Transcript:
You guys like that applecart of you I did yesterday yeah no all right whatever today we’re actually gonna do some analysis on Apple and we’re gonna go over their event they just had with all the services they announced you know the Apple News plus the Apple TV channels Apple card of course the Apple arcade Apple TV plus and we’re gonna do it with the help of Ben Thompson over astra tech Sheree the best tech analysts in the game and I’ll link to this article so you guys can read it too so the first thing that Ben mentions is that Apple announced a lot of stuff at that event but they didn’t really give much details about any of this stuff for example the lack of pricing information we know that Apple News Plus is $9.99 and the Apple card has no fees but that’s about it so the question is why do they have this presentation now and of course most likely it’s to please Wall Street please these investors because if you looked at Tim Cook what are you said in January he revised Apple’s guidance lower January 2nd is when Tim Apple announced it and the next day Apple dropped 10% rough day but Timmy probably announced at the right time I mean Apple was in a downtrend and that announcement was like the short-term bottom it’s been moving up since there but one of the things that he said there is that we can’t change macroeconomic conditions but we’re undertaking and accelerating other initiatives to improve our results so these other initiatives are likely all these things that they just announced see Ben Thompson says it seems possible that announcing so many new services so far ahead of their launch was just an attempt to deliver on that promise ahead of the company’s next earnings call and that earnings call is coming out very soon May first you got to work the investors a little bit right and by the way I should mention that all of this about Apple with all the services this is all part of their transition into more of a services company because as we’ve explained in our previous Apple videos which if you haven’t seen I’ll put a link to that playlist right here iPhone sales have flattened out because the market is pretty much saturated so for Apple to keep growing as a company revenue wise and profit wise they need to focus on pulling more revenue out of each one of their iPhone users so they’re shifting from hardware more to services and again we explain that in all those videos so go check it out and Ben reiterates that point again the iPhone isn’t going anywhere it’s still a cash cow but it’s no longer growing so Apple has no choice but to look elsewhere and there’s three main ways that companies as big as Apple with cash cows like iPhone already in hand there’s three ways they can achieve growth first way is create new products so this is the most obvious path because you know Apple you associate amazing products with them but it’s also the most difficult it’s not easy to create a phenomenon like the iPhone and over again I mean Apple has done it a few times but it’s still very very difficult and as Ben says they’re still doing pretty well with it Apple watch is a hit air passages is everything right now people love them and they love flexing with the home pod though you know that didn’t work out as well but management is already moving on from that you win some and you lose some right you got to keep releasing products to be able to get a hit so that’s the first way to grow create new products the second way is to extend the integration so Apple is vertically integrated and that means they’re creating the hardware and the software and it’s all one company all the way through which is different from like Google who creates the Android operating system but they don’t create all the phones there’s lots of different companies with different phones that all use that Android operating system now as Ben explains here even Apple they’re not creating every part of the product they have a lot of third-party suppliers that are supplying them with like the chips and everything they go into the phone but the more you integrate that and bring those types of things in-house the more revenue you could pull out of it yourself because you’re not paying money off to these different companies and every time you integrate services like this iCloud backup Siri photostream any of those services as you make them exclusively Apple that helps to differentiate the iPhones so people end up wanting the iPhone not just because it’s a great product but also because it has all these exclusive features or services so it’s just more ways to differentiate your money-making product so that hopefully you can at least keep sales steady or even increase them possibly which is pretty difficult as we’ve explained on the iPhone right now so that’s kind of that I deal with a lot of the services that Apple has announced so previously credit cards you know everyone had a credit card from their own credit card company but the new Apple card is all about integrating that into the Apple ecosystem so here’s a low graphic here you had credit cards and Apple pay all going through the iPhone now you have Apple pay credit cards and app the card so the red is more of Apple taking that over which means more revenues for that same thing with gaming with this Apple arcade that’s coming out they’re gonna have another bundle so people will just subscribe to Apple arcade instead of buying individual games or money for Apple Apple News Plus again once again aggregating stuff so you just pay for your subscription to Apple News Plus and you get everything else you used to get individually so it’s all bringing these services all to get and under the Apple umbrella which I don’t know how I feel about that I mean it might be convenient for customers but it also gives Apple again so much control over everything and we already have that problem we’ve got these big tech companies pretty much controlling the Internet you know I talked about this before like Google Facebook controlling where traffic goes and same thing here like say your newspaper or magazine now you got a big problem if you’re not in the Apple News plus because if people are already paying a subscription here why are they gonna go to your stuff they might as well just use what’s in that subscription that they’re already paying and it’s a bundle deal it’s a good deal so these guys are forced to either get with Apple News plus or died out and I mean it’s more complicated than that and what’s happened to the whole publishing industry is more complicated but you get the idea if Apple has so much power and now they’re doing all the bundles and they want everyone going through their stuff well you either got to play up to Apple or you’re screwed it so it’s more of that closed internet which I’m not a fan of so that’s the second way a huge company like Apple can grow extend integration and the third way is acquisitions because they have all this cash right so any new company that’s about to blow up they can acquire it so one of the things that Apple announced was Apple TV channels which is not the same as Apple TV plus Apple TV channels is just like Amazon channels or roku channels where basically you’re using Amazon Roku or Apple to get to the channel that you want and the channel might be like HBO or Showtime it’s like a la carte shopping that you’re doing through either your prime account roku account or Apple account Apple didn’t have that before but now they’re gonna have it and what’s really interesting about these channels that Amazon Roku that these guys have is that these are their real money makers which is the same thing for Apple TV so we’ll get into the analysis of Apple TV Plus but Ben says here that it’s not the money maker or probably the TV channels that are the money makers basically what happens is when you buy a subscription through a certain platform like say Amazon to another channel like Showtime or HBO Amazon is getting a cut of that money it’s like an affiliate program because they’re driving that traffic to those subscriptions and these are huge huge traffic drivers like a coordinated variety Amazon channels account for 55% of all Alucard direct to consumer video subscriptions so like 55% of all the subscriptions to all these different channels are coming through Amazon so they’re getting a nice chunk of money from that and that money that they make from Amazon Chan is actually what justifies their Amazon Prime video I mean you’ve noticed right the TV that we’re watching now every show on every network is so high-quality and looks so expensive to produce where do those cost go well as we discussed in that HBO video which if you haven’t seen our link to above all these companies had different business models so like Amazon Prime video might actually be a loss leader but Amazon is making money on it through different ways through their Prime subscription through these Amazon channels through other services through products they sell but yeah these shows are expensive they take a bunch of money to produce and a lot of these companies aren’t actually making money on those shows themselves which is what Ben talks about with the Apple TV Plus because Apple is spending billions of dollars to create original content for that service and what’s interesting about Apple’s strategy that it’s only going to be available on certain devices like it’ll be there on Amazon and Roku but it will not be there on Android Windows or the web so they’re trying to make something like Apple TV Plus which is all their original content exclusive to the iPhones right because they want more people to get into the Apple ecosystem but they’re also making it available on certain other devices because you need some scale to be able to afford making that content in the first place see as Ben says the economically optimal approach is to make your content from Apple TV plus available as widely as possible that way you increase the leverage on the fixed costs of making the show like you want more subscriptions right you want more people watching the same content you want more and more people watching that one to show that you produce and this is as Ben goes on to explain why like Apple and Netflix aren’t direct competitors you can’t be Netflix is too big and again these are all the different business models that we explain in that HBO video if you want to watch it so that leverage he was talking about he has a little example here so assume Netflix has 200 subscribers who pay $10 each where Apple because you know they’re restricted to just iPhones and certain devices they only have 50 subscribers who pay $10 each so Netflix is break-even point for a show is $2,000 the 200 people times the $10 so sure Apple could outbid Netflix for the show and pay 2,000 and $1 but that’s a loss of over $1500 based on their economics so like the question for Apple strategy is can they stomach years and years of losses because that’s who they’re going up against right Netflix to buy the best shows to buy the best actors directors all that stuff can they afford all those losses and then for the short-term can they afford to ignore billions of Android and Windows because there’s users that are basically saying no you can’t get appletv plus because you don’t have an iphone again that closing internet thing that makes me mad but it’s their strategy I guess so as Benton goes on to explain the strategy of competing against Netflix doesn’t make sense the way that Apple TV Plus does make sense is not as a new product with a new business model but rather as another extension of Apple’s integration so this is a way to sell new iPhones and also Apple’s TV app and once someone has the Apple TV app they’re gonna collect money every time that person buys a new Apple TV channel so if you get that OTT box set that a little black Apple box and you go and buy HBO Apple get some of that mark right we explained that so the whole Apple TV Plus thing may not be a money maker they might actually lose money on it but the point is that they’re a services company now right so they need more services like that Apple TV and they will get some revenue from it obviously with all these services and hopefully that revenue will become bigger and bigger as they grow bigger but for Apple they’re still very dependent on products physical products in the physical world and these services are just working to differentiate those products so again you need an iPhone if you want Apple TV plus come buy it and that’s where Apple will hopefully make their money with the long-term strategy of services completely taking over but now it’s like a hybrid it’s the same thing with all these other services like we just mentioned Apple card Apple arcade Apple News plus it’s all about providing the services pulling the most revenue out of these customers and enticing new customers to come into the Apple ecosystem so that’s Apple strategy that’s why they made those announcements that’s why they’re doing all this stuff now as far as would I buy the stock right now I mean honestly it’s not on my radar because it doesn’t fit into my system which I’ve told you guys before is it Nasdaq all stars momentum system which is fully systematic like I’m not discretionary anymore if you want to learn more about that system that I use I’ll link to a video right here that goes into how it works and why it’s successful and why I love it so much more than discretionary training but anyway if I was just analyzing Apple it looks like it’s fighting with its 200-day moving average so if I was looking for an entry I would want to see a significant close above this blue line and really I guess we’ll see what happens here like it could just go sideways and fight around with this blue line until its next earnings report and that could actually be an inflection point like investors really liked what they heard here then you might see price really launch from here and that be a good entry point and you got a nice little risk area right here where you could say your stop how you do it it’s up to you and as you know the process of how you do that is way more important than picking Apple in the first place right the trade management is most important so before you get into any stock make sure you have that point now if you liked this video make sure you subscribe and hit that bell so you get email notifications when our future videos come out we’re gonna keep covering Apple it’s super interesting great business model so we’re gonna keep you abreast of it and we publish videos every single day on all stock market and business topics so subscribe and I will see you in the next video stay fala Bob
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