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The star of Apple’s new iPhone may not be the phone

Aaron Pressman
The Exchange

Apple’s (AAPL) new iPhone, expected next month, is grabbing headlines but many of the most significant upgrades and improvements will benefit millions of owners of older models, too.

Apple iOS 7

The rumored "iPhone 5S" may have a faster processor and better camera but it will also be running Apple’s new iOS 7 software. And the software can be installed on the last 3 iPhones, going back to 2010's iPhone 4, and every iPad but the original.

That means a lot more people can share in the improvements. Instead of just the 10 or 20 million people who buy the iPhone 5S in its opening weeks, hundreds of millions of owners of older iPhones and iPads will also be able to use iOS 7.

It also means a lot more companies – not just phone makers like Samsung (005930.KS) and Nokia (NOK) -- could be hurt by competition from Apple. Online music service Pandora Media (P) will suffer if users defect en mass to Apple’s new iTunes Radio. Facebook’s (FB) Instagram could be hit as competitor (and Yahoo-owned service) Flickr gets deeply integrated in the iPhone operating system. And Google could suffer if an improved Siri search service reduces the need for Google searches.

The strength of iOS 7 also poses dangers for Apple. To the extent that owners of older phones feel like they've gotten a free upgrade from the many software improvements, they may be less likely to buy a new iPhone. And even new phone buyers may opt for older, cheaper models or the rumored lower-priced, plastic "iPhone 5C." Apple's vast iOS ecosystem, encompassing apps, music, ebooks and movies, makes customers less likely to defect to Android, but bestows its benefits on users of old or new hardware nearly the same.

Overhauled visual design

Many of the new features will be obvious up front, starting with a radical overhaul of the basic design scheme. From the icon-filled home screen through all of Apple’s own iPhone apps, colors are brighter but designs are less ornamented, with a flatter, simpler appearance. Gone are faux textures meant to look like leather or felt.

While the software is still being tested, some details could change. But Apple has already begun promoting many of the new features.

The visual changes are substantial but developers who have been testing the software say they had no troubles getting used to the more colorful, less ornate design. David Barnard, who runs App Cubby, says he was initially concerned that the new visual style would be too jarring. But after using iOS 7 for several weeks, he feels “surprisingly at home.”

The new iTunes Radio service, free with occasional ads, has its own flat app icon harkening back to an old style boombox radio. Listeners choose themed stations, which stream music wirelessly to the phone. Station themes will range from music similar to a famous artist (“If you like Bruce Springsteen…”) to more common genre-based selections (“80s dance party”).

Apple customers who pay $25 a year for the iTunes Match service, which stores their music collections on the Internet for access on multiple devices, won’t even hear the ads.

Pandora, Spotify and other online music services will continue to benefit from their large pools of existing customers and well-developed features to help users discover new songs, says Ben Bajarin, Director of Consumer Technology at Creative Strategies. Still, “if iTunes Radio can deliver a better experience plus a more integrated buying experience then I anticipate it to be a home run with consumers,” Bajarin says.

Some analysts argue that Pandora, with over 71 million active listeners, is already big enough to withstand the coming Apple onslaught. And while iTunes Radio will seek to personalize the songs it selects based on user preferences, it won’t have Pandora’s so-called genome system, which analyzes music along many attributes to improve suggestions.

“The iTunes Radio shadow may linger, but it doesn’t seem to leapfrog Pandora’s music discovery and its genome engine,” Wedge Partners analyst Martin Pyykkonen wrote in a report this week. And users don’t typically rely on just one service, he added. “Multiple radio and on-demand streaming services are the norm for music enthusiasts.”

More subtle improvements

Some iOS 7 features are incredibly simple but extremely helpful, like a new control pane that appears with a finger dragged up from the bottom of the screen. The pane gives quick access to frequently needed controls, which used to be buried layers deep in the settings app, like turning Bluetooth and Wifi on and off.

Developer Marcus Zarra, running a pre-release version of iOS 7, says he uses the control center constantly. “Easy access to music, alarms and other control features is a great time saver,” says Zarra, who writes for the “Cocoa is My Girlfriend” blog and co-founded app maker Empirical Development.

Flickr’s addition will be obvious to users as soon as they hit the iOS share button on a photograph. The current share button supports posting to only two non-Apple services, Facebook and Twitter. But the revamped sharing pane adds Flickr for photos and Vimeo for videos.

As always, iPhone users can post pictures to competing services like Instagram directly from inside of those services’ apps. But it’s not as quick and convenient.

Apple is also building into iOS 7 the photo effects filters that Instagram pioneered.

Other new features will work behind the scenes to improve the iPhone software. Apple is adding a background feature to let apps grab updates, like new Twitter posts or updated news articles, even when they aren’t running on a user’s phone.

Apple has previously banned third party apps from operating in the background in that manner, saying such operations can drain battery life too quickly. But the company says it has optimized the background feature to run a limited amount and during “power efficient times,” like when an iPhone is connected to Wifi.

None of that will matter much to users, who will just see their Twitter app filling with new posts more quickly, for example.

“This is a subtle improvement that most people will never notice directly,” says Steve Streza, an iOS developer who worked on Pocket, an app that downloads web articles onto a phone for a user to read later. “But it will make any app that talks to the cloud feel much more responsive and snappy.”

Another hidden addition could be a popular with gamers. Apple is adding code to let iPhones work with separate game controllers – those multi-button handhelds that typically go with an Xbox or Playstation.

“Touch controls are great, but some games are just better with a d-pad and a few buttons,” says Jeremy Olson, founder of app maker Tapity. “Now users will have the best of both worlds.”

And that’s not just users who buy the newest iPhone.