Apple is set on Tuesday to announce pricing for its forthcoming Apple TV+ streaming service as well as updates to its iPhone lineup, as the tech giant reaches a turning point where it focuses as much on services as its hardware and software.
The annual upgrade to the iPhone is expected to include new camera features but few big changes, with Apple in a "holding pattern" until it rolls out 5G phones with faster mobile data speeds next year, analysts said. Instead, services like the television content featuring the likes of Oprah Winfrey that will compete with Netflix and Walt Disney could take center stage.
While the iPhone still makes up more than half of Apple's sales, Tuesday's event may nudge it off centre stage after a decade in the limelight.
Apple long boasted about its competitive advantage over rivals such as Samsung Electronics, which makes handsets, or Alphabet's Google, which provides the Android operating system for most of the world's phones. Apple touted controlling both the hardware and software, resulting in polished products that commanded premium prices and captured most of the smart phone industry's profits.
But at the fall event at 10 am PT (10:30pm IST) in the Steve Jobs Theater in Cupertino, California, typically Apple's splashiest and dedicated to its flagship devices, Apple is cementing a third element to its focus: hardware, software and services.
The new strategy, which Apple hinted at an event in March where it gave some details about the Apple TV+ streaming service, comes as iPhone sales have declined year-over-year for the past two fiscal quarters and investors are fixed on the growth potential for services.
Questions about how Apple will price its television service, and whether it will bundle it with its streaming music products, will weigh on the minds of Wall Street and analysts just as much as whether the Apple TV hardware box gets an upgrade or how many cameras the iPhone has. Apple has not yet given a specific launch date or price.
"This is the first time we'll get to see Apple's strategy with all three parts of the business," said Ben Bajarin, an analyst with Creative Strategies.
With streaming content, Apple is entering a crowded field. Since Apple's initial television event in March, rivals like Walt Disney have since announced a $6.99 per month service that will contain that firm's iconic children's content.
Apple is also likely to unveil updates to the iPhone and Apple Watch. Analysts expect the iPhone to feature better cameras, and perhaps new chips to help handle the work of sensors on the device, but few new blockbuster features. Those are not expected until next year, when Apple is expected to have a 5G device capable to taking advantage of faster mobile data networks.
"I believe we are in an incremental holding pattern until 5G. Customers with iPhone X and beyond likely won't have a reason to upgrade," said Patrick Moorhead of Moor Insights & Strategy.
In terms of pricing, most analyst expect prices to remain unchanged from the last year's models, between $749 and $1,099 depending on size and features. Apple makes much of its profits on selling memory upgrades to devices with larger storage capacity, and Moorhead said falling memory chip prices could help Apple absorb the cost of tariffs on Chinese-made goods, which are expected to hit mobile phones starting December 15.
"Thankfully storage and memory prices have declined so instead of taking more profit, I see Apple eating the cost and not raising prices," Moorhead said. "I can also see Apple leaning heavily on its supply chain to eat some of the cost."
© Thomson Reuters 2019