Very, Very Counterintuitive -- Apple -- June 8, 2018

Don sent me this link earlier this morning: Apple music subscribers reach 50 million. Then the light bulb went "on." It finally made sense.

I posted this article earlier this morning: Apple iPhone sales falling. That appeared just after the article noting that Apple was taking the unprecedented step of offering its most recent upgrade (iOS 12, yet to be delivered) to Apple iPhones going back to 2013 -- that's five year ago, and unprecedented. Google/Androids updates generally go back only a year or two years, maximum.

When I wrote that, it seemed crazy. Allowing those with iPhones as old as five or six years to upgrade. That extends those phones another five years, meaning some folks will be able to keep their current smart phones for ten years or more. It did not make sense.

Yes, one way to reward great customer loyalty, but what's the benefit to Apple?

Then it dawned on me, as soon as I saw the linked article above.

Churn.

When one's iPhone has reached the end of its life (batteries, operating system, etc), the iPhone user has two options: a) buy a new iPhone; b) buy an Android.

Advertisers would suggest (and they may be correct), an Android is every bit as good as the iPhone (assuming you don't need the Apple ecosystem and/or you don't need Group-FaceTime.

But for an iPhone user, just about the time your operating system seems to be getting a bit old -- wow, Apple has just provided a free upgrade, and it will be a major upgrade.

With chargers now ubiquitous (in the home, in the office, and in the car) batteries are becoming less and less an issue for even really, really iPhones.

Back to the linked article that started all this:

Apple Music subscribers have reached 50.0 million, up from 30.0 million in October 2017.

This includes paid members as well as users on membership trials. Apple Music expects to reach 60.0 million subscribers by the end of 2018. Apple Music subscribers have increased significantly from 13.0 million in April 2016 and ended 2016 with 20.0 million subscribers.

During Apple’s fiscal Q2 2018 earnings call, CEO Tim Cook stated, “The App Store set a new all-time revenue record in the March quarter and Apple Music reached a new record for both revenue and paid subscribers, which have now passed 40 million.”

Spotify is the global leader in the music streaming industry. Spotify has 75.0 million subscribers, and it recently announced revenues of ~$1.4 billion in the first quarter of 2018 for year-over-year growth of 26.0%.