As much as I hate to say it I was raised on Microsoft Office, and one major component is the Excel spreadsheet. I love spreadsheets. They’re like statistics, visual math, and they can be twisted and turned to say about anything you want numbers to say (like lies, damned lies, and statistics, only on your screen).
When talk of Apple licensing this or that– Mac, iOS, Services– where are the spreadsheets?
For all of Apple’s delicious product designs and detailed attention to the user experience, I don’t doubt for a moment that someone, somewhere at One Infinite Place has put a spreadsheet to all kinds of wacky ideas.
Surely, someone at Apple has a Numbers spreadsheet and Keynote slideshow on how Apple could license Mac OS X, iOS, watchOS or tvSO or something that would generate a few hundred million in licensing fees (perhaps in a vain attempt to mimic what Microsoft makes from royalties and licenses from Android device makers).
Here’s the problem with these vain attempts to convince anyone that licensing anything to competitors makes sense for Apple. The math doesn’t support the premise.
Wait. Didn’t Apple try licensing Mac OS back in the day? How did that turn out? It was great. Great? How could almost going bankrupt be considered great? You need to read the story of Joseph in the Bible. He was sold into slavery, thrown into prison, became the #2 guy and saved his family from starvation. Good ending, right?
Likewise, Apple’s Mac OS licensing fiasco almost brought the company to bankruptcy, which opened the door for Steve Jobs and NeXT to get bought by Apple’s then lame CEO, and the rest is history. Jobs saved Apple. Licensing good, right?
Where Is The Spreadsheet?
Jonny Evans thinks Apple is missing the boat and a huge opportunity by not licensing something; anything.
If we define Apple’s core products as Macs, iPads and iPhones, then it makes little sense for the company to license its operating systems. Not only do they give its products a unique selling position, because they are better designed and work better than anything else, but these cash cows also contribute a great deal of revenue to the company coffers.
Yep. Been there. Done that. What else you got?
However, Apple is also developing its services income. That means its app stores, online services, Apple Music, messaging and a range of associated service-based solutions, each of which contribute a few more dollars to its bottom line.
Ok, Jonny doesn’t seem to understand business parlance whereby income is not revenue, but I get the idea. Apple makes money besides hardware. Lots of money. As with iTunes for Windows, Apple’s Apple Music app for Android is designed to grow revenue and profits from the great unwashed masses of hardware buyers who decided, for whatever mental illness reason they use these days, not to buy hardware from Apple.
It shouldn’t really matter to Apple which platform people using some of its services happen to be on, just so long as they enjoy the user experience and are willing to pay for it. Once Apple brings one of these non-Apple device users into the fold, it just has to give them what they want and treat them properly and the customer journey will have begun. That journey means Apple claimed more Android users than ever before switched to iPhone in its just gone quarter. In other words, offering services to customers across multiple platforms is a gateway to selling its core products to those customers in future. The recurring income also helps.
Or, so the story goes. Where’s that damned spreadsheet, Jonny?
The idea here is that Apple could license watchOS for wearables to competitors (thereby reducing Watch sales, because… you know) or license tvOS to competitors (thereby reducing Apple TV sales because competitors can only differentiate their wares by price, undercutting Apple’s notoriously massive gross margins, which, by the way, were not mentioned once by the aforementioned Mr. Evans).
Microsoft gets less by licensing Windows to other manufacturers than it makes by selling its own Surface tablets. Likewise, assume, for the sake of numbers, that Apple could get $5 for each watchOS or tvOS licensed to whomever or whatever entity foolish enough to do that (after all, they get the same thing from Google for free). And one of the smarter competitors sold an Apple TV or Watch wannabe for $99 and $199 respectively. And, collectively, sold 10-million a year. Apple’s licensing fees at $5 a pop would be $50-million before expenses.
Assume gross margins of Watch and Apple TV at nearly 40-percent– typical for Apple– and the company keeps $135 and $50, respectively, for each Apple Watch and Apple TV it sells, and they sell both in the millions each year. Watch alone is already a multi-billion business, so why would Apple invoke some kind of brain dead licensing scheme that would bring in less revenue, lower profits, and result in lower product sales?
*Maybe Apple gets the licensing business better than people who write for a living but don’t know how to use a spreadsheet or calculator fully understand or appreciate.