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30 Days of Blog

iMessage is not service, it’s a feature[30 days of Blog 19]

This post is part of my 30 blogs in 30 days series. More details here.

The title is a bit of a clickbait. iMessage is an extensive, large scale messaging app with supposedly 1.3B active users. On a technical level, it is a ‘service’. However Apple’s business case for building this service and just giving it away for free for every Mac, iPad and iPhone user, is that it is a value-add to their hardware. In that sense all of Apple’s services are merely features; they are either supposed to provide a value-add or be an up-sell. Or Both. Lets see which ones are which.

iCloud

What is it?

The backend and branding for Apple’s Mail, Calendar, Storage,Back-up products.

Why is it just a feature?

iCloud sync only syncs between iOS, iPadOS and MacOS devices. There is a Windows app but it is anemic compared to competitors. You can access iCloud docs from the web and Android, also Find My. You can’t really back up your files

iCloud has no real enterprise storage plans, and syncing with other services can only be done through ‘hacks’.

Is it a value-add or an up-sell?

Up-sell. iCloud will probably be the biggest revenue driver going forward. Apple’s physical storage prices are ridiculous, but iCloud prices are pretty competitive. Also, it is the only option if you want to backup your Apple device in the cloud.

Apple Arcade

What is it?

A subscription-only gaming service.

Why is it just a feature?

Apple Arcade is an anomaly for the company; a gaming product that is ahead of the industry. Their only competition in this space is Xbox Game Pass, which is twice the price(triple if you want it on both Xbox and PC).

It is not hard to qualify this as just a feature. Apple Arcade games:

  • Are Apple exclusive on mobile, so no Android versions.
  • Can only be played with the subscription, no App Store
  • The subscription cost is only $5.
  • Not available on any non-apple platform.

Is it a value-add or an up-sell?

Both. You have to pay for it, but given the cost to Apple, it is meager.

Apple TV+

What is it?

A premium subscription-only Video Streaming Service.

Why is it just a feature?

Apple TV+ was also a first for Apple; before launching the service, they also launched the Apple TV app on rival Smart TV manufacturers, pretty much leaving Apple TV, the device, in the dust(tvOS was barely a blip at WWDC2020). Apple TV+ is also very very cheap; only $5/month for premium HBO level content. Apple has spent a lot of money to make this content($6 Billion at launch in November 2019, more since). Unlike it’s closest pricing competitor, Disney+ at $6, Apple doesn’t have almost a century’s worth of stuff to put on their service. On top of that, AppleTV+ is free for one year for any one who purchases an iPhone, iPad, Mac or AppleTV. There is not business case for AppleTV+, especially for a company like Apple. Even at the most generous estimates, it would take years for Apple to recoup the costs they have already spent.

If you take into account the amount of money they would have spend just to be competitive, it becomes clear that they are not interested in being Disney, Netflix or HBO. They just want to give another reason for people buy their hardware.

Is it a value-add or an up-sell?

Value-add. No question about it.

Apple Music

What is it?

A music-streaming product.

Why is it just a feature?

It is not. Apple Music launched on Android(😯😯😯) as well iOS at launch. Recently they also launched a web app, making it compatible with most desktops. Its only real competition, Spotify, has already been left behind in the US. Apple is closing in on other markets. Apple Music can be spun off into it’s own company today and still be a thriving business.

Is it a value-add or an up-sell?

Neither.

Other

There are other services Apple offers, but they are not even competitive enough to worth mentioning.

The Pivot

Apple has, through earnings calls and ‘analysts’, has emphasized service revenue growth as a shining light in face dwindling hardware sales. The hardware sales growth is getting back on track, thanks to AirPods, but it is only through the strength of their brand that they have not face any skepticism on growing their services revenue. Most of their services are barely competitive in their verticals and have very little growth opportunity outside of Apple’s existing consumer base. With a clear exception; Apple Music. Eventually Apple will either have to untether their services from their hardware platforms, or shut these services down. They have the cash to push it as far as they can. How long the investor confidence lasts remains to be seen.

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