179: Somewhere Between One and a Gabillion


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00:00:00   (upbeat music)

00:00:03   - From Relay FM, this is Upgrade, episode 179.

00:00:12   Today's show is brought to you by Squarespace,

00:00:15   Timing and Eero.

00:00:16   Hey, thanks for stopping by.

00:00:18   My name is Myke Hurley.

00:00:19   I'm joined by Mr. Jason Snow.

00:00:22   - Hey, welcome.

00:00:23   Are we doing this now?

00:00:24   Are we talking to people as if they've come to our door?

00:00:26   - We welcome them in.

00:00:26   - I didn't expect to see you here,

00:00:28   But then again, you come here at the same time.

00:00:30   They've chosen to spend their time with us no matter what it is they're doing

00:00:34   right now.

00:00:34   So we appreciate that as always.

00:00:36   And Jason, not only do we appreciate people's time, we appreciate when they

00:00:41   ask us questions for the show and today's hashtag snail talk question comes from

00:00:46   Andreas and Andreas wants to know, Jason, when is your tea time and which tea do

00:00:51   you like?

00:00:53   When is your tea time is a very strange question to me

00:00:57   because all the time is tea time.

00:01:00   - Tea time is whenever I want tea.

00:01:02   - Am I awake?

00:01:03   It is tea time.

00:01:04   So we get up in the morning,

00:01:07   usually awakened by our dog who wants to be fed.

00:01:12   And she will stand,

00:01:13   she will walk back through the hallway to our bedroom,

00:01:15   clip, clop, clip, clop, her little claws on the wood floor.

00:01:19   And then she will wander around our bedroom grunting

00:01:21   as she does, 'cause she doesn't bark,

00:01:23   but she does grunt and whine a little bit. And one of us will get up and feed the dog

00:01:28   and we will make the tea. So that means that tea time for me, I guess technically, is probably

00:01:33   something around 7.15, somewhere between 7 o'clock and 7.30 is tea time, and then tea

00:01:39   time continues from that point until the tea is gone. So mostly a morning thing, although

00:01:46   depending on how much tea I need, I will make more tea. Not so much in the afternoon, unless

00:01:51   it's a cold day or something, I usually will not have tea in the afternoon. And what teas

00:01:56   I like, it's black tea with caffeine, so English breakfast, Irish breakfast, Scottish breakfast,

00:02:03   you know, those are things. I've got a couple of other kinds too, but and I just buy loose

00:02:07   tea in bulk, black caffeinated tea. I buy it in bulk. I make a big pot of it using the

00:02:13   tea robot and then I put some honey in it. My wife takes it with milk. I put honey in

00:02:18   mine because I don't know, I love honey and tea and that's what I do. People tell me like,

00:02:24   "Oh, you know, you put some honey and some tea for a sore throat." I said, "Or every

00:02:29   day." That's the other way you can do that. It doesn't have to just be for a sore throat.

00:02:33   - Well, okay. Do you ever have a sore throat, Jason?

00:02:37   - I do sometimes and you know what? I just don't vary it. I just continue to have my

00:02:40   tea with honey in it. So it's all the same.

00:02:44   - You should double the dosage at that point.

00:02:46   That's a good idea. I'm always up for that because I like tea. In the evening, if I do

00:02:52   want a hot beverage because I have a sore throat or I have a cold or something, then

00:02:55   I go to a lemon tea, something that's not caffeinated. But most of the time, 99 times

00:03:01   out of 100, actually, it's caffeine tea because I don't drink coffee. So my caffeine dose

00:03:07   in the morning is tea.

00:03:09   Thank you so much to Andreas for submitting the question. If you would like to ask us

00:03:12   a question about basically anything to open the show, just send a tweet with the hashtag

00:03:17   SnellTalk and I pick them out. We will open up the show with our only piece of follow

00:03:24   up for this week and it is about HomePod audio sources. So as of last week there was still

00:03:31   much confusion about what could actually be played as audio on the HomePod and how. So

00:03:37   So one of the questions was, you know, people had seen, if you go digging through the technical

00:03:41   specifications, that there's a Bluetooth chip in this thing.

00:03:44   So great, it works as Bluetooth speaker, right?

00:03:47   No it does not.

00:03:48   You cannot use the HomePod as a standard Bluetooth speaker.

00:03:52   It is AirPlay only.

00:03:54   Yeah, Bluetooth seems to be for pairing or some other kind of like connectivity with

00:04:00   your iOS device that's setting up the HomePod.

00:04:04   That's why it's there.

00:04:05   not being used for an audio source.

00:04:08   I will say I find that to be a shame because the chips in it. Like I know that I do share

00:04:14   the feeling of I really wish there was a line in on this thing because I would like to connect

00:04:18   my TV to it. But I you know whatever like it is and so I'm not going to complain about

00:04:25   it because it's not there like whatever. But if there's a Bluetooth chip in it like at

00:04:28   least let me connect to it. But I would say probably for the most part I'm going to be

00:04:32   be

00:04:51   Apple has also confirmed that the HomePod will work with both iTunes Match and purchased

00:05:03   iTunes Music as well as Apple Music.

00:05:06   So you don't have to have an Apple Music subscription to be able to get your music

00:05:10   on this thing.

00:05:11   It will work with iTunes Match and then iCloud Music Library which is iTunes Match and iTunes

00:05:16   music so confusing but basically if you have music somehow in Apple's platform and you

00:05:25   pay something to Apple you will be able to listen to your music right you got you got

00:05:30   to pay them something because you either have purchased it or you're paying for iTunes match

00:05:35   or you have Apple music so one of those things will get you music in an iCloud library and

00:05:41   and you can play it on the HomePod. Beats 1 is always on worldwide for you if you need

00:05:47   it and Apple Podcasts are also rounding out the possible audio sources for the HomePod.

00:05:54   Yeah, it's funny. I actually just got an email from Amazon because I realized that

00:05:58   I was still paying for their, well it's an annual, but their version of iTunes match.

00:06:05   And what I discovered was that, first off, that they discontinued it.

00:06:11   And that like, unless you're a current subscriber, you can't sign up for it anymore.

00:06:14   They actually stopped this program.

00:06:16   - Yeah, they have like a streaming service now.

00:06:18   Like that's what they want you to sign up for.

00:06:20   - Yeah, they want you to buy the unlimited thing.

00:06:21   And I realized I bought the unlimited Amazon music for one device for my Echo that's in

00:06:26   the kitchen so that it has access to anything we want to play by voice control.

00:06:31   And so I don't ever play music on an Amazon Echo that isn't from their music service,

00:06:37   so I don't need that upload feature, so I turned it off. But it is funny to think about

00:06:41   that, but I know Apple has a lot of customers who are still like, who don't want to be in

00:06:46   the Apple Music world yet. They do have the people who are like, they bought music on

00:06:50   iTunes, they've uploaded the music that they've gotten from other sources, and that's what

00:06:54   they want their music library to be. And so that'll work too. We'll see how well it works,

00:06:58   But it makes sense that if basically if Apple's cloud services know about music that you get

00:07:04   access to, it should play it.

00:07:06   So we both have HomePods on order, right?

00:07:09   For pickup or delivery on Friday, this Friday?

00:07:11   Yep.

00:07:12   Okay, great.

00:07:13   I was wondering, was there some kind of secret?

00:07:16   Jason wasn't admitting to anything.

00:07:17   But at least I know I have one ordered to go pick up on Friday morning, so you can look

00:07:23   forward to our thoughts on the HomePod on next week's episode as we'll both have them

00:07:29   to play around with and I'm very intrigued to put Siri through its paces with this device.

00:07:35   I have lots of unanswered questions about how the HomePod's gonna interact.

00:07:41   I hope Siri answers them but I don't like your chances.

00:07:44   Well yeah this is...

00:07:45   I like that, that was very clever.

00:07:47   So yeah, I'm very intrigued to see what this product is all about.

00:07:55   I have a lot of intrigue about it, we'll see.

00:07:58   Alright, so, Upstream, we have artwork!

00:08:00   You can see it if you use an application that supports MP3 chapters like Overcast or Pocketcast,

00:08:06   you can now see our lovely chapter artwork for Upstream, and these are your stories to

00:08:12   be paying attention to in the media technology world.

00:08:16   So we have been talking about the JJ Abrams sci-fi drama. HBO and Apple were in a bidding

00:08:23   war. The show is going to be called Demimonde. I can't.

00:08:28   It's Demimonde. It's French, not Spanish. I went with anything. I just pronounced what

00:08:35   I saw was a string of letters, which I've been trying to pronounce in my head for the

00:08:39   last 24 hours. HBO scooped it up. HBO outbid Apple and they have got the JJ Abrams sci-fi

00:08:48   drama. Abrams was quoted as saying that he was really impressed with how HBO handled

00:08:54   Westworld so that may have played into it a little bit for him to go with a known entity

00:09:00   than to go with Apple. So that's one that he missed.

00:09:02   It's funny how influential, I was thinking about this, how influential, first Game of

00:09:07   Thrones. Incredibly influential because nothing succeeds like success, right? People were

00:09:13   like, "Oh, it was a huge hit!" And so now everybody's kind of like trying to make the

00:09:16   next Game of Thrones. Amazon, all the reports are like Jeff Bezos basically said, "Get me

00:09:21   the next Game of Thrones," and they spent it, you know, hundreds of millions of dollars

00:09:24   on the rights to the Lord of the Rings intellectual property so they can make a Lord of the Rings

00:09:28   TV show, which strikes me as being a little too on the nose.

00:09:30   - Wow, I didn't know that actually. - Like literally they're trying to make the

00:09:32   next... Yeah, not based on necessarily anything, but the Tolkien...

00:09:36   and they haven't spent money on the show yet. They literally just spent money to write a

00:09:40   check to the Tolkien estate to get the rights to make a show set in that universe.

00:09:45   That's so weird. Because, like, to make the next Game of Thrones, you don't literally

00:09:51   have to make a magic fantasy show. Well, this is what I was saying. It's a little too on

00:09:55   the nose. They're literally just trying to make the next Game of Thrones by going back

00:10:00   to the material that is probably the most influential to make stories like the ones

00:10:06   George R. R. Martin wrote. So that seems weird, but I get it. And then what's really interesting

00:10:12   to me is that Westworld, which was by all accounts a troubled production, but everybody

00:10:18   seems to be looking at Westworld a little bit stylistically and as an example of like,

00:10:23   this is how you build a show that has a chance to be the next Game of Thrones. I think it's

00:10:30   kind of interesting. Like Game of Thrones, it's been on for years now, but what would

00:10:35   happen if knowing Game of Thrones existed, you made another show that you're trying to

00:10:40   make a big hit. And I think Westworld has been very influential in that way, where people

00:10:44   have looked at the way Westworld is styled and how the story rolls out, even down to

00:10:51   how the opening credits are devised. I feel the influence of Westworld and a bunch of

00:10:56   other stuff I've seen recently, like Altered Carbon on Netflix feels like it owes, even

00:11:01   though it's a sci-fi series set in a Blade Runner-esque future instead of a West, you

00:11:06   know, simulation of Western America, it is, it feels very Westworldly to me. And so J.

00:11:14   J. Abrams citing Westworld here for another show that's going to be on HBO. It's interesting

00:11:20   that this is, this is the game that a lot of people are playing when they talk about

00:11:23   Game of Thrones and Westworld. What they're saying is we're going to spend a huge amount

00:11:26   of money on a genre show that we think has broad appeal. And then what they're really

00:11:30   saying is, "Come on, we want to be Game of Thrones. We want to have that show that everybody's

00:11:34   talking about." So, we'll see. But Apple's not going to get it.

00:11:40   YouTube TV is now on the Apple TV. So if you're a YouTube TV subscriber, I believe it's a

00:11:45   secondary app, I think, is the way at least their press release made it sound. I can't

00:11:50   discover this information because all of the links are dead for me because I'm in the United

00:11:54   Kingdom. Right. But yeah, YouTube TV, it's now on a bunch of boxes including the Apple

00:12:00   TV, which is great if you're a YouTube TV subscriber. So YouTube TV was a huge sponsor

00:12:05   of the Super Bowl, and this seems to have been timed with the Super Bowl, that they

00:12:10   would do this huge push for YouTube TV and say, "It's on all the streaming boxes."

00:12:14   Could you watch it on YouTube TV? Could you watch the Super Bowl? No. No? Oh. No, I don't

00:12:20   have YouTube TV. I watch the Super Bowl and they advertised YouTube TV on the Super Bowl.

00:12:26   So it wasn't...

00:12:27   I mean, if you are a YouTube TV subscriber, could you watch the Super Bowl on YouTube

00:12:31   TV?

00:12:32   Yeah, because it's YouTube TV is just like the Hulu, whatever they call it, or PlayStation

00:12:38   View. It is an over-the-top TV service. It essentially means you cancel your traditional

00:12:43   cable channel package, but keep your internet from wherever your internet provider is. Probably

00:12:48   your cable company, oh the irony. And then your box becomes your cable box, your streaming

00:12:54   box. And there's an app on there that basically gives you all the live channels, and in YouTube

00:12:58   TV's case you've got like DVR so you can actually like quote unquote record the program and

00:13:04   watch it later and skip through the commercials and all of those sorts of things, like having

00:13:08   a TiVo or something like that, a DVR attached to a cable provider, but instead it all happens

00:13:13   an app on a box or on an iPad or on an iPhone. And this is, I mean, it's IPTV, this is the

00:13:19   future. This is probably, eventually the cable companies will just say, "We also have an

00:13:24   app, you don't need a cable box anymore, right? Let's move on." But right now there's a difference

00:13:29   between it. That's what YouTube TV is. It's one of the players trying to get people to

00:13:33   cancel their cable, or more likely, people who have canceled their cable but miss having

00:13:40   access to some of TV to get them to sign up for this. So this is a big step for them to

00:13:45   be on Apple TV and Roku and all the other boxes and it was one of the glaring deficiencies

00:13:50   of this product before.

00:13:52   Will: YouTube TV have just secured the rights, the TV rights to the Los Angeles Football

00:13:58   Club matches and this is soccer, LAFC. Very peculiar and was in more, I think even more

00:14:05   peculiar and niche sports streaming action, Facebook has become the official streaming

00:14:11   partner of the World Surf League. So if you want to watch surfing, Facebook is the place.

00:14:17   Streaming - so for a long time, sports was viewed as being one of these last - these

00:14:22   kind of like bulwarks against people cutting the cord. The reason sport rights have so

00:14:27   much value is you have to watch them live and they put them on cable and then you need

00:14:32   to pay them in order to see that. That's great. What's funny now is that we're also seeing

00:14:38   streaming services spending money to get rights, sometimes exclusive, sometimes not, to sporting

00:14:45   events because then it forces you kind of down the path of becoming one of their subscribers

00:14:50   too. And sports, as long as people enjoy watching sports of various kinds, since they need to

00:14:57   be live and you need to have live access to watch them, they will be effective tools to

00:15:04   move audiences and generate customers. And so that's going to keep... who knows what

00:15:11   will happen with scripted content and reality shows and all sorts of other things, but sports,

00:15:16   unless people stop playing sports, which is not going to happen, the sports may change,

00:15:20   but people's interest in watching sport is just a thing that exists. And so, yeah, especially

00:15:25   live so it becomes a talking point a chance to pull viewers here and there as this unsettled

00:15:36   world is churning.

00:15:38   This also feels to me like YouTube and Facebook trying to dip their toe in the water like

00:15:44   picking up things that are not going to get tons of traffic before they try and start

00:15:48   to go after some bigger stuff on an exclusive basis. You know just so they can try and get

00:15:54   their tech in place before they maybe try and go for some NFL or something like that.

00:15:59   The podcast network Gimlet launches Gimlet Media as a TV and film arm of the company.

00:16:06   They're doing this to try and effectively push their content onto screens, so they're

00:16:10   adapting their shows into TV stuff, as well as being involved in current projects that

00:16:14   the network has sold away. So it seems like that Gimlet have kind of changed their approach

00:16:20   to this. I think previously they were more keen on just selling the rights to stuff and

00:16:25   it's how like I think it's called Alex Inc. which is the show about Alex Bloomberg and

00:16:29   kind of his life that was sold for example but they are only producers like executive

00:16:33   producers of that project. This feels like Gimlet becoming a lot more involved in trying

00:16:37   to do some of this stuff themselves and have more of a hand in the production of adaptations

00:16:44   of their shows.

00:16:46   It struck me as being a story that also reminded me, strangely enough, of kind of comic book

00:16:53   companies that because movies and TV shows based on comics are so successful these days,

00:17:01   the owners of comic book companies, comic book companies can be mildly profitable. They're

00:17:05   not wildly profitable, they can be mildly profitable. They can also lose money, which

00:17:09   is why Marvel went bankrupt in the 90s. So what they've become is sort of a viable business

00:17:17   on their own, but also a generator of intellectual property that is raw material for film and

00:17:26   TV projects. And I look at this Gimlet deal and I think, "Well, this is interesting because

00:17:31   maybe given all of the investment that's been made in Gimlet, you know, which they need

00:17:36   to get back in terms of value. Maybe what they've decided is Gimlet's way to really

00:17:42   kind of transform itself in terms of generating a lot of money is not making really nice well-produced

00:17:50   podcasts and selling ads on them, or even making really nice sponsored, sort of like

00:17:56   sponsored podcasts that people listen to but have a single sponsor who pays Gimlet to make

00:18:01   them. Those are two business models they have. But is instead like that's a nice little business,

00:18:07   but the way that they transform what they generate is they're churning out things that

00:18:11   lead to new intellectual property that can be transformed into films and TV shows and

00:18:16   make a whole lot of money that way. And that's that I'm really not mocking them. That is

00:18:21   an interesting way of viewing a business that you have this little business that people

00:18:25   love just like Marvel comics or DC comics, you know, Gimlet podcasts are like that. But

00:18:31   the people with the money are saying, "Well, it's great that people love that, but it's

00:18:35   only a few people who love that. But if we could take those ideas and then sell them

00:18:39   so it's a big movie or a network TV series, then we get our money." And that looks like

00:18:44   what's happening with Gimlet.

00:18:45   Geoff - Yeah, like they do the development of the intellectual property on a smaller

00:18:47   stage, the podcast stage, and then they see if it works.

00:18:51   to experiment with that, right? It's like way cheaper to do that.

00:18:54   - Go for TV, and it seems like that's what they're doing. And finally, this was announced

00:18:59   during the Super Bowl last night, Cloverfield Paradox, a sequel to the movie Cloverfield,

00:19:04   which has now had a prequel. And this, I believe it's a sequel. It's a little bit hazy.

00:19:09   - The Cloverfield series is loosely connected. - It's all over the place.

00:19:13   - Question mark. It's connected more by J.J. Abrams and secrecy and all of that.

00:19:19   This is a crazy story. When this happened, it blew me away. This is my favorite thing that happened during the Super Bowl.

00:19:26   And then I read up on it later. It turns out, so they worked on this movie, they worked on it in secret, they give it a name, it had a different name, it was called God Particle.

00:19:34   But whenever there's like a J.J. Abrams movie with a lot of security and nobody knows what it's really about, and it's just got a generic title, it's probably a Cloverfield.

00:19:42   In fact, to the point where there's another movie that they think is a Cloverfield movie that is supposed to come out this fall.

00:19:47   So, they make this movie and it is totally going to be a Cloverfield movie. Paramount

00:19:52   gets new leadership, Paramount Pictures, which releases this thing. And one of the things

00:19:56   they did is survey the upcoming releases that they've inherited from their previous management.

00:20:00   And they're like, "Well, you know, some of these things, we don't want to spend the money

00:20:03   marketing them. They're going to do maybe okay, maybe they'll flop, but we don't want

00:20:07   to spend the time. We're going to put our money on other projects." And this happens

00:20:10   a lot when you get new management, that the projects of the old management are like, they're

00:20:17   nobody's babies anymore. So, Annihilation is a movie that they made that they apparently

00:20:23   sold the rights direct to Netflix for the rest of the world except the US where it got

00:20:27   a release. And because they weren't that thrilled with it and they just thought let's just...

00:20:32   And apparently the Netflix rights money essentially paid for the movie. So they got to walk away

00:20:37   from that one. With Cloverfield Paradox, they were originally gonna release it this weekend.

00:20:43   had pushed it to April. It sounds like they didn't love it internally and they didn't

00:20:47   like the idea of spending a lot of money promoting it. And they talked to Netflix and basically

00:20:52   said, you know, "Would you like to pick this up and just release it on Netflix instead

00:20:57   of in theaters?" And Netflix said yes. And so what happens is the marketing budget for

00:21:01   this movie, which if you've ever known anybody who works in the movie business, marketing

00:21:06   budgets are huge. Sometimes the marketing budgets are larger than the budgets for the

00:21:09   movies to make them. The marketing budget for Cloverfield Paradox was two Super Bowl

00:21:15   ads, one of which was a trailer during the second quarter I think which made everybody

00:21:22   sit up and say, "Wait, there's a new Cloverfield movie that's set in space and looks scary?

00:21:26   That's interesting, I'd never heard of this movie." Because like literally unless you

00:21:30   were reading some movie websites you'd never heard that there was another Cloverfield movie.

00:21:34   So you're sitting up and like, "Oh, what a great idea!"

00:21:36   started yesterday morning that this was going to happen anyway. And then the card comes

00:21:41   up saying it's on Netflix at the very end and you're like "whoa" and then it says "coming

00:21:45   very soon" and you're like "what does that mean?" And in the fourth quarter, if you haven't

00:21:50   already gone to Netflix, at that moment if you went to Netflix, the top item in the banner

00:21:55   on Netflix was "coming after the game" and in the fourth quarter they ran that ad again

00:22:01   and said, "Coming after the game." So they took a movie that most people didn't know

00:22:06   existed and they didn't just premiere the trailer during the Super Bowl, they literally

00:22:11   said, "We're dropping," it's like dropping an album that some artists have done, right?

00:22:16   And like after the game you're looking for something to watch, this movie trailer that

00:22:19   really excited you, you can just watch it on Netflix after the game. Now, I've heard

00:22:23   things that it's not that great and that's one of the reasons that Paramount was fine

00:22:27   to give it to Netflix. Netflix is okay with that. They made Bright, which by all accounts

00:22:32   is terrible, and they released that. But as a stunt, even if it was semi-accidental, brilliant.

00:22:40   It doesn't matter how good this movie is, Netflix made history and they made headlines.

00:22:47   I mean, how can you go from "I literally have no awareness that they're making this movie"

00:22:52   oh and you can watch the movie now in an evening. That's a new one to me and I think it's brilliant.

00:23:00   I think it's a brilliant piece of showmanship and I bet you they got really good numbers

00:23:06   for Cloverfield Paradox, more than they would if they had just premiered it as a normal

00:23:10   Netflix release by putting it on the Super Bowl and doing it. In fact, I look at this

00:23:14   and I think this is going to be the new "what does a network put on after the Super Bowl"

00:23:19   where Netflix and maybe other streaming services are gonna start dropping streaming content

00:23:25   and using the Super Bowl audience, which is a very large audience, just to promote it

00:23:31   and then drop it afterward. And so then there's like more competition. I think this is not

00:23:35   the last time we'll see stuff like this happening. So that's cool.

00:23:39   All right, last thing, Jason. In no more than three words, what are your feelings about

00:23:45   the solo Cheezer trailer.

00:23:49   Hmm. Um. Who's that guy?

00:23:54   Alright, great. That'll do. That'll do. That wasn't what I was expecting, but there we

00:24:00   go.

00:24:01   Or maybe, maybe, I'll give you an alternate three. Hey, it's Lando! That's my other way.

00:24:07   That is good because it was basically Meyers Wove just bid the Lando movie, honestly. Just

00:24:13   I'm so excited to see young Lando Carrizio play with him on Clubhead.

00:24:23   Today's show is brought to you by Timing, the automatic time tracking app for Mac OS.

00:24:27   Hey let's talk about why you should be tracking your time.

00:24:31   If you're billing hours, it's obvious.

00:24:33   But even if you are employed or you build a project or you work for yourself, sometimes

00:24:38   it's really good to know how long a specific task is going to take.

00:24:43   Time tracking helps you stay on track of estimates but also with just planning your day to make

00:24:48   sure that your projects are going well and also to make sure that you're spending your

00:24:51   time effectively.

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00:25:09   I like having those numbers as a way to look at how I'm feeling and also having been time

00:25:16   tracking for a while now, I can get reports and see over long periods of time, how is

00:25:21   my time tracking going?

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00:25:23   What am I not working on?

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00:26:48   We thank timing for their support of this show.

00:26:50   All right, so it is earnings time.

00:26:55   - Ching.

00:26:57   - Everyone's favorite four moments of the year.

00:27:01   But this is the big one.

00:27:02   This is always the big one.

00:27:04   Q1 2018 means the holiday quarter of 2017.

00:27:24   I'm going to run through some statistics and stop at points to discuss some of the interesting stuff.

00:27:32   Top line, $88.3 billion in revenue, which is up from $78.4 billion for last year. Apple had

00:27:41   forecast between $84 to $87 and this was going to be their record quarter. They actually ended

00:27:47   up beating that with $88.3. This is $20 billion in profit compared to $17.9 billion year on year.

00:27:56   So I just want to stop already right here. We're going to talk about the stuff that made

00:28:01   the headlines later on, but I don't really feel like a lot of emphasis is being placed upon the

00:28:07   fact that Apple broke their record. They did it again. This is the most revenue Apple has ever

00:28:15   generated in a fiscal quarter and it's by a lot. It's by almost 13 percent, and there are lots of

00:28:24   of different things driving this that we will get to, but when the... there are a lot of

00:28:31   different dials you can look at, a lot of different charts you can look at to try and

00:28:35   determine like what Apple's doing and what Apple's going to be doing. And one of the

00:28:38   challenges whenever we talk about financials is there's a couple ways of looking at this

00:28:42   that are equally valid. It's all about your point of view. And one of them is, how's Apple

00:28:47   doing today? How's their business doing today? And the other is, what's going to happen in

00:28:52   the future because I'm investing in Apple, right? And I don't, I care what's

00:28:58   going to happen in from Apple in the future sort of, but absolutely not

00:29:03   from investment standpoint because I'm not an Apple investor and I don't really

00:29:07   write about that. I'm writing about products and about kind of like the

00:29:10   company's product path more than I am about the company's cash path or

00:29:15   anything like that, even though we're talking about financials this time. So

00:29:18   depending on, you know, your perspective you can get a different, you can get a

00:29:21   different view of where they're going and that's colored by your

00:29:26   judgment about how their business is doing. But what is undeniable is that

00:29:30   while a lot of people have talked about Apple being kind of maxed out and having

00:29:36   reached its peak and how the implication there from some is that it's going to

00:29:42   slide down the other side, which I would argue that if Apple has reached its

00:29:47   peak it's far more likely to idle at the top and just throw off huge amounts of

00:29:52   money than it is to come down for a long time. I mean maybe eventually but for a

00:29:57   long time. But if you look at revenue, it's not true. If you look at revenue,

00:30:03   Apple just had its best quarter ever by a lot. By a lot. And even the times when

00:30:07   we think of as being kind of peak Apple, which is really kind of peak iPhone, no.

00:30:14   No, like this quarter was, what, $13 billion more revenue than peak iPhone.

00:30:23   And 10 billion more, 10 billion more than last quarter.

00:30:28   It's a huge jump, 12.5, 13% on what was already the biggest quarter they had ever had.

00:30:33   So you can't, you've got to factor that into your equation here, which is Apple is generating

00:30:38   more revenue and basically making more money, because it was also record profit, than they

00:30:43   they ever have before. They broke $20 billion in profit in three months.

00:30:49   I remember a couple of weeks ago, Amazon reported their earnings and they did $2 billion, just

00:30:56   under $2 billion in profit. And like Wall Street went berserk. And I mean, there was

00:31:02   good reason for it because in the past Amazon did no profit. Like that was the way that

00:31:07   they worked. Like they did no profit. They put all the money back into the business.

00:31:12   And now they are reporting profit and they beat their estimates, they beat all the analysts

00:31:17   right and they did 2 billion.

00:31:19   And like it's incredible, it's fantastic, like that's a lot of money.

00:31:24   Apple just did 20.

00:31:25   And I know like Amazon doing that is amazing, right?

00:31:30   Like it is.

00:31:31   $2 billion in profit in a quarter is berserk money, right?

00:31:36   And I know that we are obviously very biased towards Apple and everything they do blah

00:31:40   blah blah.

00:31:41   do get desensitized to these numbers. And Apple did 10 times that profit this quarter.

00:31:50   You could argue that Amazon manages its profit right and that it can throw off within a certain

00:31:54   span as much or as little profit as it wants to. But yes, it is easy to get used to Apple's

00:32:02   numbers and to lose sight of just how staggering they are even compared to the other tech giants.

00:32:11   If this is peak Apple, it's peak Apple like today.

00:32:15   There was somebody on Twitter who was saying, responding to some tweet of mine that got

00:32:19   retweeted who was like, "Oh well, you know, Apple topped out four years ago, you know,

00:32:24   and since then it's all just been flattered down."

00:32:26   It's like, no, if Apple topped out, it topped out right today.

00:32:31   And maybe it's downhill from here, it's not, but yeah.

00:32:34   If what you're saying is they've topped out on their products, like that's fine for your

00:32:37   opinion, the rest of the world disagrees with you, right?

00:32:39   Because they keep pumping more money in.

00:32:41   Depends on how you measure it.

00:32:42   Yeah, Amazon in that quarter.

00:32:43   So in this quarter, they did 60 billion in sales, right?

00:32:47   So it's like it's close.

00:32:49   Obviously, they are doing very different.

00:32:51   They have very different business models, Apple and Amazon.

00:32:53   So the way that the profit comes out and stuff, but still,

00:32:56   Apple did 20 billion more than that, right?

00:32:58   So it's like the sheer numbers that they are operating in are so wild to me.

00:33:03   Like I often talk about like how I my I believe that it's hard to imagine

00:33:10   Facebook being knocked off where they are in social networks, right?

00:33:14   And like, because in the past, there's always been a social network that comes to take down the big one, right?

00:33:21   Like MySpace, you know, Facebook killed it, right?

00:33:23   And there's always been stuff before that, like live journals, always been ones before it.

00:33:27   But Facebook is at a scale now where it's significantly harder to do that, because they're so huge,

00:33:36   and they're just getting bigger by acquiring the cool kids stuff, right?

00:33:40   Like there's so many stories right now about how snapchat is falling and Instagram is rising, you know

00:33:45   Like this so Facebook are just continuing to increase their span

00:33:50   Making it harder and harder for somebody to knock them off

00:33:54   So like I think like maybe Facebook is always going to be the biggest social network there for as long as there are social networks

00:34:01   Maybe Facebook is the one forever. We don't know I feel this way now about Apple like they are making so much money

00:34:10   constantly always, how does somebody beat that?

00:34:14   Like, I don't know how you come up to beat the company

00:34:19   that is throwing out $20 billion in profit a quarter

00:34:23   and is not spending the money.

00:34:25   - Well, and that's sort of what I was getting at

00:34:29   with saying like, even if you think

00:34:32   that they've kind of maxed out,

00:34:34   I don't see it coming down so much as in that case,

00:34:37   it would just sort of level off and go for a while.

00:34:39   And then eventually, look, eventually,

00:34:42   if they, depending on how they execute,

00:34:44   they can lose sales and their profits will subside.

00:34:50   And look, I saw,

00:34:52   I remember when Microsoft was an unbeatable giant.

00:34:56   And the fact is, Microsoft,

00:34:58   although no longer relevant in a lot of ways

00:35:00   that it was relevant and no longer seeming unbeatable,

00:35:05   still is a pretty amazing business, right?

00:35:08   So there's that too, they still make a lot of money.

00:35:11   So we'll see what happens with Apple,

00:35:14   but they're in an incredible position.

00:35:18   And it's also funny for those of us who got tired

00:35:21   of hearing about Mac market share over the years

00:35:23   that Apple doesn't have the market share lead

00:35:26   in almost any category, if any category,

00:35:30   but it makes huge amounts of money and huge profits.

00:35:34   And that's because it's basically in the markets

00:35:37   that it's entered, it's chosen to compete in, it does incredibly well. And then there

00:35:42   are a lot of places where it just doesn't go. And that's something that I think is a

00:35:46   key misunderstanding that a lot of people have about Apple, where it's, you know, they

00:35:51   think that Apple is, should be fighting a market share game and being in markets that

00:35:56   Apple chooses not to be in, and they don't understand that. But you can't, I mean, we

00:36:00   need to break down the products, but you can't dispute the revenue and the profit here. It's

00:36:05   shocking how huge it is and increasing, like it's increasing, they're still growing.

00:36:11   I mean, what, maybe in 2019 there is a $100 billion revenue quarter? Like maybe that happens,

00:36:21   right? Like, maybe. It's only increasing if it continues to increase at the rate that

00:36:26   it's been increasing, maybe that happens. I can't, wow.

00:36:30   Keep in mind that what we're also talking about here is that Apple's revenue has almost

00:36:36   doubled in six years. Doubled.

00:36:39   So let's talk about some products. This is an interesting one. The Mac is down $6.9 billion

00:36:49   in revenue compared to 7.2 year-on-year, 5.1 million units sold compared to 5.4 million

00:36:56   units sold. Throughout the whole of 2017 sales in revenue and units was up year

00:37:03   on year from the quarters previous. So 2017 the entire year was up from 2016

00:37:08   we're starting 2018 down. Why? I don't know. Because in theory 2017 was tough it

00:37:20   it got better at the end, right, with the iMac Pro.

00:37:23   So what's happened?

00:37:26   Like, what's happened to the laptops

00:37:28   that were selling so well?

00:37:30   - I don't know, I mean, this is still a,

00:37:32   I think the way I would put it is,

00:37:34   I suspect this is because they sold so many Macs in Q4

00:37:38   in the previous quarter.

00:37:38   Because if you look at their sales numbers,

00:37:43   sometimes they sell really well holiday quarter,

00:37:48   but other times they sell kind of equally well

00:37:51   in the previous quarter, the back to school quarter

00:37:54   and the holiday quarter.

00:37:56   And so this seems to have been a lot like two years ago

00:37:59   where they sold 6.9 billion in Mac revenue in Q3

00:38:04   or in Q4 and 6.7 in Q1 of the following year.

00:38:08   And this time we got 7.2 and 6.9.

00:38:10   So I wonder just off the top of my head, I look at that

00:38:13   and I think I wonder if there's some correlation there

00:38:15   'cause what happened in last year

00:38:17   is that they had not a lot of sales in Q4,

00:38:21   and then a huge sales spike in Q1,

00:38:24   which is the holiday quarter.

00:38:25   So last time, that spike was big,

00:38:29   and this time the spike is not so big,

00:38:31   and you're comparing year over year.

00:38:33   But their previous quarter was way bigger.

00:38:35   So if you look at the quarterly,

00:38:38   it maybe makes a little more sense

00:38:41   that maybe this is seasonality.

00:38:43   I mean, the Mac has been kind of toddling along

00:38:46   for a while now and where it's just kind of like fine.

00:38:51   And as they have pointed out,

00:38:55   static in a PC market that's down is growing,

00:38:59   but Mac units are,

00:39:03   the last four quarters, 4.75 million a quarter.

00:39:07   And that's down from a high sort of at the end of 2015,

00:39:11   beginning of 2016 of 5.1, 5.15 million. So they're selling, whatever that is, 350,000

00:39:19   fewer max a quarter than they did a couple years ago.

00:39:21   Yeah, it's just interesting to me, right? Like, there's some things changed, possibly,

00:39:28   because I mean, even looking at just like the actual units sold, you know, there's,

00:39:35   So for Q4 2016 they sold 4.9 million, Q4 2017 5.4 million, so that was up, but then when

00:39:44   it comes to Q1 2018 it was down on Q1 2017.

00:39:48   So is it something peculiar may have happened?

00:39:52   Maybe it was just not a buying time?

00:39:54   Who knows?

00:39:55   But if we look at this in the way that we looked at the iPad, right, it was the same

00:40:02   thing for us when the iPad Pro started coming out, right? Like, Apple's focusing on it,

00:40:08   please please let the numbers tell the right story, not the wrong story. So like, this

00:40:13   is something to watch now, like, are Mac sales on a decline now? We won't know for the next

00:40:18   few quarters, but if they are, you don't want to see that at a time that Apple's committed

00:40:22   themselves to more Pro Macs again. So let's hope it's like a blip on the radar.

00:40:28   - I don't think this is,

00:40:31   I honestly don't think this is anything.

00:40:33   If you look at the last two quarters of max sales,

00:40:36   the max doing fine, it's not doing,

00:40:39   everything Apple did two years ago was like a record high.

00:40:43   And then last year they went down.

00:40:46   And I think what you're gonna see is that the max sales

00:40:48   are going to continue looking more or less like they have

00:40:52   over the last couple of years.

00:40:54   And that this is a little bit more about where the sales fell

00:40:58   in terms of Q4 versus Q1 than it is about anything

00:41:03   endemic to the Mac beyond that.

00:41:05   - The iPad story is continuing to be positive.

00:41:09   13.2 million units compared to 13.1 million units

00:41:13   year over year.

00:41:14   We have a 6% growth in revenue.

00:41:16   Suggests that the iPad Pro is still doing well

00:41:19   because Apple are making more money

00:41:22   than they are the unit growth,

00:41:23   like what that would indicate, right?

00:41:24   So it suggests that the average selling price

00:41:26   is continuing to increase.

00:41:29   So you know, they didn't have a huge unit growth,

00:41:31   but they had pretty good revenue growth.

00:41:33   So happy to see that.

00:41:34   That's, you know, again, for the iPad lovers right now,

00:41:38   it's just keep it steady and slowly increasing.

00:41:43   It's better than decreasing, that's all you wanna see.

00:41:47   - This is the third straight quarter

00:41:49   where the direction is up,

00:41:52   even if it's only slightly up here,

00:41:53   and there's some mitigating circumstances there.

00:41:56   The fact that they, I would also say,

00:41:59   it's the first holiday quarter since 2014,

00:42:03   where the iPad has grown at all year on year.

00:42:06   - Wow.

00:42:08   - Right?

00:42:09   - Wow.

00:42:09   - 'Cause it was 26, then 21.4, then 16, then 13.

00:42:13   - That 26 just ruins all the charts.

00:42:16   I hate it.

00:42:16   I hate that number. - It is a great number.

00:42:19   But the stabilization,

00:42:20   iPad quarter is funny.

00:42:23   I'd say the stabilization of the iPad continues.

00:42:25   This is not a kind of result,

00:42:28   I usually write something about the iPad,

00:42:29   I've done that for like the last eight quarters

00:42:31   and I felt like I had nothing to say this time.

00:42:33   It's more like, yeah, it was fine.

00:42:35   It shows that it's not dropping,

00:42:37   nor was it a surprising tick up, right?

00:42:40   It was more just like, it was, you know,

00:42:42   slightly up over flat and for the iPad, that's a win.

00:42:46   And the revenue went up by a little bit more,

00:42:50   which means that, you know, that's good.

00:42:53   average selling price went down a little bit.

00:42:55   That's okay because it's a holiday quarter.

00:42:59   I think in the holiday quarter,

00:43:00   they're much more likely to sell the cheap iPads

00:43:03   than the iPad Pros.

00:43:04   And in the end, they, you know, it's fine.

00:43:09   It's not a regression of the iPad to the free fall

00:43:14   that it used to be in,

00:43:15   even though it's also not a boost into the stratosphere.

00:43:18   But I'll take it.

00:43:20   but it is a middling iPad thing.

00:43:24   And given the context of previous years of iPad,

00:43:26   the last three years of iPad, middling is good.

00:43:29   - Most definitely.

00:43:31   Well, it's stability, isn't it?

00:43:33   And I like this, the stability level is about two times

00:43:38   the amount of the Mac,

00:43:38   which I think is where it kind of should be,

00:43:40   considering platform age and focus.

00:43:43   So I think that's good to see, right?

00:43:45   Like I'm happy to see that.

00:43:46   So I hope that it continues.

00:43:49   The service's revenue is continuing to soar, $7.8 billion in revenue compared to $6.4 billion

00:43:57   from year over year.

00:43:58   Apple Music is clearly performing well.

00:44:01   There was a report from the Wall Street Journal which suggests that Apple Music has been adding

00:44:07   subscribers at a 5% monthly rate according to people familiar with the matter.

00:44:12   Spotify is growing at 2%.

00:44:16   If this continues, if these rates continue the same, Apple will catch up and overtake

00:44:21   Spotify in the US by the summer.

00:44:24   That is surprising to me.

00:44:26   Like I believe it.

00:44:28   Like it's funny, you know, like what I can believe it, right?

00:44:31   It's not an impossible thing to imagine, but I don't know if I would have predicted it

00:44:36   happening this soon if it happens.

00:44:38   I was surprised by that too.

00:44:40   I also thought to myself as when I saw this story, ah, the week that HomePod comes out,

00:44:45   story gets reported.

00:44:46   Yes.

00:44:47   I don't think that's a coincidence.

00:44:48   It is the perfect time to do a controlled leak.

00:44:51   The person in the know may have worked for Apple PR, but if they are being accurate,

00:44:56   if they are telling the accurate story of this, then that is kind of wild.

00:45:02   It took me by surprise too.

00:45:03   I hadn't really thought, I know Apple's doing well with services and the service revenue

00:45:06   continues to grow.

00:45:08   They've increased service revenue, I think basically every quarter for as far back as

00:45:12   my charts go.

00:45:13   The revenue increase in the service category would strongly suggest growth in Apple Music.

00:45:19   I would expect at this point it's probably the biggest revenue generator in that category,

00:45:24   right?

00:45:25   I don't know, maybe.

00:45:26   Or at least the biggest growing.

00:45:29   I can't imagine there's anything growing at the rate that that might.

00:45:33   I don't know.

00:45:34   iCloud storage may be growing too.

00:45:36   But I imagine that iCloud storage, like you pay for it and they've got the whole history

00:45:41   of people paying for it, where Apple Music is newer, so you can get all of the new people

00:45:45   plus all the old people.

00:45:46   Yeah, they're acquiring new customers.

00:45:49   That may be. I think it does show home field advantage here, which is what we talk about

00:45:56   with Apple Maps and Google Maps, that it's not surprising that so many people use Apple

00:46:00   Maps because it's already on your phone. And I feel like this is actually with podcasts

00:46:05   too. It's not surprising that the Apple Podcasts app is the most popular podcast app because

00:46:09   it's already on your phone. You literally don't have to do anything and it's there.

00:46:13   And it's now even, you know, it's now even connected directly to Siri, which it, I think,

00:46:17   wasn't so much before and that is driving it even more like the being on the phone.

00:46:22   So having it be in the music app, like you're listening to music and there's Apple music,

00:46:27   it's in your face, it's right there. And there are huge benefits to that. But this is interesting

00:46:32   because the narrative really has been like Apple's trying to take on Spotify, you know,

00:46:36   good luck and the fact is Apple is building this business of paid right

00:46:40   because there's also sort of free stuff that you can do I think on Spotify it

00:46:45   also Spotify my understanding is like is a money loser and just lost at an

00:46:49   attempt to change the terms of some of the streaming fees and this is an

00:46:54   interesting example where the platform owners like Apple using their platform

00:46:59   power to build their own services and bundle them with the photo backup system

00:47:05   all over again. Yeah, it's just you have power with the home field advantage and

00:47:09   Apple is definitely taking advantage of it here and and then spreading it to

00:47:14   other devices. So I like Apple Music, it's a good service. I'm sure Spotify is a

00:47:19   good service too, but I think that's one of the challenges when the platform

00:47:24   owner is there, the difference in catalogs is not notable, like it's the

00:47:28   same stuff, and if you have all Apple devices, Apple Music is awfully

00:47:33   convenient. It's awfully inconvenient if you have anything else other than a Sonos

00:47:36   because it doesn't work with anything else. But yeah, so services is big. It

00:47:41   didn't go up as much as I think it's gone up in other quarters. We'll have to

00:47:46   watch that if the services growth slowing down a little bit, but Apple

00:47:50   seems really confident that it's going to continue to grow and be a huge part

00:47:53   of their business. And this is one of the reasons the services stuff is one of the

00:47:55   reasons why they are setting records and revenue even though other parts of the

00:48:00   business are only up a little bit is they've added this huge other line where they're throwing

00:48:06   off now almost $8 billion a quarter in services revenue and that is one of the things that

00:48:12   fuels the engine.

00:48:13   Well, we'll expect them to do it again this year, right? TV service. That should be another

00:48:18   way to add Apple Music sized increases to this revenue model, like to this area of the

00:48:25   revenue. This is the reason they're doing it, right? They are doing this because they

00:48:28   want to boost the services because as long as the services is boosting like

00:48:32   is going up so will the share price because that's where they can show

00:48:36   growth and it's a classic Apple move in the sense of Apple has always thought

00:48:42   that if I think Apple's philosophy and this comes directly from Steve Jobs is

00:48:47   if anybody can make money from our users it should be us like we should get for

00:48:55   - Yeah, or like if anyone can do it,

00:48:57   we can do it, but better, right?

00:48:59   - And that leads to, you know,

00:49:01   that leads to both of those things lead to a bunch

00:49:04   of different Apple behaviors.

00:49:05   Some of which are not particularly

00:49:06   like Sherlocking features, right?

00:49:08   Is you could argue there are lots of reasons

00:49:10   why Apple builds something that turns off a third party

00:49:13   because it's because of the home field advantage,

00:49:15   because yeah, you can download a third party app

00:49:17   that does this, but only a tiny fraction of people do that.

00:49:20   But when it's in the system, it's right there

00:49:23   and everybody's gonna use it.

00:49:24   once it's bundled in, once it's part of it.

00:49:25   So that's part of the argument.

00:49:27   It does lead to Me Too stuff like the iPod Hi-Fi,

00:49:30   which was very much like how dare Bose make money

00:49:33   on the sound dock.

00:49:34   We can make one of those too.

00:49:35   It turns out they couldn't.

00:49:38   And this is, but this is a little bit like that

00:49:39   where there are markets where Apple's looking at this,

00:49:42   it's very smart and saying,

00:49:44   the smartphone is a great platform

00:49:47   and the iPhone is a great platform

00:49:49   for things like a streaming music service.

00:49:51   and so many of our customers use Spotify.

00:49:54   Why not us?

00:49:55   Like, why are we letting Spotify get that revenue?

00:49:57   Why don't we get that revenue?

00:49:58   You could have a selling media,

00:50:03   like somebody else could do that,

00:50:04   Amazon could do that, whatever, but why not us?

00:50:06   Why don't we put it out there?

00:50:07   And we have the home field advantage,

00:50:09   so we're gonna be able to take a bigger chunk of that

00:50:11   than we would if everything was neutral,

00:50:13   and that's to our advantage.

00:50:15   They're not gonna enter every market

00:50:16   because most of them are probably too small,

00:50:19   but the ones that they can control

00:50:21   and that they can fuel their revenue.

00:50:23   And this is why Apple does a music service

00:50:26   and this is why Apple is gonna do a TV service, absolutely.

00:50:28   Because there are other companies

00:50:31   making a huge amount of money

00:50:33   or building a huge customer base

00:50:35   with loyal Apple users driving their revenue

00:50:38   and Apple looks at them and says,

00:50:40   "Maybe we should do that instead

00:50:41   and provide a viable alternative."

00:50:43   And I realize it seems a little bit ridiculous now

00:50:45   to think about like Apple becoming a viable alternative

00:50:48   to Netflix and the dynamics are different because it's about exclusive content in a

00:50:53   way that music isn't. But still, that's the kind of idea here. Like, if they can build

00:50:58   a business that's a viable alternative to Netflix and it's already on your device, that's

00:51:03   going to be powerful. And people will still use Netflix and they may use both, but it

00:51:08   gives Apple another little wedge to get more money out of you, not necessarily that you

00:51:13   wouldn't otherwise have spent. Sometimes it's just instead of someone else. Give

00:51:18   it to Apple instead of somewhere else. It's also worth remembering and we

00:51:21   spoke about it a bunch of times during upstream, right? Like if you're thinking

00:51:26   about what Netflix have been that's not what the company is gonna be, right? Like

00:51:30   if you thought of them as where you go for those TV box sets like that's kind

00:51:35   of not what they are anymore. They are trying to be the next HBO. Like everyone's

00:51:40   trying to do that instead. So Apple and Netflix are moving towards each other at a quicker

00:51:46   rate than it may seem from the outside. Apple's not bothering with the back catalog stuff,

00:51:51   they're trying to build their own at the same time that Netflix is trying to build their

00:51:54   own. By the way, I've been watching The Crown over the last couple of weeks. That is a wonderful,

00:52:00   wonderful Netflix original that I thoroughly recommend. It's like House of Cards but with

00:52:05   the Queen. It's wonderful. Very, very, very, very good. I recommend it. I will say, just

00:52:12   as a word of warning in case you're not familiar with a lot of UK history stuff, they take

00:52:17   a lot of rumours and turn it into what look like fact. It's just worth noting that. Like,

00:52:23   there's a lot of stuff that is, that has never been proven or was just newspaper conjecture

00:52:28   that they kind of play off as if it actually happened. I just ask you to bear that in mind

00:52:32   when you watch the TV show, but it is excellent. It is incredible casting. Matt Smith as Prince

00:52:38   Philip. Oh, just so good. Anyway, great, great, great TV show. Great TV show. Yeah, I'd recommend

00:52:47   it. Anyway, iPhone. We need to talk about the iPhone. That's where all the headlines

00:52:51   have been, where all the always, but maybe even now more than ever, we need to talk about

00:52:55   the iPhone. That's why we do. Let me thank Eero for their support of this show. With

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00:54:29   that your home is blanketed in the wonderful Wi-Fi blanket that Eero provides. I like that.

00:54:33   It's like a warm hug of Wi-Fi you get.

00:54:37   It's keeping me warm. It's keeping me warm, yes, in all the parts of my house. My house

00:54:41   isn't particularly large but one base station didn't fit it and now I have the Eero base

00:54:45   station and the beacon and I've got one in the back and I've got one in the garage and

00:54:50   it's especially necessary actually now

00:54:52   because I have so many connected devices.

00:54:54   So there are places where devices are living now

00:54:58   where I never needed wifi before

00:55:00   because I'm not going to sit hanging,

00:55:04   or I'm not gonna hang from the front of my roof, right?

00:55:08   But there's a light out there.

00:55:09   - Yeah, it's like, it's nice to get a few little stars.

00:55:12   - It's not that fun.

00:55:14   And so those places that didn't need wifi coverage before,

00:55:18   now suddenly I find myself wanting stronger Wi-Fi and that's one of the other benefits

00:55:23   of the Eero is not only am I getting it in the house in the backyard but in like the

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00:55:58   Alright, ladies and gentlemen, buckle up, it's time to talk about the iPhone.

00:56:03   $37.1 billion in revenue compared to $34.9 billion in revenue. Oh great, that is a year

00:56:10   of a year increase. That's what we come here to expect. More money on the iPhone. But hold

00:56:15   on one moment, ladies and gentlemen. 77.3 million units compared to 78.2 million units.

00:56:26   That is, yes, you heard me right, a unit decline in the iPhone year over year. Now, Jason,

00:56:33   we're going to talk about some of the stuff surrounding this. But am I right in assuming

00:56:39   this is the first time this has happened?

00:56:41   A unit decline year over year?

00:56:42   - Well, I mean, no.

00:56:46   - Okay.

00:56:47   - No, I mean, that was the whole story of what 2016 was.

00:56:52   - Oh, of course it was, yes.

00:56:53   - Unit decline year over year.

00:56:56   But that story was over and we were seeing now

00:56:58   like a slow but steady unit growth year over year

00:57:03   after the, you know, Apple came down from the peak

00:57:05   of that the late 2015, early 2016 kind of iPhone 6 thing, which was the big spike. Then

00:57:15   it came down and then for the last few quarters we've seen growth year over year.

00:57:19   I must have blocked that out of my brain. That was Q2 of 2016 compared to Q2 of 2015

00:57:27   where they lost 10 million units. So that was the big, big decline. They kind of bounced

00:57:32   back from that with a bunch of reasons. I think the reason I blanked it out of my head

00:57:36   is I am, I got so frustrated with having to hear the answer to that, like for a year basically,

00:57:42   right, of like what happened there, what happened there, that kind of thing. Because oh we made

00:57:46   a big phone and we put it into China and you know, so that was all taken care of. But this

00:57:50   is a different situation. So what happened here, right? So much higher revenue, revenue

00:57:54   is lovely, they sold less, right? They sold less of them. And, okay, well, let's just,

00:58:01   We'll get to that.

00:58:02   We'll get to that.

00:58:03   But I mean, you look at it on paper, right?

00:58:06   You look at the numbers, there's less.

00:58:09   During their holiday fiscal quarter, they sold fewer iPhone units than they did during

00:58:14   their holiday fiscal quarter a year ago.

00:58:16   Okay.

00:58:17   Absolutely true statement.

00:58:18   So that is that, right?

00:58:19   So we're gonna park.

00:58:20   A very small number, but yes, smaller.

00:58:21   We're gonna park that for just a second.

00:58:24   One of the other things that was going on here is that analysts, they do what analysts

00:58:29   do when they forecast, and many were expecting 80 million. Now, that means what it means,

00:58:34   it can mean nothing, it can mean everything, right, but there is a whole industry based

00:58:38   around this, right, that is how all of this stuff works, that's how the stock market works,

00:58:42   there are analysts.

00:58:43   That's right, expectation is reality in a way in the stock market because your stock

00:58:47   price gets built based on the expectations and the, you could say, is it fair that Apple,

00:58:54   There are a bunch of stories saying Apple missed its iPhone number because some outside

00:59:00   group decided that they looked at Apple's guidance and picked a number that was too

00:59:04   high.

00:59:06   If you're worried about accurate reflections of Apple's business, then it's not fair.

00:59:13   And if you're concerned about the street and investment, it's totally fair.

00:59:19   So you know.

00:59:20   - It depends where you plug your attention into.

00:59:23   - And what you're trying to get out of it, yeah.

00:59:25   - Don't forget, the last two weeks prior to this

00:59:28   has been full of stories about a decline in sales, right?

00:59:33   - Right, there was a narrative going in that was like,

00:59:36   oh, the iPhone X is selling badly, iPhone sales are bad,

00:59:41   it's not going well for Apple.

00:59:43   There was this narrative that was developing,

00:59:45   which I have to say in hindsight, looks like fraud to me.

00:59:50   It looks like maybe somebody was trying to suppress

00:59:52   Apple stock and play some games because it's not born out

00:59:57   by the numbers at all.

00:59:58   But what happens is that narrative starts to move

01:00:01   and then sometimes you get writers who see numbers

01:00:05   and it allows them to continue with the existing narrative

01:00:08   instead of questioning it.

01:00:09   And there was definitely some of that.

01:00:11   - 'Cause I had my theories about this, right?

01:00:12   Like what was going on here?

01:00:13   So then I was thinking,

01:00:14   "Oh, well maybe what it was was we're looking at the wrong quarter, right?

01:00:18   And that these declines, this sales decline, oh, was actually happening in what would be

01:00:23   Q2, right?

01:00:24   That was my thought when I was looking at these numbers because clearly there hasn't

01:00:27   been a horrific decline and we're going to get to all of the reasons why in a moment.

01:00:31   But it's like, oh, maybe this is being reported for now.

01:00:35   But jumping ahead, next quarter of Apple's guidance, they are saying the iPhone will

01:00:40   grow double digits year on year.

01:00:42   So I guess not then.

01:00:44   So my only thought on this is that something's got mixed up here and that what is actually

01:00:50   happening and I believe will happen is that the iPhone X will not be available next year

01:00:54   right because they will replace it with other models in the line which has happened before

01:00:59   I think it was the iPhone 5 it just stopped being made they made the 5c instead right

01:01:04   like they didn't make the iPhone 5 anymore for whatever reason and the reason with the

01:01:08   iPhone X is probably that we spoke about this I believe on this show that they won't be

01:01:12   be able to bump it down the line to make it cheap enough. So they're going to replace

01:01:15   it with a whole new line of products next year. And then somehow in all of that reporting

01:01:20   and all of that conjecture, it got believed that this was because no one was buying the

01:01:25   iPhone X where that doesn't seem to be the case at all because ASP was up. ASP was up

01:01:30   significantly.

01:01:31   Yeah. So this is the thing, and I know this is boring acronyms and stuff, but ASP means

01:01:36   average selling price. And if there is a single statistic, other than I guess the revenue

01:01:42   itself, that I would take away from this quarter, it's the average selling price of an iPhone.

01:01:52   The average iPhone sold during this holiday quarter was $100 more expensive than last

01:02:02   holiday quarter.

01:02:03   And were the 8 and 8+ more expensive than the 7 and 7+?

01:02:08   I don't think so.

01:02:09   Yes.

01:02:10   They were?

01:02:11   Okay.

01:02:12   I think they were.

01:02:13   Weren't they like $50 more expensive or did that boost come in with a 7?

01:02:16   I don't remember.

01:02:17   But also, sequentially, which means last quarter compared to this quarter, the average selling

01:02:22   price was up $178.

01:02:26   So and we mostly talk year on year here because holiday quarters are very different.

01:02:29   average selling price changes a little bit seasonally, but also just... look, the

01:02:35   story here is the iPhone X sold well. It sold really well. And what it did, and

01:02:44   maybe the change in composition with the 8 and the 8 Plus, it dragged the entire

01:02:49   iPhone up. And that's why revenue was up. It's because Apple, like, imagine if

01:02:56   literally every iPhone anybody bought went from they were all by every every

01:03:02   single iPhone sold was last year's model that's discounted $100 to this year's

01:03:09   model so literally every iPhone sold Apple got $100 boost that is what

01:03:14   happened and that's because of the iPhone 10 it's because that the Apple

01:03:19   found that there was a portion of the iPhone audience that was happy to give

01:03:23   them a thousand dollars or more for an iPhone and another portion of the

01:03:28   audience that was happy to not and use the iPhone 8 which is the advantage of

01:03:31   having the iPhone 8 as well. We thought this was a huge gamble and how was it

01:03:36   going to go and were people going to reject it or were they going to sit out

01:03:39   of the iPhone market and we don't know like the next three quarters we should

01:03:44   we could see some very interesting things with iPhone sales especially

01:03:46   since you know there's a lot of details of inventory and all that and Apple's

01:03:50   forecasts are that the iPhone is gonna kinda like slide back a bit in the next

01:03:56   quarter but the iPhone X gamble you look at it here and it's like it worked like

01:04:01   Apple is making more money per iPhone sale than it was and a lot of that is

01:04:07   coming from the iPhone X because that's the that's how you drag the average

01:04:11   selling price up like that. What was that you mentioned about sliding back in the

01:04:15   next quarter? There's some weird and I'm not the best person to talk about it but

01:04:19   there's some weird stuff with how they fill the channel and how they empty the

01:04:22   channel and how there were channel and there was a whole thing where Luca

01:04:24   Maestri the CFO talked about you know in addition to the change the the the the

01:04:31   length of the quarters which we're going to talk about in a minute there were

01:04:33   also some things about filling the channel and not that might suspect that

01:04:38   there are like there are more numbers in this quarter than will be seen for next

01:04:41   quarter

01:04:42   it's unclear like next quarter is not going to be a record quarter for Apple I

01:04:48   I think even Apple said that.

01:04:49   I don't think they're saying that it's gonna be bad.

01:04:51   But my point is, the launch quarter of a brand new iPhone

01:04:56   does not always tell the whole story

01:04:58   of how the iPhone is going to be accepted.

01:05:00   And we're gonna have to see,

01:05:01   I think next quarter's gonna be really interesting.

01:05:03   The one we're in right now.

01:05:04   - They did say about iPhone growth year on year

01:05:07   was gonna be good though, right?

01:05:09   This stuff is so confusing.

01:05:11   - There's a lot of complexity here.

01:05:14   It's a huge business, there's a lot of complexity here.

01:05:17   But anyway, for me, this is a huge deal, the ASP thing,

01:05:20   which is normally, I mean, I track it,

01:05:22   but it's normally kind of boring.

01:05:24   You see it like when the new MacBook Pros came out,

01:05:26   the Mac ASP went up because those were more expensive

01:05:29   systems and they sold a bunch of them.

01:05:30   And so it changes the composition of what got sold

01:05:33   and drags it upward.

01:05:34   And with the iPhone 10, especially, you're seeing it here

01:05:37   where this is all getting dragged upward.

01:05:40   And that's what Apple was trying to do.

01:05:43   And if they failed, we should have seen it.

01:05:46   and I don't think we saw it.

01:05:48   I think that the iPhone X appears to be a success.

01:05:50   Apple also said in their commentary,

01:05:54   in their call with analysts,

01:05:56   which there's a complete transcript at six colors.

01:05:59   If you don't wanna listen to a Apple conference call,

01:06:00   you can always read it or just search for words

01:06:03   that you're interested in hearing

01:06:04   that Tim Cook said or didn't say.

01:06:06   But one of the things they said is the moment

01:06:07   that the iPhone X went on sale,

01:06:09   it was their top selling phone,

01:06:11   it remained their top selling phone all the way through now,

01:06:13   not even through the end of the quarter,

01:06:14   but through today, beginning of February,

01:06:18   it is still their number one.

01:06:19   So for doubters about the iPhone X,

01:06:22   iPhone X is their number one phone,

01:06:23   and then the 8 and the 8 Plus are behind it.

01:06:25   And they said in a lot of countries, including China,

01:06:28   if you look at like the top five selling smartphone models,

01:06:31   four of them are iPhones.

01:06:33   So the iPhone's doing okay, is what we're saying.

01:06:37   It's doing okay,

01:06:39   even though there's some interesting quirks in here,

01:06:41   and that Apple strategy with the iPhone X so far

01:06:44   seems to be bearing out.

01:06:46   - Yes, obviously there's a couple of things to note, right?

01:06:49   One, the iPhone X came out in November,

01:06:51   so it doesn't get the full time period.

01:06:54   We don't know how or how much that could have affected.

01:06:57   - There's a chunk of this quarter

01:06:59   where the iPhone X was not on sale

01:07:00   and people were concerned

01:07:01   that that would affect the quarterly numbers

01:07:03   because there were people holding back from buying an iPhone

01:07:05   to wait for the iPhone X to ship.

01:07:07   - It could have, like we don't know.

01:07:08   Like there could be effect in there.

01:07:11   We're probably never gonna know that,

01:07:13   but like that could, maybe if it came out in September,

01:07:16   there would have been more sales

01:07:18   than there ended up being, who knows?

01:07:20   So here's the thing, right?

01:07:21   Apple were repeatedly talking about,

01:07:23   and I was reading in the tweets that you were sending out

01:07:25   from the Six Colors Live blog

01:07:26   and from other people talking about it.

01:07:28   Apple were repeatedly talking about the fact

01:07:31   that this quarter was one week less

01:07:33   as being a key factor in iPhones numbers.

01:07:35   So let me tell you my personal story on seeing this.

01:07:39   I roll my eyes and I'm like, okay, there's your excuse,

01:07:43   I'm like, "Oh, okay, here we go. Excuses, excuses." I'm seeing the headlines and

01:07:50   I'm seeing that the numbers are down. It's like, "Okay, this isn't surprising."

01:07:53   I'm looking at the charts and I'm assuming this is the excuse that they're giving.

01:07:57   It's not all that bad, but they want to give a little excuse so they can say why

01:08:01   it was the case. In the same way that they were giving the excuse for the drop, which

01:08:07   we were talking about earlier, as being, "Oh, well, we had unprecedented demand due to the

01:08:11   the fact that we sold in China for the first time,

01:08:13   that was their excuse, right?

01:08:15   And I'm just like, all right, whatever.

01:08:16   So I'm like, how much of a factor is it really?

01:08:18   So this is some quotes that I'm gonna read from Jason Snell.

01:08:23   77.3 million iPhones, which is the highest number ever

01:08:27   for a 13 week quarter, averaged weekly iPhone sales

01:08:31   were up 6% over last year.

01:08:33   If you took at how many phones were sold a week

01:08:36   during the quarter and just like divided those numbers out,

01:08:39   was a 6% increase year on year. Apple sold more phones per day than last holiday quarter,

01:08:46   but the last quarter had seven more days. And Apple wants to make sure you know it.

01:08:55   So something from Philip Alma DeWitt, he said Tim Cook and Luca Maestri mentioned the per week

01:09:02   discrepancy 16 times during the Q1 earnings call.

01:09:07   Yeah, so they did. And what's funny about it, so the short version here is last holiday

01:09:14   quarter Apple did a 14 week quarter, which is not what they usually do. They usually

01:09:19   do a 13 week quarter. Why is that? Well, 13 times 4 is 52, so that's a year. I think

01:09:27   it has to do with where the breaks fall because it's not based on months, it's based on

01:09:32   weeks and they wanted to cover the end of the holiday and New Year's last year. The

01:09:40   cynical among us, and I'm not sure whether you can prove, I think I imagine that they

01:09:43   always intended the quarter to fall this way, but let me rephrase this. Apple benefited

01:09:49   from this last year. Yes. Apple benefited by having a 14 week quarter because they were

01:09:53   trying to show that the iPhone sales had stabilized and were going up year over year instead of

01:09:57   what they had done for the previous three quarters. So they took the week, right? They

01:10:01   took that week. So they get that 14 week and again I think it may have been planned it may not have

01:10:04   been I don't know let's say it was planned but they get to benefit from it because they get that

01:10:08   extra week of sales that they get to claim as a part of the holiday quarter and that allowed them

01:10:16   to eke out basically flat to slightly up results last year so they they did that and they didn't

01:10:22   talk about that I mean I think they mentioned it was a 14 week quarter but they didn't talk about

01:10:26   it in great detail because they just want you to look at the main numbers and then if you recall

01:10:30   Like in the week after that, there was a guy who like went around and was

01:10:35   tweeting at all of us and emailing and he posts stuff on his blog.

01:10:37   And he said, he said, this is kind of a bogus analysis because it's a 14 week

01:10:43   quarter.

01:10:43   And if you look at the actual sales figures, you know, per day or per week,

01:10:47   iPhone sales were down and he's, he was absolutely right.

01:10:50   And I remember posting everything on six colors and saying, yup, he's right.

01:10:53   Like if you, if you're looking at this, this is a nice quarter, uh, in that,

01:10:57   that the iPhone sales were not down.

01:10:59   But if you look at iPhone sales day by day or week by week,

01:11:03   they were down.

01:11:04   They were down on average during the quarter period

01:11:06   because it was longer.

01:11:08   Okay, so this time, Apple doesn't,

01:11:11   and at the time I actually said,

01:11:13   this raises the bar for next holiday quarter

01:11:16   because it's gonna be 13 instead of 14

01:11:18   and Apple's gonna have to deal with that.

01:11:20   And here is where it bit them,

01:11:22   which is why they kept talking about the fact

01:11:24   that it was 13 over 14.

01:11:25   'Cause the truth is, during this holiday quarter,

01:11:30   the average iPhone sales per day were up 6%

01:11:34   over last holiday quarter.

01:11:36   Up 6%. - 850,000 iPhones per day

01:11:39   in late 2017 compared to 798,000 iPhones per day

01:11:44   during the 98 days in late 2016.

01:11:47   By the way, that's huge.

01:11:49   850,000 of something sold every single day?

01:11:53   - You can divide it by 24 per hour.

01:11:55   - Especially when you assume that it is not like that.

01:11:58   So like there are some days where they sell

01:12:00   over a million a day, right?

01:12:01   Like it's wild.

01:12:03   - Well, that's also true, right?

01:12:05   The seasonality, we don't get a level

01:12:07   of granularity below this.

01:12:08   The point is, by that measure,

01:12:11   which I would argue is the more accurate measure,

01:12:14   because when you're talking about 13 versus 14,

01:12:17   it's not right, and it was not right last year,

01:12:19   and it's not right this year, it's easy, but it's not right.

01:12:23   Apple, because they're living by the sword and dying,

01:12:25   the sword, Apple now wants to demystify you, you know, because Apple wants to have be seen in the

01:12:32   best light possible. It was okay last year, it's not okay now. It's also true that if you're

01:12:38   focused on year on year and year on year is actually not the same, that, you know, it's up

01:12:44   to you. Like, basically you get to decide what story you want to write. And so if you want to

01:12:48   write a story that says Apple iPhone sales down year-on-year versus you know

01:12:55   versus the year ago quarter it's accurate. Apple's iPhone sales slumping

01:13:01   Apple sold fewer phones during the holiday season there are a lot of these

01:13:07   kind of lazy phrases and headlines that go into some of these stories and that's

01:13:12   not right like Apple actually sold more if you take any span of time I suspect

01:13:19   calendar days between last year and this year or between you know 16 and 17

01:13:24   holidays you say the month of December or you know November 15th through

01:13:30   December 25th or whatever it is I suspect that pretty much for any one of

01:13:36   those spans of identical time Apple sold more iPhones this year than last it was

01:13:41   it's you know it's close enough but but again I have a hard time I wanted I want

01:13:49   to know it I want to understand it accurately the same time I don't have a

01:13:52   lot of sympathy for Apple because Apple benefited from this last year at a point

01:13:56   where they were trying to show that iPhone sales were no longer sliding and

01:13:59   so now it bites them a little bit it's tough because I know it's calendar-based

01:14:03   and all of that but look at the revenue point at the revenue and deal with it I

01:14:07   think though if the problem is that there are some people out there who

01:14:10   really want to point and say, "Aha! Look, weakness in the iPhone. It's going down.

01:14:15   Haha, they are in trouble again." And it's not borne out by the data. That's just,

01:14:21   it's not true. It's a quirk. And you could very much say, "Aha! Look, iPhone

01:14:26   sales continue to be kind of flat to slightly up, and it's now entered a

01:14:30   slower growth trajectory than it's ever seen, you know, before the last

01:14:35   two years." Yep, that's true. But I think that's all it tells us, is

01:14:39   that what really has happened is the iPhone business post the 2015 boom is what we're

01:14:46   seeing here, which is it's growing again, but it's growing slowly. It's growing at a

01:14:52   much higher level. This is something that also I think a lot of people don't understand.

01:14:56   The iPhone, we talk about like, "Oh boy, they had that boom and then it was really rough

01:15:00   after that because the sales fell." If you look at the average quarter before the iPhone

01:15:06   came out. It was between 35 and 40 million units, and it's now like 53 to 55 million

01:15:23   units. So we think of that bump as like a brief success, and then it led to sort of

01:15:31   a sad slide back for Apple. But if you look, that bump led to the sea level rising. Like,

01:15:38   the new normal for iPhone down from that big bump is way bigger than it was before the

01:15:44   big bump. So they didn't lose, it didn't go up and then back down to where it was. It

01:15:48   went up and then went down some. So, you know, again, you can write any story you want here,

01:15:54   but I do think that there's some malpractice of journalism going out there where people

01:15:58   really want to write a story about how the iPhone sales are slipping and it's not borne

01:16:04   out by the data.

01:16:05   David: No, but I think the important thing to remember in this is however you choose

01:16:10   to write your story, you're bound to for the future. So like if you last year were

01:16:16   like look how amazing iPhone sales are but you don't take into account the 14 week,

01:16:23   right?

01:16:24   They weren't amazing, but they were like not down.

01:16:27   - If you talk about like, oh, look how great it is,

01:16:31   then you also need to appreciate the change

01:16:33   on the other side, right?

01:16:34   Like, I feel like that, and that's why I like talking

01:16:37   about it in all the different routes that we talk

01:16:39   about on this show, 'cause basically,

01:16:41   all these earnings reports are Apple trying

01:16:44   to tell the best story they can with the data available.

01:16:47   - Yes, always, always. - So you are able

01:16:49   to look at this data and draw whatever conclusion

01:16:52   you want from it because there's so many avenues to it. Because Apple do not come into

01:16:58   these calls and give you all of the data completely accurately without spin.

01:17:03   No, no, they will. Well, I'll say if it's an unprecedentedly good quarter on all fronts,

01:17:10   which rarely happens, but it does happen for Apple, they will come in and not spin because

01:17:15   they don't need to. But usually there are some of these gauges that are not up to snuff

01:17:22   And that's when they start pulling out,

01:17:25   but this and look at that.

01:17:27   And this other thing that we didn't put in the notes,

01:17:29   but now we're gonna tell you so that you can report it.

01:17:31   And it's all about that.

01:17:32   And so this is a case where they tell,

01:17:34   they talk about the quarter length six times

01:17:36   because they're now, like I said,

01:17:37   live by the sword, die by the sword.

01:17:39   They benefited from people not reporting the quarter length

01:17:42   very much last year until like I said,

01:17:44   a couple of days later, you know, that one guy was like,

01:17:47   this is not true.

01:17:48   And he was totally right.

01:17:50   and now they're trying to go the other way,

01:17:52   which is, well, I know we benefited last year,

01:17:54   but this year, no, no, no, no, no, no, no, no,

01:17:55   you gotta understand how many weeks there are in a quarter.

01:17:58   It's like, it's PR, it's, I mean,

01:18:00   this is Apple trying to put its best foot forward.

01:18:03   - So when I say about like not reporting

01:18:04   all of the data completely accurately,

01:18:06   I don't mean they're changing numbers,

01:18:08   but what they're doing is stuff like what they do

01:18:09   with the Apple Watch.

01:18:11   So Apple Watch, 50% growth in units and revenue,

01:18:14   best quarter ever.

01:18:15   - Four straight quarters of 50% growth.

01:18:17   - Yeah, if you ask Apple, what does that mean?

01:18:19   they will just repeat that to you. They will not tell you how many, right? So it's like

01:18:23   for whatever reason they have chose to make that decision and they're sticking to it.

01:18:27   And will they ever break it out? Who knows? But this is all that is right now. So Apple

01:18:32   have sold somewhere between one and a gabillion Apple watches, but just know that there was

01:18:37   50% more than the year before.

01:18:40   Even on my Bezos chart that has no scale, um, you can see that the Apple watch, I mean,

01:18:47   It did have the best quarter ever.

01:18:49   It did grow for the...

01:18:51   Not knowing the numbers, you know, they're selectively choosing and I can give them some

01:18:55   grief for it.

01:18:56   I had a couple people misunderstand my joke about this and be like, you know, "Why are

01:19:01   you making fun of the Apple Watch?

01:19:02   It did really well."

01:19:03   And it's like, "I'm not making fun of the Apple Watch.

01:19:04   It did do really well.

01:19:05   Did you look at my chart?

01:19:07   The numbers, the bars are good.

01:19:08   There are no numbers, but the bars are good."

01:19:10   Point is, they don't give us details, so we're left kind of like trying to guess what they

01:19:14   mean.

01:19:15   deciding to do, which is not telling you.

01:19:18   - That said, when a product's year-on-year growth

01:19:21   is 50% for straight quarters, it's doing pretty well.

01:19:26   It's doing pretty well.

01:19:28   And so that's what's going on here, is it's doing really well.

01:19:33   And remember, the last holiday quarter was a record sale

01:19:37   for the Apple Watch, and the previous one

01:19:39   was the best yet for the Apple Watch.

01:19:41   So they're not only growing in the intervening time,

01:19:44   but they're also putting growth,

01:19:45   and I think it's quite substantial growth

01:19:47   on last year's record numbers.

01:19:50   So it looks like the Apple Watch is more,

01:19:53   well, it's seasonal like a lot of Apple's business.

01:19:57   The holiday quarter is the best one,

01:19:58   but it's also doing really well

01:20:00   to the point where I saw some analysts saying,

01:20:01   "I'm not sure there's a smartwatch category."

01:20:03   There's kind of an Apple Watch category.

01:20:05   - Oh, that's true.

01:20:06   - 'Cause there's, you know, it's just,

01:20:08   and by some measurements,

01:20:10   Apple is the largest purveyor of wearables by a large amount.

01:20:13   Like they have a huge percentage of the wearables market

01:20:16   if you define the Apple Watch and AirPods.

01:20:18   - Apple is the biggest watchmaker in the world now.

01:20:21   - And Beats, I suppose.

01:20:22   Yeah, it's, yeah.

01:20:25   - Yeah, it's fine. - All right, so next quarter,

01:20:27   guidance of revenue between 60 to 62 billion,

01:20:30   which would be a record for,

01:20:32   well, it would be beating 52.9 in Q2 2017.

01:20:35   So--

01:20:37   - No, it would be a record for Q2.

01:20:39   If they are really hitting in there, they're never wrong.

01:20:41   Like, and when they are wrong, they're only ever wrong up.

01:20:45   - Yeah, which is a good way to be.

01:20:47   - I mean, for a while they really sandbagged the numbers

01:20:49   and they were like, they were wrong up every single time.

01:20:53   And they've gotten better at that lately.

01:20:55   They're closer to their guidance now.

01:20:57   I think that they've tightened that up

01:20:59   under Luca Maestri's regime. - Because it's not good

01:21:00   to, like you think, oh, if you beat it every time,

01:21:04   that's amazing.

01:21:05   Yes, but it's not actually good

01:21:07   for what you're supposed to be doing at this point.

01:21:09   Like you need to show that you know

01:21:12   what your business is doing.

01:21:13   - Yeah, guidance is supposed to be realistic

01:21:15   and also it trains people into believing.

01:21:18   It's like the boy who cried wolf.

01:21:19   It trains people into believing

01:21:20   that you're always sandbagging the numbers

01:21:22   and that makes it hard when you're looking

01:21:24   at a tougher quarter and you try to hit it right on

01:21:27   and everybody assumes you're gonna be 10 billion up from that

01:21:30   and you're like, no, no, no, no, really this time.

01:21:33   So, but anyway, yeah, that 60 to 62 billion,

01:21:37   like Apple has never done more than 60 billion

01:21:42   in a quarter that wasn't a holiday quarter before.

01:21:44   And they're quoting it as being that, right?

01:21:46   It would beat the revenue number from,

01:21:50   the current record is 58, which is from 2015,

01:21:54   the first quarter of 2015,

01:21:56   which was that the heights of the iPhone 6 mania

01:22:01   that was happening.

01:22:02   And yeah, so it's actually kind of a remarkable

01:22:06   bit of guidance.

01:22:07   - Interesting.

01:22:08   - Well, we'll see.

01:22:09   I doubt they're wrong, but I'm interested to see how it all breaks out.

01:22:13   - Yeah, I'm sure they're right, and I think the question is gonna be what are the details?

01:22:16   Like where's the, as usual, it's gonna be where's the iPad go?

01:22:19   Where's the iPhone go?

01:22:20   Are they trending up and down?

01:22:22   What's up with the Mac, as you asked earlier?

01:22:23   - I wanna see where the Mac goes.

01:22:24   I wanna see where the Mac goes.

01:22:25   - And then we can assume services is gonna keep on growing, and other products is gonna

01:22:28   keep on growing, because those are areas that just keep expanding as Apple expands its portfolio.

01:22:34   and the other will probably include the HomePod. So that would be money that they never made before.

01:22:38   Yeah, that's true.

01:22:40   Alright, this episode is brought to you by Squarespace. Use the offer code

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01:24:30   So let's move into Ask Upgrade, the triumphant return of Ask Upgrade after the week off last

01:24:34   week.

01:24:35   Please laser it up for me Snail.

01:24:37   It's back!

01:24:38   Timothy asked, "I discovered I'm still playing for iTunes Match.

01:24:43   Do I need to keep this subscription now that I pay for Apple Music?

01:24:47   Is there an easy way to make sure I don't lose anything?

01:24:51   The answer is iTunes Match is now included in Apple Music.

01:24:54   So you no longer need, and this has been the case for a year, year and a half, so cancel

01:24:58   that iTunes Match subscription, I did.

01:25:00   All your music that you have that you rip from CDs that you downloaded that's like a

01:25:04   rare, like live track or whatever, if you're an Apple Music customer, that stuff gets uploaded

01:25:10   from iTunes just like it did with iTunes Match and is part of your library and it all just

01:25:16   is fine and works fine. So they've really gotten that. It took them a while. iTunes

01:25:21   match was bumpy at the beginning. It wasn't initially part of the Apple music kind of

01:25:25   thing, but it's all together now and I use that and so I don't need a separate iTunes

01:25:30   match subscription anymore.

01:25:31   - Yeah.

01:25:32   - And neither do you.

01:25:33   - No, I don't and I, well, I know you're not talking to me, you're talking to Timothy,

01:25:37   but I don't either.

01:25:38   - Timothy, yeah.

01:25:39   - But thank you for addressing the direction to me too.

01:25:40   - Nobody does. You, dear listener, dear listeners, don't pay for iTunes match if you're an Apple

01:25:44   music customer.

01:25:45   Jason, Roger wants to know, do you think that Apple renaming iBooks to books means they

01:25:50   might be paving the way for an iOS laptop?

01:25:54   Oh boy.

01:25:55   Well, I wrote an entire article on this that you can read at Macworld.

01:25:58   So we'll put that in the show notes.

01:25:59   That'll be fun.

01:26:02   Which is, uh, which includes a, a Star Trek reference in one of the subheads that some,

01:26:08   one of my readers got immediately, which made me love that reader so much.

01:26:12   The answer is I don't think it necessarily means that. I would love to

01:26:17   believe it because I think iBook would be an awesome name for an Apple iOS

01:26:23   laptop and they have the name because it's freed up.

01:26:26   I don't think this means that. I think it means that Apple is continuing to

01:26:30   simplify a lot of their software and taking the i names off of pieces of

01:26:34   software that don't need it anymore.

01:26:36   My piece in Macworld is basically like the conventional wisdom is

01:26:40   there'll never be a new eye product that Apple is decommissioning it everywhere.

01:26:43   And while I think that that's probably the most likely scenario here, I just had,

01:26:48   I had that moment where I thought to myself, well, wait a second, where does

01:26:51   Apple use the eye and not all, but many of the places where Apple uses the eye

01:26:56   are for this eye platform, the iOS ecosystem, right?

01:27:00   iOS has iPhone and iPad and even iPod touch, right?

01:27:05   The I name could be seen as referring to iOS devices,

01:27:10   just as the Mac name refers to macOS devices.

01:27:15   And if that's true, couldn't Apple have leeway to,

01:27:20   and if, I'll even go further,

01:27:22   if Apple did create an iOS laptop, what would they call it?

01:27:27   And would it have I in the name?

01:27:30   I think maybe it would.

01:27:31   I'm not saying they're going to.

01:27:33   I still think that this is a flight of fancy for me,

01:27:35   little bit and that you know even though I'd like to see it I'm I don't know if I

01:27:38   actually want to let myself believe that it might happen but if they did wouldn't

01:27:43   it make sense to say iPhone iPad iBook instead of iPhone iPad Apple lapbook or

01:27:53   whatever like I feel like the I name although it feels old on one level you

01:27:58   could make the argument that actually what they're trying to turn it into is

01:28:02   is something that's tied into this iOS platform.

01:28:05   So I think it might mean that...

01:28:09   What it means, Roger, is that they could call something else

01:28:13   "iBook." I kinda wanted the iPad to be called "iBook," but that didn't happen.

01:28:17   It means they could now, because it would be less confusing, because

01:28:21   iBooks is going away and is just going to be books. I don't think that's probably

01:28:25   why they

01:28:26   did it. I think they did it because they are continuing to sort of simplify a lot

01:28:30   of their product names.

01:28:31   I do wonder about like iMovie, like what in the long run what's going to happen with iMovie,

01:28:36   and is that something that they change and turn into something else, or do they just

01:28:40   leave it because it's had that name for so long that they're going to keep it? I don't

01:28:44   know. That one I don't know. And iCloud, you know, I don't think it's going to go anywhere.

01:28:48   They're going to rename that again. Seems not. And, you know, again, Apple's most popular

01:28:52   platform is iOS. So on that level, it's probably okay. And then the outlier is the iMac, which

01:28:59   which again, I think it's not impossible that Apple might change the iMac's name to call

01:29:04   it something like Mac, but now that there's an iMac Pro, what would you call that? So

01:29:09   I think in general, my inclination is that popular products with "i" in the name are

01:29:14   just going to stick around because even if Apple doesn't want to ever make anything new

01:29:17   with "i" in the name, those products are too famous to change. But I do think if I were

01:29:25   making a new bit of iOS hardware, I would seriously consider giving it an iName because

01:29:30   it would fit with its "buddies" in the iOS ecosystem.

01:29:34   Anyway, that's my short version. You can read the whole column. I went into it.

01:29:39   Brianna asks, "The 5S can see live photos in messages but can't take live photos.

01:29:44   Can the iPhone 8 and other iPhones see Animojis in the same way?"

01:29:48   The answer is yes. Somebody can send Animojis to anyone and you can view them, you just

01:29:52   can't make them yourself and send them back.

01:29:54   just videos. They're just video attachments.

01:29:57   You can even like take the videos and share them in other places as well, which is kind

01:30:01   of funny. So like I say, you see them on Twitter because people like send them a messages and

01:30:05   then they open the little video and they copy it and paste it into tweet bar or something

01:30:08   like that. Yeah. Jeff says, so Apple's gutting Mac OS server. I'll put a link in the show

01:30:14   notes if you're not familiar with what's going on there. Jeff wants to know, do we know anything

01:30:19   about what hardware and software Apple runs its own data centers on? I mean, obviously

01:30:23   I'm assuming not Mac OS server. No. Because that would be a shame for them, wouldn't

01:30:29   it? So, do we know anything? It's probably just like Linux or something. I know that

01:30:34   they use Azure, right, for some stuff. Yeah, well, I mean, they're using Azure for some

01:30:39   things, but they also have their own data centers. I don't know. There's probably

01:30:45   somebody who knows. There's some story out there in some semi-esoteric publication website

01:30:51   somewhere about Apple's approach here, although Apple keeps it quiet, they're not talking

01:30:55   about like Google and Facebook and Amazon. But I imagine it is a Unix/Linux of some kind

01:31:02   and is it running Apple's own like Darwin stuff? It wouldn't surprise me if Apple is

01:31:06   running some custom stuff. It also wouldn't surprise me if Apple is running stuff that's

01:31:13   very commonly used. But, you know, what we do know from other companies is a lot of these

01:31:19   companies that have huge cloud infrastructures start building their own stuff because they

01:31:25   can control all the parts because it gives them security to their, they're not taking

01:31:29   stuff off the shelf because we have heard that there have been stories about like you

01:31:33   order a server from some, you know, server manufacturer and there's spy hardware in it

01:31:41   so that they can intercept. I mean that, that is a thing that happens now. So I think Google

01:31:47   and Facebook build their own stuff. I think maybe Amazon builds their own stuff. So it

01:31:51   wouldn't shock me if Apple is using its own stuff. It's not using Mac OS, right? But it

01:31:57   wouldn't shock me if its competitors is building some of its own Unix-based servers, running

01:32:06   code that it is taking from open source maybe and modifying or writing some stuff itself

01:32:10   to do that. But if somebody has links to like articles about which give us a little bit

01:32:17   better idea of what Apple's own server infrastructure is, I would be fascinated to hear about that.

01:32:23   Or if you know and you want to tell us so we can pass it on anonymously, that would

01:32:29   be great too. But it's certainly not Mac OS. And as somebody who's used Mac OS server for

01:32:33   a long time, I'm kind of sad that it's going away at the same time. I mean, because it

01:32:38   just keeps getting content taken out of it and the latest update, the story has pulled

01:32:42   a lot more features out of it. But at the same time, you know, a lot of that stuff is

01:32:47   still in the sharing control panel so it's not that big.

01:32:49   There's questions from Leon. Regarding the YouTube competition talk, what do you guys

01:32:52   think of Vine 2? The most there kind of is to know about this is there is going to be

01:32:57   a new Vine. They've got a Twitter account, V2 app. My feeling on this is I'm happy that

01:33:03   they're going to make it because Vine was awesome, right? Vine was a great little thing

01:33:07   and it was a real shame actually I think that Vine went away. I don't know what I think

01:33:13   is how I feel this is going to go for them in the future. One of the reasons Vine worked

01:33:19   so well is that it was natively embedded in Twitter and I'm going to assume they're probably

01:33:25   not going to be able to get that again so then if that's the case and there's just links

01:33:29   then are people really going to want to watch the Vines? How good of a social network can

01:33:33   Vine be on its own? I don't know. I don't know. My concern is it gets a bunch of hype

01:33:42   for like a couple of weeks, everyone's excited to use it, and then maybe they don't anymore.

01:33:48   That would be my concern. What do you think?

01:33:50   Yeah, I don't think I have an opinion on this. I mean, Vine... what's funny is that Vine

01:33:55   seems to have remained successful after its death. Like, my kids know all these memes

01:34:01   that come originally from Vine. And so the idea of this six-second video social network,

01:34:07   it's just, it was a huge missed opportunity to turn it into something that it was Twitter,

01:34:13   right, that bought it and then basically just killed it. It's a shame. I think maybe like

01:34:18   you said, the time has passed and we have to move on, but there's going to be stuff

01:34:26   that is invented that takes off and maybe it'll be this, but probably not because that's

01:34:30   just true of anything.

01:34:33   Yeah, alright and last today from Jim. Regarding the Apple Watch Always On display, could there

01:34:39   be a big concern about image retention on the OLED and not battery life?

01:34:46   I don't think so because you can you can you can vary it in software right like if you

01:34:51   had an Always On that wasn't the animation and it was just text you can the old classic

01:34:56   trick is you can move the text around the screen a little bit, just a little bit. And

01:35:00   it's like a, like a screensaver. It changes which dots are lit up. And I am sure that

01:35:05   a, uh, that, that clever Apple software engineers could find a way to combat any potential burn-in

01:35:11   on the OLED in order to give people actual, you know, always on time, even if the time

01:35:17   wasn't always in exactly the right place, maybe if they felt like that was an issue

01:35:21   and maybe it would be like, how long does it have to stay on? I'm not saying that there

01:35:23   might not be a burning issue but I'm saying that there's got to be ways around it in terms

01:35:28   of just smart software. Other people do it right and the iPhone 10. That's true. Right

01:35:32   they are obviously doing stuff with the iPhone 10 to prevent burning where they can right

01:35:35   like there's elements that are on for long periods of time. I think I replied to Jim

01:35:39   on Twitter about this but I wanted to say on the show too my feeling on this is that's

01:35:44   Apple's problem to solve right they have to find a way to fix that because this is an

01:35:49   obvious thing that the watch should be doing and if they can't find a way to solve that

01:35:54   then I would be concerned.

01:35:57   Because there are things that like, this is the thing with Samsung, they move elements,

01:36:02   the always on elements on their phones because they have some software elements that are

01:36:05   there permanently like the home button and stuff, they move it by millimetres which is

01:36:10   imperceptible if you're just looking at it but that's like a way that they stop burning

01:36:13   on the phone.

01:36:14   It's like they move the elements ever so slightly every now and then.

01:36:17   Not a way that you'd ever see, but it stops it from being in the same place constantly.

01:36:21   So there are ways around it, that's just a thing that they would have to work on over

01:36:25   time and I hope that they do find a way to do it.

01:36:29   It may well be one of the reasons they haven't done it yet, but I really hope that they find

01:36:34   a way and I think that they should and what is it?

01:36:37   Life finds a way?

01:36:38   Something like that.

01:36:39   I think that's a phrase that we can apply here too.

01:36:43   Okay, we're at the end.

01:36:44   Done.

01:36:45   Thanks for listening to this week's episode of Upgrade. You can go to relay.fm/upgrade/179

01:36:52   to get show notes for this week. Thank you so much to Squarespace, Timing and Eero for

01:36:56   their support. You can find Jason's work at sixcolors.com and the incomparable.com as

01:37:01   well as on relay.fm. We both host many shows at relay.fm. Just go to relay.fm/shows and

01:37:06   you can check out many of the shows here. I think you would enjoy if you're only listening

01:37:10   to this one or one other then you should listen to more I think listen to more

01:37:16   Jason is on Twitter he's @jasonel I am @imike I am YKE you can send in your

01:37:21   questions for the show with the hashtags #askupgrade and #snelltalk

01:37:25   two very different types of questions send them in to us and we will do

01:37:29   our best to answer as many as we possibly can next week hopefully HomePod

01:37:35   until then say goodbye Jason Snell goodbye everybody

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