Known for its sexy hardware, Apple is trying to reinvent itself as a services company.
This week Apple announced its much-anticipated news service, as well as a streaming service to rival Netflix, a games arcade and a credit card. Instead of the usual hype around physical product launches, Apple casually announced a new iMac, two new iPads and new AirPods as a warm up to Monday’s hype-filled launch of these new services. That alone is remarkable.
Faced with a saturated market for smartphones and its declining sales of the iPhone, which accounts for two third of its revenue, Apple is expanding its income opportunities. And it is banking on its massive installed base of iPhone and iPad users, many of whom are already paying for a service of some kind, including its App store, iTunes, Apple Music, its iCloud storage offering and Apple Pay.
Apple has some 360m subscribers to these, which accounted for $10.9bn in revenue in the last quarter, albeit all the services that people subscribe to through the App store (of which Apple takes 30%). This include music streaming Spotify, which this month reported Apple to the European Commission for anticompetitive behaviour for that.
The TV offering will feature two documentaries from talk show megastar Oprah Winfrey, who summed Apple’s unique proposition as: “They’re in a billion pockets, folks. The whole worlds got them in its hand, and that represents a major opportunity.”
Indeed, it does. Perhaps that’s why Steven Spielberg has signed on to do a reboot of Amazing Stories, the science fiction show that inspired him as a kid.
Or why the Wall Street Journal, Los Angeles Times, Vogue, the New Yorker, National Geographic, Rolling Stone and Sports Illustrated signed up to be part of the Apple News+ service that offers 300 magazines for just $10 a month. Notably the New York Times and Washington Post aren’t participating in a service that is reportedly giving Apple 50% of the income to reach the 900m Apple devices running its iOS operating system. If that revenue share figure is correct, it says a lot about the willingness of under-pressure news publishers to participate in a chance to get themselves in front of more eyeballs.
The streaming video service, called Apple TV +, will feature – amongst others – Reese Witherspoon, Jennifer Aniston and Steve Carrell doing “The Morning Show,” which Friends star Aniston called “an honest look at the complex relationship between women and men in the workplace”.
The Apple Card is a credit card – backed by MasterCard and Goldman Sachs – that works with Apple Pay (which isn’t available in South Africa, but may will be soon given this new push). Finally, the Apple Arcade will be a subscription gaming service for $10 a month and has 100 games on offer at launch.
These are bold bets by Apple, which is busy reinventing itself in its post-iPhone hit product era. Given Apple’s massive user base and habit of tracking the right trends, it’s likely to be a good bet.
This column first appeared in Financial Mail