Each month, I write the MacFormat Investigates feature for MacFormat magazine. Below is an excerpt from the latest edition.
For decades, Apple’s business model was almost exclusively based on one-off sales of high-cost products. Firstly Macs, then later iPods, phones, tablets and so on. Sure, the company wanted you to come back and upgrade your Mac, but that might only happen a few years down the line. Similarly, most people did not, and still do not, buy a new iPhone annually. In addition, Apple’s software products tended to require a significant one-off payment. Not so long ago, they even charged users to upgrade to the latest Mac operating system!
Services have become an increasingly important part of Apple’s business in recent years, allowing the company to keep generating revenue from customers who are not buying new Macs or iPhones. We’ve seen the introduction of Apple Music, Apple TV+ and iCloud storage, to name but a few. Furthermore, many of these have been consolidated into Apple One bundles, in which you pay to access to a collection of services. Significantly, these services and bundles are offered on a subscription basis – monthly or annual payments. And it has worked. Results for the first quarter of 2023 showed that Apple generated a record-breaking $20.8 billion in revenue from services.
In another major development, in early May 2023, Apple released Logic Pro and Final Cut Pro for iPad as subscription products. These music and video-editing apps each cost £4.99 per month or £49 per year. This seems particularly meaningful as it moves Apple into the Software as a Service (SaaS) space. You can argue that things like Apple Music are Saas products, but this move felt different as Logic Pro and Final Cut Pro had been ‘traditional’ items bought with a one-off payment. It is worth noting that products such as Microsoft’s Office suite have long been available via subscription. Indeed, you can take out a subscription to it via the App Store.