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Why Did Apple Open a “No Hardware Product” Presentation?

apple event
apple event

After releasing all the hardware upgrades one week in advance, Apple launched a new product presentation of “full service products.” This did not live up to its reputation as “starting as a hardware product and aiming to develop software services.”

Apple CEO Tim Cook set a small goal in 2017: By 2020, Apple’s service offerings have doubled.

2020 is next year. The sales revenue of iPhone and iPad is good and bad. Apple needs stable service growth and needs service products to support it. But Apple’s service products accounted for 14% of total sales last year.

According to the Apple Annual Report, Apple divides service products into four areas:

Digital content and services, including the iTunes Store, App Store, Apple TV, Apple Music, etc.; cashless payment service Apple Pay, cloud services, and warranty service AppleCare.

At the product presentation on March 25th, Apple announced its product direction in 2019, focusing on service products. Apple will expand Apple Pay financial services and even issue a virtual credit card Apple Card, of course, users can also get a real card of titanium.

In the area of ​​digital content and services, Apple has launched a comprehensive subscription service: paid news subscription Apple News+, game subscription Apple Arcade, and movie subscription service Apple TV+. Apple realized the use of news, games, and film and television platform distributors. But it also means that Apple will compete with the old players in these industries.

Apple has clearly expressed the market in which industries to enter, but the success or failure is still unknown.

Traditional hardware product landslide

In the fiscal year of Apple’s 2018, the iPhone brought 63% of sales revenue, while the total sales revenue of service products accounted for 14%.

Although the iPhone is still Apple’s main source of income, the revenue pillar has already shown its weakness.

Apple’s 2019 financial year is unfavorable. The financial report showed that iPhone sales were difficult in the first quarter, and revenues fell by 15% compared with the same period last year. Cook attributed the decline to the economic recession in the Chinese market and the Sino-US trade war.

Apple Plus service products may be passive choices. In the same quarter, Apple relied on the growth of service products to restore the trend, service revenue reached a record high of 10.9 billion US dollars, an increase of 19% over the same period last year. Mac and wearables, home and accessories revenues also reached record highs, up 9% and 33%, respectively, and iPad revenue increased 17%.

From the perspective of Apple’s revenue in the past three fiscal years, hardware sales have shown signs of decline. The sales growth of the Mac is not strong, and the iPad has even declined year by year.

In contrast, service products have grown year after year in three fiscal years, with revenues of $37.19 billion in 2018, $29.98 billion in 2017, and $24.448 billion in 2016.

Although the growth rate of Apple’s service products has expanded year by year, because the base is too small, unless there is explosive growth, Apple still has a long way to go to change its dependence on iPhone revenue.

Large-scale realization of digital content and services

In January of this year, Cook announced that there are 1.4 billion active electronic products using Apple’s iOS system. These 1.4 billion electronic products are also the chips of Apple’s expansion service business.

This year, in terms of digital content and services, Apple chose to incite other industries in the news, games, and film.

The news product Apple News+ will be available in a paid version for $9.99 a month, costing about $120 a year, and reading a $8,000 publication. The US news media has struggled for many years in the payment jackpot. Apple News has developed a paid channel to distribute content. Whether it can rewrite the dilemma of news non-profits is still unknown.

Traditional news media have raised concerns about Apple’s news products. Apple launched iTunes in the 2000s, bringing a crisis in the music publishing arena. Apple’s current news copyright cooperation is not smooth. According to the Washington Post, the New York Times, the Washington Post, and other media have not reached a content distribution agreement with Apple. At the press conference, Apple briefly mentioned the Wall Street Journal, emphasizing the focus on the content cooperation of the magazine.

Game distribution is another area of ​​intense competition. CNBC quoted Mirabaud Securities as saying that about 82% of the App store’s revenue comes from games, so Apple is among the biggest gaming companies, although it doesn’t make games. Apple’s game subscription service will change the way payment is paid. Users no longer buy a single game, but pay Apple to try a series of games. This will re-divide the benefits between the game developer and the platform.

Apple has not yet announced the subscription price for video services. Apple will face companies such as Netflix, Hulu, and Amazon in the field of video services. According to The Verge, Apple is investing $2 billion in film and television this year to cope with competition in the film and television industry.

Partnering with Goldman Sachs to incite the financial services market

Through the issuance of virtual credit cards, technology giant Apple and investment bank giant Goldman Sachs broke into the consumer finance sector. Apple Card has revolutionized a range of technologies, such as no card number, security code, signature, expiration date, no overdue fees, annual fees, cross-fee fees, etc. . Apple offers a range of benefits to users, trying to push for action payments.

The US mobile payment development is slow, the number of Apple Pay users has not yet been announced, and credit cards are still the mainstream consumption habit. In 2014, Apple launched Apple Pay, an action payment product, along with the iPhone 6. Apple has launched a virtual debit card, Apple Pay Cash, which allows users to transfer funds via iMessage or offline. In 2014, Apple established a partnership with payment networks such as Apple Express and Visa.

Bloomberg quoted financial analyst David Ritter as saying: “The Apple Card is unlikely to subvert the US credit card market because its core functions are similar to those offered by Citibank, Chase Bank, etc., and those cards offer a wider range of benefits and reward redemption options. “

Apple Pay also has a new move. It plans to offer mobile phones by subway in a few cities such as New York and Chicago in the second half of this year.

Regardless of whether the Apple card can break the US action payment deadlock, at least the United States is finally able to use the mobile phone to take the subway.

The original source: Apple

Nandini Singh
From a very young age I was interested in computers and technology in general, I had my first computer at the age of 10 and at 15 I set up my first tower, since then I have never stopped. Whatever technology, I'm in the front row to know more.

Goldman Sachs: Apple’s new service has little contribution to profit, and its share price has fallen more than 20%.

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