Apple, the destroyer of comfort-zones

More dangerous than it looks...

The music industry has been an unhappy one for almost a decade. Music sales are worth some $ 17.6 billion, but that is 10% down in just the last four years. For every song sold, 20 are estimated to have been pirated.

However, one firm is grinning cheerfully.

In 2001, Apple – the fashionista's technology company – released the iPod and iTunes music store. A cunning digital music player twinned with a dedicated music download store. Since 2001, Apple has sold 140 million of the little gadgets and sold over 1 billion songs; 80% of all digital music.

And Apple got away with it. No other company has managed to break into Apple's digital music domain.

Flushed with this success, Steve Jobs, Apple's CEO, led the firm into the launch of a cellular phone.

Phones are a consumer item. Like computers, washing machines, dishwashers and microwave ovens. Our requirements from them haven't altered much in the past decade. We use them for phone calls and to send short messages via SMS. Outside of South Africa the growth of cheap bandwidth means that people enjoy watching television or playing online games on their phones, but that is financially prohibitive locally and something only our politicians can afford.

In many ways, the cellular phone market had become a cushy one where everyone struggled in the shade of Nokia's empire.

On 29 June 2007, the first iPhones went on sale in the US. People queued up overnight as if this mass-produced consumer item were a bunch of scarce concert tickets. Within 30 hours Apple had sold 270,000 of them.

Now, in comparison to the global cellular phone market, that is tiny. Nokia sold 435 million devices in 2007 and the total market is growing at 16%. Yet the terror that Apple caused should not be understated.

Remember that the iPod has only been selling for seven years and is totally dominant. Remember that phones and music devices are converging. People want to use their phones for all sorts of purposes; from music to photographs to blogging to internet chat to even making phone calls.

Companies as diverse as Samsung, Blackberry, HTC and Sony Ericsson rushed touch-phones to market in pursuit of an "iPhone killer". So far, the race is still on.

Apple was so convinced of the inevitability of their victory that they extracted some pretty heavy concessions from their retailers. They would only allow a single network provider in each of six countries to sell their phones, only on contract, with Apple taking a percentage of the revenue generated from calls and SMSs made from their phones.

It wasn't surprising that a massive parallel-market in hacked iPhones erupted. You even saw some around South Africa where they were definitely not for sale.

The mobile phone industry is one of the world's freest. Licences may be dolled out, but the market is more competitive than most. There are no state-owned or protected cellular phone manufacturers.

That means businesses have to be tremendously responsive to the needs of their clients. Apple demonstrated, rather convincingly, that customers want a better interface on their phones and are prepared to pay for it. Companies are responding and, though caught by surprise, are rapidly catching up to Apple's innovations.

Apple appears to have realised that they are going to have to adapt. Their new 3G iPhone was released, without contractual strings, on 11 July to 70 countries and should be available in South Africa by year-end.

The beauty of all this is that prices are falling and technology improving in gigantic strides without any government intervention at all. This is a pure market play. You, the customer, have decided and the products are taking shape around you.

Competition triggers innovation. Would that governments would allow the same unleashing of competitive creativity on areas like education, health and social services, instead of hogging it for themselves.