Apple spent much of the 2000s riding high on a wave of cool. Whether it was MP3 players, smartphones, tablets or laptops, Apple was the brand that everyone wanted, and anything else seemed like the “sensible” (read: uncool) pair of sneakers your parents forced you wear in sixth grade. (Growing up in New York in the ’70s, we used to call them “skips.”)
This wasn’t entirely random. Apple’s strategy was fairly straightforward: find a nascent industry where the existing products were functional but unsexy, designed by engineers for people with a high degree of tech savvy. Then Apple would come in with a product with fresh design and an elegant, intuitive interface and sell it for a premium price, thus creating the “it” product of the moment. It was a logical enough plan, and it worked brilliantly for many years.
But recently, Apple’s strategy has been coming up short. That’s because the companies they are seeking to displace aren’t the pushovers their previous competitors have been.
Apple’s first “failure to dominate” came with Apple Music, their streaming music service. After years of users downloading (and thus owning) music via iTunes, Apple attempted to introduce their own streaming service. Only this time, they likely got in too late. Services like Pandora and (especially) Spotify had already grabbed the popular imagination, and their products were well designed and well liked. Apple Music was neither of those things and it did not provide users with anything that looked like an improvement or reason to switch from the platforms they were already using. One of its key selling points—the ability to import your iTunes library—was lost on millennials and Gen Zs, most of whom didn’t own any music to begin with.
That gap is reflected in current adoption numbers, with millennials preferring Spotify to Apple Music 47% to 14%. And though Spotify may still be struggling to turn a profit while Apple sits on a quarter-trillion dollar war chest, they have something far more valuable—that cool factor. Apple is your parents’ music service, clunky and more than a bit dorky. Spotify and Pandora are the hip services that younger listeners want.
Apple’s second misstep was in the area of voice commands. Siri, Apple’s ubiquitous voice assistant, was among the first to market but was released before she was ready for prime time. As a result, her mix-ups became something of a running pop culture joke and paved the way for Amazon’s Alexa, which seems to have captured the popular imagination. (Amazon controls close to 75% of the voice-enabled speaker market.)
Apple’s response to Alexa, the HomePod, was met with a collective yawn when it was announced earlier this year. It’s also almost twice the price of its competitors. While HomePod does feature a high-end speaker, the Amazon Echo Dot, a $40 device that connects to all manner of high-end stereo speakers, lets audiophiles get the quality they want at a sixth of the price, while letting them stay within the highly developed (and currently much cooler) Echo ecosystem.
Apple’s final miss on the cool front has been in the streaming device market, where three recent studies, from Parks Associates, ComScore and eMarketer have Apple TV trailing significantly behind Roku, Chromecast and Amazon’s Fire TV in terms of market share.
Here again, Apple came into a market where the early competition (Roku) was not only fairly well-designed but had an avid fan base as well. And the product Apple introduced just wasn’t all that. In this case, it was well-designed and functional, but no more so than its competitors and it had far fewer channel options than Roku.
The real killer though was the price point: at $150 and $200, depending on the amount of storage, Apple TV is six to eight times as expensive as the entry level Roku, whose ability to play Netflix on your TV set via a simple and somewhat intuitive interface is pretty much on par with Apple’s.
And so once again Apple, which has less than half of Roku’s market share, appears to be the also ran, the overpriced device your parents buy because they’re afraid to go with a brand (Roku) they’ve never heard of.
The TV Factor
The loss of this cool factor (and the resultant loss of market share) presents a huge problem for Apple as it attempts to enter the TV market. Apple Music and Apple TV factor heavily into Apple’s original TV content play, to which they’ve already committed $1 billion.
The assumption is that Apple will distribute their shows via Apple Music, which will likely only be available on Apple TV.
Or, to be more cold-hearted about it, their shows will be distributed on the least popular streaming music service which will only be available on the least popular streaming TV device, which will likely be controlled by the least popular voice-activated speaker.
Not a good starting point, especially when the target audience for those TV programs is all those younger viewers who are no longer in thrall of Apple and its products.
The iPhone Factor
Fortunately, all is not grim in Cupertino. The iPhone, Apple’s biggest seller and the product responsible for a massive chunk of that quarter-trillion dollar war chest has not lost its cool factor.
If anything, the iPhone’s cool factor is growing, at least with Gen Z.
According to research from Piper Jaffray, 76% of U.S. teens own an iPhone, up from 69% a year ago, and 81% said they expect their next phone to be an iPhone, up from 75%. That’s a huge win and gives Apple a good starting point for upping the coolness factor of their TV-related devices. While teens are more likely to watch TV on their phones than their parents, they still rely on their parents subscriptions, and so the goal would be to get both teens and their parents to rethink Apple Music and Apple TV.
I’ve recently offered up two possible solutions for Apple: give away their TV content for free as part of iOS (they can chalk it up as a marketing expense) and introduce a lower-priced Apple TV stick to compete with Roku, Amazon Fire TV and Chromecast (something they’ve done successfully in the past with the low-priced Shuffle and Nano.)
Doing nothing and hoping the market realizes how cool they really are won’t work this time, nor will introducing even more high-end features that nobody really wants (e.g., the new 4K version of Apple TV.)