What if you didn’t sell a device as a stand alone entity but instead sold a device based on the “service” it provides/accesses?
What if the capabilities and content you could access was more important then the hardware itself? We’re about to enter the era of “Device-as-a-Service” as a buzzword, but will this be disruptive to the current market, or is it business as usual?
Any discussion of the iPods success has to include a conversation on iTunes and it’s ecosystem, an eco-system that allowed users to easily, cheaply, and legally acquire music and sync it to your iPod. It’s worth noting that Apple created this ecosystem at a time when the recording industry was still fighting the disruption of digital distribution, in many cases illegal sharing. Apple and iTunes brought the disruption back to a legal distribution system that today leads the music industry.
Other MP3 vendors such as Sony would try to imitate the Apples hardware/software model, but never quite got there, none had the level of integration with hardware. Later Apple created the iPhone and after a generation or two they added apps, further developing and enriching the ecosystem. Now you could add functionality to your device, all through the same familiar interface.
With free reign (app store guidelines aside) users were now free to once again add applications and functionality to their devices, including apps that would allow them to consume a growing list of media types. This was yet another catalyst to the disruptive change technology was playing in the print industry. Magazine publishers were then scrambling to create apps as an additional way for costumers to consume their content.
Connected device studies such as those from MediaVest and Comscore are constantly asking participants about their media consumption on devices. These surveys are then thoroughly reviewed by media companies to ascertain consumer behaviors and use cases on the ever-broadening range of devices. The results of said studies point to greater time spent consuming media on tablets then phones, and support the notion of the tablet as a lean backdevice. People spend more time watching and consuming content on tablets then they do their phones.
Amazons latest business strategies and Kindle Fire line up indicate both an embracement of this consumer trend and a pricing and revenue strategy similar to game console makers. Nintendo, Microsoft, and Sony all sell their gaming consoles at or near a loss. This allows them to receive licensing revenue and profit sharing from the games developed for their respective platforms. You can’t sell Super Mario if people don’t own a Wii.
Amazon is using an aggressive price strategy to get the devices in the hands of consumers to drive App and Content store revenue. In contrast iTunes and the App Store we’re originally more of a secondary revenue source for Apple. As they have become more lucrative we now see Amazon and others entering the space.
On the marketing communications side Amazon isn’t trying to sell you a device because it has email, or 4G or a high resolution display, or because of any one of a hundred features, they’re selling you an access point to content and apps. Apple did the hard work, they convinced you that you “NEED” a tablet. Amazon’s just telling you that you can use their cheaper one and get the same benefits.
Microsoft has even started the shift to device as a service, giving consumers the option to buy a discounted Xbox 360 in exchange for a long term commitment on Xbox Live. Once on Xbox live you can sign up for services such as Xbox Music (formerly Zune) and spend Xbox Live Points(virtual currency funded by real money) on all sorts of in app and avatar upgrades. Xbox Music is even built into Windows 8 and Windows Phone. Microsoft is even trying to shift Office to a subscription model more inline with Software-as-a-Service.
While Device-as-a-Service may be a new buzz word the business models behind it are tried and true. The benefit to consumers is the continued refinement of tablet and other electronic products at an even more competitive price. This can be viewed as a complementary to the disruptive change that technology has brought to media.