Apple, the big brother, takes the lead in smartphones changing from hard to soft

Last week, Apple did something unconventional and released new hardware products on its official website for three consecutive days, setting a precedent in the industry. All of this was to make way for Apple's spring conference on the evening of March 25.

According to comprehensive media reports, Apple will most likely hold its first press conference in history without any new hardware products, and will focus on promoting video streaming services and news subscription services. Among them, the video streaming service will integrate the original content and subscription services of traditional video media platforms.

This shows that Apple's development focus is shifting from hardware to software services.

Apple increasingly relies on software services

Apple designs numerous hardware products, which have been the mainstay of its revenue for many years, with the iPhone taking more than 90% of profits in the mobile phone market.

However, in recent years, the iPhone has been lackluster in innovation and its sales have been declining. According to the fourth quarter financial report of 2018, Apple's revenue for the quarter was US$84.31 billion and its net profit was US$19.965 billion, down 0.5% from US$20.065 billion in the same period last year. iPhone sales in China, Japan and Europe have all declined, especially in China, where the decline was the most severe, with a year-on-year drop of 27%.

Under such circumstances, Apple has become increasingly dependent on software service revenue. In the fourth quarter of last year, software service revenue including Apple Music, AppStore and iTunes was US$10.875 billion, a year-on-year increase of 19%, becoming the second largest source of revenue after hardware.

Last fall, Apple released three iPhones, but the market response was disappointing. Apple had to cut prices several times in less than half a year to boost sluggish sales. Now Apple's situation is getting worse. The overall shrinkage of the mobile phone market is an irreversible trend. The competition for the limited market is more intense. Android players such as Huawei are eyeing Apple's market by moving up the market.

If Apple can enrich its software system services and content, it can strengthen user stickiness and prevent them from switching to the Android camp.

It is in this context that the video streaming service and news subscription service held a tailor-made launch conference, which can be considered a landmark event for Apple's transformation from a hardware company to an Internet company.

Apple wants to be a super content platform

Three or four years ago, Apple's only streaming platform was iTunes. Now, services such as Apple Music, Apple News, and Podcasts have been launched.

We don’t know what kind of surprises Apple will bring to Apple fans at the spring conference, but it is foreseeable that Apple’s charging strategy for content layout will remain unchanged. It is reported that Apple’s streaming service subscription standard will be as high as 30%, while the App Store’s share from other streaming applications such as HBO and Netflix is ​​only 15%.

In today's era of Internet information explosion, subscription services that help users discover high-quality content have certain value in themselves, and some users will pay for them. Therefore, in theory, there is no big problem for Apple to introduce differentiated charging. Getting users to pay for software applications has always been what Apple is good at.

In the long run, Apple is likely to learn from China's ByteDance or Weibo and build a super content hub to connect content from all parties, and then achieve scale revenue through models similar to information flow advertising. The essence of this model is based on user time. Apple has the most user time and super permissions at the operating system level, more than any other app.

Apple is about to build a new content distribution platform, just like China's ByteDance, connecting users and information and benefiting from it. The difference is that Apple will not focus on the advertising model in the initial stage, but will use the subscription payment model to realize its monetization, which will make media giants such as Netflix and Disney feel uneasy. They are worried that cooperating with Apple will not only hand over user information to Apple, but also lose the pricing power, which will bring worse results, and it is possible that they will become Apple's "senior employees".

The media's voice is declining in front of super content platforms. The core reason is that the content distribution rights have been transferred to a few large platforms. The number of reads of an article is determined by the platform's algorithms and editors. Users no longer directly connect with the media that produces the content. Apple also seems to have the ambition to become such a super content platform.

How many media giants will respond to Apple this time will be revealed tonight.

Mobile phone companies will "change from hard to soft"

Just a few days ago, Xiaomi, which calls itself an Internet company, launched a short video app called "Zhen Jing". Earlier, Xiaomi was also a player in the live broadcast market. Whether Xiaomi is making short videos or Apple is pushing streaming media services, it shows that mobile phone companies are not doing their main business and are doing the main business of Internet companies.

First, smartphone companies can provide an integrated experience by providing Internet services.

When iPhone users encounter crashes, they will first think of the App problem; when Android users encounter problems, even if it is an App problem, they will attribute it to the poor performance of the phone. From this point, we can see that the integration of software, hardware and content can bring a better user experience. As smartphones enter the stock era, mobile phone manufacturers have also entered the stage of refined operations from the previous extensive development. The once fragmented Android ecosystem is concentrating on top manufacturers such as OPPO, Huawei, vivo and Xiaomi, which is expected to end the fragmented state.

For the entire mobile phone industry, it has become a general trend to integrate more applications, content and services on top of hardware, continuously optimize user experience and increase product added value.

Secondly, smartphones can generate sustainable value by providing Internet services.

Since iOS 10, Apple has stepped up its integration efforts on content and service businesses such as Apple Music and Apple Pay. In absolute terms, its Internet service revenue has exceeded that of Facebook, making it an Internet service company.

Apple's today is Android's tomorrow.

In the past, Android phones’ cooperation with Internet companies was mostly pre-installing Internet companies’ apps. Pre-installing not only brings a bad experience, but also essentially helps others to do the wedding dress, which makes the “fat water flow to other people’s fields”. In the future, Android phones will not simply pre-install, but deeply integrate data, products, services and experience. In fact, such a trend is already happening. For example, OPPO and Xiaomi jointly invested in China’s information flow platform Yidian Zixun, which is comparable to Toutiao.

In the past, the core value of smartphones to the Internet was “distribution”: they distributed apps and the content and services they carried to users, and then left them alone. The value generated by Internet services had nothing to do with mobile phone manufacturers.

In the future, the value of smartphones to the Internet will be "integration". Through self-construction, investment and cooperation, Internet services will be deeply integrated into mobile phone systems to provide users with a seamless experience.

Mobile phone companies are increasingly providing payment, cloud storage, information, photo beautification and even e-commerce services. Now they are targeting short videos, live broadcasts, information streams and all Internet content service areas.

Through such measures, mobile phone manufacturers can get a share of Internet services and make up for the decline in smartphone hardware revenue. Perhaps it is for this reason that Lei Jun has emphasized in many places: Xiaomi is not only a mobile phone company, but also a mobile Internet company and a new retail company. If it is a mobile phone company, it is a one-stop business, and if it is an Internet company, it is to provide continuous services and obtain continuous value.

In the AI ​​era, integrating Internet services is something smartphones have to do.

The combination of AI and smartphones is a trend, and smartphones will become users' personal assistants. If smartphones want to use AI technology to provide users with intelligent assistant services, they need to deeply integrate services. Whether it is Siri on iOS, Huawei's EMUI AI assistant, or Samsung's Bixey assistant, the premise of a good experience is the effective integration of services.

In short, smartphone companies will become half Internet companies, and more mobile phone manufacturers will strengthen their Internet services.

But there is no doubt that as the leader of the smartphone industry, Apple's press conference tonight will have a strong symbolic significance for the industry. This is a watershed moment for the smartphone industry from the hardware era to the Internet era, and from hard to soft.