The latest rumor going around is that Apple (AAPL 0.87%) plans to bring its signature iTunes software and store to Android. The credibility of this rumor is shoddy at best, but every so often something like this makes the rounds. True or not, this seems like a poor business decision and one that Apple shouldn't adopt.
Apple needs software to differentiate itself
These days, just about anybody can build a smartphone -- the hardware is largely a commodity at this point. The real "secret sauce" to Apple's wild iPhone profitability lies in both the brand loyalty it has garnered over the years and in the differentiated software ecosystem that the company includes with its phones.
Source: Apple.
The core of this ecosystem is, of course, iOS. However, while iOS has captured the hearts and minds of developers worldwide, just about every important third-party app that can be found on iOS can also be found in Google's Android. And since Android is free (except for the various license fees some vendors need to pay Microsoft (MSFT +0.63%)) and customizable, the "ecosystem advantage" is waning, meaning that first-party apps and services are becoming increasingly important.
Apple's iTunes is a core advantage
A big part of the iPhone's "stickiness" is that plenty of folks own a fairly sizable collection of paid apps, making a move away from the iOS ecosystem a bit difficult. Apple's iTunes is very similar; just replace "apps" with "media." While some may prefer to use something like Amazon.com to buy MP3s that can be played with the platform-agnostic Amazon Cloud player, iTunes revenue is still quite robust (Apple's software/services/iTunes generated $4.4 billion in sales last quarter, up from $3.69 billion in the prior-year period).
Apple's iTunes Radio is another service that helps keep iOS "sticky." Source: Apple.
By bringing iTunes to Android, consumers have one less reason to "need" to buy an iOS device. Indeed, if Apple brings the core of its software/service ecosystem to competing platforms, then how is it going to maintain such high profitability on its devices? Differentiating on hardware is nearly impossible, especially when iPhones typically don't pack the latest-and-greatest, buzzword-compliant specifications. In fact, Apple intentionally goes with the cheapest it can get away with on the hardware side and then more than makes up for it on the software side.
But iTunes is available on Windows!
One big counterargument is that when Apple brought iTunes to Windows, this was an unequivocally good thing. However, it's important to understand the pretty significant difference here. Apple wasn't using iTunes to try to sell Macs (which are becoming an increasingly negligible part of Apple's business) -- it was using iTunes to try to sell iPods and later iPhones.
Foolish bottom line
iTunes, as well as the rest of Apple's first-party software, is key to keeping its platform as "sticky" as possible. In a world where anybody can put together a fast, slick smartphone with a gorgeous screen and great battery life, it really does come down to the usability and usefulness of the device. This, first and foremost, is determined by the software and the content and the more tied to the platform customers are, the better it is long term for high-margin hardware sales.
