We heard all these arguments before in various industries along with calls for protection(ism) and government intervention. Unsustainable, unfair competition, crushing the competition leading to lower quality and higher prices down the road. It just rarely seems to come to that, not for long at anyway. They never manage to actually hike prices.
Sustainability is a messy concept. What is the product that needs to be sustainable? How do you define that? Why is the handset alone necessarily the product that you want to be sustainable on it's own? Is a web browser a product that needs to be sustainable on its own? There are many businesses where the real product is not the gadget we hold in our hands. And every time those who try to make a profit from some individual component complain about unfair competition from others who sell a larger package and subsidise that individual component.
Let me ask a few questions about your Amazon example. You say no one will enter the market once Amazon crushed everyone else for fear of Amazon coming back with low prices.
But why wouldn't someone else cross subsidise from a different kind of business and successfully compete with Amazon? Google definitely does exactly that. Others may come up with more ways to do that. Oracle reviving its Java handset business, carriers + Mozilla, someone buying Sony and it's media business. Apple might well be able to do it through media subscription services or just keep selling into the high end luxury/fashion market.
Will Amazon shareholders put up with razor thin margins (even losses recently) forever or will they eventually ask for a payout?
What keeps another big retailer that doesn't carry the cost of giving away handsets from undercutting Amazon in the retail market? Or if it's such a good idea to give away handsets, why wouldn't WalMart buy Netflix and join forces with Samsung or HTC to do the same?
At the end of the day, I'm not concerned about any of this being just temporary. Smartphone prices will never go up. There are just too many angles from which a wannabe monopolist could be attacked.
Sustainability is a messy concept. What is the product that needs to be sustainable? How do you define that? Why is the handset alone necessarily the product that you want to be sustainable on it's own? Is a web browser a product that needs to be sustainable on its own? There are many businesses where the real product is not the gadget we hold in our hands. And every time those who try to make a profit from some individual component complain about unfair competition from others who sell a larger package and subsidise that individual component.
Let me ask a few questions about your Amazon example. You say no one will enter the market once Amazon crushed everyone else for fear of Amazon coming back with low prices.
But why wouldn't someone else cross subsidise from a different kind of business and successfully compete with Amazon? Google definitely does exactly that. Others may come up with more ways to do that. Oracle reviving its Java handset business, carriers + Mozilla, someone buying Sony and it's media business. Apple might well be able to do it through media subscription services or just keep selling into the high end luxury/fashion market.
Will Amazon shareholders put up with razor thin margins (even losses recently) forever or will they eventually ask for a payout?
What keeps another big retailer that doesn't carry the cost of giving away handsets from undercutting Amazon in the retail market? Or if it's such a good idea to give away handsets, why wouldn't WalMart buy Netflix and join forces with Samsung or HTC to do the same?
At the end of the day, I'm not concerned about any of this being just temporary. Smartphone prices will never go up. There are just too many angles from which a wannabe monopolist could be attacked.