13 Thoughts on Apple for 2015

Much like the mechanical watches with which its newest product will compete, Apple is an organization in perpetual motion.  The Apple Watch launches in April 2015 as the company’s first foray into the wearables market.  The just-announced new MacBook, with a retina display and only two ports, joins it as a spring release.  An enterprise iPad Pro is expected to debut in the fall, and a rebranded Beats music streaming service and updated Apple TV are also forecasted to drop this year.  And let’s not even get into the Apple Car that’s purportedly in the works.

Here are thirteen thoughts, broken into four broad topics, about Apple’s product pipeline after its “Spring Forward” event last Monday.

Wearables
1) The Apple Watch is already a success.
2) The Apple Watch Edition may have a minor Glasshole problem.
3) New Beats headphones will be important, and Jony Ive shouldn’t design them.

Devices
4) The Macbook is stunningly gorgeous and two years ahead of schedule.
5) Boost Mac sales by emphasizing Continuity with mobile platforms.
6) The entire iPad line should be consolidated and renamed.
7) What’s the future of the iPod?
8) HomeKit is the next big frontier, and Apple TV is the conduit.

Speculation and Hypotheticals
9) An Apple-Nintendo partnership won’t happen, but they would be a natural fit.
10) Could iTunes or Apple TV become a carte blanche media streaming service?
11) Tesla would be a synergistic feverdream, but CarPlay makes more sense.

The Big Picture
12) Diversity beyond the iPhone is critical.
13) Tim Cook is a better CEO than Steve Jobs.

***

Wearables

1) The Apple Watch is already a success.

Full stop.  Without sales data, professional reviews, or market feedback, the Apple Watch is already a success.

Its criticisms are real and important to take into consideration: a slightly bulky frame, comparatively poor battery life, and high starting price relative to other Apple devices.  But these criticisms don’t matter in the context of this product launch.

The goal of the first generation Apple Watch is innovation informed by heritage.  Whereas other smartwatches are focused on technology, the Apple Watch is as much about fashion as it is computing – perhaps even more so.  It’s an exercise in expanding the concept of what should be expected from a digital watch.

This essay by Ben Clymer is my favorite evaluation of what Apple got right and wrong with the Watch.  It is remarkably balanced in its evaluation, and Clymer pinpoints why the Watch is so important:

Apple products have a way of making someone not want to live without them, and while I wasn’t able to fully immerse myself in the OS yesterday, what I saw was impressive. So while certainly not direct competition for haute horology watchmaking right now, the Apple Watch is absolutely competition for the real estate of the wrist, and years down the road, it could spell trouble for traditional watches even at a high level.

The Apple Watch is about setting the stage.  It’s about building that connection with customers and improving upon the current offerings in the smartwatch and entry-level luxury watch market.  “The overall level of design in the Apple Watch simply blows away anything – digital or analog – in the watch space at $350,” Clymer says.  He’s right, thanks to the relationship between form and function that Apple’s competitors have yet to attain.

Analysts are predicting that Apple will sell 12-15 million units in 2015 and nab half of the smartwatch market share.  That might be a high forecast, but Apple’s profits from the device, especially the Edition, should be significant even if fewer than 10 million units are sold.  And it will sell.  Customers will look past things like battery life because of the novelty factor.  Come for the hype, stay for the quality of apps and services that the platform affords – a far more robust infrastructure than any other smartwatch company by far.

The Watch will be a flop only if Apple fails to convince customers outside of Apple aficionados and the smartwatch market that the Watch is a valuable device by its next iteration.   This first generation Watch, flaws and all, just needs to generate enough electricity to get that conversation off the ground.  And by that metric, it’s already succeeded.

2) The Apple Watch Edition may have a minor Glasshole problem.

“Glasshole Syndrome” might be defined as when a product’s design language becomes synonymous with people who want a visible token of their superiority.  “Glasshole,” of course, refers to the early adopters of Google Glass, which became infamous for its stealth video recording capabilities, $1000+ price point, and embarrassing design.

The Apple Watch will not suffer criticisms for privacy invasion or poor design.  It is a beautiful machine whose utility and app ecosystem makes it a more worthwhile product right out of the gate.  But the Watch Edition, which starts at $10,000 and reaches $17,000 in its most expensive iteration, is ripe to become an iconic emblem of conspicuous consumption.  I fear this may unfairly tarnish the rest of the Apple Watch line.

In September 2014, John Gruber wrote about the Watch Edition’s price and its likely reception among the tech community:

Apple Watch is not a product from a tech company, and it will not be understood, at all, by the tech world. Apple creates and uses technology in incredible ways. The Apple Watch may prove to be the most technologically advanced product they’ve ever built. But again: Apple is not a tech company, and Apple Watch is not a tech product.

When the prices of the steel and (especially) gold Apple Watches are announced, I expect the tech press to have the biggest collective shit-fit in the history of Apple-versus-the-standard-tech-industry shit-fits. The utilitarian mindset that asks “Why would anyone waste money on a gold watch?” isn’t going to be able to come to grips with what Apple is doing here. They’re going to say that Jony Ive and Tim Cook have lost their minds. They’re going to wear out their keyboards typing “This never would have happened if Steve Jobs were alive.” They’re going to predict utter and humiliating failure. In short, they’re going to mistake Apple for Vertu.

Utter and humiliating failure are simply not in the cards.  Sales of the Watch Edition are going to match maximum production capacity.  The profit margin on each device is likely astronomical, and Apple is going to make a significant profit while establishing itself as a serious player in the luxury fashion market.

The Watch Edition will sell.  The question is: who will buy one?

prording to Ben Clymer, no one should buy one.  Clymer argues that for $10,000, the Watch Edition is simply a poor choice given the field of alternative options:

In addition to perceived value, mechanical watches are also priced by human value: how much of the work is done by hand (in many cases using 200-year-old methods). For example, a watchmaker named Philippe Dufour makes just 12 watches per year, alone in his one-room atelier in the mountains of Switzerland. A simple, time-only piece can cost $100,000. Whether the case is gold or platinum, the price of a Philippe Dufour watch remains (roughly) static — you are not paying for materials, you are paying for Mr. Dufour’s time and touch. The Apple Watch has minimal human value, and that is the biggest difference between it and its mechanical counterparts.

From $10,000 to $20,000, you are into the realm of watchmaking where everything you see is original and interesting — or at least should be. Consider fully ceramic chronographs,stunning hand-wound dress watches, or modern legends all fall within this range — all featuring truly in-house movements with a moderate amount of hand-finishing to internal components. These watches will be assembled by hand, completely in Switzerland and offer the incredibly low tolerances and extreme quality for which this industry is known.

Leave aside the (very good) utilitarian question of how someone could ever justify spending $10,000 for a watch when there are people dying of hunger around the world.  Assuming you have $10K to blow on a timepiece, why would you ever choose the Apple Watch Edition?  You’re not purchasing a stunningly unique style that will last your entire lifetime.  You’re not funding a the exquisite craftsmanship of a master engineer to produce a mechanical wonder.  You’re buying a product with the exact same functionality and design as its $349 sibling.

And that’s the point.  The people who buy the Watch Edition are buying it because it’s $10,000 worth of gold.  They want their wealth to be evident.   It’s tough for a non-watch expert to identify a Rolex from afar, let alone guess its exact cost.  The Apple Watch is designed to be iconic, and the Watch Edition’s price is its crown achievement.  You buy the Watch Edition so everyone knows that you spent exactly $10,000 on a watch.

Tim Lee believes that Apple is following Tesla’s lead in this regard.  He argues the Watch Edition’s high price is a means of generating a halo product for the smartwatch market, making it an enviable good:

It’s hard to remember today, but a decade ago electric cars didn’t have a great reputation. Carmakers had experimented with a few electric vehicles, but these had not been a commercial success… Tesla’s solution to this problem was to focus on the very high end of the market. The first Tesla car, the Roadster, cost $109,000.

This strategy of defying stereotypes about electric cars helped Tesla become one of the most prestigious brands in the auto industry. And as it has moved downmarket (the company introduced a $57,400 Model S in 2012 and is working on a vehicle that will cost $30,000), it has been buoyed by the luxury reputation the Roadster helped to establish.

Apple faces a similar challenge with its Watch. Smartwatches have a reputation as impractical devices for nerds. Apple’s strategy is to defy this stereotype by creating luxury smartwatches that (Apple hopes) people will pay $10,000 for.

I actually fear that the opposite of this scenario will emerge.  Instead of boosting the reputation of smartwatches, it’s easy to imagine how the clientele of the Apple Watch Edition might come to be the entire line’s defining characteristic: a product for rich Silicon Valley bros who want to flaunt their wealth in the easiest way possible.  As Racked and The Verge noted, “it was Apple fanboys who lined up to view the watch at Colette (a recent fashion show), not the fashion cognoscenti.”  That is a deathly blow for a device with aspirations of the highest fashion circles.

The Edition is, by definition, for the 1%, but it matters which people in the 1% it attracts.  It would be a shame to see this “halo” infect the rest of the Apple Watch line and make it an object of derision.  Though its capabilities are still comparatively limited, I trust Apple more than any other technology company to fully leverage the Watch’s potential as a useful, integral part of our daily lives.  Apple has largely sidestepped criticisms of conspicuous consumption by selling products at higher prices whose design and utility largely, if not wholly, justify the extra cost.  Owning an iPad or an iPhone 6 is a status symbol of relative material comfort, but that ownership extends beyond demonstration of financial wealth because of the function afforded by the device.  The burgeoning app store and the truly beautiful design of the Watch and Watch Sport suggest a promising value proposition in the same vein.   The same cannot be said of the Watch Edition, and it’s queasily easy to see it as a sort of Google Glass in vogue.

I hope I’m wrong about the arguments listed above.  In a certain sense, I’m glad Apple is going so aggressively after a slice of the luxury timepiece market, because it can put the profits earned from the Watch Edition to use in service of other world-changing technology.  And, realistically, the Watch Sport is going to be the most popular model that Apple sells; it will earn the lion’s share of market attention, making it unlikely the Edition’s aura will extend beyond the diamond wrists of the elite.

I just hope the Edition price point, and its clientele, don’t come to define the full product line and overshadow the legitimately groundbreaking work that was accomplished in creating this device.

3) New Beats headphones will be important, and Jony Ive shouldn’t design them.

If you haven’t already done so, go read the New Yorker’s profile of Jony Ive.  It’s an incredible, exhaustive look at the man behind Apple’s iconic products and the work his team does to make them a reality.

The emphasis here is on “exhaustive” in more ways than one.  From the opening paragraphs, it’s clear that Jony Ive is dead tired.  He owned the entire Apple Watch product build and he’s also responsible for design across the iPhone, iPad, and iOS.  That is a massive amount of oversight and work.

Jony Ive is synonymous with Apple.  If he retires in the near future, there might be even greater panic and uncertainty surrounding the company than in the wake of Steve Jobs’ death.

It’s a little surprising, then, that Apple hasn’t elected to give other members of his design team more high-profile platforms to discuss their work and create their own personal mythologies.  Deference to Ive is obviously warranted and justified, especially since he has given no indication of retiring anytime soon, but contingency plans are wise.

I’d like to see a couple of key figures from Ive’s team take charge of the Beats hardware division and update the product line in accord with Apple’s design philosophy.  In that New Yorker profile, Tim Cook makes it clear that Beats are currently an outlier amongst Apple’s computers and phones:

Would Jony have designed some of the products?” he said. “Obviously, you can look at them and say no… I want Beats to be true to who they are. I don’t want to wave the wand over them in a day and say, ‘You are now Apple.’ Down the road, we’ll see what happens.

Modifying a well-established brand is risky, and given Beats’ 60+% share of the premium headphone market, immediate changes run the potential of alienating Beats customers.  Much of Beats’ market penetration has been thanks to overwhelming advertising and genius marketing deals with famous athletes and stars.  Apple’s cash hoard guarantees Beats will never lose the ability to make those cultural cache deals, suggesting future changes to the product line could be conducted with minimum risk.

Why not let some of Ive’s team members take the lead on rethinking what Beats can be?  Perhaps retain current model stalwarts like Beats Studio and PowerBeats, but completely redesign Beats Pro and Mixr in accord with Apple’s design philosophy.  Introduce a new line that doesn’t fall victim to the classic Beats criticisms of ear-bloodying bass and muddy, subpar audio quality.  On the hardware development side, hire engineers from companies like Sennheiser and Audeze.  Oppo just introduced a $400 pair of planar magnetic headphones; Apple could easily introduce this kind of highest-end quality to the Beats line, and its marketing leverage (prime placement in Apple stores!) is a guarantee of huge volume and high margins.

Apple reportedly purchased Beats primarily for the streaming infrastructure and contracts of its music service.  If Apple is serious about expanding into wearables, it should look to leverage Beats hardware as another fashion item with untapped market potential.

Devices

4) The new Macbook is stunningly gorgeous and two years ahead of schedule.

Forget the Apple Watch pricing.  The most incredible parts of the March 9 keynote were ResearchKit and the new Macbook, and the latter is breathtakingly beautiful.  I thought the Dell XPS 13 gave Apple a run for its money a couple of months ago, but Apple once again blew its PC competitors out of the water with this new machine.

In terms of style, that is.  Functionality- and price-wise, the Macbook is a solid entry into the laptop market, but it’s not transcendent.  Though the retina display and weigh of the machine are attractive, the $1300 base price and the single port (!) mean that it’s primarily a device for early adopters at this point instead of the broad laptop market.

Which is as it should be.  The original Macbook Air was similarly criticized for shearing off too much too soon, but it looks prophetic in hindsight, having eliminated the CD drive before most other PCs made the leap.  The same is true for this Macbook.  With cloud storage becoming the go-to means of sharing files and Wifi available in more places than ever, Apple is ahead of the game once again.  Cutting out those extraneous ports is going to look like a smart move two years from now.  (Though an additional USB 3.0 port might be welcome.)

I can’t wait for the second-gen Macbook to lower the price on this first model.  In the meantime, I’d love to see some limited-edition color variations to the three currently offered – anodized white, rose gold, sandstone, or evening sky blue, perhaps?

5) Boost Mac sales by emphasizing Continuity with mobile platforms.

Apple sold 160 million iPhones and around 55 million iPads in Q4 2014.  In contrast, its Mac division generated around 20 million unit sales.

In 2014, Apple introduced Continuity for Mac, which allows users to swipe and send documents and files from an iPhone or iPad to a Mac in real time.  Similar capabilities also exist for Windows computers, but Apple has the benefit of a unified software ecosystem to make these transfers completely hassle-free.

Microsoft’s unpopular Windows 8 and forthcoming launch of Windows 10 gives Apple an enormous window to converting former Microsoft customers into new users.  The close integration of iOS with OS X is no doubt going to be a lynchpin of that pitch.

6) Consolidate and rename the entire iPad line.

Apple’s current iPad offerings include five different base models, each with multiple colors, storage options, connection capabilities, and price points.  At a glance, it’s difficult to tell how exactly they differ from each other, or whether they’re actually different at all.

The rumored 12.9” iPad Pro offers Apple the opportunity to slim down their iPad line and refresh the distinctions between each device.  If the Pro is launched alongside the 2015 refreshes for the line, it would be great to see a new nomenclature adopted for each category.

7) What’s the future of the iPod?

Apple’s iPod revenues have plummeted due to the popularity of the iPhone and iPad.  The company expected this self-cannibalization and appears inclined to let the iPod slowly fade away.

That’s probably the wisest course of action since it doesn’t make sense to invest in a product line that has seen its profits fall off a cliff in the last five years.  But the iPod does still have a dedicated customer base that could be well served with some incremental updates, especially since its current iPod offerings are overdue for a refresh.

Among the potential iPod revamps the company could pursue:

  • A bigger iPod Touch that aligns with the iPhone 6’s internal specs and size.
  • An iPod Pro with significant storage (possibly a hard drive?), sold at a premium to customers with enormous music collections. Essentially a replacement for the workhorse iPod Classic which was retired a while back.
  • A revamped iPod Nano that emphasizes fitness and exercise capabilities. The Apple Watch will likely fulfill this niche in a future iteration, but the Nano could be a lower-cost option that essentially replaces the iPod Shuffle as the entry Apple device.  (Either way, the Nano desperately needs to be redesigned; it’s easily the most visually unappealing product in Apple’s repertoire, an ugly mash of metal, glass, and an inferior iOS clone that looks like it’s from 2008.)

8) HomeKit is the next big frontier, and Apple TV is the conduit.

Smart household devices will become ubiquitous in the next few years – connected refrigerators, lighting systems, garage doors, etc.  Current iterations of those products usually include device-specific standalone apps for remote user access and control.

Standalone apps will increasingly become unviable as the volume of connected household items increases, and Apple’s HomeKit is positioned to become the conduit for collecting device controls.  It’s easy to imagine a scenario where an Apple HomeKit app aggregates each smarthome input and allows the user to manipulate each device from a central dashboard.

One sticking point is ensuring all devices are regulated by the same network to ensure they’re all properly synced for local and remote control via Apple devices.   Christopher Breen notes the importance of having a dedicated, centralized network for this purpose:

Wouldn’t it be better if each home had a small, power-efficient, always-on, platform-agnostic, Wi-Fi-enabled computer that could talk to your devices both remotely and over a local network?

If you haven’t yet glanced over at your Apple TV, now’s the time.

Apple TV is rumored to be receiving a substantial update later this year, which may include a hardware redesign and new content such as HBO’s streaming service.  The product has only received incremental updates since its launch eight years ago and has been largely eclipsed by Chromecast, Roku, and other streaming devices.

An Apple TV relaunch featuring full HomeKit integration would easily make Apple’s TV offering the most logical option on the market.   Robust streaming options plus full iTunes integration are an attractive proposition for Apple’s 100 million+ iTunes users, and having a centralized home base for device control and additional security only sweetens the deal.

Speculation and Hypotheticals

9) An Apple-Nintendo partnership won’t happen, but they would be a natural fit.

If Apple really wanted to own the living room beyond a relaunched Apple TV + HomeKit, it might also consider trying to acquire Nintendo.  This theory has been floated before and a deal is not going to happen, even though Apple easily has the cash to cover Nintendo’s $18 billion market cap and a purchase premium.

But what a win it would be for both parties!  Apple acquires Nintendo’s treasure trove of licensed characters and games.  On the mobile front, it essentially starts printing money by offering Nintendo classics on the App Store and perhaps reinventing the iPod as a game console a la the 3DS.  On the console front, it could offer a more powerful Apple TV Pro that competes with Sony and Microsoft as a complete living room entertainment hub.

Nintendo wins by earning a fat return for its investors and by attaining greater creative freedom than it has now.  Though its first-party games are constantly lauded for their quality, Nintendo has fallen victim to a conservative and confusing development cycle, where sequels and character appropriation replace new franchises and experiences.  The shortfall of cash generated by App Store sales and the reduced hardware development costs associated with an Apple purchase would ensure Nintendo has the financial footing to redouble its efforts to make world-class games.

10) Could iTunes or Apple TV become a carte blanche media streaming service?

Apple will reportedly price the revamped Beats streaming service at $7.99 per month and apparently has the enthusiastic support of major music labels.  The service is said to be outside the purview of iTunes, which will continue to sell music on a track-by-track basis.

Given Apple’s massive customer base and the fact that it succeeded in getting music executives on board with this price point, is it possible Apple might try to introduce the first cross-media streaming service under the iTunes brand?  Would you pay $40 a month for unlimited music streaming, unlimited television streaming, two free movie rentals of your choice, and a limited library of free eBooks?  I would in a heartbeat.

Apple has long talked about rethinking how television works as part of an Apple TV upgrade, and this would certainly qualify, especially if this “base” subscription package could also include additional bundles like HBO streaming or extra movie rentals for an additional fee.  Being able to consolidate media subscription services into one payment (combining Netflix, Oyster, Spotify, and HBO, for example) would be worth it for the convenience alone.

Again, this is not on the horizon, but it would be an absolute coup for Apple if it comes to pass.

11) Tesla would be a synergistic feverdream, but CarPlay makes more sense.

If Apple gets into the automobile manufacturing game, as recent rumors have suggested, all the more power to them.  It would be thrilling to see how Apple’s designers and engineers could rethink how we travel and engage with our vehicles.

Tesla has been cited as a potential acquisition for a couple of years now as part of that entry into the car market.  Of late, that talk has been supplanted by suggestions that the two companies are competitors, poaching each other’s employees with fat bonuses.

It’s tempting to envision a scenario where the two companies come together: Elon Musk on Apple’s board, an iPad replacing Tesla’s center console, Jony Ive designing the Model 3, Apple leveraging Tesla’s battery production process for its other devices.  But all signs point to Tesla’s continued independence.  Apple probably won’t acquire Tesla given this status quo.

That’s fine.  In the short to medium term, Apple’s CarPlay dashboard technology is a more promising avenue for immediate profits and widespread adoption.  If Apple acquired Tesla in the next year or two it would almost certainly not license CarPlay to other car manufacturers.  That would be forsaking a gold mine, given the 16.5 million cars sold in fiscal year 2014.

Apple is smart to seed CarPlay now.  If Tesla continues to expand in market share, Apple will no doubt have the cash to purchase it in the future.  And if Tesla stumbles along the way, Apple can swoop in and acquire it at a discount.

The Big Picture

12) All of this is to say that diversity beyond the iPhone is critical.

Apple’s sales figures suggest it will live and die by the iPhone.  The enormous success of the iPhone 6 has guaranteed the company stability for the next few quarters, and the likely improvements to the iPhone 6S (Force Touch, better battery, etc.) suggest the iPhone line will be a rock-solid profit generator at least through 2016.

That said, the pressure to continually produce an expectations-exceeding iPhone is immense.  I don’t doubt Apple’s ability in the slightest to amaze customers with whatever it introduces in the iPhone 7.  But if even one new iPhone model is a flop, Apple would lose a significant revenue source that would probably wreak havoc with its stock price.  (Not that stock fluctuations should matter too much, since it has hundreds of billions of dollars in cash on hand.)

2015 will be remembered as the year when Apple consolidated its mobile phone dominance with the iPhone 6 and also took the first steps to significantly expand beyond the iPhone.  It wouldn’t surprise me in the slightest if the Apple Watch is only the tip of the iceberg for new products released under Tim Cook’s leadership.

13) Tim Cook is a better CEO than Steve Jobs.

This is an admittedly tough claim to defend; Steve Jobs’ legacy speaks for itself.  But Tim Cook has already presided over some of the most important moments in Apple history, including its most profitable quarter ever and the launch of an entirely new product category.  And he has done so with poise, remarkable foresight, and efficiency.

Profiles of Jobs all lead to the same conclusion: he was a genius, a leader with unparalleled foresight, and, quite often, a horrible person to work for and with.  Cook retains Jobs’ passion without the tempermentality.  He is an exceptionally hard worker with one of the best leadership teams in the industry.  He is a man who deserves respect.

The good news is that Cook’s tenure has not shown any signs of heightened internal discord leading to a stagnant product pipeline.  On the contrary; if anything, there has never been a more exciting time to wonder what Apple has in store as its purview expands to home automation, automobiles, fashion, and untold product areas.

More than hardware and software development, however, has been the moral facet of Cook’s guidance.  Environmental responsibility has been a hallmark of his tenure; “If you want me to do things only for ROI reasons, you should get out of this stock,” he famously told a group of shareholders last year.  Product (RED) offerings have continued uninterrupted.  And, most significantly, Cook has emphasized the importance of overseeing an ethical supply chain through the publication of Apple’s progress report earlier this year.

At best, Apple is an amoral amalgamation of inputs and outputs.  It creates exceptional products while undoubtedly engaging in questionable business practices that affect workers and the environment, primarily in developing countries.  Cook will probably not change this by mandating, for example, that all Apple suppliers offer their employees a living wage.  But he seems more cognizant than both Jobs and most other tech CEOs of Apple’s ability to shape just labor policies and supply chains.  That his tenure has already seen pledges for improvement in these areas suggests he is serious about Apple’s commitment to ethical production and product creation.

I’d love to see Apple make a push at developing markets with a low-cost iPhone, essentially selling it at cost to seed those customer bases for future iDevices.  Much of Apple’s revenue comes from selling expensive products to comparatively wealthy clientele, with the Apple Watch Edition representing the peak of Apple’s pursuit of the luxury market.  It would be good for Tim Cook’s Apple to counterbalance this trend by advocating for productivity and growth in markets that can’t afford a $700 unlocked phone.

Apple’s market share and singular vision suggests it can have the most substantial impact for the good in most of the areas it chooses to enter.  Let’s hope this will be put to good use going forward.  The future certainly looks bright.