Years ago, late Apple Co-founder Steve Jobs had said about television that he believed he had “finally cracked it”. In a ‘showtime’ announcement, did CEO Tim Cook demystify what Jobs had meant? Or is Apple just going the Amazon way, being a neutral distributor and seller of its own offerings simultaneously?
- Apple announced a host of new services in its recent press event centring around its bid to take of multimedia giants like Netflix and Prime
- The announcements were more of a mirage in the present time, with the audience having to imagine the future of Apple’s offerings rather than get a clear glimpse
- Apple’s announcements without concrete product details but a heavy dose of celebrities aims to create a buzz as it expands its services business
Surprisingly, the event did not shed light on any major plans for its hardware products – instead it was all about Apple’s services.
Apple has seen a slump in iPhone sales recently. With more and more hardware players in the market, Apple has made a marked shift in its business ways – heavily endorsing the service model.
The transformation means – Apple is attempting to bring its growing services business at par with the revenue stream from hardware. But is the tech giant ready to make the shift?
What was hot at the event
Apple made a plethora of new announcements of services including Apple News+, Apple TV+, Apple Arcade gaming service and the Apple Credit Card.
Apple News+ is a digital newsstand which will give full access to over 300 magazines including National Geographic, The New Yorker, Popular Science, WIRED, LA Times, and WSJ. News+ will specifically curate news to fit a reader’s interests and won’t allow advertisers to track users.
Apple TV experience will encompass streaming subscriptions, cable channels, and specialty add-ons. TV+ is a new initiative where Apple has started creating original content with celebrity collaborators like Steven Spielberg, Jennifer Aniston and Oprah Winfrey.
In a bid to ensure its original content reaches as many screens as possible and not just Apple devices; the company is introducing an Apple TV app for high-end smart TVs, Amazon Fire TV, and Roku later in 2019.
A new type of credit card was the most exciting announcement at the Apple event.
The most exciting announcement was a new type of credit card which will let users pay for all the new subscription services. The credit card is backed by Goldman Sachs and unlike other credit cards, won’t carry late fees, annual fees, or international fees.
Apple also announced a new subscription service for premium games called Apple Arcade which will provide over 100 new games. The announcement has been huge among young Apple customers as a dedicated gaming offering was missing from the Apple arsenal. Representing today’s modern generation, Rahul Raj Kaistha, a hardcore fan of Apple products exclaimed:
“With over 100 premium games, Arcade is the best gift that Apple could give to teenagers like me. I am eagerly waiting to play the new games on my iPhone.”
Expansion of the services business to compensate for stagnating iPhone sales
In a recent interview, CEO Tim Cook had emphasized on the fact that Apple’s services division was growing significantly over the last several years. An investor would question if the new offerings will be able to compensate for crater being formed due to slowing iPhone revenue.
iPhone revenue slumped by $9 Billion in the December quarter 2018. Credit: Bloomberg
If that is Apple’s plan, this could take a while for the firm with iPhone making up for 60 percent of its revenue.
Cook did comment that services are just one aspect of the non-iPhone revenue stream of the company. Cook said:
“If you sort of back up and look at Apple, in our last fiscal year, we had $100 billion of revenue that was not iPhone. $100 billion. And in this last quarter, if you take everything outside of iPhone, it grew at 19 percent. 19 percent on a huge business.”
Announcements are good, but Apple’s services stream has a long way to go
What apple did was told its audience to imagine the new world of Apple, rather than give them proper details. Apart from Apple News+, none of the other services announced are available right now.
This is in stark contrast to Apple’s usual approach where its famous for creating immense fanfare on launch and then encashing it by started shipping the products right away.
Apple managed to create quite a buzz with overload of celebrity quotient at the event.
The fact that Apple’s announcements had no immediate prospects for its users to try their hands on, gives it an incomplete feel. It has made people wonder – Why hold the mega event when the offerings are not ready?
The event works to the advantage of building a buzz around its later releases in 2019. But it can’t be ignored that the Apple fan base was left wanting for more info and glimpses into what they are going to get from the tech giant.
Apple is facing a complex equation, just like Amazon
Apple is creating a new story for itself and trying to bring people in line with its vision. The keynote event ascertained the fact that Apple is going big with the subscription services model. Tim Cook ended the keynote that at Apple, ‘the customer is and always will be at the centre of everything that we do’.
The strategy at Apple has traditionally revolved around promoting its own products through added services. But with the world now filling up with digital content from hundreds of sources, Apple has had to partner with several content creating and publishing companies for its new services.
App Store makes up the major part of Apple’s non-hardware revenue
Its multimedia services are its campaign against Netflix, Amazon Prime and Hulu. Instead of solely building fresh content in large quantities, Apple is bringing in magazines, news websites, and TV shows from HBO among others. Paolo Pescatore, a technology, media and telecoms analyst at PP Foresight said:
“In essence Apple is seeking to become a Netflix of everything in services; music, news and magazines, video and games,”
The is in serious conflict with Apple’s business model of services evolving experience only for its products.
Instead of solely creating and publishing its own content, Apple’s services will feature content from a wide variety of independent sources
There have been instances when big name like Google and Amazon have come under criticism for driving users to information or entertainment that the company owns, thus creating issues with regulators and business partners.
Bloomberg reported that U.S. presidential candidate Elizabeth Warren and EU regulators have been unconvinced with Amazon’s image as an online mall for buying goods and in sharp contrast, selling its own brands of the same goods online.
Apple has faced similar sentiments from unhappy business partners. It has been on the receiving end of criticism from digital music provider Spotify which has been vocal about ‘Apple giving itself “an unfair advantage at every turn” with its competing Apple Music service.’
With iPhone no longer being the invincible Titan of the mobile phone market as it once was, Apple has taken on a new business model. There have been innate ethical concerns and business conflicts when a company acts as both a supposedly neutral distributor and a provider of their own services.
In the long run, Apple will need to justify how the company will keep this new model fair for the content and services from businesses which heavily rely on Apple’s App Store for their revenue.
- Apple has witnessed a near stagnation in its iPhone revenues, which makes up for 60 percent of its revenue
- The bid to expand the scope of its originally created services is in sharp contrast and conflict with its image as a neutral distributor of third-party apps and content
- With this shift, Apple will have to justify ethical concerns and business conflicts of regulators and its partners when it acts both a supposedly neutral distributor and a provider of similar in-house services.
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