Why Apple is shifting its focus from hardware to software-driven services

If there was one thing missing from Apple’s keynote event, it was the strong presence of Apple hardware. Apple unleashed a flurry of new services, not all of which will be exclusive to Apple users. Apart from a few upgrades to the iPad Air and iPad Mini, the company placed minimal importance on hardware.

Apple's line up of services included a TV programming service, credit card, magazine subscription and game subscription service. Another unusual fact about the event was that most of the announcement Apple made wasn’t ready for launch. The tech giant also steered clear of pricing of most of their new services.

Most of Apple’s services aren’t ground-breaking feats of innovation; they simply improve on current software-driven services that are available today. But, why the shift in focus?

iPhones accounted for a significant chunk – well-over 50-per cent – of Apple’s business ever since their inception in 2007. However, iPhones have lately become a mainly expensive affair with prices in the US soaring above $1000, and that’s considering prices aren’t inflated in US markets. In markets like India, the budget iPhone XR (US Price – $700) launched at Rs 76,900 (Roughly $1,115). That’s a lot for a smartphone. Apple’s increase in profits has primarily been in part due to its expensive smartphones rather than increasing popularity.

Another reason is technology. Smartphone technology has just about reached its peak, and any current innovation in smartphone technology only serves as an update from the previous generation, rather than an entirely new concept. New features like gesture control, vibrating screens and cinema-wide aspect ratios don’t particularly influence average consumers. In fact, flagships usually tend to offer great performance for three to four years.

But while Apple smartphone sales numbers haven’t been particularly good, the company is making excellent strides in its services area. Apple’s services are their second highest revenue source after smartphones. So, rather than bank on expensive hardware, Apple has strategically doubled-down on its subscription services.

Apple users who don’t find value in paying extra for the Apple brand may consider switching to a different smartphone manufacturer, which is why most of Apple’s new services are exclusive to Apple devices. In this case, even if a user were considering upgrading an Apple device in the future, their new ecosystem which is currently jammed packed with subscription services will give users plenty of reasons to stay loyal to the brand.

Simply put, subscription services are a perfect way of locking down consumers. By releasing multiple subscription services on multiple fronts, Apple gives users plenty of reasons to keep coming back to their brand.