With its latest iPhone event, Apple made headlines less for its flagship device as for its new willingness to undercut, bundle, and price competitively. It’s a strategy that leans on services at scale in anticipation of a maturing (and therefore slowing) hardware market.
That doesn’t mean that hardware wasn’t at the top of Apple’s priorities. But it does seem that there are comparatively few major updates it can add to its phones. The new iterations, the iPhone 11 (numerals are so 2017) and the iPhone 11 Pro/Pro Max, come armed to the teeth with cameras and camera technology to rival Google’s photography software.
Where it’s going: In the 11, Apple hinted at its new direction: this year’s entry-level iPhone will cost around $50 less than the XR did last year. What’s more, the $1000 Pro model wears the justification for its name in the title. Those tactics will have to be good: as the FT reports, International Data Corp numbers predict a 2.2% fall in smartphone shipments this year.
Commenting on the announcement, Dominic Sunnebo, Global Consumer Insight Director at Kantar told WARC that “by reducing the price of the entry level 2019 iPhone, Apple shows an understanding of consumer pushback against the steep price rises over the last few years.”
Aside from hardware that suggests single-lens photos are a thing of the past, the most notable announcements came from the content-side of the business: Apple TV+ and Arcade, its game-streaming subscription platform.
Arcade will launch first on the 19th September in over 150 countries with a $5 a month subscription including more than 100 exclusive games, which users can play across their Apple devices.
Apple has spent dearly – to the tune of hundreds of millions of dollars – to fund its new service, but the pay off is expected to be significant. HSBC analysis, cited by the New York Times, forecasts Apple’s gaming revenues to outpace its other services – news and TV – by 2022 to reach global revenues of $2.7 billion.
The big surprise: Apple TV + will undercut Netflix and Disney plus. The share price of both competitors fell following the announcement. Despite selling phones worth more than the average laptop, Apple will launch on 1st November charging just $5 per month. Meanwhile in India, it will charge just $1.40 a month.
For that price, the aim is scale. Crucially, the service will be free for a year to buyers of new Apple hardware products on which they can feasibly watch TV content. The analogue to look at is Apple’s iCloud – the only way users can back up their phones to the internet and the default cloud storage on Macs.
As the Verge pointed out in an analysis of Apple’s services business, the cheapest iCloud plan is just shy of a dollar a month – under $12 a year. But Apple has 1.4 billion active devices worldwide; while not all of those users subscribe, it can afford to go cheap in return for massive scale. Especially as its TV+ service currently lacks the breadth of content boasted by competitors, aggressive pricing is essential.
“With an installed base of 900 million active iPhones worldwide we believe Cook & Co. have an opportunity to gain 100 million consumers on the streaming front in the next 3-4 years,” said Dan Ives, an analyst at Wedbush Securities, in comments reported by Bloomberg.
The advantage of services: The smart bet here is that services don’t suffer value erosion if priced aggressively in the way the iPhone or the Mac would. What would be seen as skimping in a hardware context looks like affordability in services.
Sourced from the Financial Times, New York Times, The Verge, Forbes, Macrumours, Bloomberg
