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Death of a Giant: The Beginning of the End for Apple?

  • Adam Casalino
  • Jan 9, 2017 1:45PM

I love Apple products. I admit that. Ever since I bought my first iPod back in 2005, I was hooked. Since then I have owned three Macbooks, two iPods, three iPads, and at least four iPhones. You can say I'm a loyal customer.

Yet in recent years I've seen a decline in my overall enjoyment of the technology. Perhaps it's the eventual fatigue any product line experiences. You can't stay excited over something forever. Even the sexiest couple settles in and becomes "comfortable."

But more and more I find myself seeing my iPhone as a mundane tool, something I consult when I'm curious about the weather or when commercials come on TV. No longer is it this amazing, revolutionary product that captivates my imagination or attention, as it did for so many of us just a few years ago.

Even the expertly crafted iPad Pro, with a stylus that actually lets me draw, just takes up space on my shelf most of the time.

Exciting ads with catchy phrases like "There's an app for that," have given way to... do they even run iPhone ads, anymore? I can't even remember the last one I saw. Was it the one with the kid videoing his neighborhood? Or was that for the new Google phone?

It's clear that the personal tech landscape has become increasingly crowded in recent years. The iPhone is no longer the big kid in the pool. Countless copycats and genuinely better rivals have squeezed their way into the market. This has provided more options for consumers, including more affordable smartphones for people with tighter budgets.

That's a good thing, but it came at a cost: smartphones and tablets aren't exciting anymore.

This week marks the 10 year anniversary of the iPhone. And while we can look back and admire how this small, touch screen device literally changed the world, things don't look so good for the future.

The big story over the last six months of Apple earnings has been the dreaded decline in iPhone sales. After more than a decade of record-setting revenue growth, the company finally saw consumer demand for its flagship smartphone dip down. During the fiscal fourth quarter ended September 24, Apple continued that trend with revenue shrinking 9.8 percent to $46.9 billion and profit falling 23 percent to $9 billion from the same period one year earlier. That's about on par with analyst expectations. (via The Verge)

While those numbers still look big to us mortals, it's the first annual revenue drop for Apple since 2001, before the launch of the iPod.

What is the reason for this shocking turn of fortunes? Apple is by no means dying- for now. But after such unprecedented growth- for such a long time- this kind of drop could be the beginning of the end.

It's so bad- even CEO Tim Cook took a hit.

Apple penalized CEO Tim Cook for the iPhone maker’s first sales slump in 15 years with a 15 percent pay cut.

Cook still did extremely well, with a compensation package valued at $8.7 million for Apple’s fiscal year that ended Sept. 24, according to a regulatory filing made Friday. But the amount was down from nearly $10.3 million in the prior year...

Apple’s revenue dropped 8 percent to $216 billion, while its operating profit declined 16 percent to $60 billion. That was mainly because it sold fewer iPhones for the first time since the device came out in 2007. (via Breitbart)

All signs point to iPhone, the company's most profitable and popular item. But why are sales declining? Is it because people don't like the larger sizes of the iPhone 7 and 7 Plus? Is the removal of the beloved headphone jack really hurting the flagship device?

While it's true that the honeymoon phase for smartphones is over, there might just be more going on than that. Yes, I don't dote over my phone like I used to, but I cannot imagine my life without it. I am still eager to upgrade after a year or so to get the fastest, best version available. So why are sales slouching?

My opinion, it was the removal of subsidized phones on the part of the providers. In late 2015 Verizon announced it was eliminating its 2-year contracts for cell phones. That meant people could leave the provider whenever they wanted for a cheaper company. But that also meant you had to pay upfront for that brand new smartphone.

Your once $200 iPhone would now start at $650. People renewing contracts also saw deep discounts, getting new phones for even less, or free. That all evaporated with this change.

My immediate reaction, like most of you I'm sure, was that most people wouldn't- or couldn't- shell out that much money for a smartphone, no matter how nice. They just couldn't afford it (especially when they had to get phones for their kids!). So Apple and providers came up with convoluted payment plans that basically meant you were leasing your phone from the company.

The same terrible system we use to buy $20,000 cars is now being used for our phones.

As you can imagine, over the last year and a half, smartphone sales have plummeted. Some have argued this is because people just don't want to upgrade. They love their phones too much! But that never stopped them in the past. What's changed is the need to pay over $600 for that new phone.

So why did Verizon and other major carriers make this disastrous change? Greed, plain and simple. Smaller companies- in an effort to compete with the giants- began to offer cheaper (albeit less versatile) plans. They invited customers to leave AT&T and Verizon for their service while keeping their phones. They even offered to pay to break their existing contracts.

This could have created a scenario where customers bought an iPhone from Verizon for $200, broke their contract to go with a cheaper company, and left Verizon on the hook to pay the remaining $450 on their phone. So they dramatically altered their plans to compensate, creating the current problem we have now.

Instead of trusting that customers would stick with their services because they were superior, Verizon and other major carriers destroyed the only attractive feature expensive smartphone plans had: subsidized devices.

They tried to spin this as good news, in that you no longer had to sign a 2-year contract, but who really cared? If I want to use Verizon's service, I don't care that I have to stick with them for 2 years. That's hardly an eternity. And if I wanted to change providers, I could have easily done so- even before the contract was up.

Because of corporate greed and a bad attempt at protecting their bottom line, cellular providers made the decision to destroy the smartphone market. The average customer doesn't- and can not- pay thousands of dollars for a new smartphone. And- as we've seen from the numbers- they don't like the weird payment plans Apple and others are offering. So we're stuck with a declining market.

This decline is even affecting other aspects of the tech consumer world, as companies are investing in the wrong kind of technology:

Despite expectations that the “next big thing” would premiere at the pre-opening for the 50th Anniversary of the Consumer Electronics Show in Las Vegas, it seems the latest tech innovations are struggling to live up to all the hype...

The focus of this year’s show was expected to be how virtual reality wearables would break out into the mainstream. But if within the “VR space,” there has been a flurry of tech and retailing headlines describing disappointing” Christmas VR headset sales.

SuperData slashed its Sony PlayStation VR sales projections in early December by over 70 percent, from 2.6 million units down to 745,000 units. SalesData called the flop the “biggest loser” for this holiday season. (via Breitbart)

I could have told them that VR was going to fail. Precious few people want to wear enormous headgear in public, cutting them off from all interaction and awareness.

I mean, have you ever ridden the bus? That's the last place I want to be oblivious to my surroundings.

Yet the tech industry has doubled down on VR headsets. Cell phone makers and video game companies are pushing these stupid gadgets, despite any indication that people want them. Why? Because most retail for around $800. Mind you, these products only work if you already have a smartphone or video game console.

This kind of greed is what drives industries into the ground. It's not the first time the tech world got predictions wrong. In 2010, CES was all about the e-reader. There were numerous Kindle clones on display because tech makers wanted to jump on that trend. But what came out later that year? The iPad, which completely destroyed e-readers.

Innovation is built around taking risks. When an industry blindly plays follow the leader, or makes choices to protect their bottom line, we all suffer.

The only solution for the smartphone debacle is for Verizon and others to nut up and start offering subsidies again. Apple needs to stop trying to compete with Android phones and return to the simplicity and style that Steve Jobs espoused.

Otherwise, things will only get worse.