Listen: Apple, Disney, Spotify discussed on After Hours
"TV plus five dollars a month apple music apple news or with ten dollars a month so mark my words. The Loyalty Bundle is coming. It's just a matter of a time where they say you know what instead of having all of these little subscriptions for one price of say twenty thirty dollars a month or one hundred twenty dollars a year sure you can have the whole thing and so you see the strategy now they wanna make sure their phone stain as many hands possible get people comfortable with paying subscriptions and and then eventually introduce loyalty bundle and they're going to give it a really clunky name because they have lost their ability to rename things apple prime plus tax. We've talked about the power recurring revenue and what a force multiplier it is. I think it's really interesting so what's beautiful about it. Is it's a nice illustration of a company that has basically lost its competitive edge in hardware that now shifts shifts the prophet pool towards services and the logic of that shift is stat. You have hardware as an entry gateway into this this universe of services I think to me the most interesting thing to think about is if you don't have that enthusiasm if you don't have to sparkle sparkle in the center is there enough magic for people to say and I will sign up for like I could have the apple video subscription subscription. Even though maybe a little more enthusiastic about Disney plus than apple rammed elise sure is how well will the bundle. It'll work if nothing sparkles. I think either way you don't need the sparkle right now. We're talking about delivering real value on really important services in a bundled away a on devices that we already love so yes perhaps the magic and spark. Er- gone but I kind of look at the opposite way. which is you can't coast on that forever? I think this fixation on declining iphone sales is missing this larger transition and by the way the margins in the service business are amazing and we haven't even and yet seen them roll out the powerful this so people have voted. They like spotify better than they like apple music people. I think they will like Disney plus experiment. They like apple and then the question is like if you're this big music fan spotify is your world. Can we imagined that people say well. I already pay for spotify like why would I want to buy into the apple. Universe I think the key to being the successful default platform arm on which the Steph sits is that you gotta figure out where you WanNa win and where you want to be a really great partner if apple can structure its its relationship with players like Disney and spotify so they can continue to sit on top of the apple ecosystem in a win win way but on the other hand apple then needs to figure out where it wants to win so apple arcade is fascinating it is utterly fabulous to have access access to games her five dollars a month with the noise of micro payments but the economics of that business are phenomenal because apple's costs are fixed so once they pay for those costs every incremental subscription is pure profit so they can scale that very profitably in a way that they can't do music Komo news so I do think it's definitely going to be tricky for apple to navigate. It's hard for me to imagine to your point Felix that they can win and all these dimensions but can they put something together. That's compelling enough that people are willing to for example. All of us probably belong to Amazon prime. That's not the exclusive service we use. We use other things as well so can it be one of those players that we are willing to pay a monthly fee to but we also shouldn't first off the new phone is really quite nice and we're still generating twenty five billion dollars a quarter of sales from it so it's not as if it has to be one hundred percent services. Mrs Company they're still going to be a bunch of fat margin revenue associated with devices with upgrades and new users so that whole machine really is quite formidable right and they feed each other. It's not as if it's a one way street so maybe I can relate. One experience had early in the summer. I wasn't the West Coast with a group of engineers and there was one person at the table who talked about apple cart amazing. It is and how wonderful and you could literally see it was one of these apple moments where even the person's expression the facial expression was really like. Oh my God is the best thing so turned out. I think there are six or seven of us at the table. No one else had an iphone and I think the interesting question is are there services that are so out of this world that we would now go out and say. Oh my God you know Apple Card. You absolutely have to have it and as a result. I switched my device if you think about the power of all the system that's what the phone did right. The phone was so amazing that you went out and you say God I just have to have this iphone and you know breaks my heart how expensive it is but half to have it ultimately in competition between ecosystems. I think that's an important thing thing to think of a candidate. Come up with something. That will make me match. Who's my next device. You think Oh yeah I should go back to iphone because it has some service that I really love but feelings. I think those days are somewhat over in the fact that they've lowered the price on their entry. Level phone. I think is really revealing because they're finally admitting knitting that there's price elasticity and that winning demand is particularly in countries like China where fifty dollars can make a difference between you buying during this phone in that phone so I think right now. What you're saying is a recognition that they have a really robust install base? Can they continue to maintain. Perhaps even incrementally grow it but more importantly can they begin to monetize that installed base in a very different way. Would they give them another ten years years of really solid results for their shareholders. I think yes I think they're laying the groundwork for another decade in particular because the the margins on services are so marshes in a way. It's an even better. It's a sixty percent march the Felix. You are right. The magic is not there anymore. I find it so interesting in a way that's been true for Microsoft for very longtime right. The magic is gone and yet their market position you look at the financial profitability."