How Apple keeps making money off you in between iPhone purchases
As Apple dismantles its walled garden, other services revenue could become more important.
Apple’s services segment is increasingly important to its bottom line as a critical revenue source to counterbalance its slowing hardware sales.
Services, which accounts for a quarter of the iPhone maker’s revenue but more than 40% of its gross profit last quarter, is also under siege on multiple fronts.
For one, regulators have been successfully pushing the company to open up its walled garden, by allowing third-party apps to replace its native ones. That’s important because the company could lose some of the income it derives from fees associated with things like the App Store and Apple Pay as consumers get more alternatives.
And even Apple competitor Google’s problems might become its own problems. To remedy its monopoly, Google could be forced to ditch its exclusive deal Apple to make it the default search engine on iPhones. Apple, makes tens of billions of dollars a year from that deal, which, as Business Insider’s Peter Kafka has pointed out, is a huge component of Apple’s services revenue.
That means that other types of service revenue could become more important to Apple.
New data from market research firm Consumer Intelligence Research Partners (CIRP), which surveys people who recently purchased Apple products, provides a look into what those might be.
CIPR found that iCloud remains one of the most popular services, with about two thirds of recent Apple buyers paying for the service. It’s followed by Apple Music and Apple Podcasts.
CIRP doesn’t ask consumers about their App Store usage or search habits because they don’t have much discretion in that matter — nor would they be able to accurately pick out how many apps they’ve downloaded or how much they’ve transacted on them — but those are major contributions to services revenue.
“The services that we're listing here, the consumers do have choice,” Michael Levin, CIRP partner and cofounder, told Sherwood. “You don't have to use iCloud. You could use Dropbox, you could use Google Drive.”
The share of Apple consumers using AppleCare on their iPhones, though, is pretty low, partly because customers can get insurance from their carriers or retailers.
“AppleCare, if they're like anybody else, is insanely profitable.”
