Conflicting strategies behind Apple’s media services
In February during the Stream On keynote, Spotify laid out its vision and long-term plan for the development of the service, as well as made a number of announcements. The world’s leading music streaming platform is not content with staying where it is now — instead, it wants to be the platform for audio content way beyond music. Spotify started its expansion to podcasts years ago with a number of notable acquisitions (The Ringer, Gimlet Media, Megaphone), and now it aspires to be the best place for any kind of audio content for both creators and consumers. “We want to be the place where educators and entrepreneurs, storytellers and authors, well-known personalities and artists, are all able to reach out and touch the world through audio”, Spotify CEO Daniel Ek said.
It’s not just a vision, but a long-term plan. Spotify already provides many tools necessary for audio content creators to both produce and host their work — unlike iTunes / Apple Podcasts ecosystem that only provides an open directory. Spotify announced a number of advertisement tools, such as Streaming Ad Insertion technology and Spotify Ad Studio, which would help audio creators with monetizing their work and getting access to advanced analytics data. Apple Podcasts currently doesn’t offer as robust services — in spite of many creators having said publicly for years that the current podcasts market needed development. It almost feels that in the last decade, Apple — the company that defined podcasting as media and happened to dominate the market for years — has been making very little progress in this area and appeared uninterested. As a result, Spotify — the service that was not even associated with podcasting just a few years ago — is now better positioned to define the medium and bring the entire audio content ecosystem forward.
Apple has been long interested in media services, as it realized years ago that if the company wants to differentiate and control user experience on their platforms, it needs to own layers beyond just hardware and low-level software. iTunes was instrumental to the success of the Mac and iPod and redefined the entire music industry. Today, Apple is focusing on media services even more — services revenue (albeit likely dominated by non-media services such as App Store and Apple Care) constitutes about 14% of Apple net sales as of fiscal 2021 first quarter ended December 26, 2020, and it’s obvious that Apple doubles down on having a strong play in the space with recent launches of Apple News+, Apple TV+, Apple Arcade and other services. Apple probably doesn’t want to sell devices that would be only defined by third-party services and apps — it wants to control the whole thing.
And yet, in each category Apple services compete in, there are strong competitors that have been established long before Apple entered the game, and/or provide arguably better quality or value. Apple’s hardware products are legendary for entering established markets and then completely redefining and dominating them in terms of mindshare and revenue share by providing best user experience — just look at the PC, smartphone, tablet, or wearables markets. Apple’s media services products, however, do none of that. They enter established markets (with the exception of Podcasts which was a trailblazer) but instead of redefining and dominating them, they either don’t move the needle for the respective markets at worst, or exist as alternatives to more full-featured offerings at best.
This raises a question — what is the grand strategy behind Apple’s media services? Obviously, it’s nice when Apple Music or Apple TV+ bring in some extra revenue here and now, but it couldn’t be just that — after all, Apple is famous for thinking strategically and long-term. Does Apple want to control and differentiate user experience by providing best, exclusive services? If so, current selection of Apple’s media services doesn’t meet this goal. Does Apple want to extend its brand to dominate the customers’ mindshare when it comes to media? If so, they are barely succeeding either. Their competitors are doing a much better job, investing more, and moving forward way faster.
In my view, there are two ways we can look at the strategic role of Apple’s media services when we consider the broader ecosystem and Apple brand:
- Apple’s media services as platforms that define and differentiate the UX and UI of Apple hardware products and operating systems
- Apple’s media services as products that aspire to compete in the area, promote Apple brand, and fight for the mindshare
Let’s take a look at each of Apple’s current media services and see how they fit into either of these roles.
Apple Music entered the music streaming market in 2015, 9 years after Spotify launched and then innovated in the area and defined the market and the format. Apple only introduced Music when it probably realized that iTunes music purchases and downloads market was shrinking and would never rebound. When Apple Music launched, there were few features that differentiated it from Spotify and other competitors, and some of them flopped and then were quietly redesigned or retired — such as Apple Music Connect and the whole social aspect of the service. Today, Apple Music is a capable service that offers a great selection of content (albeit similar to what you can find in other services) and a good selection of curated playlists and radio stations, but its recommendation and personalization algorithms are arguably lagging behind some competitors, and social tools are almost non-existent. Spotify seems to be evolving and introducing new features more quickly than Apple Music, which widens the USP gap even more as time goes by. In addition to Spotify, there are many regional streaming services that offer better selection of local music and more relevant regional recommendations — examples include Deezer in France, Yandex.Music in Russia, and others.
- Apple Music as a platform / Apple’s ecosystem differentiator. One of the biggest USPs of Apple Music is it’s ability to integrate with your local (iTunes) music library to create a unified collection of albums and songs that you both own and stream. For music nerds like me, this is great — but there are fewer and fewer users who care about downloaded or CD-ripped songs, as the majority of music listeners are exclusively consuming music via streaming and subscriptions. Competitors such as Spotify are distributing their content via separate apps or the web and are not integrated deeply with Apple Music and Apple ecosystem of products. Thus, Apple Music is not a fully-realized overarching music content platform if you use any third-party services, and it likely will never be, as third parties want to directly control their user experience, avoiding Apple wherever possible. When it comes to Apple Music’s role as a differentiator of the Apple platform, it’s very questionable, as the service is available on Android, Windows (via iTunes app), and other platforms.
- Apple Music as a standalone product. Like mentioned earlier, there are few features in Apple Music that make it better than Spotify and others — the biggest being tight integration with Apple’s hardware and operating systems, which is a pure integration and marketing advantage, not the product advantage per se. If you are a devoted music fan and care about content, curation and especially social features, it’s hard to choose Apple Music over Spotify or some other services. Apple Music is not a bad service — far from it — but it should evolve much faster and introduce more features way more aggressively if it aspires to be a truly premium, best-on-the-market product Apple always strives for.
Apple TV app / TV+
Apple launched TV+ as the place where best storytellers share their creations with the world. It’s deliberately designed to be a service that prioritizes quality over quantity, and it feels that Apple is playing a very long game with TV+ — as of today, many customers have access to it for free, as it’s bundled with any recent Apple hardware purchase, and Apple’s expectation is that when the service builds up reputation and grows its content library over the years, it would become a great value that most customers would not want to pass on.
- Apple TV+ as a platform / Apple’s ecosystem differentiator. Apple’s TV strategy is fascinating. Apple TV+ is a stand-alone subscription service, but it’s built on top of, and embedded with, the Apple TV app that appears to be marketed as heavily as the subscription service itself. It looks like the strategic play for Apple is not to have as many TV+ subscribers per se, but to have as many people consuming TV+ content as possible via the TV app — and thus being exposed to (and pay for) third party content and Apple TV Channels. Thus, Apple TV app (as opposed to Apple TV+ service) indeed acts as a platform that provides a layer of user interface and controls user experience on top of the individual services and channels integrated into it, and it’s a smart strategic play. That said, the biggest elephant in the room — Netflix — is not integrated, as it wants to control their user experience directly and bypass Apple’s subscription fee cut, so Apple’s goal to control and differentiate video content UI on their products via the Apple TV app is far from being achieved. There are also services such as YouTube and Twitch which are not integrated with the Apple TV platform in any way. In addition, Apple TV app is also not exclusive to Apple products and available pretty much everywhere, which makes it not much of a differentiator for the Apple ecosystem.
- Apple TV+ as a standalone product. With the current state of the video media market and the segmentation of the content, it’s probably impossible to be “the” service for TV and movies, as iTunes Store aspired to be years ago before the streaming era began. However, Netflix has come close and de-facto replaced iTunes when it comes to mindshare, so Apple waited too long if it ever wanted to maintain the status quo. In this reality, Apple can’t compete with Netflix when it comes to content library, so the only other way is to offer an exclusive selection of quality content, similarly to what HBO has been known for. While Apple TV+ has not set the world on fire yet, it already has an impressive collection of great shows and movies which will only grow, so Apple TV+ looks well positioned to become a good ambassador for the Apple brand and a stand-alone quality product. Overall, the integration of the existing iTunes Store, Apple TV app, and Apple TV+ looks like one of the more defined and clear offerings Apple has across all of their media service bets.
Arcade is one of the more curious Apple’s media services especially when it comes to long-term strategy. While somewhat accidentally maintaining one of the largest gaming platforms in the world with iOS (and having a history of being a major player in the space with Apple II and during older Macintosh days), Apple has, however, been somewhat alien to gaming and historically didn’t understand games well. This, however, started to change recently. Explosive growth of the games industry in the last decade has made gaming too lucrative of a market not to invest in for Apple (especially in light of the growth of AR and VR), and Arcade is one of these bets. However, Arcade seems to be too much of a niche and casual offering for core gamers who have been long invested in PC and console games. It’s unclear how large is a subscription market in the more causal mobile games space.
- Apple Arcade as a platform / Apple’s ecosystem differentiator. Arcade is a platform for select developers to publish and monetize off their games, but when it comes to customers and UX, Arcade is not a platform at all — it exists as a separate tab in the App Store apps (and as a standalone app on tvOS) and in no way attempts to be an overarching UI on top of other mobile games existing in the Apple ecosystem. It is, essentially, an additional offering of exclusive games available for a subscription fee on top of what is already available on the App Stores. (In a way, Apple Arcade enhances App Store similarly to how Apple TV+ enhances Apple TV app.) Since Arcade only exists on Apple platforms, it is indeed one of the more obvious points of differentiation for Apple — with two caveats. First, many Arcade games are not in fact exclusive to Arcade, as they are available on PC and consoles. Second, the current selection of games on Arcade skews heavily towards casual mobile experiences, with no mainstream blow-away hits, so it’s hard to imagine many people would purchase any of Apple hardware products specifically to play Apple Arcade games.
- Apple Arcade as a standalone product. As just mentioned above, the current selection of games in Apple Arcade’s library doesn’t look like a compelling enough proposition for millions of gamers to subscribe to the service for exclusives. Apple Arcade is offering a selection of curated (primarily mobile) quality games, but it’s fair to assume that many gamers are much more interested in stores or services like Steam or Xbox Games Pass. Most popular mobile games are cross-platform and are available via various app stores. Arcade has its appeal for parents who want to make sure their kids play a curated selection of games with no in-app purchases or ads, but if Apple is serious about becoming a major player in the core gaming space, the company needs to scale massively to accommodate AAA PC and console quality titles from large studios and publishers, not just smaller indie studios. It’s unclear if Apple is willing to invest billions into it, and even if it is, it will take years to build the expertise and library. Apple has also been historically aggressive at retiring older technologies in their products and operating systems (for many right reasons), which makes their platforms not particularly game development friendly, as modern gamers expect their libraries and backwards compatibility to last for decades. Finally, Apple Arcade is exclusive to Apple products, which obviously limits the service’s addressable market. Repurposing Arcade into a platform-agnostic gaming streaming service could help with some of these challenges, but it appears that Apple prefers to double down on native software paradigm — and games streaming market hasn’t seen a major success yet.
Apple News / News+
Apple News launched as an attempt to bing some clarity, curation and quality to the increasingly complex and downright hostile world of chaotic social media driven news distribution and consumption and spread of misinformation. If you don’t want to rely on social media to get your news from, the only alternative would be reading news on the web or standalone media outlets’ apps (which is often a bad user experience — with horrible UI and abundance of advertisement), so the idea of one app that would serve as a gateway to quality journalism seemed like a great idea. Later, Apple launched News+ as a way to subscribe to paid publications and outlets, but it hasn’t reportedly been a major commercial success yet. Also, after years on the market it’s still only available in just a few primarily English-speaking countries.
- Apple News as a platform / Apple’s ecosystem differentiator. Apple News as an app acts as a platform for both publishers and consumers — it’s one place where readers are invited to go to consume their news, helped by curation and personalization algorithms. It is, essentially, a streamlined UI layer on top of chaotic content otherwise available all around the web. News+ allows access to pay-walled content from a limited selection of publishers, which makes sense from the UX standpoint, but it contradicts publishers’ desire to maintain direct control with their readers (as well as not to share their revenues with Apple), so relatively little success of Apple News+ is not surprising. Apple News (and News+) as a product is only available on Apple platforms as native apps, so it indeed acts as a meaningful differentiator for the ecosystem.
- Apple News as a standalone product. Since Apple News acts as a defined platform and Apple’s ecosystem differentiator, it’s difficult to assess it as a standalone product. I can see how customers might want Apple News even if they might not be interested in Apple’s hardware or software — so if it was available on Android or Windows, it would’ve probably found the audiences there. However, this space has its credible competitors such as Google News and some local regional services. It’s also notable that Apple News Today daily show is available as a standalone podcast.
It’s debatable if Apple Podcasts in its current form is a service — it’s not even listed at the bottom of apple.com under “Services” section — but it increasingly feels that Apple treats Podcasts as a service nevertheless. It should be — considering the aggressive moves by Spotify and others in the space, as mentioned in the beginning of this article. Historically, Podcasts existed as a segment in the iTunes app and served as a directory — it’s now a separate app, but little changed from the functionality standpoint. Apple now offers curated lists and recommendations, and there have been rumors for years that Apple is planning new features for Podcasts, but if this was true, they’ve been very slow with rolling them out. I wouldn’t be surprised if some kind of Podcasts+ service is in the works.
- Apple Podcasts as a platform / Apple’s ecosystem differentiator. From a purely UX standpoint, Podcasts app indeed serves as a classic platform — it’s a place one goes to get all their podcasts content. In this capacity, Podcasts dominated the market for years as it was the only notable player in the space, but recently, things started to change — it now feels increasingly necessary to install third party apps such as Spotify to get all the podcasts you want. It’s unclear if Apple would want to turn Podcasts into a kind of overarching layer for all podcast content providers (similar to what Apple TV app aspires to be), but even it if would, I can see how major players like Spotify would refuse to be a part of it. When it comes to content creators, as mentioned above, Podcasts is not a full-featured platform — it offers no ways to create and host content, let alone monetize off it. Apple Podcasts doesn’t currently serve as a meaningful Apple ecosystem differentiator — even thought the app is exclusive to Apple platforms, there are similarly featured apps available on competing platforms, as well as on the web. Many podcasts are now striving to go directly to users via web and even YouTube. If Apple launches Podcasts+ that would allow content creators to monetize off subscription revenue share, it might become a better platform for them, but it’s unclear what would be the competitive advantage over what Spotify is already offering or planning to offer.
- Apple Podcasts as a standalone product. Apple Podcasts is not a full-fledged service or product yet, and it currently serves just as a place where Apple products users go to to subscribe and listen to their favorite podcasts, but there is nothing exclusive or unique to it. If Apple Podcasts+ becomes a reality, it would make sense for Apple to make it a cross-platform offering with exclusive content to compete with Spotify and others and to fight back for the shrinking mindshare of Apple as a major player in the podcasts space.
Unlike Apple Podcasts, Apple Books currently sits in the list of “Services” on apple.com, but it feels to be evolving in a similarly slow pace as Podcasts, especially when it comes to regional rollout. The last major update overhauled the entire look and UI of the Books app (previously known as iBooks) — it now looks way more modern, but at the same time very different from the rest of Apple services apps. Apple Books houses both traditional books and audiobooks.
- Apple Books as a platform / Apple’s ecosystem differentiator. Apple Books acts as a platform for publishers, as uploading books to it is relatively simple. When it comes to users, Apple Books is not an overarching UI layer, but just one more app to purchase and read books in. Amazon Kindle, a major competitor, is a different app, let alone lots of smaller or regional services that sometimes offer more tailored and specialized collections of books. Because of the existence of so many third-party competitors, even though Apple Books is exclusive to Apple products, it’s hardly an ecosystem differentiator.
- Apple Books as a standalone product. Currently, Apple Books offers little unique features or exclusive content that might make it a compelling standalone product outside of Apple ecosystem. As mentioned above, after long years on the market, Apple Books is still not available in major markets such as Russia, and many regional services offer bigger and more tailored collections of books and audiobooks. If Apple were to roll out Books to other platforms, it’s difficult to imagine it would move the needle in terms of Apple’s ambitions to dominate the mindshare. Aggressive regional rollout and inclusion of more regionally-specific books, as well as considering subscription business model, might have helped.
Looking holistically at the selection of Apple’s media services and their aspirations discussed above, one thing is clear — there is a notable lack of synchronized approach and visible long-term strategy behind them as a unified ecosystem. It feels as there is some kind of internal conflict — some services, such as Apple Music or Apple TV+, want to be everywhere as standalone products, whereas others, such as Apple Arcade or Apple News, exist just on Apple platforms. Some services, such as Apple Music and Apple Podcasts, aspire to be overarching content consumption platforms for users, whereas others, such as Apple Arcade, act as standalone offerings that compliment third-party content.
But no matter which models any of these services use, significantly higher investments and more aggressive rollout of new features, content and updates are required for many of them to stand above the competition. With major competitors such as Spotify, Netflix, Kindle, Xbox Games Pass and others moving much faster to dominate the mindshare, Apple faces the risk of losing tight control over critical aspects of user experience on their platforms.
As a user deeply entrenched in Apple ecosystem, I like Apple’s media services and use them a lot. Not necessarily because they are better — but rather because they are already there, pre-installed, integrated with all my hardware and software, “just work”, and I don’t need to bother with curating and maintaining a list of third-party apps. Is Apple content with this somewhat uninspired approach of just being the default, or does it have the ambition for consumers to deliberately choose their services because they are better than the competition? Historically, the latter has worked much better for Apple as a company.