For the second time in a row, Apple has announced sales of iPhones are slumping, apparently in large part because too many people have them already. But this time around, people didn’t seem to much mind.
Part of that was because Apple had flagged in advance this time that sales were likely to slow down. But it was also because Apple has a big plan for life after the iPhone.
That mostly revolves around selling apps and services. The company has always been huge in software – establishing the idea of the App Store and using it as a central selling point of its iPhone – but now those phones could making money from apps, rather than the other way around.
And the financial markets, usually so punishing of Apple, appear to have liked it – despite the company telling a very similar story the last time it announced its results. Despite the negative results, Apple’s shares were pushed up 5 per cent in late trading.
Much of that was helped by growth, rather than outright numbers – and it is growth that the financial markets are worried about, since it appears to have stalled. But Apple hopes that those service markets will continue to get bigger even if the sales of iPhones and other devices fall – since the nearly 600 million people who own Apple devices can keep spending money on apps, which they do to the tune of an average $68 a year.
In all, the service segment’s sales were pushed up by 19 per cent. That includes all of the company’s online services: everything from stores like iTunes and the App Store to people paying for extra iCloud storage.
The increase pushed the full sales to $6 billion. That’s more than Apple made from the sales of either iPads or Macs, and far bigger than most other large tech companies in itself.
None of that money actually comes directly from making things and selling them. Instead, it’s mostly made by providing the infrastructure that does so – taking a cut as it does so.
That means that what Apple really needs, in its new strategy, is not to sell more iPhones. Instead it needs more apps like Pokemon Go – which makes money through in-app purchases, all of which Apple takes a portion of, and through which it stands to make billions of dollars.
Mr Cook even addressed the popularity of Pokemon Go during the earnings call, saying both how pleased he was that the app was doing so well and that Apple would be looking into the same things.
"It also does show that AR can be really great,” he said in a conference call with analysts. “We have been and continue to invest a lot in this. We are high on AR for the long run, we think there's great things for customers and a great commercial opportunity.
"The number one thing is to make sure our products work well with other developers' kind of products like Pokemon, that's why you see so many iPhones in the wild chasing Pokemons."
