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Co-opetition Between Apple, AT&T Defines Relationship

Thursday, September 13th, 2007 at 1:00 PM - by

The co-opetition between Apple and AT&T could lead to a potentially strained relationship, according to C|Net on Thursday. So far, all's worked out well, however, AT&T is not accustomed to the fast moving nature of Apple.

"With this deal, AT&T thought like a traditional phone company, focusing mostly on driving subscriber growth," said Michael Goodman, director of digital entertainment for market research firm Yankee Group. "But the partnership with Apple won't make AT&T a successful provider of digital entertainment."

Therein lies the problem. While AT&T has delved into music, working with eMusic, Apple has sold 3 billion songs. In fact, Mr. Goodman estimated that all the carriers, AT&T, Sprint, Nextel and Verizon sold as much music in 2006 as Apple sells in three or four weeks.

There are several co-opetition factors that create some tension between Apple and AT&T. AT&T gets no revenue from iTunes music sold to iPhones. Apple, not AT&T, gets to decide services and offerings on the iPhone. The recently announced Wi-Fi Music Store bypasses the AT&T network -- even though with good reason related to network speeds. Finally, Apple will generating revenue from its recently generated ringtone service, not AT&T. In 2006, the U.S. carriers generated US$873M in ringtone revenue.

AT&T's Mark Collins, VP of consumer data services for AT&T's wireless unit appears to have a good perspective. "AT&T is a market leader in wireless and Apple is the market leader in online and portable music. So it was a natural fit for AT&T and Apple to make a product available to our customers," he said.

However, new issues from the fast-paced Apple continue to crop up. For example, it's not clear yet whether the iPod touch is a competitor to the iPhone from AT&T's perspective. Apple's Natalie Kerris doesn't believe it. "...one is a phone and one is not. So I would disagree with an interpretation that these products compete," she said.

Even so, by offering a Wi-fi enabled iPod that can buy music wirelessly, AT&T may not see it that way. "The best that AT&T could hope for from this deal with Apple is adding new subscribers," Mr. Goodman said. "And my gut feeling is the iPod Touch will have a negative impact on iPhone sales at least in the U.S."

Ultimately, it boils down to how good a partner Apple is in the best business sense. It's an area where Apple has had some problems recently. "The bottom line is that Apple is not a good partner," said Yankee Group's Goodman. "They have tremendous products and marketing. But if you're a partner, you'd better put your hand on your wallet. I haven't seen a deal yet where Apple hasn't come out of it smelling like roses and its partners have had to bear the brunt."

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Bosco said:

member since 03 Jun 2002 with 999 posts, unranked, send him a message or view his profile

Thu Sep 13, 2007 1:29 pm

I think what the article is saying is that Apple is like that really pretty girl you knew in college. You got with her for awhile one evening, but she left you with blue balls and an unsightly cold sore.

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Terrin said:

member since 29 Jan 2006 with 360 posts, unranked, send him a message or view his profile

Thu Sep 13, 2007 1:35 pm

Give me a break. AT&T got a lot out of this deal. First, it got a lot of free publicity that allowed it to essentially banish all traces it's old Cingular name and reinvigorate its brand. Companies pay millions for that type of publicity. Second, it got to trade off of Apple's good will in which it gets to be associated with a company that gets high customer satisfaction marks. . Third, it got a five year exclusive deal in which it is the only carrier who can sell the iPhone. So far that has made AT&T millions and millions of dollars. Fourth, it gets to mingle with Apple executives, in which it has the opportunity to learn from Apple. Fifth, the no name CEO of AT&T is now somebody who journalists and the such are interested in.

Sure AT&T isn't making money off of music Apple sells, but it isn't incurring any costs either. Moreover, what type of idiot would think the iPod Touch competes with AT&T any more then a regular iPod .

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derpassante said:

member since 23 Aug 2007 with 7 posts, unranked, send him a message or view his profile

Thu Sep 13, 2007 1:40 pm

Ah yes, that old refrain. Apple is not a good partner. Is 250,000 new subscribers ( 25% of the millon iphones sold) such a bad deal?

The real problem with ringtones and music sales over phone systems is that they are overpriced and the network is too slow. That's not Apples problem. Is ATT and Verizon's.

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vasic said:

member since 09 Aug 2005 with 238 posts, unranked, send him a message or view his profile

Thu Sep 13, 2007 2:30 pm

I thought that the figure was 40% of all iPhone purchasers were new to AT&T? Which would mean 400,000 new subscribers, which further means additional $20 million in revenue every month, just because of the iPhone? Not to mention that it's only the first million of iPhones; the coming months will only bring more switchers over, and the clear winner in the price reduction is obviously AT&T, as they get all that recurring revenue. While Apple will be receiving their $9 per subscriber for the next two years, AT&T will continue to receive their remaining $50 per subscriber for as long as that iPhone works, or until the exclusive deal expires, and that's at least the next five years.

By the end of 2008, if Apple meets its 10 million goal, AT&T will be raking in over $2 Billion per year from new iPhone owners coming to iPhone. It seems to me they're getting a very good deal here.

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h-dog said:

member since 11 Jul 2005 with 10 posts, unranked, send him a message or view his profile

Thu Sep 13, 2007 3:05 pm

"I haven't seen a deal yet where Apple hasn't come out of it smelling like roses and its partners have had to bear the brunt."

I think that if your business model is effectively dead, you add almost no value to the product and act solely as a gatekeeper, and you treat your customers like crap, then yes, partnering with Apple will probably leave you bearing the brunt. If that's the case, then you have to honestly answer the question of why Apple - an incredibly successful, cutting-edge company - would want to partner with a dinosaur like you (eg: Motorola's chip division, the Music Industry, and now AT&T). The answer is that Apple only partners with these types of companies for exactly as long as it has to to get to where it wants to be, and then drops the offending beast like a syphillitic, crack-addicted ex-girlfriend. That's business.

If you want to look at some successful Apple partnerships, look at their manufacturing partners. The frigtards running the Music Industry, the TV Networks, the Movie Studios and the Cell Carriers are already dead and just don't realize it yet. Can't blame Apple for being one of the first to realize it and deciding to feed on the carcasses - again, that's business. These industries are just pissed because they're used to being treated like royalty, but now the revolution is happening and they can't accept what's happening around them.

As an aside, where do "Analysts" come from? Nearly everything they seem to publish about Apple is wrong. I woulkd have thought someone paid to analyze and industry or company would be better able to establish context and extrapolate the future. Are they as completely clueless in other industries as well?

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A guest said: (hide)

Thu Sep 13, 2007 3:18 pm

vasic wrote:
I thought that the figure was 40% of all iPhone purchasers were new to AT&T? Which would mean 400,000 new subscribers, which further means additional $20 million in revenue every month, just because of the iPhone? Not to mention that it's only the first million of iPhones; the coming months will only bring more switchers over, and the clear winner in the price reduction is obviously AT&T, as they get all that recurring revenue. While Apple will be receiving their $9 per subscriber for the next two years, AT&T will continue to receive their remaining $50 per subscriber for as long as that iPhone works, or until the exclusive deal expires, and that's at least the next five years.

By the end of 2008, if Apple meets its 10 million goal, AT&T will be raking in over $2 Billion per year from new iPhone owners coming to iPhone. It seems to me they're getting a very good deal here.

It may be 40%. Lets just say its a large number and getting l

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miranderm said:

member since 15 Dec 2001 with 28 posts, unranked, send him a message or view his profile

Thu Sep 13, 2007 5:21 pm

Its amazin how in the face of stellar product and performance the media would stoop to incite disharmony. But I do remember a quote " the dog barks at the passing train" from how to win friends and influnce people ) I believe.Fact is this gadget of the century will see AT&T, Apple, Intel, Starbucks, Best Buy as luminaries and survivors in the near future.

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A guest said: (hide)

Thu Sep 13, 2007 10:18 pm

This article is talk for the sake of talk.

Which partnerships are pure upside for both partners.....any examples....Bueller....Bueller??

There is always give and take, Apples take is just shiner and easier to notice for the knuckle draggers who call themselves journalists and analysts.

ATT has the long term contract, a reason for them to put the big money on a Nationwide 3G effort, a reason to build out, knowing that when they complete, people will be willing to upgrade to one of the most talked about, recognizable, sexy sweet phones out there.

Cha-Ching!!!

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burrito said:

member since 07 Aug 2005 with 176 posts, unranked, send him a message or view his profile

Fri Sep 14, 2007 7:07 am

this isn't necessarily a bad thing for AT&T. they get to focus on improving their phone service, while apple handles the multimedia aspects. that's what partnerships are all about. if apple is bono, then AT&T is the edge. (pun intended)

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