Analysis: Apple to put services at its core

Apple’s September event has traditionally heralded the launch of a new iPhone, and while it announced new devices at the annual California event this week, the main focus this year was on services,

“Overall, the story is all about services. It represents another landmark moment for Apple with more airtime dedicated to services. Furthermore, it is the right time for Apple to be joining the services party.”

On Tuesday, Apple held its annual September event which typically consists of new hardware. While, this was no exception there was a clear and growing focus on services. In fact, this was the first time that services featured so prominently and arguably stole the show for the Californian company. In terms of news, Apple announced the following:

• Apple Arcade: More than 100 games available for $4.99/month; one-month free trial. This will be available in more than 150 countries from September 19 (includes family access)
• Apple TV+: Will launch on November 1^st at $4.99/month (includes family access). Available in over 100 countries
• The new iPhone 11 starting from $699; iPhone 11 Pro from $999; and iPhone 11 Pro Max from $1099
• New 7^th generation 10.2-inch retina display iPad from $329
• Apple Watch Series 5 as well as a price reduction for the Series 3. Apple adopting a similar successful approach with phones to help drive sales among price conscious users.

With the devices, there were few surprises. Apple unveiled upgrades across the board with greater emphasis on the camera and imaging in line with previous years and recent rival announcements. The lack of 5G will grab all the headlines but this is unsurprising. More so when rivals like Samsung have a slew of 5G devices. Ultimately Apple lovers will wait for next year’s device.

The new iPhone 11 pro devices are great for shooting video. These smartphones have a three-camera system, complete with a telephoto, ultra-wide, and regular lenses. Among the key features, users will be able to record 4K resolution videos at 60 frames per second. A demo on stage with FiLMiC showed that it will be possible to shoot with multiple cameras at the same time all in 4k. This will be great for content producers and creators as they will have the same takes with framing to choose from in editing.

On services, Apple made a huge statement of intent. Immediate global rollout of its new Arcade and TV+ services at a punchy price point outlines Apple’s commitment to compete head on with rivals. These services represent a great add on to Apple device users. It is all about adding value and providing users with the best service experience across devices. Apple is in a unique position to achieve this. Apple needs to retain users, drive engagement and seek to gain new users with its unique service offerings.

Pricing for its Apple TV+ was a huge surprise. Apple has undercut all of the other online video services and will launch ahead of the eagerly anticipated offering from Disney. Disney+ is set to launch on November 12th for $6.99 a month. In addition, it will also offer its own bundle with ad-supported Hulu and sports streaming service, ESPN+, for $12.99 a month. To put this into context Netflix which has a bigger catalogue is priced at $12.99/month (its most popular plan). Overall, Apple’ has decided to adopt an aggressive approach to pricing because it can afford to. Yes, the content catalogue is limited compared to other services, but it will grow. The company can be more flexible given its loyal base of device users. At launch, Apple TV+ will have a few key series, including Reese Witherspoon and Jennifer Aniston’s The Morning Show, See starring Jason Momoa and Alfre Woodard and Hailee Steinfeld’s drama series about poet Emily Dickinson, Dickinson.

Apple’s rivals should not be complacent and should keep a watchful on Apple’s long-term services strategy. For now, many of these online video services will co-exist given that they serve different segments in the household. In time, as Apple expands its content offering to include other genres then it might compete head on with the likes of Disney et al.

Ultimately, they are all competing for viewers airtime and more importantly disposable income. In reality there are too many services chasing too few dollars. Consumers will need to carefully consider which services to sign up too. The move towards online video will lead to high levels of churn and a fragmented experience for users. Here lies a role for the super aggregator which Apple is trying to achieve with its broader video strategy through Apple TV.

• Read more: Overcrowding in the OTT landscape

Users who buy a new iPhone, Mac or iPad will get one-year access to Apple TV Plus. Therefore, we should not be surprised to see a potential surge in initial adoption. The biggest challenge for Apple will be keeping these customers hooked to paying $4.99 after the first year. Alternatively, Apple may choose to maintain the offer allowing users to get another year for free when the new iPhone 5G is released. Key will be the content catalogue and a variety of genres to cater for the household.

However, there were no bundles for Apple Music. This is interesting as Apple already has a reasonably loyal base of music subscribers and the service is pretty much established. Whereas in games and video, Apple is starting from scratch (at least in terms of a subscription-based service). These initiatives will help build a base, cross sell into the existing base and drive engagement.

There’s plenty of scope to be novel in services with live TV, premium on demand content and commissioning original shows. Apple is looking to address all of these areas. What comes next is really interesting in terms of how the services scale and innovative bundles. Undoubtedly, this will open up new avenues for subscriber and revenue growth for Apple.

Currently, there is a lot of focus on games. The opportunity to become the “Netflix of games” is up for grabs. With the rollout of 5G networks, many telcos have focussed on games due to the low latency and robust connections provided by these new networks. Also, web giants are looking at different ways of expanding their own offerings; Microsoft with its Xbox Game Pass, Google with Stadia and publishers like Ubisoft have launched their own standalone service.

Apple Arcade is great way for smaller developers to stand out in a crowded market, who are looking to raise their presence and generate revenue. The following demos were showed on stage:

• Frogger in Toy Town from Konami
• Shinsekai: Into The Depths from Capcom
• Sayonara Wild Hearts, developed by developed by Swedish studio Simogo and published by indie studio Annapurna Interactive

These latest subscription services add to a slew of other services currently offered by Apple. Among others, this includes iCloud, music, news, AppleCare as well as the device itself. Apple needs to carefully consider its approach to subscription-based services, in a way that offers flexibility to users. The cost of signing up to all of these services on a standalone basis could cost more than the device itself.

Hence why the rollout of new services and any others in the future paves the way for Apple to introduce offerings and business models akin to the all-you-can-eat bundles like Amazon Prime. In the future we might even see users pay for a service bundle and receive a new iPhone every year.

This latest event underlines the growing importance of services to its future growth. Now is a pivotal time for the company as it executes on its grandeur plan for services. Apple is firmly positioning itself as a one stop shop as the Netflix of services. In order to achieve this, it might have to make a super mega acquisition.

Undoubtedly, this is a long-term investment as Apple will need to fork out billions every year in order to refresh its content catalogue. Apple is putting all the building blocks in place. It will take time to fully realise the overall vision. The road ahead is a long one. It must seek to leverage its scale and distribution to promote awareness and generate subscriber uptake for all its new services.