Apple Watch Predictions 2

Ok, we're just over a week to the launch and the battle lines have already been drawn. Many pundits are expecting the Apple Watch to flop outright, and fans are rushing to its defense.

Everyone I've talked to is, at best, on-the-fence about its prospects. Most are skeptical. I was too, at first. But after thinking it through, I believe this could be a great success.

It's Not a Tech Device

Here's the problem: Anyone who would discuss the prospects of the Apple Watch is almost certainly a techie, and the Apple Watch is simply not a very compelling piece of technology. Heck, watches are not compelling pieces of technology. Timekeeping is a completely solved problem. No one wears a watch only to tell time anymore.

How about as a wrist-computer? Apple Watch v1 is going to be comically limited in that regard. Even ignoring the engineering problems of battery life and processing power (the Apple Watch v1 is not much more than a mirrored screen to an iPhone), the fact is that there isn't a whole lot you would want to do on such a tiny, awkwardly positioned screen anyway. Especially if you already have an iPhone.

It's All About Fashion

The folks at Apple are not dummies. They, more than anyone else, know this. That's why they are advertising in Vogue, not *um*, MacWorld.

Apple Watch (v1) will succeed or fail as a fashion accessory.

Note that fashion also includes sports fashion. People don't wear heart-rate monitors because they are super accurate, they wear them because it projects to the world that they care a lot about their health.

The Apple Watch more than meets that bar. Display your pulse with a cool color graphic? That one feature alone beats the existing competition. Watch out Polar!

Sports fashion will be the primary market for the Apple Watch. Expect to see athlete endorsements, and special partnerships with Nike. A matching sneaker for every band? Why not?

How About That Gold Edition?

The other thing everyone is speculating about is the price of the Gold “Edition" edition. The answer is: It doesn't really matter.

If you weren't going to buy one, you wouldn't buy one if the price were $1,999 or $19,999. The smart thing for Apple to do would be to price it high, as in over $20,000. That will determine if there is a market for high-end smart watches or not. There's no downside either way.

Techies, myself included, have trouble understanding why anyone would pay more than $500 for a watch. The fact is that there are many people who do. Rolex makes over $3B a year. The question is, can Apple convince that market that the Apple Watch can replace a Rolex?

I'm very skeptical about this, but it's not unreasonable that they will have at least some success. There is an existing market segment that considers the iPhone a luxury item. There is a subset that won't blink at paying $20,000 for a watch.

However, this is not a game Apple needs to win right away.

It's All Upside

The brilliant thing about the Apple Watch is that there is no downside. Every watch sold, at any price point, is net new revenue for Apple.

Here's the thing to pay attention to: How Apple positions it at launch.

Again, I predict that the first version will find success primarily as a fitness fashion accessory. A $249 Apple Watch heart rate monitor would be a solid product. That's the price of one of the top rated monitors on the market.

I would hope/expect the launch to heavily feature fitness, with a new custom App that kicks the pants off every fitness tracker out there.

If, instead, the focus is more heavily on the 3rd party Apps, à la iPad, that's a sign that Apple is missing the ball. I'm surprised they chose to offer a Watch SDK for v1 at all.

In any case, I would expect the growth curve for the Apple Watch to be lower than the iPad, and even the iPhone. This is more akin to an iPod launch - it's a brand new market where Apple doesn't have significant advantages, but is trying to disrupt.

Remember how clunky the first iPod was? That's the Apple Watch being launched this year. Expect the market to look very different in 3 years time.

Standard Disclaimer: I hold Apple stock, and (based on this analysis) plan to hold on through the Apple Watch launch.

Related: Business.