The incredibly unpredictable nature of the United States’s trade policy is going to have a profound effect on Apple hardware, not just in the U.S., but globally. Whether or not Apple absorbs the costs from their margins, hikes prices, or starts to move physical production and supply chains around the globe is all up in the air when the trade policy of the United States can vacillate so wildly in the span of days. I withdrew and resubmitted this column with these wild swings. If a new deal is on the table by the time you’re reading this, then just wait a little bit and I’m sure things will fall apart.
As Dan Moren pointed out, software isn’t subject to these tariffs, and could present a path forward. That’s the power of positive thinking. You know what’s easier than trying harder though? Squeezing your customers.
Services, including advertising, are not subject to these tariffs, and they already provide Apple with the growth on Jason Snell’s charts that so enamors investors. That could well be the stabilizing force to offset whatever the hell is going on with trade: dependable, digitally-delivered dollars. At least while the dollar is worth anything.
To that end: We should mentally prepare ourselves for ways that Apple might squeeze more out of its customers in each of its service while everything else is on fire.
Apple Ads
This week, Apple rebranded Search Ads as Apple Ads. 9to5Mac’s Benjamin Mayo posted about the change, and reports that Apple says the change is because Search Ads has already broadened in scope. It’s speculation that the scope will broaden further, but we’ve heard rumors about just that occurring with expansions into Maps and Apple TV+.
People often confuse Apple’s stance on privacy and its emphasis on premium products as equating to “no ads” when that’s not what that means at all. I’m sure there will be a differential-privacy paper all about how private its ad-tech is.
App Store
The eye-watering commissions Apple makes on app purchases, in-app purchases, and subscriptions are almost high enough to encourage someone to set up a monopoly on it. Apple probably can’t get anymore out of those existing relationships, but I’d expect that it will go harder in all its legal cases around the globe. The company is going pretty hard right now, but (slaps roof of App Store) this bad boy can fit so much malicious compliance in it.
iCloud
This thing just prints money! Look at it go! Grandma doesn’t want to lose the photos of her granddaughter forever, does she? Of course she doesn’t. Here’s that monthly bill, Grandma! We generously included the Invites app, too! No, we don’t know why!
Like the App Store, I don’t see how Apple can extract more from iCloud. It’s not likely to be from add-ons like Invites or fragile Private Relay.
Apple might increase plans slightly, but it’s at risk of regulators pushing for alternative backup solutions, or customers just not paying for backups, then losing their phone and saying, “To hell with you” right before they switch to Android.
A possibility would be new higher tiers for storage as people fill up their devices with more and more stuff-those higher tiers would have commensurately higher prices. It would also open the possibility of Mac backups (Time Machine in iCloud) with pricey plans to cover all the data those hefty Macs store.
AppleCare
It might seem like the perfect service to charge more for, but AppleCare is quite expensive as it is—to the point where people would rather skip the coverage and take their chances. More expensive devices and more expensive components mean AppleCare prices are likely to increase, but probably just linearly.
The awful thing Apple could do is sell hardware with an AppleCare plan set to start charging at the end of the free window. Thus customers would need to opt-out of the subscription or start incurring AppleCare fees. That seems a little too predatory, but Apple is currently pretty pushy about AppleCare when you buy new devices. You can’t get pushier than opt-out.
Apple Music
Streaming music is a commodity. There are many venues, and they all offer basically the same catalog. Spotify, for better or worse, is the industry leader, and Apple is second fiddle1. Increasing the price of a commodity product just drives people elsewhere. Apple’s main advantage is that it owns the Music app, and can abuse that position to drive you into submission.
They can’t nag more than they do now. As a recent Apple Music canceler, I’m getting marketing push notifications for promotional rates to rejoin Apple Music. Three of the screens in the iOS Music app interface are about subscribing to Apple Music. It would have to be a flashing banner that said:
What seems more likely is the introduction of a discounted ad-supported tier. Spotify, Deezer, Pandora, etc. offer ad-supported free tiers, but I believe Apple would still try to get some money out of people. It will undoubtedly justify it with fewer commercial interruptions, or higher quality audio.
It could, I dunno, be more competitive by making the Music app experience better, but that seems way too difficult at this point.
Apple TV+
Another candidate for ad-supported tiers is Apple TV+, where there have been rumors about such an offering for years. That would be ad-supported video on demand—AVOD. It would be entirely possible for Apple to also carry free, ad-supported TV (FAST) channels directly in the TV app as well. You’re probably not a connoisseur of FAST services, but many of them offer “channels” that are effectively the same between each platform.
If Apple can position itself as the starting point for your video viewing experience by having FAST channels at your fingertips, then you’re less likely to launch another app that has the same FAST channels. Then Apple collects the ad revenue because they’re in first position.
Apple TV+ has a tremendous amount of churn when compared to other streamers because people only sign up to watch a show that “everyone is talking about” like Severance.
From Matt Belloni’s Puck newsletter about Apple TV+ on March 21st:
Still, the Apple TV+ churn rate, meaning how many people cancel every month, is still around 6 to 7 percent—well above the weighted average of all platforms in the past year. We’re about to see a big test of churn now that Severance is ending. “Apple has some of the fewest committed subscribers of all the major services,” the streaming analyst and my Puck colleague Julia Alexander told me today. “Fewer than 35 percent of all subscribers keep the service for longer than six months.”
HBO used to sit in a similar, premium position that Apple TV+ now sits in. People would churn depending on whether or not a hit HBO show was on. HBO Max, and then Max, were attempts to mitigate this by offering shows and movies with a broader, year-round appeal than HBO.
Apple can keep increasing what it charges for the ad-free Apple TV+ experience, but there’s a ceiling where it runs into competing services that do offer wider arrays of shows and movies. Apple TV+ isn’t a commodity, like Apple Music, because Apple TV+ shows are unique, to an extent.
We’ve kind of reached that extent. Apple TV+ is on Amazon Channels. Season 1 of Severance is free with ads on Prime Video to get people hyped to subscribe in Amazon, or elsewhere, for the recently completed second season. Apple pays for an Apple TV+ button on every Roku remote that ships and 50% of broadband households have a Roku. Apple has a $2.99/mo promotion to get new and returning subscribers to watch the new Jon Hamm show. It wants you to get hooked and stop churning, but maybe it’s only training its customers to subscribe during promotional windows and wait for select titles to filter down to Amazon?
Apple could join a broad entertainment bundle from a competing studio, like the Disney+/Hulu/Max bundle. That would reduce churn because people wouldn’t want to rejigger their subscriptions when a show concluded, but Apple would need to find a partner that complements its offering.
Apple TV+ spending is one of the areas Apple justified as an investment in US jobs. Which is sort of funny when you think about how global production pipelines are, due to companies wanting to take advantage of far-flung tax rebates. It seems likely Apple would generate more profit by pushing harder for Canadian production (not that I’m encouraging such a thing).
Apple News+
It’s real hard to charge more money for people to read news on the internet. The paid product also has ads already, and they’re famously terrible.
The growth opportunities have all been in copying The New York Times‘s move into a family of lifestyle apps for word games (not in Apple Arcade lol) and recipes. You unfortunately have to get your games and recipes in the bad News app, but they arguably add more value than the SEO-affiliate-link-filled “articles” News leans so heavily on, or on Apple’s poor stabs at objective live coverage, like the 2024 election Live Activity.
It might be time to admit defeat on the human-curated front page, where a view centered on nothing and no one adds little value. In an effort to appear impartial, the least partisan news coverage from hyper-partisan right-wing news organizations appears mixed in with everything else on the front page. Which adds to the frustration of using the product when it insists on showing a gray box for the post that’s blocked.
Newsletters are incredibly popular and iPhones have this little thing called Mail where you get those newsletters. Why not offer the perk of picking up your newsletters from the Mail app and bringing them into News to flow dynamically with the rest of what you’re reading?
Maybe there’s a newsletter post that links to a Washington Post story. Show the Wall Street Journal story and “linked in…” or “related” with the newsletter post. Make it seem like you’re providing value in the field of news when in reality you’re matching URLs. If you can’t provide editorial voice to the news, then let people connect the editorial voice to the news instead of giving them a parade of “unbiased” reporting that’s mostly disconnected from everything surrounding it.
Apple Fitness+
I can’t speak comprehensively about this, because this is perhaps the service that I use least. Those that use it are happy with it, but maybe that’s all it can ever really amount to. At-home workouts are for a very specific set of people. Tacking on ads won’t generate more revenue, and nagging people that don’t want to work out at home isn’t going to lead to a spike in conversions. I definitely see why it exists for passionate fitness enthusiasts who will get an Apple Watch, an Apple TV, AirPods/PowerBeats, etc.
Apple Arcade
This is perhaps the most disappointing service Apple offers. The ambition to have game apps that aren’t casinos for children was thwarted by Apple’s financial dependency on casinos for children.
Apple just announced five new games joining Apple Arcade in May, but most of the five aren’t new, just versions of older App Store games that don’t have pay mechanics in them.
Apple Arcade can never be financially successful as long as developers, and Apple, make more money from App Store games. The incentive structure is totally broken, so there’s no way to charge more for customers to subscribe to this without actually offering a lot more.
Ad support here also defeats the purpose of this product. It’s not a gross solicitation for virtual currency, but it will show ads? A smoke-free casino? What would the point be? Look elsewhere for revenue generation, except…
Apple One
One of the roles that Apple Arcade plays is as a value-add for the Apple One bundle. But if a value-add is in a bundle and no one really uses it, did it add value?
What’s important is that it allows Apple to talk about how much you save when you get the bundle.
The One in Apple One, really means Three, in the US that’s:
- $19.95/mo – Individual – 50 GB iCloud, TV+, Music, Arcade.
- $25.95/mo – Family (6 people) – 200 GB iCloud, TV+, Music, Arcade.
- $37.95/mo – Premier (6 people) – 2 TB iCloud, TV+, Music, Arcade, Fitness, News+.
By Grabthar’s hammer, what a savings.
The key to any bundle is that it decreases the chance that you will churn—you’ll keep your bundle rather than downgrade to à la carte subscriptions.
You might notice that the introductory bundle, the Individual plan, is not priced very well at all, particularly if you seldom use Arcade, which is $7 of the total claimed $9 savings. There’s not much incentive to get into a bundle to begin with. An individual is better off churning through Apple TV+ and other services as needed
Most people would get more value out of an ad-free Netflix subscription, paying for iCloud, and using free Spotify. Or split it down the middle with the bad ad-supported Netflix and ad-free Spotify. Maybe YouTube Premium? Or YouTube Premium Lite? It’s hard not to think of better ways to spend $19 and $1 for storage.
Things are even trickier to balance when you go up to the family plan, or if you need more storage as an individual. If your goal is “I have to watch Severance!” then there’s not much that will suffice as an alternative, but if you’re just watching videos in general than there’s no reason to be partial to this bundle.
Sure, you probably have the Premier plan, because you’re a Six Colors reader, but not everyone is a lifelong Apple fan that needs to stay current on all things Apple. That is not the primary motivating force in their lives. They probably don’t even use the Apple stickers that Apple used to ship. The ingrates!
Dystopian Bundles
One of the ways to go about getting people into bundles is by offering ad-supported tiers for the à la carte services I mentioned above and then the calculated value of the ad-free bundle of services can increase by virtue of the fact that it doesn’t include ads. Instead of pretending Arcade is saving people money, it can be something that’s more directly understood—no ads.
The really awful thing Apple could do is make yet another Apple One plan named Lite or Air (ha) that is a bundle of ad-supported TV+, ad-supported Music, $7 of valuable Arcade of course, and the chintzy 50 GB of iCloud storage. Of all the nauseating options this one is surely the most nauseating, but there’s a reason for it. Apple can cut deals with phone carriers like T-Mobile, where it has its Apple TV+ promotion. Then people enter into a bundle instead of an à la carte monthly subscription that they got as a deal with their phone plan.
Another terrible thing to do would be to include AppleCare in an even higher tier of Apple One: the Max plan will cover accidental damage repair on up to three of the six iPhones or something similar where people would still buy more coverage but feel like they got some coverage.
Anyway, I can keep imagining darker and more insidious traps but we should probably stop there.
To Serve Man
I don’t want people to come away thinking that I’m looking forward to Apple emphasizing services that drain your wallet on a monthly basis. This whole thing is a mental exercise to figure out where the company’s revenue will come from to offset those volatile markets. Even if Trump indefinitely “pauses” his tariffs everywhere except China, or makes special exceptions for Apple, the buying power and habits of consumers will change the world over. Particularly if buying cycles elongate due to uncertainty, or because a bunch of people rushed to buy stuff before they thought tariffs would happen.
Apple’s going to get the profit it currently makes and the linear services growth Wall Street expects, regardless of whether or not it gives you or me the ick. Get ready for the ick.
- But their second fiddle has Spatial Audio. ↩