Back in 2010, Apple's (NASDAQ:AAPL) services business was so immaterial to the big picture that it was aggregated within a larger segment called "iTunes, Software, and Services." The company's most prominent service at the time was AppleCare, an extended warranty program, while the bulk of that segment's revenue came from digital music sales and apps. Apple wouldn't introduce in-app subscriptions in the App Store until 2011.
We're now just days away from the end of the 2010s, which provides an opportunity to look back over the past decade and see how things have evolved. In the technology industry, 10 years is an eternity -- and a lot has changed.
Services brought in $5.2 billion in 2010
In early 2010, Apple introduced the original iPad, which launched alongside iBooks (since rebranded as Apple Books) as Apple jumped into the e-book market dominated by Amazon.com. The iTunes, software, and services business generated $5.2 billion in revenue in 2010, which nearly doubled to $10.2 billion over the next two years.
Following the close of fiscal 2014, Apple revamped its financial reporting structure to create the simpler "Services" segment that investors know and love today. The company also provided a historical reclassification. The new segment still included digital content sales from iTunes and the App Store. Here's how quarterly services revenue has skyrocketed ever since. Services revenue topped $12.5 billion last quarter compared to the $5.2 billion for all of 2010.
Driving that growth is a slew of services that Apple has launched over the years. In addition to introducing in-app subscriptions in 2011, Apple launched iCloud storage that year. It would be another four years until Apple Music debuted in 2015, a major strategic repositioning necessitated by the secular shift away from digital downloads toward music streaming, which was led by Spotify. This year saw a handful of new services, including Apple News+ ($10 per month), Apple Arcade ($5 per month), Apple Card, and Apple TV+ ($5 per month).
Services brought in $46.3 billion in fiscal 2019
When Apple publicly laid out a goal in early 2017 to double its services business relative to fiscal 2016 over four years, that marked an important shift in the investing narrative. Apple knew that it needed to retake control of the story following the first-ever decline in iPhone unit sales in early 2016.
For a brief period, Apple had started to disclose "installed base related purchases," a non-GAAP metric designed to underscore post-purchase monetization as iPhone owners loaded up their devices with digital content and subscriptions. Apple quickly stopped reporting the metric, potentially due to broad regulatory scrutiny of non-GAAP metrics.
The company then shifted to highlighting paid subscriptions -- a stable source of high-margin, recurring revenue -- that are billed through its various platforms. Apple has now tripled paid subscriptions to 450 million over the past three years.
With 2020 on the horizon, Apple's services segment has grown to $46.3 billion in fiscal 2019 revenue -- nearly nine times as large as it was in 2010. Services is now 18% of total sales, compared to the 7% of the business that it accounted for in 2010.
It's been quite an eventful decade for the Mac maker's services business.