Apple’s Shifting Business Model Is A Signal

Mitch JoelPosted by

Access over ownership.

This is the new paradigm in consumer behavior. Don’t confuse the Apple news from this past Monday. This is not about streaming technology. This is not about subscription models. Consumers are willing to spend a monthly fee for access to a library of goods and services over paying a one-time fee for ownership of one particular good or service. This is great for the consumer (more access to  the stuff that they want). This is great for the brand (recurring and predictable revenue, ability to stay connected and to be relevant in the consumer’s life). We’ve seen this model work for Netflix and Amazon (think Amazon Prime) and countless others. All three of the new services that Apple brought to life this past week (Apple TV+, Apple News+ and Apple Arcade) are built on this same model. As for the Apple credit card? It still fits within the realm of what we’re seeing on the brand landscape. Lock consumers in with a monthly/frequent connection point.

It’s not just Apple.

Back in 2016, there was this article: Starbucks has more customer money on cards than many banks have in deposits. Storing money on the Starbucks app isn’t just convenient for consumers (with auto reloads, etc…), it is money that Starbucks now holds (it can use it to invest and beyond). From a business perspective, the stored and recurring fees make cash flow more manageable (and predictable). From a consumer standpoint, it’s all about ease, access and convenience. Point, swipe and infinite access/options seem to be the ideal business model moving forward. Buying individual songs, albums, movies (or renting them) has become (somewhat) antiquated. Apple didn’t just catch up with the times, it’s indicating to brands everywhere that consumers want access (and they don’t want to think about it).

This is less about brands and more about consumers.

Put streaming aside. Put subscription models aside. Consumer behavior is the big shift here. Much like the hurdle of getting a consumer to put their credit card online back in the early days of online shopping (we overcame that), we’re now seeing that the consumer’s desire to pay a monthly fee for access over ownership of an individual product or service is more about their behaviors than a business model. Still, within that behavior the subscription business model has truly evolved and come of age. One could even argue (I would), that this is an entirely new business line (and opportunity) for brands today. Is it a business line for every brand? It can (and should) be. What do you have to offer? It could be pre-sale information, post-sale connection points or a new way to close the sale. For some industries and brands, this may be challenge, while for others it may be obvious (just not a path that has yet to executed on).

These new business models work in mysterious ways.

Going back to the Starbucks example cited about, the output is that Starbucks is holding so much of their consumer’s cash that it’s not just about the company’s ability to utilize this funding to grow their business but (as is the case with Starbucks) that money is now greater than the entire GDP of many countries. Takes a deep breath, stop and think about that. A business model to make their consumer’s lives easier (and quicker) created an entirely new business model (auto-reloads), the ability to innovate (based on the excess cash that Starbuck’s now holds and is auto reload as needed), and this is more money than most countries generate. 

It’s staggering… and Apple is pushing it forward.

The business lessons are truly everywhere. Some saw the Apple news as a simple subscription model for services. Some saw it as a shift away from products and hardware. Some talked about their further push to monetize the cloud. This is much more than that. It’s an admission that consumer buying behavior has shifted, and it’s a power move by Apple to capture (and capitalize) on the revenue opportunities that have already been validated by countless other progressive brands.

What’s your play? 

Leave a Reply

Your email address will not be published. Required fields are marked *