- Apple releases new devices, but fails to generate euphoria around iPhone 6s and iPad Pro.
- Apple TV increases Apple's hold on the entertainment ecosystem.
- A foray into China could yield big results in the long-term.
On September 9th 2015, Apple (NASDAQ:AAPL) treated the world to a new range of devices, namely; the iPhone 6s, iPad Pro and Apple TV. The widespread consensus on the iPhone 6s was that it wasn't a big enough improvement. Moreover, the iPad Pro was viewed as closely resembling the Surface Pro 3- an established product in the convertibles market. Consumers and investors were hoping for something that will put the competition’s back against the wall. Investors responded with their wallets. Apple stock plummeted during the keynote.
With companies such as Samsung, HTC, and even Huawei coming out with great devices this year, Apple needed to give the world of devices the same euphoria it generated for the first iPhone or Macbook Air.
However, one device that has gotten less airtime is the Apple TV. It is likely to be the best device Apple has made with regard to the longterm. In order to appreciate why, we need to assess the ultimate ambition of every major tech company. Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) have invested a lot of money into creating new devices. In Amzon’s case some have even been sold at a loss. In order to grow, you need an ecosystem.
The old tech model of making most of your money by selling devices is long gone. As the Apple keynote showed us, technological breakthroughs aren’t occurring as rapidly as they used to. Therefore, people are simply not upgrading their devices as often. For instance, the most used iPhone in North America is the iPhone 5.
As a result, from a tech company’s perspective, it makes sense to have a strategy whereby customers buy a product and then pay a monthly subscription to access certain services.
The Apple TV has a big part to play in establishing dominance in the entertainment market. Apple TV ties their whole entertainment ecosystem together. The Apple TV now has gaming capabilities. To elaborate, one can use a range of controllers to bring their favourite games to their living room. This shows great timing and strategy by Apple. With the gaming industry set to hit $100 billion by 2018, Apple is placing itself to get a bigger piece of that pie.
Unfortunately, Apple still relies on TV providers such as Now TV and Netflix to provide TV programmes and movies to Apple TV. Netflix (NASDAQ:NFLX) had a revenue of $5.5 bn in 2014, a YoY gain of more than 20%. Therefore, Apple is likely to offer their own a-la-cart TV subscription model in the future. With 61.2 million iPhones sold in Q2 of 2015 alone, Apple has a great start if and when they choose to do this.
Apple’s insatiable appetite for control is evident when they pulled Google maps from iPhones in 2012. Although it led to a public outcry due to the myriad of issues with Apple’s offering, they stood firm, and now it is as if it never happened.
If you want to see how far Apple can go with the Apple TV, let’s place our attention to Apple’s foray into the Chinese market. With 1 in 5 human beings living in China, a growing middle class, and Apple devices being seen as status symbols, China could be Apple’s biggest market over the next five years. However, the ‘Great wall of China’... an appropriate name for China’s national firewall could make it difficult to deliver certain experiences to the Chinese people.
Although Apple hasn’t yet developed a Netflix like TV subscription service, it won’t be surprising to see that being offered early next year.
In conclusion, strong sales figures for both the iPhone 6s, iPad Pro, and Apple TV is a surefire way to silence the critics and cause a surge in Apple stock. Interestingly, they are remaining rather tight-lipped about first week sales figures, while on the other hand, Apple stock has received a rating upgraded and a higher price target, as analysts see strong sales emerging. However, let's wait on see. Until they arrive, it isn't wise to buy Apple stock. If they are less than the market expects, the share price will take a nose-dive. However, Apple TV puts the world’s most valuable brand in a great position moving forward, with a view on the long term.
Cover image source: Flickr/Michael Sandoval