Apple’s New Era Has Begun

You're complaining mostly about Apple charging too much for not enough.

But since people are signing up for these things in droves, Apple is making $$$$, which means Apple's strategy is succeeding.

Apple's services strategy pays off when it makes a lot of profit, not when when you feel like you're getting amazing deals on everything. Apple's never been a budget-product company, it's always been high-end.

I think the general reception of Apple One has been pretty good.

> At this point it looks almost certain that they'll either change their fee structure or face regulatory action.

I want this to be true, but honestly I wouldn’t hold my breath.

Someone had brought in their iPhone and it needed to be wiped for repair. The rep was pushing iCloud under threat of losing their data. It seemed like such a scam. I can only imagine what it feels like to be tech-illiterate and told you must buy a subscription or we'll wipe your family photos.

A 'premium' phone like an iPhone should really have a free backup for at least the data size of the phone. At the very least you should be able to get iCloud free for when your phone is in for repair.

> Apple have taken their absolute dominance in selling music and moved to middle of the pack in music streaming squeezed between Spotify and Youtube.

That is true, but Apple is estimated to have almost ~70M subscribers and Spotify has ~290M. Not sure how many of Apple's are paying but that's a lot of people who find Apple's service at least "good enough" which means less revenue for Spotify and competing services. If apple decides to provide a platform for music creation and direct publishing to Apple Music, that creates more lock-in.

> They're late to TV streaming and somehow, despite being incredibly closely linked to Disney have failed to tie up a deal.

Apple being late is a pretty frequent occurrence but execution is what can set them apart here. I doubt Apple will invest the billions it takes to make good entertainment but time will tell. They succeeded (in the USA) with maps and the Apple Watch so far.

> Apple's Siri is distinctly second tier, losing them both for Apple Music, but also potential shopping via smart assistant.

No question there - Siri is still a mediocre product but it is also accessible across their devices. Assistant is better but only if you have an Android phone or the Google app. If you want to buy a smart speaker, you have to _device_ which service you want versus "If Apple makes this speaker, I know it has Siri and works with my devices".

> iCloud

Yep that's a joke and bad deal. Storage is quite cheap so I don't get why Apple won't expand the options.

Apple One is a rough start but I expect them to refine it and slowly add options to improve the offering. Fitness+ could be huge if they pair it with the socioeconomic class of people who go to spin/yoga/pilates/crossfit classes and view fitness as a badge.

They can create a social network effect like Strava and build partnerships with Peloton, Flywheel, etc. (I'm not the right demographic so this is a guess). Apple could partner with hospitals for health data sharing with doctors and maybe get insurance companies on board for discounts.

> Finally you've got the Appstore. Apple is getting absolutely hammered on their 30% fee. At this point it looks almost certain that they'll either change their fee structure or face regulatory action.

+1

> If Apple is a services company why isn't FaceTime adding $100Bn of market cap to Apple's value as a competitor to Zoom?

Because Apple sucks at making services for a world that's not Apple-focused which is what you need to survive in enterprise. I'm okay with Apple dominating cross-platform video calling ...

Overall, I think the ease of a customer using their Apple ID/Device for _everything_ is hard to overstate and is Apple's long term play.

For films: Netflix all the way. Do not even get me started on the #@%^$# signup process for Apple TV

iCloud: I needed, do not see an easy alternative :(

Apple one: yeah, no thanks.

Appstore: I needed and it is fine for my needs.

Apple Music: Like it, works great for my needs and works fine with Shazam. Do not try to play anything they suggest however. From play lists to "specially for you" it does not even come close to what I want to listen to. Playlist management overall is terrible too.

Apple Car Play: NEEDS A WIRE, in 2020! I got a wireless charging thingy in the car (Audi 2019), and keyless entry, but I need a cable to use Car Play: disappointing to say the least.

Your other examples: did not know they existed, no need for them.

So basically I am using the same old Apple services since day one and see no need at all to switch to anything existing. If they would allow me to host my email from my private domain however...

Love the "live long" updates, the interface and the styling of the devices and the (perceived) privacy enough to stick in this ecosystem.

Apple Fitness+ will be the same with only 6 supported countries.

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To address your points:

> Apple have taken their absolute dominance in selling music and moved to middle of the pack in music streaming squeezed between Spotify and Youtube.

This is your point I agree with most, Apple music just isn't as good and its shocking they lost so much ground.

> Apple's Siri is distinctly second tier, losing them both for Apple Music, but also potential shopping via smart assistant.

Siri just isn't good but honestly how many people use voice assistants for more than changing songs or checking the weather?

> Cloud comes across as Apple nickle and dime-ing their customers, insisting you need to back up your phone but providing laughable amounts of storage for free - and then becoming nagware

Agreed it is laughable but I would argue people concerned with backing up all their devices are in the minority of Apple customers. It wouldn't be why most people pay $15 a month.

> Finally you've got the Appstore. Apple is getting absolutely hammered on their 30% fee. At this point it looks almost certain that they'll either change their fee structure or face regulatory action.

I don't really see how this is relevant to the mediocre services Apple offers except it is an unfair advantage they have on other SaaS competitors. I suspect it may be one of the reasons they haven't already decided to swallow SaaS competitors like Spotify, so they can say the app store is competitive and not disturb the golden goose that is the 30% fee.

> If Apple is a services company why isn't FaceTime adding $100Bn of market cap to Apple's value as a competitor to Zoom?

I don't think market caps, especially with the past years stock market, tell us much about the effectiveness of services. However, Apple's current market cap is 2 trillion, 20 times the cap of Zoom. To add to this, Zooms P/E ratio is 530 compared to Apples P/E of 36 which indicates Zoom is wildly overvalued. Even if it was a useful comparison Apple is in a different league.

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I think Apple's biggest problem is the lack of one killer service to offer as part of their bundle. If they offered mediocre Apple music, Apple fitness and Apple arcade but Apple TV was on par with Netflix most people would use the mediocre services to save on the gaining number of other SaaS products modern consumers pay for.

Apple has the money and talent to create one killer service, they just haven't been running a lot of their services long enough to be killers - (with the exception of music). I think it's just a matter of time until Apple create a killer service and people getting sick of paying for multiple SaaS products.

What's forgettable about Apple News+? Its got a ton of magazines. If you read just a handful a month it beats the newsstand price.

It also includes WSJ. On iOS and iPhone (but annoyingly not MacOS) that means when someone submits a WSJ link here on HN and you click it and hit the paywall, you can simply hit the "share" button in Safari and pick "News" from the sharing options to go to the story in the News app.

Agree on the quality of Apple Services. All of these problems and questions requires first looking into Apple Services Revenue.

Both App Store Revenue and Google Placement are nearly 100% margin. Popular belief is that Apple only makes 20% margin on App Store because that is what they took as cuts. In reality App Store Apple only book their 30% / 15% cut as revenue, and nothing else from Gross Margin Stand point other than payment processing. Google Search Engine placement deals are also ~100% margin. Both of these Revenue has been growing, and they are literally, pure profits.

And a reminder, Apple report Gross Margin of its Services Revenue as 60-70% over the past few years. ( I remember they only start giving out this numbers in 2016 / 2017 )

Apple foresee that problem fairly early on. You cant tell the world we have services revenue of 9x% Gross Profit. They need something, something to help dilute down those margin. And First enter Apple Music ( 2015, although the acquisition of Beats happened in 2014 ).

Music Streaming Services are basically a thin margin Business. 75% of your monthly subscription are payment to Labels, regardless of how many minutes your customer listens to and how many customers you have. For Apple, they pay a little higher than ~75% which is what Spotify pays, and gets a good PR with paying more to help out artist. They then end up with a Gross 20% Margin Services, or even less as they could also afford to give out more free trails and student discounts. I would not be surprised if it was running at at lost in the early days.

Then there is iCloud. Remember when iCloud used to cost more than Google? That make sense because Google and Microsoft have their own DC for storage and gets better unit cost. While Apple, tends to ( and AFAIK continue to ) use GCP, Azure and AWS for their iCloud Storage. In 2015 they announced their new pricing and stay competitive with Google. And has been pushing its users to iCloud Backup. iCloud also has a clear Unit Cost and are low margin business, this also helps Apple to dilute its Services Revenue Margin.

And you get the idea, it is the same with Apple News+ ( Cost per Article Read ). Basically Apple could afford to offer services to its customers running at very low margin or at cost.

So What about Apple TV+ and Apple Arcade? They have zero on going cost, Apple pays TV / Movie up front, along with Games inside the Arcade. This is a large up front investment, which ( on the surface ) goes well with Apple Cash pile sitting there doing nothing. With Apple TV+, Apple could afford to give you a year worth of free services. It doesn't cost them anything as they are already paid down. ( I believe there will be a small percentage of Arcade paying to studios as on going maintenance, so you dont see Apple giving out Apple Arcade for free like Apple TV+, only three months trial )

If Apple could get enough customers to pay for Apple TV+, as long as it reach above their initial / ongoing investment, they would have profits, aka Netflix. But that is not what Apple is doing here. It was part of the Apple One plan.

Apple could not simply bundle iCloud and Apple Music together and give you discount on the bundling. There are no margin left to lower price. But if you throw in Apple TV+ and Apple Arcade, all of a sudden the bundle offer more value ( on the surface ). As they could afford to lower price. In the Apple One Individual bundle, Apple is essentially offering Apple TV+ and Apple Arcade at half the price.

In 2018 / 2019, Apple also put $10 per iPhone / iPad / Apple TV / Apple Watch sold towards Services as their OS and Maps and Siri usage cost. All of a sudden Apple can now start putting lots of things into Services segment as cost.

Which leads to IAP. You need both All Margin Business to grow as well as Thin Margin. That is why you start seeing Apple's aggressive push into IAP in the past 2 years.

And hopefully you see, it doesn't seems Apple started any of these because they think they could contribute. ( A word Steve Jobs like to use when he enters into a new market ). They are doing it because strategically it makes financial sense. They didn't do it because they think they could do it better, or doing it because it is part of their integral product services ( iTunes ), They are doing it for profits. Which before you hit the downvote button, is nothing wrong with going for profits.

And notes, Apple Music aren't exactly a wild success as most have predicted and writing. When you have 1 Billion Customers that is of the highest paying / purchasing power segment, and only manage to achieve half of Spotify customers.

There is a Huge difference between having a Product / Services with a Go to Market Strategy and Go to Market Strategy with a Product and Services. And Steve Jobs sums it best,

“When you have a monopoly market share, the people who can make the company more successful are sales and marketing people, and they end up running the companies, the product people get driven out of the decision making forums.

Companies forget what it takes to make great products. The product sensibility, the product genius that brought them to this monopolistic position is rotted out... The people running these companies have no conception of a good product versus a bad product. They've got no conception of the craftsmanship that's required to take a good idea and turn it into a good product. They really have no feeling in their heart about wanting to really help the customers”

I would bet money if Steve Jobs were alive, Apple Music wouldn't have started out with the Stupid "Next Song" Design. Which after a few years they finally steer away from it. Apple / We are lucky to have Steve picked up many B&W audio engineers before Beats got to Apple and makes every speaker / headphone with heavy Bass. Apple TV+ would have made a bet and leap of faith together with Disney to make one of the best Streaming services that we would all rejoice. Unfortunately, he is gone.

You deduced that from the "record breaking quarter breaking all estimations" part?

Apple directly selling out UX for $ is certainly not an optimistic sign.

I do wonder at a much broader level if there's some way to structure society to bring the motivation & focus that young companies give us w/o the inevitable slide to evil that capitalism and investors demand.

Can you clarify what you mean here? I associate the term "rent-seeking" with efforts to manipulate public policies in a way that advantages the company specifically over other competitors.

You seem to be talking about an ecosystem "lock-in" approach, which is something different than "rent-seeking".

It could drop quickly for Spotify if Apple decides to ban them from the app store like they did Fortnite, which will in part depend on Spotify trying to get around the App Store fees like Epic did.

And things could change drastically if the lawsuits currently springing up against Apple's fees and monopolies end up successful.

But then, it'll likely mean "Apple makes less profit" than "Apple is destroyed". Remember, Apple has nearly $200 billion in cash, as well as a 20% profit margin. They pump a lot of money into R&D (nearly $20 billion a year, still climbing every year). Basically they're very secure, financially speaking.

Lets come up with valid examples to compare/contrast.

I really hate Apple's spammy advertising; it seriously damages the user experience (not to mention Apple's reputation and brand) for no good reason.

Obviously spammy and obnoxious advertising works to some extent or companies wouldn't do it - but user goodwill takes years to build up and probably shouldn't be sacrificed on the altar of short-term monetization.

If Apple's services are actually good, then users shouldn't need to be spammed with obnoxious alerts and preinstalled adware. It should simply be an optional (and opt-in) add-on that's included in the box like a "free" code for a year of service if you want - and I think they do that already for Apple TV+ and Apple Arcade. If it's worth it, people will renew. Word of mouth and regular non-spammy advertising should do the rest.