Everything Brands Need to Know About Apple’s New Services
Apple unveils new subscription services that will disrupt the media landscape and resets the rules of credit cards with Apple Card
On Monday, Apple hosted an unprecedented media event dedicated to services at its Cupertino headquarters. The iPhone company went through four of its service categories — news, payments, gaming, and TV — to unveil new services, mostly subscription-based, that will add value to its hardware products and deepen its moat of differentiation to lock users in its ecosystem. Together, these new services may once again reshape the industry landscape in content and payments. More importantly, they are illustrative of what all brands need to do in order to strategically position themselves to retain consumer attention and build brand trust.
What Apple Announced
Apple Enters The Credit Card Market
The surprise of the show on Monday was an Apple-branded credit card. Natively integrated with Apple Pay, the new Apple Card can be easily obtained and managed via the Wallet app on iOS devices. Working with Goldman Sachs as the issuing bank and Mastercard as the global credit card network, Apple is set to rewrite the rules on digital user experience for credit card holders with its first credit card, due sometime this summer.
A better user experience — The key value proposition Apple is making for Apple Card are mostly focused on improving the user experience of credit cards. Because Apple controls the entire hardware-software stack, they designed the whole experience to be mobile-native. Customers will be able to sign up via the Wallet app, start using the card “in minutes,” and customer support will be available 24/7 through iMessage. Spending will be clearly marked by merchants and sortable by category, like “Food and Drinks,” “Shopping and Entertainment,” and so on. Weekly and monthly spending summaries will provide users with a better understanding of their spending.
No fees whatsoever — Following Apple’s simplicity-oriented design, there will be no annual fee, no late fees, and no international transaction fees with Apple Card. There will, however, be interest fees, and if a customer misses a payment due date, additional interest will be added to the total balance. Apple said the interest rate will aim to be “among the lowest in the industry,” but according to the fine print on its website, its variable APRs will “range from 13.24% to 24.24% based on creditworthiness” — a reasonable interest rate, but not exactly groundbreaking. Payments for Apple Card will also come with a clear calculation of the interest at different payment amounts, designed to guide users to form healthy financial habits.
A physical card to ensure universal acceptance — Apple Card will not just be a virtual credit card. Instead, there will also be a physical version of the card that consumers can use it in stores that don’t accept Apple Pay. The physical Apple Card is made out of titanium in a sleek, all white design. For security reasons, it doesn’t have a card number, CVV, expiration date, or signature bar on the back, and only carry the cardholder’s name on it. Such a unique design immediately sets it apart from most of the other credit cards on the market, a clear attempt on Apple’s part to make it the next potential status symbol a la the AirPods.
Purchase data security as a selling point — Not only is the physical card designed to thwart credit card fraud, Apple Card is also designed to protect your credit card purchase data. All of the spending, tracking and other information is stored directly on the device, not Apple’s servers, so Apple won’t know how or where you are using Apple Card. In addition, Apple also promises that “Goldman Sachs will never sell your data to third parties for marketing and advertising.”
Simple cash back rewards designed to encourage mobile payment — Apple Card also comes with a simple “Daily Cash” rewards program, promising a 2% cash back on all purchases made via Apple Pay and a 3% kickback on Apple purchases, including purchases made in an Apple Store and in the App Store. Daily Cash will be automatically added to a user’s Apple Cash card every day, rather than at the end of the billing cycle like most cash back rewards, thus ensuring Apple Pay users have a strong incentive to keep using Apple’s mobile payment solution. Interestingly, Apple will only offer 1% cash back for purchases made via the physical Apple Card, thus incentivizing users to use the Apple Pay version over the physical card.
Apple Card as a retention tool for Apple Pay — It could be that Apple Card is operating at a loss, but that’s the kind of asymmetric competitive advantage that Apple can afford. Apple’s goal with Apple Card is not necessarily to make a profit off it, but rather to ensure Apple Pay’s retention and encourage curious users to give Apple Pay a try. The more people use Apple Pay with Apple Card, the more Apple gets to keep most of the money within their ecosystem. If successful, Apple will raise the consumer expectations on the overall credit card experience, and put the pressure on the rest of the credit card industry to keep up in terms of the digital UI design and features, ultimately benefiting consumers.
Apple Adds All-Access Magazine Subscription To News
Moving onto the media subscription services, Apple is mostly playing catch-up to the consumption trends and the resulting shift in business models. Apple started off Monday’s presentation with the revamped News app, which Apple touted as the №1 news app in the world where over 5 billion articles are read each month. And to make that news-reading experience even richer, Apple is adding magazines to the mix with the launch of Apple News+ as part of the iOS 12.2 released today.
All-you-can-read access — For $9.99 a month, Apple News+ subscribers will be able to access over 300 magazines as well as some additional digital news subscriptions for the Wall Street Journal, LA Times and the Toronto Star. One caveat here is that WSJ is only making part of its content available for Apple News+. All magazines are reformatted for an optimal mobile reading experience, with some featuring striking video covers and interactive designs. It is unclear who is handling the redesign work, but Apple could potentially be hiring graphic designers to make sure all digital magazines look great in Apple News+, therefore increasing the likelihood that publishers stay with the service, a challenge for Apple’s previous efforts in the space.
No ads in magazines — As a premium subscription, the Apple News+ experience will be mostly free of advertisements. No ads are included in the magazines accessed via News+, although the aforementioned newspapers still carry display ads in their articles. Despite the lack of ad opportunities, however, brands may still able to reach readers of Apple News via branded content, as evidenced by Airbnb’s branded travel magazine is included in the News+ subscription.
Content recommendation that protects data privacy — As in the current News app, Apple News+ will learn what subjects you’re interested in and recommend articles and full magazines based on your history. New issues of magazines will be downloaded automatically so that you can read them offline. Once again, Apple stressed privacy and security of this service, leveraging on-device AI algorithms to handle content recommendations so that Apple can’t see what you’re reading and advertisers and publishers can’t track what you view in the app. Part of the news article recommendation will also be editorial, handpicked by human editors to ensure the quality of Apple’s news curation.
A credible news source — Apple clearly wants to position Apple News as a credible, trustworthy news source that stands in stark contrast to the social networks, which are plagued with fake news and clickbait articles that are amplified by flawed algorithms. To ensure the quality of the news it offers, Apple is acting as a gate-keeper by favoring credible, established name publishers, employing human editors to manage the front-page curations, and compensating the publishers based on readers’ time spent on each article to hedge against clickbaits. Boosted by News+, Apple News could further unbundle the news functions of social media and shift some attention away from social platforms, as more and more consumer grow conscious of the quality of their news.
Apple Bundles Exclusive Premium Games With Arcade Subscription
Apple is also extending the subscription model to gaming. Just as the pre-event rumors suggested, Apple unveiled Apple Arcade, a paid subscription service that provides access to over 100 new and exclusive games. It will launch this fall, presumably with iOS 13, in over 150 countries and regions, bringing high-end premium mobile games to a mass audience.
Accessible right in the App Store — Over half a billion people visit the App Store each week, according to Apple, and over 1 billion users have downloaded games on the App Store. Therefore, it is only natural that Apple Arcade gets its own delicate tab in the App Store app, complete with personalized recommendations generated by on-device machine learning.
Cross-platform play heralds the future of apps — The games included in the Arcade subscription will be playable across Apple devices, including iPhones, iPads, Mac laptops and desktops, and even Apple TV. Using Apple’s new universal framework Marzipan, which allows UIKit-based iOS apps to run natively on Mac, game developers will be able to create stunning games that can be enjoyed on any Apple devices seamlessly.
Games as a media competitor — The existence of such a cross-platform gaming service demonstrates how close Apple’s mobile devices have become to dedicated game consoles in terms of processing power. The fact that you can play these high-quality, immersive games on any Apple device with a screen (save for the Apple Watch) means that they are also competing with all the other content services for consumer attention. Marketers tend to regard gaming as its own category separate from the rest of media when, in fact, it is a huge attention-grabber that brands cannot overlook. That being said, there is no direct way for brands to leverage Arcade to reach consumers, since it is completely ad-free.
Apple’s Content Strategy Takes Shape With New TV Services
Last but certainly not the least, Apple finally unveiled its long-anticipated TV streaming service. Dubbed Apple TV+, this ad-free video streaming service will be available in 100+ countries when it launches in the fall, but a Netflix killer it is not. Instead, Apple is positioning the revamped Apple TV app as the one-stop destination for all your TV and movie streaming needs, as it aims to use the premium original content of Apple TV+ as the key differentiator, but also leverage Apple Channel as a way to compensate for its lack of back catalog content.
The Apple Upfronts showed little of Apple’s original content — In an unprecedented move, Apple yielded the stage to the A-List Hollywood talents in attendance to introduce their projects with Apple to the world. Steven Spielberg, JJ Abrams, Reese Witherspoon, Jennifer Aniston, and Oprah are among the many talents that took the stage, one by one, to hype up the upcoming Apple TV+ in classic TV upfront style. However, only one trailer for Apple’s original content was played at the end of the segment, and most introductions ended up being rather opaque and unconvincing. But that largely doesn’t matter in the long run, considering this presentation was perhaps intended for the creative talents in Hollywood, to showcase Apple as “a new home for creative storytellers,” as opposed to selling its original content to consumers, which will happen when the service officially launches in the fall.
Apple TV Channels to fill the gaps — Given its thin content library and a total lack of back catalog shows, Apple opted to take a page out of Amazon’s playbook and launched a Channels service to allow Apple TV users to subscribe to other streaming services like HBO, Showtime, Starz, and CBS All Access, access their content without leaving the Apple TV app. Apple will host the content on their own servers to ensure optimal streaming experience.
Redesigned Apple TV app promises better experience — Apple also redesigned the TV app to better accommodate all the new content available via TV+ and content providers in Apple TV Channels. Content curation also plays a big role in the viewing experience here, as Apple aims to provide you “Up Next,” a list of shows that you’ve watched, while the rest of the app are populated with lists of shows curated by Apple.
Apple TV+ is not exclusive to Apple devices — In early March, Apple Music launched on Amazon Fire TV, allowing customers to ask Alexa to play tunes from Apple Music. Many took this as another sign Apple is pushing services to as many people as possible, and that also happened with Apple TV+ today. Apple announced that the new TV app will also be available on smart TVs made by Samsung, LG, Sony, and Vizio, as well as set-top box devices like Roku and Amazon Fire TV, making Apple’s original content accessible on rival streaming devices.
Apple TV likely won’t be the one-stop TV destination — While Apple reportedly rushed to get HBO and Showtime on Apple TV Channels, it was obvious from the start that Netflix wouldn’t be part of Apple’s integrated play. Similarly, there is certainly an argument to be made for the upcoming Disney Plus to not be part of Apple Channels as well, as Disney would want to take full control of its customer data and manage the customer relationship. With those big streaming players missing from Apple TV, it can never become the one-stop destination for all your favorite content like Apple hopes it will be.
Questions remain about Apple TV+ — Many questions still remain regarding Apple TV+. First, Apple is completely silent on its pricing, a crucial piece of information the Apple may have yet made a decision on. Then, there is the question of whether Apple TV+ is already too late to the streaming market, especially considering the growing subscription fatigue as video streaming options multiply? If some combination of Netflix, Amazon Prime Video, Hulu, and YouTube is already giving you all the content you can keep up with, then what’s the point of subscribing to yet another streaming service? Challenges abound for Apple TV+ to break out of an already saturated streaming market.
That being said, Apple TV+ likely won’t be a total failure either. All the A-list stars alone will be enough draw for a portion of Apple’s massive user base to at least sample some of the shows, and Apple seems as committed to promoting that original content as it did for Apple Music. Apple’s asymmetric business model will likely mean Apple TV+ can be successful with a much smaller audience than Netflix, as long as it adds value to Apple’s larger content ecosystem.
What Do The New Services Mean for Apple
Catching up to the media consumption shift to subscription — Starting from the days of the iPods, Apple has always positioned delivering content to consumers a key function of its hardware products. However, in the past decade or so, they have fallen behind in how content is being consumed. Instead of the a la carte purchase model that iTunes perfected, media consumption across categories has been shifting towards subscription-based streaming services like Spotify and Netflix. Consumers are increasingly choosing universal access over media ownership, and the three new subscription services are here to respond to this ongoing shift in media consumption. While Apple is late to a crowded market in terms of video streaming, it likely won’t matter to Apple, as evidenced by Apple Music being late to the market but is now on track to overtake first-mover Spotify in the U.S.
The services are additive to Apple, not the goal — Many reports covering Monday’s event called it a significant step for Apple to transition from a hardware company to a service-oriented company. A popular narrative among press regarding Apple’s service strategy goes like this: the iPhone sales have stopped growing, so Apple must look elsewhere for new growth drivers as to offset slowing revenues, and it has landed on services to pivot Apple away from the hardware business. This take completely ignores that most of Apple’s services are still largely exclusive to Apple devices, and are meant to add value to Apple products, where the company still makes most of its money. Apple Pay, Apple Arcade (give and take a few titles that will also be on game consoles), and Apple News+ are all exclusive to Apple devices, more or less functioning as an ecosystem lock-in to ensure users stay in Apple’s walled garden.
The exceptions here are the music and video streaming services — the economics of upfront fixed cost of production demands those two streaming services to be monetized against the largest amount of audience possible. Notably, however, Apple cares more about making its content accessible on most TVs than elsewhere, as the Apple TV app will not be available on Android and Microsoft platforms. This could also be Apple’s way to ensure the Hollywood talent that their works will be widely accessible via TV screens without having to make its TV app fully platform-agnostic.
Apple TV+ vs. Netflix? Not quite — Instead of a direct competitor to Netflix, Apple TV+ is being positioned as a lead generator for the Apple TV app, where Apple can take a cut out of all subscriptions made via Apple TV Channels. If consumers get accustomed to Apple TV as their go-to streaming TV interface because of either Apple TV+ content or that’s where they manage their OTT subscriptions, regardless of what device they are using, that would be a big win for Apple and a huge loss for the streaming services that are not included in Apple TV. Granted, Netflix is big enough now to drive people to its own app, but if Apple can rally all the other streaming services and aggregate everything in Apple TV, it could stand a decent shot of stealing some eyeballs away from Netflix.
Don’t underestimate the power of the default — Another advantage that Apple services enjoy over other streaming services is that they don’t need to be №1 in the respective market to be considered a success for Apple. Apple’s own services are the default choices on Apple devices, and that built-in user base and the benefits of native integration mean that Apple services just need to be good enough. This is true in the case of Apple Card, whose interest and reward rates are in line with industry standards, but derives most of its value from native integration with Apple Pay and the Wallet app. It is also true for Apple Arcade and News+, since Apple won’t be paying the 30% cut it charges all other app developers and publishers for distributing their apps via the App Store. This is why Apple TV+ may not seem competitive to Netflix, which is totally fine for Apple.
Apple as a trusted content curator — Through the presentation, Apple kept driving home the positioning as a trust-worthy content curator, using its team of human editors and machine learning algorithms to surface relevant content to users. When introducing the revamped Apple TV app, for example, Apple stressed that it includes a dedicated “Kids” tab for children’s content by calling it “a safe space [for families] to explore together,” a not-so-subtle dig at the content safety issues that YouTube has been battling. In the age of Peak TV, content curation itself is a valuable service for consumers increasingly overwhelmed by the onslaught of content and struggling to choose what they should pay attention to.
Setting the stage for a super bundle — it is important to remember that this is all just a start for Apple’s services. There are still many services that Apple has yet to properly monetize, such as podcasts, Apple Maps, and Siri. Granted, those services won’t necessarily be monetized via subscription services like the rest of media, but there are definitely future opportunities there to help Apple double down on using services to add value to its products. One possible way to battle the increasing subscription fatigue among consumers is to bundle together the subscriptions a la Amazon Prime, and sell consumers on a super bundle that allows users to access all or most Apple services at a discount.
What Does This Mean for Brands
For brands, what Apple announced on Monday was light on direct on marketing opportunities since all subscriptions are ad-free service. Still, there are some valuable lessons to be learned from Apple’s strategy as it dives into the service business.
Leverage services to add value to the brand experience — Similar to the way Apple is developing these new services to add value to its hardware products, other product-oriented brands should also explore relevant services that will add value to the overall product and brand experience. This would help product brands to think beyond one-off transactions and develop a long-term relationship with their customers. When that customer relationship is managed properly, it creates the kind of consumer trust that is increasingly important to brands in the current market landscape. In a world where every brand that matters is taking on the characteristics of a lifestyle brand, it is important that brands explore relevant services and transition towards multimodal business models.
Brand as a content curator and/or creator — Apple sets its services apart from competitors by emphasizing its content curation led by both human staff and algorithms. As more and more brands striving to create branded content to reach an increasingly ad-averse consumer base, it is also important to see the value in well-done curation. In today’s increasingly fragmented and saturated content market, simplifying consumer choices through content curation is a service that some brands can use to reach customers, especially when it comes to content that is relevant to their products and services.
While all of Apple’s new subscriptions, like many others, are completely ad-free, that doesn’t mean there is no way for brands to reach the audience behind the paywall. Product placement is one way to go. According to data from Branded Entertainment Networks, 74% of Netflix original series contain product placement while 91% of Hulu originals have it. It remains to be seen how open Apple will be towards product placement in their original content. Another route is to work with content creators to produce premium content. Airbnb, for example, has a branded travel magazine that is included in the Apple News+ subscription.
Data privacy as a selling point — As a vocal proponent for user privacy and data security, Apple made a point to highlight privacy as a key benefit for all its services. With these four new services announced on Monday, Apple is extending its walled garden to even more industries, aiming to cordon off access to a segment of user data in those domains.
With an increasing media consumption gap between ad-supported free services, which monetizes users’ attention and personal data, and ad-free subscription services like the ones Apple announced, brands will need to thread the needle carefully and recognize the long-term value in ethical, secure data practices. Data can provide a great competitive advantage for brands to better understand their customers and analyze market trends, but it is never worth losing consumer trust over.
Want To Know More?
If you are keen to learn more about Apple’s latest announcements and what they all mean for your brand, or just want to chat about how to prepare for the next paradigm shift in general, the Lab is here to help. You can start a conservation by reaching out to our VP of Client Services Josh Mallalieu (josh@ipglab.com).
