Apple (AAPL) today revealed a little bit more of its iPhone business strategy in an e-mail sent from its public relations department. The main revelation: “To set up your iPhone, you’ll need an account with Apple’s iTunes Store.” In other words, Apple will pave the way for a separate billing relationship (probably via credit card) from every iPhone user, and will not have to rely on AT&T (T) to play go-between.
The full text of the section on iTunes and the iPhone follows:
To set up your iPhone, you’ll need an account with Apple’s iTunes Store. If you already have an iTunes account, make sure you know your account name and password. If you don’t have an account, you should set one up now to save time later. To set up an account, launch iTunes, select the iTunes Store, and click the Sign In button in the upper right corner of iTunes. Sign in and you’re ready to go.
This makes me wonder whether AT&T stores will be signing people up with iTunes accounts as they purchase iPhones and calling plans. Some people who buy iPhones might not be interested in purchasing and downloading content from iTunes (they might want to just load content they already own), and the occasional iPhone buyer might not have convenient access to a PC or Mac that’s capable of running the latest version of iTunes (7.2). I’ve got to wonder whether this will cause any challenges at retail.
Check out an image of the Apple e-mail, below:
First, this is not necessarily a huge problem. Many iPhone early adopters will already have iTunes accounts. Where it could get tricky is during the phone activation process. Will AT&T store reps have to learn to sign people up for iTunes accounts if they don’t already have them? What if people have iTunes accounts, but forget to bring their usernames and passwords to the store when they purchase their iPhones? Customer service will have to do a good job handling the added layer of complexity.
But from a business perspective, this is a smart move on Apple’s part. It would be bad if AT&T were the only company that had a continuing billing relationship with the customer – Apple needs to have some ownership as well. Apple will also be able to send iPhone owners e-mails with special iTunes-related offers, to prompt recurring revenues.
So in summary, the iTunes requirement adds another level of difficulty to the purchase of a phone that has a learning curve as it is – that could pose problems at retail. (In my experience, the employees in carrier stores have enough trouble signing people up for basic phones, much less revolutionary products with brand new interfaces.) But in the long run, it’s a good idea for Apple to establish a billing relationship with every iPhone owner.