Apple broadens focus on services

Interesting assessment. (The article might be behind a paywall for some – sorry.)

Though the iPhone still contributes about two-thirds of Apple sales, the company has encouraged investors to focus on a growing services business, which includes streaming-music subscriptions, app-store sales and mobile payments. Services are expected to top $50 billion in sales by fiscal 2020 and contribute more than about 60% of Apple’s total revenue growth over five years, according to Morgan Stanley , which estimates the iPhone fueled 85% of growth during the prior five years.

The services business also is key to preserving iPhone loyalty. Just as Amazon has used media and music offerings to increase the value of Prime membership, Apple executives view its mobile payments, music service and coming video offering as ways to encourage current iPhone owners to buy future Apple handsets.

Apple has said it aims to pass 500 million paid subscriptions across its platform by 2020, up from 360 million now.

Nice roundup of the changes. I hadn’t made this connection:

In August, Apple hired Tesla Inc.’s engineering chief Doug Field and gave him day-to-day responsibility for the company’s roughly 1,400-person autonomous-vehicle project, known as Project Titan. Last month, he cut the team by about 200 people, according to people familiar with the change, which was previously reported by CNBC.

Encouraging if the layoffs were due to an expert assessment of what the division needs rather than Apple deprioritizing cars.

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The most valuable company in the world is no longer a growth stock, and Cook is working to create multiple (usually interrelated) income streams to buttress a phone market with decreased growth prospects. Services - at this inflection point where more and more people are willing to unbundle from cable packages - will help to build a related business with steady cash flow. But it’s going to cost them a lot more than the $1 billion they’ve recently spent on content…

The car project is really the outlier for Apple, as unlike the progression from personal computing to mobile phones/pads and to music to movies /games/tv etc the vehicle business is a pretty big jump from Apple’s core competencies. To me one relevant link seems to be AR, which seems likely to be included in both the electric car project as well as being an increasingly prominent part of iOS.

I wonder who Apple expects to buy their car if, in fact, they are still planning to build one.

Most car companies are already planning for a major drop in private car ownership over the next decade, as much as 80% by 2030.

Rather than people continuing to own vehicles that remain parked 95% of the time the guys with the crystal balls see most people using using self driving ride share vehicles. At least in urban areas.

I never thought they were planning to build one, nor is there any evidence they’re gearing up to do so. There are far better alternatives, primarily licensing and partnering, which is apparently also the path Waymo/Google is taking.

I just wanted to link to the exact same post from @MacSparky. I agree 100% with his post. Apple’s video service might be interesting, but I am not so sure, if it will be great or worth 15 bucks per month as one rumor suggested yesterday:

Hopefully, the new service won’t stop other content providers from supporting the AppleTV platform because I really like to be able to access Netflix, Amazon, YouTube and several German platforms right from my AppleTV as it is possible today.

I do not want to bash Apple and we really should wait until we get some actual facts about their yet to be announced services, but I am a little concerned about them getting way too far with their revenue phantasies providing “services”:

To quote John Gruber, who is not exactly someone who likes to bash Apple:

Apple keeping “about half” of this revenue is nuts. Given the margins in the news industry today, even Apple’s usual 70/30 split would seem a bit greedy, but half is insane.

And this is the news industry. If content providers for video content like Netflix, Amazon, Disney and many more will see Apple as a threat for their own revenue, I fear that we as Apple users will not be in a better position as a consumer in the future compared to the present…

Yes, Apple has to make money. But some of Apple’s recent ways of making money start to feel a little like having some extortion elements to them.

iTunes and Apple’s way of dealing with MP3 saved the music industry according to some articles out there. I am not sure if Apple’s current strategy will be seen the same way in the long run, when it comes down to the way how they deal with newspapers, news outlets in general or video platforms.

And as a customer, I do not see myself paying for even more monthly subscriptions. And I do not see myself cancelling Netflix any time soon… Oh well, I think we just have to wait…

If Apple does an autonomous vehicle I think it will most likely be something they use to provide a service rather than sell hardware directly to consumers.

That was written before it was pointed out to him, as he later discussed,

that it’s precisely the split that Texture, the magazine service Apple bought 11 months ago, has with publishers. Magazine publishers are on board, major newspapers aren’t (yet).

But it’s so much easier to do it about unknown services, and their contents and pricing, before they’re confirmed or detailed! :rofl:

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In order to recoup its investment, compete with the competition (which is ahead of it, in different ways) and move beyond a small niche that would persist indefinitely I think licensing is more plausible than offering hardware as a service. (Although licensing itself can be seen as a type of recurring service revenue!)

For many, many years people (who grossly oversimplified) complained that Apple’s hardware prices were an ‘Apple tax’ on otherwise identical hardware, whereas the truth was that Apple was selling Macs with better quality components in custom configurations that were tied to its proprietary operating system. And Apple designed the hardware but contracted out the manufacture.

I don’t see it as a stretch for Apple partner, to create configurations (reference designs, or partnerships with at least one carmaker to start) that similarly offers an integrated solution, but with extant carmakers in the automative industry - who already have the sales networks, the experience with safety issues for individual countries (not to mention differing laws sometimes by individual US states) and the manufacturing prowess to mass produce and sell.

Apple can’t go it alone and directly offer a service that isn’t a niche (in the marketplace, even a niche geographically) for many years. But a partnership would solve many issues it hasn’t shown it is even trying to tackle now.

And that’s also the way Google is going, working apparently aiming not to sell its own cars, or buy and retrofit and lease or whatever, but to perfect its tech and then then probably offer it to everyone, getting licensing revenue (a la ‘Microsoft tax’) as well as possibly live telemetry data it will use to buttress its mapping/traffic/tracking/advertising core.

Yes, I think that’s the right direction. “Doing a vehicle” is far more complex and difficult to get to profitable scale while reducing marginal cost per unit (as Tesla has demonstrated), than providing features (“services” generating recurring revenue streams over the long term) that make autonomy possible and attractive. Both for the consumer inside the vehicle and for the vehicle.

(Ben Evans at a16z posted a few years ago a still-relevant essay on car tech, and another last fall. Evans has made the point that Apple ignoring cars would be like Nokia ignoring smart phones. The question is “how should we play?”)

More free road for me. :wink: I don’t think we will see anything near a 80% drop.

Well, I think I deserved that one… But… I stand by my full sentence you’ve quoted in part so nicely. :slight_smile:

At the risk of derailing the thread a bit, I have trouble coming to grips with the whole “subscribe to a car service” notion. With apologies to George Carlin, my car is a place for my stuff in addition to my transportation. I couldn’t imagine having to limit what’s in my car to what I can pick up and carry all at once. Maybe I’m just not the target audience for such a service.

I use 2 car sharing services. And you are completely right, it’s stuff in my own car that’s missing. Also:

  • shared cars are dirty. Not once I rode sitting in the bread crumbs/food remains of whatever slob used it before me.
  • shared cars are restricted to certain areas. Not driving, but picking-up/returning. And those areas don’t cover the whole city, just the inner districts/parts. So, what if your destination is not in such an area?
  • cars are underwhelming/underpowered/(mostly) small. On the highway (Autobahn) I don’t like to feel like an obstacle. If I don’t have a car at all, I need a shared car to transport stuff, so it needs to be bigger. That’s why I own a completely overpowered station wagon. Fast and plenty of space.

Maybe not. It does seem hard to believe, but Ford, GM, and other car companies appear to be planning for it. Both are working on a fleet of self-driving cars. Ford says they will have cars for Uber & Lyft by 2021. Insurance companies and lawmakers, according to some, are looking to the day is when the the “Johnny Cabs” can match a human driver, not when they are perfect.

I started losing my love for driving decades ago when the cost of insurance forced me to sell my 2 year old 1968 Chevy Camaro SS 396. It’s barely a memory today.

A relative of mine, whose current car is over a decade old, is looking to buy a new one and was asking me some questions to help narrow down her choices. I suggested that she consider that this would probably be the last gas-powered auto she ever buys, could be the last one she buys that she drives herself, and might even be the last car she buys outright or owns.

I think I blew her mind.

:brain: :fireworks::exploding_head:

My company car is electric. I would buy one for myself.

I have a friend who has been on the Tesla 3 waiting list for a couple of years, and is upgrading from a Prius. I know someone else who went from a Nissan Leaf to a Tesla. Neither wants to have anything to do with a gas-powered vehicle ever again.

My relative’s next purchase, a downsizing from an old Honda Odyssey minivan, will still need to be capacious enough to haul garden supplies, so she’s looking at compact-size SUVs and hatchbacks and station wagons. That electric vehicle space for consumers is not being focused on right now, but I think that by 2022, if self-driving tech matures and becomes accepted, we’re going to see a lot of electric, self-driving micro vans (with delivery people in them, perhaps doubling as backup drivers), which will be able to double as platforms for taxis and some consumers.

Living in NYC I have no need for a vehicle - I’m a 10 minute walk from the subway and a block from buses, and Uber/Lyft/Juno/Curb/Via/Arro fill the void when I don’t want to try to flag down a taxi, and a half dozen rental car companies are around if I want to drive somewhere. So for me a self-driving car as a service would be an interesting, intriguing option to add to current ones.

Marques Brownlee drives a Tesla Model S (must be nice to be young and a Youtube star). A few months ago he was sideswiped by a semi. Total cost of repair was almost $50K. And it only took 3 months, because the shop already had parts in stock. He mentioned it is not unusable to take 3 times as long. https://www.youtube.com/watch?v=YFtxYb-GN9k

A couple of years ago a front running light burned out on my brother’s Cadillac. Not that long ago, this would have been a DIY repair that anyone competent with a screwdriver could complete for less than $5. The cost was $2500 to replace the entire headlight assembly, which BTW, required removing the front fender.

Repair cost is another reason s-d car as a service can’t get here fast enough for me.

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