Analyst: Apple's poor earnings will recover now they've switched from innovating to rent-seeking

Apple just had a really poor Q3 earnings report, with hardware sales falling off as people figure out that they just don't need to get a new phone every year or so; writing in Bloomberg, Leonid Bershidsky tries to soothe investors by pointing out that Apple is still seeing growth in "services" and that there's plenty more growth to be realized there.

Bershidsky is refreshingly honest in his description of these services: he refers to repairs, sales through the App and Itunes stores, and cloud services as "collecting rent" on Apple customers and its suppliers.

As Bershidsky points out, long-term Apple users are rather locked into its ecosystem by the tedious and potentially risky process of extracting their photos, music, etc to a rival platform. That means that the suppliers of things like music, ebooks, and videos are also locked into Apple's stores, unlikely to win a battle to establish rival stores that interoperate with Apple's Itunes and other apps, but which take a smaller commission on the sale of their products. Apple has inserted itself into the transactions for copyrighted works for the foreseeable future, passively creaming off a substantial portion of the profits from the sales not because their store is the best, but because they have used DRM and other proprietary tactics to lock out competitors.

A Goldman Sachs report suggests that Apple aggressively turn the screw on the rent-collecting end of its business, using bundling and anti-competitive retail tactics to crush Dropbox and other cloud providers currently serving Iphone owners. Read the rest