A Closer Look at Apple One, Apple’s New Rumored Subscription Bundle

The iPhone maker wants a monogamous relationship with its customers.

Last week, Epic Games introduced a new method for players to purchase V-Bucks, the in-game currency in its popular game Fortnite. Instead of paying through the Play Store or App Store, players could save 20 percent with a direct payment to Epic. The move was messaged as an attempt to save players some cash. But Epic was also poking two of the biggest bears in technology.

As Samit Sarkar at Polygon explained, Apple and Google require that payments for in-app digital products be processed through their respective internal billing systems. Epic’s direct payment option was a deliberate ploy to foil Google and Apple’s developer guidelines — after all, it knew Fortnite would be removed from their marketplaces. And when it was, Epic immediately filed separate antitrust lawsuits against the two companies, with its ire especially focused on Apple, which has stricter rules than Google on external payment options.

But while gamers and the technorati debated the merits of the lawsuits and the ethics of the 30-percent fee Apple and Google collects on all purchases made within App Store and Play Store apps, Mark Gurman at Bloomberg broke another Apple-related story that marks a new chapter in the tech company’s evolution and is worth a closer look.

According to Gurman’s reporting, Apple is launching a series of bundles that will let customers subscribe to several of the company’s digital services at a lower monthly price. The product is named Apple One and could launch as early as October.

Gurman and his colleague Gerry Smith first reported last November that Apple was considering bundling services like News+, Apple TV+ and Apple Music to fuel its growth as the smartphone market stagnates. And months before their story was published, Scott Galloway, professor of marketing at NYU Stern and founder of Section4, predicted Apple would eventually develop a rundle — a recurring revenue bundle.

“There are three ways to add shareholder value and Apple has already mastered two of them. One is top-line growth, which is difficult at Apple’s size. The second is margin expansion, and Apple’s net margins have actually decreased as the firm’s flagship product, the iPhone, has lost some of its power and differentiation,” Galloway said to The Supercreator. “The third is to move from a transactional relationship with consumers to a [rundle]. Apple has all the makings for a compelling rundle: a loyal base of customers, highly relevant products and an emblematic brand.”

Anne Gherini made the case for the rundle in an Inc. article last year. The model encourages customers to buy more because of the perceived discount, which increases your business’s average order value (AOV). You can recoup costs from unpopular products by bundling them together in a package with your flagship offering. And you can even introduce new products to customers by coupling them with best-sellers. The goal, according to Clay Walton-House of ProKarma is to create monogamous relationships with your customers. And, in Galloway’s eyes, Apple is on the verge of inspiring monogamy “with the 100 million wealthiest people in the world.”

Galloway points to two other tech behemoths as examples of rundling done right. “If you look at Microsoft, which was the most valuable company in the world, and Amazon, which has added the most shareholder value, there is one main similarity: They both rely on recurring revenue,” he said. “Microsoft has a recurring relationship with the global corporate world in the form of Microsoft Office, and Amazon has a recurring relationship with 82 percent of US households through Prime.” Galloway argues that even though serial dating, or having transactional relationships with strangers, is exciting in the short run, it’s exhausting in the long term. “When you partner with someone else, you tend to build wealth faster. It’s the same in the business world: companies with recurring revenue relationships tend to outperform and build stakeholder value faster than those that are in serial dating-like relationships.”

But while Apple One may be a no-brainer for the tech company in theory, its execution leaves much to be desired for some, including Daring Fireball blogger John Gruber. “To me the whole point of a bundle should be twofold: a greatly simplified offering ( ‘Just buy Apple One and get it all’) at a very compelling price ( ‘Even if you don’t think you care about, say, Arcade and News+, hey, you’re effectively getting them for free’),” he wrote in a blog post. “That’s the secret sauce to Amazon Prime. It’s a simple decision — get Prime or don’t — at a compelling price that makes everything other than the free shipping on Amazon purchases feel ‘free.’”

Instead, Apple One is offering what Gruber describes as a “pay for a bunch of services on top of Apple Music, get one of them free”; the smarter play is for subscribers to “pay for one additional service on top of Apple Music, get the rest free.”

That said, if Apple gets its rundle right, then even more companies will follow suit. And Galloway thinks one in particular could thrive with a rundle: Peloton.

“The firm already has [software-as-a-service]-like repeatable revenue. The opportunity lies in bundling Peloton’s products for a monthly fee: the bike, the treadmill, videos subscription classes, apparel, and standalone workout equipment,” Galloway said. “And the gangster addition? Peleton dating. Think about it: Peloton’s consumers are the professional elite who pay a premium to look, or at least feel, hot. And who do hot, successful professionals like to date? Other hot, successful professionals.”

To be clear, rundles aren’t just for big companies. “Especially from a small publisher, small business, sustainability perspective, subscriptions are such a key foundational element to monetizing your [creative work],” Mark Armstrong, founder of Longreads and an editor at Automattic WordPress.com’s parent company, said in 2019. And publishers like Substack and Revue, membership software like Memberful and MemberSpace, and community platforms like Circle have made it easier than ever.

If you’re looking to sustain your creative work with a rundle some day, Galloway has some words of wisdom: Provide a compelling reason for the consumer to give you their money month-in and -out.

“Word has gotten out that moving from a transactional to a recurring revenue relationship with your consumer is rewarding, and the market has gotten crowded,” Galloway said. “As such, the requisite investment needed to convince consumers to put a ring on their relationship with you, the company, is extraordinarily high. The streaming wars is a great example. Netflix’s content budget in 2019 was $15 billion — that’s how much investment consumers expect in exchange for $13 a month.”

Originally published at https://thesupercreator.com on August 21, 2020.