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The R21 Analysis

Apple isn’t always the first to market with any technology, but they’re often the ones to do it right. The iPod and iPhone being two quintessential examples. (They’ve also screwed up: Mobile Me being the best example.)

Apple’s success is largely due to Steve Jobs’s “benevolent dictatorship” where every product ultimately must meet his standard. There are countless Apple concept products that are developed but never released because they don’t meet the standard. Importantly, Steve Jobs isn’t a programmer or a hardware engineer – he’s a business leader with an eye for design, an understanding of the market, and the ability to hire and inspire the best out of his engineers and designers.

R21 doesn’t know if there really was an Apple digital camera in the works in 2002, but if a product existed, it is clear why it wouldn’t have made sense. While capacity would have been a major complaint of photographers at the time, the technology did not exist in 2002 where Apple could offer a digital camera with a 5GB drive and still maintain any reasonable battery life or a reasonable form factor. Could they have done something with a Microdrive? Perhaps, but what would an Apple digital camera in 2002 offer over a competing Sony, Canon, or Nikon camera?

Fast forward to 2008. The technology has advanced and today, Apple remains the second largest consumer of flash memory in the world. iPhones push 8 and 16GB capacities, more than what a typical consumer will carry in compact flash or SD cards for their digital camera. Apple’s buying power also means that they get better pricing than their competitors so it’s hard for Canon, Nikon, and Sony to compete at the same level.

In addition, Apple’s photography technology has improved considerably since 2008. Today, Apple Aperture, iPhoto, and Shake have shown that the software side of Apple understands color management and color processing. Apple has the technical know-how to take off-the-shelf imaging sensors and lenses to develop a point-and-shoot with image quality competitive with the big 3.

Apple’s secret sauce will come in the form of the multi-touch interface and Mobile Me. A digital camera with an iPhone-esque multi-touch display will offer a great user experience and Mobile Me/iTunes will provide a mechanism for easy archiving, easy sharing, and easy printing of photos taken by such a camera.

Finally, the market for digital cameras is considerably higher in 2008 and a recent survey by Reevoo.com says that the digital camera is the #1 most baffling gadget in Britain, ahead of the GPS and mobile phone, with more than 25% having no idea how to use the camera properly! Everyone in the US knows that you sound smarter when you speak in a British accent, and if the British are confused, this is a trend that’ll likely exist worldwide. This is an opportunity for Apple’s human-computer interface design specialist.

Finally, with that much memory on-board… what about including iPod capabilities to the camera? Going from the 90% profit margin of the iPod Touch to the iPod Camera makes sense.

What about the 30% clue? Well, digital SLRs offer a profit margin of 20-30% while compact cameras have a profit margin of 5-10%. With the “Apple tax” and the flash memory buying power, 30% sounds reasonable to us.

September surprise from Apple?

It’s harder to predict what Apple will do, but we’re betting on a digital camera. A 30% profit margin makes sense given the market and Apple has the technology and incentive to create it. The more subscribers to Mobile Me, the more likely they’ll end up with a Mac, an iPhone, and an iPod Camera.