Apple Event: Upgrades, Upgrades, Upgrades

on September 11, 2019
Reading Time: 4 minutes

On Sept 10th, at the Steve Jobs Theater, Apple gathered press, analysts, and guests to take a first look at the new iPhone models. During the keynote, Apple introduced the new iPhone 11, the iPhone 11 Pro, and the iPhone 11 Pro Max together with the new iPad 7th Generation and Apple Watch Series 5.

There was a lot packed into the keynote. Rumors seem to be getting better every year, but it is about the final details on how new features and specs are delivered that help you understand the impact these new products might have on Apple’s business and the market.

iPhone

While not immediately evident at the start, it became clear, that iPhone 11 is the new iPhone XR. The name is a smart move from Apple as it simplifies the naming convention but, even more so, because it does not label the product as inferior. You might not be able to afford the iPhone 11 Pro, or you might not see yourself as a pro user, but you do not feel like you are settling for a “second best” product by buying the iPhone 11.

Despite all the concerns about the trade war with China and the impact that tariffs might have on pricing, Apple maintained iPhone 11 Pro pricing in line with last year and dropped the iPhone 11 price by $50 compared to the launch price of the iPhone XR.

While we get excited about the new products, future sales are also driven by iPhone models that remain in the line-up and get a price cut. Apple XR now starting at $599 and iPhone 8 starting at $449 offer two great options for current users who are looking to upgrade.

Upgrades are not just crucial for Apple to drive hardware sales. Making sure the current users base is on one of the most recent iPhone models ensures they can access and benefit from the services and key features Apple is providing from Apple Card to Apple TV+ to Face ID for security.

Missing from the rumored feature set was reverse charging. Your guess is as good as mine as to why we did not see this feature, but I do wonder if Apple thought iPhone battery life might get impacted too much or that charging time was not fast enough to provide a positive experience.

Apple Watch

iPhone XR and iPhone 8 were not the only two products that remained in the portfolio with a more attractive price point, Apple Watch Series 3 did too at $199. Apple Watch 5 will get the press and drive upgrades, but Apple Watch Series 3 will certainly attract new users who have been looking at Apple Watch but were either unclear about the value or they just could not afford or justify the price. I expect Fitbit to be the brand most impacted by the new price point and not only on their smartwatch portfolio but on their bands too.

The new Apple Watch Studio is a great new way to purchase Apple Watch. Customers will be able to pick size, material, and band to create precisely the product they want. This will certainly drive out of the box satisfaction, and I do not expect to negatively impact sales of additional bands as the choice is now so broad and users have started to have specific bands for specific occasions.

Apple also announced three new health research studies and a health research app which proves once again that Apple is committed to making Apple Watch not just a fitness device but a health device. It may seem a subtle difference, but it is about turning a device from being useful to being essential.

iPad

The iPad line up saw a new 7th generation iPad launch at $329 replacing the 6th generation and getting a 10.2” screen and a smart connector for the Smart Keyboard. The new design, coupled with the existing Pencil support offers a device that not only competes with the few Android tablets left in the market but also with lower-end PCs and Chromebooks.

The iPad, which is the most popular model in the portfolio, is often the first Apple device consumers buy. If you have an iPhone and an iPad, the value of having both is clear, but many consumers still see the iPad as a device that delivers a computing experience that is separate from the phone. Researching iPad over the years, I have often seen Android phone users with an iPad, and this has become more the case as the numbers of brands bringing Android tablets to market has been decreasing.

Apple Arcade and Apple TV+

Apple Arcade and Apple TV+ pricing was probably the biggest surprise of the keynote. Both are $4.99 for a family subscription. A pretty striking difference to the $14.99 Apple Music family subscription and $9.99 Apple News+ which maybe just helps to bring home the cost of licensing content and adding your cut on top.

Apple Arcade is the first of its kind as it does not target at core-gamers, but at the much broader casual gamers market, so pricing does not have a real comparison yet.

The super aggressive price of Apple TV+ compared to expectations, but also to other video services, signals a few things. First, it might be that Apple is sensitive that they do not have a track record in video content. Actually, their first attempts at producing content with Planet of the Apps and Carpool Karaoke were not very successful, to say the least. It might also be that Apple does not feel they have enough catalog that would justify a higher price from the get-go.

Second, I think that at $4.99 it becomes less about subscribing to Apple TV+ instead of another service. You are instead deciding between Apple TV+ and a movie rental or a latte. This makes the decision process much easier.

Lastly, being more aggressive on a subscription price has no negative connotation on the brand. This is quite different in the hardware business, where a lower price does impact the way the brand is perceived.

From tomorrow if you are purchasing an iPhone, iPad, Mac or Apple TV, you will receive a free annual Apple TV+ subscription. This is really not about helping devices sales, but it is about giving Apple TV+ an audience.

 

And this brings me to my final point about what we saw from Apple. As hardware and services come together, the value-add from one to the other is no longer a one-way street. We used to see software and services add value to Apple hardware, and now we also see Apple hardware being instrumental to the success of Apple services. Some services have gone beyond Apple hardware: Apple Music recent web-based beta or Apple TV+ on Samsung, LG, and other TVs, and on the web, however, Apple hardware will remain the biggest driver for Apple services uptake. This means that making sure users have the best possible device to get the added value of services might require some different thinking when it comes to pricing. This need rather than market pressure is what you saw Apple respond to this week.