Thursday, February 23, 2012

Whatever Happened to "Give Away the Pipes, Sell the Bubbles"?

My student Alex points me to a curiosity in reports from the Apple shareholders' meeting; we have Apple President Tim Cook saying apple has lots of content for its devices, "but that it 'was not there for the profit,' noting that the iTunes Store is targeted to run at break even as a convenience to users, not as a business." 

Wha--? What ever happened to "give away the razors, sell the blades?" Or, like sell your device at below cost, trusting you will make it up on content? I mean, not that I'm complaining; I assume those guys know how to run their business.  

Bonus Extra: Don't miss Evgeny Morozov's New Republic Review of the Isaacson biography.  

3 comments:

Thomas Barton, J.D. said...

It will be entertaining in 2026 to plot the long and inexorable decline of Apple profits as their absurd margins built on the bent backs and crippled hands of FoxCon employees come screaming back to earth from the stratospheric highs of 2006 to 2012.

Michael J Roberts said...

This is how one exploits agglomeration externalities. Having the biggest ap store helps Apple keep their fat margins that would otherwise erode with competition.

Kaleberg said...

It's not that new a model. Didn't RCA run a radio network and produce shows to support the sales of radios? Didn't GE run a television network and produce shows to support the sales of televisions?