Apple’s Services Marketing Advantage

There are a wide array of entertainment industry trends in Apple’s favor when it comes to the changing behavior of consumers and how they consume entertainment. The big shift in winds is coming as cord-cutting continues to accelerate in growth and share of wallet opens up for new digital services that consumers find valuable content with. I wrote yesterday about my optimism for both Apple TV+ and Apple Arcade and had the opportunity to speak with a few friends who work in the entertainment industry, and the buzz is strong in Hollywood as well for Apple TV+ in particular.

What I think is being underestimated at the moment is the advantage Apple has over so many others in this space when it comes to being able to market their services. This point is being entirely underestimated, in my opinion, and the more I’ve thought about this, the more I think Apple’s services have the potential to become a behemoth in its own right.

Apple’s Retail Weapon
I’ve long written about Apple’s retail strategy as a core pillar of Apple’s competitive advantage. While Apple retail itself may not be the driver of most of the sales of Apple’s hardware, it is the single physical place where Apple controls the customer experience from the time a customer enters the store to the time they leave.

I remember when Apple News+ launched, and I was in a retail store a few weeks later. Promotion of Apple News+ was the default screen on nearly every device you could see in the store. It was then I realized how powerful Apple retail stores could be in driving awareness of their services.

If you think about the two companies getting into the digital entertainment business with direct to consumer subscriptions with the largest physical presence and foot traffic, it is Apple and Disney. Apple retail sees over 500 million retail visitors each year, and Disney had 157 million visitors to their parks worldwide in 2018. You could argue that these two companies are the best positioned to take advantage of areas where they have a competitive advantage over other digital services, competing for a share of wallet.

While it is true Disney has much more established brands and franchises at their disposal, Apple has a larger retail footprint and daily touchpoint with over a billion consumers. Both reasons why I consider these two companies best positioned to accelerate the adoption of their digital services in ways others can’t.

I’m yet to see how Disney will promote Disney+ in their parks, but we know it will happen. Interestingly, even with the hugely popular franchises Disney owns, forecasts for Disney+ are in the 60m range by 2021. Now, I think those forecasts are low, but you see how consensus thinking behind these forecasts shows just how difficult it is to scale here and get customers.

Thinking about Apple retail, consider how powerful the daily touchpoint Apple has with its customers from their retail associates. Apple doesn’t just need to have their services promoted on walls or screens in their stores but can also use retail employees to help drive awareness or plant the seeds of their services. Imagine a customer buying an iPad or iPhone and the Apple employee helping the customer simply says, “have you checked out Apple TV+ yet? The Morning Show is great, and I’ve loved the series.” Or have you checked out Apple Card yet? Did you know you get three % back on Apple purchases and daily cashback you can spend anywhere? Application is free and immediate through the app.” It is common to have retailers promote the benefits of their credit cards in their stores, but how Apple can promote Apple TV+ and even Apple Arcade with the help of retail employees feels, to me, a unique advantage.

For Apple Arcade, a service I’m much more optimistic about having seen some of the games, consider how many times you walk past an Apple store and see the iPad tables full of kids playing games while their parents’ shop. Going forward, all iPads can have Apple Arcade there and kids and be exposed to all the games in the library and see the full benefit that Arcade has to offer. Again, it’s the touchpoint of over 500 million customers each year that has me most intrigued with how Apple can use their retail presence to help sell the value of their services.

Again, the scale here feels entirely reachable by Apple when you consider the largest the sheer size of their customer base, the daily touchpoints they have with devices, and most importantly, their retail foot traffic. Netflix, the largest direct to consumer streaming video service, has 148 million subscribers from their latest earnings report. Growth has slowed for Netflix, and I don’t see a sudden burst of new subscribers for them in the coming years. While I don’t think for a second the vast majority of consumers in developed markets are going to cancel Netflix to move to Apple TV+ or Disney+ because the reality is both those services would be additive to Netflix. What should worry Netflix is that Apple and Disney begin to steal time from them, and I think that is a very real possibility. Remember when Netflix CEO said the things that worry him are things like Fortnite that pose a larger threat than HBO. Apple has two things which can steal time from Netflix now in Apple Arcade.

With Netflix at 148 million worldwide subscribers, HBO with 140 million as of the end of 2018, Amazon with over 100 million Prime subscribers who have access to Prime video, it seems entirely reasonable both Disney and Apple have upside here among the same potential numbers if not more.

For Apple, I am watching how they use retail and their daily touchpoints with customers it will be interesting to see how they strike a balance to gentle promotion instead of feeling like its being pushed too hard. While I think retail is Apple’s secret weapon here, I encourage Apple to keep the customer experience front and center and preserve that even as they look to use retail to drive awareness and adoption of their services.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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