The smartphone market is being dominated by a shrinking group of powerful companies. You have to wonder if there’s room for any real diversity anymore. The barriers to entry for new companies are almost impossibly high. Apple and Samsung have been raking in the lion’s share of profits between them. Once successful companies, like HTC, are shrinking. Even fairly major players with fingers in other pies, like Sony have been struggling to make a dent in recent years.
Fierce competition has driven down prices, but major innovation seems scarce. Smartphones are increasingly similar and the ruling oligopoly is getting smaller and more powerful all the time. The failure of Nokia and BlackBerry highlights just how tough it is. We asked a while back “Why won’t Nokia make an Android phone?” and it seems we now have our answer. BlackBerry finally released a platform worthy of the modern smartphone age, but it was too little, too late and there’s no doubt the battle for third has been lost.
Nokia swallowed by Microsoft and BlackBerry broken up for parts. Where is it all heading?
The Apple model
While many analysts have continued to predict the demise of Apple because Android has a commanding market share, the Cupertino-based company has been happy to focus on that bottom line. The iPhone is jaw-droppingly profitable. Even with a niche share of the market, Apple can make more money than everyone else. Much has been made of the “walled garden” approach, the fact that Apple owns and controls all aspects of its smartphone business. It makes its own hardware, it closely controls the software that’s made available on it, and it even has its own range of stores to show that hardware off to best advantage. Whatever you think about this approach, we can all agree it has been incredibly successful.
Are Google and Microsoft now aiming for the Apple model of control?
Google’s purchase of Motorola Mobility gives it the hardware piece of the puzzle. The Moto X is designed to show off Google’s services and make the most of Android. We can’t see Google shutting down its Android partners, but it has already shown a desire to ensure that the Android experience is solid across the board. Producing hardware through Motorola is one way of combating the fragmentation issue and leading by example.
The idea that Google will exert Apple-style control over Android can only occur if you fail to understand the company’s ultimate aim – to attract users for its online wares. Google wants people using its services, so it can sell advertising. Low margins on Android make sense when you view the platform as a way to lock people into Google.
Microsoft’s Windows Phone
Microsoft is a whole different kettle of fish. The company has been resting on its laurels under the obnoxious Ballmer, but as he slides out, a new CEO could really turn things around. Nokia has always manufactured great hardware. You could argue the restrictions Microsoft placed on hardware and its “special relationship” with Nokia account for the failure of other manufacturers to bet big on the Windows Phone platform. How do they differentiate themselves? How do they justify the licensing costs when the market share is so small? Why should they bother when all the marketing spend focusses on Nokia’s hardware? That will be even truer now that Microsoft has acquired Nokia.
With the purchase of Nokia, Microsoft is moving towards the Apple model. Microsoft has tight control over Windows Phone software, it has its own chain of stores in the U.S., and it makes its own hardware. The Nokia acquisition allows it to add smartphones to the tablet line it’s already producing. Microsoft would love to emulate Apple, all it needs is a decent sized niche of customers, and BlackBerry’s disappearance from the race makes it a shoe-in for third. It may be a distant third right now, but the right moves could see the gap close.
Room for any more?
It’s seems a shame to see BlackBerry and Nokia disappearing, but the tech industry is fast-paced and there’s no room for stagnation. As tough as it looks for a new player to crack there are always a few green shoots. Maybe Tizen, Ubuntu Touch, or Firefox OS will grow into realistic alternatives. Maybe an entirely new player will sweep into town, or perhaps we’ll see an offshoot of Android threaten Google’s ownership of the platform. The one thing we can predict is change.