Monday, July 26, 2021

Apple Business Model: A Naive Nostalgic Look

Jean-Louis Gassée:

At first, the App Store looked like another product in charge of propping up sales volume and profit margin for the main act, the iPhone. That didn’t last. The App Store became more than an iPhone support function, it became a gigantic business in itself. One that Apple doesn’t disclose but bundles into the Services category. The Services number includes much more than the undisclosed App Store revenue, it encompasses services such as iCloud and Music revenue, Apple Care, and the more visible Apple TV activities.

In the company’s latest SEC filing for the quarter ended in March 2021, Apple’s Services reached $16.9B, exactly as much as the $16.9B number for the combined Mac and iPad revenue, although still far form the $48B iPhone revenue for that quarter.


What happens to priorities, to company culture? What will be sacrificed and what will be preserved? For example, if budgetary restrictions are needed, what will be prioritized: the next Ted Lasso or the next Apple Silicon processor?


I don’t have immediate worries for Apple’s culture. But I’m old enough to have seen strong companies lose their way as their priorities changed and they lost sight of their strengths.

I think we’ve been seeing tradeoffs favoring services over customer interests for a while now. Today, I was trying to play a song in Monterey’s Music app. It was stored locally, but I couldn’t get to the Library section of the app. The main part of the window was entirely devoted to an ad for Apple Music, and there seemed to be no way to dismiss it except to subscribe. There was no “x” or “Later” button, even on hover. Clicking outside of the border or in the sidebar didn’t close it. Eventually, I figured out that it would go away if I pressed Esc.


Update (2021-07-27): Nick Heer:

But this new focus on recurring services revenue — predictable monthly payments from as many buyers as possible — has created plenty of opportunities for Apple to degrade its existing product offerings. As the iTunes Store gave way to the Apple Music streaming model, iTunes was replaced with the much worse Music app, which feels like an old <frame>-based website given the façade of a desktop application. Applications across MacOS and iOS now interrupt users with advertisements in a nagging reminder that your multi-thousand-dollar purchase of a hardware product is merely the beginning of your financial relationship with Apple.


One thing not mentioned by either Gassée or Apple is that about one-fifth to one-quarter of Apple’s services revenue is from Google for making it the default search engine across Apple’s ecosystem. I mentally subtract $3 billion from this category in the quarterly earnings report to create a truer estimation of how Apple’s own-brand services are performing.

Update (2021-08-18): Nick Heer:

I subscribe to Apple Music for the premium experience.

Subscribing to Apple Music is not enough to silence the big red ads; now Apple wants you to subscribe to Apple One.

Ryan Jones:

On the fucking album screen!?

Hi to everyone that said Services incentives wouldn’t change Apple.

1 Comment RSS · Twitter

I disabled iTunes Store and Apple Music in the preferences on my Mac. I also deleted the Music app from my iOS devices after it sent me an ad in the form of a notification. I'm happy to report never being harassed by Apple Music since then, but it's a sad state of affairs.

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