Apple celebrated the 10th anniversary of the iPhone with both updates to its existing product lineup and the opening of the Steve Jobs Theater in Cupertino, CA on its new campus with the much-anticipated doughnut or spaceship building.
Apple generates its revenue from selling hardware or products with most of the revenue from iPhones. Convincing consumers both to upgrade and adopt new products is challenging. Moreover, experiences with products are ever more dependent on its ecosystem of partners for content and services. Apple (as always) did an outstanding job of showcasing the experiences consumers can have with its products. It also dropped the price on older (yet still very new) devices to make them more affordable.
Here’s my take on Apple’s three big product announcements of the day:
Series 3 Watch: The Apple Watch has already overtaken the Rolex as the number one selling watch in the world. With the Series 3, Apple continued to build out health and fitness capabilities, and this year’s enhancements focused on the heart – the monitor, EKG’s and more. The combination of fitness apps, GPS, waterproofing, seamless syncing with apps and more makes this a compelling fitness device. Apple also added a cellular radio to the Watch to allow consumers to make/receive phone calls, use Siri, and access the Internet to stream music, for example. The Watch will share a phone number with the iPhone. What isn’t yet clear is if it will demand extra service charges from the carrier.
The Watch keeps getting better and the fitness enthusiast in me can’t wait to get the Series 3. I’m completely hooked on the magic of the existing use cases such as paying, tracking speed and swim laps, getting notifications and more. I look forward to leaving both my wallet and smartphone at home. However, these experiences are unlikely to offer a compelling enough experience that the Watch crosses the chasm from “nice to have” to “I can’t leave home without it” for the vast majority of consumers. Apple needs that to happen to turn the Watch into a substantial revenue stream.
AppleTV: The new AppleTV will have 4K including apps for live sports with personalization features. Apple will also upgrade users’ content libraries free of charge. Apple experiences depend more and more on the quality of content and services from its ecosystem partners. Consumers will be more willing to pay for content whether it is an app, music, video and more if they can use it seamlessly across their own ecosystem of devices in the home, car and on-the-go. The more components or devices a consumer owns, the less likely they are to switch brands. The open question will be the role of apps and how ubiquitous they become across platforms. In addition to Google, Apple competes against Amazon as well as both content and service providers in the home.
iPhone X: The updates to the iPhone 8/8S was the appetizer – and everyone in the audience knew it. After discussing the usual updates, Tim Cook then announced the ‘future of the smartphone’ and key new features weren’t far from the press leaks. Apple’s iPhone X new features include more advanced cameras, FaceID, an AI chip to make the magic happen on the hardware, and more gesture or swipe-based controls. These features will have the most impact on how consumers use the phone for photography (the technology will make us all look like professionals), communication (Animoji), finding/opening apps and gaming. I’m in love with portrait-mode photos and selfies – now portrait-mode selfies – killer. And, finally, Apple introduced its users to wireless charging.
Each time the price increases on the smartphones, we question whether consumers will ante up for new devices. Is there enough new there? Apple has a loyal base of users who will – its customers are accustomed to paying a premium and appreciate the quality of the experience and the seamless integration with other devices they own.
Apple excels at demonstrating the experience consumers can have with its devices. Getting consumers to upgrade devices isn’t easy, and experience improvements will be more subtle as we go forward and are more dependent on AI. Consumers won’t pick up the new iPhoneX necessarily and think it is so much better, but in 2019 they will look back at the iPhone7 and earlier models and think to themselves, “This experience is so much better than the one I had before.”
Written by Julie Ask,Vice President, Principal Analyst at Forrester