Revisiting the Pre-WWDC 2018 Thoughts

Below are the items I listed in my quickfire Pre-WWDC 2018 Thoughts along with how they shaped up through the keynote. Along with unsolicited commentary.

  1. Tucked or untucked?
    • Mostly tucked I think. but considering there were more women presenters than men on stage, I think this question will be shelved in future. Apple is making good on its promise to become more diverse.
  2. Big Siri improvements and announcements. (Will we see the new Siri chief?)
    • No Siri chief, probably too soon. Besides, he has far too much work to do!
    • Siri had some significant stage time, especially with Siri Shortcuts being demonstrated and mentioned several times through the keynote.
  3. Widespread improvements and announcements for AR, Machine Learning and photo/video features (paving the way for new iPhones coming out later this year).
    • Yes. Plenty of AR announcements on iOS. Some solid stage time spent on ML and plenty of announcements regarding Photos, photo sharing and FaceTime.
  4. Dejarik” AR demo – please! (The space chess game from Star Wars)
    • Sadly not…
  5. Increased security and encryption. As well as increased privacy controls and awareness (Trump/FBI and China proofing).
    • Security, check. Encryption, check. Privacy, double check!
    • Apple launched some shots across the Facebook and ad-tracking bows. Safari doubling down on privacy and making it increasingly difficult for ad tech to find a foothold.
    • Will be interesting to see how the App Limits and Activity Reports have an effect on apps that we waste time in.
    • I wonder what the effect will be on the Facebook apps if in-app usage lowers due to App Limits as well as the curtailing of tracking on the web? Being squeezed from two sides.
    • My guess – not much effect on the giants (likely severe on those in the middle-ground).
  6. Increased and improved Health features.
    • Many announcements here for the Apple Watch.
    • The new Workouts features look great! Especially in context of running with Target Pace, Cadence and Rolling Miles (I hope they have km too?).
    • The Competition features also look appealing for those who are holding each other accountable in their fitness goals.
  7. Will iTunes finally be split into multiple apps?
    • No… not just yet. But… Apple Books, Apple Music, Apple Podcasts… Apple Video? We are almost there if you squint at it.
  8. New apps and services to bolster the burgeoning “Apple Services” narrative.
    • Definitely a lot of focus on Apple apps such as News, Stocks and the all new Apple Books.
    • No mention of Clips though?
  9. Increased iCloud storage tiers and options (iCloud TimeMachine anyone?).
    • No and no.
    • I think iCloud Storage is likely making up a decent chunk of the revenue in the Apple’s service narrative and to increase the tier sizes and lower the price may have a negative effect on that story just as Wall Street is getting on board.
    • That being said, an iCloud based TimeMachine-like backup service would be additive, not subtractive. Is iCloud Storage not already doing this you say? I am speaking in the macOS context here, so no. Effectively it would be doing what a service like Backblaze already does.
  10. Improved/re-designed Mac App Store (not expecting Mac Pro updates just yet…)
    • Yes. Called it!
    • Will be interesting to see how this fares “second time around”. Big questions around sandboxing.
    • Certainly interesting to see Microsoft and Adobe on board. However, Lightroom is not, to my mind, one of the bigger Adobe apps. Adobe testing the water maybe?
    • Having bonafides such as Panic and BareBones in the store are a vote of confidence.
    • I believe Sketch is still missing?
  11. Apple TV news to lay foundations for whatever streaming plans Apple has.
    • Well… I don’t know the American cable market well enough to know whether Charter Spectrum is a big or small fish… but judging by the lack of crowd reaction it seemed like a very small fish. I think the number was 50 million subscribers? Which does not sound very big in comparison to the US market. It’s progress I suppose. Out of all the segments, it really felt like Apple had to wring as much as they could out this segment without much to work on.
    • Yes, Dolby Vision and Dolby Atmos are crowd pleasers, especially with the free upgrades (but we knew these were coming right?).
    • Apple spent an awful lot of time on what amounts to very expensive and very beautiful screensavers.
    • Out of all the segments, this section reminded me of John Gruber’s “how Apple rolls” column the most. Progress, no matter how slow it may seem in the moment, Apple keep plugging away at the features.
  12. Apple TV games announcements?
    • No. For a developer conference it seemed the Apple TV segment was devoid of any developer related news. Surely… surely this is coming? All Metal and no cigar.
  13. Incremental improvements for Apple Maps.
    • Not that I can remember. But the announcements that third party navigation apps will be available in CarPlay sure roused a cheer. (Louder than the Charter Spectrum one I think)
  14. Any mentions of this possible MacOS/iOS platform unification?
    • Yes! Big news!
  15. HomePod love? (Now that AirPlay 2 and audio-pairing just got released – what next for HomePod)
    • Well… Siri Shortcuts on HomePod, so yes.
  16. Fruits of the Workflow and Shazaam acquisitions?
    • No mention of Shazaam, maybe these integrations are coming with the iPhone announcements later this year?
    • As for Workflow, I suspect they had a hand in a lot of the Siri Shortcuts, but this is just speculation.
  17. China, China, and more China.
    • Didi mention! Claiming it.
  18. More diversity on stage.
    • Big yes! Never mind Tim and Craig running on and off stage, we had Jules cycling on stage!
  19. Everything faster and more battery efficient. (So that products later this year are as thin or thinner than ever).
    • YES!
  20. Extra points for every mention of security, privacy, machine learning, AR.
    • All of the above (but thematically, these were easy calls, so no kudos here.)

Out of 20 items listed, only 18 of which could really be said to be predictions: I score myself at 12/18. Not too shabby!

Pre-WWDC 2018 Thoughts

Just some quickfire thoughts before WWDC gets on the go. Broadly, I think (or is that hope?) some big themes will be:

  • Tucked or untucked?
  • Big Siri improvements and announcements. (Will we see the new Siri chief?)
  • Widespread improvements and announcements for AR, Machine Learning and photo/video features (paving the way for new iPhones coming out later this year).
  • Dejarik” AR demo – please! (The space chess game from Star Wars)
  • Increased security and encryption. As well as increased privacy controls and awareness (Trump/FBI and China proofing).
  • Increased and improved Health features.
  • Will iTunes finally be split into multiple apps?
  • New apps and services to bolster the burgeoning “Apple Services” narrative.
  • Increased iCloud storage tiers and options (iCloud TimeMachine anyone?).
  • Improved/re-designed Mac App Store (not expecting Mac Pro updates just yet…)
  • Apple TV news to lay foundations for whatever streaming plans Apple has.
  • Apple TV games announcements?
  • Incremental improvements for Apple Maps.
  • Any mentions of this possible MacOS/iOS platform unification?
  • HomePod love? (Now that AirPlay 2 and audio-pairing just got released – what next for HomePod)
  • Fruits of the Workflow and Shazaam acquisitions?
  • China, China, and more China.
  • More diversity on stage.
  • Everything faster and more battery efficient. (So that products later this year are as thin or thinner than ever).
  • Extra points for every mention of security, privacy, machine learning, AR.

These are all wild guesses. As always, it will be exciting to see what is coming down the Apple pipes!

Pre-HomePod

It seems that the anticipation surrounding the soon to be released HomePod is more centred around a desire to tear it down and declare Amazon Echo or Google Home to be the winner in the expanding voice assistant category than it is for the actual anticipation of the product. Once the reviews drop, we can expect plenty of:

  • It is too expensive.
  • Siri is worse than Alexa/Assistant/Cortana.
  • I cannot do X, Y or Z on HomePod.
  • The sound isn’t as good as X, Y, Z.
  • Apple is doomed.

In the meantime, I will be looking forward to reading about (and eventually hearing) how good of speaker it is.

2 years ago I bought a JBL Charge 3 for my girlfriend. It is one of the best purchases I have ever made. It sounds good, it’s portable, the battery lasts a good while and it is even waterproof. One thing it is not, is smart or have a voice. While the JBL Charge 3 is great, I am looking for something a little more permanent to pair with the Apple TV in the lounge while the JBL Charge 3 can go in the bedroom or go with us on holiday. As far as I am concerned, any smart/voice features are all upside. The jobs to be done in my case are:

  • Music
  • Audio for video
  • Podcasts

I would not underestimate the value of a good speaker. The real test will be to see how HomePod compares to higher end speakers and audio systems. It is interesting to consider HomePod not as an over-priced, under-featured voice assistant, but rather as a low-end entrant to the high-end audio market.

 

About Those iPhone X Supply Chain Rumours

Mike Wuerthele wrote an article at AppleInsider about a KGI Securities research note regarding the iPhone X titled:

“If iPhone X demand is less than expected, analyst expects it to be ‘end of life’ when replacements ship”

The “internet” then decided that this meant the iPhone X would be cancelled due to weak sales.

My advice is to read Wuerthele’s article from bottom to top for a better understanding of what KGI Securities analyst Ming Chi Kuo is actually saying.

Here is my summary:

  • Analyst expects trio of iPhone models in 2018 with possible launch of iPhone X Plus.
  • Current iPhone X is unlikely to be retained in line-up once replaced.
  • Notch may be affecting impact in China.
  • Shipments of 18 million iPhone Xs expected in Q1.
  • No comment on holiday sales.
  • Analyst expects 10% iPhone growth in 2018.
  • Firm remains positive on the Apple and the iPhone supply chain.

Don’t believe the clickbait.

Apple 2018

In the spirit of some speculative fun, here are my guesses at what Apple may or may not do in 2018:

iPhone

It is going to be fascinating to see what Apple does with the iPhone line in 2018. 2017 introduced 3 models: iPhone X, iPhone 8 and iPhone 8 Plus. What happens with the traditional ‘S’ cycle upgrade since being upturned by the latest release cycle?

Generally Apple does not introduce new form factors in the ‘S’ cycle (last year being the exception) and this cycle is traditionally focused on software-based introductions and improvements. Does this mean we will see:

  • iPhone XS.
  • iPhone 8S.
  • iPhone 8S Plus.
  • iPhone SE (with iPhone 7 internals).
  • New battery case (Has anyone noticed Marty Bird’s continual use of the battery case in Ozark?)

It will be fascinating to see what Apple does in 2019 to the “old” iPhone form factor. Depending on how the iPhone 8/X sales go, might we see the “old” form factor kept as the low-cost option, or will it fall away completely? On that note, I suspect 2019 will see the release of:

  • iPhone X (What will it be called? iPhone X2?).
  • Will we see a dual-camera iPhone X?
  • iPhone X Plus.
  • Apple Pencil integration for iPhone X Plus.
  • What will happen to the notch?
    • The race to a fully-full-screen phone is on and there are big questions around how to solve for the front-facing camera and sensors in order to achieve this.

AirPods

  • New AirPods.
  • New colours.
  • Pricing of new vs old AirPods.
  • Another interesting AirPods question is when will we see “low-end” AirPods in the box with new iPhones? (Could this be on the cards as the product line matures and the components move down the cost curve making EarPods-level AirPods ‘Lite’ possible?)
  • I suspect the AirPods serve as a successful up-sell, so providing AirPods in the box might cannibalise “high-end” AirPods so we may see the form factor remain constant for a while. Maybe there is space to incorporate the AirPods price into the iPhone as iPhone price pushes upwards?
  • Do AirPods remain a single form-factor product line? Does Apple widen the product offering to include on or over-ear headphones that compete with Beats?
  • When we will see cellular connectivity in the AirPods?

iPad

  • After the raft of iPad updates in 2017, will Apple continue this story in 2018?
  • iPad with iPhone X-like bezel-less design.
  • iPad with FaceID.
  • New (smaller) Apple Pencil.
  • Improved iPad keyboards/cases.
  • What of these MacOS/iOS combination rumours?

Apple Watch

  • Always-on time (‘Finally’ becoming a ‘real’ watch.)
  • I suspect there will be one more year of the current form-factor before a thinner Apple Watch in 2019.
  • Or do we see a new form-factor this year and always-on remains a hanging fruit? (Apple must be itching to get a thinner Watch out there! Would likely be a good push on the upgrade cycle. Especially considering all those health-insurance subsidised watches out there.)
  • When (if ever) does Apple breakout Apple Watch numbers?

HomePod

  • Release within Q1?
  • And what of Siri integration?

Siri

  • Looking forward to many improvements as Siri is now under Craig Federighi (along with iOS, MacOS, TvOS and WatchOS)
  • Multi-lingual support is an area Apple can claw back on the “Amazon Echo” lead. The presence of smart speakers in non-English markets is still in the very early to non-existent stages it seems.

Mac Pro

  • Will the Mac Pro see the light of day in 2018 as announced?
  • And what about those external monitors?
  • Big questions around form factor? (To avoid thermal corners)

MacBook and MacBook Pros

  • Will we see regular spec bumps in order to avoid the very long upgrade cycles and ever-rising (but currently relatively dormant) Mac criticisms?
  • What happens to the TouchBar? (Does Apple keep it (surely?) and continue to maintain two lines of MacBook Pro?)
  • What more will we find out about the MacOS/iOS combination? ARM-based Macs? LTE Macs?
  • Increased usage of T-series processors (and other Apple silicon) across the Mac range.

The HomePod, Mac Pro and MacBook/Pro release and upgrade cycles will come under scrutiny. Apple has made announcements and commitments to these and already the HomePod is slipping. Will be keeping an eye here to see if the others slip too.

Mac App Store

  • Phil Schiller’s leadership of the App Store has resulted in great improvements to the iOS App Store. When will we see the fruits of his leadership come to the Mac App Store?

Apple TV

  • Dolby Atmos.
  • Improved remote (Likely only in 2019 with new Apple TV hardware).
  • Game controller? (Likely only paired with new hardware. If ever.)
  • Anyone other than Gene MApple TV TV.

Apple Video and Music

  • Launch of first batch of Apple streaming video series.
  • Improvement of Apple Music interface and recommendations.
  • Shazam integration.

iCloud

  • Improved iCloud free and paid tiers.
  • Streamlining of iCloud features – the iCloud authentication and password flows still seem horribly touchy and strange to me.

Project Titan

  • What happens with CarPlay?
  • More rumours… leaks? (Likely that those leaks will only start in earnest once the supply chain comes into play.)

Other areas of interest will be:

Now that the majority of the work on Apple Campus and the Apple Stores seems to be done, where will Jony Ive be exerting his focus?What will be revealed about Apples US plans in terms of campuses, hiring, cash and tax repatriation?What effect will moving to the new campus have on the employees and their work?Will Apple be able to batten down the hatches in terms of public and somewhat embarrassing bugs?Come what may, it is going to be an exciting year!

Update 23/01/2018

Apple have announced that HomePod will be available in Apple Stores in US, UK and Australia on 9 Feb. Multi-room audio, stereo pair and AirPlay2 will however only be added in future software updates.

Apple’s widened ban on templated apps is wiping small businesses from the App Store

Sarah Perez writing for TechCrunch:

“Many companies have recently been given a January 1, 2018 deadline, after which point any new apps they submit will be rejected by the App Store Review team, they’ve been told by Apple. In the meantime, some have been able to maintain their existing apps, but it’s unclear how long that will last. […] What’s unfortunate about the expanded policy enforcement is that these app makers specifically target the small business market. They build apps for businesses that don’t have the internal resources to build their own apps or can’t afford to hire a custom shop to design a new iOS app from scratch.”

  • Cleaning up the App Store is a good thing.
  • Apple clamping down on spammy, keyword-squatting, low quality apps is a good thing.
  • Banning apps only because they are generated by a template or app builder is not a good thing.

Firstly, the argument that this move by Apple is akin to banning websites running WordPress or Squarespace from the internet is off base. The App Store is not the internet. The App Store is Apple’s. Right of admission reserved.

The case can also be made in defence of Apple’s move that, if these app generators allow legitimate small businesses to generate apps, the same will go for spammy businesses generating spammy apps. Chances are fair that there is a side to this story not highlighted in the article and that Apple may well be responding to scenarios where these generators are being used to submit many low-quality apps to the App Store. If this is the case, the situation would improve if the companies behind the generators were to apply a more rigorous approach to enforcing standards on their customers. In the same breath however, this would likely reduce the app generator sales pitch – which is anyone can make an app, easily, quickly and cost effectively.

What does not ring true about this situation is that Apple’s focus seems to be on the implementation details. On the surface it seems that Apple may be using this as a polite way of kicking out hordes of low quality apps without saying so directly. Ultimately though, the centre of the affair should be that the banning of apps from the App Store should be about app quality and app content. That is to say, that the app should have a purpose and reason to exist beyond just being a copycat or spam. While it may irk Apple to have, for example, 50 pizza ordering apps that are more or less the same, chances are good that there are, at the same time, some unique, high quality apps that are built by generators too.

I don’t know anything about the technical merits of these bans, but as mentioned in the article, Apple’s partnership with IBM and their app generators are not included in the ban. The optics of this are poor: “Large successful company can sell template apps to large corporate customers for very high fees, but John Doe down the way may not use the same approach in a more cost effective manner”.

As is often the case, one needs to consider the sheer scale of the App Store. The volumes of app submissions are enormous and as the saying goes “You can’t make an omelette without breaking a few eggs”. However, if you take a look at the Shoutem website, it certainly seems like they have created a high quality product and now, their egg is broken. Apple does not mind breaking a few eggs on balance, yet the rub is that there are real people on the other end of these businesses catering to real needs and real gaps in the market. Apple is eager to promote the successful underdog stories however it is not all roses in the App Store. This reminds developers that this is not the Internet. This is a walled garden and you are at the whim of a gatekeeper whether you like it or not.

Without being able to see more clearly how Apple judges or determines these bans it is difficult to side with Apple on the surface of it. As is often the case, more transparency and clear guidelines would alleviate the confusion. This is precisely what Congressman Ted W Lieu asks for in his letter to Apple. The concern is that Apple is “casting too wide a net” and it seems this could be true. If anything, large tech companies likely do not want to be under any further scrutiny than is necessary.

After all, quality should come before implementation. Just because your app was generated in some way, does not necessarily mean it is low quality. In the end, while we all know the App Store is not a level playing field, developers would rest easier at night knowing that if John Doe down the way cannot build apps from templates, then IBM should not be allowed to either.

About that Apple TV Set

It seems the rumour mill around the Apple TV Set has started churning again. Let’s examine this topic for a moment.

The Hockey Puck

The future of the “TV” is in the streaming of content to a hockey puck device. Whether that puck is “integrated” into the panel remains to be seen. The latest Apple TV is already coming under criticism for what is seen to be an overly inflated price for something that is done as well in considerably cheaper devices.

Generally speaking, Apple charges premium prices for its integration of hardware, software and services. While Apple TV is a good product, it is not widely considered good enough for the price tag in an area where the software is not considered a differentiating factor (yet). TVs and hockey pucks have, until recently, struggled when it came to software, and I would venture to say that most people dislike the software bundled with regular TVs and satellite/cable boxes. The challenge here is that:

  • Most people just make do with the crappy (but improving) TV interfaces they have.
  • There are not that many “killer” apps. Broadly there are only two at present: video and games. With a bit of music thrown in (however, that job is being eaten by smart speakers and soon the HomePod).

As such, delivering an easy to access streaming app, game or music player is just about all the average home viewer wants.

The differentiating factor, is the service (or the game). HBO, Netflix, Hulu or Amazon are not limited to one box, they are on all the boxes. Ditto, more or less, when it comes to streaming music. As such, the choice of box is more often than not driven by price and “good enough” with the true decision point being “Which streaming services do I sign up for?”

4K is a feature not a selling a point and will be adopted across all devices and services in time. The integration of software and the value of “how it works” is not that valuable in the living room at present. Especially if you are not deeply invested into the iTunes ecosystem.

On the mobile phone and computer, the integration of software and hardware is so critical because the use cases for the devices are so diverse. They enable so many people to do so many things that are used in so many situations. When it comes to TV, most people just want to watch TV (or YouTube), play games or listen to music (when not watching the screen). For the rest they have their phone, tablet and increasingly some form of voice computing.

The Screen

Since Apple already has a a horse in the hockey puck race, that leaves Apple with the screen. Apple makes some gorgeous displays. And as Nilay Patel convincingly lays out in his piece about the possibilities of ProMotion for a TV set. Apple can surely bring some much needed improvements to the experience. However, that argument to one side, despite the fact that Apple makes gorgeous displays and has some great software to make them even better, for some time it looked highly likely that Apple would be leaving the external monitor market. Only selling integrated devices – which a TV set would be. That was until the announcement of the Mac Pro and the poor showing of other brand monitors. As such, if there is any credence to this rumour, it is that Apple will be looking to re-enter the monitor market with a range of high-end monitors that are there to be the perfect display for your Mac Pro or possibly your Apple TV. An expensive and premium monitor for a niche market of customers willing to shell out a lot of money for Apple hardware. I suppose that the market for such high-end, specialised devices is small. The equation in many people’s minds might be that they want to strike a balance with good picture quality and price when it comes to the screen and video quality. For most people, I suspect, they may be willing to shell out a little more on the screen, but then what is left for the puck when they have to pay for all their video service and satellite/cable too?

Too Many Products

I would not go so far as to say Apple has too many balls in the air at the moment. It is just that some balls stay in the air longer. That is to say, some products do not progress and improve as quickly as others or as quickly as some customers would like. The addition of a raised, white ring on the Apple TV remote screams “we just didn’t have time/it’s not a priority at present”. There are few devices in Apple’s current stable that raise so much ire as the Apple TV Remote, yet with Apple’s skill sets would be achievable without massive investments. However, the need to field an edge to edge phone, bring the cellular Apple Watch, AirPods and a completely revamped Mac line to bear as well as a new product, the HomePod, is clearly taking priority over the TV.

My gut tells me the HomePod will follow the same path as the Apple TV. Amazon will keep iterating and expanding for all it is worth in the Home/TV area since it does not play in the mobile space at present. Google’s contributions will be more similar to Apple’s in that they will come out with a new device and vision every now and then but will not submit the necessary resources to making them must have devices.

It is all well and good to say that Apple should enter a space and save those of us frustrated by less than perfect experiences, but the reality is that product categories are not one time things. When Apple enters a market they believe they can make a difference there, but they cannot enter every market and regularly, update all those products all the time. One need only look to the frustrations around the Mac, iPad and Apple TV upgrade cycles to realize there is no magic bullet.

Apple will slowly but surely keep turning the wheel in the TV space and a hockey puck keeps their options open while they tease out the threads and see where they lead. A successful HomePod may well start to tip the scales towards Apple creating a larger presence in the living room over time. The fact is, coming out with a premium TV set, with ProMotion and perfectly mastered video will convince some, but the reality is that good enough is a strong motivator in the TV market at present. For Apple it will be a case of finding the right levers to pull in the right way to make the entry worthwhile.

So for now, I think Apple will keep chipping away at the TV. At times the change is imperceptible and frustrating but it is happening. Just not as fast as some would hope.

Thoughts on Apple acquiring Shazam

Apple Confirms Shazam Acquisition

  • I didn’t realize Shazam have been around since 1999!
  • Did Google ever kick the tires on a deal? If you take a look at YouTube comments on videos that have music, inevitably there are people asking “What song is that?” Or “Who is the artist?” Having to use another app to figure out the song and then yet another app to actually get hold of the music is too much friction.
  • As Apple says in their statement on the acquisition. This is a natural fit to Apple Music. To my mind it will widen the funnel into Apple Music and remove layers of friction in the process of recognize > discover > purchase. Integrating this into the OS/Siri layer so that it is easily and more importantly, instantly available when you need it os a good step.
  • The potential of the integration of Shazam into Apple TV is appealing! How many times have you heard a song in a movie or TV show and you wonder what it is? I can’t count how many times I hear something good on TV but then having to bring up the phone, open the app and record. Often this process takes too long and the moment passes. Built into the OS, into Siri, connected to the streaming is where this should be. It is the natural form and extension to the question of “Who is this?” when hearing a great song.
  • What happens to the existing integrations to Spotify and Snapchat?
  • I imagine the Android version will remain since Apple Music is on Android.

Yet another video service

The launch of the Amazon Prime Video app on Apple TV yesterday is a reminder of the scale of challenge I believe HBO will face when Game of Thrones, currently the biggest (and last) TV show on earth, ends:

  • Netflix is currently available in over 190 countries
  • Amazon Prime Video is available in over 200 countries
  • HBO Go is available in 1 country. HBO Now is available in that same country as well as US territories.
  • HBO itself, is available in over 50 countries.
  • The rest of the world gets its HBO shows through regular TV.

Added to the pure reach of these services, one of the more underrated aspects of Netflix’s strategy is that they are investing heavily into foreign language shows. In the past few months myself or my girlfriend have watched:

  • Peaky Blinders (UK)
  • Fauda (Israel)
  • Cable Girls (Spain)
  • Dark (Germany)
  • Luther (UK)
  • Sherlock (UK)

The significance of the above is that, over the past few years, the majority of shows we have watched have been American shows. Now that we have access to such variety, there is no reason for us to watch only American shows.

No one disputes HBO’s ability to create incredible shows that people the world over want to watch, but the questions I have are:

  1. Can HBO extricate itself from all the international rights deals that feed its business model in order to go direct to customers worldwide?
  2. Can HBO build out the necessary networks in order to to reach those worldwide customers?
  3. Can HBO continue to create the great shows while Netflix, Amazon, Apple and others start to compete for and possibly to crowd out the talent base with their deep pockets?

Keep in mind, that Netflix is very quickly becoming the default. Amazon seems to be rapidly establishing itself as the sidekick in second place (especially since it is free for Prime members). Personally, the third spot is currently reserved to the local competitor Showmax (which has the rights to all HBO’s shows in this country and is quickly expanding in Africa) and fourth place is a holdout for what is likely to be Disney’s horse in the race.

So if HBO’s answer to my 3 questions above is: Yes.

The remaining question is can HBO do all of that before people lose their desire the fork out for yet another video service?

*  All of this goes without saying that YouTube, Facebook and Instagram are also steadily carving out more viewing time from all of the above

** There is however, always that anticipated Game of Thrones spin-off to potentially kickstart things.

Why Apple should not buy Sony

Frederic Filoux’s threw in his few cents on the “what Apple should spend its cash hoard on” topic with his latest blog post titled “Why Apple Should Buy Sony“. Speculating on what Apple will or will not do is certainly fun and going through the thought exercise of building the cases for and against such a hypothetical deal can be educational in building up and framing an understanding of why a company might do something. But therein lies the rub, Frederic’s post only raises the “pros” and and spends very little time on the what would be the “cons”. Considering that Apple is famous for saying “No”, this is a big gap in an otherwise interesting argument for the buying of Sony. So let me present my view on the “cons”:

#1 Acquisition Size

At the beginning of the post, Frederic notes that Apple’s current cash hoard is at $262 billion. At the end of the article, he lists Sony’s market cap as being at $47 billion (just over 20% of the value of the cash hoard). Now, while one cannot say that because Apple has to-date, not made such large acquisitions that it will not do so in the future. It is certainly worth considering what Apple would be looking to gain from spending upwards of $40 billion more than their largest acquisition to date which was a mere $3 billion for Beats.

#2 Camera Sensors

The primary thrust of the article’s argument is that Apple is reliant on Sony for a critical component in the iPhone, namely the image sensor and that it competes with other manufacturers to secure the production of these components from said suppliers. This makes sense, as securing the supply chain to feed the immense demand for components is critical to creating and supplying iPhones the world over. Added to that, Apple has famously driven relentlessly towards “owning” the critical components to their business. Considering the camera is one of the most important pieces of the iPhone and that the photos people take with them are priceless, it certainly makes sense Apple would want to secure this production. The thing to remember here is that generally, Apple does not buy the suppliers. Apple buys and secures the capacity or production from the supplier. What is more likely to happen is that, similar to the A-Series of chips, Apple will design the sensors and then purchase the production from said suppliers. Apple’s ever increasing lead in chip prowess is not due to the production of the chips, but due to the design, integration and optimisation specific to Apple’s needs coupled with the large scale production that brings about the competitive advantage. From that perspective, camera sensors are no doubt important, but colour me skeptical when it comes to Apple buying the cow when it is happy to pay for the milk. Remember also that Apple is a such a large customer, it is highly likely Apple is also the best customer. It is unlikely that even Samsung could compete with Apple’s buying power in this regard.

#3 Culture

Purchasing a company as large as Sony with as long a history comes with the enormous challenge of integrating two cultures that are likely to be very different with years of ingrained behaviour. Not to mention the location of the companies and the staff. Apple is primarily located in California, with small branches in other areas and countries. Sony is headquartered in Japan with locations the world-over. Looking at Apple’s list of acquisitions over time, it is clear that Apple prefers to integrate smaller, growing companies into the fold. Mashing two very large companies together is an entirely different proposition. Not to colour Apple with the same brush, but two relatively similar acquisitions in recent history by big American technology companies did not prove very fruitful in the hardware department, namely Google and Motorola as well as Microsoft and Nokia. Apple and Sony sounds like it would fall into that camp.

#4 Playstation

Fredric lists the Playstation with $20 billion in sales as a reason for purchase. While $20 billion is by no means something to sniff at, look at what Apple would need to pay, acquire and integrate to even access that value. First of all, the Playstation is a gaming console. While iOS is a gaming behemoth, Apple has traditionally not shown much interest in venturing into the hardcore gaming market. With the release of the latest Apple TV, this notion has only been reinforced with little to no change to either the remote or even a hint at first party gaming accessories or controllers. Gaming on the Apple TV, as it is, leaves something to be desired for gamers. However, it would not be a stretch for Apple to release an Apple TV product that took “casual” gaming more seriously and released a game controller. Game developers would likely jump at the opportunity should it arise and I doubt that Apple believes the gaming market is unachievable should it set its mind to entering it.

Further to that, I highly doubt Apple thinks it would need Sony’s VR goggles and TV sets. Apple would much prefer to create their own hardware should they choose to do so, and chances are fair that such a product would be an improvement over what Sony has to offer.

#5 Films and Music

The dark horse here is Sony Pictures Entertainment and Sony Music. Apple is serious about music and has signalled clear intentions in the original video content arena. Owning these entities would certainly give Apple a large sword to yield. As Fredric notes, SPE is one of the Hollywood Big Six and Sony Music holds around 20% of the music sales industry. Yet again the question arises “What do they gain by doing so?”. The music and film industries are already suspicious of Apple’s movements here. Purchasing one of the major studios could possibly endanger existing or future content deals Apple has with the other large houses and could send the other houses running into the arms of a competitor. Remember that the labels hold a lot of the power in the music streaming business and while it would be great for Apple to have “exclusive” content, it goes against the desire of the artists and content that would arise. Artists want their work to be consumed by the largest number of people possible – yes Apple Music is on Android, but containing Sony content to be exclusively on the Apple ecosystem is likely to engender as much unhappiness as it is business. Besides, for that amount of money, if Apple wanted to go all in on video content like that, why wouldn’t they buy Netflix or Spotify? Failing that, why not just buy Sony Pictures Entertainment and Sony Music outright without the rest of Sony?

In the end, I am sure the totality of Sony’s business may signal possible gains for Apple, but it is the cost of those gains that one needs to consider. To my ears, such an acquisition does not align with what i know about Apple. Purchasing a huge company and trying to force integration in areas of competency that are already within Apple’s wheelhouse seems like a horribly expensive exercise and likely to deliver far less value in the long run.

If we were to distill the argument, my retort would be:

Securing camera sensors – Apple designs its own sensors and purchases the production capacity as they do with other components.

Hardware – Apple can create the necessary hardware and software necessary to build VR/AR goggle TV sets and better gaming hardware.

Culture – Apple is likely not looking to merge such a large company into itself.

Music – Apple already has a music platform and is iterating on it slowly but surely.

Film – Apple is investing and slowly developing in the area.