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Apple Is Reorganizing Its $78B Services Division

What would an overhaul do for Apple subscriptions and services?

Apple is shaking things up in its Services division, which includes subscriptions like Apple News+, Apple TV+, Apple Music, Apple One, and others, reports Business Insider. The move comes about as Peter Stern, VP Services, makes plans to leave the company at the end of January. Business Insider says Stern is leaving the company to spend more time on the East Coast. With Apple for six years, Stern was responsible for helping build Apple’s subscription base including Apple Arcade, Apple One, News+, Fitness+ and iCloud+.

According to Business Insider, Apple is going to reorganize the Services unit, separating it into three distinct divisions. Those plans are still in the works, but Apple Insider reports that Todd Teresi, VP of advertising; Oliver Schusser, who heads up Apple Music; and Robert Kondrk, who is currently the VP of Apple Product Services and Design; will lead those divisions.

For the fiscal year 2022 ended September 24, 2022, Apple reported total services revenue of $78.1 billion, compared to $316.2 billion for products (e.g., iPhone, iPad, Mac, Wearables, etc.). The company’s services revenue has been inching up each quarter. It now represents 19.8% of total company revenue. For fiscal year 2021, services revenue represented 18.7%.

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Services division

With 900 million paid subscribers, Apple has a broad range of subscription services, and Apple continues to innovate as they diversify revenue to be less reliant on product revenue. Subscription services include:

Apple ServiceOverviewPricing
Apple Arcade200+ mobile games including originals, classics and App Store greats; no ads; no in-app purchasesFree 1-month trial, then $4.99 a month. Also available with an Apple One bundle and gamers can get 3 months free with the purchase of an Apple device.
Apple BooksBooks and audiobooksBooks and audiobooks are sold individual; there is not currently a subscription available.
AppleCare+Technical support, Apple hardware service and software support for Macs, iPads, iPhones, Apple Watches and moreSubscription prices vary based on product. For example, AppleCare+ for Mac is $34.99 a year or $99 for years. AppleCare+ for an iPad is $3.49 a month or $69 for 2 years.
Apple Fitness+Thousands of video and audio workouts and guided meditations. Can be used on iPhone, iPad, Apple TV, or Apple WatchFirst 3 months free with purchase of a qualifying device, then $9.99 a month or $79.99 annually.   New subscribers get 1 month free, than pay $9.99 a month or $79.99 annually.
Apple MusicOver 100M songs and 30,000 playlists ad-freeFree 1-month trial, then $10.99 a month*.
Apple News+300+ magazine and newspaper titles$9.99 a month
Apple One­Apple One lets subscribers bundle Apple subscriptions into one package – Apple Music, Apple TV+, Apple Arcade, iCloud+, Apple News+ and Apple Fitness+.­Apple One offers 3 plans: Individual – $16.95 a month (Music, TV+, Arcade and iCloud+ with 50GB), monthly savings of $7Family – $22.95 a month for up to 5 other people (Music, TV+, Arcade, iCloud with 200GB), monthly savings of $9Premier – $32.95 a month for up to 5 other people (Music, TV+, Arcade, iCloud+ with 2TB, News+ and Fitness+)
Apple PodcastsMillions of podcasts, including premium content with subscriptionsMillions of shows are available for free. Apple also offers premium shows, episode and channels that can be purchased through a monthly or annual subscription
Apple TV+Streaming TV, including Apple originalsFree 7-day trial, then $6.99 a month* or bundle with Apple One
iCloud+Every Apple device has iCloud to store 5 GB worth of photos, files, notes, etc.iCloud+ offers additional options with 50GB, 200GB and 2TB of storage. Plans and pricing vary by region. In the U.S., 50GB is $0.99 a month; 200GB is $2.99 a month; and 2TB is $9.99 a month.

*Several Apple subscriptions have increased in price recently. Apple Music and Apple TV+ price increases were announced in October.

A screenshot of the Apple subscription services available in the Apple One subscription bundle - Apple Music, Apple TV+, Apple Arcade, iCloud+, Apple News+ and Apple Fitess+
Source: Apple One screenshot, Jan. 10, 2023

Insider Take

When Apple started diversifying revenue to add more subscriptions and other services to the mix, it was a smart move. They had so many opportunities to turn Apple fans into long-time customers through subscription, increasing their lifetime value to the company. Apple has gradually added new subscriptions and services to the mix, and their percentage of total revenue is gradually increasing.

So how will Apple benefit from a shake-up? There are probably just as many opportunities ahead of them as behind them, and Apple wants to maximize those opportunities in a more targeted way. Stern did a lot for Apple, but he was just one person. Perhaps three separate teams will focus on separate goals and get more resources to make things happen. Smaller divisions may also be more manageable.

We like what Apple has done so far, but their features and pricing can be complicated. If you purchase a device, or bundle with Apple One, there are different price points. If you live in a different region of the world, your pricing will vary, and some services like Apple Books have per-unit pricing. Other services could use some love. For example, Apple News+ has an impressive list of magazines – a bonus as Amazon does away with most of theirs – but it only has one national newspaper (the Wall Street Journal) on its roster. The New York Times, the Washington Post and USA Today are noticeably absent.

By breaking down their Services division, Apple may have an opportunity to do more of what works well and improve on things that don’t.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

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