Category: Apple

During last week’s Apple event, Tim Cook said (among other things), “The future of TV is apps”. But he also spoke about what I’ve referred to elsewhere as Apple’s playbook, a set of five features that characterize all of Apple’s operating systems. One of these five was the App Store concept. Ever since the debut of iPhone OS 2 in 2008, apps have become an increasingly central component of the user experience on all of Apple’s devices. In fact, I’d argue apps are Apple’s fundamental units, the building blocks of which its various user experiences are built. I’m going to talk about what this means and both the strengths and some of the shortcomings of this approach.

The original iOS – apps only

For a long time, essentially the only functionality in iOS lived within apps themselves. For the first year, those Apple supplied with iPhone OS 1 and, subsequently, the combination of Apple’s apps and those that users installed from the App Store. The only exceptions were notifications and alerts associated with some of Apple’s apps, notably Phone, Messages, and Calendar. Over time however, Apple has allowed some of this functionality to migrate out of those apps, including the use of third party push notifications, widgets, Spotlight search, and Siri. Despite these extensions of functionality outside of app containers however, all these features still required the installation of apps that appeared on a home screen. That has huge benefits from a user perspective – you only ever experience things you’ve explicitly installed, those things can’t talk to each other without your permission, and you can easily uninstall them at any time. Add in the review process for the App Store and you get a guarantee, of sorts, that anything you do install in this way won’t misbehave.

Keyboards and content blockers, and Apple Watch

Last year’s release of iOS 8 brought a new category of apps to iOS: third party keyboards. This could have been an opportunity for Apple to change the app model to allow some functionality to exist in containers not defined by rounded rectangles sitting on a home screen – after all, these keyboards would only really exist as input methods within other apps. And yet Apple implemented these apps, too, in the same basic way. They then followed this same pattern with content blockers in iOS 9, released to the public yesterday. Like keyboard apps, these apps basically only exist to provide functionality within other apps and have no meaningful existence outside of them, but they also show up as app icons on a home screen.

With Apple Watch and what we might now think of as WatchOS 1, Apple also used this same “functionality=app icon” approach. In order to use an app on your Apple Watch, you had to install the companion app on your phone first. This led to a third situation in which you didn’t need an app icon on your home screen at all, but had to have one because of functionality you wanted to show up somewhere else – as an alternative keyboard, as a content blocker in Safari, or as an app on your Watch.

3D Touch builds on top of apps

The headline feature for the new iPhones Apple introduced last week is 3D Touch, which provides new ways for iPhone users to navigate around and interact with elements in iOS. However, what’s striking about 3D Touch to me is it’s very app-centric approach. While others – notably Google – are working hard to provide experiences that transcend apps (for reasons that are at least in part self-serving), 3D Touch reinforces the role of apps in the Apple ecosystem. In fact, 3D Touch only works in two contexts today: on the home screen, where users can deep press on app icons to access functionality normally buried within those apps; and within the apps themselves, where 3D Touch provides faster access to functionality normally buried a layer further down. Neither of these functions works without the apps themselves, whether Apple’s own or the third party apps that choose to support it.

The “junk drawer” problem

All this leads us to a Buzzfeed article written this week, in which John Paczkowski has a 20-minute conversation with Tim Cook on the way to a surprise drop-in at the 5th Avenue Apple Store in New York. During this conversation, one of the questions Paczkowski raises with Cook is, “Why are there apps on iOS I can’t delete even though I never use them?” Tim Cook’s response is interesting and fits right in with what we’ve been talking about. Hey responded with, “There are some apps that are linked to something else on the iPhone. If they were to be removed they might cause issues elsewhere on the phone.” Cook goes on to talk about the other apps that don’t fit this pattern and to suggest some of these might become optional downloads over time.

But that first part of the answer gets at the fundamental issue here: because apps are essentially the repository of almost all functionality on the iPhone, we have a variety of apps that exist almost entirely because they provide that functionality somewhere other than inside the app itself – whether that’s the Stocks app providing the data for its widget or the Weather app serving up the current temperature to a complication on the Apple Watch or other examples I mentioned earlier. At some point, it’s worth asking the question whether Apple’s fundamental model for apps should change, to allow some functionality to exist in some other layer – e.g. as an item in the Settings app – so as to allow a decluttering of the home screen. The key advantage of the current model is it’s always utterly transparent when you’ve installed an app and how to get rid of it. But the disadvantage is that, because of this transparency, you’re often hiding what I might call these “headless apps” in folders, making them harder to uninstall than if they were squared away in the Settings app or somewhere less obtrusive.

A different solution to the growth of pre-installed apps

I suspect the reality is most users don’t care an app is pre-installed per se, but that its icon is taking up what they consider valuable real estate on their home screen. Remove the app icon from the home screen, and the problem would largely go away. Apply this same model to some of these new types of apps – keyboards and content blockers – and you’d allow users to further declutter, something Apple itself has always prized. I wrote an Insiders piece here a couple of weeks ago about the growing number of pre-installed apps (including two new ones in iOS 9), and this approach would go some way toward mitigating the impact of this growth and the attendant filling up of our home screens. Intriguingly, one new app in iOS 9 gives users the option of whether to display it on the home screen – iCloud Drive is turned off by default, but can be turned on through the Settings menu. Two other apps – News and Podcasts – can be prevented from showing on the home screen, even though they show by default. This approach might be another interesting one for some of Apple’s own apps, if not third party headless apps.

Apple announced a lot of new products at its big event on Wednesday – new iPhones, new iPads, a new Apple TV, and new Apple Watches and bands. But in some ways, the most underestimated announcement Apple made is going to be the introduction of the iPhone Upgrade Program.

Apple’s own device installment plan

In case you missed it, the iPhone Upgrade Program is Apple’s own implementation of installment billing for phones. If you’ve been reading Tech.pinions for a while, you’ll know I’ve written about these installment plans a few times over the past eighteen months. In this piece, I wrote the installment billing plans carriers were beginning to introduce could end up coming back to bite them. The reason? Customers no longer needed the carriers to subsidize phones and were, in fact, being trained to pay for their own devices in installments. Apple, Samsung, and potentially other device vendors might eventually introduce their own similar plans and that could be bad for carriers.

Fast forward to this week and, sure enough, Apple has finally done what I first said it should do a year and a half ago. So why is this a big deal? Well, the reasons are fairly simple: it allows Apple to take over the primary relationship with the customer, relegating the carrier to a secondary role in relation to their device purchase. Yes, you’ll absolutely still have a direct relationship with the carrier, but it will now be exclusively around the service plan and you’ll no longer be dependent on the carrier for upgrading your device. You’ll now be able to put your carrier on autopilot while you have a much more active relationship with Apple, upgrading annually on a set schedule.

More predictable iPhone sales, fewer churn opportunities

For Apple, this is a great arrangement because iPhone upgrades become much more predictable and it gains much greater visibility over future iPhone sales as a result. This should also help to stabilize Apple’s revenues from quarter to quarter, depending on how it ends up accounting for these leases. But more importantly, Apple now avoids the situation where an iPhone customer looking to upgrade wanders into a carrier store to check out new iPhones and winds up walking out with a new Samsung instead. Apple basically protects itself against the threat of competitive switching with these users, who will never even go into a carrier store in the first place.

Carriers risk higher churn

From a carrier perspective, things get worse rather than better. Yes, they forgo the expense and risk of financing the user’s device. But they also lose that primary relationship. With two year contracts going out of style and customers now no longer locked into device payment plans, the risk of churn goes up significantly, since customers on the iPhone Upgrade Plan can take their unlocked devices to another carrier whenever they want to. Since carriers still discount service if you bring your own phone, these customers will get the same deal on their service plan as if they were getting their device through the carrier, but without the lock-in.

A better deal than it might seem

To be sure, Apple’s pricing for this service is a little higher than most of the installment plans and leasing options out there today, at $32 per month for an annual upgrade, something Sprint’s CEO was keen to point out on Wednesday. But it includes AppleCare+, something which would cost a few extra dollars a month on a standard carrier plan and therefore the difference isn’t that great. In fact, customers on the iPhone Upgrade Plan will pay $768 over two years and get new iPhones both years, while paying off a new iPhone on a 24-month plan would cost $650 over the same period, but you’d have an older iPhone for half that time.

Bigger iPhone sales in countries without subsidies

The other interesting thing about the iPhone Upgrade Plan is that, even though it’s starting out as a US offer, it will spread to other markets over time, including some where carriers don’t subsidize devices and where the iPhone therefore suffers from its premium pricing. In some of these markets, Apple’s leasing plan will give the iPhone a significant boost versus historical performance and market share. It’s too early to know how big a boost, especially since we don’t yet know the timing for new markets, but it seems likely this will factor into the big upgrade cycle Apple seems to be anticipating for the iPhone this coming year.

Even though the carriers have largely celebrated the end of subsidies and the move to installment and leasing plans, it’s quite possible the carriers have opened the door to a trend that may well come back to bite them. They’ve both weaned customers off subsidies and trained them to buy their devices outright in monthly installments and, in the process, they’ve played right into Apple’s hands. They might well rue the day they embraced the move away from subsidies.

It’s now widely expected Apple will announce new Apple TV hardware next week, alongside new iPhones and possibly other products too. The headline feature for the new hardware are significantly beefed-up specs which, in turn, will enable the creation of a wide variety of third-party applications including games, through an open SDK.

Ahead of next week’s announcement, I want to look at the potential for a new Apple TV to transform not just gaming but also video consumption.

Bringing casual gaming to the console

Back in 2006, Nintendo launched the Wii with a stated mission of expanding the number of console gamers (and therefore console buyers). The device was enormously popular. Both the controller and the kinds of games offered were breaks from past patterns and from competitors’ offerings at the time. As such, the Wii sold enormously well for several years. By enabling gaming on the Apple TV, Apple is arguably aiming at a similar strategic objective: taking console gaming beyond the hardcore gamer and expanding the market dramatically. However, Apple isn’t the first company to try this but why should it fare differently when all the others (Amazon, Ouya, etc.) have essentially failed?

Well, for one thing, Apple is bringing one of the largest bases (and arguably the single most lucrative existing base) of casual gamers to the table. iOS on iPhones and iPads is second only to Android in size and likely generates more direct revenue than Android from games and from apps in general. Games are already by far the most popular category on the iOS App Store and typically take up the vast majority of spots on App Store charts. Apple has cracked casual gaming – and specifically the monetization of casual gaming – in a way no one else has. The App Store grosses close to $5 billion a quarter already and, over the next year, will likely generate more than $20 billion in gross sales with 70% of that going to developers and 30% to Apple. Games likely account for over half this revenue, so that’s a significant revenue stream in its own right for both Apple and its developers. None of the others who have tried this approach have had this sort of base of users, developers and – importantly – revenues when they did so.

The thing that sets Apple apart from Nintendo, meanwhile, is that though Nintendo changed some aspects of the console model with the Wii, it left the fundamental business model largely unchanged. The Wii itself was expensive hardware and games continue to be priced very high, as console games always have been. Apple, meanwhile, has an opportunity to bring the low-cost app sales model from iOS to the console, alongside that base of users and developers and a proven revenue model. I’m intrigued by the possibility for the definition of “Universal” apps on iOS to expand to include the Apple TV. And there’s also the interesting prospect of cross-platform gaming, with one participant in social gaming using an Apple TV while others use iPhones or iPads.

Big questions for gaming on the Apple TV

The big questions to my mind about the Apple TV are:

• How easy it will be for existing iOS game developers to port their apps?
• How effectively the controllers Apple offers (whether the new remote, iOS devices paired to the TV, or new custom controllers) work for gaming on the device (other TV-centric boxes have floundered on this point)?
• How will Apple stimulate sales such that there are enough users to attract developers and how it will incentivize developers to get a quick start so as to drive interest from consumers? Without many games, there will be little to attract users to a more expensive Apple TV box and, without many users, the Apple TV will be a far less attractive platform to developers than iOS.

These points are also interrelated, of course – ease of porting apps will drive developer interest while the effectiveness of the gaming experience on the platform will be critical to both developer and user interest. But I think it’s entirely possible Apple will create a huge new opportunity for itself and developers around the Apple TV, based on gaming alone.

Don’t ignore the content opportunity

However, I think focusing on gaming alone misses a big part of the opportunity Apple will create here. Remember, although the Apple TV has been in the market for a number of years, Apple has always been the gatekeeper for the third party apps that make their way onto the box. As such, though there has been significant growth in the number of apps on the Apple TV, it still pales in comparison to Apple’s other platform or even other set-top boxes such as Roku. Major TV and video apps notably absent from the Apple TV include Sling TV and Amazon Instant Video, both of which are present on iOS. One of the attractions of the Roku box in particular has been they offered essentially every video app except Apple’s own, including Netflix, Hulu, Amazon and many others. In a world where usage has been gravitating towards streaming, Apple’s own iTunes store has become less relevant to many consumers.

Neutralizing some competitive advantages and opening up new business models

An open Apple TV SDK also unlocks the door to these popular streaming services, some of which Apple has likely kept off the box for competitive reasons. That may be a downside for Apple, but it should actually make the box more attractive, especially in the period before it launches its own video streaming service. But there’s also a very long tail of more specialized content which could never make its way onto the Apple TV under the current model but might well do so under an open model. Two categories in particular are worth noting. One is the Religion category on the Roku which offers some of the most popular channels, suggesting that some users interested in this content are drawn to the Roku because they offer it. But another category – Fitness channels – might be more lucrative, both for developers and for Apple. Both the Roku and the iOS App Store offer an increasing range of fitness channels and apps respectively. These have some interesting business models associated with them. Rather than buy gym memberships or hire personal trainers, people are increasingly turning to digital subscriptions to fitness and training content. The Apple TV seems an ideal home for this sort of thing. Interestingly, even Craig Federighi mentioned during a demo at WWDC this year he starts the day with a meditation app, which would also be a great fit for the TV. There are lots of business models around video content the Apple TV has hitherto not supported. An open SDK would allow this and, in turn, could drive significant new revenue.

New interfaces required

In time, it still seems highly likely Apple will launch its own TV service but, until it does, there will continue to be many third party TV and video apps on the Apple TV. On the iPhone and iPad, however, this situation is already leading to large numbers of separate, disconnected apps which consumers have to access to find the content they want to watch (see Ben’s piece from earlier this week for his screenshot of video apps on his iPad). The Apple TV is already a little unwieldy with its many icons for different kinds of video content, and this will only get worse with an open SDK. As such, Apple needs to evolve the UI for the Apple TV significantly and the most important feature it could introduce to help with all this is universal search. On the day I’m writing this, reports have emerged the new Apple TV will indeed have universal search and I think that’s critical to the success of the device when it comes to video. Being able to search for specific content first, rather than have to guess at which app might contain it, will dramatically improve the experience. Some of the enhancements to Spotlight search on iOS announced at WWDC should make their way into the Apple TV too, allowing the search function not only to find content within apps, but deep-link directly to it. Allowing Siri on the Apple TV to perform some of this searching without clunky text input through a remote is another critical feature and one I’d expect to see next week.

One last thing I think an open SDK could allow, beyond what has currently been possible on the Apple TV, is interactivity around TV. Competing boxes including the Amazon Fire TV already provide some of this, but I think there’s room for significantly more innovation in this area. Bringing up information about actors on screen, showing two alternative viewing angles side by side for sports events, showing related content from favorite blogs, news sites, or social media, and many other possibilities become available when app makers are free to experiment with how they present their content rather than being constrained by Apple’s traditional UI for third party Apple TV apps.

Timing the last big question

The other big question is timing. Every time Apple has either created a new product with an SDK or released an open SDK for an existing product, it has given developers several months to create apps for it. Given that Apple is announcing the new Apple TV next week, when will it actually go on sale and will that give developers enough time to create compelling apps for it? I’m sure Apple would like the box to go on sale before the holiday gift-buying season starts in earnest, which probably means a November launch, but that seems like a very short window for developers, unless porting their apps really is trivial. The new box is reportedly based on iOS, which should help, but I suspect it may be into early 2016 for some of the better apps for the Apple TV to land.

A few weeks ago, I wrote a piece for our Insider audience that talked about Amazon’s new Echo device. I said I saw the Echo as a Trojan Horse Amazon could use to help them gain a stronger place in the home, especially when it comes to home automation and IoT.

I put the Echo on my kitchen counter and, using voice commands, I ask it all kinds of questions regarding things like the weather, news, play a specific song, turn on lights, etc. One of the handier features is to tell it to put an item on my shopping list and, when I go to the store, I just pull up the Echo app on my iPhone and all the items I told the Echo is on the list.

The more one uses it, the more becomes clear Amazon’s Echo is on to something. It has become an important cornerstone of a bigger strategy Amazon has in mind. They have published the APIs so third-party device makers and software vendors can support it. This is especially true for things like controllers for light switches, thermostats and makers of electronic door locks. I suspect Amazon will offer a whole home security system tied to the Echo as this would be a great application for it. The Echo has the potential of being a digital control center for the home and, when tied to their mobile app, it could some day allow for a complete, centralized remote solution to manage all of the digital connections one has in their home.

As it turns out, this idea has been floating around for some time. In fact, if you look at the original Knowledge Navigator video Apple produced in 1987, it actually had some elements of this concept in it, albeit the example was around an education/research metaphor instead of the home.

Given Apple’s long history with the idea of using a TV/computer voice command system to navigate around digital data, I would not be surprised to see Apple making that a key part of their new Apple TV platform that included HomeKit apps and voice commands as part of its design. If so, this would be Apple’s answer to the Echo and it too could become an important strategic “Trojan Horse” for Apple. However, Apple could have quite an edge over Amazon given Apple’s rich iOS. I am sure it would sit at the center of their new Apple TV. A powerful SDK would let developers create apps for it and, using HomeKit, create all types of connected home devices that would be controlled by voice through an Apple TV box.

Sure, you could also handle the voice commands on the iPhone via Siri but, in the home, people do not carry their phone with them all of the time. Many times it is set on a desk, counter, etc. However, if the TV is in a centralized place where all one had to do is say a voice command and Apple TV handles it, then the function of Apple TV and this interface would add a new dimension to the overall man/machine interaction within the home.

That is one of the cool things about Amazon’s Echo. As I point out in the Insider piece on Amazon’s Echo I refer to above, this device is small and blends into its surrounding. But all I have to do is use the command “Alexa” to turn it on and it is ready to respond to my voice commands. At the moment, the Echo’s abilities are limited but that is where Amazon is hoping to get strong support by third party vendors who would create apps and connected devices that would work with it.

However, Apple already has an army of software and hardware developers well schooled in how to create apps and devices for iOS and it would be relatively easy for Apple to tweak the current SDKs to give them another great platform to create and control innovative apps and products for the connected home integrated into Apple TV. Now, I have no clue if Apple is doing this in a new Apple TV they reportedly will release this fall, but it would not make sense for Apple to do a stand alone box for this purpose. On the other hand, an Apple TV would be the ideal vehicle for delivering an Echo-like experience connected to HomeKit and add these functions to make it a centralized voice command center for handling TV, music, connected devices and information on demand services.

The more I use Amazon’s Echo, the more I like it, even with its current limitations. It has serious potential if Amazon can get third party developers to back it. But Apple could one up Amazon if they added this type of capability to their TV device/platform and give this box a new level of intelligence that uses voice for people to access information and control their home automation. If they do they could have another big hit they could add to the ones already driving Apple’s very large profit engine.

AUTHOR’S NOTE: I do not know the source of this outstanding analysis, but I got it from Ben Thompson, HERE, and I will attribute it to him until such time as I’m advised otherwise.

ADDENDUM: Ben Thompson has informed me that the brilliant “Omniscience, Omnipotence, Omnipresence” analysis upon which I built this article was original to him. Outstanding!

Study the past, if you would divine the future. ~ Confucius

1) Four Ages: Hunter/Gatherer, Agrarian, Industrial, Information

It is generally accepted that the age of “Modern Man and Woman” began around 150,000 years ago.

— The Hunter/Gather Age lasted about 140,000 years.

— The Agricultural Age lasted about 10,000 years.

— The Industrial Age lasted about 300 years.

— The Information Age began about 30 years ago.

As you can tell at a glance, the Ages are occurring at an ever accelerating pace. Ideas beget ideas.

When it comes to global standards of living, history resembles a hockey stick resting on its side. ~ Marian Tupy

CAPTION: Real GDP from 1 to 2008 BCE

Humans are distinguished from other species by our ability to work miracles. We call these miracles technology ~ Peter Thiel (@peterthiel)

CAPTION: Life Expectancy In England From 1540 to 2011

There was a time when people owned one suit and no other garment at any given time. Only a century ago. ~ Horace Dediu (@asymco) 11/1/14

If you’re yearning for the good old days, just turn off the air conditioning. ~ Griff Niblack

If you think you have it tough, read history books. ~ Bill Maher

The Agriculture Age multiplied our food. Farmers could grow enough food for themselves, and have a surplus to sell to others. This allowed for the rise of cities and civilizations.

The Industrial Age multiplied our muscle. A single person sitting in a bulldozer could do the work of thirty, and do it while exerting much less back-breaking effort.

The Information Age is multiplying our minds. A single mind can crunch calculations in seconds that a thousand clerks could not have completed in a decade.

For me, a computer has always been a bicycle of the mind. Something that takes us far beyond our inherent abilities. ~ Steve Jobs

2) The Information Age

My 7 year old just asked “Does B.C. mean before computers?” ~ Micah N Gorrell (@_minego) 6/14/15

The Information Age — which only just began 30 years ago ((Contrarians often contend that one age has not yet ended, which means the next age, or stage, could not yet have begun. However, when a new age or stage begins, the other age or stage does not disappear, it simply diminished in importance. A new — more important — layer is added atop the last.
—
Man and womankind did not stop hunting when the Agricultural Age began. Neither did they stop growing food when the Industrial Age began. Just the opposite — they grew food at an every faster pace.
—

The farmer since 1800 has become more productive in the United States by a factor of 36. -Deirdre McCloskey

—
The same is true of the Information age. Just because we’ve left the age of desktops and notebooks does not mean that they’ll disappear, anymore than agriculture or industrial machinery disappeared.)) — is already in its third stage.

Stage 1: Omnipotence

The computers of the 1980’s and early 90’s were all about Omnipotence — the promise of computing power. The combination of Microsoft, Intel and Moore’s law, kept computing power doubling and re-doubling, seemingly ad infinitum.

Stage 2: Omniscience

The mid-ninties brought us Omniscience. The combination of the Internet and Google Search put all the knowledge of human history at our fingertips. Some of us were less-than-impressed with how we actually employed this seemingly god-like power ((“I have a device in my pocket containing the sum of all human knowledge…
…I use it to view pictures of cats, and start arguments with strangers. ~ Phil Veal
—
I’ll use a quote from Steve Jobs to respond to the pessimism expressed, above:
—
Tools are always going to be used for certain things we don’t find personally pleasing. And it’s ultimately the wisdom of people, not the tools themselves, that is going to determine whether or not these things are used in positive, productive ways. ~ Steve Jobs)) but no objective observer can deny that our ability to rapidly and accurately search the internet was a giant leap forward in the way in which humans gained access to their shared storehouse of knowledge.

.
CAPTION: The main file room at FBI headquarters in Washington DC, 1944 (via LIFE)

Stage 3: Omnipresence

The smartphone industry compressed 25 years of PC industry history into 5. ~ Benedict Evans (@BenedictEvans) 11/12/14

The third stage of the Information Age was initiated by Apple in 2007 and 2008 with the introduction of the iPhone and the App Store, and extended by Google with the introduction of their free Android operating system.

TOUCH USER INTERFACE

Pundits underestimate the revolutionary power of the intuitive smartphone user interface — probably because we’re old. Remember IT departments? Kid’s don’t.

An entire generation is growing up without knowing what ‘I don’t have local admin rights’ means. ~ Benedict Evans on Twitter

Teaching a teenager how to use a smartphone is like giving a fish a bath. ((Shamelessly stolen from Arnold H. Glasgow: “Telling a teenager the facts of life is like giving a fish a bath.”))

Using our fingers — using touch as the primary input method — seems so natural, so obvious, to us now. But it wasn’t at all obvious in 2006.

So much of what we try to do is get to a point where the solution seems inevitable: you know, you think ‘of course it’s that way, why would it be any other way?’ It looks so obvious, but that sense of inevitability in the solution is really hard to achieve. ~ Jony Ive

Microsoft and Blackberry made smarter and smarter user interfaces. But we didn’t want a smarter user interface. What we wanted — and what Apple gave us — was a user interface that makes US feel smarter. A user interface that makes us feel better about ourselves. A user interface that makes computing FUN and something we want to do, even when we don’t have to do it. The iPhone user interface gave us all that…and more.

APP STORE

People sometimes forget that the iPhone was introduced in 2007 and that it took another year before the App Store was introduced.

It will take until February (2008) to release an SDK because we’re trying to do two diametrically opposed things at once: provide an advanced and open platform to developers while at the same time protect iPhone users from viruses, malware, privacy attacks, etc. This is no easy task.,” Jobs wrote on Apple’s Hot News page. “We think a few months of patience now will be rewarded by many years of great third party applications running on safe and reliable iPhones. ~ Steve Jobs (Quote provided via Mark Rogowsky, of Forbes)

Talk about an understatement.

The powerful one-two combination of the iPhone/App Store — like the powerful combination of Microsoft Windows/Intel and the combination of Internet/Google Search — created a wholly new category of device that was so small, so easy to use, and so easy to enhance via seamless — and inexpensive — access to software programs known as “apps”, that almost every person on Earth could — and more importantly, every person on Earth would want to — carry it with them at all times.

Removing what seems like trivial friction can have an enormous impact on how useful a product is. ~ Benedict Evans (@BenedictEvans) 6/18/15

How true. But the App Store removed more than trivial friction. It removed an entire dam of frustration and unleashed a virtual flood of innovation. How quickly we forget that, in 2007, if we wanted to install software on our computers, we used to have to travel to a store, buy software in a box — often at hundreds of dollars per program — bring it back to our home or office, spend hours installing it, and act as our own IT department if anything went amiss. Nowadays, I can be flinging angry birds at hungry pigs in a mere matter of seconds. Or, to take a slightly more serious tack, I can annually upgrade my computer operating system — with virtually no effort — from almost anywhere — for free.

At the Apple World Wide Developer Conference (WWDC), Apple released a video entitled “The Incredible Impact of Developers” ((The video was named “The Incredible Impact Of Developers” when it was originally displayed on Apple’s web site, but it has since been renamed “The App Effect” when it was made available on YouTube.)). You can watch the video, HERE.

Here are two transcribed excerpts from the video:

Apps plus handheld devices. I think that’s a watershed moment for civilization. I put it up there with the invention of the microscope and the telescope. Here we live in a time where the most powerful tools ever imagined to investigate and probe our world are in the hand of essentially everyone. ~ Neil deGrasse Tyson, Astrophysicist

If you think the industrial revolution was transformational, the App Store is way bigger. I don’t think we’ve seen anything reach a mass adoption at anything close to this pace. It took, for example, electricity over 100 years to get to its first 50 million users. It took television 13 years…and the App Store got to 50 million users in only 17 months. ~ James Manyika, Director, McKinsey Global Institute

Perhaps you think the above speakers are engaging in egregious hyperbole?

Or, more likely, you have forgotten the 9 circles of hell that you had to sojourn in order to download an application onto your mobile phone in 2006. Dante’s hell hath no fury like that of the Verizon and Cingular technocrats of yore.

Do you remember WAP? Well, of course you don’t. You have psychogenic amnesia, which is your brain’s way of protecting you from traumatic events — like WAP — that are too horrible for the psyche to bear. If you were to look up the historical records, you would see that WAP caused early onset Tourettes. Victims, who had been exposed to WAP for too long a period of time, would begin to twitch, violently convulse, and suddenly break into uncontrolled fits of swearing.

Human beings have an almost infinite capacity for taking things for granted. ~ Aldous Huxley

The hardest part of creating a new platform is getting developers to develop for it. And Apple made that part look like a walk in the park.

In 2008 Apple launches the App Store with 500 apps. In 2015 the App Store has 1,500,000 apps.

The average person has 119 apps.
850 apps downloaded every second.
100,000,000,000 apps downloaded.

It’s not hyperbole if it’s real. And there’s nothing more real than the effects of the smartphone/app store combo.

$10.35 billion: amount American moviegoers spent on ticket purchases.

$14.28 billion: amount iOS users spent on apps.

~ Horace Dediu on Twitter

The term “game changer” is way over used, but when it comes to the iPhone/App Store combo, the term is spot on.

We were able to change the rules of the game, and that’s what got us excited about getting in the phone business. ~ Steve Jobs

3) The Omnipresence Stage

The current stage of computing is Omnipresence and it has been misunderstood, misapplied and misdefined.

Misunderstood

The important part of “Mobile” devices is not their mobility, but the fact that they are ever present on our persons.

Yes, it’s true that many people DO NOT carry their Smartphones with them at all times…yet. But this is only because it is early days. As time passes, even the outliers will be drawn toward keeping their phones with them at all times. And, as an aside, this is one of the reasons why wearables are a shoo-in to become the next great computing category. More on that, below.

Misapplied

Note that while the category “mobile” lumps tablets and phones together, “Omnipresence” does not. Phones are ever present. Tablets are not. Computing has bifurcated into primary supercomputers that we always have with us and secondary computers that have larger screens.

We tend to think of ‘tablets and smartphones’ as a new category next to ‘PCs’. More helpful to think of ‘big screen and small screen’. ~ Benedict Evans (@BenedictEvans)

Tablets are not hired to do the same job as smartphones. While smartphones are our primary — and for most, our only — computing devices, tablets — along with hybrids, notebooks and desktops — are secondary devices catering to those who need greater screen size, flexibility, complexity or power.

Posit, paradox of usability: the more powerful, flexible & general-purpose a computer system, the smaller/narrower the user base & use cases. ~ Benedict Evans (@BenedictEvans)

‘Computing’ is inexorably being absorbed by the mobile phone. ~ @asymco

Misdefined

Yes, today’s devices are “mobile”, but that is not what defines them. The current stage of computing is defined by the intersection of three separate elements:

1) Everyone; will have a
2) Supercomputer;
3) With them at all times.

4) Everyone

Everyone’s going to have a mobile phone. Yes, everyone. ~ Benedict Evans on Twitter

7.1bn people on earth.
5.2bn adults
4.4bn literate adults
3.5-4bn mobile phone users, so far
~3bn internet users

~ Benedict Evans on Twitter

Some time next year, the 20 billionth mobile phone will be sold. ~ Benedict Evans (@BenedictEvans) 6/17/15

Smartphones are being sold to four-fifths of the adults on the planet.

More people on earth have a mobile phone than a street address. ~ Benedict Evans (@BenedictEvans)

By 2020, 90 percent of the world’s population over 6 years old will have a mobile phone. – Ericsson

Largest Tech Expansion Ever

In 2007, Apple introduced the modern smartphone. Eight years later, there are approximately 2 billion Smartphones in existence and we are headed town having 4 billion people on earth with a Smartphone. Smartphones are being sold to almost everyone on earth and they are upgraded every two to three years. There will soon be something like 5 times more smartphones than consumer PCs and, unlike PCs, they will be always will you, available for use both both at work and at home and while traveling.

Unit sales since 1995:
16.7bn phones
4.2bn PCs
~ Benedict Evans on Twitter

Mobile phones sell at ~2bn units a year, to ~4bn people, at $200 avg. Has any manufactured product ever done similar? ~ Benedict Evans on Twitter

The sale of a smartphone to ~4bn people in the next few years is the largest expansion of the reach of industrial capitalism in history. ~ Benedict Evans (@BenedictEvans) 11/16/14

(Emphasis added)

First

For hundreds of millions of people, mobile phones are not just their first computer but their first electrical device of any kind. ~ Benedict Evans on Twitter

Many middle-class families in China never owned a personal computer or television, jumping directly to mobile devices. ~ Ajit Pai on Twitter

Over half the rural population of Bangladesh now has a mobile phone. That’s a totally new kind of purchase. ~ Benedict Evans on Twitter

5) Supercomputer

Today, your cell phone has more computer power than all of NASA back in 1969, when it placed two astronauts on the moon. ~ Dr. Michio Kaku

Today, your cell phone has more computer power than a supercomputer called a Cray-1 back in 1975. A Cray-1’s raw computational power of 80 million floating-point operations per second (FLOPS) pales beside the 76.8 Gflops inside the iPhone 5s.

Today, your cell phone has more computer power than a supercomputer called a Cray-2 bak in 1990. The Cray-2 was the worlds fastest computer. The liquid-cooled, 200-kilowatt Cray-2 had a performance of up to 1.9 GFLOPS, which still compares unfavorably to the 76.8 Gflops inside the iPhone 5s.

https://twitter.com/BenedictEvans/status/535119007569821696

6) Everpresent

The most interesting place to be is no longer in front of a computer, it’s to go out into the world with a computer in your hand. ~ @monkbent

An always-with-us device changes entirely the way we interact with our computers and the way everyone else, who has a supercomputer in their pocket, interacts with us. The always-on-you supercomputer changes the way we communicate, and the way we exchange ideas. It even changes the way we trade and it has — already — created an entirely new branch of trade known as the sharing economy.

Someone much smarter than me, called the smartphone a “cursor for the cloud”. The smartphone always knows where you are and that adds context — a dimension that simply was not possible with earlier computer devices.

Communication

The productivity benefits of asynchronous communication are hard to overstate. Not too long ago, the world ran on meetings and phone calls. ~ Balaji S. Srinivasan on Twitter

There will be more written on Twitter in the next two years than all the words in all the books ever printed. ~ Dataclysm

If you look at the personal computer, it’s going from being a tool of computation to a tool of communication. ~ Steve Jobs

Exchange

We’re now talking not about hundreds of people getting the benefits of an idea, but of millions. ~ “The App Effect”

Cameras

The above bears repeating. There will be more photos taken this year than were taken on film…EVER.

Do you think all the recent videos of police shootings are a coincidence? Think again. Everyone has a camera with them at all times.

Trade

The key to rising prosperity over the course of human history has been the exchange of goods. ~ Bill Gates

If you have networks of trade and exchange, it becomes cheaper to buy stuff than to steal it. ~ Steven Pinker

No meaningful shopping malls have opened in the US since 2009. ~ Benedict Evans on Twitter

Just stop for a moment and think about the implications of the above.

Thanks largely to smartphones, ecommerce is a $4b industry in… Vietnam. ~ Andrew McAfee (@amcafee) 6/13/15

It turns out, there are a lot of middlepersons in this society. And they generally tend to slow things down, muck things up, and make things more expensive. The elimination of them is going to be profound. ~ Steve Jobs

Sharing Economy

We don’t have to own things. We don’t have to own our own cars. We don’t have to own our own music. We can call it up when we need it. ~ “The App Effect”

Apps like airbnb and Uber have literally changed the way we do business.

Who’d have thought NYC taxi revenues would be slashed in 2014, because of iPhones… ~ Walt French 10/2/14

No one predicted Uber when the iPhone came out in 2007. No one. The truth is, we just don’t know what these devices will allow us to do next. We. Just. Do. Not. Know.

7) Changing The World

Most tech innovation is attacked as ‘rich people’s toys’, but ends up giving the poor things that previously only the rich could have. ~ Benedict Evans (@BenedictEvans)

See if you can think of a technology that didn’t start looking like a toy for rich people. Now, one that didn’t help everyone. ~ Benedict Evans on Twitter

It’s still a common mistake to see smartphones (and even phones) as a luxury. In fact, their value is inversely proportionate to income. ~ Benedict Evans (@BenedictEvans) 8/15/14

Mobile in emerging markets solves problems much further down Maslow’s Hierarchy. ~ Benedict Evans (@BenedictEvans) 8/24/14

The Juniper report divides the two groups thus: Poor people use the mobile Internet for personal advancement, whereas rich people use it for personal convenience.

24 percent of people in developing countries use the mobile Internet for educational purposes, versus 12 percent in the richest countries. ~ Juniper Report

97 percent of people in developing countries say mobile Internet access has been transformative in their lives, versus 78 percent in the richest countries, including the United States. ~ Juniper Report

CAPTION: Charging Phones Via Solar Power

Some people will walk for a day or more just to charge their phone in parts of Sub-Saharan Africa… ~ @BenedictEvans

8) The Next Stage — Always With Us…And Always On Us

The Ages of Man and Womankind are moving faster and faster, and the stages of the Information Age are tumbling, one upon another, at an every quickening pace.

As I mentioned, above, the Information Age is only 30 years old, but we’re already in the third (Omnipresence) stage. The third stage of the Information Age began only 7 years ago, with the introduction of the App Store… but we may already be entering the next stage of development.

Smartphones (pocket supercomputers) are important because they are always with us, but smartwatches ((Smartwatches are poor descriptions of wearable technological devices, because the time keeping aspect of the device is its least important attribute. In other words, the watch is to a smartwatch as the phone is to a smartphone.)) are not only always with us but, unlike smartphones, they are also always on us, too. This adds at least two wholly new dimensions to computing.

Identity

First, being “always on us” adds Identity. The Smartwatch knows who we are — and that we are who we say we are — and this allows us to discreetly and securely broadcast our identity to payment centers, other individuals, home and car locks, and an endless variety of wirelessly connected devices.

Sensors

Second, being “always on us” adds sensors that are in touch with our bodies and which can read and monitor our physical condition.

I think we’re in the very early days of sensors. We’ll soon look back at the Apple Watch’s feeble heart-rate monitors and mock them in the same way that we currently mock the original iPhone’s inability to take videos or perform simple tasks such as “cut and paste.”

Even though we’re only in the early days, the path ahead is clear to see. Once the Smartwatch becomes the norm — and it’s already well on its way — and once sensors become more sensitive and more powerful — the health and fitness benefits that the Smartwatch will provide to us are, literally, unimaginable. (Or, at least, the health and fitness benefits are beyond the limits of this author’s poor imagination.)

Just as one example, some modern cars can automatically alert a service center about a technical problem, yet a child’s looming illness creates no such alert. Children being born today will look back at their parents lives and wonder how they even survived without “always-on” devices to monitor their health.

You think I’m exaggerating? Try this experiment. Picture the state of technology that existed on the day you were born. Got it? Archaic, right?

That is how children being born today will picture the smartwatch.

9) The Next Age

I’m talking about entering the next stage in the Information Age, but perhaps I should be talking abut entering the next Age of Man and Womankind, instead.

With Google Now and Apple’s recent entry into predictive technology, it’s clear that technology is morphing out of the role of a dumb servant and into the role of a helpful, ever-present, assistant.

The next thing is going to be computer as guide or agent. And what that means is that it’s going to do more in terms of anticipating what we want and doing it for us. ~ Steve Jobs

However, my guess is that the next Age, after the Age of Information, will be tiny wearable devices imbedded in our clothing or our bodies, which will act — for the most part — without conscious interaction or decision-making on our part. Today, supermarket doors slide open as they anticipate our approach. Tomorrow’s technology will anticipate our approach and prepare our path. Who knows where that path may lead?

Science is magic that works. ~ Kurt Vonnegut on Twitter

10) Conclusion

Mankind, by the perverse depravity of their nature, esteem that which they have most desired as of no value the moment it is possessed… ~ François de Salignac de la Mothe Fénelon, Télémaque

The Agricultural Age gave us a cornucopia of food. The Industrial Age gave us the strength of giants. The Information Age has given us the god-like powers of omnipotence, omniscience and now, omnipresence.

I was a peripheral visionary. I could see the future, but only way off to the side. ~ Steven Wright

I suspect that most of us are peripheral visionaries too. We can see things way off to the side, but we often don’t see the things that are occurring right in front of us.

I don’t know much, but I know this: We’re still just at the very beginning of all this.

And I can’t wait to see what happens next.

One of the biggest challenges that any highly regarded company faces is the difficulty of living up to the expectations that its previous successes create. No company in any industry faces this challenge as much as Apple. This company has provided absolutely incredible performance for its investors over the last decade or so, thanks to its hit-machine of great products and sticky ecosystems, and that, in turn, has created an enormous supply of happy customers who have come to expect the world from the Cupertino-based company.

Common logic will tell you that those kind of expectations can’t go on forever, and at some point, there’s bound to be some kind of let-down. I’d argue that yesterday’s WWDC (Worldwide Developer Conference) keynote in San Francisco could be the start of a return to earth that many have been predicting for Apple for quite some time.

Don’t get me wrong. It was still a good event, and there were several interesting new announcements from the company during yesterday’s keynote. The iOS 9 improvements around contextual intelligence, smarter search, and iPad multitasking were all quite nice—though I have to admit I was disappointed to learn that some of the coolest new iPad multitasking features require an iPad Air 2 (the most recent iPad, in case you haven’t been keeping score).

In fact, for many vendors, the kind of additions and enhancements that Apple announced yesterday would be perceived as being pretty impressive. But this is Apple, and rightly or wrongly, we have been trained by the company to aim our expectations generally much higher.

Thankfully—I guess—early rumors suggested that this year’s WWDC might be relatively light on major news developments, so I went into the event with relatively low expectations, and frankly, those expectations were met.[pullquote]I went into WWDC with relatively low expectations, and frankly, those expectations were met.”[/pullquote]

Part of the problem, quite honestly, is that it’s getting really hard to make major innovations in product categories that are already pretty good. In the case of Mac OS X El Capitan, for example, senior VP of software engineering, Craig Federighi, described and demonstrated a number of nice innovations, but nothing that’s going to dramatically change a typical Mac user’s experience. I see this as more of a reflection of the relative maturity and sophistication of Mac OS X than a problem with Apple. We’re reaching a point of diminishing returns.

Even many of the iOS 9 improvements, while definitely more impressive, essentially amounted to incorporating into the core OS (and its main apps) the kind of functionality you can already find in 3^rd party apps. From the Transit information incorporated into Maps, to some of the recommendations that Siri now makes for locations you plan to visit, to the Flipbook-like capabilities of the new News app and the Evernote-like extensions to Notes, Apple is integrating some of the innovations we’ve seen other companies create into their core offerings. It seems to me there’s a software company in Redmond, WA that’s done similar things in the past and caught a fair amount of grief for it. But I digress….

I was also very disappointed at the almost complete lack of updates that Apple provided on HomeKit and CarPlay. Given the intense interest in IOT overall, and particularly connected homes and connected cars, I expected Apple to come out swinging and describe why their solutions are better and more robust than the growing competition in these fields. Unfortunately, we got nothing of the sort.

Apple Music looks interesting, but I really didn’t see anything that suggested Apple had cracked the code on how to do a killer streaming music service. The offerings certainly look better than what the company has done in the past, and given Apple’s brand and overall position in the digital music world, it’s bound to have a decent impact. However, if I’m a happy Spotify or Pandora user, I’m not sure I saw enough to get me to switch. Yes, the Beats1 radio station concept is intriguing, but it’s a single channel with a single genre of music, and that’s just not going to appeal to everyone. In the end, Apple Music could end up as yet another app on your phone or tablet that you just can’t delete.

You could argue that my criticisms of Apple’s latest offerings aren’t completely fair, and in a way, you might be right. However, I’d argue that the world of business isn’t about fairness, and Apple has managed to maintain a “reality distortion field” for an incredibly long time. Perhaps by failing to meet unrealistic expectations, the company may actually benefit, because, in the long run, doing a reality check can be a very good thing.

As I listened to Tim Cook and Apple’s executives give us an update on OS X — now known as El Capitan — iOS 9, Apple watchOS 2.0 and explain the new Apple Music “Beats 1” service, I was struck by the fact Apple’s ownership of the hardware, software, services and commerce layers of their devices are so well designed, they deliver a level of integration and continuity better than any other ecosystem on the market today.

In fact, the continuity of apps and services on all three device platforms are so tightly integrated that Apple’s customers have to be happy with what they heard from WWDC and can look forward to using these new versions of the OS, apps, and services when most of them launch later in the year.

I was particularly interested in the role Siri now plays across all devices and how Apple has worked hard to make it 40% more accurate and 40% faster than it was last year. I also loved the new contextual features in Spotlight that let me type in a stock name and get its current value and other related news. Or how I could use Spotlight to ask the current score of my team’s game and it posts all related info to me instantly. In fact, the big theme of all of the software news from the WWDC Keynote was everything is faster and better connected.

Contextual via search across all systems and all of the new apps and services take full advantage of what your devices know about you. These new operating systems are designed to not only be reactive to your needs but also proactive too. For example, Siri and its underlying search engine can look deep into contacts, calendars and other items related to your day and give prompts, suggestions and even directions without even asking for them. Apple’s new operating systems have become smarter and, as a result, should make users of Apple products more productive, have more fun, and become more efficient in their communications, learning, and daily activities.

One new app called Transit is tied to the Maps app and will make using public transit easier than ever to navigate. Apple painstakingly mapped out the subways in selected cities like NYC and London with many more to come. It will make it easier to find the right tracks for a person’s next train or the right exit to get to their destination faster. It uses the intelligence of iOS 9 — it can even anticipate where you are going from your calendar and get that info to you in real time as needed.

The new features for the iPad should make iPad users very happy too. IOS 9 for iPad now includes multi-windows support, picture in picture and, my favorite — two finger gestures that can be used for more efficient cut and paste, a feature I use daily on my iPad.

As for Apple watchOS 2, out this fall, Apple used WWDC to give developers a new SDK that allows them to write apps directly to the Watch. This is a huge and important step since it means we will see thousands of innovative apps for the Apple Watch, a key to getting more and more people to buy this product. Apple also announced new Watch faces that tie into one’s photo album so a particular image can be part of the watch face. Or tie it to your entire photo album and every time you look at your watch a new picture pops up. They even announced support for video for the Apple Watch and it will be interesting to see what developers do with this feature. They also announced greater accuracy and functionality for Siri in the Apple Watch and applied the same contextual features they have in IOS 9 to the Watch too.

I see Apple Music as a game changer because of the way they manage, organize, and deliver a person’s music experience. The idea of putting everything related to my music in a single container called Apple Music and then using the intelligence of the OS to make one’s music experience highly personal is a big step for music lovers. The way they take a person’s existing music library and then ask about a person’s favorite artist and the type of music they like that can then be applied, using the intelligence of iOS 9, to tailor the streaming music and the radio service will make a person’s music experience richer. Add the role of the professional DJs that will also curate music 24/7 and Apple’s customers are bound to become fans of this new service.

I think the idea of including all music related items in a single app/service will drive a lot of people to Apple Music — priced at $9.99 per month or $14.99 for a family of 6 through Apple’s family sharing app. It will launch on June 30th and be available cross-platform on Android and Windows too.

WWDC is a software developer conference and, if anyone had hoped for any new hardware to be launched, they were disappointed. But Apple rarely announces hardware at WWDC. This year’s show was completely software focused — as it has often been. WWDC continues to be an important yearly event for Apple’s developers and Apple’s customers are the real beneficiary of this conference. By the fall, Apple users will have a new OS for all of their devices along with new apps and services that should make their Macs, iPads, iPhones and Apple Watches even more useful.

Right after Apple released their record breaking iPhone sales number for the last quarter, Wall Street analysts were wringing their hands over the future growth of the iPhone. They reasoned that Apple can’t continue to break sales records continually and some even suggested iPhone sales have peaked. I am as pragmatic as the next guy when it comes to forecasting iPhone growth but our research continues to show Apple will still have a serious upside in iPhone growth with the iPhone 6 models well through this year and very likely into next year, too.

After the first of the year and well before Apple’s calendar Q4 earnings report, we predicted Apple sold 72.5 million iPhones in that quarter even though the highest Wall Street estimate was around 69 million. Apple sold 74 million during the holiday quarter. Our predictions for iPhone sales for the first calendar year quarter was 61 million even though the highest Wall Street estimate was 58.5 million. Apple sold 61.2 million last quarter. Our bullishness on these predictions come from following Apple for three decades and my own personal mantra that says, never underestimate Apple’s ability to surprise. Also, we have very good ties to the supply chain and, if you have followed our iPhone predictions for each quarter over the last few years, you will find our iPhones predictions are pretty consistent with what Apple actually ships.

There are three key reasons I am still optimistic about iPhone growth over this period and well into 2017-2018. The first lies in the fact Apple execs have stated that less than 20% of iPhone users have upgraded to the iPhone 6. Part of that is related to smartphone upgrade cycles that take place every two years, especially in the US. However, Apple is adding millions of new users to the iPhone fold each quarter and, given their rich app and services ecosystem, the iPhone will continue to be of great interest to people all over the world. There is another key issue that bodes well for Apple, too. Apple is now selling more iPhones in China than in the US and, by 2017, China will could be the most profitable region for Apple smartphone sales as well as iPads, Macs and Apple Watches. In China there is a rising middle class that loves Apple. Apple products are status symbols in the country and this demographic will drive sales of Apple products sky high in the next few years. There is a very good book about the China middle class that is a must read if you want to grasp the growth potential of Apple in China. It is called “China’s Super Consumers” (Amazon affiliate link) by Savio Chan and Michael Zakkour. The book looks at one billion new consumers in China and especially the buying habits of the rising middle class. More importantly, the authors describe how Apple has gone after this market and why they are poised for even more success in the country going forward. It is too myopic to judge Apple’s iPhone sales through a US-only prism. Apple is an international company and much of its future growth will come from international markets that are barely tapped by Apple at this time.

The second reason is due to what Apple calls switchers. During the recent analysts call, Apple CEO Tim Cook stated, at least five times, that demand for iPhones by those switching from other smartphone platforms are very strong. This is not a trivial fact. Our own research shows Apple is luring millions of Android smartphone users over to the iPhone and iOS and we have no reason to believe this will not continue for the near future. Many Android smartphone buyers opted for Android phones because of their larger screens and that was a strong driver for Samsung and others who made phones with 5” for 5.5” screens. However, our research showed that, if had Apple had iPhones with larger screens, 40% of them would have preferred buying an iPhone over an Android smartphone. Consequently, pent up demand by switchers has been key to Apple’s iPhone growth. As Android users move out of their two year contracts, more and more of them will migrate to the iPhone platform. I see switchers continuing to help drive strong iPhone sales at least through early 2016.

The third reason goes under my “never underestimate Apple” mantra. It is crazy to think Apple will not continue to innovate around the iPhone. Just making a larger screen iPhone is nice but that was not innovation. What was innovative is the power of their new mobile processors, great screens, dual authentification security and an evolving ecosystem that makes the iPhone a great smartphone. I realize Wall Street analysts have short term views on purpose and have a hard time with long range views. However, as an industry analyst, it is imperative we look beyond each quarter and look at the things Apple might do to make the iPhone even better, which translates into strong iPhone sales. I believe Apple will continue to evolve the current iPhone design through 2015 and the new iPhone they deliver later this fall will have a faster processor, better camera, higher security and some new and innovative touch features such as the tap and gesture engine that is on the Apple Watch today. However, I believe the next major advance in iPhone design that will drive huge refresh rates will come with the iPhone 8 that should debut in the fall of 2016. While this is pure speculation on my part, I can see how an iPhone 8 could be where Apple introduces things like an iris scan for enhanced security and a 3D camera that uses lasers so you can point it at anything and get its dimensions. It could even be used to take a picture of something to be printed out on a 3D printer.

I recently wrote about an Apple patent regarding this 3D camera and I believe we could see this in the iPhone 8. Apple has also patented a smart pen and, while it seems targeted at the iPad, it could be used on a new iPhone with special sensors built in to give even more functionality to their smartphone.

Who knows what other tech innovations are in Apple’s labs today that could make an iPhone 8 even more compelling than a larger screen iPhone that has driven Apple’s iPhones sales into record numbers since it was launched last September? I also think Apple is not done with wearables connected to the iPhone. Tim Cook says there are things in the labs nobody has even written about and I would not be surprised if they have another wearable up their sleeves tied to the iPhone by late 2017.

In the short term, Apple could hit a snag or two with iPhone growth since breaking sales records consistently each quarter is be difficult. However, to think Apple has hit saturation in iPhone demand is premature. And, given their ability to innovate and with an international audience, it represents strong iPhone growth potential. Apple never rests on its laurels and you can bet they will not stand still when it comes to making the iPhone even better and drive greater demand in the future.

Signals that Apple is rapidly approaching launching its new streaming music service are getting stronger all the time. The release notes for this week’s beta of iOS 8.4 made particularly clear something is in the works and it’s coming soon:

The iOS 8.4 Beta includes an early preview of the the all-new Music app. With powerful features and an elegant new look, enjoying your music is easier than ever. This preview provides a sneak peek into what we’ve been working on, and what’s to come — the music is just getting started.

The new app itself makes changes to the interface, but adds no significant new functionality. However, these changes suggest the new music service might well fit somewhere within these confines too. I had some debate on Twitter earlier this week about whether this makes sense and it’s prompted me to finally write up something I’ve been thinking about for a while — how an iTunes-branded subscription service can differentiate itself.

Thinking about who buys music

When thinking about subscription music services, the starting point has to be the people who pay for music today, because you’re unlikely to convert non-payers into people who will pay $120 a year, but you’re much more likely to convert people who buy a few albums a year into subscribers. The reality is the people who spend the most money (but actually the least time) listening to music are more affluent and older than the average. In other words, they’re not teens and young adults but more likely to be in their 30s and more likely to have kids of their own than to be kids themselves.

All this makes perfectly good sense: the older you are, the more money you have to spend, but the less time you tend to have to enjoy what you’ve spent your money on. So you spend money where it has the biggest impact and in ways that save you time and maximize the use of your time.

Conversely, when you’re young and poor, you’re more likely to be willing to spend your time than your money, which, when applied to music, means you have more time to spend in discovery and a higher tolerance for ads and other things which interrupt the listening experience. In other words, there’s a bifurcation between cash-rich and time-poor and cash-poor and time-rich which will tend to drive the former to pay for music and the latter to make heavier use of ad-supported services such as YouTube and the free versions of services such as Spotify.

Note: as with all such analysis, this is an over-simplification, but data from Nielsen and other sources back up the broad conclusions well enough to use this as an underpinning for the analysis below.

Discovery versus ownership

Beats had two key features: it was exclusively a paid service and it was oriented around discovery. Ironically though, that means it targeted elements of both groups without going whole hog after either of them. It was focused on discovery, which aligns better with the younger, poorer group, but charged for the service, which likely eliminated many of the most obvious buyers as potential customers. There are undoubtedly older, wealthier buyers who appreciate the ability to discover new music and there are undoubtedly younger, poorer buyers who nonetheless care enough about music to spend $10 a month on it. But it’s not a great strategic fit and Beats never did very well in gaining subscribers (even paying subscribers) in comparison with other, more popular services such as Spotify, Deezer, and so on. Those services could at least get users hooked with the free proposition and then upsell them as they sought to remove ads from the experience.

When you’re relatively time-poor, subscription services are often a poor fit, because they’re overwhelming. Instead of being presented with a familiar list of stuff you like, you might be presented with a search box, a list of generic playlists which don’t match your personal taste, or a series of album covers for newly released music you don’t know. If you just want to start listening now, the best place to start is often the music you already own, because by definition you already know you like it. That’s clearly not enough by itself, because you wouldn’t need a subscription music service if you only listened to music you already own, but it’s an important starting point for many paying users even in a subscription service.

The challenge with most subscription services is they force you to recreate this sense of ownership in some way within the service – either by manually favoriting this music (another time-consuming activity) or by searching for it each time you want to listen. Some services have attempted to bridge the gap by either importing your owned music into the subscription (e.g. Google Music) or by showing your library within the context of their app (e.g. Spotify). But both of these are cumbersome. The former taking a lot of work to get set up and maintain and the latter providing two very separate experiences awkwardly sandwiched together. In many cases, users are likely opening two different apps depending on whether they want to select music from their own library or new music.

Redefining “My Music”

The only way to make owned music truly part of a subscription music service is to bake it in. And Apple is arguably the only company that can do that for many of its customers because iTunes is where their owned music lives. This means reinventing the concept of ownership, or of “my music” in a way that fits the subscription music model. That collection would be at the core of such a service but the definition would have changed from music you’ve explicitly purchased to music that you’ve claimed as yours. That, in turn, would be a mixture of the owned music you brought with you and the music from the subscription service you’ve added to it. As you experimented with new music – a new album from a favorite artist, or perhaps something someone recommended – you could either temporarily or permanently add it to your music collection. Your “collection” of music would grow, but you’d no longer have to explicitly pay to do so, reducing the risk of trying new music significantly while retaining a sense of ownership.

The corollary to this is that, in iTunes Radio and other discovery-centric environments, you’d no longer be invited to buy the music (though that option might still be there), but rather to add it to “my music”. That would dramatically reduce the friction associated with engaging more deeply with new music, because it no longer involves a purchase. But it also means you could easily:

• replace that album you used to own but that got lost or damaged
• replace the music you accidentally deleted when you switched computers, or that was on that hard drive that died
• fill in the rest of an album of which you have some tracks already
• finally get that album you meant to get but you only knew one or two tracks on

By the way, I’m not sure it’s a coincidence the tab for listening to your own music in the new iOS Music app in 8.4 is called simply “My Music”. One critical element to all this, however, is total transparency about the cloud and local elements of the service. Today, it’s still often hard to manage which elements of your total iTunes music library are stored locally on which devices and this part of the experience would need to be really good for this whole concept to work.

The economic impact could be positive for Apple and the labels

Make no mistake: this absolutely replaces purchasing behavior for these customers but it gives them a very definite sense of ownership over this music as long as they remain subscribers of the service, which in turn should make them enormously sticky. Since these customers tend to spend more than the average on music but spend less time actually listening to music, the economics could work out very well. Limited discovery time means these customers would likely listen to relatively little new music each month, while integrating their owned library means Apple wouldn’t have to pay record labels for their listening to that library. Today, streaming services have to pay for every listen to every song, whether it’s one the user already owns or not. Whether Apple would choose to share the benefits of these economics with labels is an interesting question – it could either pay out at a higher rate because total listening is shared over fewer songs and artists or it could pocket the difference.

One app or several?

One of the questions I debated on Twitter this week was whether Apple would put its new music service into this same Music app or whether it would be separated out. After all, when Apple launches this service, it will have three separate music offerings:

• Traditional iTunes – purchased and owned music
• iTunes Radio – free streaming, but no on-demand
• iTunes On Demand – subscription streaming, including on-demand

Given everything I’ve talked about, I’m convinced if you’re going to split these into two apps, Radio is the one that doesn’t fit. It’s the only element that bears no direct relationship to the music you already own, and it’s entirely plausible as a standalone service. For all the reasons I outlined above, I think iTunes On Demand (as I’ve chosen to call it) should actually be tightly integrated with the traditional iTunes experience. I don’t think it makes sense to separate it out. Given iTunes Radio has stubbornly remained part of the Music app so far, I suspect that will stay too.

The role of discovery

Having said early on in this piece that discovery is less relevant to the target segment for subscription music services, I want to return to that topic as I close. Just because discovery is less relevant doesn’t mean it’s irrelevant in this segment. In fact, being really good at discovery could be a key differentiator for this segment precisely because those in this segment don’t have time for poor discovery experiences. Constantly having to skip songs, train algorithms, hunt and search for new channels or stations is a pain in the neck and actually reduces the amount of time people will spend on discovery.

All this means Apple needs to create the best possible discovery experience as well as the most integrated owned-and-claimed approach to subscription music. Beats majored on discovery and I’ve no doubt that was a major reason why Apple acquired it. But I actually think the integration with traditional iTunes is going to be a stronger value proposition for many of the target customers than integration with Beats, for all the reasons I’ve talked about.

One of the things that has struck me this week as I’ve read the Apple Watch reviews (including Ben’s), is the Apple Watch builds subtly on work Apple has done over the last several years in other products. Yes, the Watch is an entirely new product for Apple, but it wouldn’t be possible without some of the groundwork Apple laid elsewhere.

A common pattern for Apple

And this is actually a common pattern with Apple, which often builds slowly and subtly to a big launch with smaller, incremental features and services. Some examples of this pattern:

• Apple Pay – launched in 2014, but built to a great extent on Apple’s collection over the years of credit cards from users; the launch of Passbook in 2012, and the introduction of 2013 of Touch ID.
• Siri – the basic model was introduced in 2009 with Voice Control. Apple then acquired the Siri technology from SRI in 2010, and launched Siri as a more fully-fledged feature in the iPhone 4s in 2011.
• 3rd party widgets – Apple had a couple of its own widgets back in 2007, but moved them to the Notification Center in 2011, introduced additional widgets of its own in 2013, and only allowed third party widgets in 2013.
• iCloud Drive – iCloud launched in 2011, iTunes in the Cloud in 2011, iCloud document storage within apps in 2013, but iCloud Drive didn’t launch until 2014.

Apple Watch builds on earlier innovations

So, which innovations does the Apple Watch build on? This won’t be an exhaustive list, but consider the following:

• Bluetooth notification extensions – introduced in 2012 and the foundation of how Apple Watch delivers notifications today
• Health and HealthKit – announced at WWDC in 2014, several months before the Apple Watch, and which the Apple Watch fitness tracking fits into
• Canned responses in iMessage – introduced in iOS 8 and are a key feature of how messaging works on the Apple Watch
• Voice messages in iMessage – also introduced in iOS 8, the other key element of messaging on the Watch
• VIPs in email – introduced in iOS 8, helps to focus notifications within the Mail app and, by extension, on the Watch
• Muting people/threads in texts – introduced in iOS 8, helps to focus notifications on the Watch
• Blocking contacts – introduced in iOS 7, also helps focus notifications
• “Hey Siri” feature – introduced in iOS 8, found its way into the Watch
• Walking directions – introduced in iOS 7, a key use case for Maps on the Watch.

And these are all just specific features – in a broader sense, many of the key features of iPhone really come into their own on the Watch, notably Siri. Almost all of these are valuable on the iPhone too. I don’t think anyone questioned their inclusion in iOS 7 or 8, but many of them really make sense in the context of the Watch. So why does Apple take this approach? I think there are at least two main answers:

• Testing – introducing these features in a partial or early form and building on them over time allows Apple to bulletproof them and make sure they’re really working right before it makes a big push around them (or, in the case of the Watch, allowed Apple to bulletproof certain things critical on the Watch but less so on the phone)
• Familiarity – Apple teaches its users new behaviors in subtle ways, tending to stay away from massive changes and instead introducing them bit by bit over time. This is true both for new products and features and for design and interface changes in iOS, which have also evolved subtly over time (with the possible exception of iOS 7, which might also be seen as a precursor to the Watch UI). Apple gets users accustomed to things and makes changes subtly, because that’s less jarring and easier to deal with from a user perspective. Swiping up from the bottom of the screen, for example, is a gesture introduced in the last couple of years in iOS, but is a critical user interface element on the Watch.

What else is Apple building now?

All this raises an interesting question: what is Apple building up to with the other features and services we’re seeing in its products today? With hindsight, we can clearly see how some of the incremental changes outlined above paved the way for the Watch, but can we use foresight to see what else Apple might be building to? This is an interesting thought exercise, and I’m not going to go into detail here, but some examples might be interesting:

• Continuity and Handoff – could Apple use these fledgling connections between Mac and iOS to drive deeper and more meaningful integration in the form of, not just notifications and communication, but potentially using Touch ID on iOS devices to unlock Macs running OS X?
• Payments – could Apple Pay and iMessage combine to provide person-to-person payments a la Venmo within iMessage?
• Touch ID, Apple Pay and Passbook – could these components combine to extend wallet functionality beyond simple payments and into loyalty cards or IDs such as drivers’ licenses and the like?

I’m sure you could go through some of the things Apple is already building and find other examples (perhaps you’ll chime in with some in the comments). I’m fairly certain Apple isn’t done with this model and there will no doubt be some more “Aha!” moments in the coming years as we see these products and features find homes or roles in new and unexpected places.

Not long after the iPad came out, I was one of those people who thought it could replace my laptop. I bought a third party Bluetooth keyboard and tried to make it a mini laptop. The good news is, in this configuration, it actually worked well for taking notes, checking email and surfing the Web. In fact, not long after the Zagg Keyboard Case came to market, I put my iPad in this combo case and it actually even looked like a mini laptop.

However, I quickly discovered that, while the iPad was great for some productivity tasks, it could never replace my laptop. Anytime I had to do a heavy lifting project, such as working on large spreadsheets and charts, editing a long document and even managing my photos, I used my laptop. I suspect that, in the end, I use my laptop for 80% of my mobile computing productivity and only use the iPad in mini-laptop mode when going to a meeting to take notes and not wanting to carry a laptop with me.

Part of the reason for this is a laptop not only has a larger screen but its keyboard and trackpad/mouse makes it much easier to navigate large amounts of content and easily cut and paste things I need for these charts and documents. While I could do some of that with an iPad, it was faster and easier to use a laptop. Plus, the laptop has much more power behind it to help me be more productive. During the first two years the iPad and tablets were on the market, many tried to make a tablet work as their only personal computing device but, during the last three years, most found it could, which is partly why laptop sales are growing again.

When I saw the new MacBook, I immediately realized it kind of looked like my iPad/keyboard mini laptop but now had a full sized keyboard, a 12 inch screen and, more importantly, the full Mac OS X experience. Interestingly, weighing in at 2 lbs, it is actually lighter and thinner than my iPad with the Zagg keyboard. I have been testing the new MacBook for about a week now and I can see how this will become my go to, carry everywhere with me laptop and will now relegate my iPad to being just a great tablet again.

Although I have been using a 13″ MacBook Air for years, I found the new MacBook’s 12” screen worked fine for all of the things I do with a laptop. Apple used a new type of ultra thin keyboard that is slightly different than larger full travel keys, yet I found it was very easy to use and took only a few minutes to adjust to its feel. Apple has been criticized for using an Intel Core M processor in the new MacBook but I found it performs very well and, with its extra graphics processing power, it plays movies, videos and music flawlessly. Even with my relatively poor eyesight without reading glasses, I have had no problem using its Retina Display even though it has a lower screen resolution compared to the screen resolutions on larger MacBook Pro’s.

To be clear, the new MacBook is not designed to be a power laptop or one that demands very high speed processing and ultra-high resolution. This is what I call the ultimate road warrior or corridor warrior machine that is light and thin and can be taken with you everywhere. While its price point is a bit high for students, it would also make a great student laptop since it is very easy to carry and gives them the full power of OS X in a very small footprint. I still will use a more powerful laptop with a larger screen, most likely tied to a very large monitor, when I do complicated charts, presentations, sophisticated DTP and editing projects, etc. However, this new MacBook will now always be in my bag and become the laptop of choice when I am away from the office and on the road.

The new MacBook is actually a game changer for the industry for numerous reasons. The first is it helps usher in the era of the ultra-thin laptop. Dell’s XPS 13 and Lenovo’s Yoga Pro 3 are the first of this breed of ultra-thins but the new MacBook is thinner and lighter and, from a design standpoint, is the most stunning of these three clamshell laptops. Apple still believes touch is not important in clamshells while Dell and Lenovo add touch as part of their design. But this new breed of laptops will be a better option for highly mobile computing users than the current ultra-lights that populate the laptop market today.

What is inside this new MacBook will eventually influence the design of next generation ultra-thin and thin and light laptops too. Apple’s logic board is the size of two iPhone motherboards. Key designers of the iPhone team helped create the new MacBook logic board and crammed an amazing amount of technology into a very small footprint. This is also a game changer since it is bound to make some laptop vendors rethink how they design logic boards for their own ultra-thin and ultra-light laptops. Also, the new terraced battery design will force competitors to look much closer at how they design their own batteries if they want to get a competitive product in the market that even comes close to Apple’s ultra-thin design.

Another thing it will influence is screen sizes in ultra-thin laptops. The Dell XPS 13 and Yoga Pro 3 both sport 13″ screens. When you put them next to a MacBook, they seem large by comparison since even that extra inch impacts their overall form factors. Apple believes a 12″ screen is the perfect size for a road warrior laptop and I tend to agree. It is a great size for us road warriors who need a fully functional OS X laptop but covet the small size and weight this delivers.

The other thing it will influence is design. It is clear to me Jony Ive is the new Steve Jobs and from now on design will be at the forefront of everything Apple creates. If you look at competing ultra-thins, they still look like mainstream laptops with color schemes that do not vary much. Apple has used design and color in the new MacBooks to make them stand out — they are highly distinctive.

This is the type of laptop I have been wanting for decades. Thin, light, under two pounds, it has had the same effect the original iPad had on me in that the iPad became a device I always have with me. My iPad is still going to be a faithful companion but I will now take the new MacBook with me as well and have the best of both worlds during my business day. This is by far the best ultra-thin laptop on the market and will become the gold standard for this type of portable computer.

I realize that Microsoft’s Surface Pro and tablet/keyboard combos make sense for some people. And in the Windows world the Surface Pro, Dell’s XPS 13 and Lenovo’s Yoga Pro 3 fit the ultra-thin need for the Windows crowd at least today. However, for the Mac crowd and switchers, the new MacBook delivers a great ultra-thin notebook experience I believe is even better and, for this group, it will have a lot of appeal. There is no question in my mind Apple’s new MacBook will be a big hit with those who want an ultra-thin portable device to carry with them all of the time. And no doubt it will eventually influence their competitors in the same way the MacBook Air pushed them to rethink their designs and create similar products just to stay competitive.