Commentary

The Teflon Phone

egg/iphoneIs the iPhone made of Teflon? Its maker, Apple, continues to prove recession-proof, posting a 15% profit gain for its fiscal third quarter as iPhone sales tripled to $1.69 billion. The 5.2 million units sold in the period were seven times the number sold a year ago, bolstered by the release of the new iPhone 3G S and the halving of the price on the earlier model to $99.

The only glaring weak spot for Apple was a 7% drop in shipments for the iPod, which may be increasingly cannibalized (except for the more extensive iPod touch) by the iPhone. Still, the company managed to report a 12% revenue gain overall, to $8.34 billion.

Apple's iPhone-driven financial performance is all the more impressive given the ad slump that has humbled even Internet giants like Google, where sales growth slowed to 3% in the most recent quarter. Highlighting one of the keys to the iPhone's success was an announcement today by Major League Baseball that it has begun offering live video of games for the iPhone and iPod touch via the App Store.

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That means that instead of just scores and video highlights or streaming individual games, users can now get MLB.com's entire out-of-market game package in their pocket. Through apps like the MLB.com At Bat 2009 title and thousands of others the iPhone has become as much a media platform as a communication device.

But unlike most other media businesses these days it isn't vulnerable to the ad downturn because it doesn't rely on ad revenue. Apple and MLB.com are two businesses that never bought into the idea that digital content should be free. And while they've both gotten their share of criticism for operating closed systems and aggressive business tactics, the paid model they represent is one struggling ad-supported-only media enterprises are now trying to emulate.

In that the App Store gives them a new market to potentially turn some "free" material into paid content, Apple can share the wealth beyond its own balance sheet.

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