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What’s happened? In the most recent reported quarter, Apple received record revenue from its services; iTunes, Apple Music & the App store. Despite what’s estimated to be a contracting hardware market, Apple has grown its ecosystem with sales of services up 27% on the previous term & the App store, now in its 10th year, has achieved its strongest earnings in Apple’s history. Services now represent over 15% of Apple’s total revenue. Morgan Stanley’s research suggests that 40% of Apple users pay for apps today, with it conservatively estimating it to grow to 50% over the next 5 years. Researcher Huberty is also expecting annual spending per user to expand from $120 per year to $220 per year by 2023. |
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The Media Store Take Here is Apple transforming from “hardware” producer to service provider. This future-proofing strategy was started by Steve Jobs in 2003 with the launch of iTunes but this foresight is now delivering credible, ongoing revenue streams. It shows that an Apple device is only the beginning of a relationship with the consumer. Every industry is open to disruption but Apple has shown the power of Brand can help tap new commercial opportunities. Keeping the consumer at the heart of any transformation is the wisest strategy. As Henry Ford said “A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large.” Charisma Bhandari |