Could Apple's "next big thing" spook investors and fans?
Starting with the iPod (yes, I don't think the early Macs counted), Apple has had a string of hardware successes, from the iPhone to the AirPods, banking billions on the process. The biggest bankroller being the iPhone.
But could services become bigger than the iPhone? And if that happened, would it spook investors?
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There's an interesting piece over on Forbes by research firm Trefis that looks at this exact possibility. The article looks at whether services could be bigger than the iPhone by 2024. Look at the data as it stands, scribble a quick chart, draw a few lines on it, and it all seems inevitable.
But things are never that simple.
The piece an interesting read, and draws some very intelligent conclusions from the data. The landscape is changing rapidly, and the article seems to have been updated a few times to reflect this.
The article does a good job of highlighting some of the threats facing Apple's service growth, from its lucrative search deal with Google, to lawsuits and app store commission cuts.
A lot has happened in the last 12 months! But it's also important to view 2020 as not normal, and as things come to a new normal, the patterns of 2020 may not be present in 2021 and beyond. People being bored and stuck at home will eventually become a thing of the past, and this move to a new normal may mean less of a reliance on buying content from Apple.
But I think that there are other factors that could come into play here. For example, the past year has seen cinemas take a pounding due to COVID-19, and as the way that new movies are released changes and evolves, can Apple take advantage of this changing landscape, or will this give the studios a foot in the door?
The litigation and antitrust landscape is also shifting rapidly, and it will be very interesting to see how Apple responds to this.
But another area where this change could become an issue is with investors and fans. Apple is seen as a hardware company, and while investors know this, it's been hard to get their eyes off iPhone sales. Apple doesn't divulge hardware unit sales anymore, but that hasn't stopped endless amounts of divination into how hardware is moving.
Investors continue to be obsessed by the iPhone. It doesn't matter how anything else is doing, if the iPhone is doing well, investors are happy, and if the iPhone is showing signs of weakness, investors get jittery.
There's also public perception to take into consideration. Apple has set itself apart from the likes of Google, Facebook, and Amazon as being privacy focused and not needing to be involved in selling user data. A shift from tangible hardware to intangible services could bring up old privacy conversations again.
Apple Watchers have seen the company become like the companies selling disposable razors -- the goal being selling the blades, not the razors, even if the razors themselves are super expensive -- so a buoyant services business comes are no surprise. But consumers, who see Apple as a hardware company, this shift may come as a surprise, and something that it may need to navigate.
Apple has already been busy laying some of the groundwork for this, with Apple One turning multiple payments into a single monthly payment. This move makes sense.
Will services outperform the iPhone come 2024?
Maybe, maybe not.
We'll have to wait and see!