Why YouTube commenters are wrong about Apple

If you only had YouTube comments to go off of, you would think Apple is some horrifically mismanaged company that’s only a few months away from bankruptcy. Almost every interview of Steve Jobs you’ll see on the site seems to have multiple comments like this.

I have no idea where these random YouTube commenters are getting this information from. It literally takes one Google search to see this is bullshit. Apple is the most valuable company in the world and looks like it’s going to be the first company in history to have a $2 trillion market capitalization. In the past ten years, Apple’s revenue has gone from $65 billion to $260 billion. I really don’t know how failure and bad leadership means increasing your revenue by almost 4x.

Of course, there is one kernel of truth to this comment that I’m sure all of us are aware of: Apple is not innovating with products the way it used to. The iPhone, released in 2007, was a product that changed the smartphone market, and by extension, the way humans communicated. In the past few years, we’ve just gotten the Apple Watch and Airpods, which are way less exciting.

Current Apple CEO Tim Cook might not be changing the tech landscape the way that Steve Jobs did, but he has helped the company become more profitable than ever. Part of this is Apple’s shift to subscription services in the past few years. And it looks Apple is making an even bigger move in the services game very soon.

Why Apple is shifting to subscription services

Apple’s iPhone sales have been slowing down in recent years. I’m sure we all remember a time where it seemed like every new iPhone seemed like a giant improvement over the last one. Now, it’s usually just a slightly better camera. As a result, current iPhone users feel like they have less of a reason to upgrade.

For a company to keep its shareholders happy, it needs to keep growing. But with iPhone sales slowing, Apple needed to look elsewhere to deliver this growth. In the past few years, Apple has tried to accomplish this goal by investing in subscription services.

In general, subscription revenue is great for businesses because it’s a stream of money that they can count on getting every month. Plus, human beings have a cognitive natural bias towards the status quo, which means that once they start paying for a subscription they’re unlikely to stop.

Apple’s current subscriptions

Here are some of the software subscription services that Apple is currently offering:

• Apple Music: Music streaming service for $10 a month
• Apple TV+: Streaming video service for $5 a month
• Apple Arcade: Mobile gaming subscription service that allows you to download games for $5 a month
• Apple News+: News aggregation service that includes content from 300 magazines including the Wall Street Journal and LA Times for $9.99 a month

Apple also has a couple of subscription services that are more hardware-oriented.

Building out these individual services seems to have paid off for Apple. Last quarter, services made up $13.2 billion, or 22% of Apple’s total revenue. That’s up from $5.97 billion in the same quarter in 2016.

Unfortunately, we don’t know how much revenue any one of these individual subscriptions programs is producing, since Apple doesn’t release that information. It’s also important to note that App Store revenue is included within that services category and probably is a big contributor to the overall number since Apple gets a 30% cut of every in-app purchase. Still, it’s undeniable that Apple’s subscription services have helped fuel revenue growth.

There’s also an added benefit that Apple sees to all this. Services can help ensure that customers keep using Apple products. Just as buying an Apple Watch makes you less likely to switch to an Android since it’s useless without an iPhone, services like Apple Arcade are specifically built for Macs, iPhones, and iPads and make you keep using your Apple devices.

Services have been great for Apple. Now, it looks like Apple is going a step further and releasing a subscription bundle in October that puts together some of these different subscriptions.

Apple’s upcoming subscription revenue bundle

Reports say that this new Apple bundle, called Apple One, is supposed to include three tiers. It’s rumored to look something like this.

• Tier 1 (least expensive): Apple Music and Apple TV+
• Tier 2: Apple Music, Apple TV+, and Apple Arcade
• Tier 3 (most expensive): Apple Music, Apple TV+, Apple Arcade, Apple News+, free iCloud storage

People have been predicting that Apple would bundle different subscriptions together like this for years. But right now, some people are complaining that this bundle seems to be kind of complicated for customers. After all, not everybody’s got time to research the pros and cons of each tier.

It’s also interesting that the iPhone Upgrade Program and AppleCare+ aren’t part of the bundle since that might be a great deal for iPhone users. Still, these are just initial reports and we’ll have to wait a couple of months to see what the final subscription offering actually looks like.

Apple One has a huge benefit for potential customers: the bundle puts together the different things that customers might already be paying for in one place. Instead of a Spotify and a Netflix subscription, someone could just pay for an Apple One subscription. It’s true that Spotify is superior to Apple Music and Netflix is superior to Apple TV+. But it would be super convenient if you can handle all of these different subscriptions with a cheaper monthly payment instead, especially if you’re already using an Apple service.

In conclusion

Say what you want about Apple, but it’s definitely not true that the company suffers from bad leadership. While I’m not going to pay for a $1000 monitor stand anytime soon, it’s undeniable that Tim Cook has helped the company grow to previously unknown heights by looking in new areas like subscription services.

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Originally published at https://sundayspecial.substack.com.