Famous analysts interpret Apple’s press conference: innovation and ambition are “iPhone as a service”


The Translation Bureau is a compilation team of 36氪, focusing on science and technology, business, workplace, life and other fields, focusing on foreign new technologies, new ideas and new trends.Editor’s note: From the “innovation” invitation to the new iPhone, which has not been upgraded so much, many people complained over and over again. This is a boring conference.But is this conference really boring?After the Apple conference, the famous analyst Ben Thompson wrote an article explaining the Apple conference.An interesting footnote is that at this year’s Apple conference, Apple officials also cited his previous analysis and comments on Apple.In his view, nothing is more to say that Apple is a service company than to make the iPhone itself a service, at least in terms of customer relationships.You can say that it is innovative.The original title of the article is “The iPhone and Apple’s Services Strategy”, compiled by 36氪, I hope to bring you inspiration.Every time Apple’s press conference ends, many people complain that it’s very boring. This is normal, especially when Apple announces such a press conference: Apple’s invitation to the conference: “Innovation” is very outstanding in reporting Apple.Mark Gurman is not a fan of this: any product launched today is not enough to satisfy people’s expectations of “innovation”: Apple has introduced the smallest iteration of watch updates in history, with a slightly larger screen.A little iPad, and the camera is equal to or lower than the iPhone of other devices.Apple needs a big breakthrough in 2020.Regarding the highly iterative nature of hardware updates, German is not necessarily wrong (although I think the Apple Watch with a dial is a big deal), it doesn’t necessarily mean that his understanding of innovation is correct..In order to understand this, we first need to define what innovation is.Beyond the iPhone, revisiting 2016, Apple released the iPhone 7 and the second generation Apple Watch.At the time, technical columnist Farhood Manjoo wrote in The New York Times that Apple wasted its advantage in hardware and software design.While the new iPhone has some new features, including waterproof and upgraded cameras, they look just like the old ones.The same is true for the new Apple Watch.As competitors borrowed and even began to surpass Apple’s best design, the iconic features of Apple’s mobile phones, computers, tablets and other products began to look ordinary… At the time, I quoted Wen’s article, andFurther explanation why I think that the keynote speech that year was very meaningful, especially because of the release of AirPods: However, the most interesting thing is what I call “the real wireless future.”What happens if we assume that the progress from Touch ID to Apple Pay also applies to AirPods?Keep in mind that one of the devices paired with AirPods is Apple Watch, which can receive updates on its own, including GPS.The addition of GPS is a part of the emphasis on health and fitness, but it is another step toward a watch with its own cellular connection. When this future comes, the iPhone will become indispensable..Just wear your watch, have your AirPods on your ears, and with Siri, you have everything you need.The future is here, although it is still very rough (especially Siri, which is the main focus of that article); Apple’s financial performance will certainly benefit a lot.In the past three years, Apple’s “wearable devices, home and accessories” category, mainly Apple Watch and AirPods, has doubled from $11.8 billion to $22.2 billion in the past 12 months..In other words, the theme of 2016 and the future it points to are indeed very innovative, based on the final measurement of the standards of all companies.Apple’s service story Wearables are not Apple’s only growth area: in the same three years, the service business’s revenue growth rate has increased by nearly 90% every year, from $23.1 billion to $43.8 billion.At the same time, many people have said that this kind of innovation is a bit annoying, especially considering the monopoly nature of the App Store.Of course, this is not entirely fair.Apple’s App Store is one of the most innovative things Apple has created from a product perspective.If you return to measuring by income and profit.Apple has positioned itself to profit from this innovation indefinitely, which is itself innovative. However, Apple’s idea of ​​becoming a service company has always been difficult to accept.When Apple first launched the “service story,” I claimed that Apple is not a service company: services (horizontal) and hardware (portrait) companies have very different strategic priorities: the former should maximize their target market (say, manufacturing)The cheaper iPhone), while the latter should maximize their differentiation.But Cook’s answer clearly shows what Apple’s focus is.The answer is to continue Apple’s pricing strategy. At that time, the price of the new iPhone was above $649, and the old iPhone was reduced by $100 per year in the market. Cook’s specific statement is “I don’t think we will deviate from this strategy.”Apple did make adjustments, but in the opposite direction: In 2017, the company launched a high-end iPhone X for more than $999, raising the price of the mid-range iPhone 8 to over $699.At the time, I wrote: The iPhone X is sold to the two markets I mentioned above: consumers who want the best mobile phones, those who want to have the highest-end mobile phones on the market, please note that these two markets are relatively speaking.Both are not sensitive to price.So, $999 (or more realistically, the 256GB version of $1,149) is not really a barrier.For the latter market, this can be said to be a positive factor.This strategy is definitely not to expand the target market for services.When it comes to Apple’s strategic direction, it is definitely not a service company.Apple’s mobile phone price cuts have led to the biggest news I have seen: Apple has cut prices.This is easily overlooked. The iPhone 11 Pro is the successor to the iPhone X and XS. Its price has not changed: the starting price is still $999 (Max model is $1,099) and the highest is $1,449.If you want the best, you will pay for it.Perhaps the most interesting point in the keynote speech is that most Apple users are not willing to pay for the best products for the first time.Tim Cook said: Last year, we released three incredible iPhones (XR).They have become the most popular iPhone in the world and the most popular smartphone.We also released the iPhone XS and iPhone XS Max, the most advanced iPhone we have ever had.This is nothing surprising.The iPhone XR is a very powerful phone with the same industrial design, the same FaceID and the same processor as the iPhone XS.The main difference is the size, one less camera, and the LCD screen instead of the OLED screen.This does not seem like a sacrifice to save $250.However, although I say that Apple’s strategy is “nearly overconfident,” I still fully expect the iPhone XS to be the best-selling phone like the previous iPhone X, which is the determination of Apple customers to buy the flagship iPhone.However, even Apple can’t get rid of the “good enough” appeal – that’s why price cuts are so important.There are two ways to see Apple’s price cuts, first, through the iPhone model: Second, through the year: In the second chart, you can see that in 2017 Apple not only significantly increased the price of the flagship model, but alsoIn the previous flagship model, the price of the mid-range model was also increased.This is important because it is these mid-range models that have replaced Apple’s usual way of selling old flagships for less than $100 a year.This means that the price increase in 2017 continued until 2018, when the “1 year model” rose from 549 dollars to 599 dollars.At the same time, this also means that there have actually been three price cuts this year: First, the mid-end model iPhone 11 launched this year is $50 cheaper than the iPhone XR.Second, the price of the iPhone XR after a year of release was cut by $150, instead of Apple’s previous $100.Third, the price of the iPhone 8 after two years of release has also dropped by $150, instead of Apple’s previous $100.To be fair, this doesn’t necessarily mean that today’s product line looks very different from the past: the only different price point is the iPhone 11 vs. XR.This is because, assuming Apple wants to continue along this path in the future, those previous price increases will take some time to get out of this model.They should know that the success of the iPhone XR is a powerful indication that the iPhone market is more resilient than ever.Apple’s sharp price cuts in China earlier this year have also been a huge success.I wrote after Apple’s earnings report for the second quarter of FY 2019: The available evidence strongly suggests that the iPhone’s demand in China is very flexible: if the iPhone is cheaper, Apple sells more.If the price is more expensive, Apple sells less.Of course, this is not surprising, at least for commodities.Apple’s problem in China is that the iPhone’s differentiation in China is lower than in other places, making it more sensitive to factors such as new design and price than others.As I pointed out, China is unique, but the debate about commodities is a variant of the “good enough” argument I mentioned above: although Apple does not necessarily have to worry about iPhone users outside of China turning to Android, they are working withThe iPhone already has competition, and as XR has proven, they will have new, cheaper phones.However, this does not matter, this is the final step for Apple to become a service company, not only in terms of financial performance, but also in strategic thinking.More mobile phone sales, regardless of price, mean more long-term service revenue (and revenue from wearable devices).Apple’s two new service-related releases of Apple’s service business are proof of the pursuit of this strategy.From a financial point of view, perhaps the most eye-catching is Apple Arcade.A family can spend a total of $4.99 a month on a series of games in the Apple App Store: from Apple’s point of view, this is compelling because Apple paid a fixed amount for these games.The cost means that once Apple pays for these games, each additional subscription is purely profitable.This is in stark contrast to businesses like Apple Music, whose cost is directly proportional to revenue, and it’s easy to understand that this service has gained such a high status, and we can explain why Apple suddenly sells more iPhones.Interested, even if their expected income is low.A similar analysis applies to Apple TV +: Once the cost of content is covered, the increase in customers is pure profit.Still, I don’t think Apple TV +’s ultimate goal is to be a profit driver.Earlier this year, I explained after the Apple Service Conference: I don’t think Apple TV+ is a competitor to Netflix.I think this is the customer acquisition cost of Apple TV Channels; Apple TV Channels can really make money, this is not an unreasonable expectation.Roku’s entire business is based on the same model: hardware is basically sold at cost, while “platform” revenue last year was $417 million, with a profit of $296 million, which is 71% of gross profit.Apple TV Channels is a way to purchase subscriptions for other streaming services, which makes a lot of money for Roku and Amazon.Apple TV + content is one reason to make Apple TV the default interface for video, so you can get more subscriptions through the Apple TV channel.This view also explains why Apple bundles Apple TV +’s one-year free access with all new Apple device purchases (this is also in line with Apple’s idea of ​​abandoning its product’s short-term revenue in exchange for long-term subscription revenue)..The iPhone as a service When it comes to Apple’s strategic shift, there is still a problem that needs to be addressed.The fact that Apple bundles paid services (Apple TV +) with product purchases is interesting, but what if Apple starts to include paid subscriptions?Cook’s keynote speech seems strange. In the final part of the keynote speech, he also released the latest news from Apple’s retail industry, but in my opinion, this slide explains why: you can not only use lower prices.Buying a new iPhone can also be paid monthly (this also applies to phones without a discount).So, in this slide, you can buy iPhone 11 and Apple TV + for $17 a month.Apple also adjusted their AppleCare+ terms yesterday: Now that you can subscribe monthly, AppleCare+ will run until you cancel, just like Apple’s other services like Apple Music or Apple Arcade.Apple has launched the iPhone Upgrade Program, which bundles an iPhone and AppleCare + every year, but AppleCare + has changed itself to purchase, further indicating that Apple’s relationship with its customers will be a subscription relationship.In order to achieve this goal, how long will it take for the variant of the iPhone Upgrade Program to become Apple’s full subscription service?Every month you pay for a certain fee, you can get everything Apple has to offer.In fact, nothing is more telling that Apple is a service company than making the iPhone itself a service, at least in terms of customer relationships.You can even say that it is innovative.Translator: Scale..