Larry Magid: Apple evolving into a services company

Larry Magid: Apple evolving into a services company

In 2007, Apple changed its name from Apple Computer to Apple, Inc. That was the year Apple launched its Apple TV set-top box and the iPhone, joining the iPod in Apple’s growing list of consumer products other than personal computers.


Larry Magid 

There’s no reason for Apple to change its name again, but if things keep going the way they are, one might describe the company as “Apple Services Company,” kind of like the old AT&T which built and rented out telephones but made the bulk of its money by charging for phone service.

That strategy became more obvious this week as Apple rolled out new iPads and Apple Watch models but also announced two new services: Apple Fitness+ and Apple One.

As per hardware, the most interesting announcement is the addition of a blood oxygen sensor on its new Apple Watch 6 which, like some previous models, also includes an ECG (electrocardiogram) sensor. A low blood oxygen reading can be an early sign of COVID-19 or other respiratory diseases, but as with all non-medical health monitoring systems, I urge caution when it comes to interpreting results. When Apple first introduced ECC in its watch, I got inconclusive results that the watch’s screen said could be a sign of a medical problem but it turned out to be a false reading because I was nervous and therefore shaking my finger as I touched the watch’s crown. I haven’t tested the new watch so have no experience with is blood oxygen sensor, but I do have a sensor at home — the same type used in hospitals and doctors’ offices — and once had a false low reading due to the way I was using the device. I called a pulmonologist friend who explained how to use it properly. While I was on the phone with him, I did another test and it came out fine.

Services

Although the new watch and the new iPads are interesting, the most important announcements, from a long-term revenue standpoint, are its Fitness+ and Apple One services

Fitness+ is a $9.95 a month (or $79.95 a year) subscription that integrates data from the Apple Watch along with sound from Apple Music to create what Apple is calling “a first-of-its-kind personalized workout experience” that people can “visualize right on their iPhone, iPad, or Apple TV.”  Designed by a team of what Apple calls “celebrated, charismatic, and passionate trainers” and monitored by sensors in the Apple Watch, the service will take people through workouts including cycling, treadmill, rowing, strength training, yoga, dance, core building what Apple is calling “Mindful Cooldown.” Unlike Peloton and some other services, people can use any brand of exercise equipment (or in some cases barbells or none at all) because the sensors are in the watch, not the bike, treadmill, or other devices.

Apple One isn’t actually a new service, but a bundle of Apple services including Apple Music, TV+, Arcade, and iCloud for $14.95 a month for an individual or $19.95 for families.  A $29.95 Premier service also includes Apple’s News+ and its new Fitness+. News+ is a news subscription service, launched last year, that provides access to about 300 magazines, newspapers.

In addition to its services, Apple is also following in the tradition of the old AT&T (nicknamed “Ma Bell”) by renting its phones. Sure, you can buy an iPhone outright, but many people are now renting their iPhones. Apple doesn’t call it renting, but uses the phrase “iPhone Upgrade Program,” where you get a new iPhone once you’ve made at least 12 payments and return your old phone. And, just like Ma Bell, the service includes a warranty program that Apple calls Apple Care. Apple Care has some strings attached but, as I remember with the old Ma Bell service, they came out and repaired or replaced your phone for free, as long as you continued to pay your phone bill.

So think about the numbers. If someone has a 256GB iPhone 11+ and a Premier Apple One subscription, they are paying Apple about $80 a month or just shy of $1,000 a year for their phone and their services. If you throw in an Apple Watch 6, that could add as much as $22 a month to your payments, although in fairness, you’ll be buying it over time and may have the option to trade it in later for a new model.

Apple isn’t the only company to be renting its products. Microsoft used to make money by selling its software but now heavily promotes its Microsoft 365 subscription service which, for an annual fee ranging from $100 to $240, provides its suite of software and services on a subscription basis.

Apple’s services are not without controversy. Spotify, which competes with Apple’s music service, has already issued an antitrust complaint about Apple One. In a statement, Spotify said, “Once again, Apple is using its dominant position and unfair practices to disadvantage competitors and deprive consumers by favoring its own services.” Spotify called on  “competition authorities to act urgently to restrict Apple’s anti-competitive behavior, which if left unchecked, will cause irreparable harm.”  Apple responded that “Customers can discover and enjoy alternatives to every one of Apple’s services. We’re introducing Apple One because it is a great value for customers and a simple way to access the full range of Apple’s subscription services.”

Spotify has also offered bundle deals with services from other companies including Hulu and AT&T, but Apple is able to take advantage of its huge hardware base to offer services that integrate with its devices. Sure, you can easily run Spotify on an iPhone, but Apple has the advantage of being able to promote its services as people are shopping for its devices.

Apple is correct about alternatives, but so was Microsoft back in the late ’90s when it defended itself from antitrust charges by pointing out that there were alternatives to its internet browser and other products and services bundled with Microsoft Windows while also citing Apple has a competitor.  But that didn’t stop regulators from the U.S. and other countries from going after Microsoft, which eventually settled charges, but — among other things — changed some of its business practices.

Larry Magid is a tech journalist and internet safety activist.

Published at Thu, 17 Sep 2020 14:42:02 +0000