Apple Music Shows Us What Apple Is Like Without an iPhone (AAPL)

ipod apple inc music

Apple Inc. is in the music business. Despite an infamous deal with The Beatles all those decades ago, the firm is once again putting music at the center of its strategy. At the firm’s upcoming music festival, due to start on September 19, we’re going to see just that. The costly affair will once again tout Apple products as the best way to get your music, and it reveals a truth about the way Apple seems to see its future beyond the iPhone.

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Feature creep may soon be over, carrier subsidies are ending, and faster chips simply can’t be used by most people. Spurring demand at Apple, a company that will sell a phone to about 3 percent of the world’s population in 2015 alone, is hard. That’s where Apple Music comes in.

Building a life through Apple

Apple  has always relied on a user’s attachment to its hardware to ensure that they keep buying new products. Because a user’s contacts and music and pictures and everything else are stored on their phone, or in the iCloud, it can be a pain to switch over to another OS. It’s better, in fact, if they buy a Mac and an iPad and work exclusively through Apple.

iCloud was the start of a new idea at Apple. Raising iPhone prices is hard, because people react poorly to the headline. Charging for a different service is easier, however. When you buy an iPhone you get 2 years of iCloud for free. Now, if you have an iPhone, you’ll get three months of free Apple Music.

After those trial periods run out, however, Apple expects you to start paying for the services you use. It’s those payments that will allow Tim Cook to expand margins, and keep up earnings growth even as iPhone sales slow down.

Apple will defend Music

A report from MusicWatch, which was published on Tuesday afternoon, said that Apple had already lost 48 percent of listeners on Apple Music. The firm has denied that the results of the survey reflect the real stats. Apple says that 79 percent of people who signed up for Apple Music are still active users.

The difference between the numbers might be based in the kind of question that MusicWatch asked, and the way that Apple defines what an active user of the service is. What’s important is not the difference in the numbers, but the fact that Apple sought to get involved at all.

No matter what kind of rumors break about Apple Watch sales, delays in the release of the iPhone 7, or anything else Cupertino usually stays quiet. It takes a lot for Apple to come out in defense of a product. The MusicWatch report brought the firm’s PR head Steve Dowling out quickly and directly. That shows how vital the service is in Cupertino’s own view.

Apple revealed earlier this month that 11 million people had signed up for a free trial of Apple Music. Until they have to pay for the service it won’t be clear how the firm is doing in Music. Spotify, currently the market leader, has about 20 million paying users.

Building on Planet Apple

Brian White of Cantor Fitzgerald is the Wall Street voice most fluent on “Planet Apple,” what he calls the firm’s upcoming package of services. Apple Music is, along with Apple Pay, the champion of the strategy at the firm right now.

Mr. White reckons his clients should Buy Apple shares, and has a price target of $195 on them right now; that’s 70 percent higher than their price on Wednesday. That’s the highest target on Wall Street.

He says that the firm’s “digital ecosystem is often under-appreciated, operating in the shadow of the company’s mobile device portfolio.” Tim Cook’s concern is an “ever-expanding and seamless digital matrix” says White, and that’s going to define it as iPhone sales slow down.

Apple will not only be able to grow by collecting the payments from those that use its services, it will also be able to grow by selling more hardware because people want to use those services. That’s the key to the new Apple, and it will be interesting to see if it works.

Selling hardware with services, not software

Apple , since its days of relying on the Mac, has focused on unique software to make its hardware worth buying. It’s changing that idea, and bringing itself in line with Mr. White’s vision of the future.

Music is just the start. A survey published by Wristly on Wednesday showed that 80 percent of Apple Watch users were using Apple Pay. The wrist-borne device is the perfect vehicle for the payment processor. If you want to use Pay, you should have a Watch for the best usage. If you have a Watch, you’re missing out on a great feature if you don’t install Pay.

Music is going to work like that as well, once Craig Federighi has sorted out the things that people don’t like about the service. The firm’s software team knows that it’s job with the streaming app isn’t done just yet, and they will fix it as soon as they can.

Once that’s done a group of software services, each of which a user will likely pay for, will make buying Apple hardware much more appealing. The firm is just starting down a road it began with the iCloud, and it will learn its trade through the growth of music streaming.

In the coming months it’s likely that we’ll see the biggest selling Apple TV ever, possibly making it compete with some of the smaller Apple products in terms of sales. That’s because Apple is going to create a TV streaming service that will make people want the set top box more than ever.

Apple is a great firm, and it’s clear that Tim Cook and his team know what they’re doing, most of the time at least. Services like Music are going to drive the future of hardware sales and a large chunk of the firm’s revenue.

When the Apple Music Festival begins, with acts like Florence + The Machine, Pharrell Williams and One Direction taking to the stage, the world will once again have Apple’s vision for the future pushed on it. It didn’t hurt too much when the firm made the smart phone a daily need, and many are willing and able to pay for the services that Apple will soon provide.

This is how Apple will deal with life after iPhone growth slows down, and it shows that the firm is always learning, and always pushing ahead, despite the cushion that device provides.

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