My friend was joking about how much Apple must hate the Dev Team, the group of hackers who reverse engineer the iPhone so that 3rd party applications can be put on the phone without going through the App store, or Apple’s approval process. The group is also the driving force behind the movement to unlock iPhones so that they can be used on any carrier network. I argued that Apple was probably more ambivalent towards the Dev Team than one might expect. Sure, the Dev Team is a pesky bunch of hackers who constantly defeat any security measures that Apple employs to blockade the phone from unlocked use. But let’s not forget that Jobs got his start in the computer world by hacking their predecessors, land line phones. As a teenager Jobs idealized hackers and wanted to join the ranks of archetypal characters like “Captain Crunch, the vanguardist hacker extraordinaire. After building his own phone “phreaking” black box, Jobs went on to found Apple, but his hacker specter certainly must live on.
Which again brings us back to the question does Jobs or Apple want their phones to be jail broken. Jail breakers have certainly pushed the development of the iPhone farther and faster than Apple themselves has been willing or able to do. Lets not forget the laundry list of features first developed for Jailbroken phones, MMS, video recording, voice recording, ability to remotely control other computers, navigation, increased Bluetooth functionality, ability to upload media to remote servers, copy & paste, I could continue but I think you get the idea. Jailbrekaing is without a modicum of doubt, the reason we have many of the features of the 3GS and OS 3.0. Jailbreaking allows applications to make their way onto the iPhone that Apple could never allow themselves for fear of litigious retaliation from any number of concerned specialty groups. Is Apple happy that hackers have pushed the development of the phone along, and shown the world what the iPhone is capable of, or are they upset that hackers have torn down the walls of their carefully constructed system and allowed everyone limitless access?
Then there is the most common argument found in any hacker debate, money. Does the hacking community increase or decrease Apple’s revenue? On the surface it seems like an easy question to answer, if people are able to get applications without needing the pay as you go App store, then Apple is loosing money. There’s also the forfeited revenue in the form of contract money from AT&T. Apple’s agreement with AT&T gives them 30% of the monthly service fees collected by AT&T on all iPhone accounts, and that adds up to a lot. With unlocked phones subscribers are no longer tied to AT&T, they are free to roam as they please from one carrier to another if they so desire, denying Apple a sizeable amount of money. However, it’s important to remember that Apple is the sole manufacturer for the iPhone and that means that every single iPhone in the world, no matter how jailbroken, unlocked, or hacked it may be, was purchased from Apple. Apple built the old iPhone 3G for around $150 for the 8gb model, and that’s cheap. Especially when you consider they collect around $700 on each phone after an AT&T subsidy to the customer. If you want to buy an iPhone outside of the US without an AT&T contract it could cost you even more, up to $800 in some places.
Revenue from the App store is generated by collecting 30% of the sale price of all applications that are purchased. And that seems like a lot when you consider that the App store has already had over 1 billion downloads. Most of those however were free, and the ones that weren’t free sold for an average price of roughly $1. When you add it all up, it amounts to a fairly small pile of money, at least when you consider Apple’s overall revenue. And that’s the point; Apple makes far more money on the sale of the physical devices than they do on the sale of applications.
Their profit model then, is the same as the model for all other Apple products. The software is created under a no-profit scenario in which more development money is spent on the software than could ever be recovered by software sales alone. But the software is what sells the hardware, and that’s where Apple makes their money.
The iPhone then, is a very profitable venture for Apple, but mostly it’s because of the huge margins on the hardware, and jailbreaking is never going to change that. In fact jailbreaking has lead thousands and thousands of anti-Apple consumers to cave in and purchase the very capable iPhone. And in this way jailbreaking and unlocking may actually be making Apple more money!
Which again brings us back to the question does Jobs or Apple want their phones to be jail broken. Jail breakers have certainly pushed the development of the iPhone farther and faster than Apple themselves has been willing or able to do. Lets not forget the laundry list of features first developed for Jailbroken phones, MMS, video recording, voice recording, ability to remotely control other computers, navigation, increased Bluetooth functionality, ability to upload media to remote servers, copy & paste, I could continue but I think you get the idea. Jailbrekaing is without a modicum of doubt, the reason we have many of the features of the 3GS and OS 3.0. Jailbreaking allows applications to make their way onto the iPhone that Apple could never allow themselves for fear of litigious retaliation from any number of concerned specialty groups. Is Apple happy that hackers have pushed the development of the phone along, and shown the world what the iPhone is capable of, or are they upset that hackers have torn down the walls of their carefully constructed system and allowed everyone limitless access?
Then there is the most common argument found in any hacker debate, money. Does the hacking community increase or decrease Apple’s revenue? On the surface it seems like an easy question to answer, if people are able to get applications without needing the pay as you go App store, then Apple is loosing money. There’s also the forfeited revenue in the form of contract money from AT&T. Apple’s agreement with AT&T gives them 30% of the monthly service fees collected by AT&T on all iPhone accounts, and that adds up to a lot. With unlocked phones subscribers are no longer tied to AT&T, they are free to roam as they please from one carrier to another if they so desire, denying Apple a sizeable amount of money. However, it’s important to remember that Apple is the sole manufacturer for the iPhone and that means that every single iPhone in the world, no matter how jailbroken, unlocked, or hacked it may be, was purchased from Apple. Apple built the old iPhone 3G for around $150 for the 8gb model, and that’s cheap. Especially when you consider they collect around $700 on each phone after an AT&T subsidy to the customer. If you want to buy an iPhone outside of the US without an AT&T contract it could cost you even more, up to $800 in some places.
Revenue from the App store is generated by collecting 30% of the sale price of all applications that are purchased. And that seems like a lot when you consider that the App store has already had over 1 billion downloads. Most of those however were free, and the ones that weren’t free sold for an average price of roughly $1. When you add it all up, it amounts to a fairly small pile of money, at least when you consider Apple’s overall revenue. And that’s the point; Apple makes far more money on the sale of the physical devices than they do on the sale of applications.
Their profit model then, is the same as the model for all other Apple products. The software is created under a no-profit scenario in which more development money is spent on the software than could ever be recovered by software sales alone. But the software is what sells the hardware, and that’s where Apple makes their money.
The iPhone then, is a very profitable venture for Apple, but mostly it’s because of the huge margins on the hardware, and jailbreaking is never going to change that. In fact jailbreaking has lead thousands and thousands of anti-Apple consumers to cave in and purchase the very capable iPhone. And in this way jailbreaking and unlocking may actually be making Apple more money!
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