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Author: Tan KW   |   Latest post: Sun, 21 Apr 2019, 4:49 PM

 

Apple’s growth depends on Androids

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Much has been written about Apple Inc’s efforts to sell more stuff to the people who own 1.4 billion of the company’s iPhones and other hardware. 
 
But to keep growing, the company will also need to strengthen a weak muscle: selling stuff to the billions of other people who don’t own Apple devices.  
 
Apple’s conundrum is that its three big gadget markets – smartphones, personal computers and tablets – are stagnating. To keep growing, then, the company has been trying to sell its existing device owners add-on hardware and services including Apple Music subscriptions, apps, the Apple Watch and its AirPods wireless headphones, a new version of which Apple announced on Wednesday. 
 
Revenue from Apple’s ancillary hardware plus its Internet-related services and apps contributed nearly 22% of revenue in the company’s latest holiday quarter. That’s good, but remember that most of those add-ons are bought by people who already own Apple devices, and new device sales are not growing much, if at all. 
 
Meanwhile, the company is largely ignoring billions of non-Apple device owners. About 85% of new smartphones sold run on Android. A similar share of new personal computers are powered by Windows. Apple sells a tiny minority of hardware that connects televisions to the internet.  
 
Yet some Apple products and services, including the Health app, iMessage, Apple News and the Apple Watch, only truly work with Apple devices. Other products, including AirPods, HomePod and Apple Music, function with devices other than those made by Apple, but they are crippled or barely used. 
 
Consumer Intelligence Research Partners said it doesn’t think it has ever had an Android device owner with AirPods in its research samples of consumers. That compares with an estimated 8% of US iPhone owners who have AirPods. App Annie estimates the Apple Music app is installed on a low-single-digit percentage of devices running Google’s version of Android.(1) (The mobile data and analytics company doesn’t have figures on how many of Apple Music’s 50 million subscribers aren’t iPhone owners.) The Apple Music app has a meagre 3.5-star user rating in the Google Play app store. 
 
People who aren’t Apple hardware loyalists are an enormous potential audience for many of the company’s products, particularly its digital services. With growth harder to come by, Apple can’t afford to treat them as second class anymore. 
 
The clock is ticking on Apple’s strategy beyond its own hardware. The company is set to announce on March 25 a new service for online video entertainment and another for news subscriptions. It’s not clear whether or how Apple plans to make its offerings available to people who don’t have a company device. 
 
If Apple makes its fresh offerings available only on its own hardware, that puts a natural, but still high, ceiling on the number of potential sign-ups. And it’s annoying. Imagine having access to an Apple movie that you can watch only on an iPhone and not on the TV in the bedroom. Imagine paying for a bundle of Internet-accessed news and magazines and not being able to read them on your PC at work. More important, if Apple limits video and news subscriptions to its own hardware, that would dent the investment thesis that Apple is now a services company first and a hardware company second. 
 
There have been signs, though, that Apple isn’t content to limit distribution to its walled garden. Apple Music is available on Amazon.com Inc’s Echo voice-activated speaker, and the company has struck deals to let TVs access Apple-piped web videos. 
 
Any rational company would want to have the largest possible audience for its Internet services. But Apple, at least in the iPhone era, has never had to bother much with making products that work well on all the world’s devices. That is Google’s problem, or Facebook’s or Netflix’s. And it’s tough to break old habits.  
 
That’s why when I watch Apple’s event on March 25, I’m eager to see whether the company caters as much to its fans as it does to the billions of people who aren’t already Apple customers. 
 
(1) For a different look at Apple Music on Android, the mobile app intelligence firm Sensor Tower estimates about 1.1 million people globally installed Apple Music's Android app for the first time last month, about the same number as downloaded Pandora's Android app. 
 
 - Bloomberg   
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