Just to be clear – I’m not an Apple fan, yet I’ll try and write this as balanced as I can.

I posted recently about the iTunes ecosystem – this post will expand on that position with a bit of analysis of it from a business point of view and conversely the impact on the consumer.
In my previous post, I quoted TechMarketView saying “if you use iTunes, you have to buy an Apple media device”. now this might not be strictly true if you use iTunes to manage your library of mp3s, but if you use iTunes properly with downloads and “genius” then you’re going to end up with some proprietary format music. The only players that play this are iPods, iPhones, Macs and iPads (the marketing people at Apple must have the easiest job in the world).
Now this might seem great, the iPhone is a great device (despite starting to copy from other phone operating systems), the new iPods run a similar version of this and the iPad is the market leading tablet. You do pay a premium, but many people argue (possible correctly) that because the hardware and software are better than a lot of the rivals, it is worth paying more.
But what happens when you have a 10,000 song library (in the iCloud – genius name, must have taken them ages to come up with that) with all your favourite playlists and all licensed through iTunes, then Apple decide the next iPod is going to cost over £400 because it has a really expensive component in it? You refuse to upgrade, and the likelihood is they won’t force you to, but eventually your device will break and you’ll need a new one. You can’t buy anything from anyone else other than Apple.
This means Apple essentially create their own monopoly by creating such as closed ecosystem that you can’t break out of it, the switching costs become equal to buying all of your music again, and the time and effort taken to do that. This will make their customers quite price inelastic – this means they can increase / decrease prices without much of a change in demand. And this is all before taking into account the “shiny” factor – are you the only one in the boardroom without an iPad 2 (you can’t get away with a 1 anymore) on the desk in front of you?
Apple have put themselves in a great position, and to a certain extent, they should be congratulated for it. Are you aware that they are worth more than Microsoft now? I’m still not quite sure how they got here – their products are good, but their marketing has always been better. The generally observed opinion of two devices (one Apple, one not) is that the Apple is better, but the swing of this opinion far outweighs the actual measurable, tangible benefits of the Apple device, and this is entirely due to the marketing and consumer vision that this marketing has created. The next Apple device, the iFridge could be a normal fridge with a touch recipe system on the front, yet people would pay triple the normal price of a fridge for one, just because there is a picture of an Apple on the front. I guess it’s no different to fashion, where a swoosh increases the price over a big cat, even though the products are largely the same.
This is something Microsoft can’t do at the moment – their operating systems and software can run on any (powerful enough) hardware – you can build your own PC from scratch and write your own drivers, then use the copy of Windows XP you bought 10 years ago. There is never a need to spend any more money if you are happy (or just not completely dissatisfied) with the software you have and are only using the number of copies you have. Because Apple control the hardware as well as the software, it has a limited shelf-life just through the way devices fail and wives drop them.
So what does this mean to a consumer? You might be happy being part of the Apple ecosystem, you love the new iCloud integration of all of your devices, you love Steve Jobs and pray for his health every day (maybe also that he will buy some new clothes) and you wait with baited breath for information about the iPhone 5. Chances are, you’ll carry on paying a slight premium for your devices over the non-Apple alternatives and will continue to be happy. But, what if Apple make some kind of a change you don’t like, and you want out….. what then?