When Apple releases its latest iteration of the iPhone this fall, it seems that the company will also be announcing the latest evolution in its rapidly expanding Services ecosystem.
On Thursday (Aug. 13), Bloomberg quoted unnamed Apple sources as saying that the tech firm will be rolling out new subscription bundles for digital services. The bundles will allow Apple users to group some of the digital services that the company has released in recent years into a bundle at a single subscription price.
How the bundles will be priced is still unknown, but sources told Bloomberg the company will offer several “tiers” of services. The least expensive offering will tie products like Apple Music and Apple TV+ together, according to Bloomberg.
Moving up the price scale, the more inclusive bundles will combine Music, TV+ and Apple’s gaming service Arcade and/or Apple News+. And top-of-the-line bundles will combine all of that with Apple’s Cloud service.
Users who subscribe to all of Apple’s major services plus the highest iCloud storage tier in today’s pre-bundled world would pay about $45 a month, but Bloomberg said they could expect to save about $5 monthly under the new bundling plans.
However, the news service said the packages won’t initially include monthly installment payments for devices. Earlier this summer, Apple expanded installment payments through its Apple Card beyond just iPhones to include the company’s entire line-up: iPads, Macs, AirPods, Apple TV, etc.
According to Bloomberg, the company is internally calling the new bundle program “Apple One.” While that name is new, the idea of Apple offering bundled services has been floating around the rumor mill for quite some time. Reports emerged last November that Apple was designing a bundle of iNews+, Apple TV+ and Apple Music as a way to draw in subscribers.
Those reports indicated that Apple hoped bundling stronger-performing digital services would provide a boost for weaker offerings like News+, which as of last fall had underperformed per the expectations of media publishers that had signed onto the platform. The executives’ main complaint was that Apple News+ was bringing in a lot less money than anticipated.
On the other hand, Apple’s overall services have been enjoying great success, as the company noted in its latest earnings report. Apple said its services segment saw revenues increase 14.9 percent year over year. CEO Tim Cook said those results meant that Apple had hit a 2016 goal of doubling services revenue by the end of 2020 – six months early.
“We had strong performance in our digital services, with all-time revenue records in the App Store, Apple Music, video and cloud services, as well as elevated engagement on iMessage, Siri and FaceTime,” Cook said in his call with analysts post-release.
Chief Financial Officer Luca Maestri added that the number of both transacting and paid accounts on the firm’s digital content stores had reached an all-time high during the quarter. He added that paid accounts had seen double-digit percentage increases across all geographic segments in which they were offered.
“In aggregate, paid subscriptions grew more than 35 million sequentially, and we now have over 550 million paid subscriptions across the services on our platform, up 130 million from a year ago,” Maestri said. “With this momentum, we remain confident to reach our increased target of 600 million paid subscriptions before the end of calendar year 2020.”
The services arena has clearly paid off for Apple – and faster than initially anticipated, pushed by consumers' pandemic-triggered shift toward a digital-first lifestyle. On some level, it's not surprising that Apple is now trying to further build its services ecosystem with interconnection, a move that can both expand potential revenue while normalizing its flow.
Moreover, the initiative should create a launching pad for other digital services that Apple is rumored to have in development, such as a much-anticipated fitness offering reportedly codenamed “Seymour.” Published reports indicate that Seymour will aim to challenge at-home workout platforms offered by Peloton and Nike, among others.
How will the world react to Apple’s expanded bundling play? Bloomberg reported that the Apple One program comes after years of investors urging the company to build something like Amazon Prime, noting the many benefits that Amazon has netted from that bundle of services.
Wall Street believes Amazon Prime has created customer loyalty and increased customer spend for Amazon by bundling a lot of attractive features (free shipping, media streaming, etc.) into a single, desirable subscription. But Prime wasn’t built in a day, and while Amazon has undeniably had success with it, other imitators have had a mixed record.
Of course, Apple One could tap into a user base of hundreds of millions of avid iPhone fans who are already buying at least some of the company’s digital services. Those offerings have pushed Apple toward becoming history’s most valuable company, with a market capitalization that’s approaching $2 trillion.