Apple in 2015

I’ve been getting calls from reporters working on end-of-year pieces looking towards 2015. While I always enjoy these conversations, one problem is only a fraction of what we discuss ever makes it into an article. So I thought I’d do a series of posts for Tech.pinions Insiders on what I see in store for some of the major tech companies in 2015. I’m starting with Apple this week, but I envisage doing similar pieces on Microsoft, Google, Samsung and others in the weeks to come (some may spill into January). In this piece, I’ll focus first on Apple’s newer products and services and then cover some of the more established product and service lines.

Apple Watch – fleshing out details, selling tens of millions

2015 will be the year of the Apple Watch. Announced in September 2014, it will go on sale in “early 2015”. Detailed pricing, market positioning, channels for retail sales and many other details remain unknown and the subject of considerable speculation. These details will emerge in the first few months of 2015 and the rest of the year will be about execution. Specifically, Apple still needs to provide key selling points for the Apple Watch, which the original announcement was short on. I think that’s fine – the keynote represents a sort of teaser trailer along the lines of the Star Wars one which debuted recently. The actual announcement and the ads are the key to positioning the device in the market. But retail channels, which may well include quite a few Apple hasn’t used before in non-tech sectors, will be equally important and interesting. I’d expect tens of millions of sales in 2015, but until we know more details about many of these issues I’m not willing to stick my neck out any more than that for now.

Apple Pay – expanding geographic, retailer and bank reach

I’ve written a fair bit here before about Apple Pay and the best summary of my view is Apple Pay will be a slow burn success, as its limited retailer, bank, device and geographic reach will make it an occasional use service for the time being. 2015 will be about expanding the reach of Apple Pay in those four areas. Late in the year, we’ll get more devices that will support it, but earlier in 2015 the key priorities must be increasing retailer, financial institution and geographic reach. The payment card industry in the US is somewhat unique (and backward), and one of the critical questions is whether card issuers in Europe and elsewhere are as eager to get onboard as some US ones have, given lower levels of fraud and fees. It’s possible Apple Pay will remain a mostly US service, which will be somewhat unusual for Apple, but it will be most transformative if it finds success overseas as well.

Beats – building iTunes 2.0

Apple’s Beats acquisition has long since closed, but it likely won’t be until 2015 we see what the company plans to do with the assets it acquired. It’s fairly clear to me the Beats music service technology will eventually be repackaged and rebranded and form part of what I think of as Apple’s iTunes 2.0 relaunch for music. From various public statements by musicians, it appears Apple is creating a new kind of music service; more artist friendly and beyond the music itself. The Beats acquisition was clearly part of making that happen. The timing is uncertain, but I’d guess it’ll be in the first quarter of 2015 we’ll start to see what Apple has in store in music. The other side of all this, of course, is what Apple does with the Beats headphone brand. We’ve already seen the first Apple-owned Beats headphones, but there were no signals regarding a new direction. The most interesting things to me are what Apple does beyond the current Beats brand and segment, if anything, and how Apple builds value with iPhone-specific functionality, such as using the Lightning port rather than the headphone jack as a connector.

HomeKit – 2015 is the year, after a very quiet 2014

Though HomeKit got some good stage time at WWDC, Apple has been quiet about it since. It didn’t get any coverage at all at the iPhone launch event in September and, aside from a couple of forward-looking announcements from hardware vendors, there’s been little activity from third parties either. The main reason was Apple didn’t provide the necessary components in terms of chips until November 2014, so 2015 will also be the year when smart home devices supporting HomeKit and Siri integration begin to show up in large numbers (we might see one or two launch before the end of 2014). I’m very curious to see whether Apple starts to make more of HomeKit as this happens, too – it’s been oddly quiet until now. The other interesting question is will Apple makes its own HomeKit hardware and whether it will be a hub or other function-specific devices for the home. The Apple TV might be a trojan horse for the hub functionality, but there have been signs Apple might be working on its own separate hardware, too. As it stands, HomeKit is mostly about adding value to the Apple ecosystem, but a direct push into hardware would have the potential to drive significant revenue too.

iPhone – massive growth, but hard to follow?

The iPhone should see massive growth in 2015. All the indications from Q3 reported results and early signals from third parties suggest it will have a huge end of year and this should easily spill over into 2015, especially given the supply constraints around the iPhone 6 Plus in particular. 2015 will easily be the iPhone’s biggest year ever and will likely drive a significant increase in share at the premium end of the market, at the expense of Android as a platform and Samsung as an OEM. The biggest question for me is what competitive levers Apple has still to pull in 2015 when it launches the successors to the iPhone 6 and 6 Plus. Can it possibly deliver as big a bump in 2015-2016 as it did in 2014-2015? That’s a nice problem to have, of course!

iPad – the year we discover its future

The iPad’s stagnating sales have been a topic of endless discussion with multiple pieces from me and others here on Tech.pinions and elsewhere. To my mind, 2015 will be the year we find out whether my thesis about upgrade cycles is true or not – it’s the five year anniversary of the product, and the four year anniversary of the big ramp in sales that happened with the iPad 2. If my thesis is correct, we should see a ramp in sales in 2015, as upgrade rates increase and new sales continue to be strong. If that happens, I foresee a good long term picture for the iPad as a growth driver for Apple. If it doesn’t, it’s hard to see how the iPad will grow significantly beyond its current size as a business for Apple. It’s an enviable business, to be sure. One interesting wrinkle is the possibility of a larger-screened iPad, perhaps at 12 inches, potentially with some sort of split-screen multitasking. I don’t see it enormously increasing the addressable market, but it might be a way to get sales growing again even if upgrade rates remain relatively low.

Mac – after a surprisingly good 2014, what next?

The Mac surprised many observers in 2014, especially in Q3, with its strong growth and sales performance. Apple’s share of the PC market continues to grow and it’s one of only two major suppliers (along with Lenovo) whose fortunes seem to be consistently improving. As others exit the PC market, Apple is bucking the trend with high ASPs and growing sales. All the drivers of the Mac’s successful 2014 are still in place, and I’d expect it to continue to grow its share of the PC market in 2015, which should put it on solid footing going forward. But it’s a stagnating and likely declining market as a whole, and it’s unclear to me how long the Mac can keep growing in that overall environment.

iPod – RIP, 2001-2015?

Sales of the iPod continue to drop rapidly, though Apple continues to sell several million every quarter. As the iPad becomes the device of choice for many (especially kids) who would have once asked Santa for an iPod touch, and as hand-me-down iPhones meet the needs of many others, it’s unclear how long the iPod line will go on. With no significant upgrade in quite some time, and with the iPod Classic finally killed off in 2014, how much longer will the iPod stick around as a product? I think it’s quite possible it will finally be dead in 2015.

iTunes and the App Store in transition

I’ve already talked about the potential for new music services from Apple using the Beats technology. But of course, iTunes is far more than that, especially if you include the App Store in the conversation. Music sales have been declining for some time now and I suspect video sales haven’t been growing as rapidly either, as subscription and streaming content become the preferred methods of consumption for many users across both music and video. The App Store is the shining light here, driving overall growth and offsetting the decline in traditional content revenues. That growth will likely continue, driven by both the ever-expanding base of Apple customers and by growth in in-app purchases, which appear to be driving up revenue per app download after several years of declines. I think so many of us want for Apple to disrupt TV in the way it has other industries, but I’m increasingly skeptical it has the skill set and will to do so. But unless it moves to some kind of subscription video service, I would expect its video sales and rentals to start to stagnate soon too, if they haven’t already. I’m also still hugely skeptical that Apple will ever make a TV set.

2015: Tim Cook’s year

In summary, I think 2015 is best seen as the first year when products overseen by Tim Cook will really drive Apple’s revenues and growth. It’ll be a great test of his leadership and his ability to continue Steve Jobs’ legacy of creating great products which not only delight customers but drive significant growth and profits for Apple as a company. And of course, Tim Cook has hinted there are products in the works which people aren’t even speculating about, so there could still be some significant surprises coming in 2015!

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

5 thoughts on “Apple in 2015”

  1. I do think that you are very overoptimistic when it come to Apple in 2015, by expecting a perfect year.

    when it come HomeKit something tell me that Apple will introduce a me too Thermostat in partnership with utility provider to compete head on with Nest in their own turf.

    other than that i do not expect the IPhone and the Mac line to continue the same momentum during the entire 2015 i expect some bump in the road

    besides Good analysis

    1. I don’t think anything above suggests a perfect year. There are still big questions about the iPad, and although iPhone will grow hugely in the first three quarters of 2015, I wonder about whether Q4 will match this year’s. I don’t see Apple launching a me-too thermostat – if they get into the space at all, they’ll do it in the classic Apple way. Nest was likely their best short-term opportunity to get into smart home hardware, but I’ve no doubt they can do at least as well on their own given time (if indeed they choose to pursue this opportunity).

  2. An excellent analysis across multiple Apple products. A very interesting area to me for 2015 are apps within the home and what the controlling device and OS will be.

    I was very excited when iPads arrived, but all the top selling paid apps are games and I see young children spending much more time on them now. With an iPhone 6 Plus, I am having a harder time rationalizing the need for a tablet. Communication (esp Messaging) apps are clearly critical and pervasive on all platforms now.

    I will be interested to see the % of growth next year for laptops vs. desktops vs. 2 in 1s. I think that tablets could easily be squeezed by lighter clamshell devices as well as phablets. How will Apple position their next Macbook Air vs. the rumored iPad Pro?

  3. Excellent as always and another reason why the ‘X-Phone is better than iPhone’ conversation has more teeth. But I noticed you omitted two things from Apple’s 2015 growing list of projects: CarPlay and Apple TV.

    Similar to Apple Pay CarPlay will also be a ‘slow burn’ initiative but could be yet another feature that separates Apple from the competition when consumers are choosing an ecosystem that can do it all. Laptop, smartphone, smartwatch, smart-car, smart-home, tablet and TV.

    As far as I know Microsoft lacks competitive offerings to CarPlay (or smartwatch, smart-home or TV for that matter) and Google’s Android Auto is limited to devices running Lollipop so Apple has a chance to be more successful in this space so long as automakers buy in.

    From what I’ve read what’s really stopping Apple from expanding Apple TV is all of the content deals they have yet to muster in order to deliver a truly standout product. With Chromecast (which I recently purchased and really like), Roku, Fire TV and eventually a TV box/stick loaded with Lollipop, the last thing the world needs is yet another piece of hardware that streams Netflix and HBOGo. But because there’s so much red tape I don’t know if Apple will be able to craft the perfect solution. I don’t know… maybe Iovine has the inside track on those things.

    We also can’t ignore the gamepad controller features they packed into iOS 8 as well as Apple’s acquisition of the company that built Xbox’s Kinect camera that could make the next iteration of the Apple TV a true competitor to the PS4 and Xbox One.

    All-in-all I can imagine a future where I’m talking to Siri to find content across apps and channels, using the Digital Crown on my Apple Watch to adjust the temperature or lock the front door while engaging in a FaceTime call from my TV that’s tracking my head and voice as I walk around the room.

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