Apple – Samsung lawsuit: How will it end?

Written by Byung-tae Lee, Dean of KAIST Business School

Recently, I attend a meeting in Europe for Deans of business schools. Their topic was about patent disputes between Apple and Samsung and Psy’s ‘GangNam Style’. During the meeting, considering historical lessons, we agree that the competition between Samsung and Apple would not end up in court; instead, it would be determined in the market. The question, then, is, how will this war end up in the market?

Psy’s incredible global success suggests how the smartphone competition will end. The success of ‘GangNam Style’ can be attributed to YouTube, which is a platform distributing funny parody videos in the world. Through free distribution of his music videos, Psy gained so much fame that he sold a vast number of mp3 files and received a great amount of money from concerts and advertisements. However, knowledge products not related to celebrities cannot be distributed in such ways.

During the flight to Northern Europe, Amazon"s e-books entertained me. Due to my greed for books, more than 400 e-books are stored in my tablet PC. It is amazing that a person can embark on a journey with hundreds of books. This shows the power of the Amazon’s e-book platform, which is called Kindle.

A revolution in the distribution of intellectual property rights has progressed because of Kindle. Amazon’s e-book sales are already higher than its ordinary books’ sales. More than 40% of the cost of a book is known as the cost for logistics. Considering labor costs and material costs of production for books, we can easily imagine how much cost is reduced because of e-books.

Through Kindle platform, consumers can read their books anywhere, any time; they can find the meaning of the words they do not know. Purchasers do not have to wait or pay for shipping. Just clicking a button, they can buy books they want. Accordingly, I was able to recognize that consumer’s perspective on the advantages of e-books has instantly changed. In the early stages, the price of e-books was lower than that of normal books. Now, however, e-books, are being sold at a higher price. Although Amazon is a book distribution company, its Kindle has emerged as Tablet PC following Apple’s iPad. This example is that Amazon’s abundant contents are distributed by its platform, which is a typical service model.

Paying attention to the lawsuit between Apple and Samsung, one of Google executives gave me a warning on Samsung: China has already starting making fake smartphones. If the price of smartphone goes down from hundreds of dollars to tens of dollars, Google and Apple will be able to give smartphones to consumers free of charge. Apple is developing the application market in iPhones. iTunes is a platform for mp3 files; iBook is a platform for distributing books; Apple’s Newsstand is also a platform for news. As we know, Google provides all kinds of apps and contents free of charge; it sells advertising. Under this circumstance, the Google executive’s question was what Samsung is going to sell at the time of the popularization of the Chinese-made smart phones.

Currently, it does not seem to be clear what Samsung is going to sell in that situation. The current lawsuit between Samsung and Apple is limited to hardware. Although Korea made the World’s first mp3 players, Korea has failed to dominate World’s mp3 markets. In order not to repeat the same mistakes, I urge Samsung to develop a platform to combine smartphones with contents or services.

http://www.dt.co.kr/contents.html?article_no=2012110902010151697001