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Apple Used To Be an Inventor. Now It's Mainly a Landlord. (bloomberg.com)
An anonymous reader quotes a report from Bloomberg: For years, analysts and journalists watching Apple have talked up the growing importance of services, as opposed to hardware sales, to the company's top line. But it's only now that Apple's business model truly appears to be shifting toward collecting rent from the company's ecosystem and increasingly relying on gadget sales to perpetuate this rent rather than drive growth. Apple's decision to stop reporting iPhone unit sales underscores the shift. Services have been steadily growing in importance for Apple since 2016, while the share of revenue provided by the flagship gadget, the iPhone, has gone up and down depending on the popularity of different models.
There's a lot of potential for Apple to squeeze a higher rent directly out of its captive user base. Goldman Sachs estimates that only 10 percent of Apple's user base pay for iCloud Storage; in terms of price and service quality, iCloud has been a poor competitor to services provided by Google and some smaller companies such as Dropbox, but that only means Apple can increase revenue from it exponentially if it bothered to compete more aggressively, as it does with another key service, Apple Music. Even that streaming service has relatively low penetration, though, with only about 35 million users last year. Goldman Sachs predicts that number will grow to 83 million by 2020. Goldman's proposal for Apple is to create a services bundle similar to Amazon Prime; for $30 a month or so, subscribers would get access to music, video, 200 GB of storage and phone repair. The investment bank calculates that with just 50 million subscribers, such a bundle could add $18 billion in services revenue in 2019. "Rent extraction from a user base that finds it hard to go away may sound a bit like extortion," Leonid Bershidsky writes in closing. "But it's more honest and upfront than extracting data from users in ways they often don't understand and then making money off the data, as Facebook does. That honesty is in itself a competitive advantage for Apple as it gradually reimagines itself as more of a services company."
The challenge, Bershidsky writes, "is to grow the services offering fast enough to make up for potential iPhone revenue losses; gadget prices cannot keep going up forever without hurting the top line, and in the end, a phone is just a phone. We only need it to gain access to all the nice digital stuff out there."
There's a lot of potential for Apple to squeeze a higher rent directly out of its captive user base. Goldman Sachs estimates that only 10 percent of Apple's user base pay for iCloud Storage; in terms of price and service quality, iCloud has been a poor competitor to services provided by Google and some smaller companies such as Dropbox, but that only means Apple can increase revenue from it exponentially if it bothered to compete more aggressively, as it does with another key service, Apple Music. Even that streaming service has relatively low penetration, though, with only about 35 million users last year. Goldman Sachs predicts that number will grow to 83 million by 2020. Goldman's proposal for Apple is to create a services bundle similar to Amazon Prime; for $30 a month or so, subscribers would get access to music, video, 200 GB of storage and phone repair. The investment bank calculates that with just 50 million subscribers, such a bundle could add $18 billion in services revenue in 2019. "Rent extraction from a user base that finds it hard to go away may sound a bit like extortion," Leonid Bershidsky writes in closing. "But it's more honest and upfront than extracting data from users in ways they often don't understand and then making money off the data, as Facebook does. That honesty is in itself a competitive advantage for Apple as it gradually reimagines itself as more of a services company."
The challenge, Bershidsky writes, "is to grow the services offering fast enough to make up for potential iPhone revenue losses; gadget prices cannot keep going up forever without hurting the top line, and in the end, a phone is just a phone. We only need it to gain access to all the nice digital stuff out there."
Then who is the true Innovators who really invented something?
We keep on saying that we are not innovating, and that companies have lost their way.
But technology has been progressing, we have been getting new things. They are not normally WOW THIS WILL Change my life. But more well this is slightly more convent, and this continues gradually. 20 years ago we had internet video, but it was normally in a 320x200 size, that if buffered would take 5 minutes to download, before it started. If you happened to happen to have such video on a CD you might be able to play it in 640x480 full screen, but it would be very choppy. Watching Ripped TV Shows on PC was poor quality.
Apple is good at taking a technology and making it for the consumer, they do not invent the technology but they implement it in a way that can be useful. Because of Apple I now have a Phone that has a resolution matching if not exceeding modern laptops, Geek Bench scores matching mid/upper tear laptops. video camera(s), GPS, Multi-touch display, counts its steps, knows its location and position..... 20 years ago this was unheard of, the thickness of such phone is thinner then some of the plastic cases.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Rent seeking is a code-word for a coercive business transaction. I don't think it fits Apple's situation.
Indeed. What is described in TFA is not "rent-seeking".
Also, most people have Amazon Prime for the free shipping on their stuff. The movies are music are just extra benefits. The cost is $10 per month. So why would 50 million people pay $30/month for a worse deal? Answer: They wouldn't.
Bundling phone repair into a monthly service package will just encourage people to fix their phones and keep them longer, which is the last thing Apple wants.
Apple is the most profitable company in the history of the world. I don't think they need advice from some random journalist about what they are doing wrong.
Lastly, Apple was never an "inventor".
This seems like nonsense to me. Apple's success has never been due to being an "inventor", and they're not currently "rent seeking". Apple is, and has been, primarily a hardware company. They sell Macs, iPads, iPhones, iPods, watches, and accessories. They sell a lot of them because they have a reputation (whether you think it's earned or not) for making high quality and widely supported products that are easy to use. That's still the case, and Apple is showing no sign of moving away from that.
Are their products inventive? I can see both sides of the debate. Most of their stuff is based off of some technology someone else invented, but on some level you could say that about all technology products. However, MP3 players weren't very popular before iPods. Smart phones weren't relatively unpopular before the iPhone. Tablets weren't selling much until the iPad. Smart phones didn't generally include virtual assistants until Apple introduced Siri. Not many people were wearing smart watches before the Apple Watch. In each case, the product class existed before Apple entered the market, but Apple seemed to introduce the first product in the class that people really wanted, and then a ton of imitating products followed.
None of those products were invented by Apple, but Apple still creates fairly innovative designs that have changed the way people use technology.
The iPhone 5S was released in 2013, five years ago. It was discontinued in 2015 in most places, 2017 in India. It's still getting software support. There are android phones that never got a single update. Apple has historically had better support for its phones than any other company. I'm on a 4 year upgrade cycle because that's generally how long my phones last (with a thin case).
I get absolutely every single dollar worth out of my iPhones while I watched friends have endless boot loops on their Pixels (which couldnâ(TM)t be repaired in Canada because google would refer them to the manufacturer and then be referred back to google BY the manufacturer).
The state of longevity and customer support in the market is fairly poor, but Apple is certainly miles ahead of everyone else.