How Apple is Gearing Up for an Exciting 2020
Decoding Apple’s announcements from this week’s iPhone 11 event
Another September, another iPhone launch event. Apple hosted its annual event unveiling new hardware products on Tuesday, in addition to offering some interesting details on original video streaming and game-streaming subscriptions. Overall, Apple played it safe this year as it stuck to the basics and left out many intriguing new products and features that pre-show rumors were hinting at, such as Apple Tag, sleep-monitoring, and wireless charging between devices. Nevertheless, what Apple did announce still packed some interesting details that are worth knowing for every innovation-minded marketer and, reading between the lines, reveals some insights into how the Cupertino company is gearing up for an exciting 2020.
Apple TV+ Details Reveal Apple’s Video Strategy
A Competitive Price
Despite early reports claiming that Apple was looking to price Apple TV+, its original video streaming service, at $9.99 a month, Apple unveiled at the beginning of the event that the subscription will cost $4.99 a month. Some media outlets and industry analysts reacted to this comparatively low pricing as Apple trying to undercut Disney+ and Netflix, but the truth is any price higher than that would be harder to justify considering the lack of content that Apple TV+ will have at launch. Unlike Netflix or Amazon Prime Video, Apple is not licensing old movies or TV shows from media companies for TV+, and it will only have eight shows ready when it officially launches on November 1. Considering the game service Apple Arcade is also priced at $4.99 a month, but with arguably more content available at launch, it makes sense that Apple TV+ would be priced the same.
Bundling with Hardware Purchases
More interestingly, Apple also announced that any purchase of new iPhones, iPad, Apple TV purchases come with one year of Apple TV+, which serves as a strong reminder that at the end of the day, Apple is still a hardware company that gets the majority of its profits by selling iPhones. Services like Apple TV+ and Arcade exist not necessarily as a profit driver so much as customer retention cost for the whole Apple ecosystem. In the case of Apple TV+, in particular, it is being positioned to drive Apple customers to use the Apple TV app and consolidate their subscriptions to other OTT streaming services there, thus allowing Apple itself to hijack the customer relationship and become a cable TV company of the digital age. This is not unlike Amazon Channels or Roku’s entire business model, except that Apple doesn’t need to sell their hardware at a cost, like those two tend to do with lower-end Fire TV and Roku boxes and streaming sticks, to achieve scale. The scale is already built-in for Apple with over a billion Apple devices in the wild. Not to mention that Apple made the service accessible on many smart TVs and third-party streaming devices, including Fire TV, as well.
Media as Customer Acquisition and Retention
The content business is usually not particularly profitable or reliable on its own, as it often hinges on a hit-driven business model where the hits and flops tend to even things out in the long run. Yet, despite this, big tech (and some non-tech) companies today are very much keen on developing their own original content. Even Walmart — yes the global retail chain — recently released a trailer for the first original series slated for its Vudu streaming service. For all these companies, the profitability of media services is secondary to its strong influence over consumer decision. Just as Amazon doesn’t expect to make a profit on people paying to watch Prime Video content, but rather use that as a way to get people to stay subscribed to Prime and thus keep shopping on its platform, Apple is not expecting TV+ to become a Netflix competitor, but as something that could attract more users and lock exiting users in its ecosystem where the lifetime value lies. Down the line, it is entirely possible that Apple would choose to bundle some of its services to make an appealing offer that hinges on hardware purchases.
A Flexible Release Strategy With Global Reach
Most of TV Plus’ series will premiere with three episodes, with one new episode rolling out each week. Full seasons of some series, however, will be available all at once. The company also announced that there will be new series announced every month, which is a good way for Apple to reduce subscription churn, an interesting thing to look out for given the relatively slim content catalog Apple has. Apple TV+ will be available to watch on the web, which means even Android users will have access to it, albeit with what will presumably be a less optimal user experience. Apple is also launching both Arcade and TV+ internationally, with the former available in 150 countries and the latter in over 100. This points to a benefit that comes with completely owning your slate of content, be it exclusive games and original video content, that there’s no haggling over international distribution rights so that a service may achieve global scale right out of the gate.
Assessing Apple’s Impact on OTT Landscape
We have arrived at the point in time where, with the exception of Netflix, every major video subscription service in market is more or less an ecosystem play. The tech companies like Apple and Amazon and Google-owned YouTube obviously have their ecosystem, and media conglomerates like Disney and AT&T’s WarnerMedia (which owns HBO) are looking to lock customers into spending more elsewhere in their businesses, be it theme parks or mobile plans. Given that Apple is not looking to take on Netflix or any other streaming services directly, and given that its content library will remain comparatively slim for a while, the short-term impact of Apple TV+ on the competitive OTT landscape will be rather low. However, in the long run, Apple’s original content output, should they commit to the same level of investment, will be competing for the same kind of audience attention that everyone in the saturated market is fighting for, and Apple arguably has the strongest ecosystem lock-in effect out of all the competitors to ensure there will always be a significantly large number of audience that would at least consider its content.
New Apple Watch Brings Always-On Screen and More Personalization
An Upgrade-Worthy Feature
Beyond the media services, Apple also dutifully updated its hardware lineups. Apple Watch Series 5 got a minimal but crucial update in the form of an “always-on screen,” which will finally allow users to glance at their watch faces to get the time or peak at the notification without having to raise their wrists. It is a simple gesture, but one that may not be so easy to do in certain everyday scenarios, such as working out, carrying groceries, or in formal meetings where it may be construed as impatience or boredom. Therefore, this is a much-requested feature that should drive some existing or new Apple Watch users to upgrade or purchase.
Sticking with the Healthcare & Fitness Focus
Apple stuck with the healthcare-heavy focus for its Apple Watch segment, as it has done in recent years, choosing to emphasize the numerous health benefits and fitness features that Apple Watch provides with a long video of various real-life customer testimonies of how the Watch saved their lives or pushed them to stay healthy and get fit. Specialized use cases, such the ECG feature added last year and a new feature for global emergency service calls, are highlighted to show the Apple Watch as a best-in-class wearable product with a clearly defined focus in digital health. To that end, Apple also furthered its relationship with the medical community by announcing three new health research initiatives with various medical institutions, leverage its large user base to advance medical research in subjects such as hearing impairment and women’s reproductive health.
More Personalization Options
Towards the end of the keynote, Deirdre O’Brien, who recently took over Apple’s retail operation from Angela Ahrendts, took the stage to offer a short update on Apple Store. One of the things she revealed was that with the release of the new Apple Watch also comes the launch of Apple Watch Studio, which will allow consumers to create the Apple Watch case and band pairing that they want, instead of having to choose one designed by Apple. This customization offer will be made available for both in-store and online purchases, marking yet another example of a brand recognizing customer’s increasing demand for personalization and delivering a cross-channel solution that enhances the overall purchase experience.
New iPhones Realigns the Smartphone Lineup
Of course, at the end of the day, new iPhones are still the star of the show. At Tuesday’s event, Apple rolled out three new models — a 6.1-inch iPhone 11, a 5.8-inch iPhone 11 Pro, and an iPhone 11 Pro Max with a 6.5-inch screen. And with subtle changes in pricing and naming, Apple realigned the iPhone lineup to become slightly more accessible. After all, more iPhones sold, even at a slightly lower profit margin, means potentially more revenue from wearables like Apple Watch and AirPod, as well as subscription services in the long run.
A New Mid-Tier iPhone
The iPhone 11 is positioned as the successor to last year’s iPhone XR, which, according to Apple, was “the most popular iPhone and most popular smartphone in the world,” and got a $150 price cut with the launch of the new lineup. The Pro models are the updates to iPhone Xs and Xs Max, but with its suffix denoting a premium positioning. By switching up the iPhone nomenclature, Apple subtly allowed iPhone 11 to take over XS as the base line, shrugging off the “cheap,” second-best perception that XR had, as the new default and a mid-tier option. Interestingly, the iPhone 11 comes in at $699 — that’s a $50 drop compared to the iPhone XR at launch last year. Notably, last year’s flagship models XS and XS Max are already being phased out of Apple’s official retail channels, giving way to the discounted XR and iPhone 8 as the affordable options for the more price-sensitive Apple users.
Computational Photography Mad Science
As with the past few years, Apple spent a good chunk of its iPhone segment touting its processing chips and camera upgrades. The new Pro models came with a triple-camera system that has made appearances on flagship handsets from Samsung and Huawei over the past year, but Apple’s main strength once again lies in its ability to use iOS as a differentiating point for its hardware. The new camera system, supercharged by the new A13 Bionic chipset (the fastest GPU and CPU ever in a smartphone, according to Apple), will enable new computational photography features such as stunning wide-angle shots, Night Mode for low-light photography, and an upcoming feature called Deep Fusion, which leverages the Neural Engine inside the A13 chip to stitch together the output image from 9 different takes, pixel by pixel. In addition, Pro model users will be able to take multiple photos and videos simultaneously with the front and rear cameras. Certain social networks, such as TikTok and Snapchat, or perhaps someone new entirely, will likely be able to create new formats of UGC out of that feature down the road.
The Covert New Addition
Perhaps most intriguingly, the new iPhones all come with a new U1 chip that uses Ultra Wideband technology (UWB) for spatial awareness, thus allowing them to precisely locate other U1‑equipped Apple devices. This was not mentioned at all during the keynote, making it more of a covert addition. At the moment, this is only being used for more precise AirDrop sharing, allowing for a direction-based AirDrop selection process, and will only work with the new models. However, pre-show leaks heavily suggested that another new product that utilizes UWB was supposed to be unveiled yesterday (more on that in a minute).
Besides spatial awareness, Ultra Wideband can also be used for short-distance data transfer, thus hinting at some sort of smart glasses product that Apple is speculated to be working on, a rumor that is being supported by new code found in the software developer tools Apple released yesterday. This means that the U1 chip is already laying the groundwork for this year’s iPhones to support the first iteration of Apple’s upcoming AR wearable products. Perhaps the iGlasses are coming sooner than we thought.
What Apple Left Out for 2020
Overall, this is a somewhat underwhelming fall event for Apple. All the new products lack significant updates in both form factor and software features, and the services announcements were largely in line with industry anticipation. They should be adequate for Apple to hold its usual growth rate but unlikely to spur another massive round of upgrade. Instead, all signs point to next year being an exciting year of innovative product launches with 5G devices and AR wearables in the wings. Here are four things that Apple may unveil along with them in 2020.
Apple Tags
Pre-show leaks based on internal iOS 13 builds indicated that Apple was readying the launch of a Tile-like device that utilizes Ultra Wideband to track Apple devices. Equipped with the aforementioned U1 chip and powered by UWB tech for precise in-door mapping capability, It would work with the revamped Find My app, and incorporate with AR-finding view with a virtual balloon that leads people to their misplaced devices. Judging by the keynote presentation, and the fact that the new iPhones are still shipping with the U1 chip, it is highly likely that the Tags announcements were scraped at the last minute, presumably to avoid another AirPower situation. They will likely surface with the upcoming iPad Pro updates next spring, or perhaps even sooner to take advantage of the holiday shopping season. Regardless of when they will be released, the Tags will be an interesting accessory to Apple devices that utilizes the UWB technology to solve a real issue that many users may encounter.
Sleep Monitoring for Apple Watch
Also strongly suggested by pre-show leaks that the new Apple Watch will come with a new set of sleep monitoring features that would allow users to track their sleep duration and quality as part of Apple Watch’s expanding wellness features. This was likely tabled due to battery concerns, since most users tend to charge their Apple Watch while they sleep, and would likely be released with the next iteration of Apple Watch.
Inter-Device Charging
Some analysts were also expecting Apple to announce some kind of two-way wireless charging (also called reverse charging) feature that will allow users to wirelessly charge their AirPods with their new iPhones, or even charge their iPhones with the iPad Pro. This feature is already available on the latest flagship devices from Samsung and Huawei, but Apple has never been the one that adopts cutting-edge features anyway as it much prefers to incorporate features later when the underlying technologies have matured. All things considered, Apple could catch up on this with the 5G-enabled iPhones next fall, or perhaps even earlier with the new iPads.
Apple Service Super Bundle
We have been banging the drum on super bundles for a while now, and given the aforementioned ecosystem play that Apple is implementing with its services, it seems highly likely that Apple will be coming out with a media service bundle soon, perhaps in a year or so when most people’s 1-year free Apple TV+ subscription runs out. Given that the underlying economics dictate that the cost of Apple Music and News+ increases in line with revenue, it would be in Apple’s best interest to bundle them with something like TV+ where, beyond the upfront content acquisition cost, every new subscriber is pure profit.
Additionally, there was zero mention of Apple Card during the keynote when many expected Apple to tout some nice numbers of sign-ups to boast what was likely the most buzzed-about credit card launch in history. At least the very least, Apple could have reminded all the consumers looking to upgrade of the 3% of cash back rewards that Apple Card offers on buying Apple devices and services.
Overall, Apple played it safe and kept things to its core products and services this year. The company may be saving some cool new stuff to gear up for an exciting 2020 lineup, but this event still proves that Apple is sticking to what has worked best for them while making its products more affordable to encourage upgrades in an otherwise quiet year. Everything is designed to deepen its moat, lock in more mobile users, and further contributing to the widening divide between the media haves and have-nots in the process.
