Apple has started the unthinkable: discounting iPhones. The company has already announced that it would discontinue the practice of reporting unit sales of its devices. Largely, Apple is moving into services.
Simply, the company is making it clear that its future is going to include services. So, if you hold Apple stocks because of iPhones and iPads, you may have to reconsider. By dropping the disclosure, Apple wants investors to focus on its revenue bottomline and not the number of devices sold. As far as the company is concerned, if it can grow revenue through payment, apps, licensing, etc, investors should not overly care what is happening on hardware as the company transmutes into making services a key part of its future. Simply, Apple has gone Services.
Apple became a category-king technology company by innovating on top of industry existing products. It perfected Sony Walkman. It perfected Blackberry. It took down Pebble with its smartwatch. Largely, it gets inspired, then and innovates better than pioneers.
But there is a big problem: there is really nothing much to be inspired in hardware except AV/VR in the next five years. Yes, Apple will make an iPhone that would help on AV/VR but after that, nothing is there on the horizon. For a company that sells proprietary hardware via exclusive software, that is a big challenge. People will not keep spending money on the same hardware if there is no clear physical innovation. Incremental innovation will not do it. So, Apple is strategically moving out of upcoming hardware-revenue paralysis, pivoting to services. That is typical: there is a limit you can improve hardware without creating more problems. That is why not much has happened in your dishwasher, bicycle, and radio except some fanciful electronics stuffs.
Apple and Netflix, Impact on DStv and iROKOtv
There is a redesigning in the entertainment industry in Africa: global ICT utilities like Netflix are aggressively coming. From DStv to Nollywood, there would be major dislocations over the next few years. As Google Station advances with its free WIFI and Elon Musk begins his immersive connectivity promise via Starlink, a new entertainment industry will emerge.
But while we see Netflix as the leading crusader into Africa, I do not see Netflix thriving beyond 2025 as a separate company. Netflix has a marginal cost problem: its increasingly decreasing marginal cost has not improved its capacity to make profit. So, the company has been borrowing average of $1 billion per year. In the near future, it would struggle. I expect Samsung or Apple to acquire it.
An Apple acquisition would mean that Netflix would become a service under Apple iOS ecosystem. A Samsung acquisition will unlock new dimensions on how it would sell Galaxy.
At the end of these possibilities, I expect the price of Netflix to drop by 50% post-acquisition. If that happens, the ecosystem would become very promising to most Africans since it would be affordable even as Netflix unloads African contents in its foreign-flavored ecosystem.
Netflix has announced that its first original African series, titled Queen Sono, will debut next year. It will center on a complex, diverse female character, in line with similar Netflix shows like Jessica James and Luke Cage with one-man epicenters. The lead character will be played by South African actor Pearl Thusi who has also starred in popular action drama Quantico alongside Priyanka Chopra. (TC Daily newsletter)
Integrating hardware to online movies will cause a shift. Apple will end up becoming the biggest threats to DStv (and iROKOtv) since some of its best customers are Apple users in South Africa. If they see Netflix as an extension of iOS, DStv will not have the opportunities to make a case. Yes, you cannot beat the user experience if Netflix becomes natively Apple!
The biggest threats to Africa-based movie streaming companies are Apple and Google. Apple taking over Netflix would mean that some of the best paying customers would be lost to Netflix via ancillary Apple services. But Google investing on African shows for YouTube Red Africa, powered by free wifi Google Stations across African cities would bring a new dimension on local competition.
Simply, if you want to watch anything, check if Google has it because if it is on YouTube it would be mobile-credit free. Yes, YouTube Red would have African-themed productions, creating a scenario that would be extremely tough for indigenous companies to defend as Google would turn-off any mobile-metering on them. That would be a challenge as the broad movie entertainment moves online: simply, besides contents, you need to consider access. In Africa, access remains a big factor.