How much more are we willing to pay Apple for the things we love?

For nearly a decade, Apple has been steadily increasing its services revenue, not just from its deal with Google for its search engine and its share of App Store revenue, but from everything from AppleCare support plans to iCloud storage to TV+, News+, and Fitness+. In its most recent quarter, Apple generated more revenue from services than from its Mac, iPad, and wearables categories combined. Its total services profit is the closest it has to Apple’s total products profit.

Even though recent US court decisions threaten the quarter of revenue from services that comes directly from Google, a huge and growing share of Apple is still dedicated to selling services for our iPhones, iPads and Macs. It’s a great growth engine, which makes Wall Street happy. But what does the future hold for Apple’s services?

More content, more ads

The obvious areas where Apple could expand its services are add-on subscriptions. The problem is that Apple has already covered many of the most obvious categories with its TV, News, Arcade, and Fitness services.

Apple’s acquisition of the MLS League Pass add-on, however, shows the way forward. Sports rights are expensive, but in the case of League Pass, Apple isn’t using them to bolster its existing TV+ subscription. Instead, it’s a separate product that generates direct revenue. Most of the most popular sports rights in the US are locked up for the next few years, but I expect Apple to continue to be interested in sports – and, eventually, to do more than just show interest.

Jason Snell/SixColors.com

Jason Snell/SixColors.com

Jason Snell/SixColors.com

I’m a little surprised that Apple hasn’t focused more on live fitness classes with Fitness+. I like that Fitness+ has a bunch of pre-recorded workouts that I can do at my own pace, but many people (yes, Peloton fans) find regular, live, interactive workouts incredibly motivating. And these classes could be, much like MLS League Pass, an add-on subscription, either through a higher Fitness+ tier or on a per-class basis.

Apple is currently in trouble for its treatment of creators on Patreon, which acts as a facilitator for creators who want to connect with their audience in exchange for money. Never one to shy away from intruding on other companies’ domains, I wonder if Apple would consider creating some sort of tool for creators who will never develop their own apps to connect with their customers on Apple’s platforms, using Apple’s existing infrastructure. Perhaps it could use News+ as a vehicle? I disagree. ask that Apple is trying to remake Patreon itself or even saying it would be a good idea, but it does seem like something the company could try.

(As someone who participates in a few membership programs, Apple could really do with a more unified approach here. Apple Podcasts subscriptions aren’t bad, but they’re limited to podcast content when even podcast subscriptions typically offer ancillary material that Apple’s system can’t handle.)

Then there’s the advertising side. A very wise person told you a while ago that it was inevitable that Apple would expand its advertising efforts, including creating an ad tier for TV+. Ads generate revenue, and offering a cheaper tier of TV+ could also potentially help lower subscription prices. If the Google deal is a threat to Apple’s bottom line, it’s an opportunity to develop its own search engine technology and likely make money by placing ads in the results. Again, I don’t like the idea, but I can see Apple doing it.

Gray areas and crossing lines

Then there are the less traditional areas of subscription revenue, and this is where I have some concerns. When Apple announced iCloud+, which adds a bunch of features to your Apple devices (Private Relay, Hide My Email, HomeKit Secure Video, and custom email domains for iCloud Mail), it got my spider-sense going.

It makes sense for Apple to limit features that have obvious server-side costs to paying customers, but… isn’t that also creating new features of the operating system that are only available to paying subscribers? If iCloud+ doesn’t cross the line, I feel like it goes all the way. Do we want Apple to create a two-tiered user experience, where those who pay Apple monthly get a better experience than those who don’t?

There are two areas I’m keeping a close eye on when it comes to this sort of thing. The first is Apple’s iPhone satellite feature, which the company never promised would be free forever. I can see access to satellite features as an add-on service or an enhancement to Apple’s existing subscriptions, but does Apple dare prevent people in emergencies from calling for help because they haven’t paid for iCloud+? Probably not. (Although it could do something like charge users per incident if it really wanted to.)

The ability to send text messages via satellite, which is coming soon, has potential. It’s not a life-saving service, it’s just a convenience. It would be wiser to make it a paid service, or to grant it to iCloud+ or AppleOne subscribers.

Foundry

Foundry

Foundry

The big issue is Apple Intelligence. Like other iCloud+ services, there’s a serious, ongoing server component, namely the servers that run the Private Cloud Compute, which do the hard-to-do things on a device. Apple is sure to have its work cut out for it to roll out Apple Intelligence over the next year. But at some point, it’s questionable whether the company will offer a basic feature set for free and then offer a more comprehensive feature set to those who subscribe.

Remember why we are here

I have no problem with Apple getting into the services business. My only concern is that the company keeps its priorities in order. Apple’s services business exists because of its products business. It’s our attachment to our iPhones, Macs, and iPads—and the ecosystem that connects them—that makes Apple’s services so desirable.

This is why Apple has to be very careful about how it increases revenue from its services. The last thing Apple wants is for the public to believe that buying a new Apple product is somehow lesser or incomplete unless they sign up for an ongoing subscription. Buying an iPhone should never feel like buying an empty box with a subscription form inside.

In some ways, Apple’s approach to its iPhone’s satellite features might show the way forward: You get them for free. for two yearsNot forever. Bundling some features with the purchase of new hardware seems like a fair trade-off. If, after a few years, I want to keep my old device, I can start paying or unsubscribe. Or – even better for Apple – I can just buy a new device and eliminate all doubt.