Apple services stand out as bright spot in otherwise rough Q2
Services revenue was perhaps one of the few comforts for Apple in its second-quarter financial results shared on Tuesday, growing 20 percent year-over-year to $5.99 billion, setting an all-time record for the company.
"We are very happy with the continued strong growth in revenue from services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices," Apple CEO Tim Cook said in a prepared statement.
As usual, the company's unaudited data summary lumped all services together, rather than breaking down individual sources. The category does, however, include everything from iTunes, the App Store, Apple Music, and iCloud through Apple Pay and licensing income.
The rest of Apple's second quarter was largely disappointing, with overall revenue down 13 percent to $50.557 billion. All of the company's major product segments -- iPhone, iPad, and Mac -- declined in terms of shipments and revenue. The iPhone, Apple's mainstay, saw shipments fall by almost 10 million units, with revenue down 18 percent to $32.857 billion.
Services growth was likely connected to Apple Music. It now has over 13 million subscribers, up 2 million during the quarter. The company is still behind Spotify, which in March had over 30 million paying customers, plus many more people on its ad-based tier.
"We are very happy with the continued strong growth in revenue from services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices," Apple CEO Tim Cook said in a prepared statement.
As usual, the company's unaudited data summary lumped all services together, rather than breaking down individual sources. The category does, however, include everything from iTunes, the App Store, Apple Music, and iCloud through Apple Pay and licensing income.
The rest of Apple's second quarter was largely disappointing, with overall revenue down 13 percent to $50.557 billion. All of the company's major product segments -- iPhone, iPad, and Mac -- declined in terms of shipments and revenue. The iPhone, Apple's mainstay, saw shipments fall by almost 10 million units, with revenue down 18 percent to $32.857 billion.
Services growth was likely connected to Apple Music. It now has over 13 million subscribers, up 2 million during the quarter. The company is still behind Spotify, which in March had over 30 million paying customers, plus many more people on its ad-based tier.
Comments
Well Apple was serious and they did a great job!
- Home Kit
- Health Kit
- Research Kit
- Car Play
Unfirtunately, they haven't gotten much mainstream traction. I'm still bullish on Apple's future, teaching myself Swift to become an iOS developer, but some of Apple's initiatives of the past few years seem to have fallen short of the aspirations.
And they honestly think they'll one day compete in the car business against the big players and Tesla? Good luck. Tesla has a huge head start. By the time the "Apple Car" is revealed, Tesla will have delivered hundreds of thousands of Model 3. The people who reserved a Model 3 would likely have been Apple customers, early adopters. Apple just lost all of them.
I'm glad services revenue has grown, but it's no replacement for creating innovative products. Apple TV4 is weak. The apps suck. Gaming is mediocre. Apple Watch is a bore. Nothing special. Competitors have caught up to the iPhone more or less. iPad Pro and Apple Pencil are cool, but a niche market. The Mac is falling farther and farther behind PCs in terms of performance for the price.
But we should all hold our breath and wait for the car to dazzle us in a few years? I think they are losing their way.
Oh, yeah, homekit. It wasn't developed further as the logical home for it would be a decorative local iOS based NAS/itunes server/backup/btooth/IR universal with Siri that just works and runs on the smell of an oily rag. But Apple wants you to access services like iTunes and iCloud on the web, as Apple knows that everyone has a 100 Mpbs unlimited connection, so it will never happen.
BUT, if Apple's main focus now is monetizing the user base then I think someone other than Eddy Cue needs to lead that effort. No one can say Apple's services are best in class. As I said elsewhere I've spent two days trying to get iTunes to recognize my iPad Pro with zero luck. I ripped a bunch of Prince songs and have been trying to get them on my phone; half showed up the other half are there but grayed out and unplayable.
When Apple Music came out it was mess. Eddy Cue's 25 minute demo at WWDC (why was this product being announced at a developer conference?) was cringe worthy. He didn't announce a service he spent 20 minutes demoing a confusing music app. Jim Dalrymple complained about Apple Music so badly Apple actually flew him out to Cupertino to fix his problems. And what about Apple TV. No remote app, Bluetooth keyboard or dictation support at launch. No App Store categories at launch. Entering passwords or searching for anything was a real pain. And now the rumors are Apple's foray into original programming is completely disorganized. As are the iCloud/Siri teams. App Store was taken from Eddy and moved under Phil. Apple analyst Ben Bajarin recently said he was moving all his stuff to Office because he felt iWork was a dying product. The places you can use Apple Pay are still very small in number. I could go on and on. There's nothing under Eddy Cue's leadership that's great. Cook needs to do something about this.
I do agree with your comments regarding what we see out of Eddy Cue's organization, and it is a cause for concern. I will hold further criticism until after WWDC, to see if there is some indication things might be improving.
Apple is not a services company, nor do I believe that Apple is trying to brand themselves as that (don't listen to or bother responding to that sog character). They are legitimately trying to put some spotlight on a growing part of the business, and it is an area that Apple needs to invest further in, in order to grow. It would be foolish not to consider methods to increase revenue from the installed base - but it needs to be a considered and not a splatter gun approach (e.g. just say no to paid search results). If the services are good, then it also increases stickiness. This might not be sexy to you, but it is good for Apple. This doesn't have to detract from Apple's primary focus on making great products that inspire loyalty.
Apple does need to both invest more here, and potentially streamline how they sell it. Apple has never been one for "bundling", but I would say that time has come. Right now you have to pay separately for Apple Music, iTunes Match, iCloud drive, & there is only Apple Care on a per-product basis. Seems like some low-hanging fruit on creating some bundles that would generate increased interest. Generate more subscription business via App Store with an official reduced rate there vs. the 30% (to what is rumoured to be the rate done with Netflix and HBO).
In a nutshell: In the mainstream consumer market, as smartphones get bigger / more powerful, they are replacing tablets / PC’s for a majority (not all) of people. Larger-screen / 2nd-screen devices aren’t necessary (or are good enough), which is why Apple has re-oriented its marketing for iPad towards the Pro / enterprise market, because that's where the biggest potential for growth lies.
So Apple has two options: A) come out with new product categories and / or
Ask that user base what they want: Better computing products or the newest albums @0.99?