a16z Podcast: How Many Taps in the Apple (Plus) Tree?

0:00:06 Hi, and welcome to the A16Z podcast. In this episode, another of our hallway conversations,
0:00:11 Benedict Evans and Steven Sinovsky go over the recent Apple event, Apple Event Plus,
0:00:15 and consider what it all means in terms of big company strategy and the evolution of
0:00:20 Apple moving to services. Please note that the content here is for informational purposes only,
0:00:25 should not be taken as legal business tax or investment advice, or be used to evaluate any
0:00:31 investment or security and is not directed at any investors or potential investors in any A16Z fund.
0:00:35 For more details, please visit a16z.com/disclosures.
0:00:40 Welcome to an episode of the A16Z podcast. I’m Steven Sinovsky.
0:00:41 I’m Benedict Evans.
0:00:47 And today we’re going to talk a little bit about the announcements at Apple’s sort of new look
0:00:48 event. The Apple Plus event.
0:00:55 The Apple Plus event, the Event Plus. But I want to start off because I haven’t paid
0:01:00 that much attention afterwards, but certainly during the event there was just
0:01:04 so much build up as usual, which is good because they’re a huge company and people pay attention.
0:01:11 But then so much sort of, oh, it was weird, it was different, and it wasn’t what we were
0:01:16 expecting and all this kind of stuff. And I want to take a step back because I’m completely
0:01:22 fascinated by Apple moving to services, which is obviously a huge deal.
0:01:26 And I want to talk about it at the strategic sense, not necessarily the financial.
0:01:30 This isn’t really about the finances or the business side as much as the strategy.
0:01:32 And so one thing that’s super interesting, just to add to the gate,
0:01:36 is Apple has 360 million or so subscribers worldwide.
0:01:42 That’s a sort of a vanity number because it includes subscriptions to apps in the App Store.
0:01:46 But because Apple gets a cut, at least for year one, it’s a relevant number.
0:01:49 So I try to find other subscriptions that were big.
0:01:53 The only one I came close was China Mobile, which is like a billion.
0:01:58 And then after that, Benedict’s old friends in Europe, Vota and Telefonica.
0:02:02 Yeah, the global mobile operators have got hundreds of millions.
0:02:04 Nobody else is as big on a global scale.
0:02:09 But even Vota and Telefonica, at least the current numbers are under that 360 number,
0:02:10 but it’s very close.
0:02:17 Yeah, it’s interesting if you sort of sit and make a list of how many different places
0:02:22 is Apple kind of putting a tap onto the tree and taking some sap out.
0:02:26 So how many different places do you have an opportunity to pay Apple $10 a month?
0:02:29 It’s a little bit like the joke about cable TV.
0:02:33 Like you cancel your cable for $100 a month and then you sign up to this for $10 and this
0:02:36 for $10 and this for $10 and you end up spending $100.
0:02:42 You could probably, pretty soon you’ll be able to pay Apple $100 a month in subscriptions.
0:02:47 Right, and the interesting thing, and of course it is a good joke about cable TV and unbundling.
0:02:52 Now, one of the things that I think that’s super interesting about that is it is replacing
0:02:58 a place where you have no choice effectively, especially in the U.S. market for television,
0:03:01 but not the case for news necessarily.
0:03:06 But it’s replacing it with a feeling of self-determination and control,
0:03:07 which I think is really important.
0:03:11 And I want to come back to something that just resonated for me throughout
0:03:14 each of the main new plusy things.
0:03:18 And that was the sort of this positioning underlying everything they said.
0:03:24 And it’s sort of the number of times in this consistency across each new subscription $10
0:03:29 a month thing that they talked about it being private and having no tracking between it being
0:03:30 curated and using humans.
0:03:36 So I heard this, somebody on Twitter said that they were a publisher and they had a
0:03:42 big advertising deal for their content on Apple News.
0:03:44 They had a big third-party advertiser.
0:03:48 The Apple News team blocked the advertiser because it wanted tracking that they weren’t
0:03:48 willing to give it.
0:03:50 Guess who the Apple advertiser was?
0:03:51 Apple.
0:03:51 Oops.
0:03:57 Apple’s advertising team was demanding tracking that Apple’s news team was not
0:03:58 going to allow a publisher to do.
0:04:03 Well, I’ve been in the situation of the right hand, left hand on tracking in particular,
0:04:05 and I know how tricky that one can be.
0:04:10 But going back, so it was private, no tracking, curated with humans was very important.
0:04:12 And that’s obviously a statement they’re making.
0:04:15 Also, no ads and family.
0:04:19 And that’s, of course, when you subscribe to a magazine or cable, it’s for your family too.
0:04:21 So it’s not like some giant leap.
0:04:25 But particularly on games, which today aren’t quite shared.
0:04:27 Obviously, Netflix does a great job on family.
0:04:34 And so there’s a big kind of sense of kind of the brand, the fuzzy brand feeling here,
0:04:36 which is not about the technology and the product.
0:04:38 It’s about privacy and curation.
0:04:42 The sort of, there was sort of gossip coming out of Hollywood that
0:04:44 Apple kept pushing back on the TV show.
0:04:46 He’s saying it wasn’t family-friendly enough.
0:04:50 They were just going, “Tim Cook apparently was writing this as being too mean.
0:04:51 Can you be less mean?”
0:04:56 And, you know, that’s a very different to where the kind of the direction of travel
0:04:59 of TV has been in the last five and 10 years with other subscription services,
0:05:02 which is being less family-friendly and more edgy and more alternative and pushing the boundaries.
0:05:04 Interesting challenge for Apple.
0:05:05 Of course, they end with April Winfrey.
0:05:07 Start with Steven Spielberg and end with April Winfrey.
0:05:11 They didn’t show lots of action movies in the interim.
0:05:13 And you’re talking about services.
0:05:17 I mean, there’s something that sort of intrigues me here that for a long time,
0:05:20 you would look at the App Store and the 30%.
0:05:22 And people would say, “Apple is doing X and Y and Z.
0:05:25 I don’t like on the App Store and they’re doing it for the money.”
0:05:29 And you would say, “No, because actually if you think about what 30% of the App Store is,
0:05:32 it’s tiny in proportion to the overall Apple business.
0:05:37 And the purpose of the App Store is to sell iPhones and to make the iPhone a great experience.”
0:05:40 And yes, they’re making a little bit of money from it kind of on the side,
0:05:43 but actually it’s there to sell iPhones.
0:05:48 And I think that’s still sort of true, except there’s now 800 million iPhones
0:05:50 and over a billion iOS devices.
0:05:53 And I think Apple said 500 million people open the App Store every week.
0:05:58 And so 30% of those purchases has become a real number.
0:05:59 Yeah, yeah.
0:06:01 And so there’s a kind of an interesting thing across
0:06:03 many of these tech companies actually,
0:06:06 that something that was kind of non-core or non-strategic,
0:06:07 all sort of not there for the money.
0:06:11 The money that you weren’t really there for has now become a really big number.
0:06:15 Well, and that’s one of the things about the scale that makes this all very interesting.
0:06:17 Because I think that this move to services,
0:06:21 people are just having trouble getting their heads wrapped around it.
0:06:28 And it’s a very natural progression for any company when it starts to reach a mature level,
0:06:35 which is, okay, are we now effectively selling things to our “installed base” enough?
0:06:41 And in the world of enterprise software, every company is in the transition to cloud space.
0:06:43 They’re taking their existing customers,
0:06:46 and they’re reselling in their old software about on a cloud thing.
0:06:48 And in the enterprise space, that’s like heroic,
0:06:51 and it’s viewed as this brilliant strategy.
0:06:53 And here’s Apple doing the same thing.
0:06:55 And it’s like, oh, this is a recognition that they’re doomed,
0:06:57 and it’s the end of the line for them.
0:07:02 And it’s a very weird thing to sort of see because it’s both natural.
0:07:05 And unlike all the other enterprise businesses,
0:07:11 Apple is saturating the population, not some artificial number,
0:07:13 like number of computers and marketing people.
0:07:15 There’s five and a half billion adults on Earth,
0:07:17 and four billion or so people have a smartphone,
0:07:20 and 800 and 900 million of those now are iPhones.
0:07:22 I mean, we should probably just kind of,
0:07:24 if you’re people who haven’t been obsessed with this stuff
0:07:24 and haven’t seen the event,
0:07:27 we should probably talk specifically about this before they’re announced.
0:07:28 So they did four announcements.
0:07:31 So the first is that they’ve extended the existing news product,
0:07:33 which has been, so they have the Apple news product,
0:07:34 has been kind of a sleeper hit.
0:07:36 It draws a lot of traffic for publishers.
0:07:38 It’s, again, manually curated,
0:07:40 so they don’t let any, theoretically,
0:07:42 they don’t have kind of random junk in there.
0:07:46 Apple News now gets this company they bought last year called Texture,
0:07:52 which is sort of PDF magazines plus reformatted magazines,
0:07:55 $10 a month, and there’s, I think, 300 magazines on the title,
0:07:56 and there’s some notable exceptions,
0:07:58 but basically everything is in there.
0:08:00 Like the New York Times isn’t in there,
0:08:03 but National Geographic and all sorts of other stuff is in there.
0:08:04 Loads and loads of magazines.
0:08:05 And you pay your $10 a month,
0:08:08 then that sits within the news curated experience,
0:08:10 so it will suggest stuff from titles
0:08:11 that you wouldn’t necessarily have looked at.
0:08:13 It will say stuff will flow up.
0:08:17 And the picture magazine, of course, here is found money,
0:08:18 because these people wouldn’t have bought your magazine.
0:08:20 They won’t read all of it, but they’ll read five stories,
0:08:22 and you’ll get some money from that.
0:08:24 People in magazine business are saying,
0:08:26 A, you’re giving up customer ownership,
0:08:28 and B, you’re giving Apple 50%.
0:08:30 An awful lot of people don’t get customer ownership.
0:08:33 Well, this is me, like yoga magazines.
0:08:36 Like the only time I really buy yoga magazines is at the airport.
0:08:37 So this is the thing, they say this,
0:08:40 you’ve got people at kind of top right corner
0:08:42 of the quadrant titles saying,
0:08:45 you’re insane, you shouldn’t give up customer ownership.
0:08:46 You look at these titles.
0:08:48 Most of those titles don’t have customer ownership,
0:08:50 and will never get it.
0:08:52 And so there’s a sort of a found money conversation in there.
0:08:53 So there’s the news product.
0:08:54 That’s kind of interesting.
0:08:55 There’s some execution questions.
0:08:56 You could go and do the micro thing,
0:08:59 which we weren’t on what’s going on there.
0:09:01 There’s news plus, then they have a credit card.
0:09:03 Well, let’s slow down for a second.
0:09:04 One more thing on news.
0:09:04 Well, shall I go?
0:09:05 I’ll do the four bullets.
0:09:08 So there’s news, they’ve extended Apple pay
0:09:09 and Apple cash with a credit card.
0:09:13 They have got a new version of their TV app
0:09:15 that aggregates content from other TV apps
0:09:18 on your phone, on your device,
0:09:19 and from stuff that you might have access to
0:09:20 through your cable subscription.
0:09:22 So it should all just show up in one UI.
0:09:24 And then they have, they are paying people
0:09:26 in Hollywood to make TV shows for them.
0:09:27 So those are those four things.
0:09:28 So that’s news.
0:09:28 Right.
0:09:30 So the interesting thing for me about news, again,
0:09:34 it comes back to, so Apple has like core values.
0:09:38 It has a set of core attributes Tim Cook has done,
0:09:40 but there’s three sets of Apple values
0:09:41 that sort of float around.
0:09:43 The Steve Jobs one, the early Tim Cook ones,
0:09:45 and then the most current ones that you can see on the website.
0:09:48 But the middle ones, one of the things
0:09:50 that they really talk about a lot is
0:09:53 they like to make complex things simple.
0:09:54 Yeah.
0:09:57 And to me, the thread through all of the announcements today
0:10:01 was like making complex things simple.
0:10:04 And for most people, a lot of these things
0:10:06 are actually pretty complex.
0:10:08 Like the idea of subscribing to six magazines,
0:10:10 it’s not just that it’s expensive.
0:10:12 It’s kind of a complex thing.
0:10:13 You got to find them.
0:10:15 Should make a note here that the US print
0:10:17 magazine market is a subscription market.
0:10:17 Right.
0:10:19 It’s not true in other places.
0:10:21 So in the UK, no one subscribes to magazines.
0:10:23 There’s a shop selling 300 magazines,
0:10:25 every 100 yards on every shopping street,
0:10:26 you want a magazine, you go in and you buy it.
0:10:27 No one subscribes.
0:10:29 In America, like living in San Francisco,
0:10:30 supposedly in an urban center,
0:10:32 if I want to get a magazine, I actually can’t.
0:10:33 Like unless I go to the airport.
0:10:35 Yeah, all of those stores, there used to be many of them.
0:10:36 They’re all.
0:10:38 But the only way I could get a copy
0:10:41 of National Geographic today is to find some way
0:10:43 of getting them to mail it to me.
0:10:43 Right.
0:10:46 And so in that context, moving to the Apple news product
0:10:48 does actually solve a consumer problem.
0:10:48 Right.
0:10:51 And also, just like again with all of these,
0:10:54 there was a lot of like hemming and hawing over,
0:10:58 oh, is this part of it going to be available in Germany?
0:11:01 And is Lichtenstein going to have special TV shows for them?
0:11:04 And the thing is, when you’re looking at your
0:11:06 installed base as the potential customers,
0:11:10 you have a lot of data over who’s buying what and where.
0:11:13 And so it becomes very natural to sort of tilt things
0:11:16 towards where the money is already being spent
0:11:19 because the easiest dollar to make is a dollar more
0:11:21 from somebody who’s already paying you.
0:11:25 And in Apple’s case, like tilting it towards the U.S.
0:11:26 and the early versions of these products
0:11:29 makes it a ton of obvious sense.
0:11:31 Now, they’ll have and expand it,
0:11:34 but they will follow the economics much more
0:11:36 than you might for hardware.
0:11:39 It’ll look a lot more like when they open their Apple stores.
0:11:39 Yeah.
0:11:41 And going back to the old world of print,
0:11:43 U.S. magazines is a bigger market,
0:11:45 and then the U.K. is a bigger magazine market
0:11:46 than France or Germany.
0:11:48 And you would expect that to be reflected
0:11:50 in what happens on this platform.
0:11:50 Yeah.
0:11:53 And so, but it’s part of what made the event weird
0:11:54 for people is sometimes it was like,
0:11:56 well, this isn’t what we’re really used to.
0:11:59 We’re used to a new device that’ll be available
0:12:02 in 160 countries on Thursday.
0:12:02 Yeah.
0:12:04 And all of a sudden, it’s like, well,
0:12:05 it’s complicated to roll out all these things.
0:12:07 Like, even just the magazines,
0:12:10 you’ve got to get everybody to be in sync on an issue.
0:12:12 Like, they can’t just show up.
0:12:14 And TV production, it’s even more uncertain.
0:12:18 So, I personally thought that Apple News
0:12:20 was particularly interesting.
0:12:21 I have some beefs with it.
0:12:23 So, I think, yeah, I’m just listening to you talk.
0:12:25 I feel like there’s these four events,
0:12:27 and you could put them in very different places.
0:12:28 Because Apple News is, I would say,
0:12:31 this is a good solid incremental upgrade
0:12:32 to an interesting, useful product.
0:12:34 It’s not changing the world.
0:12:34 It’s a good product.
0:12:36 This is a good upgrade.
0:12:38 The same thing with their refresh of the TV app.
0:12:38 Yeah.
0:12:40 This is a good upgrade of an existing product
0:12:42 that solves a bunch of problems.
0:12:43 There’s also a two-hour argument
0:12:44 about how well it does that,
0:12:46 and what else will happen, and so on.
0:12:46 Right.
0:12:48 But there, basically, it’s an incremental upgrade
0:12:50 to an existing, well-understood product.
0:12:52 Then you have these kind of two sort of meteorites.
0:12:54 Let’s finish TV, and let me get to that one.
0:12:56 Because the thing on the TV that I think,
0:13:00 this is one where I would say it’s the,
0:13:02 if only Apple got into the business of X,
0:13:04 they would fix it.
0:13:06 And there’s just this hope
0:13:08 that Apple could show up and erase
0:13:11 the existing business infrastructure of television.
0:13:14 And all the reasons why it’s like that would stop mattering,
0:13:15 and it would just go away.
0:13:18 It reminds me of anything that we all dislike,
0:13:21 and we all wonder if only Apple would make that,
0:13:22 the world would be a better place.
0:13:25 And we forget they didn’t do that to telco.
0:13:29 You still pay your telco X amount of money,
0:13:32 and the service is still the works of pretty much
0:13:33 the way it was trained 15 years ago.
0:13:35 In fairness to them, they, you know,
0:13:37 especially with the soft sim and things like that,
0:13:38 they’ve made–
0:13:39 But pretty incrementally.
0:13:42 It’s incremental, but it reduced complexity
0:13:43 in some significant way.
0:13:44 And so I think that–
0:13:45 But they didn’t buy a record label.
0:13:46 Right.
0:13:47 They didn’t buy telco.
0:13:47 Exactly.
0:13:49 They didn’t, until they didn’t buy a bank.
0:13:50 Or a book publisher.
0:13:51 Yeah, exactly.
0:13:52 To fix books and stuff.
0:13:53 And so I think that there’s,
0:13:57 the problem is when people are unhappy with
0:13:58 any company doing something,
0:14:01 it’s often because, you know, the company messed up.
0:14:03 But it’s equally often that there’s just a mismatch
0:14:06 between expectations and what was really done.
0:14:07 And I think in the case of TV,
0:14:10 everybody just wants so much more.
0:14:13 And really, nobody is cracked it.
0:14:15 In fact, what’s interesting is so much of the negatives
0:14:17 about what’s going on with TV,
0:14:20 we forget how many people thought Netflix would never work.
0:14:23 And how many people, like, that were in TV
0:14:24 said Netflix wouldn’t work.
0:14:26 Like, there were a bunch of people at Disney
0:14:27 who were clearly convinced
0:14:29 that it wasn’t going to get any traction.
0:14:31 Which is why they let them buy their shows.
0:14:31 Right.
0:14:35 There’s just no escaping this reality of TV
0:14:38 that the people who make things like
0:14:40 there to be a large number of customers
0:14:42 and divide up the market in different ways,
0:14:44 by streaming and not streaming and DVD,
0:14:47 or pay-per-view or theater, plus by country.
0:14:49 And that’s not, they make it.
0:14:51 So it’s not going to change.
0:14:52 Yeah, exactly.
0:14:54 I mean, it is as though Apple had to do a telco
0:14:56 and then you were complained that somehow
0:14:58 the existing telco market structure hadn’t changed.
0:15:02 Well, yeah, you’re only going to do this slowly
0:15:03 and piecemeal in a careful bit
0:15:05 because there’s very, very strong incentives there
0:15:06 that aren’t going to go away.
0:15:07 Right.
0:15:10 But if they can make, you know, like, I’m a TiVo user
0:15:12 and Roku was much the same way.
0:15:14 And both of those are products
0:15:17 that take a very complex world of many different apps
0:15:20 with many different feeds of potential content
0:15:22 and make it simple.
0:15:25 And there’s so much room for Apple to make that even simpler.
0:15:28 And the fact that they have a TiV device is very interesting.
0:15:31 The fact that they will incrementally expand where that,
0:15:35 you know, in Visio TV or LG TV or Samsung TV is all goodness.
0:15:40 And I think it fits the description of like progress.
0:15:41 And that’s good to see.
0:15:43 It didn’t erase the TV industry, but it’s progress.
0:15:46 Yeah, we’ve got news and the TiV app.
0:15:49 These are interesting, useful products to sell problems for people.
0:15:51 They are not the Jesus phone.
0:15:51 No.
0:15:55 But this is just good incremental work by a bunch of people there
0:15:56 making it a bit better.
0:15:56 Apple card.
0:15:58 I’m not, I’m not a card person,
0:16:00 which is actually also interesting in the context of TV.
0:16:03 Are you like, so you’re like anti-tracking and everything?
0:16:05 So you only use money or is that a British thing?
0:16:07 No, no, what I mean is I can’t sit there
0:16:09 and analyze exactly what this position is
0:16:11 and what it looks like relative to other positions,
0:16:12 which is similar to TV.
0:16:15 A lot of the TV questions are actually TV industry questions,
0:16:16 not Apple or tech questions.
0:16:17 Right, right.
0:16:20 I think another way you can think about all of these services
0:16:23 are they all bind you into the phone.
0:16:24 Right, and so there is a, you know,
0:16:27 just as everything Amazon adds to prime
0:16:29 keeps you from canceling your prime account
0:16:32 and that drives all of your purchases through Amazon,
0:16:35 all of these things are sort of ways of making
0:16:38 your next phone purchase be another iPhone.
0:16:42 And if your credit card is a particularly sticky thing,
0:16:43 if you’re getting your TV through it,
0:16:45 if you’re getting your magazines through it,
0:16:49 if you’re getting any other transit, XYZ service,
0:16:52 anything that you can do that makes,
0:16:54 both makes the product better,
0:16:56 but also is something that’s going to be kind of a pain
0:16:59 in the backside to switch out and replace with something else,
0:17:00 all of that becomes valuable.
0:17:02 Right, which is of course exactly what
0:17:04 everybody enterprise software does
0:17:06 and why SaaS is so interesting to them.
0:17:09 So it’s no surprise that Apple is doing all of these things.
0:17:12 And it’s this, it is just this weird view of like Apple
0:17:15 as a boom bust company dependent on hit gadgets,
0:17:18 which isn’t true all that much either.
0:17:20 But the thing to me about the card,
0:17:23 I found the card actually particularly innovative.
0:17:25 And then a lot of people were like, oh, you know,
0:17:28 you go to nerd wallet and you see all of these cards
0:17:30 that do better points or better this and better that.
0:17:32 You think it’s like the people who said,
0:17:33 oh, Dropbox isn’t very innovative.
0:17:37 You just go into your GitHub and you can download 15 scripts
0:17:38 and tie them together and you get the same thing.
0:17:41 Like even people who said that the way Apple did,
0:17:43 Wi-Fi hotspots wasn’t innovative.
0:17:47 And like underneath every, they’re probably, you know,
0:17:49 a very, very small number of people
0:17:53 at a very, very smaller number of companies
0:17:55 that understand all the complexity
0:17:57 that could go into delivering Apple card.
0:18:00 That complexity, Apple is erasing.
0:18:02 Like some very simple thing, like you mentioned,
0:18:04 well, if Apple can make the phone sticky
0:18:06 when you get a new phone, right,
0:18:08 this is exactly the kind of thing that they can do.
0:18:10 Make it really easy to get a new phone,
0:18:11 even if all your credit card and money
0:18:14 are sitting on your Apple device.
0:18:17 And that upgrade is hugely valuable.
0:18:18 But on top of that,
0:18:21 there’s all this innovation that happened in the space.
0:18:22 And yes, you can go to Nerd Wallet
0:18:25 and you could find some card that does, you know,
0:18:28 3% cashback on everything, not just store purchases,
0:18:30 or you can find one that gives you better miles.
0:18:32 But anyone who knows any of these things
0:18:34 knows that once you’re on that game,
0:18:37 you’re almost like the person who’s determined
0:18:40 to find everything you want to watch on off-air free TV.
0:18:44 Like people are only willing to spend so much effort
0:18:46 for some of those…
0:18:47 You’re like the coupon queen.
0:18:50 Well, coupons are very good for certain people
0:18:52 at certain economics.
0:18:53 But like at some point,
0:18:56 like you’re making a trade-off over time versus effort.
0:18:58 And if you’re an Apple customer,
0:18:59 you’ve already made that trade-off
0:19:01 because your phone is a luxury good.
0:19:04 Like you didn’t buy the $99 phone,
0:19:05 you bought the expensive one.
0:19:07 So you’re looking for other things.
0:19:11 And this is where another part of where people view these services,
0:19:12 they sort of get a little confused,
0:19:15 which is first, Apple off the top
0:19:18 is not aiming for all five billion humans
0:19:19 that will have a smartphone.
0:19:21 They’ve already said we’re going to only go,
0:19:22 we’re not making super cheap phones,
0:19:23 it’s not that big.
0:19:24 We’re aiming for a billion.
0:19:25 Right.
0:19:28 And on top of that, they can do their services
0:19:29 as a subset of those people.
0:19:31 Like they already have everybody in the app store
0:19:34 and then they have some very large percentage of people
0:19:36 that will buy iCloud for backup.
0:19:38 And then after that,
0:19:41 they don’t have to get 900 million people for every service.
0:19:44 And they can aspire to that and they can measure that.
0:19:48 But there’s some point where it becomes a very good business
0:19:50 and a very great value proposition,
0:19:51 even for people who don’t have them
0:19:53 to know that they can get them.
0:19:55 I think that kind of takes us onto the TV product
0:19:57 where we sort of slightly hesitant about,
0:20:00 I suppose the best way of putting it is to say,
0:20:04 we’re sort of reserving judgment on any kind of specifics
0:20:05 because we don’t have the specifics.
0:20:07 We know Apple has officially said,
0:20:09 we’re doing a TV service.
0:20:11 We’re going to get a bunch of really great people
0:20:13 to make some fantastic TV.
0:20:14 We’ll tell you more later.
0:20:15 Yeah, yeah.
0:20:16 So that’s TV plus you’re talking about.
0:20:17 Yes, this is TV plus.
0:20:18 Apple will pay people in Hollywood
0:20:20 to make the TV shows for them
0:20:22 and they will tell us more in the autumn.
0:20:26 You can guess that it will be $10, $15 a month.
0:20:30 They’ve said it will be global or 100 countries
0:20:31 because they own the rights.
0:20:35 The big unanswered question is how much,
0:20:37 what actual volume of content,
0:20:39 because Netflix is spending something over $10 billion,
0:20:42 it’s here, how much are they going to make in there?
0:20:43 For how big will the proposition be?
0:20:45 How many of those great shows will there be?
0:20:47 That’s kind of the big thing everyone wants to know
0:20:48 and we don’t know.
0:20:50 And we don’t know and we’ll find out.
0:20:51 And the thing is people are like,
0:20:52 ooh, this is weird and stuff.
0:20:53 And look, this is what,
0:20:55 this is the power of being Apple
0:20:58 is that you basically can convene all of these people.
0:20:59 They’re willing to experiment.
0:21:01 But the strategic level that one sees there
0:21:03 is here again, Apple is saying,
0:21:05 here is something good that you might like
0:21:07 and you can pay a bit more money
0:21:08 and get it on your Apple devices.
0:21:10 And that sits next to news.
0:21:12 It sits next to the card.
0:21:14 Is Apple bringing something unique to credit cards?
0:21:16 No, they’re just changing the experience.
0:21:19 Well, and there’s a bunch of integration.
0:21:21 I think the credit card is more innovative
0:21:22 than people are willing to say
0:21:24 because they focused on sort of the nerd wallet checklist
0:21:26 as opposed to the security and the privacy
0:21:26 and the money management.
0:21:28 There’s a bunch of Apple engineering stuff
0:21:29 going on in the card.
0:21:32 There’s not apparent that there’s a bunch of Apple engineering
0:21:34 stuff going on in the TV,
0:21:36 but there’s a bunch of Apple decision
0:21:37 about what should you see
0:21:39 and how does this make your overall
0:21:41 being an Apple customer experience better.
0:21:43 Right, and if they can reduce the friction
0:21:46 of acquiring it, of browsing it,
0:21:48 of suggesting what to watch and when,
0:21:50 I mean, there’s a whole lot of places
0:21:52 where this is literally,
0:21:54 you know, like the Jim Barksdale famously said,
0:21:57 like there are two ways to make money in business.
0:21:59 You can either bundle things or unbundle them.
0:22:02 And so what we’re seeing is a gradual creation
0:22:05 of a series of bundles from Apple.
0:22:07 And yeah, sure, there might be Apple Prime
0:22:09 or something down the road
0:22:11 that bundles all of these into something,
0:22:13 but for the time being, they don’t need to.
0:22:14 And in fact, it’s, I would argue,
0:22:16 one of the things that people were jumping to
0:22:18 was to have like this all in one.
0:22:19 But the fact that Apple is allowing them
0:22:21 or keeping them separate
0:22:23 is also a way to find product market fit
0:22:24 for each of those.
0:22:26 Because you don’t prematurely bundle things
0:22:28 because then you really don’t know
0:22:29 if you’re successful or not.
0:22:31 And this is what all the credit card companies
0:22:33 sort of count on, which is basically,
0:22:35 they’re going to make a giant basket of stuff
0:22:37 and move it around all the time.
0:22:39 And most people only care about like one thing
0:22:40 that they’re getting.
0:22:42 – Yeah, I mean, see what the Apple could say,
0:22:45 it is 200 bucks a month and you get a free iPhone
0:22:47 and a free iPad every two years
0:22:49 and you get all of this stuff.
0:22:50 – Yeah.
0:22:51 – And yeah, that would,
0:22:54 I don’t think that would actually be a good proposition
0:22:55 for most customers
0:22:57 because you wouldn’t get to pick and choose which bits
0:22:59 and it would also be kind of a huge sticker price.
0:23:00 And it’s much better to say,
0:23:02 well, there’s a phone and there’s how you pay for a phone.
0:23:03 And then there are these bits that come
0:23:05 that you can have on top of it.
0:23:07 – And also the people who would jump at buying that
0:23:10 probably would be spending $400 anyway.
0:23:12 And so that’s like one of the weird things
0:23:15 when you do these mega bundles is you’re also trading off.
0:23:17 – Yeah, those are the people who’d buy a new foot
0:23:19 atop of the line iPhone XS.
0:23:20 – Every year.
0:23:21 – Every year anyway.
0:23:22 – Every year and they would buy AirPods
0:23:24 and a whole bunch of other stuff.
0:23:30 And so, for me, there was just a lot of overthinking
0:23:31 of this whole thing.
0:23:34 And that’s the constant challenge with Apple is you over,
0:23:36 in fact, last night I tweeted that like
0:23:38 when before the iPad came out,
0:23:40 we were all sitting around trying to figure out
0:23:41 what they were going to do.
0:23:43 And we for sure thought they were going to go build
0:23:45 a Mac tablet with a pen,
0:23:48 which was just sort of our weird
0:23:49 strategizing about what they were going to do.
0:23:50 Not this very-
0:23:51 – I think there’s a kind of,
0:23:52 there’s a sort of a high level point here,
0:23:54 which I think you said a couple of years ago that,
0:23:56 you know, Microsoft would do some big event
0:23:58 and then you look in the tech press
0:24:01 and you discover what your brilliant Dr. Evil strategy was
0:24:02 and you read it and you think,
0:24:03 “Oh, that would be a good idea.
0:24:04 “Maybe we should do that.”
0:24:06 And the people sort of, you know,
0:24:09 I said earlier there’s like,
0:24:11 there’s two sets of Apple strategy here.
0:24:13 There’s news in the TV app,
0:24:14 which are incremental improvement.
0:24:16 And then there’s a credit card in the TV content,
0:24:18 which are rather big around ambitions.
0:24:19 And you can kind of generalize that over
0:24:22 any kind of big company that you’ve got stuff to doing,
0:24:24 which is just VPs doing VP stuff
0:24:25 and product teams doing product stuff.
0:24:26 And they’ll just carry on doing it.
0:24:27 Every now and then, like you’ve got
0:24:28 the huge mega strategy.
0:24:30 But very often you’re just kind of carrying on
0:24:31 doing what you’re doing.
0:24:34 And I think a lot of what we saw was sort of Apple
0:24:35 just kind of carrying on doing what they’re doing.
0:24:36 Some of it’s good.
0:24:37 Some of it you can argue about.
0:24:39 Some of it is a big mega future strategy.
0:24:40 Some of it isn’t.
0:24:42 And you can kind of, and over analyze,
0:24:44 you can kind of over rotate on that we’ve got to work on.
0:24:45 – And it is one of the things
0:24:47 that Apple does particularly well,
0:24:50 is progressively reveal the strategy.
0:24:52 Like take something like the Apple card
0:24:55 and the Apple cash that’s in it.
0:24:56 Like Apple cash came out
0:24:58 and everybody’s like, why would I ever use this?
0:24:58 What am I going to do?
0:25:00 And then last week, they just, or earlier in the week,
0:25:04 they made the change that now you can pay off your bills
0:25:06 using Apple, which now it’s all starting to come together.
0:25:07 And it’s this whole thing like,
0:25:08 I always think about Keychain
0:25:11 and how for years they were doing Keychain.
0:25:13 And then one day they have the fingerprint reader.
0:25:13 – Yes.
0:25:14 – And it all comes together.
0:25:15 – And suddenly your fingerprint,
0:25:17 your password is automatic.
0:25:18 Yeah, I mean, you can run your scenario back.
0:25:20 So they start with a fingerprint reader
0:25:22 before the year before they do Apple Pay.
0:25:23 It’s really obviously going to do Apple Pay.
0:25:24 But they do the fingerprint reader first.
0:25:26 And there’s a reason that it’s there.
0:25:28 Then they had Apple Pay.
0:25:29 Then they had the cash.
0:25:30 Then they had the card.
0:25:32 Now you take the Apple card,
0:25:34 you get your 2% cash back on everything you spend
0:25:35 and where does that money go?
0:25:38 Well, it goes into P2P payments using cash
0:25:40 or it goes into the app store or you spend it.
0:25:42 – And I, you know, like just,
0:25:45 and taking their family friendly view of things.
0:25:47 Well, now you have like a credit card
0:25:50 where the, your son or daughter doesn’t need the card,
0:25:52 can use it at a set of number of places.
0:25:53 They have spending graphs.
0:25:54 They’ll earn this, man.
0:25:56 You can give them cash allowance directly.
0:25:58 All of a sudden it’s like the family friendly way
0:26:00 to run finances.
0:26:02 And it’s super interesting.
0:26:05 So sort of for me, like there was just a lot more there.
0:26:08 And I think it just didn’t have this big bang,
0:26:10 you know, big companies too that you set a date
0:26:12 and you have to do an event.
0:26:13 Like you can’t not do it.
0:26:16 And then you’re, you run around and like,
0:26:18 sure, when you’re launching hardware, you know,
0:26:19 – We forgot to mention the game thing.
0:26:20 – Oh, the game, right.
0:26:22 – The game thing is also the family friendly piece,
0:26:24 which is you pay the subscription,
0:26:27 you get these nice, fun, interesting indie games
0:26:30 that are not about blowing people up and are-
0:26:31 – Curated and private.
0:26:34 – And private and are not about kind of manipulating you
0:26:37 to get you to spend more money on loot boxes.
0:26:39 And also about kind of trying to help
0:26:41 the indie development, develop a base a bit more,
0:26:44 which is obviously sort of a challenge
0:26:45 that they have to address.
0:26:47 And make money and make money.
0:26:49 – In this case, iMac 2 or Mac 2.
0:26:51 – And pull people, you know, another way
0:26:53 in which there are better games on iOS
0:26:54 than there are on Android.
0:26:55 And it’s another $10 thing.
0:26:57 And it’s another piece of your brand experience
0:26:59 and a reason why as a parent
0:27:01 or something you might prefer to be on iOS
0:27:03 because you’ve got this great thing.
0:27:04 And again, you wouldn’t want to say,
0:27:06 well, you have to have this,
0:27:08 but it’s an interesting experiment
0:27:10 for a way of shifting what that gaming experience
0:27:12 might look like that kind of fits into the Apple
0:27:14 kind of branding and experience.
0:27:16 – Right. And it also, it shows that their view
0:27:18 of how these bundles work,
0:27:20 which is they’re confident enough
0:27:23 in the value proposition of the phone itself
0:27:25 that they’re not bringing all of these things in
0:27:27 for free on the phone.
0:27:29 Like it’s very easy to see another company
0:27:32 with a similar set of assets and other strategy
0:27:35 constantly worried about making the phone upgrade cycle work
0:27:38 and drawing every bit of software that they make
0:27:41 into the sort of the default phone experience.
0:27:42 And then a bunch of groups within the,
0:27:44 all the VPs, as you said, within the groups,
0:27:47 like competing over which percentage of the phone upgrades
0:27:48 did their free thing cause.
0:27:49 – Yeah. And then it would be like,
0:27:52 you can only get the game subscription on the new iPhone.
0:27:52 – Right.
0:27:54 – You have to buy the new, you have to buy this product
0:27:55 in order to get that subscription.
0:27:57 – And again, this was something Apple pioneered
0:27:59 very early when they made upgrades
0:28:01 to the Mac operating system free.
0:28:04 They realized that that turns out to be a better business
0:28:06 if you just make owning,
0:28:07 being part of the ecosystem great.
0:28:11 So for me, I felt that there was just a lot of,
0:28:15 of strategizing and hand wringing
0:28:17 and trying to find like the big thing
0:28:19 when in fact this is a big company executing
0:28:22 reasonably well on a bunch of stuff.
0:28:24 And some of it is going to play out and some of it won’t,
0:28:26 but the strategy is really clear
0:28:28 and the evidence is clear.
0:28:29 And then what I would call like the framework
0:28:32 or the meta strategy of being family friendly and private,
0:28:35 it resonated across all the things that they did.
0:28:39 I left thinking it was a pretty positive view for them
0:28:41 in the sense of putting together a strategy
0:28:43 and communicating it.
0:28:44 – Yep. It came. Thank you.
0:28:48 Thank you. I’m Stephen, and this is A16Z Podcast.