AAPL - Apple Inc.

[Liberty]

http://variety.com/2015/digital/news/apple-eyes-move-into-original-programming-exclusive-1201582020/

 

Partnership with Cisco:

 

http://bloom.bg/1Q459zH

[johnny]

I'm mildly nervous about the signaling of Apple looking at financing (exclusive?) production. I'd much rather them see develop a much closer relationship to Netflix and work on trying to make the Netflix experience better on their platform than the others. The common enemy of Amazon is what gave me hope for this in the first place.

 

Not necessarily mutually exclusive, but not encouraging.

[Liberty]

I'm mildly nervous about the signaling of Apple looking at financing (exclusive?) production. I'd much rather them see develop a much closer relationship to Netflix and work on trying to make the Netflix experience better on their platform than the others. The common enemy of Amazon is what gave me hope for this in the first place.

 

Not necessarily mutually exclusive, but not encouraging.

 

I see both positives and negatives. On balance, I would probably agree that they should stick to being a platform and not compete with 'horizontal' content providers (who scale up by being on all platforms).

 

I think the sub-optimal way to do it is to build a complete Netflix competitor with access to a wide selection of licensed content. That might not be the worst use of the cash they find behind the cushions of their couch, but I don't think that's the smartest way to do it.

 

I'd rather see them just finance some exclusive content of the highest quality (a few TV shows by people with great track records, steal a few big hitters from HBO..) and have that available on Apple TV and iOS devices as a kind of separate channel, either for free or at a super low cost (which is possible if you only have a few things and don't try to carry thousands of TV shows and movies), and leave all the rest of the content to Netflix and HBO GO and such.

 

That way the exclusive content would act as a kind of differentiator from other platforms, and the money invested would mostly be recouped through hardware sales (a kind of loss leader). And you are not really competing full-on with Netflix and HBO for the big monthly subscription fees, but people might still pick Apple TV over other things because they can then have Netflix and HBO and exclusive Apple stuff which they can't get elsewhere.

 

If they invested just a single billion in content creation, they would overnight become one of the big hitters in the TV series world (even a big show like Game of Thrones cost about $6 million per episode)..

[Viking]

Apple seems to be having its challenges striking a deal with content providers for a channel bundle for Apple TV. I wonder if the rumor of Apple looking to make its own content is to give it some additional leverage in negotiations with content providers. Tuesday will be interesting to see what Apple has planned for the fall.

[giofranchi]

I know this misses the whole picture... But I think it interesting to follow how this trend evolves:

 

http://www.bloomberg.com/news/articles/2015-09-03/the-iphone-company

 

Cheers,

 

Gio

[johnny]

If they invested just a single billion in content creation, they would overnight become one of the big hitters in the TV series world (even a big show like Game of Thrones cost about $6 million per episode)..

 

Absolutely. My concern is that the implication of being a "big hitter" in this context essentially means pulling up a chair and throwing out competing bids against HBO and Netflix. Too much of this could end up hurting feelings and really ruining relationships.

 

The worst case outcome from this, IMO, would be Netflix getting fed up enough that they begin significantly assisting competing hardware platforms by really focusing a lot of development effort on them. Again, I see Netflix of the present day as a tactical ally against Amazon and I'd hate to see a potential gang-up turn into a free-for-all. As long as Netflix feels like Apple has no interest in displacing or disrupting -their- business, Netflix won't worry about Apple TV dominance in the living room. If Netflix can't trust Apple, I think they'll have a more salient concern about living room box diversity.

 

There's also the simple fact that this is way out of Apple's wheelhouse, and the closest effort they've demonstrated (Beats, Music) has not suggested they have a real knack for this stuff. Beats Radio is a multi-billion dollar project, and its impact so far has been, depending on the hour, modest to pathetic. And this is with very substantial tailwinds in the form of exclusive content (Dr. Dre's new album to coincide with the Straight Outa Compton film release) and...the entire thing being free for 3 months.

 

That said, it is worth noting that we are hearing a lot about how they bid for, but did not win the new Top Gear. That is a very peculiar result, and it gives me hope that they're really just posturing to make sure that everybody respects platform and doesn't try to starve it.

[Liberty]

Beats Radio is a multi-billion dollar project

 

Can you elaborate? I'm pretty sure it's not, unless I'm misreading you.

[johnny]

I should have said "Apple Music" rather than Beats Radio. And I'm referring mostly to the purchase price for Beats, which was ~3B. I think they may have attributed the majority of that price to the hardware business, but I think we would all agree it wasn't actually worth that. And it is hard to imagine that Apple ended up using much of the pre-existing technology either.

 

It was mostly about acquiring Iovine, Dre, etc. and having those people be the face of the new Apple Music so that they could wrangle exclusives, make deals, and promote the service. Beats 1 is a single component of the Apple Music strategy, but it is I think fair to say that they consider it their flagship component, and it also is pretty easy to get an idea of how much of an impact it is making (which isn't much, as of yet).

 

 

[Liberty]

I should have said "Apple Music" rather than Beats Radio. And I'm referring mostly to the purchase price for Beats, which was ~3B. I think they may have attributed the majority of that price to the hardware business, but I think we would all agree it wasn't actually worth that. And it is hard to imagine that Apple ended up using much of the pre-existing technology either.

 

It was mostly about acquiring Iovine, Dre, etc. and having those people be the face of the new Apple Music so that they could wrangle exclusives, make deals, and promote the service. Beats 1 is a single component of the Apple Music strategy, but it is I think fair to say that they consider it their flagship component, and it also is pretty easy to get an idea of how much of an impact it is making (which isn't much, as of yet).

 

I don't know what the hardware business was worth, but the few numbers that i've seen (you can look back in this thread), and guesstimating at growth rates and margins, it was probably worth a fair chunk of change by itself. $200 headphones that probably cost less than $40 to manufacture have pretty good margins... Not a bad idea to own one of the most popular and profitable accessories/brands complementary to your main product (and also popular with Android users).

[DCG]

Apple watch is a dud, and Apple Music is largely a disaster. We need some indication with tomorrow's event that they're still heading in the right direction.

[TheAiGuy]

Apple watch is a dud, and Apple Music is largely a disaster. We need some indication with tomorrow's event that they're still heading in the right direction.

 

Ha! you must be trying to drive down the price of the stock so you can buy more.

 

Both of those businesses are a rounding error for Apple. It doesn't matter if they succeed and Apple has a had plenty of failures in the past.

[DCG]

Apple watch is a dud, and Apple Music is largely a disaster. We need some indication with tomorrow's event that they're still heading in the right direction.

 

Ha! you must be trying to drive down the price of the stock so you can buy more.

 

Both of those businesses are a rounding error for Apple. It doesn't matter if they succeed and Apple has a had plenty of failures in the past.

 

 

I know, but it's (to me) a sign that they're losing focus, and are missing that guy who was the filter of what is too complicated, what products should be released, and what marketing materials should be approved. I've been very supportive of Tim Cook, but do honestly question some of their decisions of late.

[TheAiGuy]

Apple watch is a dud, and Apple Music is largely a disaster. We need some indication with tomorrow's event that they're still heading in the right direction.

 

Ha! you must be trying to drive down the price of the stock so you can buy more.

 

Both of those businesses are a rounding error for Apple. It doesn't matter if they succeed and Apple has a had plenty of failures in the past.

 

 

I know, but it's (to me) a sign that they're losing focus, and are missing that guy who was the filter of what is too complicated, what products should be released, and what marketing materials should be approved. I've been very supportive of Tim Cook, but do honestly question some of their decisions of late.

 

 

No, they're just getting bigger and they make more products. They made bad product decisions under Jobs too (Ping? Mobile me? There was that special music player for the iPod). They're doing other things well: the mac is growing in a declining PC market and they've been successful in monetizing services. The iPad's not going well but the recent IBM and Cisco deals are a good idea, at least.

 

Nothing will ever be as good or as useful as the iPhone -- but if you compare the iPad to the Kindle fire or the Chromebook lines, it looks like a hit. Same thing if you compare that Apple Watch to Fitbits or even something like luxury watches (so far, we'll see how well that goes). Other products aside, they are crushing the competition with an iPhone that was designed after Jobs running software he'd probably not have made.

[DCG]

Apple watch is a dud, and Apple Music is largely a disaster. We need some indication with tomorrow's event that they're still heading in the right direction.

 

Ha! you must be trying to drive down the price of the stock so you can buy more.

 

Both of those businesses are a rounding error for Apple. It doesn't matter if they succeed and Apple has a had plenty of failures in the past.

 

 

I know, but it's (to me) a sign that they're losing focus, and are missing that guy who was the filter of what is too complicated, what products should be released, and what marketing materials should be approved. I've been very supportive of Tim Cook, but do honestly question some of their decisions of late.

 

 

No, they're just getting bigger and they make more products. They made bad product decisions under Jobs too (Ping? Mobile me? There was that special music player for the iPod). They're doing other things well: the mac is growing in a declining PC market and they've been successful in monetizing services. The iPad's not going well but the recent IBM and Cisco deals are a good idea, at least.

 

Nothing will ever be as good or as useful as the iPhone -- but if you compare the iPad to the Kindle fire or the Chromebook lines, it looks like a hit. Same thing if you compare that Apple Watch to Fitbits or even something like luxury watches (so far, we'll see how well that goes). Other products aside, they are crushing the competition with an iPhone that was designed after Jobs running software he'd probably not have made.

 

 

I agree with that. I do have concerns that the growing amount of product lines is starting to get close to the days before Jobs returned to the company and started pruning down products. I worry that they're trying to get into other markets (cars?) just due to the potential size of the market, and not that there's a real need in the market, and something they can make a large impact on.

[TheAiGuy]

Apple watch is a dud, and Apple Music is largely a disaster. We need some indication with tomorrow's event that they're still heading in the right direction.

 

Ha! you must be trying to drive down the price of the stock so you can buy more.

 

Both of those businesses are a rounding error for Apple. It doesn't matter if they succeed and Apple has a had plenty of failures in the past.

 

 

I know, but it's (to me) a sign that they're losing focus, and are missing that guy who was the filter of what is too complicated, what products should be released, and what marketing materials should be approved. I've been very supportive of Tim Cook, but do honestly question some of their decisions of late.

 

 

No, they're just getting bigger and they make more products. They made bad product decisions under Jobs too (Ping? Mobile me? There was that special music player for the iPod). They're doing other things well: the mac is growing in a declining PC market and they've been successful in monetizing services. The iPad's not going well but the recent IBM and Cisco deals are a good idea, at least.

 

Nothing will ever be as good or as useful as the iPhone -- but if you compare the iPad to the Kindle fire or the Chromebook lines, it looks like a hit. Same thing if you compare that Apple Watch to Fitbits or even something like luxury watches (so far, we'll see how well that goes). Other products aside, they are crushing the competition with an iPhone that was designed after Jobs running software he'd probably not have made.

 

 

I agree with that. I do have concerns that the growing amount of product lines is starting to get close to the days before Jobs returned to the company and started pruning down products. I worry that they're trying to get into other markets (cars?) just due to the potential size of the market, and not that there's a real need in the market, and something they can make a large impact on.

 

I'm skeptical of the car thing, too (but what do I know, the list of Billion dollar tech idea that I thought was stupid is long). I am, however, pretty bullish on another several more years of iPhone growth and pretty happy about their capital discipline.

 

They also are a good engineering firm, and I'm not really concerned about their ability to develop new product lines. Say what you will about the iPad or Watch, but they are well made products that people are willing to buy in the millions with very large profit margins. That wasn't true in the pre Jobs' return period.

 

As for the watch itself as a product, it may not stand the test of time but it is a nice product that is likely sold at a good margin. I have one and I like it (though, I'm biased with) and I know several people with them and most (not all) really like it. If you go on watch forums and blogs there is a lot of comparison between the Apple Watch and more expensive Swiss watches (see this comparison to a Philppe Patek http://www.ablogtowatch.com/patek-philippe-3582-apple-watch-common/), so its not exactly poorly received. Wether or not its a long term success, Samsung couldn't have made something like that.

 

Even if they kill of the watch in a couple of years, what's the ROIC on it? They've spend, what, $18B in the last 3 years in R&D and another $30B on capex (a period that encompasses the watches development). Most of that is probably the phone, so say the watch cost, I don't know, $5-10B to develop. They sell about 5 million macs and 10million iPads a quarter, say they can sell 3M Watches a quarter at an ASP of $500. That would be a "failure" but would still be $8B revenue a year, plus the strategic benefit for the iPhone.

[DCG]

My question with the iPhone is after the 6S (size increase for those of us with a 5S), where can they go with it to continue to get people to upgrade their phones every could years. They have been relying on the 2-year upgrade cycle. Curious how the recent carrier contract changes will pan out over the next several years.

 

Seems like iPhone battery life (probably intentionally) grinds to a halt after around 2 years, so I guess there's that.

[TheAiGuy]

I don't know but it doesn't really matter. I've got a 6 and when the 7 is out, I'll get it b/c it will mean faster internals, a better camera, probably a better Touch ID sensor, and some other, random new feature Apple has added that seems like no big deal but makes the phone more useful. Siri will be another iteration better as it continues its slow journey from a parlor trick to a really useful interface. I'll probably really like it and it will probably be much nicer than the beat-up 6 I'll have by the time I switch.

 

What am I going to get, an Android phone? Why would I take a step down in quality for the single most useful device I own? Think about how often you're on your phone -- it's several hours a day.

 

Also, the 2-year upgrade cycle thing implies that the power dynamic is such that people care about their cell-phone service provider, and that such service is not a commodity.  The new plans in the US, in which the carrier strips out the phone subsidy and bills it as a separate line item, are just a different way of financing the phone. It won't have an impact if people still want new phones, and they only have a life span of 2-3 years before they really start to show their age.

[rkbabang]

My question with the iPhone is after the 6S (size increase for those of us with a 5S), where can they go with it to continue to get people to upgrade their phones every could years. They have been relying on the 2-year upgrade cycle. Curious how the recent carrier contract changes will pan out over the next several years.

 

Seems like iPhone battery life (probably intentionally) grinds to a halt after around 2 years, so I guess there's that.

 

In addition to making them thinner, faster, and improving the camera (and maybe the screen) every time, they will need to keep adding must have features to keep people upgrading.  They could choose to take a play out of the Microsoft/Intel playbook and add so many features (bloat) to the OS every release that you always need the latest fastest hardware to keep up.

[TheAiGuy]

My question with the iPhone is after the 6S (size increase for those of us with a 5S), where can they go with it to continue to get people to upgrade their phones every could years. They have been relying on the 2-year upgrade cycle. Curious how the recent carrier contract changes will pan out over the next several years.

 

Seems like iPhone battery life (probably intentionally) grinds to a halt after around 2 years, so I guess there's that.

 

In addition to making them thinner, faster, and improving the camera (and maybe the screen) every time, they will need to keep adding must have features to keep people upgrading.  They could choose to take a play out of the Microsoft/Intel playbook and add so many features (bloat) to the OS every release that you always need the latest fastest hardware to keep up.

 

They don't actually have to do that -- they can have Facebook do it for them. Must have apps by large companies update their software constantly, and that can build in obsolesce to the older phones.

[rmitz]

I agree with that. I do have concerns that the growing amount of product lines is starting to get close to the days before Jobs returned to the company and started pruning down products. I worry that they're trying to get into other markets (cars?) just due to the potential size of the market, and not that there's a real need in the market, and something they can make a large impact on.

 

I think this misses *Why* Jobs needed to cut product lines and create focus in the first place.  In his first period with the company, he did not manage to create a culture around his ethos (which isn’t too surprising, since it was still developing at the time—NeXT and Pixar were key).  He had to almost single-handedly (plus a few hand picked folks like Jony Ive) set the direction of the new Apple.

 

Now, the culture exists throughout the company.  Only someone at the top can come in and totally destroy it (IMO). 

[portfolio14]

My question with the iPhone is after the 6S (size increase for those of us with a 5S), where can they go with it to continue to get people to upgrade their phones every could years. They have been relying on the 2-year upgrade cycle. Curious how the recent carrier contract changes will pan out over the next several years.

 

Seems like iPhone battery life (probably intentionally) grinds to a halt after around 2 years, so I guess there's that.

 

In addition to making them thinner, faster, and improving the camera (and maybe the screen) every time, they will need to keep adding must have features to keep people upgrading.  They could choose to take a play out of the Microsoft/Intel playbook and add so many features (bloat) to the OS every release that you always need the latest fastest hardware to keep up.

 

They don't actually have to do that -- they can have Facebook do it for them. Must have apps by large companies update their software constantly, and that can build in obsolesce to the older phones.

 

+1.

 

Wirth's law. This is a critical factor that drove Wintel growth for decades.

 

https://en.wikipedia.org/wiki/Wirth's_law

[rkbabang]

My question with the iPhone is after the 6S (size increase for those of us with a 5S), where can they go with it to continue to get people to upgrade their phones every could years. They have been relying on the 2-year upgrade cycle. Curious how the recent carrier contract changes will pan out over the next several years.

 

Seems like iPhone battery life (probably intentionally) grinds to a halt after around 2 years, so I guess there's that.

 

In addition to making them thinner, faster, and improving the camera (and maybe the screen) every time, they will need to keep adding must have features to keep people upgrading.  They could choose to take a play out of the Microsoft/Intel playbook and add so many features (bloat) to the OS every release that you always need the latest fastest hardware to keep up.

 

They don't actually have to do that -- they can have Facebook do it for them. Must have apps by large companies update their software constantly, and that can build in obsolesce to the older phones.

 

+1.

 

Wirth's law. This is a critical factor that drove Wintel growth for decades.

 

https://en.wikipedia.org/wiki/Wirth's_law

 

Absolutely.  It is not just the processing power & RAM, but it is also the flash storage space as well.  For instance I have a 16GB iPad that is completely full and I already took all my pictures and music off of it. As the apps take up more and more storage space people will upgrade just to go to 64GB then 128, 256, 512....

Better cameras with higher resolution will exacerbate the storage problem as well.

 

New functionality aside there is still a lot of room left to run for faster and faster phones with more and more flash.

 

[TheAiGuy]

My question with the iPhone is after the 6S (size increase for those of us with a 5S), where can they go with it to continue to get people to upgrade their phones every could years. They have been relying on the 2-year upgrade cycle. Curious how the recent carrier contract changes will pan out over the next several years.

 

Seems like iPhone battery life (probably intentionally) grinds to a halt after around 2 years, so I guess there's that.

 

In addition to making them thinner, faster, and improving the camera (and maybe the screen) every time, they will need to keep adding must have features to keep people upgrading.  They could choose to take a play out of the Microsoft/Intel playbook and add so many features (bloat) to the OS every release that you always need the latest fastest hardware to keep up.

 

They don't actually have to do that -- they can have Facebook do it for them. Must have apps by large companies update their software constantly, and that can build in obsolesce to the older phones.

 

+1.

 

Wirth's law. This is a critical factor that drove Wintel growth for decades.

 

https://en.wikipedia.org/wiki/Wirth's_law

 

Absolutely.  It is not just the processing power & RAM, but it is also the flash storage space as well.  For instance I have a 16GB iPad that is completely full and I already took all my pictures and music off of it. As the apps take up more and more storage space people will upgrade just to go to 64GB then 128, 256, 512....

Better cameras with higher resolution will exacerbate the storage problem as well.

 

New functionality aside there is still a lot of room left to run for faster and faster phones with more and more flash.

 

 

+1

 

Also, I'd like to add that this doesn't imply a problem with bloatware or "over serving". Apple could prune its iOS software offerings / iPhone feature set and you would still have all of these problems driving upgrades.

[Liberty]

iOS 9 will actually reduce storage space required for many apps and the OS itself (they call those technologies App slicing and App thinning).

 

http://9to5mac.com/2015/06/09/ios9-app-thinning/

 

iOS 9 will also contain a few power-saving features that will extend battery life on existing iOS devices by around 1 hour, and it'll also have a special low power mode that can extend battery life by a few more hours when you really need it.

 

I don't believe in the "planned obsolescence" conspiracy theories about batteries and such. It would be very easy to prove by anyone looking at the actual batteries used or doing some tests with the software. The reason why batteries degrade is because that's a limitation of current battery chemistry. In a standalone digital camera, you might recharge the batteries every few weeks, so the total number of cycles over a typical year is very low. In a smartphone, most people do at least half a cycle per day, with many people doing a full cycle every day (sometimes more, with charging during the day). That's around 400-800+ cycles after just 2 years...

 

Mobile devices will always have shorter replacement cycles than stationary devices. They are bumped, dropped, cracked, exposed to humidity, salty sweat, end up underwater by accident, etc. They're also a lot more important to the life of a regular person's than a computer ever was, so upgrading is an easier choice. They're also highly visible, and when you pull out an iPhone 4s in public, it doesn't say the same thing as pulling out a brand new 6s, kind of like driving an old beat up car (most here probably don't give a crap about that, but most people aren't like that).

 

Others have already mentioned that software is adding new requirements fast and older devices can't keep up past a certain point. Either the CPU isn't fast enough, or the GPU isn't, or there isn't enough RAM, or they don't have some new hardware feature that is required (NFC, fingerprint sensor, a GPU that can handle the Metal API for game graphics, the motion-detection coprocessor, etc).

 

Another factor in the upgrade cycle is that smartphones are now people's primary cameras. A few years ago, they paid hundreds of dollars for a standalone photo camera, and a few hundred more for a video camera. Now with a phone upgrade they get an upgrade to both. If all your baby pictures and videos look better, that's pretty compelling value right there.

[rkbabang]

iOS 9 will actually reduce storage space required for many apps and the OS itself (they call those technologies App slicing and App thinning).

 

http://9to5mac.com/2015/06/09/ios9-app-thinning/

 

iOS 9 will also contain a few power-saving features that will extend battery life on existing iOS devices by around 1 hour, and it'll also have a special low power mode that can extend battery life by a few more hours when you really need it.

 

I don't believe in the "planned obsolescence" conspiracy theories about batteries and such....

 

I don't believe in any conspiracy theories about battery life, but I do believe that Apple could extend the useful life of its devices by making the batteries user replaceable and by adding a memory card slot or making the flash inside user replaceable/upgradable.  Apple purposefully doesn't do this to drive people to replace their devices. I don't know if that fits the definition of "conspiracy", but it is a decision made by the company, and it seems to be working well for Apple.