Apple Tries to Re-Invent Itself as a Service Company

After delays and failed/false starts in the past, today was the day Apple held a special launch event to announce various new subscription based streaming services.  Although in many ways, Apple was one of the first to offer streaming with its iTunes service, it has surprisingly but thoroughly dropped the ball, seeing new services come from nowhere to eclipse iTunes – in particular Netflix and Amazon Prime Video, but also dozens (or, more likely, hundreds, possibly even thousands) of smaller streaming services too; each and all of which have been chipping away at its market share.

With Apple proving to itself and the rest of the world its inability to open up new hardware product lines, and with the declining sales of its flagship range of iPhones, the company has taken a risky (but perhaps unavoidable) pivot, and instead of being defined by what was once its unique and generally high-quality high-end hardware, it is instead diving into the “services” field, where it acts as nothing more than another conduit between original content creators and people like us who wish to read, watch, and listen to the content.  Apart from vaguely referring to “curating” the content it offers (which is of course only one step removed from censoring) there is very little if any unique value-adding that Apple is offering to its new services, and similarly, apart from debatably its credit card, very little if anything truly innovative or new.

So the entire event was a rather lackluster presentation with the unspoken thought “this is merely catch-up” never far from the thoughts of the people attending.

We feel Apple’s shift to services to be another national tragedy, and another abdication of our once world-leading role as a hardware innovator.  We used to set the standard for the rest of the world, and the same people who once promised us the Japanese would never be serious competitors in the auto industry have in the last year or two been growing similarly silent when it comes to repeating their equally nonsensical assurances that China could never match the US for innovation.  Cheaply copying our ideas, yes.  Stealing our ideas, yes.  But coming up with their own innovations – never!  Or so we were formerly told.

Tell that to Apple, today, in an event that was marked by not a single new piece of hardware being announced, just “services” that do little more than resell content from other people.

Apple is hoping to leverage its current still-sizable share of the screens in our lives to cajole or otherwise convince content providers to join its “new” services – in truth, there’s very little new about these services other than slapping the Apple brand onto the same sort of thing as is offered by many other providers currently.  It is a big shift for Apple to go from being the absolute master and controller of the products it sells to now being reduced to another “me too” conduit for other people, and as has been shown with its past dabbling in the market with its Apple TV streaming service, it has not really been very successful.

In addition, its demand to take massive slices of the revenue that it charges us for the new services, leaving very little to the content providers, has brought about little real enthusiasm or rush by original content providers to join.  This was particularly evident by the paucity of newspapers joining their new news service, and hinted at by the vagueness of what movie studios are joining its Apple TV+ service (and its emphasis on creating its own content).

Before we look more at what it offers, it might be helpful to review how streaming has become so important in our lives.

The Growth of (Video) Streaming

This weekend my daughter wanted to watch a couple of the Lord of the Rings movies.  To our astonishment, both of them are “out of print” and not available on either Blu-ray or DVD.  But plenty of online streaming services offered the movies for sale, and we ended up buying extended editions of two of them for $19 each – a fairly stiff price for movies that came out in 2002 and 2003; the sort of thing you’d normally now find on disc, complete with hours of extras, deleted scenes, and special features, for the same price (or much less in trilogy anthologies).  Instead, we get the movie only, no special features, and we can only watch it while we are somewhere with a high-speed internet connection.

While the good news is that internet streaming of first music and now video has become reliable and better quality than DVD (1080P rather than 480P); the bad news is that some of the features of hard-copy disks have been lost.  You can’t so readily skip to chapters, going back and repeating sections is clumsy and slow, and the wealth of special features that traditionally accompanied movies on disk have been lost.

On the other hand, it is many months since we last bought a disk, something that used to be a regular weekly occurrence.  But it is less than a day since we last watched something streamed, and these days, we have to wonder if there are many homes untouched by the presence of streaming video.  There are 61 million Netflix accounts in the US, with most shared among households and sometimes more widely.  There are over 100 million Amazon Prime (including their free video) members in the US.

Sure, at the low-end, there are also an unknown number of people enjoying YouTube content every day – an eclectic range of miscellanea ranging from 15 second blurry video clips of cute cats to several hour HD presentations of documentaries, conference presentations, and operas.  There are probably hundreds of streaming services that are “free” but which often include every bit as many annoying ads as television channels and with very little quality content, and others that are very specialized.

But when you move up to the likes of Netflix and Amazon Prime Video, one has a chance to browse through many thousands of movies and television shows, and can always find something to watch, pretty much whatever genre you enjoy.  It seems that Amazon Prime now has about four times as many movies, and perhaps slightly fewer television shows, and we sometimes find ourselves wondering if we still need to keep our Netflix subscription, because we can go weeks at a time without watching any Netflix.

Between them, Netflix and Amazon Prime Video have become so good at recommending movies (and tv shows) that one can simply get comfortable on the couch and not move for as long as you wish to keep watching.  They have made the selection and viewing experience easier than getting up, walking over to where one’s video disks are kept, choosing one, taking it to the player, inserting and starting it (and of course, removing and returning it at the end of the show).  These days I even find myself streaming content that I also have at home on DVD or Blu-ray disks, just because it is easier, and (in the case of DVDs) the video experience is better via streaming.

Apple’s New Services

The first service Apple released is what it calls its News+ service.  This is a rather underwhelming collection of assorted magazines and a few newspapers that you can read on its devices, and offered at $9.99 a month.  If by some good chance, there are several of the participating titles that are important to you, it might make sense to subscribe to the Apple service rather than to directly subscribe to each individual publication, making for a more convenient single app on your screen, and a single monthly payment that might be less than four or five separate payments direct to each publication.

Although it is called News+, a better name might be Magazines+.  There is a wide range of 300+ magazines included, ranging from Popular Science to Conde Nast Traveler to Time.  But, as best we can tell (like everything, details and specifics were vague rather than clear) there are only three newspapers participating to start.  The Wall St Journal will be releasing a limited number of its articles to Apple, the LA Times, and a newspaper in Canada.

If there’s nothing on your “must read” list featured, you’re unlikely to want to start tossing another $10/month for yet another monthly subscription.  Every so often we stop and realize that all those $10/month fees actually add up to quite a lot each year!

There are plenty of news aggregation services out there currently, our favorite is Flipboard.  Plenty of companies have tried to sell news aggregation services, and none of them have been outstandingly successful to date, and there’s not a lot to suggest that Apple is about to succeed where others have not.

The next new service is an Apple (credit) Card.  There was a time, a few years ago, when the thought of Apple entering the credit card market would have terrified Visa, Amex, etc.  These days, probably not quite so much.  But, having said that, we feel the Apple Card is probably the strongest of all the products Apple introduced at the launch event.

Like many cards these days, it offers cash back – generally 2% on purchases when electronic transactions (1% if done the “old fashioned way” with a credit card), and 3% when buying products from Apple.  That doesn’t leave a lot of margin for Apple in the middle (assuming it charges merchants just under 3%) but it changes the Apple Pay concept from one that had very little opportunity to make money to one which now has a clear pathway to some profit.

Astonishingly, the Apple Card has no fees – no annual fee, no late payment fee, no over-limit fee, no obvious surcharges on international transactions.  That sounds too good to be true, and subsequent to the event, some details have leaked out that suggest, if nothing else, that the interest rates being proposed for this new service (not disclosed at the release event) are likely to be at the high end of the scale.

Although you get a physical card (and a very attractive one) the card is more a “souvenir” than an actually usable card, and you don’t get as many benefits if you use the card rather than going through the Apple Pay process.  All the important data resides within your phone, and you make payments by touching your phone to a payment machine in the stores you visit.  A special “credit card” number can be generated if you want to buy something online.

So, do you either need or want another credit card?  If you do, the 2% rebate on most purchases is generally better than what seems as an industry standard closer to 1%, and if you’re already using Apple Pay connected to a different credit card, it becomes an easy thing to switch to Apple’s own card.  But, just for the sake of yet another card is a weak concept, because it also means another payment to make to another bank (Goldman Sachs in this case) each month as well.  We’ve massively reduced the number of cards we used to have, and suspect most other people are at close to “maximum card” levels too.

We also note that this, more than everything else Apple announced at the event, is 100% dependent on people owning iPhones.  If you don’t have an iPhone, it seems there’s no way to use your Apple credit card and Apple Pay service at regular retail outlets.  The good news is that, in the US, it seems that iPhones are enjoying a reasonably stable market share of about 50%, but we can’t see that continuing into the future due to the ever wider gap in price contrasting to the narrower gap in features between iPhones and Android phones.

An iPhone now costs a minimum of $450 for an old iPhone 7 or $750 for a current entry model XR, and quickly ranges up from there to as much as $1450 for a fully featured XS Max.  An Android phone comparable to an iPhone 7 can be had for less than $100, and one comparable to an XR for less than $250.

We switched ourselves recently from our old iPhone 6+ to a new Motorola G6, and apart from a few very small adjustments to how things work, we’ve not missed our iPhone at all, and now look with puzzlement at people who continue to pay $500++ for an iPhone rather than a similar (or even superior) Android phone.

The next new service is Apple Arcade.  A collection of games, the details of which were lacking, and with an as yet undisclosed subscription fee.

And then, moving to the most anticipated of the services – video streaming.  The first service is called Apple TV Channels.  It includes a number of other streaming and cable services, including HBO, Showtime, Acorn TV, and assorted others.  But it seems that rather than a single price for everything (as is the case with their News+ service), you instead pay on an “a la carte” basis, so much for each of the different premium channels you might wish to add.  Instead of having free-standing channels with their own distinct identities, we think Apple is now sort of blending and merging them all in to their own service.  Like most of the things being released, the service isn’t yet available, but will come out in May.

This is nothing new or innovative, and is much like how it works with Amazon Video, and similar to how you can add channels via a Roku player as well, and we couldn’t see any compelling reason to add yet another streaming service for people who already have Netflix and Amazon Prime.  The exact details of which premium channels could be added, and at what cost, were not disclosed.

Then came the release of an updated/upgraded Apple TV, now called Apple TV+.  Apple splurged with an amazing line-up of “the great and the good” from Hollywood parading on stage to (largely mutely) indicate that if you pay a person enough, they’ll turn up to any event at all, and apparently the oblique message being conveyed is that Apple is going to copy Netflix and Amazon (and, of course, before then, HBO and everyone else) and start developing original content for their video streaming service.  Just what we need – yet another deep pocketed company, developing original content, and a requirement on our part to pony-up yet another monthly fee to access it.  We gather it will be available in the Fall, making it a very early announcement of a far-into-the-future product.

And then, all of a sudden, after still more celebrities appearing (Oprah Winfrey is going to release two documentaries onto Apple TV+), the event was over, leaving one with a hollow empty feeling, much like the lack of details of exactly what Apple TV+ would include or even its monthly cost.  Other than the Apple brand, there was nothing notably new or different, just copy-cat me-too examples of services already well established and out there.

Perhaps underscoring Apple’s now dismissive approach to hardware, less than a week ago saw it releasing new iPad models including a fairly good 10.5″ screened unit, but rather than marking this with a special event (as was once the case for its iPad releases), or even sharing this event today, it seemed to be nothing more than a press release, and so understandably little featured by the usual industry commentators.

If this is the new Apple – vague announcements of un-priced new services not due to be released for up to six months, and with nothing new or innovative, could we please have the old Apple back.