Apple’s “California Streaming” special event was another iteration of providing products with increasing value to consumers at largely consistent prices, Loup Ventures’s Gene Munster writes.
Apple on Tuesday announced a slew of new products: iPad (9th gen.), iPad mini (6th gen.), Apple Watch Series 7, iPhone 13 mini, iPhone 13, iPhone 13 Pro, and the flagship iPhone 13 Pro Max.
Apple’s annual flagship event was another iteration of providing products with increasing value to consumers at largely consistent prices. This is what we refer to as a virtuous cycle of mutual benefit. A product provides increasing value to the consumer at the same or lower price point, while more value accrues to Apple as it continues to grow its monetizable device base. Companies that participate in this virtuous cycle are most likely to continue to gain market share and expand market cap.
Apple has made annual upgrades seamless. And herein lies the beauty of Apple’s seemingly boring annual upgrades: annual upgrades! Pulling customers into a faster upgrade cycle. Combine all this with Apple’s advertising (from the event itself to 30 second spots to product placement in Ted Lasso), and the company’s world class marketing capabilities are clear and obvious.
What is less obvious is the juggernaut they’ve created with these annual upgrades. Apple enjoys increasingly recurring spend on a growing share of consumers’ wallets with expanding optionality from related services and accessories. Also important, the upgrade 5G rising tide will continue in FY22. We estimate 400m iPhones are over 3 years old, a base that gives Apple a head start in meeting Street expectations for 260m iPhone unit sales over the next 12 months.
MacDailyNews Take: As with Munster and Stokman, we await Apple’s hardware subscription plan: Apple One for services plus iPhone, Mac, iPad, and/or Apple Watch hardware for a single monthly fee, with built-in upgrade schedules for hardware. Depending on which hardware subscription plan they choose, users would always have current or near-current hardware.
$500 full-subsidized with a plan! I said that is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard which makes it not a very good email machine. — Steve Ballmer, January 17, 2007