140: Disappointed Dad Tim Cook


00:00:00   [Music]

00:00:08   From Relay FM, this is Upgrade, episode 140.

00:00:13   Today's show is brought to you by Encapsula, MacWarlan, and Blue Apron.

00:00:18   My name is Myke Hurley and I am joined by Mr. Jason Snell.

00:00:23   Just another sunny Monday morning here in California, Myke.

00:00:26   How are you?

00:00:27   Good, nobody cares about the weather.

00:00:28   Remember that, Jason.

00:00:29   Chris wants to know, what was the first piece of writing that you were paid for?

00:00:35   Um, this is a very difficult question to answer.

00:00:40   Okay.

00:00:41   So I wrote, I'll go through it very quickly, I wrote a computer program in BASIC that did,

00:00:46   that was a blackjack game that a computer magazine paid me $20 for.

00:00:50   Ah, because people used to like print the code for games, right, in the magazines, and

00:00:54   then you could type them into your computer.

00:00:55   - Yes, and they never used it,

00:00:56   but apparently they thought it might be an example

00:01:00   or something.

00:01:01   I don't really actually know why they paid me

00:01:03   for a dumb basic program, but they did.

00:01:06   So that was the first thing I made that I wrote technically

00:01:09   that I got paid for.

00:01:10   I won my high school short story contest

00:01:13   and got a hundred dollars for that.

00:01:14   So I got paid for something I wrote.

00:01:16   In college, when you wrote articles

00:01:21   for the student newspaper, you got paid.

00:01:24   It was very little, but I wrote a lot of articles.

00:01:26   So I did get paid for that as well as a stipend

00:01:28   for being an editor.

00:01:29   So that was my job basically in college.

00:01:32   You know, my college job was the college newspaper

00:01:35   and I did get paid some small amount of money for that.

00:01:38   And the way you got paid was by length of article.

00:01:43   And even more than that, you thinking,

00:01:46   oh, like a word count or something like that.

00:01:47   No, by the inch, literally we had a ruler

00:01:51   and you would go through the articles

00:01:54   that you had published and see how long they were in inches.

00:01:58   - Column inches, is that what the price comes from?

00:02:01   - Yeah, that's it.

00:02:03   And then I believe it was something like

00:02:05   the first X number of inches, it was a base price.

00:02:08   And then you got paid something for every inch thereafter,

00:02:12   which I just think is hilarious.

00:02:14   So I got paid for that stuff too.

00:02:15   So by the time I went to my local newspaper,

00:02:21   summer after I graduated, you know, they were paying me to write articles on as the intern.

00:02:29   And then when I was an intern at MacUser and I left, my first, I guess, official freelance

00:02:36   work was a piece about making charts in Excel. There was a little how-to article for MacUser

00:02:44   that I wrote in the little period, the three-month period where I was no longer an intern and

00:02:50   not yet had not yet been hired as an editor. So any of those would probably count.

00:02:55   I would like to thank Chris for his submission with #SnailTalk to open episode 140. If you

00:03:02   would like Jason to answer a question about literally anything, and I have lots of literally

00:03:09   anything questions in our document right now, just tweet with the hashtag SnailTalk and

00:03:14   I will get them. But right now we must begin the podcast follow-up segment of this show.

00:03:21   Follow-up was of course invented by John Siracusa. He is @Siracusa on Twitter. You should thank

00:03:27   him for the invention of follow-up. We'd like to begin with affiliate pricing. Remember

00:03:32   we were talking about affiliate pricing, I think it was a couple of weeks ago, maybe

00:03:35   it was last week, who knows? Time is a constant. I don't remember a lot about last week anyway,

00:03:40   So you know, whatever.

00:03:42   Federico and John at MacStories came across the realization that we were talking about

00:03:49   Apple taking 7% down to 2.5% for affiliate commissions.

00:03:54   Well there is an iTunes affiliate resources website which published an article about this

00:03:58   and nobody saw it for like two or three days because Apple don't do anything to promote

00:04:03   it.

00:04:04   There's no extra email.

00:04:05   But it has been clarified now that the 7% to 2.5% reduction of affiliate commissions

00:04:11   is just on in-app purchases. So the standard price of 7% for purchasing in a paid-up front

00:04:17   app still remains.

00:04:19   I want to give a shout-out to Rick Molina at MacGamerHQ. He's the one who--he actually

00:04:25   emailed me about it and said that he talked to an iTunes rep and got the details about

00:04:30   this, and I like what he wrote up because he didn't write one of those things that

00:04:35   is like "I know blogs are saying this is true, but bloggers are really stupid." Instead,

00:04:39   he's like "well of course we would expect this." The key line in his story is "the

00:04:45   message is crystal clear, yet it seems that wasn't exactly what Apple meant." Apple's

00:04:51   statement was very clear and wrong, basically.

00:04:54   Rick was the first person to note that I'd seen that commissions wasn't changing what

00:05:01   was being paid out and they emailed the support and the support gave a response but it wasn't

00:05:06   like an official, like this is what it is, right?

00:05:10   People were like well is this the case, this is not the case, no one's answering anything

00:05:13   and then kind of late on Friday Apple published this thing and still didn't tell anyone for

00:05:18   for like two days until it was just found on the affiliate linking blog or whatever,

00:05:24   the iTunes affiliate blog that Apple apparently has. So there you go. I don't understand why.

00:05:32   People must see this, right? There was all these articles written and people talking

00:05:35   about it for like a week and they clarify it but don't tell anyone. Very peculiar.

00:05:43   peculiar indeed, but it's good. It's good because, and again, like I said last time,

00:05:49   inside baseball, most people don't care, but what you do care about is that some

00:05:54   of the things that you read, some of the sites you visit, are funded by affiliate

00:05:58   links. Like, that's a major source of funding or maybe a partial source of

00:06:01   funding, and that goes for things like Mac Stories. It goes for sites like Touch

00:06:05   Arcade and App Shopper, and so this is good for them because it means that the

00:06:12   app referral itself, the core app referral part hasn't changed.

00:06:20   Last week Mateus in Ask Upgrade was asking if we could recommend the timezone conversion

00:06:26   application.

00:06:27   I mentioned the widget that I used, Clock, K-L-O-K, but it's not an application and the

00:06:33   widget hasn't been updated in a long time.

00:06:36   So since the last episode, an application called Zones was updated and again to Mac

00:06:41   the

00:06:56   the

00:07:17   within the, between this episode and the last episode,

00:07:21   it got a nice upgrade and a user interface refresh

00:07:23   to version 2.0.

00:07:24   So, Matthias, that may be the one to check out.

00:07:28   And as I said, I'll put Federico's review in our show notes

00:07:31   so you can go and read it if you want to,

00:07:33   to fully make up your mind before purchasing.

00:07:36   - So on the Mac, I just use the,

00:07:40   you can use the world clock widget on the Mac.

00:07:42   Although it's not great, but it does exist.

00:07:46   I use something on the Mac called clocks.

00:07:49   In general.

00:07:53   - How is that spelled?

00:07:54   Is that like Q-U-L-O-X?

00:07:57   - Quite literally just the word clocks.

00:08:00   - Okay.

00:08:01   - In general, I find time zone conversion applications

00:08:05   to be very appropriately and boringly named,

00:08:08   but that's a pretty good one actually.

00:08:12   I like that one on the Mac.

00:08:14   - Okay.

00:08:15   one out too if you want. Jason and Marvel have joined Comixology Unlimited. We spoke

00:08:21   about Comixology Unlimited a while back, which is their kind of subscription service. It's

00:08:25   like a Netflix for comic books. And it was when it was launched, it was mostly independent

00:08:31   publishers and what was the big publisher that was in Comixology Unlimited? Was it Image?

00:08:37   Yeah, I mean, there are a lot in there, including Image. So for people, there's been some confusion

00:08:44   about this and I'm trying not to sound cranky about it because like I have some opinions

00:08:48   about these services and that they're very different from each other and then there's

00:08:52   a lot of conflation going on and it makes me kind of cranky so just to be clear so Marvel

00:08:56   Unlimited is a service that Marvel sells monthly or annual where you get access to like 17,000

00:09:04   older comics and it means very old comics as well as things that were published six

00:09:07   months ago because they basically publish out on a delay all of the stuff that they

00:09:12   put that they sell to Marvel Unlimited,

00:09:14   it shows up six months later.

00:09:16   It's a little bit like waiting for a new season of a show

00:09:20   to show up on Netflix.

00:09:22   There's a delay of a TV show, a broadcast show,

00:09:25   and then it shows up.

00:09:27   'Cause they wanna sell it first

00:09:28   and then they'll make it available for subscribers.

00:09:30   So that's Marvel Unlimited and that's just Marvel Comics

00:09:35   and it's like 17,000 of them.

00:09:37   Comixology Unlimited, same name, right?

00:09:40   Is a very different service.

00:09:42   It's cheaper, it's $5 a month.

00:09:44   It is smaller, I think it's like 10,000 comics

00:09:48   or maybe even less.

00:09:48   It comes from multiple publishers.

00:09:51   And the way it, a lot of times what it is,

00:09:53   is it'll be the first trade or the first 12 issues

00:09:57   of various comics.

00:10:00   So it allows you to try new comic series

00:10:03   that you might not otherwise wanna pay to try,

00:10:05   which is great.

00:10:06   And that is the purpose of the service.

00:10:09   What it's not is what Marvel Unlimited is, which is sort of like you can just keep on

00:10:14   pursuing dozens and dozens and hundreds of issues of various storylines across it. That's

00:10:20   not what Comixology Unlimited is for. It's for trying some new stuff out, the beginnings

00:10:25   of these storylines. And quite honestly, from a publisher standpoint, the goal here is to

00:10:30   get you hooked on the first four issues of a comic so you'll buy the rest. And Comixology

00:10:36   as a middleman in their Amazon,

00:10:39   basically Amazon owns Comixology,

00:10:41   they want to sell you comics too.

00:10:43   So the goal of Comixology Unlimited is for a low fee,

00:10:46   you get to try a bunch of stuff

00:10:48   with the hope that when you find stuff you like,

00:10:50   you will then start buying it.

00:10:52   And that's a little bit different.

00:10:55   So Marvel is now a part of that,

00:10:58   which means that there are some select

00:11:01   first groups, blobs of issues

00:11:05   of various Marvel comics that they will also be putting on there. Also, I have to say,

00:11:10   Comixology Unlimited has a lot of on and off where they'll bring things on for a month

00:11:14   or two or three and then they go away. Which means that like some TV shows on Netflix and

00:11:19   Amazon if you're in the midst of reading them and they get pulled, you're out of luck. You

00:11:23   gotta go buy them because they will go away. It's not a Marvel Unlimited once they're on

00:11:28   the service that's it. They're there forever basically because they're building a huge

00:11:31   catalog. So they're just very different services. So if you're somebody who is curious about

00:11:36   comics but doesn't know where to start and does not want to start buying issues, Comixology

00:11:42   Unlimited could actually be a useful service. But be aware that their purpose is to get

00:11:50   you into things so that you'll start buying them. That's just how it is. They're going

00:11:55   to give you the first 20 issues of something or the first 10 issues of something.

00:11:57   -Taste is free, Jason. -Well, first taste...

00:12:00   And this is one of the things that kind of hurts me a little bit, is first taste is $5 a month.

00:12:04   [laughter]

00:12:06   But it's as much as you want for that to get inside the door.

00:12:10   So, anyway, it's good. The real question is what happened to DC Comics,

00:12:13   which is the only major comics publisher now not making its comics available

00:12:17   to a digital subscription service, so far as I can tell.

00:12:20   Because almost everybody else is in Comixology Unlimited,

00:12:23   and then of course Marvel also has its own product.

00:12:26   And DC Comics know where to be seen.

00:12:28   So if you want to buy DC Comics,

00:12:30   you just got to buy them a la carte.

00:12:31   That's just, that's just how you got to do it.

00:12:34   But anyway, that's the digital comics.

00:12:35   Somebody was asking me, oh, actually, you know,

00:12:37   our friend, our friend Gray was asking me

00:12:40   what I use to read comics these days.

00:12:42   And my answer was Comixology, Marvel Unlimited,

00:12:47   and Chunky Comic Reader for all of the non DRM stuff I have.

00:12:52   Chunky Comic Reader, very nice iOS app.

00:12:55   and I do all my reading on my iPad Pro.

00:12:57   - Chunky comic reader.

00:13:00   - Chunky comic reader, yeah, it's very good.

00:13:02   - I used this when the iPad first came out

00:13:05   because I was like, this is gonna be great for comics.

00:13:08   So Zapp has been around for a very, very, very long time.

00:13:12   - Awesome, that's real cool.

00:13:13   Last week we were talking about stickers

00:13:16   and what to do if you wanna remove your stickers

00:13:18   and you mentioned that there was something

00:13:19   that you couldn't think of the name of

00:13:21   that you would use to remove stickers.

00:13:23   turns out via Upgrading Jason, that it's called Goo Gone.

00:13:27   - Goo Gone, I mean, I'm sure there are other things

00:13:30   out there, but this is what I was thinking of.

00:13:32   It's Goo Gone and it's like a spray bottle,

00:13:35   like a household cleaner kind of thing.

00:13:40   But what it's designed for is to dissolve

00:13:44   the adhesive that stickers use.

00:13:47   So you gotta still use some elbow grease,

00:13:49   but if you use elbow grease in something like Goo Gone,

00:13:52   you can get that laptop back looking

00:13:56   like it never had a sticker on it.

00:13:58   - And finally for follow up this week,

00:14:01   Recode are reporting that they've heard

00:14:04   from Amazon employees that an Amazon Prime video app

00:14:07   will show up on Apple TV

00:14:09   in the third quarter of this year.

00:14:11   (imitates trumpet)

00:14:13   Exactly.

00:14:14   - Sorry, that was the herald of Amazon arriving

00:14:17   in the Apple compound.

00:14:19   Please all rise for Lord Amazon of...

00:14:24   - Sir, Lord Amazon approaches.

00:14:26   - Something's changed, right?

00:14:28   - Yeah.

00:14:29   - This hasn't happened just like it took this long, right?

00:14:33   It's like, oh, we've really been trying.

00:14:36   We've been toiling away in the app development mind

00:14:38   to create, this has not been what's happened.

00:14:41   Something's changed.

00:14:43   Now, my thinking on this is,

00:14:45   does Amazon know something that we don't, right?

00:14:47   Is there something coming?

00:14:49   I don't think it's that I was, I was looking at the people who cover this

00:14:52   closely, the TV deals and the Apple TV deals, including, um, including Peter

00:14:58   Kafka, who I think wrote that story.

00:15:00   Right.

00:15:00   Um, and, and Jason Del Ray, both.

00:15:03   It sounds to me like, first off, it sounds like on Apple TV, the 30% for your

00:15:11   subscription service thing is not there.

00:15:16   It's like negotiable.

00:15:19   This is what, which I didn't realize,

00:15:21   but apparently has been known for a little while.

00:15:23   It's like Netflix is not giving Apple 30%, right?

00:15:27   It is on the Apple TV, those signups,

00:15:29   it's completely negotiable.

00:15:31   So it sounds like maybe there was a lot,

00:15:34   it sounds like behind the scenes,

00:15:35   there really was a negotiation happening

00:15:37   between Apple and Amazon

00:15:38   about how much Amazon was willing to pass to Apple

00:15:41   to be on their platform versus not.

00:15:43   And the question is, did they come to a resolution

00:15:47   Or did Amazon just decide they're gonna do

00:15:49   what they do on iOS, which is not let you sign up?

00:15:52   My guess though, is that they came to a resolution

00:15:55   that Apple thinks is beneficial enough

00:15:58   to get Amazon on their platform

00:16:00   and get the Apple TV and Amazon's storefront too.

00:16:03   'Cause remember they won't sell a streamer box

00:16:07   that doesn't have Amazon video on it.

00:16:09   And also, you know, works for Amazon

00:16:11   in terms of the amount of percentage

00:16:13   they're willing to give up.

00:16:14   - Yeah, my memory says that when we were talking

00:16:17   about the subscription pricing changes

00:16:20   before WWDC last year,

00:16:23   I remember seeing stuff at that point,

00:16:25   which was saying that HBO got like a 15% deal or whatever.

00:16:29   Like this was a thing, 'cause it was like,

00:16:31   oh, well, this has started to happen,

00:16:33   that was the beginning of this happening.

00:16:35   But my thing about this is, yeah,

00:16:37   let's say that that is the case, right,

00:16:38   and they got a different deal.

00:16:39   It's like, why is it taken till now?

00:16:42   Like that's what I'm interested in.

00:16:43   Like I wonder if either Apple or Amazon,

00:16:46   one of those two companies has broke

00:16:49   and there's a reason, but we don't know what it is yet.

00:16:52   Right, like one of them has given in

00:16:54   on what the other side wanted.

00:16:56   And I wonder if it's like Apple have maybe a new Apple TV

00:17:01   that may really want Amazon to be on that.

00:17:04   Or Amazon have a really big show that they're working on

00:17:07   and they want everyone to have it.

00:17:09   You know, these are the two things I'm thinking about.

00:17:10   - Well, what I was thinking is it's also possible

00:17:13   that the TV app hasn't gone as well as Apple had hoped.

00:17:18   And that maybe Apple thought that that would be a thing

00:17:24   that would sweeten the deal,

00:17:26   would be to get Amazon to agree in exchange

00:17:29   for what Apple would give them in the negotiations,

00:17:32   that one of the things maybe Apple would get back

00:17:35   is Amazon's participation in the TV app, right?

00:17:38   'Cause that's a new-ish wrinkle, not the TV app itself

00:17:42   that came out last fall, but the fact that the TV app

00:17:43   momentum is so slow, there's so little in there,

00:17:47   that maybe that was a connection.

00:17:50   Yeah, I do wonder, like you said,

00:17:52   if what's happening here is Apple is looking at

00:17:55   what its TV rollout update refresh is gonna be this fall,

00:18:00   and is thinking we need to make deals

00:18:04   to have that be a good offering,

00:18:06   and that Amazon's one they can take off the board, right?

00:18:08   Amazon, they can just go in and say,

00:18:09   "Okay, we will do this.

00:18:11   can you do this? This is what we want. So they can put that in the win column

00:18:15   when they're trying to build their list

00:18:18   of what they need because you know they're either gonna wanna do their

00:18:21   own service or they're gonna wanna integrate with existing

00:18:24   over-the-top services in the TV app, right? They're gonna

00:18:27   wanna have a story there about where do you play compared to PlayStation

00:18:31   View

00:18:32   and Sling and you know, list them all off. YouTube TV and DirecTV Now

00:18:38   and now Hulu TV

00:18:41   And so that's all going on, right?

00:18:45   There's so much change happening in the TV world.

00:18:47   So it would be interesting to see

00:18:49   what they would like to come out with in the fall

00:18:53   and then see whether that was something

00:18:55   that maybe motivated this.

00:18:56   But you'd make those,

00:18:57   you'd wanna make those deals now, right?

00:18:59   You can't wait until August to make a deal

00:19:02   about the product you're launching in September,

00:19:03   assuming you are, which I am assuming they will.

00:19:06   - I do think that like the fact that it's Q3

00:19:08   might say something about refreshed Apple TV,

00:19:11   because let's imagine they've just made this deal

00:19:13   like two weeks ago.

00:19:14   I don't imagine that Amazon have just now started working

00:19:16   on this app.

00:19:17   Like I'm sure that it's done.

00:19:19   They've had it done for ages, right?

00:19:21   Like in case anybody ever changed their mind.

00:19:23   - It's not a technical issue, right?

00:19:25   It's just a deal issue.

00:19:27   Joe Steele in the chat room points out also

00:19:30   that Amazon's got a lot of 4K and HDR content

00:19:35   for their programming

00:19:38   and that if Apple is trying to find,

00:19:42   if Apple's gonna do a UHD, a 4K Apple TV,

00:19:46   they're gonna wanna have content to point to there.

00:19:49   And there's like Netflix and Amazon and not a lot else.

00:19:51   So it would allow Apple to bulk up its argument

00:19:55   for why you would want to buy a 4K Apple TV.

00:19:59   - I have one of those 4K Ultra HD compatible televisions.

00:20:03   - Me too.

00:20:04   - And I've seen a couple of things on it in that format.

00:20:07   like the BBC had like a test for one of the nature shows. My word it looks so

00:20:13   good it looks so very good I'm excited for more services to to be going to net

00:20:18   bandwagon I think House of Cards is shot all shot in 4k right? Yeah. So I'll be able to watch

00:20:23   House of Cards in glorious 4k that'd be nice. All the all the Marvel stuff is

00:20:26   there's a lot of cool Amazon and Netflix stuff that they're doing in 4k now and

00:20:30   I'm watching some of it but it's through my TV's kind of terrible player

00:20:34   interface and I would like to get one box that I can trust, that I can show everything

00:20:39   on. The other thing about 4K and Apple, which I think we haven't talked about much, but

00:20:44   like I want that 4K content on iTunes too, right? I mean I feel like that has to be part

00:20:52   of the story too. I want to be able to rent a movie and have it be in that or buy it and

00:20:56   have it be in that format too. And you know we haven't, we're not there yet.

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00:22:46   Do you see what I mean about the fact that they don't look like sweatpants?

00:22:48   Right, like they don't have that I feel any like that traditional sweatpants

00:22:53   look I got them in the color the 9i in the color. I agree they could be

00:22:57   mistaken for slacks. Yeah and I like that I like that especially when I'm

00:23:01   traveling in them right like I feel like it sure just makes it makes it look a

00:23:04   bit better for me. So you should go try those I think everybody out there

00:23:08   because they make great stuff it performs well looks good. Listeners of

00:23:12   this show they can get 20% off at Macworldon.com that's Macworldon.com

00:23:19   when they use the code upgrade so dear listener 20% off you can get with the

00:23:22   code upgrade thank you so much to Macworldon for their support of this

00:23:25   show and Real AFM.

00:23:32   It is earnings season and we're going to talk about Apple's earning results.

00:23:36   So I'm going to start off by giving some top line results so people can just kind of get

00:23:41   the numbers in case you are dying for those numbers.

00:23:44   And you wrote a great piece on Macworld about the six key takeaways.

00:23:47   So like distilling down everything that happened from the numbers and all of the analysis and

00:23:52   all of the questions.

00:23:53   And we're going to talk about those.

00:23:55   So let me give let me give someone who's top line results, Jason.

00:23:58   So Apple's revenue was reported to $52.9 billion which is up from $50.6 billion year on year.

00:24:05   Profit is $11 billion up from $10.5 billion.

00:24:09   So let me stop you with those two because I think what's interesting is to put those

00:24:13   in perspective.

00:24:15   They're both pretty flat.

00:24:16   They're up a little bit, not a lot year on year.

00:24:19   But what's interesting is, so just $53 billion in revenue.

00:24:24   to be clear, Apple's big competitors, Google and Microsoft,

00:24:29   their revenue was in the 20 range.

00:24:34   So it's pretty dramatically different in revenue

00:24:37   and Apple's profit of 11 billion,

00:24:39   again, I'll just point out that some of their competition

00:24:43   is making 20 billion in ish in revenue.

00:24:48   So something to keep in mind with Apple

00:24:51   is the scale of the business,

00:24:53   which is not, and what I'm not saying is anything about like where it's going in terms of size,

00:24:59   in terms of growth, it's going up, it's going down, but we should keep in mind the scale

00:25:03   of it. The scale of Apple right now, these aren't a bunch of companies that are roughly

00:25:08   the same size doing the same thing jockeying for position. In terms of sheer revenue and

00:25:13   profit, Apple is way out in front and it's easy to lose sight of that because of Wall

00:25:19   because Wall Street's concerns are all about about growth because when you price a stock,

00:25:25   you're looking at the future, not the present and investors are more concerned about having

00:25:30   the company grow so that their stock price grows than they are about the company being

00:25:34   a reliable profitable machine. That's kind of not what that that's already priced into

00:25:39   the stock. So but we but but that can skew your understanding of it as a business. And

00:25:45   And so it's just, it was a moment to remind our myself and to remind everybody that this

00:25:51   is a, this is a staggeringly large business that Apple has. It is, it is not Google, right?

00:26:00   It's not even, it's not Google. Google's not close to it. Microsoft's not close to

00:26:03   it.

00:26:04   And I guess it's kind of two things, right? Apple sells products at high prices and they

00:26:10   sell boatloads of them. I guess that's what makes these companies different. Not only

00:26:16   are their products high-priced, higher-priced than maybe some of their competitors, but

00:26:20   they also sell way more. Google's business is mostly advertising, that's their revenue,

00:26:25   and it's a different ballgame completely.

00:26:28   And $25 billion in revenue for Alphabet is pretty good. That's pretty good.

00:26:33   That's a huge number. It's huge. It's a massive amount of money, but it's half.

00:26:37   But it's half of Apple's. And Microsoft is 22 billion and it's got a great, very thriving

00:26:42   cloud business and it's doing very well. But it's less than half of Apple's. It's twice

00:26:47   Apple's profit.

00:26:48   And I don't think that what you're saying here is that this makes Apple twice as good

00:26:51   as those companies, right?

00:26:53   No. No, but it is a false equivalency to say, well, they're all pretty much the same. Their

00:26:58   businesses are pretty much the same. Not only do their revenues come from very different

00:27:02   places, we don't flatten them all together, right? They're like, they're tech companies.

00:27:05   And this is actually, I suspect, the source of a lot of the terrible analysis about tech

00:27:10   companies that we read on blogs. This is the sort of thing that the Macalope gets to write

00:27:14   about. I suspect a lot of it is from people who really want to think, and this has always

00:27:20   been the case for criticism of Apple by especially Wall Street types, but there are a lot of

00:27:26   people who misunderstand Apple. And again, not saying Apple can't be criticized, I'm

00:27:29   saying Apple's often criticized for the wrong things by people who fundamentally misunderstand

00:27:33   And I think this is one of the reasons is that everybody wants to put these companies in a box and say they're all the same.

00:27:39   And like Google, Microsoft, Apple, Facebook, Amazon, their businesses have some overlaps, but largely have nothing in common.

00:27:49   And then when you look at the size of the businesses, the sizes are different, which means their revenue is coming from very different places.

00:27:57   And it's just something to keep in mind.

00:28:00   That keep it all in perspective, that it's so easy.

00:28:04   All of us as human beings want to simplify

00:28:06   and make it like A and B are the same

00:28:09   and let's compare them in detail.

00:28:10   And the fact is like the saying goes,

00:28:14   A ends up being an apple and B is an orange

00:28:16   and you really shouldn't compare them

00:28:18   'cause they are both fruits.

00:28:20   Yes, they are in that category, but that's it.

00:28:24   Like beyond that, why are you comparing them?

00:28:27   It's like Google, Apple, and Samsung will all go on stage

00:28:30   and throw their products around as if they're all equal,

00:28:34   right, like these are what our businesses are,

00:28:37   but all three of those companies, their businesses,

00:28:39   the revenue is so fundamentally different,

00:28:42   like where it all comes from, right?

00:28:44   Like a company like Samsung, you know,

00:28:46   not Samsung Mobile, right, I know that they break them up,

00:28:49   but let's look at Samsung, the holding company,

00:28:50   like Google, Alphabet, the holding company,

00:28:52   it's like all over the map where that money comes from

00:28:55   compared to Apple, right?

00:28:56   Like it's so very different, but their public facing messages, they treat it like they're

00:29:03   all competing on the exact same battlefield when they're not really, right?

00:29:07   Like they have overlapping products, but looking at the whole businesses of all of them, they're

00:29:12   very, very different.

00:29:15   It's an interesting comparison to put forward.

00:29:18   Going back to the results of, this is Q2, right?

00:29:21   It's a Q2 results.

00:29:24   iPhone 50.8 million units sold down from 51.2 iPad 8.9 million units sold down from 10.3

00:29:34   Mac 4.2 million units sold up from 4 million Services 7.4 billion dollars in revenue generated

00:29:42   up from 5.99 billion from last year Other products include the watch, beats and

00:29:49   AirPods is at $2.87 billion up from 2.19. So Mac services and other products that are

00:29:57   up, iPhone and iPad down, iPad down more significantly.

00:30:01   And iPhone, you were, so what you did for those three product areas is look at unit

00:30:08   sales. If you look at revenue, iPhone was actually slightly up. It was slightly down

00:30:12   in units, slightly up in revenue and we'll get to it but that's because the mix of what,

00:30:18   One of the things, I think this is a fairly flat quarter, we can glean things from it,

00:30:22   there's a lot that's not particularly interesting about these results. They are up slightly.

00:30:28   If in a simplified version, it's like they're good, they're up slightly, that's about it.

00:30:33   But when it comes to the breakdown of what they're selling in these product categories,

00:30:37   it gets a little more interesting. And the iPhone is an example where having your units

00:30:42   go down and your revenue go up, that suggests that you're sold more of your more expensive

00:30:46   and the Mac is the same way. Mac went, units went up, but revenue went way up, and for

00:30:52   similar reasons.

00:30:53   So I don't ever listen to these calls because I can't bring it upon myself to do that. What

00:30:59   do you...

00:31:00   They sound way better now. They fixed their whole, they fixed their whole workflow. They,

00:31:04   they are, they're like podcasting now. They've got, they're like routing it. I was trying

00:31:08   to, Dan Morin and I on the Six Colors podcast last week, we talked about like, I had a,

00:31:13   I have a theory about what they did and it's just like imagining how instead of streaming

00:31:17   a phone call what they did is they piped the phone call into a mixer with good microphones

00:31:20   in the Apple conference room where they do this and then streamed that and so all the

00:31:24   Apple people sound great and then all the analysts are just people on the phone.

00:31:28   So I assume that you know Apple's getting ready to do a podcast any day now right?

00:31:33   Well they you know they do they actually do podcast the the keynotes and I think the earnings

00:31:38   calls.

00:31:39   There you go.

00:31:40   So you can subscribe to the earnings call podcast.

00:31:42   It sounds way better than it used to.

00:31:44   - Thank you.

00:31:46   So from listening to those,

00:31:48   do you get a sense for what the analysts prefer?

00:31:51   Do they prefer unit sales or revenue from the products

00:31:54   or do they not really have a preference?

00:31:56   - They don't have a preference

00:31:58   because they're not looking at signals

00:32:02   and they're looking for growth.

00:32:04   And so they wanna know like when they look at those,

00:32:06   like with the iPhone,

00:32:09   they aren't gonna say, oh, well, I'm disappointed

00:32:11   because units went down.

00:32:12   And they're not going to say, oh, I'm happy

00:32:14   because revenue went up.

00:32:15   What they're gonna say is, oh, the product mix changed

00:32:19   and the average selling price went up.

00:32:20   Because if you divide your units and your dollars,

00:32:24   units by sales, what you get is average selling price.

00:32:29   That's actually pretty simple math.

00:32:31   And from that, you can see that average selling price

00:32:36   of an iPhone went up.

00:32:37   And that matters to them in the sense not that they always want ASPs to go up either,

00:32:42   but it's another bit of data in the mix about that they can use to sort of glean like where's

00:32:47   this product line going and where's the market for smartphones going and Apple's place in

00:32:50   it.

00:32:51   So I would say that there are not, other than just generally they like growth, that Wall

00:32:56   Street likes growth, beyond that it's all about the details.

00:33:00   So there was growth of some kind in the iPhone, right?

00:33:04   like it wasn't overall but it was growth in a certain line.

00:33:09   I would say if you gave it to analysts and said which are analysts happier with sales

00:33:13   growth or revenue growth, they will always say revenue growth.

00:33:17   Because that's what drives the value of the companies in theory, right?

00:33:21   In the end, if what that means is that you're selling fewer of the cheap phones but more

00:33:26   of the expensive phones, that's great. They like that.

00:33:30   So let's get into some of the things that you think are interesting from the call, right?

00:33:34   So the first being that Tim Cook addressed on the call that he believes that there has

00:33:40   been a pause in purchases of the iPhone because the rumour cycle has begun earlier and there

00:33:48   are more frequent reports than usual.

00:33:50   So this new iPhone that's apparently coming in September that we know everything that

00:33:54   we think we know about, that this is something that they believe is affecting sales and it's

00:34:00   happening with a lot more bigger than usual and that they're actually addressing this

00:34:07   as the reasoning.

00:34:08   Yeah, I, we could argue whether this is true, right? Is it true, is it really true that

00:34:17   the reports about future iPhones have come earlier and are much more frequent? It may

00:34:22   be, I'm going to leave that analysis to someone else, but it may be that because this bezel-less

00:34:28   iPhone thing, when did we first hear about that? It may have been last year.

00:34:32   It was last year. It was before this one. Right? Before the 7, right? And so if it's

00:34:38   really true that that was the phone they were working on for 2017, and in mid to late 2016,

00:34:45   they were already talking about it and had skipped a whole generation, well yeah, that's

00:34:50   pretty early, right? But so there's the question like why why would that be

00:34:57   happening and what would the impact of that be? I don't I don't know I mean I'm

00:35:03   sure that people anticipating a major new refresh of an iPhone is going to be

00:35:07   a reason to hold off. If you're somebody who has the 6 or the 6s or the 7 and you

00:35:12   know that there's a big big big new redesigned iPhone coming, I think that

00:35:19   some percentage of the people in all three of those categories are going to hold off.

00:35:22   Like I've got a six, why get a seven if I can, six is still pretty great as a phone,

00:35:30   why don't I just wait it out because there's going to be a completely new version and not

00:35:33   one that looks more or less like my six, but it's just a little bit better. So I can see,

00:35:38   I mean I think that's a real thing, people deferring purchases because everybody knows

00:35:42   that the next big iPhone is coming. This does lead to yet more seasonality in Apple's numbers.

00:35:48   If Apple ends up with this new rumored model selling a billion of them because billions

00:35:54   of them billions and billions of them if it's a hit like the six was because there was a

00:35:59   lot all of that pent up demand for the big screen six we may end up in a situation where

00:36:05   once again Apple's iPhone sales trajectory has to be smoothed out over years because

00:36:11   it may turn out that there's a there's always a huge bump in sales for a brand new style,

00:36:18   and then they kind of let it ride for a year or two, and then there's another huge bump that could

00:36:22   happen. And then what that means is that they'll have a really great year, followed by a year where

00:36:27   everybody's complaining that they didn't grow like they did the previous year because the previous

00:36:30   year was such a huge bump. What fascinates me about it is that they actually blamed this on

00:36:36   rumors because Apple doesn't like to talk about rumors. They don't like to talk about future

00:36:40   products, they really don't like to talk about rumors about future products, right? And yet,

00:36:45   here it is. They didn't make a big thing of it. He said it in passing. He moved on. They

00:36:49   didn't talk about it again. But earlier and much more frequent reports about future iPhones,

00:36:56   that is the rumors are out there and we think it's slowing sales. And we're going to use

00:36:59   it as a reason why people are not saying they're intending to purchase an iPhone. Because the

00:37:05   The number that people were asking about is some analysts reports of plan to buy studies,

00:37:13   which is basically, are you planning on buying a new iPhone in the next three months or something?

00:37:17   And those numbers are down from their historic numbers. And the question is why? And what

00:37:22   Apple is saying is it's not that they don't like the iPhone. It's not that they don't

00:37:25   want an iPhone. It's that they have heard about the new iPhone this fall and so they're

00:37:30   waiting. That may or may not be true, but that's what they're saying. That's what Apple

00:37:34   says is the reason. I believe it. I honestly do believe it. I think that it is of a stronger

00:37:41   intensity than previously for two reasons, right? It is that people know when the phone's

00:37:47   coming, right? People know now that September is new iPhone time, right? Like that is a

00:37:51   given at this point. But I think it's different this time because the current phone looks

00:37:56   like the one before it and the one before it. So I think people were less inclined to

00:38:01   move now to buy an iPhone because they're aware of the fact that it hasn't changed for

00:38:06   a while and that it makes it less, I think it makes it less appealing for people that

00:38:10   are maybe looking to upgrade because they know that, you know, or potentially know,

00:38:14   or they ask the person in their life that might know, right, which I think is a role

00:38:19   that many of our listeners will play for their family and friends. And those people are saying,

00:38:24   "Don't buy an iPhone now because there might be a really cool one in September."

00:38:29   Yep.

00:38:30   So I bought it.

00:38:31   - Yeah, that's, I totally get it, right?

00:38:34   Like if I had a 6 or a 6S,

00:38:36   and I was thinking of getting,

00:38:39   I think the 6 is a good example, right?

00:38:40   'Cause so many people bought the iPhone 6.

00:38:42   It was such a huge hit.

00:38:44   Why would you buy a 7

00:38:46   if your 6 is still in pretty good shape?

00:38:50   And it is, that's a great phone.

00:38:53   And the new model is coming.

00:38:56   Like at this point, if you could wait,

00:39:00   I'd tell anybody that, right?

00:39:01   If you can wait, wait,

00:39:02   because there will be a new iPhone this fall

00:39:04   and it may be dramatically different

00:39:05   from the ones you've seen before.

00:39:07   And if it isn't, then you will have waited a little bit

00:39:09   and you could still get a fresher model, right?

00:39:12   Because I think we're all assuming

00:39:13   that there will be, in addition to this new model,

00:39:15   there will probably be an updated version

00:39:18   of the existing phone style,

00:39:19   like a 7S or something like that.

00:39:21   And if that's all true, then why not wait and see?

00:39:24   Because you're gonna get a better phone regardless

00:39:26   and you might want to at least consider

00:39:29   this super fancy new phone that may be coming. At least give yourself the option, right?

00:39:34   Right. No, it's being a smart shopper for that stuff. So it's all logical. It's

00:39:40   entirely logical. The analysts are worried about Qualcomm. This

00:39:45   is something that I have been aware of, this Qualcomm situation, but haven't really been

00:39:51   interested in covering, so let's do it very quickly right now. So I'll give you a quote

00:39:55   from Tim Cook in case you need some catching up. Qualcomm is trying to charge Apple a percentage

00:40:02   of the total iPhone value because Qualcomm chips are in iPhones and they do some really

00:40:08   great work around standards essential patents but it's one small part of what an iPhone

00:40:13   is. It has nothing to do with the display or the touch ID or a gazillion other innovations

00:40:18   that Apple has done and so we don't think that's right. So what Tim is saying here,

00:40:21   is trying to charge Apple a percentage of total iPhone sales because Apple uses chips

00:40:27   and/or the chips that they use include patents that Qualcomm own. Instead of charging the

00:40:34   standard license fees, they now want to charge a percentage instead and Apple is not willing

00:40:39   to do that because of the actual what they consider percentage of value that Qualcomm

00:40:43   is adding to the phone. One of the big issues around this is not just that they're fighting

00:40:49   this fight. Apple has stopped paying Qualcomm and Qualcomm is trying to seek injunctions

00:40:54   on phones being shipped to the US. Have I done a good job of trying to summarize that?

00:40:59   It's, it's, all this stuff is stupidly complicated.

00:41:01   Well, is Qualcomm seeking injunctions? Do we know that?

00:41:06   They have said that the, I have seen reports that they are considering it.

00:41:10   Ah, okay. They're threatening. Yeah. So, uh, they asked Tim Cook about that and he said,

00:41:16   He said, "They can't see."

00:41:18   He says, "You never know, but their lawyers

00:41:20   "basically can't see any real likelihood

00:41:25   "that that would happen, that there would be injunctions."

00:41:29   I have to say, this is all posturing, right?

00:41:31   So what Cook is saying too, they asked him

00:41:34   about not paying Qualcomm, and his response

00:41:37   was something like, "Well, how can you pay somebody

00:41:39   "if you can't agree on what the price of the bill is?"

00:41:43   It's like, okay, well, interesting.

00:41:48   You could pay them and still sue.

00:41:50   So it's a negotiation that has led to lawsuits

00:41:56   because the way Cook put it is,

00:41:59   if we can't come to an agreement,

00:42:00   then this is the next thing.

00:42:03   And if you're asking yourself,

00:42:04   why are lawsuits a recourse in a corporate negotiation?

00:42:09   The answer is it's friend patenting.

00:42:13   Basically it's considered a standards essential patent, and there is a legal

00:42:18   requirement of the patent holder, which is Qualcomm to license it at a fair rate.

00:42:24   And Apple says it's not a fair rate.

00:42:26   Right.

00:42:28   So the idea is that like they've created technology that everybody

00:42:31   should be able to use, right?

00:42:33   Like that that's, what's considered as a thing.

00:42:34   Like it should be, it should be priced fairly.

00:42:37   Right.

00:42:38   There are standards that everybody uses for wireless.

00:42:42   And those standards include patents owned by Qualcomm and others.

00:42:50   And so the, the FRAND idea, the standards essential patent idea is that you can put your patents, it was meant, I believe, to encourage the growth of standards by saying, look, let's agree on a standard and some of it will be patented.

00:43:08   of it will be patented, but what we'll do is make those legally required to be offered at a

00:43:14   reasonable price. So you'll get your money, but you're not going to be able to hold the entire

00:43:17   standard hostage with your patents. And Apple's saying that Qualcomm's charging method for their

00:43:24   patents is not legal, and that's why it has to go to court. Apple says that this does not fulfill

00:43:35   Qualcomm's legal rights and legal requirements under standards of central

00:43:41   patents. And the second part of the quote, what you read, is Apple's argument.

00:43:46   Apple's argument is that Qualcomm is charging a tax on the

00:43:51   the price of the phone even though the phone contains all sorts of innovations

00:43:57   that Qualcomm had nothing to do with. So I think Apple is arguing that Qualcomm

00:44:03   should charge a price per phone, not a percentage of a phone sale, which I think

00:44:11   the way I read it is maybe what they're trying to do here. And you could see that

00:44:16   if you're selling more expensive phones, what Qualcomm's saying is that basically

00:44:20   if you use our patents in a $200 phone or $1,000 phone, you pay a different

00:44:25   price. And what Apple's saying is, "The radios are the same. We don't want to pay

00:44:30   you anymore. So, and then, you know, I'm not a lawyer, it's going to go to the lawyers

00:44:35   or the threat of all the lawsuits is going to lead to more negotiations and they'll reach

00:44:39   a settlement. But, um, the way Apple spins this is that Qualcomm has been taking advantage

00:44:45   of everybody because they have these patents and they're tied to the standard. And, and

00:44:50   probably somebody at Apple said, they're not supposed to be able to do this. This is why

00:44:55   this regulation exists. And maybe Apple felt like they have the most leverage and the most power,

00:45:04   and so that they can be the one to take them on, and they're fighting for all the other

00:45:08   phone makers that are out there. It is funny because this is Apple's key product,

00:45:13   and Apple's got a lot of money. So you could just let it ride and say, "Yeah, Qualcomm's gonna

00:45:18   wet its beak here. That's fine. We're still making money." But obviously, Apple feels like Qualcomm

00:45:25   is getting away with something here. And so, because I don't, you know, it's an interesting

00:45:29   thing when a company has so much money in the bank and makes so much money in profit every quarter,

00:45:33   that they would, they would look at something and say, I want, I'm a bit of a cheapskate.

00:45:37   I want to lower, how do we lower that price Qualcomm? But obviously this relationship has

00:45:42   gotten so fraught and stressful and Apple feels like Qualcomm is ripping them off because you

00:45:49   you could just let it ride and pay them and you'd still make a lot of money.

00:45:53   But Apple seems to have decided that they're not, they're not, um,

00:45:57   willing to do that or that they can get a lower price by threatening them.

00:46:03   Okay. That makes, I mean, this is,

00:46:08   these things happen every now and then, right? This is,

00:46:11   I don't think this is the first company that I've tried to get an injunction on,

00:46:15   on Apple shipping phones. I think like maybe Samsung tried to do it once.

00:46:19   I don't know, it's hard to keep up with.

00:46:21   But it is something that is worth noting, right?

00:46:24   Because it's a problem,

00:46:28   because imagine if they're successful.

00:46:31   Well, that would be--

00:46:31   - Well, if the iPhone doesn't ship

00:46:33   because Qualcomm got the shipments to be halted,

00:46:35   that's bad, that's like spectacularly bad.

00:46:38   That is the risk here.

00:46:41   And to the analysts who asked about it,

00:46:44   Tim Cook's response was, we don't think it's a risk.

00:46:47   So, hmm, I don't know, it's all part of the game.

00:46:51   It's all part of the game.

00:46:53   Everything Cook says to the analysts is,

00:46:55   it's about the public posture against Qualcomm,

00:46:58   and it's about reassuring investors

00:47:00   that they're playing this game,

00:47:03   but they think it's not gonna be a problem

00:47:04   so that the investors don't get scared

00:47:06   that there's a chance that the iPhone couldn't ship

00:47:09   because of Qualcomm.

00:47:11   So it's all out there.

00:47:14   So next up we have two countries, China and India.

00:47:19   These are two big areas for Apple.

00:47:21   Start with China.

00:47:21   So what's going on in China?

00:47:23   There's been a dramatic drop off in revenue

00:47:25   year over year in the country.

00:47:27   The 7 Plus did so well there.

00:47:29   There's been growth in the Mac services and retail.

00:47:31   Apple are saying that currency devaluation is a problem

00:47:35   as is particularly weak sales in Hong Kong

00:47:38   and slumping sales on older iPhone models.

00:47:41   how much of a worry is China for Apple?

00:47:44   I mean, before it was the great savior of iPhone growth,

00:47:49   and now it seems to be Apple's fallen side.

00:47:52   - So yeah, I mean, Apple is actually growing

00:47:55   much more everywhere and then not growing in China.

00:47:58   That's basically the story right now,

00:47:59   is that if you took China out of the equation

00:48:02   across the board, you'd actually see kind of

00:48:04   continual growth of a slow variety,

00:48:07   but instead you add it in and you see this huge growth

00:48:10   and then a huge drop off.

00:48:11   It sounds like, and I'm gonna point people,

00:48:16   we'll put in the show notes,

00:48:17   Ben Thompson at Stratechery wrote a great article last week

00:48:20   called Apple's China Problem about this very subject.

00:48:23   And his argument is that in China,

00:48:27   WeChat is so popular for everything.

00:48:30   It's not just social networking, it's also buying things.

00:48:33   It is the smartphone operating system.

00:48:35   - It's not even like just a smartphone operating system.

00:48:38   It's like a life operating system.

00:48:40   Yes, right?

00:48:41   Yeah, it's everything from food ordering to paint, it's the whole thing.

00:48:45   Yeah, so Ben's argument is that Apple's number one strategy thing, and think about this when

00:48:50   we talk about Microsoft's Surface laptop and other things like that, in the end you can't

00:48:56   forget that a huge part of Apple's value proposition is that their products are the only products

00:49:02   that run iOS or macOS.

00:49:05   If you forget that, you're missing a huge part of the equation.

00:49:08   like if you're penciling out the specs of the Surface laptop versus the MacBook or the

00:49:14   MacBook Pro without Touch Bar, don't forget the other key differentiator, which is only

00:49:23   the Mac runs macOS, otherwise you're running Windows. And if that matters, and it probably

00:49:27   does, you gotta put that in there. Likewise with iOS. Ben Thompson's argument in China

00:49:32   is all that really matters is does it run WeChat? And beyond that, and it does, and

00:49:37   so do Android phones. They all run it. So, okay. Well, then what? What it does is it

00:49:44   reduces Apple to being a hardware manufacturer. If iOS is no longer really part of the equation,

00:49:50   it means Apple is a hardware manufacturer. It means that all Apple is competing on with

00:49:54   all the other phone makers in China is style of their hardware. And Apple s hardware is

00:49:58   pretty good, but it hasn't had any major evolution to the hardware since the 6, which sold wildly

00:50:05   well everywhere, including in China. And there are other phones that have come along that

00:50:09   are more stylish, and like, the cost to jump from an iPhone to a--iPhone 6 that you bought

00:50:15   two and a half years ago to a new fancy phone that you see today in China, the cost is almost

00:50:22   nothing compared to the cost of leaving the platform anywhere else in the world, because

00:50:27   Does it run WeChat? Check. Okay, then it doesn't matter. I'll just log into WeChat.

00:50:31   And the financial cost is the same, right? You're going to move to one of those two

00:50:35   phones, they're all priced the same. You know, you're not getting a price and a

00:50:39   vantage. John Gruber wrote a big post about this as well, which is also very

00:50:42   interesting. And John seems to be more of the opinion that, in his belief, that this

00:50:49   wouldn't be a factor, that the iPhone is still desirable. I understand that, but I

00:50:55   I think it's coming at it from a different perspective and I'm much I can totally see the argument and I think my personal opinion

00:51:02   Again, like like John not knowing really anything about this market

00:51:06   But my personal opinion is if what you're trying to do is show that you have

00:51:10   The latest and greatest as a status symbol which my understanding is that is a big thing in in Asia

00:51:17   That yes

00:51:20   It doesn't matter how great the iPhone is. It's not the new one and you can like, you know

00:51:25   I've seen a lot of people saying maybe that's one of the reasons that Apple made a red phone

00:51:29   Do you know what?

00:51:30   I'm sure it is because the red phone shows new but like it doesn't matter if the LG phone is not as good as the iPhone

00:51:37   If people know the LG phone is newer then get the LG phone if it doesn't matter what your phone is

00:51:43   All you're trying to do is show that you have money and access we chat then why would you get an iPhone 7?

00:51:49   Well, and it goes back to the core of one of the reasons you get an iPhone is because it's an iPhone not just the

00:51:54   Hardware but the the operating system and if the operating system is the same if like literally

00:51:59   Every phone in China ran Android including apples

00:52:03   You know you could see well

00:52:05   Then Apple's footing is very different because Apple just has to compete as the as the new thing

00:52:11   They lose that piece of their market, and it's been let's be honest

00:52:14   It's been three cycles of the same basic phone design with improvements

00:52:17   but the same look. So, you know, if you get, depending on what model you get, an iPhone

00:52:22   7 today in gold is not appreciably different looking from an iPhone 6 from two years before

00:52:30   in gold. So, you know, it's an issue. So, I think that's what's going on in China, but

00:52:37   it's more than that if you look at the numbers because what it also says is that Apple's

00:52:41   — and this goes to that point, though, right — which is, if you look at the product mix,

00:52:45   The suggestion is, and what they say is, older models aren't selling, because why would they?

00:52:50   So the models they are selling are the 7 and the 7 Plus, especially the 7 Plus, because

00:52:55   they love the big phone in China.

00:52:58   They love the big phone.

00:52:59   I mean, the world loves the big phone, but especially in China, they love the big phone.

00:53:02   So that's still selling well, and that is a new phone.

00:53:05   And to Gruber's point, like the jet black iPhone 7 Plus, like, you can tell that's the

00:53:11   new iPhone, right?

00:53:12   That says new all over it.

00:53:14   it doesn't look like a previous iPhones do.

00:53:16   So you could get that.

00:53:17   And those are selling well in China, according to Apple.

00:53:20   It's the old models that are not selling as well.

00:53:23   Because it turns out Apple's strategy of selling old phones

00:53:26   to people for $100 or $200 off doesn't work so well in China,

00:53:30   probably for some of the reasons that we've already mentioned.

00:53:33   And in other parts of the world, maybe people care so much.

00:53:35   But if you're going to buy a brand new phone

00:53:37   and it's actually a two-year-old phone,

00:53:39   for some people looking for value, that's a thing.

00:53:41   but that does not seem to be part of the market

00:53:44   as much in China.

00:53:46   And then, you know, the usual complaints

00:53:48   that Apple throws in about currency devaluation.

00:53:50   And in this case, Hong Kong,

00:53:51   that Hong Kong's had a lot of economic issues,

00:53:54   and Hong Kong dragged down the greater China region too.

00:53:59   But in the end, you know, that's what it is,

00:54:02   is the only phone that Apple's selling really, really well

00:54:04   in China right now is the 7 Plus.

00:54:06   - And then move to India.

00:54:09   Cook said that Apple have a ton of energy going into this country on a number of fronts.

00:54:15   It kind of looks like Apple want India to be their next China.

00:54:20   Cook said at one point, "I have never seen growth like this before anywhere in the world."

00:54:25   And he's talking about the country, not the sales, right?

00:54:29   Yeah, no, he's talking about the country. He's talking about the growth, and he's talking about technological growth.

00:54:33   He's talking about putting high-speed wireless internet

00:54:37   into India and how that's growing rapidly,

00:54:42   which means that there's more of a market for their phones.

00:54:48   And they've got a new developer center in Bangalore

00:54:52   that they put in, Phil Schiller was out there.

00:54:54   Apple has struggled in India,

00:54:58   but Apple's putting a lot of resources into India.

00:55:00   And I think Apple feels like it will pay off eventually,

00:55:03   that Apple is, Apple is laying the groundwork there. They feel there will be an explosion

00:55:06   of growth in smartphones in India and that they have, they have an opportunity to ride

00:55:12   that wave, but it is a, it is a challenge for them to sell better. That has been one

00:55:17   of their weakest markets. So, but the growth means there's a huge opportunity there and

00:55:21   Apple's got the money to invest in it. The question is just, can they come up with the

00:55:25   right combination of products that will, that will work with that market as it grows? I

00:55:32   liked the line from Cook. Cook played a little, I don t know, it was like disappointing dad,

00:55:39   disappointed dad a little bit. It s like he was trying to scorn someone, right? He was

00:55:43   listening. It was kind of weird. Yeah, well, well, I think. What did he say? What did he

00:55:47   say? So what he said was, our growth rates are good in India, really good by most people

00:55:52   s expectations, maybe not mine as much. And I thought that was really interesting because

00:56:00   I think what he's trying to get at is Apple's doing fine in India. Depending on who you

00:56:06   talk to, you might look at how Apple's doing in India and say, "Oh, it's actually not bad.

00:56:11   Like you're doing pretty good." And so he wanted to give the analyst that positive spin.

00:56:16   Look, we are growing. It is doing that. But he didn't want to leave it there because he

00:56:21   wants to express his dissatisfaction. "We can do better," is basically what he's saying.

00:56:25   Like, I expect us to grow faster in India. And it was funny how he phrased it, maybe

00:56:32   not mine as much, but I think in the end what he wanted to do was he, I think he maybe realized

00:56:37   that he had, he had done the usual kind of positive sell of, Hey, things are great. We're

00:56:42   growing great. People think it's, it's like, it's not just good. It's really good. Like

00:56:46   he, he pumped it up and then he realized maybe he needed to add a little note of dissatisfaction

00:56:52   there because what he's really trying to express is he thinks that Apple can do way better

00:56:57   in India and you can't just look at the numbers now and say they're good enough because he

00:57:00   doesn't think they're good enough. Now, yes, there may be somebody who's an executive inside

00:57:05   Apple who's focused on India who's like, "No, no."

00:57:09   Tim Cynova Well, I know who I'm seeing in the morning.

00:57:13   Tim Cynova Cleaning out your desk, Bob. Clean it out.

00:57:16   Yeah, yeah, that, that, it was weird to hear that and to read that because that really

00:57:22   does feel like for me coming from the corporate world, like that's what your boss would say

00:57:26   on a conference call with a larger department, right? Like we're going well but not good

00:57:30   enough and that is a way to like send, I know that's not what they're doing but to send

00:57:35   a signal to that person, that employee that their job is, that they're not doing a good

00:57:38   enough job, right? But it's like I can imagine them having that feeling because it doesn't

00:57:44   really feel like an incredibly planned statement, right? No, no it's, and again I think the

00:57:51   reason he said it was to put that note of "we think we can do better here" into the

00:57:55   statement so it didn't come across as just Pollyanna-ish kind of like "it's great, no

00:58:00   India is great, yay India!" while people are like "Apple you had some problems you need

00:58:03   to grow more in India" so he threw it in there. I do wonder though if yes in the back of his

00:58:08   mind, what he's thinking of is an actual frustration he has in some secret meeting somewhere in

00:58:15   Apple where he's like, "Damn it everybody, why are we not doing better in India?" And

00:58:19   if it just sort of popped out, like the way it got phrased, because those are his real

00:58:23   feelings that he had on the inside.

00:58:25   This was just the next meeting that he went to, so he was still thinking about the last

00:58:29   one.

00:58:30   Yeah. I have no doubt that his phrasing serves the purpose of the analyst call, right? But

00:58:36   But yeah, the way it came out, I'm sort of like, "I bet there have been meetings about

00:58:41   this," right?

00:58:42   Where Tim is like, "I am not satisfied."

00:58:44   Like, you know, "What do you mean this is a really great number?

00:58:47   It's not good enough."

00:58:48   So, you know, disappointed dad, Tim Cook, there he is.

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01:00:01   Services growth via subscriptions.

01:00:06   So Apple's services and kind of the money that they're bringing in from that is the most consistent growth area for Apple.

01:00:13   This is the one line of the earnings report quarter after quarter that continues to shine.

01:00:18   Right. Like this is what they can hang their hat on as you want to see some growth in the company.

01:00:22   They point to that line. It's not the biggest line. Right. But it's growing and it continues to grow.

01:00:27   grow.

01:00:44   Apple provided a little bit more detail on that growth in this call.

01:00:48   They updated a number that they previously mentioned.

01:00:51   Three months ago, Apple said that they had 150 million subscriptions to their services.

01:00:58   Now they have 165 million. But this isn't people necessarily, right?

01:01:03   No, it's duplicative. So like, I have an iCloud Drive subscription, and I have an Apple

01:01:12   Music subscription. And so those are two subscriptions. I'm one person, but those are two subscriptions.

01:01:19   So it's, but you know, in the end, every subscription is worth money.

01:01:23   So they are growing and that's a huge percentage growth in sequential quarters for Apple subscriptions.

01:01:31   So yeah, this is the thing Apple said a couple years ago, they were going to be beating the

01:01:36   drum on subscription revenue and they felt that they could make a lot of money on subscription

01:01:40   revenue.

01:01:41   And here we go.

01:01:43   is, you know, analysts love it, is the single area of Apple's balance sheet that is consistently

01:01:51   growing and there are two ways to look at it, right? I mean, one way to look at it is

01:01:57   to say, "Oh boy, Apple's just going to be squeezing more and more money out of everybody."

01:02:04   And they said, like, the longer somebody is an active subscriber, the more they spend.

01:02:10   like, these are not people who come and then give Apple money once and then tail off. These

01:02:17   are people who give Apple more and more money so these subscribers become more valuable

01:02:21   over time. So, and I think it's fair to look at that and say, "Wow, part of Apple's game

01:02:25   now is going to be to squeeze more money out of us after we use our products." So I feel

01:02:32   that argument. I'm starting to think, though, that maybe it's all for the best because maybe

01:02:39   the way you motivate Apple to make good services is by having a major part of their business

01:02:46   that they're showing off to Wall Street and that they've taken a lot of pride in in terms

01:02:50   of being a growth area of the company be tied to their services because it's a lot harder

01:02:56   to ignore or do really shoddy services if they're a key part of your business, which

01:03:02   they never have been right. It's always been about the hardware and the software and not

01:03:06   the services, but like the services are really important now. So if somebody

01:03:09   really screwed up an Apple service today, do you think they could skate by and

01:03:15   everybody could just shrug it off like .Mac and be like, "Well, whatever,

01:03:19   mobile me, whatever, we don't care." No, like it's a huge part of Apple's future

01:03:24   growth strategy. So in the end, yeah, maybe we'll have to pay for those services, but

01:03:29   maybe those services will all be better. I know, follow me here, I mean, if Apple, if

01:03:34   If they're lousy and Apple's only getting them because of platform lock-in, then it's

01:03:37   a different story.

01:03:38   But if they're good, maybe the reason they're good is because Apple actually has business

01:03:43   reasons to focus on this and care about it that maybe they didn't have when services

01:03:48   were just an afterthought to hardware and software.

01:03:51   Yeah, I think in the past Apple services have been like, "Okay, you're in the platform.

01:03:55   Let's give you something."

01:03:57   But there is a potential now that it's about to start to change into Apple trying to create

01:04:03   competitive advantage which I don't think that they've ever particularly really driven

01:04:08   for especially with like the add-on services right you know like email and like all the

01:04:13   iCloud stuff things like that I don't think that Apple is really seriously driven to beat

01:04:19   Google or whatever in these in these services but I think that that is becoming more and

01:04:24   more of a thing that they know they have to do and they're trying to you know they're

01:04:28   trying to compete in their own way right privacy being one of them and stuff like that right

01:04:32   Apple's trying to find their competitive advantage, but for me it doesn't matter what it is because as long as it's good then I'm I'm happy

01:04:38   Because I will say that the services that I use of apples have been consistently better and better over time

01:04:45   - and I think that that's a great thing because I think it has been an off repeated phrase that their services suck

01:04:51   Right because they have in the past and like that there has been a consistent

01:04:56   Mistrust at giving Apple anything important like photos, right? Everyone was really scared

01:05:01   it

01:05:08   I don't think there's been any widespread problems like Apple's had in the past. So

01:05:13   I think this is a good thing for the Apple user. And honestly, I don't care who my money

01:05:17   is going to as long as the service is good, which I'm getting, right? I don't care if

01:05:23   it's Apple or Spotify as long as it's good. So Apple getting my money for my music, that

01:05:28   works great for me. Apple Music is perfectly fine. It's everything I want out of a music

01:05:31   streaming service. I've been a happy customer.

01:05:33   Yeah, I think the only challenge is when Apple erects these walls to make it difficult for

01:05:38   you to use as competitors and then tries to make money off of you because it's

01:05:42   it's more I would like to see Apple compete and yes there are always going

01:05:46   to be cases where Apple can be better integrated than the competition because

01:05:49   Apple can go deeper down into the operating systems but it still bugs me

01:05:53   when Apple when it feels like Apple is creating barriers to its competition

01:05:59   that the walls are not specifically to give Apple music better function but to

01:06:04   to make it better than the competitors

01:06:09   just by not giving them those functions, right?

01:06:11   Is kind of what you say.

01:06:12   - Right, right, yeah.

01:06:12   I mean, like a good example would be,

01:06:14   so on the phone, Google Photos and Dropbox

01:06:21   and anybody else, they can't sync all of your photos

01:06:25   automatically to the cloud.

01:06:27   - You have to open the app every now and then.

01:06:28   - Because the app, if the app's not running,

01:06:30   it can't do a background sync.

01:06:32   It just, it can't.

01:06:33   and it probably should be able to do that, right?

01:06:38   They should be able to compete on that point

01:06:39   because for some people that will be the difference

01:06:41   between using Google Photos and using iCloud Photo Library

01:06:44   is that you can't reliably trust that,

01:06:48   well, no, I went out and I took a bunch of photos

01:06:50   and now I open Google Photo Library on my Mac

01:06:55   and the photos aren't there.

01:06:56   And I have to go get my phone and open Google

01:06:58   and then have it upload all the photos

01:07:00   and then they show up, that's really bad.

01:07:01   and on Apple's thing, that's not the case.

01:07:05   That said, there are other places where,

01:07:07   like on the Mac is a good example,

01:07:09   where sometimes the third parties can play

01:07:12   because the Mac is open to all of that stuff

01:07:15   and they don't or they do a bad job.

01:07:17   And so what it suggests to me is that if you did it on iOS,

01:07:22   the same rules might apply,

01:07:23   that Apple would be allowing their platform to be good

01:07:27   for people who wanna use the competition,

01:07:28   but that Apple could just beat them at the game.

01:07:31   And that's a better way to compete.

01:07:33   So that's my only hesitation here,

01:07:35   is I get why from a competitive standpoint,

01:07:39   you'd wanna put barriers between you and the competition

01:07:42   using your advantages as the platform owner,

01:07:44   but I would rather Apple compete by building good services

01:07:49   than by building mediocre services

01:07:52   that are only better than the competition

01:07:54   because the competition doesn't have

01:07:56   the platform owner access that Apple has.

01:08:00   - Feels like cheating.

01:08:01   - It does, but this is the game.

01:08:02   I mean, a lot of people play it.

01:08:04   A lot of companies play it.

01:08:05   Like their advantage is that they own the platform

01:08:08   and this is one of the ways they make money off of it

01:08:11   is being able to have that.

01:08:12   But yeah, it does feel like cheating

01:08:14   because it reduces customer choice

01:08:16   and it makes it not a fair competition.

01:08:21   And I don't love that.

01:08:24   I think I'd rather have Apple's products be good

01:08:27   and win me over by being good.

01:08:29   Like if Google Photos did all that syncing on iOS,

01:08:34   would I use Google Photos instead of iCloud Photo Library?

01:08:37   Honestly not, because on the Mac,

01:08:39   I vastly prefer using Photos

01:08:41   to using the Google Photos web client at this point.

01:08:45   Maybe my opinion would change and I would switch,

01:08:48   but that would probably hold me back,

01:08:51   even if that sync was reliable.

01:08:54   I might have to agree with you there actually.

01:08:55   Like whilst I find Google Photos searching and memory type features to be

01:09:00   superior, um, the,

01:09:02   the fact that they don't have like a good native app where I can just browse my

01:09:06   photos, that's a frustration for me.

01:09:08   I don't like going through the web for that. I like there to be an app.

01:09:10   I agree.

01:09:12   Even though, you know, the photos app annoys me in some ways,

01:09:15   like the fact that you can't drag a photo from the photos app directly into an

01:09:19   application has to go to the desktop first. It really annoys me.

01:09:22   That is a frustration that I find quite frequently.

01:09:26   Just kind of like the web in that regard.

01:09:27   So wearables, so Apple spent a bit of time

01:09:30   talking about wearables.

01:09:31   I got some quotes from Tim here.

01:09:33   Talking about the watch, the watch area is really hard.

01:09:35   In essence, from an engineering point of view,

01:09:37   it's similar to a phone in terms of the intricacies.

01:09:40   So I'm not very surprised that some people

01:09:42   are falling out of the business.

01:09:43   We're very committed to it and we believe

01:09:45   that it's already a big business

01:09:46   and believe that over time it will be even larger.

01:09:48   We saw the watch as a really key product category for us

01:09:51   before we launched it.

01:09:52   We took our time to get it right and made it even better with series two.

01:09:55   We're proud of the growth of the business.

01:09:57   Watch units more than doubled in six of their top 10 markets in the quarter."

01:10:01   That is a big surprise, right?

01:10:05   Doubling of sales?

01:10:08   I don't know who can tell with the details of what those markets are.

01:10:12   Right, so it could have gone from one to two.

01:10:14   Yeah, yeah, I get you.

01:10:16   But yeah, it's surprising other than the fact that maybe they were…

01:10:20   I keep going to think like, well, were they supply constrained to those markets?

01:10:24   Like are those, did those markets not get very many series twos?

01:10:27   And that's why they had to wait for this next quarter in order for the sales to

01:10:32   double where the sales suppressed in those markets.

01:10:34   And then they jumped up.

01:10:34   We don't know.

01:10:35   Cause we don't know any of the details.

01:10:37   They're definitely putting the most positive spin on it.

01:10:39   They can while not having a broad superlative to use for the watch.

01:10:43   You know, they didn't say that the sales were up because they were probably down

01:10:48   year over year and sequentially from the holiday quarter.

01:10:51   So instead we got the cherry picked sort of six of top 10

01:10:55   'cause they wanna say something positive.

01:10:57   Even though we can't really charge it.

01:10:58   But I like the way they're framing it here

01:11:02   'cause they're basically,

01:11:03   the question that people, somebody asked was basically,

01:11:05   this is hard,

01:11:06   your competitors have really struggled here.

01:11:08   And Cook agreed and said, yes, it is very hard.

01:11:12   I'm not surprised that people are bailing out on this thing.

01:11:15   They thought it would be easy and it's not,

01:11:17   but we're committed. We think this is a good business.

01:11:20   We think it's going to keep growing and we're happy with where we are.

01:11:23   And that's, you know, that's, I think if you had told me to predict the Apple

01:11:30   watch trajectory a couple of years ago, I think I feel like I would have

01:11:34   guessed something like this, which is everybody rushes in.

01:11:37   Most of them realize that it's not going to work and they bail out.

01:11:40   Apple kind of motors away, takes its time and is doing fairly well.

01:11:45   and everybody's disappointed because they thought it would be a huge product when it

01:11:50   was never going to be.

01:11:54   They did what they always do. Apple loved to do this and Alice liked to do this because

01:11:58   it is interesting to try and look at what slices of Apple's business could be Fortune

01:12:02   500 companies all by themselves, right? Because there's so much money flowing through the

01:12:06   company. And Cook said that combining the Apple Watch, AirPods and Beats sales for the

01:12:11   last 12 months and it is that size. It would make a Fortune 500 company all by itself.

01:12:16   And this was the first full quarter of AirPods sales. So it looks like, I guess it looks

01:12:22   like AirPods and the watch are doing well enough that the sales continue. I can't imagine,

01:12:28   you know, I know that Beats sells well, but I don't think Beats have had like a big blockbuster

01:12:33   product that would have pushed them particularly higher than normal. At least nothing that

01:12:38   I am familiar with and I feel like I would be more familiar with Beats product launches

01:12:42   now than before, right, because Apple owns them. So it would get into my purview a bit

01:12:46   more. So I guess, you know, AirPods do seem like a hot product. They're still really

01:12:50   hard to get a hold of. And I guess watches are selling, right, and they're selling

01:12:55   more in some areas for whatever reason. So this does seem like an area for Apple that

01:13:01   there is continued growth as well in their wearable category, which would be this.

01:13:06   I think that's rolling this all into wearables, I think is the right thing to do. And I think

01:13:11   it's, it's notable that Apple does it talking about beats and talking about AirPods, that

01:13:16   Apple is viewing wearable technology as a category with growth. And when you think about

01:13:21   it that way, then the watch stops being like, Oh my God, is it the next iPhone? And becomes,

01:13:26   you know, one in a constellation of wearables, one in that collection of things that you

01:13:34   They're very small, miniaturized, limited by where they are and what they're used for,

01:13:42   but still a great opportunity for Apple. And so in your ears, on your wrist, absolutely.

01:13:48   That's part of the thing. And presumably someday feeding information into your eyes down the

01:13:54   road.

01:13:56   So they were the things that you picked out as kind of the areas of interest. And I think

01:14:00   that there is a lot of stuff there, right,

01:14:02   which we can look at some of these things

01:14:04   like where is Apple gonna go, right?

01:14:06   China and India.

01:14:07   So I think that especially for China, right,

01:14:09   that they're gonna, I think more than anything

01:14:11   that says they're gonna try their darndest

01:14:13   to make an iPhone that looks different, right,

01:14:15   because I think that they really wanna make sure

01:14:17   they get some of those sales back.

01:14:18   India, I guess, that they wanna make sure

01:14:21   that they continue to have a lot of iPhones to sell

01:14:24   in all different price points, right?

01:14:25   I think that that's a key thing for that.

01:14:27   And you know, I think that they are key parts

01:14:31   that inform Apple's decisions is they want

01:14:34   to sell more iPhones.

01:14:36   Well, the markets that they're mature in,

01:14:38   it's just gonna continue to go as it's been going.

01:14:41   And they want to sell more of them,

01:14:42   so they have to sell them to these countries.

01:14:43   And I think that that continues to push

01:14:45   where their business is going.

01:14:47   Talk about the iPad.

01:14:50   - Yeah, sure.

01:14:51   Feeling okay?

01:14:53   - Not really.

01:14:54   Am I right that this is the record worst quarter in unit sales? I mean I was looking at some

01:14:59   charts and it seems like everybody's charts don't have a lower unit sale quarter than

01:15:04   this.

01:15:05   I think it's not a record low but it's their lowest in what, six years? Something like

01:15:13   that?

01:15:14   That's not good.

01:15:15   Let me look at iPad units. iPad units.

01:15:19   You got your big charts here.

01:15:21   They sold 8, what, 8.8 million iPads.

01:15:26   The last time they sold fewer iPads was quarter two of 11, so six years ago.

01:15:33   Six years ago they sold 4.6.

01:15:37   But that wasn't low then though, was it, really?

01:15:40   Just the first year of iPad sales, just to put this in perspective, the first year was

01:15:44   3.2, 4.1, 7.3, that was the holiday quarter, and 4.6 or 4.7 I guess. And at that point

01:15:53   the third quarter of 11 it shot up to 9.2. It has not been down to that down

01:16:00   below 9 since then until now. So not in absolute terms but I think that it would

01:16:10   not be incorrect to call this the worst iPad sales quarter of all time because

01:16:15   it's not the lowest number but it's it's gotten to a point now where it hasn't

01:16:23   been this low since there was one product and it just come out right yeah

01:16:28   I mean I could argue that the worst quarters were ones where the year-over-year

01:16:34   year decline was huge, but you could also just argue units and point at the units and

01:16:41   say, "Not since this product's first year of existence did it sell as few as it sold

01:16:46   in the last three months."

01:16:47   All right, so the downturn is not over.

01:16:53   Nope.

01:16:54   It's not over.

01:16:55   The situation is not improving.

01:16:57   There are some silver linings, but like, I think it's straws that we're clashing

01:17:02   at this point.

01:17:03   - Well, I had to laugh when Luca Maestri, the CFO said

01:17:07   about the 8.9 million units sold,

01:17:09   that it was ahead of expectations.

01:17:11   That made me laugh.

01:17:13   - I mean, you can keep saying that.

01:17:14   I mean, why don't you tell us the expectations?

01:17:16   - Well, what it means is that Apple thought

01:17:18   that it would be even worse.

01:17:20   And they're like, oh, look,

01:17:21   it wasn't quite as terrible as we thought.

01:17:23   And despite supply constraints,

01:17:25   which is part of it too, right?

01:17:26   Which also means that Apple didn't make as many

01:17:30   as they could have perhaps sold.

01:17:34   Now the question there is, is that because Apple

01:17:36   just doesn't wanna make these iPads that aren't selling well

01:17:38   or does it mean that they're working on new iPads

01:17:42   and they will be out there?

01:17:43   My guess is it's the first one of those.

01:17:45   It's that Apple like didn't make too many iPads

01:17:48   'cause they figured they wouldn't sell

01:17:49   and then they ended up having some supply constraints.

01:17:52   - I kind of don't take the supply constraints excuse.

01:17:55   - Well, what it means is that there were cases

01:17:59   where they didn't have them to sell,

01:18:02   but the reason they didn't have them to sell

01:18:03   is because they thought that they wouldn't sell.

01:18:05   - Right, but what would you have, 8.95?

01:18:08   How many more, honestly, was it?

01:18:10   - Who knows?

01:18:11   But I think the point there is that Apple

01:18:15   low-balled the iPad too.

01:18:16   Even Apple didn't expect it to be particularly successful.

01:18:20   And yeah, I also chuckled ruefully at Luca

01:18:25   saying the iPad is very successful

01:18:28   in the segment of market in which we compete $200 and up.

01:18:31   And what he's basically saying there is,

01:18:34   look, it's not just us, it's the whole tablet market.

01:18:37   And the part of the tablet market that we compete in,

01:18:39   we own, which is all true.

01:18:42   But again, if the whole market is falling apart,

01:18:47   then congratulations on owning it.

01:18:52   I don't know.

01:18:53   - Well, another market that Apple owns is the watch, right?

01:18:57   they own the smartwatch market but nobody is calling the smartwatch market or attempting

01:19:03   to call that the future of computing. So it's like, alright, great, you own that market

01:19:10   but it's not a big one right now. So if 8.9 million units is owning that market for you,

01:19:17   that's very small compared to some of the other markets that you're attempting to play

01:19:20   in. The Mac sells 4.2 or whatever but Apple's not walking around claiming to own the smartwatch

01:19:27   the computer market, right? But anyway…

01:19:31   Well but Apple's percentage of the tablet market is vastly, vastly, vastly higher than

01:19:36   the PC market.

01:19:38   I agree that that's true, I'm sure that it's true, but like at a certain point these

01:19:44   are just things they can just keep saying as a way to try and hide the fact that things

01:19:48   are continuing to decline. These are all facts, I believe that, but like at a certain point

01:19:54   you have to say something different.

01:19:56   There was one different thing this time,

01:19:58   is that iPad sales grew year over year in the US,

01:20:01   quarter over quarter.

01:20:03   And that apparently large iPad sales grew year over year.

01:20:06   This is some stuff that came out.

01:20:07   I don't really know what large iPad means,

01:20:10   like does that mean the 12.9?

01:20:11   Does it mean from 9.7 up?

01:20:13   Like what does that mean?

01:20:14   It's a weird thing to say.

01:20:15   I mean so there is something there, right?

01:20:18   That there are some markets where it's growing,

01:20:20   but it continues to not.

01:20:21   I mean, what have I got to say at this point?

01:20:24   release new models and see what happens? I don't know.

01:20:28   - I think the idea is they need to do new models

01:20:33   and new updates to iOS that help drive the pro side

01:20:40   of the business and they need to go through a holiday quarter

01:20:45   with that new 329 iPad and then we'll see.

01:20:51   I think they could be, I think just off the top of my head

01:20:55   here, I think that given the 329 iPad and given the changes

01:21:00   that they may make with iOS 11 and new models,

01:21:04   let's say in the fall, that it's possible that

01:21:09   the holiday quarter 2017 will be a huge iPad success.

01:21:15   - Oh, Jason, don't do this to me.

01:21:20   Now, well, here's the thing.

01:21:23   Is an iPad success a success?

01:21:26   Or by putting an iPad in front of it,

01:21:28   have I just lowered the bar so low that it's like,

01:21:31   is it still alive?

01:21:32   Yay, it's a success.

01:21:34   I don't know.

01:21:34   But I'm just saying, I think 329 iPads will be a much better

01:21:37   product for the holidays.

01:21:38   I think it'll be a better product for the education

01:21:41   selling season, too, for them.

01:21:42   And so I think that'll all be good.

01:21:44   And that if they have new iPad Pro models as well

01:21:46   that come out in the fall, then they're

01:21:48   refreshing that along with the iOS updates that will also potentially spur

01:21:53   some sales because those products presumably especially if there's that

01:21:57   rumored high resolution iPad Pro that's in that 10.5 area with reduced bezels

01:22:03   perhaps that we've been talking about for ages now and still doesn't exist.

01:22:08   You know, I think Apple is on the road to figuring out how to properly

01:22:13   sell iPad models and differentiate them, but the market will have to like actually judge them. And

01:22:19   they're not there yet. They're just not there yet. But I think they're doing, I think, I think

01:22:23   they're doing some stuff like that 329 iPad, I really do believe will pay off for them come

01:22:28   the fall. But, you know, again, to what, to what level, our guess about what the, what the

01:22:34   turnaround of the iPad looks like, our, our, our expectations continue to be diminished, right?

01:22:39   Like, declaring victory now is way easier than it would have been two years ago, right?

01:22:45   Or a year and a half ago or a year ago, because we keep drawing a lot.

01:22:49   You know, the bar keeps being lowered and we keep hoping that the iPad will clear it,

01:22:52   and it has still failed to clear it.

01:22:54   - It makes me sad.

01:22:56   - Yeah, me too.

01:22:59   I love my iPad Pro and I use it all the time.

01:23:04   And I don't love the fact that it as a product category seems to not be doing

01:23:11   well, right?

01:23:11   Like I, you start to have those thoughts about, I mean, I don't want to say this,

01:23:16   but at some point I think it might be worth having the conversation.

01:23:20   Not today, but I'm just going to put it out there.

01:23:23   Like if you're Apple at some point, do you say, okay, it didn't work.

01:23:30   Let's just update the Mac to be more iPad.

01:23:33   like? At some point do you do that? I think there are lots of arguments, it's a huge

01:23:39   argument and I think there are lots of arguments against it, but at some point

01:23:42   do you have to look at the sales numbers for the iPad and say, "People don't want

01:23:48   this." I don't know. I don't know. That's where I'm feeling right now is that as a

01:23:54   user of it I'm starting to get that little tingle in the back of my

01:23:58   head that's like, "Oh no, what if I love a product that is doomed?"

01:24:03   I still feel like we're far away from that. Yeah, we're not close yet, but if I'm Apple

01:24:08   and I'm looking at a few years, you gotta have contingency plans, right? At some point

01:24:12   do you have to make at least make the argument internally and maybe they have and they've

01:24:16   resolved this. But you gotta make that argument like, "What if this just is a product category

01:24:24   that is largely rejected by the market and it's got a niche audience that's great and

01:24:28   we might as well keep it around

01:24:29   because we gotta update iOS anyway,

01:24:32   but you can make some arguments about like,

01:24:33   why are we investing in Pro features or iOS?

01:24:35   Instead, we should just put more work into macOS stuff.

01:24:39   I have a hard time believing that myself.

01:24:41   I kind of can't even say that with a straight face,

01:24:43   but I look at the iPad Pro numbers and it's just like,

01:24:46   ouch.

01:24:49   Cheer up, Myke, cheer up.

01:24:50   - There's only one thing that can cheer me up

01:24:52   and it's ask upgrade.

01:24:53   But before we do that,

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01:26:28   creme fresh sauce or maybe even three cheese and baby broccoli stromboli with tomato and

01:26:34   oregano dipping sauce. Jason, it is too close to dinner time here in London.

01:26:38   Yeah, I know. I had the first one of those with the snap peas and the beef and the rice.

01:26:42   It was really good.

01:26:43   sounds so good. In fact I had the leftovers. My daughter wasn't here, she was traveling

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01:27:29   Ask Upgrade time! John would like to know, "Any magic tips Jason to get photos on my

01:27:35   iPhone to use less storage? I already have optimized storage turned on and it's currently

01:27:41   taking up 12 gigabytes of space.

01:27:44   The way it works right now is it waits until your disk is full or like a 10% of capacity

01:27:53   and then it starts deleting things.

01:27:55   So you kind of just have to keep pushing it, right? Don't worry about it. Keep pushing

01:27:59   it.

01:28:00   question is why do you want to do this? Because in theory if you keep trying to

01:28:07   add more things to your iPhone it should then start deleting things from photos

01:28:13   in order to optimize storage. I think the reality is that there may be some apps

01:28:17   where you try to drag in a bunch of things from the Mac or you try to import

01:28:21   something and then it says "oh no I can't that's a huge file I don't have enough

01:28:24   room" but I think the idea is anyway that as you accumulate new data it's waiting

01:28:29   for it to go over that threshold.

01:28:31   And when it does, it does a bunch of cleanup.

01:28:32   And if you have more and more data, it does more cleanup,

01:28:35   and it's supposed to keep it so that you've got

01:28:37   sort of 10% free, which is the same thing on the Mac

01:28:40   is how it's supposed to work.

01:28:41   Now, I agree, it's really frustrating.

01:28:44   And on the Mac, I've had it happen

01:28:46   where I've tried to copy a big file and it said,

01:28:47   oh no, this is too big.

01:28:48   I've been told by Apple that that's a bug

01:28:50   and I actually haven't seen that recently in Sierra.

01:28:53   I imagine the same sort of thing is going on in iOS.

01:28:55   So, you know, I have no doubt that there are cases

01:28:58   where bugs creep in, where apps are not looking

01:29:01   at the right way of handling storage

01:29:03   and that you get a, your phone feels full when it's not.

01:29:08   But the way it's supposed to work

01:29:10   is that that optimized photo library

01:29:13   should be deleted,

01:29:17   items from it will be deleted on the fly

01:29:19   as you need the space.

01:29:20   That's how it's supposed to work.

01:29:21   And there is no UI for it.

01:29:23   You can't delete those photos any other way.

01:29:28   So you have to just trust that it's doing it right.

01:29:29   So I guess, Jon, if you're having problems,

01:29:31   it's not doing it right.

01:29:32   And there's nothing you can do about it, unfortunately,

01:29:35   which kind of sucks, if that's the case.

01:29:37   Todd asked, do you see a future

01:29:40   where workouts recorded on the Apple Watch

01:29:42   could appear somewhere like iCloud.com,

01:29:45   as alongside Notes and Contacts?

01:29:46   And also, do workouts sync anywhere

01:29:49   other than between the one iPhone and Watch?

01:29:51   So as far as I'm aware, they do not sync anywhere else,

01:29:54   right, and you know, people, we always talk about this

01:29:56   when we do our, I think now famed or infamous, I guess,

01:30:01   upgrade episodes where we get our new devices

01:30:04   and have myriad problems.

01:30:06   None of this workout data or health data sinks anywhere,

01:30:09   so it's possible to lose some of it

01:30:11   during an upgrade process.

01:30:13   I think I would like to see a world in which Apple

01:30:17   works out a way to sync this data.

01:30:19   I just don't think that they will do it

01:30:22   in the near future, at least,

01:30:24   because of the way that they try and worry about privacy

01:30:28   and what they say about privacy and do about privacy.

01:30:30   - Yeah, it's personal health data,

01:30:34   so they would need a way to do it,

01:30:35   but at the same time I see the value of it.

01:30:38   So yeah, yeah, I would like to see them

01:30:44   be able to do something with it,

01:30:45   but I don't know if that'll happen.

01:30:47   - There are applications that allow you

01:30:50   to export your health data,

01:30:52   So you can like take your current,

01:30:54   all of the health data you have,

01:30:56   export that to a cloud service

01:30:58   and then import it back in again, right?

01:31:00   Or there are apps.

01:31:01   So when you're switching from phone to phone,

01:31:03   you don't lose the data.

01:31:05   So you can do that,

01:31:06   but it's not necessarily the workout stuff specifically.

01:31:09   So that is an option.

01:31:10   And I'll put a link in the show notes to an article,

01:31:12   again on Mac stories.

01:31:14   Federico and John again, a bunch of links from us today.

01:31:16   They do good work there.

01:31:18   And so you can,

01:31:19   there are apps that can allow you to do that

01:31:21   when you're kind of going through the upgrade cycle,

01:31:23   or if you just want a backup of it just in case.

01:31:25   But it doesn't sync anywhere right now.

01:31:28   So Steven asked, "I've always been nervous

01:31:31   to use a password manager like LastPass or 1Password

01:31:34   because I don't want to get hacked.

01:31:36   Any insight into this?"

01:31:37   - I mean, you're more likely to get hacked

01:31:41   by using bad passwords than you are

01:31:44   by using a service like this.

01:31:45   There was a hack, I think, for LastPass at one point.

01:31:48   I would say, I know at least 1Password,

01:31:52   you don't have to use their sync service.

01:31:53   You can put it on your own Dropbox or even not sync it,

01:31:56   although it's a lot less convenient if you don't sync it,

01:31:58   'cause then you don't have access

01:31:59   to it on your mobile devices.

01:32:00   But you can sync, I sync my 1Password on Dropbox.

01:32:05   So I am now just relying on Dropbox,

01:32:07   which I trust and that's just, you know,

01:32:10   I made that decision because I want the convenience

01:32:13   of having those passwords everywhere.

01:32:14   Also, I don't know about the details of LastPass.

01:32:17   I know one password, even if you got to the data,

01:32:19   it's an encrypted bundle, so it needs your password

01:32:23   in order to get to the encrypted files.

01:32:25   So even if you broke into my Dropbox,

01:32:27   you couldn't actually read my password file

01:32:28   unless you also had my password for that encrypted bundle,

01:32:33   or you could break the encryption,

01:32:34   which I am pretty confident you can't.

01:32:36   So you know what, if you're super paranoid, I get it,

01:32:41   but I don't see how not using a password

01:32:46   will ever be more secure.

01:32:49   Because you're either gonna have weak passwords

01:32:51   or you're gonna write them down

01:32:52   and then you've got written down passwords

01:32:54   that could be stolen by somebody physically.

01:32:56   So unless you're a hermit living far away

01:33:00   and you keep your passwords on a piece of paper

01:33:02   in a lockbox or something, maybe in a safe.

01:33:07   But I think in most scenarios,

01:33:09   you're safer off using a password manager

01:33:11   because then you can use strong passwords

01:33:13   and they're different everywhere

01:33:14   and you don't have to remember them or write them down.

01:33:18   - Now, I don't know if they still do,

01:33:20   but I believe that, I know that they used to,

01:33:23   but 1Password used to do Wi-Fi syncing.

01:33:26   Yeah, it still does.

01:33:28   So you don't have to use any cloud service at all.

01:33:33   - They all just talk on your local network

01:33:34   and share their data that way.

01:33:36   Yeah, see, there you go.

01:33:37   So there are options.

01:33:39   You have options that are not putting your passwords

01:33:42   even encrypted in a cloud service somewhere.

01:33:45   - So it's worth checking that out.

01:33:48   So you can sync your Mac or Windows PC

01:33:50   with your iOS or Android devices.

01:33:52   You have to use one of them as like a,

01:33:53   becomes the WLAN server.

01:33:56   You can set that up and you can do that.

01:33:58   So that is an option.

01:33:59   I understand the idea of like having concern

01:34:04   about using the, like the online component

01:34:09   of these services.

01:34:10   Like I get that.

01:34:10   As you say Jason, the encryption is so hard to break, probably impossible.

01:34:15   So I understand, you want to create the security, why would you create an account with them?

01:34:22   So I keep my stuff, I do actually use, we use 1Password for Teams, I'm happy with that.

01:34:28   But other than that I use Dropbox for my personal stuff.

01:34:32   But if you're really security conscious, like super security conscious, you should use something like a password manager

01:34:37   like I said, allows you to create these super strong passwords, right? Because otherwise,

01:34:42   you're already security conscious, have strong passwords, different ones in different places.

01:34:47   Just use Wi-Fi syncing and you'll be good to go. In theory. I never want to say that

01:34:52   for definite. Chris asked, "Do you think that we'll see a new Magic Trackpad this year?

01:34:56   What new features would you expect to see, if any?" I mean, new features, the Magic Trackpad,

01:35:00   I guess like bigger, right? Like isn't the one on the MacBook Pro bigger than this?

01:35:05   then the current Magic Trackpad is not?

01:35:07   I don't think so, no.

01:35:09   Well I guess it's the only thing you could do, I can't think of features

01:35:11   that would go into the Magic Trackpad.

01:35:13   Well, I mean, Touch ID.

01:35:15   You think I'd go into the Trackpad?

01:35:17   I guess, yeah, maybe.

01:35:19   I always figured keyboard for that,

01:35:21   but yeah I'd prefer it on the Trackpad

01:35:23   because I don't want to use Apple Keyboard

01:35:25   because I like the ergonomic keyboard that I have.

01:35:27   So that might be kind of nice.

01:35:29   I don't know. I would...

01:35:31   I wouldn't put money on it

01:35:33   on it because I think it's more likely than not

01:35:36   that they just won't.

01:35:38   But I am intrigued by the idea of Touch ID

01:35:41   coming to Apple input devices for other Apple devices.

01:35:45   And yes, part of it is me wanting,

01:35:48   I would rather buy a new Magic Trackpad with Touch ID

01:35:51   than use a new Apple keyboard with Touch ID

01:35:53   because I like my keyboard

01:35:55   and I don't wanna use a different keyboard,

01:35:57   but I would upgrade my trackpad to Touch ID.

01:36:01   So that's what I'm gonna,

01:36:03   hang my hopes on, but I don't think it's,

01:36:06   I think it's not likely only because Apple updates

01:36:10   their input devices outside of integrated input devices

01:36:14   in computers very rarely.

01:36:16   - And let's just say before people write in,

01:36:18   we don't think the touch bar is gonna go

01:36:19   onto the track pad, right?

01:36:20   - It would have to be a completely different orientation,

01:36:24   which would seem kind of wacky.

01:36:25   I love the idea of the touch bar on the track pad.

01:36:27   I think that that would be a great place for it,

01:36:29   but the touch bar is so wide that this would be a complete,

01:36:32   you'd have to have like a separate layout for this device versus that and I

01:36:37   have a hard time seeing Apple breaking the touch bar platform you know in two

01:36:42   and having everybody have to optimize twice for touch bar I can't see it.

01:36:47   And finally today Oplez asked any recommended shipping track link app that

01:36:52   will work with multiple carriers? Deliveries by June cloud.

01:36:56   That's the app you want.

01:36:57   Yep, I use deliveries.

01:36:58   Yep.

01:36:59   iPhone, iPad, Mac.

01:37:00   You can go have a load of fun with that application.

01:37:04   I use it, it's great.

01:37:06   It's the one to use.

01:37:07   I actually don't even know of any of it because I've used deliveries for so long.

01:37:10   That's the one to go for.

01:37:11   It's on all the great platforms.

01:37:13   They even have a watch app.

01:37:15   All the great platforms.

01:37:16   All the great platforms.

01:37:17   If you want to submit some questions for #AskUpgrade, just tweet with the hashtag #AskUpgrade and

01:37:22   we can try our best to help you out or provide insight into the thing that you're thinking

01:37:26   of. If you have a Snell Talk question for me to ask Jason at the top of the show, just

01:37:31   to find out what's going on in Jason's life, just send a tweet with the hashtag Snell Talk

01:37:36   and we'll do our best to answer those questions for you. Well I'll ask them, Jason will answer

01:37:40   them. Thanks again to our sponsors this week, Blue Apron, Encapsula and Mac Weldon. If you

01:37:46   If you want to find Jason online, he's over at SixColors.com, he's @JasonL on Twitter,

01:37:51   J-S-N-E-double-L, and he's the host of the brand new show on Relay FM called Download,

01:37:56   which you should go and check out. You get upgrades, start your week, download, finish

01:38:00   it. We get, we tee it up, download, brings you down to the, to the, get in everything

01:38:04   you need to know about what's happened in the week of technology.

01:38:07   We're not going to bring you down, though. You're going to be happy and fulfilled, not

01:38:10   sad. I'm trying to find up and down, you know.

01:38:12   Yeah, I get it. Let's tee up and then, I don't know.

01:38:15   It's going to take lots of great information and download it right into your brain.

01:38:18   And that's how you end your week.

01:38:19   Funnily enough, you're much better at pitching your show than I am.

01:38:23   I am @imike, I am YKE.

01:38:26   This show is over at Relay FM, you can go to relay.fm/upgrade/140 to find out everything

01:38:31   you need to know about this week's episode, including a bunch of links to all the stuff

01:38:34   that we have discussed.

01:38:36   Upgrade-ians out there, thank you for listening, we'll be back next time.

01:38:39   Until then, say goodbye, Mr. Snell.

01:38:41   Doo doo doo doo!

01:38:43   Goodbye!

01:38:44   Lord Amazon has left the building.

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