It’s obvious why Cook is pushing so hard on services. Not a lot of work involved taking 30% or 15% from an Apple TV app “channel” subscription. Same with the cut they get off of every App Store IAP. With high margins like that and Wall Street being obsessed with “services“ and recurring revenue it’s a no-brainer. As as a long time fan of the company it’s a little depressing. Sure we still get flashes of great products like Apple Watch and Air Pods but the focus now seems to be on just being a money machine and pleasing Wall Street.
Jason Snell wrote about this on his six colors website (I can’t find the article right now). It was all about how it‘s hard to get excited about Apple‘s new business model of extracting more $$ from its install base. Take Apple TV+. What reason does it have for existing other than to help grow Apple’s services revenues to offset declining hardware sales? It’s not like there’s a dearth of streaming content. It’s not like Apple TV+ content is heads and shoulders above HBO, Netflix, Amazon etc. in terms of quality. The Morning Show could have gone anywhere. It wouldn’t be out of place on any other streaming service. Apple TV+ nothing more than Apple has piles of cash to throw at content creators. But is that really changing the world like iPhone did and Apple Watch could? I can see why Ive decided it was a good time to retire from the company. The stock is having a good run up now because investors know 5G iPhones are coming. But then what?
Is it "all about the money?" It always is. The greed-as-deadly-sin argument. But people always hope for growth in income, whether as investors, employees, through self-employment, etc. "I'm making enough, I don't need more, in fact, I can get by on less" is a pretty uncommon attitude.
I guess Apple could say, "We'll stick to hardware," and find ways to sell more hardware to more people every year. But then you have Wall Street moaning that the smartphone market is near saturation, so slow/minimal growth is likely. You have the fundamental problem of coming up with new, compelling hardware capable of taking the torch of growth and carrying it forward. When hardware companies have products capable of delivering services and/or entertainment, they often turn to services and entertainment to provide some of that growth.
Apple hardly invented this. IBM was selling supplies and maintenance and consulting services to the buyers of its equipment long before it was in the computer business. The makers of player pianos produced the piano rolls to go with them. Thomas Edison followed a similar model when he invented/popularlzed gramophones and motion pictures. RCA, Philips, Sony, Columbia Gramophone Co., Dumont, etc. made gramophones, radios, TVs, CD players, and VCRs and also own/owned broadcasting networks, record labels, movie studios...
Such companies become less dependent on encouraging customers to replace/upgrade current equipment, because they earn additional income throughout the life of the product. Further, their entertainment products keep their brand name in the public eye, and can be sold to people who don't own the company's hardware.
As to Jason Snell and his lack of excitement over services and entertainment... Another person could find new electronic hardware to be equally boring. In a sense, it's all entertainment. After that, it's a matter of finding
compelling entertainment. Hit products, star performers. "You're only as good as your latest hit."
Lets assume that, given enough time and money, Apple will join the likes of Netflix, HBO, Amazon, etc. in making the transition from supplying entertainment produced by others to (also) producing hit original entertainment. When that happens, all will be forgiven. Everyone loves a hit.
When it comes to services? Services are nearly always boring. They don't have to be exciting, they just need to be useful. I find backups to be incredibly useful. I find synchronization of data between my computers, iPhone, iPad, and Watch to be incredibly useful. All are worth paying for. Insurance (AppleCare) is boring. So is water, sewer, and electrical service. They all earn a boring, steady stream revenues for the companies that provide them. No big hits, just a very nice profit margin and very little drama. And like water and electricity, the customer can be wasteful or take steps to minimize the monthly bill.
