US_warships_entering_Lingayen_Gulf_1945The latest Apple quarterly results announcement provides an interesting chance to compare and contrast with Amazon’s word on its 2015 holiday season. As I reported earlier, Apple announced a 25 percent drop in iPad sales, from 24.4 million in 4Q2014 to 16.1 million in 4Q2015. It also recorded almost flat iPhone sales, at 75 million for the quarter, and forecast these to drop in 2Q2016.

Contrast Amazon. Its statement on its “Record-Setting Holiday for Prime, Amazon Original Series and Amazon Devices” declared that 4Q2015 was the “biggest holiday ever for Amazon devices – up 2x over last year’s record-setting holiday.” Of course, it would be great to know how many device that meant, but Amazon isn’t telling. What it did say was that “the all-new Fire tablet and Amazon Echo topped this year’s most wished-for and gifted items for customers.”

Now, I don’t claim that Apple and Amazon will be going head to head in hardware. But I do think that Apple’s best news of the quarter sets the stage for a very interesting battle between the two giants that will be as defining as Apple’s struggles with Microsoft in the noughties, or its more recent tussles with Google and its mobile device partners.

Apple recorded a hit quarter in one respect, as everyone should acknowledge – the most profitable quarter for any company in history. And as Tim Cook said, “the growth of our Services business accelerated during the quarter to produce record results.” Against a backdrop of falling hardware sales, that means Apple’s business focus will have to shift increasingly towards services. And who’s king of the services hill in the U.S.? You guessed it: Amazon.

Matt Rosoff in Business Insider spelt out the obvious in his headline on the results: “Apple can’t keep relying on the iPhone forever — it needs a new hit.” And he was “not convinced that Apple has the chops to deliver a world-changing online service — it never has.” Amazon, meanwhile, has been doing nothing else. What is the $50 Fire but a front-end for its services and content offerings, including the Kindle Store of course? And Amazon may be ready, if reports are true, to put the Fire Phone fiasco behind it with smartphone partnerships that will turn third-party devices into similar service storefronts. Meanwhile, Amazon Digital Services is becoming a very lucrative testament to Amazon’s services strength – so good that it sells it to others.

Unless, as Rosoff emphasized, Apple manages to wrench the competitive faceoff back onto hardware territory with something as revolutionary as the original iPhone or iPad, it’s going to be forced to play on Amazon’s turf. Now, Amazon is actually doing some pretty sensational things in hardware right now – look at the surprise hit Echo speaker, or the Dash buttons. All those, though, are integrated into its services platform, which of course hits its peak in Prime.

Latest estimates of Prime membership calculate some 54 million members in the U.S. alone – one sixth of the entire population. Prime members could form their own medium-sized respectable nation any time. What’s more, those estimates declare that Prime members are very loyal, and high spenders.

Tim Cook boasted in his results speech that Apple had passed “a major milestone, crossing 1 billion active devices for the first time,” as well as extolling “the mother of all balance sheets, with almost $216 billion in cash.” Just as well, because Apple is going to need every dollar and every loyal user if it hopes to seriously compete with Amazon in services. And Amazon dominates services in a way that Apple has never managed to dominate the mobile device space. This could be quite the tech battle of the (new) century.

Image credit: Here.


  1. I’m not sure Amazon and Apple are going to compete over the same services. Amazon with its Amazon Web Services is the king of that realm. Apple is still struggling to make its iCloud reliable. It isn’t a service they can sell to others.

    In other areas, the tables tilt so heavily one way or the other, there is no real competition. Amazon’s app sales are nothing in comparison to Apple’s huge iOS app store. And as much as I wish Apple would make their iBookstore a worthy competition to the Kindle, its top executives seem to have little interest in books, digital or print. If they did, they’d make something of the iBookstore.

    In other areas, the competition has yet to develop. Apple’s TV show distribution ambitions are still on hold. And there, Amazon won’t be Apple’s chief foe. Amazon’s Prime streaming service and anything Apple might offer is likely to be anemic in comparison to the wealth of benefits that Roku offers, much of it free after you buy their little $50 stick. Roku is streaming video done right. Roku doesn’t try to own the content. It merely provides a platform for distribution that content by those who create channels.

    In payment services, Apple has an advantage that Amazon may never match. How can you provide a pay by smartphone service when you don’t have a viable smartphone?

    What I dislike is that Amazon, Apple and others are moving very heavily into gatekeeper areas, charging others a toll to pass through their services. I don’t particularly like to see tolls collected by industry giants who’re providing little added value other than that they sit athwart the digital tollways.

    Used books sold through Amazon illustrate that. A Goodwill store who sells through Amazon has to pay Amazon $1.35 plus for trivial services that cost Amazon pennies. That’s often more than charities such as Goodwill are making on a sale. If Amazon had a heart, it would wave that $1.35 charge for non-profits.

    And if Apple had a heart, it would make a laptop that makes good sense for middle schools and high schools. It currently makes nothing but fragile and almost unrepairable laptops. If it cared about our schools, they’d be sturdy and modular, so they hard to damage and easily fixed.

    And if both Amazon and Apple had hearts, neither wouldn’t demand millions in tax rebates from the impoverished little communities where they put server farms. Instead, they’d give money to those communities. And if Amazon and Apple had any sense of social responsibility, they would not be using every trick they can, legal or illegal, to avoid paying taxes.

    In a dog fight between Amazon and Apple as to which has the warmest heart and greatest sense of social responsibility, I’d be for neither. For both, money is the ultimate value. That’s equally true for this fight over services. Wasn’t it Shakespeare who wrote, “a pox on both your houses.” That’s my feeling. I’d rather see these services provided, like Roku and Dropbox, by other, more reasonably sized companies. I hate seeing these mega-corps reaching out their tentacles, taking over more and more areas, as if the entire earth were their entitlement.

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