Adam Estes reports in Gizmodo:
People just aren’t buying as many iPhones as they used to, so Apple has been scrambling to figure out its future. After the iPhone, Apple’s second-biggest moneymaker is its services business which generated $37 billion in revenue last year. This includes App Store and iTunes, iCloud, Apple Music subscriptions, Apple Pay, and could include streaming video.Apple will continue to make expensive phones, watches, and computers. It’s possible that Apple will invent more gadgets at some point in the future, but it seems very unlikely that we’ll to see radically new hardware in the next few years.
A weird thing happened this year: Apple put its brand new iPhone on sale just a few weeks after release. Well, it wasn’t an outright sale. Faced with poor sales, the company boosted trade-in values of old iPhones so that you could get an iPhone XR for up to $300 off. These slumping sales numbers are part of a trend, too. People just aren’t buying as many iPhones as they used to, so Apple has been scrambling to figure out its future.
What will it look like? It might look pretty rotten, in my opinion.
I know, I know. “Rotten” is a too-easy quip to describe potentially troubling times for a company named after a fruit. But I can’t stop thinking about the company’s trajectory, especially the degree to which it’s just stuttered in the past few months. I also can’t stop seeing reports of Apple’s plummeting stock price. Just last week, Apple entered a death cross, which is a very bad thing that happens when a stock’s 50-day moving average falls below its 200-day moving average. The same thing happened to Google, Facebook, and Netflix earlier this year, which some observers believe signals the beginning of a bear market or even a recession. I’m personally circling back to this rotten Apple idea.
The last time the United States faced a major financial crisis, Apple was a much different company. It was almost a dozen years ago that Steve Jobs showed the world the first iPhone and announced that the company would be dropping “Computer” from its name to become Apple Inc., a consumer electronics business. By the time Lehman Brothers abruptly collapsed in September 2008, Apple had become the third largest mobile handset maker in the world and launched the App Store, which Jobs said would become a billion-dollar business. This year, Apple bragged about how people spent $300 million on App Store purchases on New Years’ Day alone. And that was after App Store developers made $26.5 billion in revenue the year leading up to that milestone day.
Apple didn’t just survive the Great Recession. The company skyrocketed in value and stretched its tentacles out into all kinds of new categories. Not only did Apple make a tablet, but the company’s iPad has become the most popular tablet in the world. Apple made a watch, and that Apple Watch is now the best selling wearable in the world. And yes, Apple has sold a shitload of iPhones in the past decade, but those sales figures have flattened out. It also looks like Apple’s next big thing might not even be a thing at all.
After the iPhone, Apple’s second-biggest moneymaker is its services business which generated $37 billion in revenue last year. This includes App Store and iTunes purchases, iCloud plans, Apple Music subscriptions, and Apple Pay, and the segment could soon include new products like a streaming video service or a news subscription service. After all, Apple has already invested $1 billion into producing its TV programming, and earlier this year, the company acquired Texture, a digital magazine subscription service, reportedly in order to launch a premium news service of its own. There are even rumors that Apple will purchase Condé Nast, although it’s unclear if this is a real possibility. Apple did hire a former Condé Nast executive to turn Apple News into a media powerhouse. So clearly, Apple has plans for growth. Unfortunately for some, that growth might not include exciting new hardware.
Somewhere along the way to becoming a trillion dollar company, Apple’s taste for hardware innovation seemed to sour. Some would argue that the iPads, Watches, and iPhones haven’t gotten any meaningful new features in years. Many would argue that MacBooks and Macs are overpriced versions of machines that Apple competitors released years ago. I mean, what has the company invented in recent memory? The Touch Bar debuted on MacBook Pro computers in 2016 and was widely panned as a gimmick. Face ID came out last year, and while some love it, some people hate it so much they’re buying older iPhones to avoid it. Just a few months ago, Apple earned accolades for adding electrocardiogram (ECG) capabilities to the Apple Watch, but the Federal Drug Administration (FDA) also had to point out that the feature doesn’t always work. The HomePod is also an Apple product that now exists, but it sucks.
Gripes like these might sound whiney. Like, “Oh no, the company that used to make magical gadgets now makes less magical gadgets, and that’s a real tragedy.” It’s not. Apple will continue to make expensive phones, watches, and computers for many years to come. The company will also apparently make a lot more services and content that let you continue to spend money after you’ve bought the gadgets. It’s possible that Apple will invent more gadgets at some point in the future, but it seems very unlikely that we’ll to see radically new hardware in the next few years. In other words, Apple appears to be settling down for a little innovation nap, conveniently at the same time that a bear market arrives.
This lull might not last long. Apple is reportedly working on an augmented reality headset that would compete with the Microsoft HoloLens and the Magic Leap One. Such a device would tap into the existing ecosystem of AR content that developers have already built for iOS using the relatively new ARKit, and according to rumors, it would connect wirelessly to a box equipped with a new, super powerful Apple processor. While some believe that these undeniably futuristic mixed-reality headsets might be as ubiquitous as smartphones one day, others have a hard time believing that people want to live in a world that looks like a scene from Ready Player One. Would you want that future?
It’s also possible that Apple is content being a luxury hardware company that makes boatloads of money by selling software and services for its devices. The company is already pushing up the average price of an iPhone and now sells premium models for well north of $1,000. Maybe the iPhone XR is selling poorly because loyal users are happy to spend a few hundred dollars more and get the very best model. And maybe Apple is fine selling fewer devices since more and more of its revenue is coming from the seemingly limitless services business. The company seems hip to this since it decided recently to stop disclosing hardware unit sales in quarterly earnings reports as it encourages investors to watch for growth in services.
But let’s be real. If you’re an Apple fan, you’re not flipping out over updates to iCloud. You’re not pooping your pants over new Siri features. You won’t be standing in line to check out Apple’s new premium news service. You’ve probably never even seen Apple’s original TV programming, and if you have, you probably regret it, because it is awful. Pretty new hardware and seeing machines do new things is what’s always been most exciting about Apple.
If Apple’s future really is all about services and not about hardware, what a rotten future that is. It probably won’t be rotten for Apple, a company with nearly $240 billion of cash on hand. Apple is rich and will almost certainly find all kinds of new ways to get richer. If that involves taking money from people in the form of subscriptions and fees instead of fun new gadgets, well, that sucks for Apple fans.
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