I’m writing up a short Apple event preview here. Please note that this isn’t a list of predictions – that’s always seemed foolish to me so close in to an event, since so much is known already, and any real out-on-a-limb projections are easily proven wrong the following day. Rather, this is an analysis of the importance and impact of the things that are likely to be announced. I’ll follow up with a comment for press in the hour or so after the event – if you’re not yet on my media distribution list but would like to be, you can sign up here.
We also did something of a preview of the event on the Beyond Devices Podcast this past week, focusing especially on the Apple TV – I’m embedding the SoundCloud player below, and you can also find the episode on iTunes and Overcast, as usual.
One of the key mistakes a lot of people in the press and other commentators are making with regard to the new iPhones is having a single-year upgrade mentality. And because they make this mistake, many people are predicting a first down year for iPhone sales, but this view is misguided. As long as you look at each new iPhone in comparison solely to the iPhone that came the year before, you’re going to totally miss the point, which is that the vast majority of iPhone buyers are on a two-year upgrade cycle, and therefore the important comparison this year is to the 5S (and 5C) and not to the iPhone 6 and 6 Plus. I put together the table below a while back for a client, and I think it’s very relevant here – the key thing to look at is the final column, because this is the set of new features an owner of a two-year-old device will see when purchasing the new device. As you can see, even if you ignore Force Touch, which is highly likely but as yet unannounced, there’s plenty to recommend the new devices over the 5S, and if you bought a 5C two years ago, you need to add in several more features that weren’t in that device but were in the 5S, notably Touch ID.
Beyond the two-year upgrade cycle, everything else points to another big year for iPhone sales:
- Switching from Android should continue at the same pace, especially since all the year’s major new Android devices are now out, so there’s no sense holding off on buying a new phone.
- Upgrades from iPhones should be big again – the 5S cycle was bigger than the 5 cycle, which drove last year’s upgrades, so the starting point is much larger, and Tim Cook has made much on earnings calls of how little of Apple’s iPhone base has upgraded to the new phones yet.
- The iPhone 6 Plus from last year will likely drop in price by $100, meaning that you can now get an extremely capable phablet for the same price as this year’s brand new phone (and the same price the Samsung Galaxy S6 and other leading Android devices launched at).
- Installment plans and especially leasing options (many of which are iPhone-centric) from the US carriers are driving more frequent upgrades and purchases of higher-priced devices, which should further help iPhone sales. Sprint and T-Mobile in particular are driving iPhone sales hard at the moment, and I’d expect to see some bigger promotions from Verizon and AT&T around the new iPhone launch too.
Will the year-on-year growth rate be as high as this past year? No. But will it veer into negative territory? Absolutely not. Apple should sell more iPhones this year than they did last year, as they have every year in the past. Even those users that sometimes or always upgrade every year should see plenty to like in the new phones too, with Force Touch and other new features making the new phones a nice step up over last year’s ones.
I’ve written a lot about the Apple TV and Apple’s TV strategy in general over the past two years, so much so that last week I put together a new topic page on this site to summarize it all. That writing kicked off with a piece from January last year on how Apple could turn the Apple TV into more than a hobby, and I stand by what I said then, which is that the real transformation can’t happen until Apple launches a TV service (note that this was well before reports that Apple was working on such a thing surfaced). I still believe that’s the case, but I also believe that the announcements that will be made tomorrow will be extremely important for the Apple TV. Adding an open SDK and App Store will create significant new opportunities for third parties and for Apple around both gaming and content, something I wrote about on Techpinions last week. The potential for gaming in particular depends a great deal on the details of execution, most importantly the ease of porting apps from other flavors of iOS, and the controllers. But I think the new Apple TV will be huge. The biggest questions in my mind are how soon it will launch and therefore how much time developers will have to begin creating apps for it. Since it’s very likely to launch before Christmas (and probably in November), it’s likely to have the shortest announce-to-launch cycle of any entirely new Apple SDK, and that’s going to make this launch very interesting to watch.
Though a minor announcement at the even this week, Apple Watch OS 2 is going to be enormously important for the Apple Watch and for Apple. I think an Apple Watch running OS 2 is best thought of as the version of the Watch Apple would have wanted to launch right off the bat, if it could have. The first version of the Watch software was good, but the reality is that the apps are sorely lacking, in large part because of the heavy dependence on the iPhone for functionality. With Watch OS 2, that all changes, and apps should be snappier, more functional, and far more varied in their capabilities. I believe this new phase of its history will change the Watch as much as iPhone OS 2 changed the iPhone, and make it a much more compelling device, while creating big new opportunities for developers. This, coupled with the holiday season, should make for a really big calendar Q4 for Watch sales. I’ve written about all this in more detail here.
It’s still unclear whether we’ll see new iPads at this September event, or whether they’ll be announced in October, but either way what I say here holds. The key for the iPad is that Apple is now engaged in what you might call salami tactics here (that’s a term that was coined back in the 1940s but which I first came across in this scene from the British comedy Yes, Prime Minister). That is, there are no huge boosts for iPad sales available to Apple, but rather a series of small steps it can take one by one, each of which will help iPad sales incrementally with the IBM and Cisco deals good additional examples. I first wrote about this idea here. I definitely see the iPad Pro (or whatever the larger iPad ends up being called) in this context – it won’t dramatically change iPad sales, but should add a little to the effort, especially in conjunction with the advancements in multitasking and split-screen functionality in iOS 9 (and potentially iOS 9.1), and the possibility of a stylus and Force Touch. I wrote a piece a while back about how iPad sales might eventually tick upwards due to upgrade cycles, but we’re coming to the end of the period when I thought that might happen, and I’m now skeptical that it will. Rather, I think they might stabilize, and that will happen in large part due to increasing education and enterprise sales rather than renewed growth in the consumer market.
Apple’s September event always sets the tone for its entire year – new iPhones are announced, and the iPhone makes up the majority of Apple’s revenue and profits, and the performance of the iPhone business largely determines overall growth rates, at least for now. So the new iPhones themselves are enormously important. But I’m actually far more interested in and excited by the Apple TV and Apple Watch OS 2, because they relate to unknowns in Apple’s business. iPhone upgrade and sales patterns are fairly predictable, but the Apple Watch is so early in its life, and the Apple TV is about to embark on such a significant transformation, that these moves are arguably more important in terms of their potential to move the needle on Apple’s future growth in unpredictable ways. On a personal level, too, I’m looking forward to a new iPhone, but I’m more excited by a new Apple TV, and by the new things my Apple Watch will do when running OS 2 and the new apps developers will create.