by Brad Moon | August 8, 2014 6:00 am
Turf battles between tech companies are nothing new, especially now that we’ve reached the stage where these companies are true giants, expanding far beyond what was once their core market.
Google (GOOG) and Samsung (SSNLF) have been clashing in multiple areas for years now. Samsung and Apple (AAPL) have had their fair share of battles, too, as Samsung moved into Apple’s smartphone and tablet turf. Seems like Samsung picks a lot of fights.
But another pair-up that’s been getting increasingly face-to-face is Amazon (AMZN) and Apple. AMZN earned APPL’s ire when its Kindle Fire tablets helped kickstart the shift to smaller, cheaper tablets that eventually dethroned iOS in favor of Android. And as Amazon continues its expansion into hardware, the front between the two is growing longer.
Apple is no innocent here, either. It has been poking at Amazon for years — making it jump through hoops with its Kindle apps for iOS — and the AAPL acquisition of BookLamp is the latest move to take the fight to Amazon’s turf.
We’ve put together a gallery outlining 5 areas where AMZN and AAPL are currently competing directly.
Apple was once a computer company, but it’s the iPhone that’s been driving the company’s growth for most of the past decade. In AAPL’s latest quarter, it reported selling 35.2 million iPhones, and with their high margins, the smartphones represent a huge chunk of Apple’s $7.75 billion quarterly profit.
Amazon is crashing the flagship smartphone party with the $649 Fire Phone (reviewed here).
The U.S. mobile market is a mature one, meaning there aren’t many net new customers looking for their first smartphone; increasingly, manufacturers must convince someone who already owns a smartphone to ditch it and buy a new one.
The Fire Phone may not be an immediate threat to the iPhone, but if AMZN succeeds in turning Amazon Prime members into Fire Phone-toting mobile shoppers, at least some of those buyers will likely leave an iPhone behind.
In 2008, Apple’s iTunes Store became the No. 1 music retailer in the U.S. and it continues to be the top source of purchased music. According to Billboard’s Ed Christman, despite 2013 being the first year digital music sales have declined, iTunes market share continued to grow, hitting 40.6% of U.S. album sales for that year.
Amazon MP3 launched in 2008 and immediately went after iTunes by offering DRM-free downloads and undercutting prices.
AAPL and AMZN continue to compete in digital music downloads, but also in streaming music services, with Amazon’s Prime streaming music taking on iTunes Radio.
The two compete on video as well, with the iTunes Store selling and renting movies and TV shows. Amazon does the same, but offers all-you-can-eat options for its Prime members and has begun producing original content such as “Alpha House” through Amazon Studios.
Also falling under digital media is mobile apps. AAPL has a significant lead here, but AMZN has the third largest app store with a slight edge over Microsoft’s (MSFT) Windows Phone Store.
E-books belong under the digital media category, but they’ve been spiked out because the amount of activity in this area lately.
While Amazon was first to the scene with its Kindle e-books, Apple opened its own iBookstore where it competes with AMZN by selling digital copies of everything from novels to textbooks.
Amazon released a Kindle app for the iPad, allowing Kindle owners to read their e-books on their AAPL device. However, Apple raised the heat by enforcing an App Store rule that would have made AMZN pay AAPL 30% of every e-book purchase through that Kindle app. The move forced Amazon to yank purchasing capability and have users launch Apple’s Safari web browser to buy Kindle e-books.
Over the past few months, Amazon has been locked in a pricing struggle with publisher Hachette Book Group and refusing to take pre-orders on some books. AAPL made it known that its iBookStore sell the disputed titles, and even offered them at sale prices.
Then, on July 18, Amazon announced Kindle Unlimited, a $9.99 monthly unlimited access plan for Kindle e-books.
The most recent move in the E-Book battle has been Apple’s acquisition of BookLamp, a startup that has been called the Pandora (P) of books — setting the stage for yet another battle between AMZN and AAPL.
There is no love lost between these two tech giants when it comes to tablets.
Apple virtually owned the tablet market until Amazon waded in with the smaller and much cheaper Kindle Fire in time for the 2011 holiday season.
Going into that December, the iPad’s market share stood at 64%. According to stats from iSuppli Technology, AMZN went from zero to 14% of tablet sales that quarter, while APPL’s share dropped to 57%.
I’m not suggesting Amazon’s entry into the tablet market has been the reason why the iPad’s share now stands around the 25% mark. Kindle tablets have been popular, but they’re not a huge part of the market. However, that first Kindle Fire was an unexpected success that set the stage for the invasion of cheap, 7-inch Android tablets led by 2012’s Google Nexus 7 that have done the real damage.
When AAPL first released the Apple TV set-top streamer box in 2007, the company repeatedly referred to the living room as a “hobby.”
By the time it launched the third-generation Apple TV in 2012, that hobby had become a real business: CEO Tim Cook admitted during AAPL’s annual shareholder’s meeting earlier this year that the Apple TV business was now worth a billion dollars per year.
There have been repeated hints that the next Apple TV will incorporate casual gaming, taking advantage of the huge number of inexpensive games available through APPL’s App Store.
But while we’re still waiting for that fourth generation Apple TV, pretty much everything it’s been rumored to offer — from video gaming to voice navigation — is now available in Amazon’s Fire TV.
With interest in the living room heating up, AMZN wasted no time in muscling into AAPL’s turf with a new Fire TV set-top streamer, priced at the same $99 as the Apple TV.
Don’t count on it.
You may be able to buy Apple products on Amazon and run Amazon apps on Apple gear, but that’s about as close as the two are going to get any time soon.
With Amazon expanding into the smartphone market — AAPL’s big money-maker — and Apple continuing to push its way into the e-book business, the two tech giants are showing every sign that their conflict is going to continue smoldering for years to come.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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