Apple nuked another market!

You never know where they hit. Once Apple admitted their iPhone 4 had the antenna problem, they had to either make a major recall (3 million units sold already) or provide everyone with a free iPhone case. Of course, it’s a no-brainer. So they went with the free cases and accidentally wiped out the market for iPhone case manufacturers. While it may seem that the smartphone case manufacturing is not an important business, still there are companies that make their money by making and selling the cases. I guess they could never imagine that Apple would start giving cases for free.

There is another point of view, that Apple has actually significantly expanded the iPhone case market, now that everyone is going to need one. Since Apple cannot create that many cases in a limited time, they will go and buy them from third-parties. However, Apple is a hard bargainer, so they will probably be buying a hundred for a dime, destroying the margins.

Market destruction with a free offer is a fascinating theme. The most famous example is Microsoft’s offering of IE and IIS for free, bundling it with Windows, and eventually wiping out Netscape Communications, once a $13B company. A lot of startups offer their services and products for free these days, in the hope of hitting it big via ads or some magic freemium model. This is basically a market destruction from the very beginning. When this happens, they don’t even need Apple or Microsoft to drop a nuke. The startups are destroying the market themselves.

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