Pixel Envy

Written by Nick Heer.

On the Timeliness of Apple’s Services Push

Steve Kovach, CNBC:

As iPhone sales continue to sink, Apple has made several key moves over the last year as it prepares new offerings to juice growth elsewhere in the business.

If you’ve been listening to CEO Tim Cook’s comments on earnings calls and in interviews recently, none of this should come as a surprise. The company has stopped reporting iPhone unit sales figures, and instead talks more about its growing base of active devices, which the company says can be used to squeeze out more revenue through its digital services like Apple Music, App Store sales and extra iCloud storage.

But it’s not just about those subscription services. Apple has made several shifts in recent months that signal its preparing to move beyond the iPhone in other ways, such as artificial intelligence, the growing smart home market and digital health monitoring.

A framing device I’ve seen a lot amongst tech analysts and journalists since Apple revised its first-quarter earnings forecast is the idea that the company’s increased push into services and other parts of its business is correlated with — or even because of — lower iPhone sales. I think this is a myopic view of the company’s products.

Let’s think about this in the inverse: I don’t see anyone seriously making the argument that Apple would not have increased their investments in services and machine learning if iPhone sales continued to grow.

More to the point, many of these service offerings were rumoured for a long time. Steve Jobs was asked about an Apple Music-like service in 2007. Apple’s apparently-forthcoming Netflix competitor has been rumoured for years. Even their long-rumoured car project was reported as being approved around the same time that the iPhone 6 was launched.

These projects all take lots of time; they are not a result of less-dramatic iPhone sales figures. Apple has been highlighting their subscription services more for a few years now and, in that time, they had their biggest-ever quarter, largely on the back of iPhone revenue. Based on all of this, the most likely reason that Apple is rumoured to be on the cusp of launching new services is simply because they’re ready now. Is this release time frame any different than it would have been if their most recent holiday quarter had surpassed expectations instead of falling short of Apple’s forecast? I don’t think there’s any evidence that supports that.