Apple (AAPL 1.45%) wants to be a service company.
It's not that the company plans to drop hardware, but it has introduced a host of new service-based offerings to go along with its devices. The company's new streaming video, gaming, and news products will join its highly successful Apple Music service over the next few months.
Launching these subscription-based products, along with an Apple credit card, is supposed to change the company's revenue mix, making it less dependent upon the next new technology hit.
Of course, there's no guarantee that any of these offerings will work. In fact, it's fair to say that all four face an uphill battle.
Apple and CEO Tim Cook plan four new service-based offerings. Image source: Apple.
What did Apple do?
At a keynote event, Apple laid out its four new service-based efforts. The company introduced the following products and services, though details for some were scant:
- Apple TV+: This is a subscription service in the style of Netflix. Apple showed off some creative partners (Oprah Winfrey, Steven Spielberg, Jennifer Aniston, Reese Witherspoon, Octavia Spencer, J.J. Abrams, and others), but it did not share potential pricing.
- Apple Arcade: A game subscription service that will have over 100 original titles. "Apple Arcade will give customers the freedom to try any game from its handpicked collection of titles that are all-you-can-play; have no ads, ad tracking, or additional purchases, and respect user privacy," according to a press release. Again, no pricing was announced.
- Apple News+: This $9.99 monthly subscription gives members access to over 300 magazines and content from a handful of other providers.
- Apple Card: A no-fee credit card designed to be integrated fully into an iPhone. The card offers cash back on certain purchases, and "Apple Card's goal is to provide interest rates that are among the lowest in the industry, and if a customer misses a payment, they will not be charged a penalty rate," according to a press release.
It's easy to see why Apple's adding these services, but it's harder to see how any of them will become major hits. Apple TV+ may have top-tier content creators, but so do a handful of other streaming services that are already established. Why pay Apple when you already have Netflix, HBO, and who knows what else?
Apple News+ offers value to people who read a lot of magazines, but is that really a large audience? This looks at best to be a niche product that serves an older audience -- if any market for it exists at all.
Apple Arcade is a similarly risky venture. Yes, games are a popular download in the iTunes store, but serious gamers aren't playing on phones or tablets. Yes, this service eliminates having to pay for some games and takes micro payments out of gameplay, but that may not be enough to win a large audience.
An Apple credit card has some appeal, but it's not that different from a variety of other options. It makes sense for die-hard fans of the brand who buy new hardware every year, but it's not a clearly better offer for the public at large.
Where will Apple be in a year?
Call it a rough guess, but one year from now Apple will have a few well-reviewed shows on Apple TV+ but lack any significant membership base. That's not a comment on the potential quality of the service but a reflection of the market.
In the next few months, Apple will launch its service and Walt Disney will enter the streaming entertainment space as well. One has unknown shows from brand-name providers. The other has Star Wars, Marvel, Pixar, and decades of children's programming, making it hard to see Apple gaining a foothold in this space.
News+ and Arcade simply aren't mass-market products, and you can argue the same about the company's self-branded credit card. These three may help the bottom line only because costs are low. Apple TV+, however, will be a drain on resources for years -- maybe decades -- as the company spends on creating programming that will make consumers join yet-another streaming service.
A year from now, Apple will look a lot like it does right now, but perhaps with less optimism about its ability to create a significant new source of revenue. As part of a bigger transformation, these moves may prove important, but on their own, they are underwhelming.
