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Apple’s billion-dollar services segment is creating a cloud of opportunities
Apple’s billion-dollar services segment is creating a cloud of opportunities
Ganesh Subramaniam

Senior Consultant at Draup

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Apple’s billion-dollar services segment is creating a cloud of opportunities

12 Jun 2019

An analysis of Apple’s shifting business trajectory towards the service sector

 

Apple’s slow growth in the iPhone and other devices business has pushed the company to change its course of investment, projecting digital services as the next big lever of growth. Over the past financial year, the services segment emerged as Apple’s fastest-growing business, with revenues growing by 24% year-over-year to $37.2 billion.
  • The App Store likely remains the biggest driver of Apple’s services revenues with a revenue share of close to 36% of its overall services segment
  • Licensing could be the second largest contributor estimated to be around 25% of total services revenue
  • Subscriptions revenue yielded from Apple music, Apple pay & others are also turning out to be highly profitable for the company
cloud of opportunities
Apple has found a cash-cow business in services that can keep the profits flowing, just as its device business begins to stumble. Apple unveiled a range of new services intended to provide it with more stable, recurring revenue sources, including:

 

  • Apple card, built into the Apple Wallet app on iPhone, offering customers a familiar experience with Apple Pay and the ability to manage their card right on their iPhone.
  • News+, a new subscription service that brings together over 300 popular magazines, leading newspapers and digital publishers
  • Arcade, the world’s first game subscription service for mobile, desktop and living room
  • TV+, a streaming service will offer exclusive shows, movies and documentaries
  • The company plans on reconfiguring iTunes to offer newly developed applications for Music, TV and Podcast indicating the need to move away from their traditionally product-centric approach.
The company will have to battle against successful giants like Amazon, Netflix and others who have been leading the services business with the perfect price-feature bundle.  Nevertheless, Apple is laying a strong foundation for the services segment for generating a nice flow of recurring revenue and expanding its customer base and its ecosystem.