Apple Wants to Make Recurring Payment Model Easier for Consumers, Says Cook
Apple CEO Tim Cook highlighted the “recurring payment” model a growing number of iPhone users have adopted on the company’s fiscal Q4 earnings call Wednesday, saying the company wants to make that process easier. Cook was responding to a question on plans for bundling hardware and services, which the company is doing for the first time beginning Friday when it rolls out Apple TV Plus. The company is giving a free year of Apple TV Plus service ($4.99 monthly) to customers who buy and activate an iPhone, iPad, Apple TV, Mac or iPod touch, dating back to Sept. 10. Customers can initiate the offer Friday and have a three-month window to sign up.
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The Apple TV Plus service bundle's “a great way to get more people to see the content,” Cook said. Critics have noted limited content available at launch. Thursday, CNET cited early reviews of Apple's original series that are “varied at best.” Though bundling won’t be a “pattern,” Cook said, “I wouldn't want to rule out for the future that we might not see another opportunity at some point.”
Cook acknowledged Apple's trying to get customers to adopt monthly financing, including offering 3 percent back on purchases made with the recently launched Apple Card -- including on the iPhone: “We are cognizant that there are lots of users out there that want sort of a recurring payment like that," including receiving new products on a standard basis. "We are committed to make that easier to do,” he said.
The CEO was sanguine about iPhone’s 9 percent year-on-year decline to $33 billion (see 1910310017), saying it's a “significant improvement” over the 15 percent decline a year ago. He credited improved results to positive reviews, customer feedback and in-store response for the 11 series iPhones.
Apple’s services business grew 18 percent to $12.5 billion, beating the previous record set in the June quarter by $1 billion. Apple claims some 450 million paid subscriptions on its platform. Services growth occurred across all five geographic segments with all-time highs in the App Store, AppleCare, Music, cloud services and the search advertising business. The company's “well on our way” to its goal of doubling FY 2016 services revenue next year, Cook said.
In hardware, iPad quarterly sales were $4.6 billion vs. $3.9 billion a year ago, wearables were $6.5 billion vs. $4.2 billion and Mac sales dropped to $6.9 billion from $7.3 billion on what Cook called a “tough comparison” to 2018 when the company refreshed the MacBook Pro.
Three-quarters of the Apple Watch buyers are new to Apple Watch, Cook said, referencing continued “build mode” for the category. AirPods keep “hitting new highs.” He noted the recent release of the noise-canceling AirPods Pro.
On a potential hit from tariffs slated for Dec. 15 on smartphones and other devices -- and whether Apple will have to raise prices in response -- Cook downplayed the impact. The company was already paying some tariffs before September and after Sept. 15 when List 4A Section 301 tariffs took effect. Cook’s view of potential December tariffs is “very positive in terms of how things are going,” he said, saying Apple’s guidance reflects that optimism. The tone of trade talks “has changed significantly, and I have long thought that it was in both countries’ best interests to get to an agreement that maybe initially doesn't solve everything but solves some things that each party may want,” he said: “I'm hopeful that that's where we're headed.”
For the December quarter, Apple forecast revenue of $85.5 billion-$89.5 billion, with guidance reflecting a $1 billion hit from foreign exchange. Shares closed 2.3 percent higher Thursday at $248.76.