Apple One, which bundles several of the company’s vaunted services together, is a genius move. At best, it saves you money. At worst, it looks like it does.
I think it’s going to be a massive hit for Apple, and will provide a much-needed boost for struggling services like Apple News+ and Apple Arcade. However, it might cause some big headaches in Cupertino, too.
Apple’s transition to a services company came, as Hemingway once said about bankruptcy, gradually, then suddenly. Older Apple fans will remember paying for operating system updates. Newer ones were likely conditioned by monthly payments for their iPhones.
The company’s big shift to recurring subscription fees happened under CEO Tim Cook’s watch. iCloud (which built on its predecessor, MobileMe). Apple Music, Apple TV+, Apple Arcade, and Apple News+. The iPhone Upgrade Program. And so on. All of these, which have made up an increasing part of Apple’s annual revenue, help even out the traditional peaks and troughs of Apple quarterly earnings.
Sure, a holiday quarter with new iPhones is still massive. But those same customers will, Apple hopes, keep shelling out throughout the year.
Apple’s answer to Amazon Prime
For obvious reasons, analysts have cried out for an Amazon Prime-style subscription bundle since the start of Apple’s transition to a service company. And why wouldn’t they? Rolled out in 2005, Amazon Prime became a crazy, against-the-odds success.
The customer-loyalty program was a bravura piece of marketing from Amazon founder Jeff Bezos: It offered “free” shipping that customers paid for annually. That proved alluring enough, but when Amazon began tacking on additional services like movies and music a few years later, the scope of Prime’s brilliance became apparent.
Prime locks people into the Amazon ecosystem with golden handcuffs that they pay for. Plus, Prime customers don’t just give Amazon recurring revenue. They also spend longer on Amazon. They’re getting free shipping, so why not take advantage of it? They’re watching movies on Amazon Prime Video, so Amazon is at the front of their brain when thinking about where to buy a new product. And so on.
The result is a market-defying triumph. As marketing guru Scott Galloway points out in his book The Four, in 2016, overall U.S. retail revenues grew by just 4%, while Amazon Prime revenues surged by 40%. Today, Amazon Prime counts more than 150 million subscribers worldwide.
Apple One can follow that model, even if those Prime numbers might never be achievable. Not every Apple service has so far proven a big hit. Apple News+ hasn’t exactly made waves. Nor has Apple Arcade. Apple TV+ offers some great shows and movies, but its slim library means it remains far from a Netflix-beater or a Disney+ rival.
Apple remains quiet about these services’ subscriber numbers, knowing that investors used to $2 trillion valuations and talk of 2 billion iPhones in circulation will balk at significantly smaller figures.
The Prime formula
But Apple Music and iCloud are proven winners. And by making them the “free delivery” of Amazon Prime, and then surrounding them with other offerings, Apple creates a compelling value proposition.
Let’s say you already spend $9.99 per month for Apple Music and 99 cents for 50GB of iCloud storage. That comes to $11 monthly. For less than $4 more per month, you can get Apple TV+ (usually $4.99) and Apple Arcade ($4.99). Even if you wouldn’t have otherwise thought to subscribe to them, they seem so cheap … why not just take the plunge?
The Family and Premium tier look like even better values. Customers may end up spending more per month. However, because it’s couched as a savings (and, yes, I fell into that trap when describing Apple One), you feel like you’re coming away with an amazing deal. And if you’re already an Apple services junkie, you actually are saving money — anywhere between $6.01 and $24.99 per month.
None of Apple’s services are bad. Apple Arcade and Apple TV+ offer comparatively limited options, but what they do provide is very good. By lowering the cost of entry, Apple gives customers the chance to try out these fledgling services without feeling like they’re specifically paying for that product. It’s a boost to “weaker” services — and it’s all wrapped up in Apple’s philosophy of simplicity.
No more multiple payments per month. Just the one. The Apple One.
Apple One: Problems and solutions
The problem, inevitably, will come from rival companies. Apple is, at present, looking down the barrel of several antitrust investigations. Whether these amount to anything remain to be seen, but they all boil down to the the same anticompetitive argument that Apple stifles its competition.
Within hours of Tuesday’s Apple One announcement, Spotify sprang into action with a complaint.
“Once again, Apple is using its dominant position and unfair practices to disadvantage competitors and deprive consumers by favoring its own services,” the company said in a statement. The argument is that, while Apple can make its services more attractive by lowering its prices, Apple’s 30% cut of App Store purchases makes it hard for rivals to offer similar savings.
As for myself? I’ll undoubtedly be jumping on the Apple One Family tier as soon as it launches. I already spend more than that per month for fewer services. If Apple Fitness+, which launches later this year, looks promising, I could see myself jumping to the Premium tier soon after.
It’s, as the kids say (or did at some point), a “no-brainer.” And that’s exactly what Apple was surely hoping for.