, as Apple gracefully leaps from one dizzying height to another – heck, it sold over 5000 apps to iPhone users during the time it took you to read this – one wonders just how far its rivals will go before they collapse, panting, in a heap.

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