The Quality Umbrella

I agree with the conventional wisdom that Apple makes a “price umbrella” for its competition. If they’re trying to sell a product at a high price point, and they refuse to make a cheaper version, that provides opportunity at lower price points. A tangible example is Apple selling phones for over $1000, which allows less expensive brands to market competing products as nearly as good but much cheaper. The same thing happened with Windows in the 80s and 90s. (And continues today)

But the price umbrella theory only works if the product is seen as a must-have, like a smartphone or computer. The same goes for internet access, streaming services, and cars. Most people can’t get by without these products, so the marketplace is operating at scale, which pushes prices down. So when Apple sticks with its luxury pricing, there’s plenty of space under their price umbrella. Look what has happened with Apple TV, for example. It’s a better product than a Chromecast, but the product has very low marketshare. It’s too expensive.

But the theory breaks down when you move from must-have products into nice-to-have ones. When Apple announced iPad, everyone wondered if there was room for an iPad in people’s life. It did less than laptops, but was bigger than a phone. Was the product really necessary? Jobs addressed the elephant in the room when announcing the product, and oriented his entire pitch around it. It took years for iPad to justify its existence. It was, and is, a nice-to-have.

The same thing happened with Apple Watch. No one had been able to make wrist computers cool, and many early reviews agreed Apple hadn’t pulled it off either. (Personally, I was very frustrated with the UI, the sluggishness, and the poor apps) It was expensive and hard to justify. It was a nice-to-have, so most people went without one. But over time Apple found success with it.

And now we have Apple Vision Pro. It is a quadrillion dollars, Apple’s pitching it for use cases that no one has ever tried, and wearing a heavy face computer will never ever ever feel as natural as just holding a paperback sitting under a tree. It’ll never feel natural to see the world through a screen, because it’s not how we’re wired. So can Apple Vision Pro even be considered a nice-to-have? Or is it extraordinarily cool tech that’s destined to fail? I have an opinion.

First, I think it will succeed. But I’d rather talk about failure, and the counter-intuitive point that Apple’s failures with nice-to-have products are actually worse for its competition than it is for them.

I’ve read about 100 articles explaining why the iPad had no reason to exist, or analysing its poor sales numbers, or talking about how it can never replace the laptop. The articles proved to be wrong (Apple sells over $7 billion in iPads per quarter), but let’s imagine a world where they were right. If tablets were a flop, and not even Apple could make them desirable, even amongst rich gadget hounds, the would spell disaster for the low end. It would mean that even with cutting edge technology, the product is bad and nothing can save it. Not even a price cut.

The same goes for Apple Watch. It does quite well, with their “Wearables, Home, and Accessories” category making over $7 billion per quarter. But it’s still a clunky wrist computer. In a world where Apple had failed to find success, it’s hard to argue that the only issue was price and that Samsung would have cracked the nut.

The same will go for Apple Vision Pro. The price is eye-popping and the technology is untested. But if it fails, which it won’t, first we’ll have to parse what the word “fails” means. And from that, we can figure out how devastating its failure will be for its competitors.

Does something “fail” if it doesn’t sell well in the first two years, which was the case for iPod and Watch, and in relative terms was also the case for iPhone? Or should we describe failure as something that’s not making a billion dollars in revenue after a decade? Or perhaps the only bar we can set is whether or not the project is cancelled outright, a la the G4 Cube? Personally, I set the bar for failure for Apple Vision Pro at “canceled or not profitable after five years,” which is why I am supremely confident it will not fail on those terms. This product will never be canceled, and it’s unfathomable for me to imagine five years of Apple iteration not resulting in a multi-billion dollar business.

But what of the competition? If Apple is selling seven billion dollars a a year (if not quarter), after five years, that’s a lot of money, marketshare, and mindshare not going to other headsets. It’s easy to call that bad news if you’re competing against them. But how bad would it be if Apple can’t even manage to make headway in the market? It would prove that not only are average people uninterested in VR at the low end of the nerd market, they’re also uninterested even when you push the technology as far as anyone’s been able to push it. It would mean the whole concept is a failure in the mainstream. It’d mean we might be waiting a long time if we want face computers to be more than a nerd curiosity that excels at mostly games and porn. That would be devastating to everyone trying to make money in this space, not just Apple. Apple will always find some measure of success with wealthy and impulsive gadget hounds. Their competitors do not have that luxury.

I’ll put it another way: Apple just showed us how headsets could look five years in the future, much like the original iPhone compared to Blackberry devices of their era. With iPhone, Apple got people to look at a futuristic and expensive product and decide it was for them. Then competition offered fewer bells and whistles at a lower price point and did well. But if they look at Apple Vision Pro decide they’re not interested, no amount of price cuts would change that, which would be bad for the whole market.

But I don’t think that’s going to happen. I think Apple Vision Pro will be an eventual hit and carve off the same massive advantage as Apple’s hardware often enjoys, and they’ll iterate from there, as they do.