Smartphone Classrooms Get Closer

(cc) hakaider

Are you familiar with the razor vs razorblade business model? If not here’s the short version. You sell the razor for a cheap price and charge more for the blades. The blades are a reoccuring expense and so are a constant stream of income. Over time you make more on the razorblades than on the razor. The exact same model is used with printers. It’s not a accident that a printer ink refill is 1/3 the cost of a new inkjet printer. In fact, by weight ink is more expensive than gold. Weird eh?

So this leads me to the smartphone market. Apple is making noises that they will be coming out with a smaller (and cheaper) iPhone. This will not replace the current iPhone line, but instead will open up new markets for Apple. Right now you have to buy an iPhone for $200 but the goal for the new one is to offer it for free (with a 2 year contract of course).

Why do this? It’s because Apple is making a pile on apps and music. They don’t want to sell you the phone and that’s it, they want a revenue stream from every person who buys one of their products. That’s why Macbooks and iMacs now have the app store. We are rapidly approaching an era where the content becomes the razor blades. That model now works because the costs of distribution have fallen so low you can change 99 cents for an app and still make money,  Apple wants as many people to access their App store as possible, even if that means making a cheaper iPhone. Google is doing the same thing by creating the Android operating system for smartphones and giving it away. They make money on search advertising. The more people with smartphones, the more people are searching, the more advertising from Google they see.

This is why I have faith in the free markets and this is why I stated a few months ago that every student will have a smart phone. It will happen faster than most people think because technology always trend to smaller, faster and most importantly cheaper. This will be a massively disruptive technology so I again ask, what will teachers do on the day when every student has a smartphone?

• Apple Works on Line of Less-Expensive iPhones – WSJ.com

  • Apple Inc. is working on the first of a new line of less-expensive iPhones and an overhaul of software services for the devices, people familiar with the matter said, moving to accelerate sales of its smartphones amid growing competition.
  • The new device would be about half the size of the iPhone 4, which is the current model.
  • The new phone—one of its code names is N97—would be available to carriers at about half the price of the main iPhones. That would allow carriers to subsidize most or all of the retail price, putting the iPhone in the same mass-market price range as rival smartphones, the person said.

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