How Apple is making money with Services
How Apple is making money with Services.
Apple is a hardware company, right? Well, sure, but after buying MacBooks or iPhones, customers continue to spend money with Apple, making its Services business its next-biggest revenue stream after the iPhone. There’s admittedly quite a gap — in Apple’s Q1 2018 (everyone else’s Q4 2017, ending December 31, 2017), iPhone sales brought in $61.6bn and Services $8.5bn — but this still makes the Services segment on its own the size of a Fortune 100 company.
What is Apple’s “Services”? It includes the App Store, Apple Music, iCloud, AppleCare, and Apple Pay.
In February, Apple CEO Tim Cook said in Apple’s Financial Conference Call that the quarter’s Services revenue was up 18% over the previous year, “and we’re on pace to achieve our goal of doubling our 2016 Services revenue by 2020.” In addition, “The number of paid subscriptions across our Services offerings passed 240 million by the end of the December quarter. That’s an increase of 30 million in the last 90 days alone, which is the largest quarterly growth ever.”
As AppleInsider points out, Cook is unlikely to mean that Apple has “a quarter-billion subscribers to its own Services;” a large proportion of this number must be subscribers signed up through the App Store for games, services, and content feeds from which Apple gets a cut.
Despite commentators predicting that the app economy boom is over, the App Store is still doing strongly. Apple does not detail how much of its revenue comes from this stream, but according to data analyst Sensor Tower, US iPhone users spent an average of $58 per active iPhone in 2017 on premium apps, subs, and inapp purchases (but excluding online shopping and the like). This was a 23% increase, up from an estimated $47 in 2016, and significantly higher than Google Play’s revenue per user of $38 in 2017.
Sensor Tower says mobile gaming represented the largest single category of spending on iPhone apps: Games and IAPs accounted for about $36 of the $58 spent per device, or 62%. Entertainment (including subscriptions to services such as HBO NOW, Hulu, and Netflix) was the next-largest category, at an average $4.40 spent in the App Store per active iPhone, a 57% rise over