Monday, Mar 25th 2019

Apple Launches Streaming Video and Credit Cards


TLDR: This move makes total strategic sense but is not surprising. Apple has a war chest of cash (~$250B) and over 900M iPhones in the pockets of a captive audience.

Rook to H7. Looks like Apple is also moving its chess pieces. You may have seen the press re: Apple TV+ and Apple Credit Card.

The long-term investor's 101: This enables Apple to cross-sell products and take share quickly. And with more products > more value to customers > more customers > more money > more products …. the network-driven flywheel continues.

Why this is good for Apple:

1 / Apple's vying to have more wallet share per customer. The average US consumer only spends a small portion annually in the Apple ecosystem ($40-50), but is spending multiples of that outside the phone. On a per customer basis, it makes sense that Apple would try to increase the amount they spend on the phone in their pocket vs. from their wallet…in their other pocket. Maybe even replace the wallet someday?

2 / Apple is late to the game on both fronts, but this shouldn't be a barrier to entry. There are dozens of cash-back credit cards and several content-streaming players. What gives? Usually scale is a real moat for a company. If we tried to start Netflix, we'd need (a) billions of dollars to film a Birdbox competitor and then (b) an audience of millions. Apple has both already. To hit this home further, Apple launched Apple Music 7 years after Spotify, but now has over 50M subscribers (vs. ~100M for Spotify).

3 / The subtleties: Apple's credit card shows it still has some of that Steve Jobs-ian inspiration. The physical credit card has no information on it other than your name. This is the core of Apple's ethos of simplicity, ever since its earliest days.

? / Several unanswered questions still remain:

  • Is Apple conceding to Samsung? Apple's hardware sales (actual iPhones) have seen intense competition from Samsung. By their actions here, they're saying they need to diversify revenues from just selling iPhones to selling you things inside iPhones.
  • What will be the actual pricing of the above services?
  • How good will Apple's content be? While Apple has the money to pay people to make content, how compelling it turns out remains to be seen.
As of this writing, AAPL was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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