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Comment by emdowling | Hacker News Reader

The interesting takeaway for me is that services is now the equal second biggest revenue centre at 9%. It is still way behind iPhone, but it is growing at a phenomenal rate. By all accounts Apple is just getting started with services (e.g.: rumoured original video content, video streaming service) so we can expect this to grow even more.

Finally Apple is capitalising on its install base to sell more addons after sale. This offsets slowing hardware upgrade rates, although not sure if it is enough to offset iPad declines.

The narrative often heard is that if they want to shift to being a services company, Apple would need to dramatically change its org structure. I may be wrong, but no one has ever monetised consumers with recurring monthly revenue as successfully as Apple has (utility companies and mortgage brokers excluded!). And it didn't even need an org restructure!

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> By all accounts Apple is just getting started with services ... so we can expect this to grow even more.

That's a very ... charitable way to put it. Another take would be that Apple, whose former CEO, over a decade ago, simultaneously oversaw Pixar and sat on the board of Disney, complete and totally missed the boat on streaming, original content, and cloud services. Think back to 2006: Netflix was a service that mailed DVDs, Amazon Prime was a year old, Dropbox was not around, Spotify was not around, Google was still focused on core services like maps and mail. Considering who their CEO was at the time, his connections, and their first mover advantage on digital entertainment and cloud, it absolutely amazes me that every single one of these companies was allowed to come in and eat Apple's lunch in some form or another.

The common explanation for this is that the content owners did not let them. Terrified of what iTunes did to the music business, they cut deals with not-Apple to prevent a monopoly from becoming more important than they were.

I don't know how to prove that, but it's a story that resonates. For a while I bought all my music exclusively from iTunes but now I subscribe to three different video services.

I'm curious, is there a source for that? It would be interesting to find out the backstory.

I've heard it before, but I don't have a source either. I wouldn't be surprised to see some mention of it in a Wired article.

I think the issue was partially with the content owners (as mentioned in another reply to your comment) but mostly about internet speeds and processing power available at the time. Remember what YouTube videos looked like in 2006?

To be fair, the man did revolutionize hand-held computing. You can't blame him for failing to be omniscient.

That's probably because in 2006 he was busy creating the iPhone.

Services, basically digital content consumption (whether songs, or movies, or apps), is a very low profit business compared to hardware.

You're competing with Netflix, Google and Amazon there. Netflix and Amazon have near zero margin in their content businesses. Most of your profit is eaten up by licensing (or production as well now for AMZN & NFLX), and that is guaranteed not to change.

$20 billion in services sales, with $3 billion in operating income, won't scratch a $638 billion market cap (and won't compensate for tanking China iPhone sales if that doesn't immediately stop getting worse).

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