Apple CEO Tim Cook speaks at the Steve Jobs Theater during an event to announce new products.
For a firm that has grown accustomed to long lines and breaking the retail mould, Apple’s March 25th event marked new territory for the firm, the world’s first trillion-dollar company, and an entirely new source of fanfare and revenue. Namely, the launch of revamped Apple services, which marks a serious broadside of not one, but four industries with video and original content streaming, news and print media, video gaming and, finally, and perhaps most strategically, banking. The launch of Apple’s TV+, News+, Arcade and Apple Card mark a major escalation of Apple’s commitment to remaining a design powered technology ecosystem, rather than merely operating as a consumer electronics firm. Waning iPhone sales may have accelerated the rollout of Apple’s pay as you go services.
Each of these services takes aim at industries with established players and established norms. The hardest for Apple to crack may the streaming segment with Netflix and Amazon Prime enjoying a substantial head start and a substantial subscriber base of more than 230 million collectively, of which Netflix commands the lion’s share. They have also secured a pattern of original content creation with blockbuster series and A-list actors, directors and producers flocking to the platforms to reach their audiences. Indeed, ever since Netflix went public it has been burning cash on content. In 2019, the company is projected to spend $15 billion on new content partly to give the firm the type of content buffers and talent, despite razor-thin margins, to fend off the arrival of massive well-capitalized companies like Apple. Apple does not only enjoy a loyal following, but its appealing hardware and software interfaces may also make it a natural enemy in this market. The run to more than 50 million subscribers for Apple Music, which was launched in 2015 (15 years after Pandora and 7 years after Spotify) is telling for how content streaming firms should keep an eye on the rear-view mirror.
Content creation, however, is a whole new ball game for which Apple brought out some heavy hitters, including Steven Spielberg, J.J. Abrams and the media queen herself, Oprah Winfrey, who have all committed to generating original content and lending their substantial halos to Apple’s new offering. News+ marks a similar broadside of the ailing media business, but with perhaps a less direct attack and more of an augmenting strategy to breathe new life into this form of content, whose readership and single paywall approaches have claimed many a media stalwart over the years, including Jeff Bezos’ purchase of The Washington Post. If academics labour with a publish or perish reality, being a publisher in the age of fleeting attention spans and digitization, where key information is consumed 280 characters at a time, Apple’s fractional subscription service, which initially will bring hundreds of publications for frequent consumption, may save a few publishing houses along the way – perhaps even rekindling a love of reading among consumers – who could use a break from screen time.
Apple’s Arcade, timed shortly after the launch of Google’s Stadia gaming service, is (pun intended) nothing short of a game changer. How the platform performs against stalwart brands, such as Sony, Nintendo and Microsoft’s Xbox, which enjoy hundreds of millions of users, remains to be seen. The model, however, of fractionalizing a gaming library for a subscription fee is liable to be a hit among users young and old, who already turn to Apple products and the App Store for their downtime, with popular hits like Angry Birds and Pokémon Go, which broke new ground when they were launched. Taping this creative ecosystem of game designers, publishing houses and creatives to power each of these subscription-based services shows that Apple intends to make 2019 a turnaround year, despite its ominous outlook in the first quarter. While Apple’s hardware challenges and critically its new iPhone adoption remains sluggish, these new services will not only create much-needed revenue diversification, they will raise the barriers to exit for its customers, while at the same time lowering draw bridges to let new types of consumers in.
Its most strategic move, however, was the launch of Apple Card, a new breed of credit card and a major foray into banking by a pure play technology firm, a theme that is beginning to weigh heavily on the minds of Silicon Valley giants. On the backs of Apple Pay, Apple’s near field computing (NFC) based solution, which leveraged Apple Wallet and your personal debit and credit cards issued by other banks, Apple Card is a natural line extension. Throughout the presentation, which enjoyed split-screen moments on media broadcasts simultaneously tracking Apple’s share price (and the share price of their competitors), the key theme of customer privacy and security echoed. Nowhere is this more important than in the Apple Card offering, for which Apple’s long-held stubbornness on the centrality of customer privacy at even the hardware design level, will prove to be an asset. Apple watchers need only recall the firm’s tug-o-war with the FBI following the San Bernardino terror attack in 2015.
The Apple Card offering, ostensibly powered by MasterCard and Goldman Sachs, promises a whole new level of technology integration, consumer control, new ground on reward models that bear some resemblance of all the fanfare of cryptocurrencies and decentralized economic structures. With features – akin to Apple’s healthcare and wellness capabilities – that give cardholders the ability to track how much they want to pay to avoid paying higher interest rates with the slide of a dial is but one example. As these new services come online in the coming months, beginning with Apple News+, which is available now, it is reasonable to assume other technology giants will follow suit, with Amazon, which already enjoys a competitive video streaming service with a host of original content, being the firm to watch. True to form, iconoclasm appears to be alive and well at Apple and the value of being an ecosystem may bear out once again as Apple seeks to transform itself and other industries. Perhaps the one thing missing from Apple’s foray into banking services was the issuance of a cryptocurrency like JPM Coin, which would reduce friction across its ecosystem while making Apple Pay an efficient and trusted remittance platform, which is a $608 billion market ripe for disruption.