Apple 2.0

Covering the business that Steve Jobs built

Apple tablet: For video, not books?

October 30, 2009: 8:16 AM ET

Chatting with a Canadian analyst, Cupertino execs offer hints about Apple's future plans

Munster's tablet

Rendering: Piper Jaffray

Apple executives (AAPL) have strict rules about not discussing products that the company has not announced. But they'll talk about market opportunities, as three of them did on Thursday at a special event for RBC Capital. And sometimes that's enough to discern what direction the company is heading.

In a report to clients issued Friday, RBC's Mike Abramsky ticks off the key takeaways from his meeting with Eddy Cue (vice president for iTunes and Internet services), David Moody (vice president for worldwide Mac marketing) and CFO Peter Oppenheimer.

What caught my eye was what they had to say about where they did -- and didn't -- see opportunities in digital content. They were talking about Apple TV, but it was as if they were thinking about future tablet computers.

Here's what Abramsky reports, in analyst shorthand, about that portion of the conversation:

Video/Content Opportunities. After music, video content is expected to be the next "exploding" opportunity, but requires overcoming industry rights dysfunctionality, competing with subsidies (cable box, video), and developing the right consumer "offer". Apple TV, while still a "hobby", is well positioned to benefit from evolving market dynamics. Apple was less enthusiastic about the online book/newspaper market, given unattractive industry structure.

Sounds like they expect an Apple tablet -- should they be building one -- to be used a lot more for watching movies or shows made for TV than for reading novels and newspapers.

Among other highlights of the Apple execs' remarks:

  • iPhone: Interest remains strong among overseas carriers despite increasing competition, thanks to high returns per unit and low churn. Going to multiple carriers in Canada and Europe doesn't seem to have hurt Apple's margins.
  • Android: Vertical integration and the iTunes ecosystem are Apple's secret weapons against the Google (GOOG) challenge. Developers, they claim, prefer Apple's single-platform model over Android's multiple hardware configurations.
  • Windows 7: Bring it on. Apple, not surprisingly, sees the transition to Microsoft's (MSFT) new operating system as an opportunity to sell more Macs.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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