Where Apple Falls Short
Written by: Renata Krieger
Under the multi billion dollar company made of strategic business choices and exceptional products lies their largest sunk cost: Apple TV. After being on the market for several years, Apple TV has began to experience a decrease in demand for their product. When Apple TV was first created in the late 2000s, Steve Jobs had the vision of Apple TV becoming a success. However, since then other competitors have entered the market including Roku, Chromecast, and Netflix. According to Forbes.com, even though Apple is capable, the company is in no hurry to upgrade their system due to the sunk cost of their investment in Apple TV. Currently, if Apple were to invest more money into their TV portion of the company, this would be taking an extremely large risk due to the oligopoly market in which they compete in with Netflix, Roku, and Chromecast. For example, when looking at this from the perspective of the diseconomies of scale in the long run, this market for Apple TV would demonstrate decreasing returns to scale. As other firms in the market continue to increase their output, Apple will choose to be strategic by ignoring their sunk cost despite the amount of money they invested in previous years.
Next, with the billions of dollars in revenue each year from the iPhone alone, Apple has no incentive to upgrade their outdated interface within Apple TV. According to CBS News, as a whole, Apple doesn’t share the same passion for providing a TV service the same way Jobs did when he ran the corporation. With this disadvantage, other competitors are able to use the elasticity of demand within the market to their own advantage. As demonstrated within Chromecast, Google decides to keep their costs lower than Apple TV because this increases the demand for their product. Additionally, Google can afford this price decision more than Apple due to the success in the Chromecast revenue. With this, Apple TV is left with a higher price tag than their competitors due to the effects of their sunk cost.
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Warren, Christina. “Welcome back, Apple TV. It's been a while.” Mashable, Mashable, 28 Oct. 2015, mashable.com/2015/10/28/apple-tv-review-2015/#qMjO1ksX_GqR.