The Breakdown | Explaining Southern California's economy
Business & Economy

3 reasons why the Apple iPhone 5 will still fail

Buyers wait outside an Apple Store in New York to get their iPhone 5s before everyone else. The new smartphone notched 2 million in pre-orders in its first 24 hours.
Buyers wait outside an Apple Store in New York to get their iPhone 5s before everyone else. The new smartphone notched 2 million in pre-orders in its first 24 hours.

I got a very robust response to my pre-iPhone 5 launch post, "3 reasons why the Apple iPhone 5 will fail," in which I detailed some reasons why the miraculous new device wouldn't be a triumph. I prefaced it all by stressing that I was taking a contrarian position, but I got called out big time for my contrarianism, both in the comments and, more recently, by the Macalope over at Macworld.

Here's a taste:

The Macalope understands that during this bad economy times must be hard at our nation’s public radio stations, with donations falling due to a deficit in our strategic tote-bag reserves.

But that doesn’t really excuse Southern California Public Radio from publishing Matthew DeBord’s “3 reasons why the Apple iPhone 5 will fail” (tip o’ the antlers to Warren Bowman).

Just three? The Macalope thinks maybe you’re not applying yourself, Matthew. The horny one himself can easily make up 15 or 20.

Still, most observers settled on the conventional wisdom that the iPhone 5 was a total snooze-fest that, because of a collection of really boring reasons involving contract lengths, Apple fanboi-ism, marketing, and reality distortion, will sell very well. “Fail” is really putting a stake in the ground. A dumb, dumb stake.

The Macalope then sets about dismantling my Fail! arguments. The thread of reasoning that undergirds it all is that the iPhone 5 won't fail because the iPhone 4S wasn't failing. All the stuff that Apple was being urged to do with the iPhone 5 was kinda sorta unnecessary because the iPhone 4S was still plenty popular. They didn't even need the stinkin' iPhone 5!

Also, the competing platforms aren't really all that competitive. Outside of the Samsung/Android context, I think the Macalope may have me there. But I still think the Windows Phone OS is a threat.

Nevertheless, there remain reasons why the Apple iPhone 5 could fail:

It won't make the big fourth quarter number. Everyone has been blown away by how fast the iPhone 5 got to 2 million pre-orders: one day. That tops the million in pre-orders for the 4S and the 600,000 for the 4. Neat trick, huh? Apple doubles first-day pre-orders with each new iteration of the device. But these early numbers aren't as important as the fourth quarter nut for 2012. The 4S sold 37 million in the fourth quarter of last year. The 5 needs to beat that by a decent margin. Do I hear 50 million? A stunning debut won't matter if Apple doesn't take it to the finish line. That's where markets are looking for growth, and for Apple, the bar is high here.

iPhone 5 users will be stuck with a behind-the-curve phone for 2 years. Sure, Apple will probably refresh the 5 halfway through the product cycle. But as Henry Blodget points out at Business Insider, Samsung will have a new smartphone in the market by February and it will surely trump the iPhone 5 in numerous ways. The counterargument to this is holistic: that Apple produces the best smartphone on planet Earth. Maybe not the one with all the stuff consumers want, your very big displays and wireless charging and whatnot. But the best, because it presides over the finest smartphone ecosystem known to humans. This of course commits the classic fallacy of arguing from Appleness. Unfortunately, some cracks are beginning to show in the idea that Apple can always sell expensive, underfeatured hardware just because it provides the best overall user experience. That just isn't true anymore.

The iPhone 5 will succeed wildly and make Apple even more totally dependent on it. Don't kid yourself. Apple makes laptops and music players and tablets even big old honking desktops, but when it comes to profits (and the nearly $700-per-share stock price and justified speculation that this could be a $1-trillion market cap company in the future) Apple gets the bulk of those from Mr. iPhone. This has created something of a dangerous box for Apple. It has to keep topping previous iPhone models with the latest version. And it can't focus too much on anything that might even remotely cannibalize the iPhone — no way can the iPhone ever be trumped by, say, a micro-tablet, in the way that the iPod was trumped by the iPhone. The iPod is killable. The iPhone, clearly, is not. 

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.