published by Chand Bellur – September 29, 2020 at 3:24 p.m.
- Unveiled at the recent Apple Watch event, Apple One is a low-cost bundle intended to increase subscriptions to new services.
- Unlike competitors’ subscription plans, Apple One does not include devices, such as the iPhone.
- Available at different tiers, Apple One plans range from $14.95 to $29.95 a month, with an option for families.
Apple Lags Behind Industry with Digital Services Bundle
Remember when Apple used to innovate? Once the pack leader, the Cupertino tech giant now seems too slow and latent to create exciting new products.
The Apple that created the iPhone is fundamentally different from today’s Apple, offering stale, overpriced devices and services. The absence of visionary leader Steve Jobs proved to be devastating for a company that has yet to create a device surpassing the iPhone’s popularity. Instead, the company makes different sized iPhones — the iPad, the Apple Watch, and Apple TV all offer slight variations on the iconic smartphone and its ecosystem. Whenever I get a new Apple device, it feels more stale than familiar.
iPhone sales are declining, and other durable products haven’t achieved the traction necessary for such a large corporation to thrive. Turning to services, Tim Cook hopes to rejuvenate earnings or perhaps provide a backstory for repatriating overseas capital. While his motives are unclear, both rationales are possible and are not mutually exclusive.
Unfortunately, Apple is playing catch up once again. Amazon Prime, one of the most popular bundles on the planet, is now fifteen years old. Competitors like Samsung offer device subscription plans, where participants get a new phone every nine months. Samsung’s bundle also includes Microsoft Office and a terabyte of cloud storage.
Apple One May Benefit Consumers Locked Into the Apple Ecosystem
Over a billion consumers participate in Apple’s closed ecosystem. Apple devices such as the iPhone, iPad, and iPod touch can only install software from the App Store. Unlike every other major computing device on the planet, Apple does not let most of their customers download software from the Web. This gives Apple an enormous advantage.
Although third-parties are encouraged to sell their apps and services in the App Store, Apple enjoys a considerable edge against competitors. Third-parties must initially pay 30% of their App Store revenues to Apple. In some cases, Apple’s take is “only” 15%. With the Apple tax, third-party developers either need to increase prices for their software and services or hobble along selling their wares at a loss.
Apple has a massive advantage. Using similar tactics employed by robber baron Leyland Stanford, Apple controls the virtual railroads. When Apple wants to get into a new business, they squash competitors, who have no choice but to sell through the App Store. The upshot is that Apple services offer competitive pricing compared to other music subscription or video streaming services. Apple TV+ is less than half the price of Netflix. After all, Apple doesn’t pay 30% to anyone.
Furthermore, any potentially superior technology can face denial or removal by the App Store. Cloud-based gaming from Google and Microsoft won’t be allowed in the App Store, although the technology offers superior experiences to native iOS games. Apple effectively eliminated Apple Arcade competitors, while denying their users a better gaming experience from Google and Microsoft.
For those locked into the Apple ecosystem, its services make sense. They’re relatively inexpensive, and now, with Apple One, the company’s services are dirt cheap. For example, the base Apple One individual plan includes Apple Music, Apple TV+, Apple Arcade, and 50 GB of iCloud storage for $14.95 per month. All of these services together easily cost more than twice the price.
Apple One May Give Apple a New Way to Appear Profitable
Large, multinational corporations use accounting tricks to appear more profitable than they really are. By incorporating overseas, the primary business unit only sells patents to subsidiaries. Most of the revenues obtained through international sales of Apple devices hide in offshore tax havens. If Apple has a poorly performing quarter, they can repatriate this capital and make it appear as revenue.
It’s unclear the extent to which this is happening; however, a recent Bloomberg report casts doubt on Apple’s services business. The Cupertino tech giant is also quiet about specific numbers regarding subscribers. Apple One may be a way to boost subscription numbers, which creates a successful backstory to camouflage repatriated capital as quarterly gains.
Let’s face it, the most important Apple product is the stock. The company, a mainstay for individual and institutional investors, enjoys an inflated stock price during a time of global economic distress. If it seems too good to be true, it is. Wall Street analysts recently downgraded Apple stock, across the board. Few are telling investors to put their money into Apple stock.
Apple’s September event was underwhelming, to say the least. With no new iPhone and competitors offering better smartphones, it’s unclear whether the 5G update supercycle will happen. Market research shows that consumers don’t value 5G networking capabilities. Other factors, such as inferior screens and cameras, may sway users to flagship Android devices. Personally, I opted for a new Android device, rather than purchase another stale and outdated iPhone. I don’t miss my iPhone at all, and I think others will have the same experience.
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