Why Ben Thompson was underwhelmed by Apple One

“Gentlemen, there’s only two ways I know of to make money: bundling and unbundling.” — Jim Barksdale, former Netscape CEO

From Thompson’s “2020 Bundles” posted Tuesday on Stratechery:

What is striking about the bundles that have emerged over the last couple of years — and over the last couple of weeks! — is the degree to which they span different types of media, often with widely varying business goals.

    • Netflix: Bundle as Business Model…
    • Disney+: Bundle as CRM [Customer Relationship Management]…
    • Amazon: Bundle as Churn Management…
    • Microsoft: Bundle as Market Expansion…
    • Apple: Bundle as Money-Maker

All of this is a long way of explaining why I was relatively underwhelmed by last week’s announcement of Apple One. Apple One includes Apple Music, Apple TV+, Apple Arcade, and iCloud storage, for either individuals or families; Apple Premier adds on Apple News+ and Apple Fitness+.

Some of the aforementioned bundle strategies are applicable to Apple One, others less so:

    • While Apple’s primary business model remains selling hardware at a profit, the company has a longstanding goal of increasing services revenue; selling a bundle potentially helps in that regard.
    • Apple doesn’t really need any help connecting to its customers, although iCloud Storage does make for a better overall Apple experience.
    • Apple One may reduce churn, particularly if customers are attached to the Apple-only services like Apple Arcade, Apple News+, and Apple Fitness+, but the truth is that Apple’s churn is already quite low
    • On the flipside, Apple One doesn’t really make an iPhone any more accessible, particularly since Apple is competing against Android, as opposed to non-consumption.

To me the biggest hangup is the first one: the degree to which a bundle is compelling is the degree to which it is integrated with and contributes to a company’s core business model, and, in contrast to these other four companies, it’s a bit of a stretch to see how Apple One really move the needle when it comes to buying an iPhone or not.

My take: While Thompson is master of provocative soundbites, his arguments are often too intricate to easily summarize. Best to read the whole thing, especially since this one doesn’t require a Stratechery subscription.

4 Comments

  1. Jerry Doyle said:
    “…. but what if Apple started including products with paid subscriptions?”

    Ben Thompson’s article on “bundling” is one of the better explanations of company’s bundling strategies I have read. Disney+ made explicit sense to me once Thompson described the company’s bundling strategy. With Disney+ one truly is immutable in the Disney ecosystem. Not so much with Apple One.

    Senior Apple Executives would advantaged the company to take Thompson’s analyses of bundling and ferret out the gold nuggets within to exploit his thesis for maximizing Apple One where it becomes meshed, or a web tangled within Apple hardware.

    Apple One now is a stand alone Service option. Thompson sees Apple One embedded deeply within Apple’s ecosystem through its entanglement in Apple hardware. I like that thinking.

    3
    September 23, 2020
  2. Dave Ryder said:
    I think I it would be dangerous for Apple to include its hardware in a bundle, as Ben Thompson suggests. Doing so would attract more antitrust scrutiny. It’s one thing, for example, for Spotify to complain about Apple’s [content] bundles but Spotify would have a much stronger case, in my opinion, if the content was also being bundled with Apple’s hardware.

    6
    September 23, 2020
    • David Drinkwater said:
      I agree. An overly aggressive bundle starts to look like: “you buy Windows OS, you get Microsoft Office Productivity package”. It becomes an over-share.

      0
      September 23, 2020
  3. Fred Stein said:
    Ben’s article helped understand the landscape. Thanks.

    Apple typically has a longer term goal. No doubt Apple will add new services, with zero marginal cost, along price increases over time.

    Apple’s TV+ and Arcade business are just getting started, in terms of content and subscribers. Both will drive growth for the bundles for a long time.

    Ben’s idea of bundling with new hardware is brilliant, especially during upcoming holiday shopping.

    0
    September 23, 2020

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