For decades Apple has been a beacon for forward-thinking companies and entrepreneurs. From the company’s technical prowess to its unique approach to customer experience, few brands captivate consumers and even competitors quite like the team in Cupertino.
So their decision to shift focus from the iPhone product line towards newer subscription services is a major momentum change. In July, Apple announced a 12% drop in annual iPhone sales since 2018,which they made up with revenue from services like Apple TV Channels, Apple News+ and Apple Music. With more subscription services like Apple Card and Apple TV+ coming down the line, it’s clear that they’re going all-in on subscriptions.
As the tech giant continues to invest in R&D for subscription services, the rest of us should prepare to feel a ripple effect throughout the world of business.
The golden age of subscriptions.
Apple’s decision to pivot towards subscription models shouldn’t be taken lightly. Subscription model businesses continue to pop up in consumer industries, media, healthcare and beyond, making Apple’s investment feels like an enormous pendulum shift. If a larger-than-life brand like Apple is suffering from slow hardware sales in 2019, what chance do competitors and newcomers have at making a successful run?
From cord-cutting services like Netflix and Hulu to subscription consumer goods like Quip, Dollar Shave Club and Blue Apron, more and more industries are going monthly rather than one-time. And there are many benefits to such a system:
For businesses, subscription payments lead to steady recurring revenue, higher customer loyalty, less ‘sticker shock’ from high up-front costs, less risk with launch ‘flops’ and easier product updates. For consumers, subscriptions create a more convenient shopping experience, reduced buyer’s remorse, more opportunities for feedback, less risk of obsoletion, etc.
More changes, more competition, more volatility.
In spaces like OTT TV, News and Music, Apple may face much higher competition than ever before. A major advantage for Apple in the past has been the inertia that current customers feel with its products. Transitioning out of an iOS device or Macbook can be cumbersome, but subscriptions make starting, stopping and switching much easier for consumers.
Just last month we saw another powerhouse Netflix drop significantly after raising prices and losing key shows like Friends and The Office. Online TV or OTT services have proliferated in recent years, forcing once-dominant players like Netflix to change up their strategies. With Apple investing in their own TV platform as well as in music and news, they will be entering hostile waters.
Predictions for the future.
We will have to see if Apple can maintain its prominence in a more competitive digital market in the coming years. But what is clear is that consumers are moving towards subscriptions, and many businesses must follow suit to survive.
This changes the fundamental ways in which companies deliver value to consumers. It’s more than a business decision, it’s a complete psychological shift. It seems likely that stubborn companies and those with stiff leadership will be the first to fall in this new order. Even household names could become obsolete if they fail to capture the same momentum their smaller, more startup-minded contemporaries are using.
As a company that’s always been ahead of the curve, everyone should be keeping their eyes on Apple to see what their next move in this space is.