Upgrade - 179: Somewhere Between One and a Gabillion

Episode Date: February 5, 2018

Apple reaches a record high in revenue and profit, but what’s up with the iPhone and Mac sales figures? This week we break down Apple’s huge holiday quarter, including the calendar quirk that has cut Apple both ways.

for relay fm this is upgrade episode 179 today's show is brought to you by squarespace timing and ero hey thanks for stopping by my name is mike hurley i'm joined by mr jason snell hey welcome that whoa are we doing this now? Are we talking to people as if they've come to our door? We welcome them in. I didn't expect to see you here, but then again, you come here at the same time.

They've chosen to spend their time with us no matter what it is they're doing right now. So we appreciate that as always. And Jason, not only do we appreciate people's time, we appreciate when they ask us questions for the show. And today's hashtag Snell Talk question comes from Andreas. And Andreas wants to know, Jason, when is your tea time and which tea do you like?

When is your tea time is a very strange question to me because all the time is tea time. Tea time is whenever I want tea. Am I awake? It is tea time. Tea time is whenever I want tea. Am I awake? It is tea time. So we get up in the morning, usually awakened by our dog who wants to be fed.

And she will walk back through the hallway to our bedroom, clip, clop, clip, clop, her little claws on the wood floor. And then she will wander around our bedroom grunting as she does because she doesn't bark, but she does grunt and whine a little bit. And one of us will get up and feed the dog and we will make the tea. So that means that tea time for me, I guess technically is probably something around 7.15, somewhere between seven o'clock and 7.30 is tea time. And then tea time continues from that point until the tea is gone. So mostly a morning thing, although depending on how much tea I need, I will make more tea. Not so much in the afternoon, unless it's a cold day or something. I usually will not have tea in the afternoon. And what teas I like, it's black tea with caffeine. So English breakfast, Irish breakfast, Scottish breakfast, those are things. I've got a couple of other kinds too but and i just buy loose tea in bulk black caffeinated tea

i buy it in bulk i make a big pot of it uh using the tea robot and uh and then i put some honey in it my wife takes it with milk i put honey in mine because i i don't know i love honey and tea and that's what i do people people tell me like oh you know you put some honey and some tea for a sore throat I said or every day that's the other way you can do that it doesn't have to just be for a sore throat do you ever have a sore throat Jason

I do sometimes and you know what I just don't vary it I just continue to have my tea with honey in it it's all the same you should double the dosage at that point. No, that's a good idea. I'm always up for that because I like tea. So that's in the evening if I do want a hot beverage

because I have a sore throat or I have a cold or something, then I go to like a lemon tea, something that's not caffeinated. But most of the time, 99 times out of 100, actually, it's caffeine tea because I don't drink coffee. So my caffeine dose in the morning is tea. Thank you so much to Andreas for submitting the question. If you would like to ask us a question about basically anything to open the show,

just send a tweet with the hashtag Snelltalk. They go into a document, and I pick them out. And we will open up the show with our only piece of follow-up for this week, and it is about HomePod audio sources. So as of last week, there was still much confusion about what could actually be played as audio on the HomePod and how.

So one of the questions was, you know, people had seen, if you go digging through the technical specifications, that there's a Bluetooth chip in this thing. So great. It works as a Bluetooth chip in this thing. So great. It works as Bluetooth speaker, right? No, it does not. You cannot use the HomePod as a standard Bluetooth speaker.

It is AirPlay only. Yeah, Bluetooth seems to be for pairing or some other kind of like connectivity with your iOS device that's setting up the HomePod. That's why it's there there it's not being used for an audio source i will say i find that to be a shame because the chips in it like i know that like i do share the the feeling of i really wish there was a line in on this thing because i would like to connect my tv to it um but i you know whatever like it is and so i'm not gonna complain

about it because it's not there, like whatever. But if there's a Bluetooth chip in it, like at least let me connect to it. But I would say probably for the most part, I'm going to be fine with AirPlay, I reckon. We'll probably be totally fine because if I think about

what would I actually like to connect to Bluetooth, it's my phone. So AirPlay should be able to work for me in basically every situation that i need but you know it is i get the frustration of like there is a chip in there right like you put the chip in but you're just deciding to kind of to lock it up um anyhow apple has also confirmed that uh the home pod will work with both itunes match and purchased itunes music as well as apple music. So you don't

have to have an Apple Music subscription to be able to get your music on this thing. It will work with iTunes Match and an iCloud Music library, right, which is iTunes Match and iTunes Music. So confusing. But basically, if you have music somehow in Apple's platform and you pay something to Apple, you will be able to listen to your music. Right. You've got to pay them something because you either have purchased it or you're paying for iTunes match or you have Apple music. So one of those things will get you music in an iCloud library and then you can play it on the HomePod. Beats 1 is always on and worldwide for you if you need it. And Apple Podcasts are also rounding out the possible audio

sources for the HomePod. Yeah, it's funny. I actually just got an email from Amazon because I realized that I was still paying for their, well it's an annual, but their version of iTunes Match. And what i discovered was that um first off that they discontinued it and that like unless you're a current subscriber you can't sign up for it anymore they actually stopped this program yeah they have like a streaming service now like that's what they want you to sign up for they want you to buy the unlimited thing and i realized i bought the unlimited Amazon Music for one device for my Echo that's in the kitchen so that it has access to anything we want to play by voice control. And so I don't ever play music on an Amazon Echo that isn't from their music service. So I don't need that upload that. But I know Apple has a lot of customers who don't want to be in the Apple Music world yet. They do have the people who are like, they bought music on iTunes.

They've uploaded the music that they've gotten from other sources. And that's what they want their music library to be. And so that'll work too. We'll see how well it works. But it makes sense that basically if Apple's cloud services know about music that you get access to, it should play it. So we both have HomePods on order, right, for pickup or delivery on Friday, this Friday? Yep. Okay, great.

Was there some kind of secret? Jason wasn't admitting to anything. But at least I know I have one ordered to go pick up on Friday morning. So you can look forward to our thoughts uh on the home pod on next week's episode um as we'll both have them to play around with and i'm very intrigued to put siri through its paces with this device i have lots of unanswered questions um about how how the pod's gonna gonna interact i hope siri answers them but i i i don't like your chances well yeah this is i like like that. That was very clever.

So, yeah. I'm very intrigued to see what this product is all about. I have a lot of intrigue about it. We'll see. Alright, so, Upstream. We have artwork. You can see it if you use

an application that supports MP3 chapters like Overcast or pocketcast you can now see our lovely chapter artwork for upstream and these are your stories to be paying attention to in the media technology world so we have been talking about the jj abrams sci-fi drama um hbo and apple were in a bidding war um the show is going to be called demi monday um that's i can't it's demi mond it's it's french okay not uh not spanish i went with anything i just pronounced what i saw was a string of letters which i've been trying to pronounce in my head for the last 24 hours um hbo scooped it up hbo outbid apple and they have got the jj abrams sci-fi drama uh abrams

was quoted as saying that he was really impressed with how hbo handled westworld so that may have played into it a little bit for him to go with a known uh known entity um then then to go with apple so that's one that... It's funny how influential... I was thinking about this. How influential... First Game of Thrones, incredibly influential because nothing succeeds like success, right?

People were like, oh, it was a huge hit. And so now everybody's kind of like trying to make the next Game of Thrones. Amazon, all the reports are like Jeff Bezos basically said, get me the next Game of Thrones. And they spent hundreds of millions of dollars

on the rights to the Lord of the Rings intellectual property so they could make a Lord of the Rings TV show, which strikes me as being a little too on the nose. Wow, I didn't know that, actually. Literally, they're trying to make the next. Yeah, not based on necessarily anything, but the Tolkien. And they haven't spent money on the show yet. They literally just spent money to write a check to the Tolkien estate to get the rights to make a show set in that universe that's so weird um because right but to make the next game of thrones you don't literally have to make a magic fantasy show well this is what i was saying it's a little too on the nose like they're

literally just trying to make the next game of thrones by going back to you know the the uh material that is probably the most influential to make stories like the ones George R.R. Martin wrote. So that seems weird, but I get it. And then what's really interesting to me is that Westworld, which was by all accounts a troubled production, but like Westworld, everybody seems to be looking at Westworld

a little bit stylistically. And as an example of like, this is how you build a show that has a chance to be the next Game of Thrones. I think it's kind of interesting. Like Game of Thrones, it's been on for years now, but what would happen if knowing Game of Thrones existed, you made another show that you're trying to make a big hit. And I think Westworld has been very influential in that way, where people have looked at sort of like the way Westworld is styled and how the story rolls out. And even down to like

how the opening credits are devised. Like, I feel the influence of Westworld and a bunch of other stuff I've seen recently, like Altered Carbon on Netflix feels like it owes, even though it's a sci-fi series set in a blade runner-esque future instead of a west you know simulation of of western america it is it feels very westworldy to me and so jj abrams citing westworld here for another show that's going to be on hbo um it's interesting that this is this is the game that a lot of people are playing when they talk about game of thrones and westworld what they're saying is we're going to spend a huge amount of money on a genre show that we think has broad appeal and then what they're really saying is come on

we want to be game of thrones we want to have that show that everybody's talking about so we'll see but apple's not going to get it youtube tv is now on the apple tv so if you're a youtube tv subscriber i believe it's a secondary app, I think, is the way at least their press release made it sound. I can't discover this information because all of the links are dead for me because I'm in the United Kingdom. Right.

But yeah, YouTube TV, it's now on a bunch of boxes, including the Apple TV, which is great if you're a YouTube TV subscriber. So YouTube TV was a huge sponsor of the Super Bowl. And this seems to have been timed with the Super Bowl, that they would do this huge push for YouTube TV and say, it's on all the streaming boxes.

Could you watch it on YouTube TV? Could you watch the Super Bowl? No. No, I don't have YouTube TV. I watched the Super Bowl, and they advertised YouTube TV on the Super Bowl. If you are a YouTube TV subscriber, could you watch the Super Bowl on YouTube TV? YouTube TV is just like the Hulu, whatever they call it, or PlayStation View. It is an over-the-top TV service.

It essentially means you cancel your traditional cable channel package, but keep your internet from wherever your internet provider is, probably your traditional cable channel package, but keep your internet from wherever your internet provider is, probably your cable company. Oh, the irony. And then your box becomes your cable box, your streaming box. And there's an app on there that basically gives you all the live channels. And in YouTube TV's case, you've got DVR, so you can actually quote unquote record the program and watch it later and skip through the commercials and all of those sorts of things like having a TiVo or something like that, a DVR attached to a cable provider. But instead, it all happens in an app on a box

or on an iPad or on an iPhone. And this is I mean, it's IPTV. This is the future. This is probably eventually the cable companies will just say, we also have an app. You don't need a cable box anymore, right? Let's move on. But right now there's a difference between it. That's what YouTube TV is. It's one of the players trying to get people to cancel their cable or more likely people who have canceled their cable, but, but miss having access to some of TV to get them to sign up for this. So, so this is a big step for them to be on apple tv and roku and all the other boxes and it was one of the glaring deficiencies of this product before youtube tv have just secured the rights uh the tv rights to the los angeles

football club matches and this is soccer lafc um yep very peculiar and was in more i think even more peculiar and niche uh sports streaming action facebook has become the official streaming partner of the world surf league so if you want to watch surfing facebook is the place streaming so for a long time sports was viewed as being one of these last these kind of like bulwarks against people cutting the cord. The reason sport rights have so much value is you have to watch them live and they put them on cable and then you need to pay them in order to see that.

That's great. What's funny now is that we're also seeing streaming services spending money to get rights, sometimes exclusive, sometimes not, to sporting events because then it forces you kind of down the path of becoming one of their subscribers too. And sports, as long as people enjoy watching sports of various kinds, since they need to be live and you need to have live access to watch them,

they will be effective tools to move audiences and generate customers and so you know that that's going to keep who knows what will happen with scripted content and reality shows and all sorts of other things but sports unless people stop playing sports which is not going to happen the sports may change but people's interest in watching sport is just a thing that exists and so yeah especially live so it becomes a uh a talking point a uh a a chance to pull viewers here and there as this unsettled world yeah is a churning this also feels to me like youtube and facebook uh trying to dip their toe in the water like picking up things that are not going to get tons of traffic before they try and start to go after some bigger stuff

on an exclusive basis, just so they can try and get their tech in place before they maybe try and go for some NFL or something like that. The podcast network Gimlet launches Gimlet Media as a TV and film arm of the company. They're doing this to try and effectively push their content onto screens. So they're adapting their shows into TV stuff, as well as being involved in current projects that the network has sold away.

So it seems like that Gimlet have kind of changed their approach to this. I think previously they were more keen on just selling the rights to stuff and it's how like i think it's called alex inc which is the show about alex bloomberg and kind of his life that was sold for example but they are only producers like executive producers of that project this feels like gimlet becoming a lot more involved in trying to do some of this stuff themselves and have more of a hand in the production of adaptations of their shows. It struck me as being a story that also, it reminded me, strangely enough, of comic book companies that because movies and TV shows based on comics are so successful these days, the owners of comic book companies, comic book companies can be mildly profitable.

They're not wildly profitable. companies can be mildly profitable they're not wildly profitable they can be mildly profitable they can also lose money which is why marvel went bankrupt in the 90s so what they've become is sort of a viable business on their own but also a generator of intellectual property that is raw material for film and TV projects. And I look at this Gimlet deal and I think, well, this is interesting because maybe given all of the investment that's been made in Gimlet, which they need to get back in terms of value, maybe what they've decided is Gimlet's way to really kind of transform itself in terms of generating a lot of money is not making really nice, well-produced podcasts and selling ads on them, or even making really nice sponsored, sort of like sponsored podcasts that people listen to, but have a single sponsor

who pays Gimlet to make them. Those are two business models they have. But is instead, like, that's a nice little business, but the way that they transform what they generate is they're churning out things that lead to new intellectual property that can be transformed into films and TV shows and make a whole lot of money that way. And that's, I'm really not mocking them. That is an interesting way of viewing a business,

that you have this little business that people love just like marvel comics or dc comics you know gimlet podcasts are like that but the people with the money are saying well it's great that people love that but it's only a few people who love that but if we could take those ideas and then sell them so it's a big movie or a network tv series then we get our money yeah and uh that looks like what's happening with the intellectual property on a smaller stage the podcast stage and then they see if it's cheaper to experiment with that right it's like way cheaper to do that go for tv and it seems like that's what they're that's what they're doing and finally this was announced during the super bowl last night

cloverfield paradox a sequel to the movie clverfield, which has now had a prequel. And this, I believe it's a sequel. It's a little bit hazy. The Cloverfield series is loosely connected. It's all over the place. Question mark. It's connected more by J.J. Abrams and secrecy and all of that.

This is a crazy story. When this happened, it blew me away. This was my favorite thing that happened during the super bowl was and then i read up on it later it turns out so they worked on this movie they work on it in secret they give it a name it had a different name it was called god particle um but whenever there's like a jj abrams movie with a lot of security and nobody knows what it's really about and it's just got a generic title it's probably a cloverfield in fact to the point where there's another movie that they think is a Cloverfield movie that is supposed to come out this fall.

So they make this movie, and it is totally going to be a Cloverfield movie. Paramount gets new leadership, Paramount Pictures, which releases this thing. And one of the things they did is survey the upcoming releases that they've inherited from their previous management. And they're like, well, you know, some of these things, we don't want to spend the money marketing them. They're going to do maybe okay. Maybe they'll flop, but we don't want to spend the time. We're going to put our money on other projects. And this happens a lot when you get to Netflix for the rest of the world except the U.S. where it got a release. And because they weren't that thrilled with it and they just thought let's just. And apparently the Netflix rights money essentially paid for the movie. So they got to walk away from that one.

With Cloverfield Paradox, they were originally going to release it this weekend. They had pushed it to April. It sounds like they didn't love it internally and they didn't like the idea of spending a lot of money promoting it. And they talked to Netflix and basically said, would you like to pick this up and just release it on Netflix instead of in theaters? And Netflix said, yes. And so what happens is the marketing budget for this movie, which if you've ever known anybody who works in the movie business, marketing budgets are huge. Sometimes the marketing budgets are larger than the budgets for the movies to make them. The marketing budget for Cloverfield Paradox

was two Super Bowl ads, one of which was a trailer during the second quarter, I think, which made everybody sit up and say, wait, there's a new cloverfield movie that's set in space and looks scary that's interesting i'd never heard of this movie because like literally unless you were reading some movie websites you'd never heard that there was another cloverfield movie so you're sitting up and like oh what a great idea started yesterday morning that this was gonna happen anyway and then the card comes up saying it's on netflix at the very end you're like whoa and then it says coming very soon and you're like what does that mean and in the fourth quarter if you haven't already gone to netflix where if you go at that moment if you went to netflix the top item in the banner at netflix was coming after the game and in the fourth quarter they ran

that ad again and said coming after the game so they took a movie that most people didn't know existed and they didn't just premiere the trailer during the super bowl they literally said we're dropping it's like dropping an album that some artists have done right and like after them after the game you're looking for something to watch this movie trailer that really excited you you can just watch it on netflix after the game now i've heard things that it's not that great and that's one of the reasons that paramount was fine to give it to netflix netflix netflix is okay with that they made bright which by all accounts is terrible and they released that but as a stunt even if it was semi-accidental right like brilliant it doesn't matter how good this movie is. Netflix made history and they made headlines. I mean, how can you go from, I literally have no awareness that they're making this movie to, oh, and you can watch the movie now in an evening.

That's a new one to me. And I think it's brilliant. I think it's a brilliant piece of showmanship. I think it's brilliant. I think it's a brilliant piece of showmanship. And I bet you they got really good numbers for Cloverfield Paradox more than they would if they had just premiered it as a normal start dropping streaming content and using the Super Bowl audience, which is a very large audience, just to promote it and then drop it afterward.

And so then there's like more competition. I think this is not the last time we'll see stuff like this happening. So that's cool. All right. Last thing, Jason, in no more than three words, what are your feelings about the solo Cheezer trailer?

Hmm. Who's that guy? All right, great. That'll do. That'll do. That wasn't what I was expecting, but there we go. Or maybe I'll give you an alternate three. Hey, it's Lando.

That's my other way. That is good because it was basically may as well have just been the Lando movie. Honestly, just I am so excited. I'm so excited to see young Lando Cruiser play by the on-clover. Like, yeah. Yep. Anyway, today's show is brought to you by Timing, the automatic time tracking app for Mac OS. Hey, let's talk about why you should be tracking your time.

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So it is earnings time. Everyone's favorite four moments of the year. But this is the big one. This is always the big one. Q1. Q1 2018. Now, what that means for anybody who's not keeping score, this means the holiday quarter of 2017. The way that the quarters are broken down is when they're reported, not what they're actually accounting for in calendar time. It's all this financial stuff, kids. All right. So what we're going to do here, I'm going to run through some of the statistics, and we're going to stop at points to discuss

some of the interesting stuff. So top line, $88.3 billion in revenue, which is up from $78.4 billion for last year. Apple had forecast between $84 to $ 87, and this was going to be their record quarter. They actually ended up beating that with 88.3. This is $20 billion in profit compared to $17.9 billion year on year. So I just want to stop already right here. We're going to talk about the stuff that made the headlines later on, but I don't really feel like a lot of emphasis is being placed upon the fact that apple broke their record they did it again this is this is the most revenue apple has ever generated in a fiscal quarter and it's by a lot it's by almost 13%. And there are lots of different things driving this that we will get to. But when the, there are a lot of different dials you can look at, a lot of different charts you can

look at to try and determine like what Apple's doing and what Apple's going to be doing. And one of the challenges whenever we talk about financials is there's a couple ways of looking at this that are equally valid. It's all about your point of view. And one of them is, how's Apple doing today? How's their business doing today? And the other is, what's going to happen in the future because I'm investing in Apple? And I care what's going to happen from Apple in the future, sort of, but absolutely not from investment standpoint, because I'm not an Apple investor. And I don't really write about that. I'm writing about products and about kind of like the company's product path more than I am about the company's cash path or anything like that, even though we're talking about financials this time.

So depending on your perspective, you can get a different view of where they're going and that's colored by your judgment about how their business is doing. But it, what is undeniable is that while a lot of people have talked about Apple being kind of maxed out and having reached its peak and how the implication there from some is that it's going to slide down the other side, which I would argue that if Apple has reached its peak, it's far more likely to idle at the top and just throw off huge amounts of money than it is to come down for a long time. I mean, maybe eventually, but for a long time. But if you look at revenue, it's not true. If you look look at revenue apple just had its best quarter ever by a lot

by a lot and even the times when we think of as being kind of peak apple which is really kind of peak iphone um no like like this quarter was uh what 13 billion dollars more revenue than peak iphone it's uh and 10 billion more 10 billion more than last quarter it's a it's a huge jump 12 and a half 13 on what was already the biggest quarter they had ever had so you can't you you got you've got to factor that into your equation here which is apple is generating more revenue and basically making more money because it was also record profit than they ever have before they broke 20 billion dollars in profit in three months remember a couple of weeks ago um amazon reported their earnings and they did uh two billion just under two billion in profit and like wall street

went berserk and i mean there was good reason for it because in the past, Amazon did no profit. Like that was the way that they worked. Like they did no profit. They put all the money back into the business and now they are reporting profit and they beat their estimates. They beat all the analysts. Right. And they did two billion. And like, it's incredible. It's fantastic. Like, that's a lot of money. Apple just did 20. Like, and I know, like, Amazon doing that is amazing, right? Like, it is. $2 billion in profit in a quarter is berserk money, right? And I know that we are obviously very biased towards Apple and everything they do, blah, blah, blah, blah.

But we do get desensitized to these numbers. And Apple did 10 times that profit this quarter like right you could argue that amazon manages its profit right and that it can it can throw off within a certain span as much or as little profit as it wants to yep but but yes as it is easy to to get used to apple's numbers and to lose sight of just how staggering they are, even compared to the other tech giants. This is, you know, Apple, you know, if this is peak Apple, it's peak Apple like today. There was somebody on Twitter who was saying, responding to some tweet of mine that got retweeted, who was like, oh, well, you know, Apple topped out four years ago, you know, and since then it's all just been flattered down. It's like, no, if Apple topped out,

it topped out right today. And maybe it's downhill from here. It's not, but yeah. If what you're saying is they've topped out on their products, like that's fine for your opinion. The rest of the world disagrees with you, right? Like, because they keep pumping more money in. And it depends on how you measure it.

Yeah. Amazon in that quarter, so in this quarter, they did 60 billion in sales, right?'s like it's close obviously they are doing very different they have very different business models apple and amazon so the way that the profit comes out and stuff but still apple did 20 billion more than that right so it's like the the sheer numbers that they are operating in are so wild to me. Like, I often talk about, like, how I believe that it's hard to imagine Facebook being knocked off where they are in social networks, right? And like, because in the past, there's always been a social network that comes to take down the big one, right? Like MySpace, you know, Facebook killed it, right? And there's

always been stuff before, like live journals, there's always been ones before it. But Facebook is at a scale now where it's significantly harder to do that because they're so huge and they're just getting bigger by acquiring the cool kids' stuff, right? Like, there's so many stories right now about how Snapchat is falling and Instagram is rising, you know, like this. So Facebook are just continuing to increase their span, making it harder and harder for somebody to knock them off. So like, I think like maybe Facebook is always going to be the biggest social network that for as long as there are social networks, maybe Facebook is the one forever. We don't know. I feel this way now about Apple. They are making so much money constantly, always. How does somebody beat that?

I don't know how you come up to beat the company that is throwing out $20 billion in profit a quarter and is not spending the money. Well, and that's sort of what I was getting at with saying like, even if you think that they've kind of maxed out, I don't see it coming down so much as in that case, it would just sort of level off and go for a while. And then eventually, look, eventually, if they, depending on how they execute,

they can lose sales and you know their profits will subside look i saw i remember when microsoft was an unbeatable giant and the fact is microsoft although no longer relevant in a lot of ways that it was relevant and no longer seeing unbeat seeming unbeatable still is a pretty amazing business, right? So there's that too. They still make a lot of money. So we'll see what happens with Apple, but they're in an incredible position. And it's also funny for those of us who got tired of hearing about Mac market share over the years, that Apple doesn't have the market share lead in almost any category, if any category, but it makes huge amounts of money and huge profits. And that's because it's basically in the markets that it's entered, it's chosen to compete in, it does incredibly well. And then there are a lot of places where

it just doesn't go. And that's something that I think is a key misunderstanding that a lot of people have about Apple, where they think that Apple should be fighting a market share game and being in markets that Apple chooses not to be in, and they don't understand that. But you can't... I mean, we need to break down the products, but you can't dispute the revenue and the profit here. It's shocking how huge it is and increasing. It's increasing. They're still growing. I mean, what? Maybe in 2019, there is a $100 billion revenue quarter.

Maybe that happens, right? Maybe. It's only increasing. If it continues to increase at the rate that it's been increasing, maybe that happens, right? Maybe. It's only increasing. If it continues to increase at the rate that it's been increasing, maybe that happens. Keep in mind that what we're also talking about here is that Apple's revenue has almost doubled in six years. Doubled.

That's a lot. So let's talk about some products. This is an interesting one. The Mac is down $6.9's a lot. So let's talk about some products. This is an interesting one. The Mac is down $6.9 billion in revenue compared to 7.2 year-on-year. 5.1 million units sold compared to 5.4 million units sold. Throughout the whole of 2017,

sales in revenue and units was up year-on-year from the quarters previous. So 2017 the entire year was up from 2016 we're starting 2018 down. Why? I don't know. Because in theory 2017 was tough. It got better

at the end, right? With the iMac Pro. So what's happened? Like, what's happened to the laptops that were selling so well? I don't know. I mean, this is still a... I think the way I would put it is, I suspect this is because they sold so many Macs in Q4

in the previous quarter. Because if you look at their sales numbers, sometimes they sell really well holiday quarter but other times they sell kind of equally well in in the previous quarter the back to school quarter and the holiday quarter and so this seems to have been a lot like two years ago where they sold 6.9 billion in mac revenue in q3 or in q4 and 6.7 in Q1 of the following year. And this time we got 7.2 and 6.9. So I wonder just off the top of my head, I look at that and I think, I wonder if there's some correlation there. Cause what happened in, in the, in last year is that they had not a

lot of sales in Q4 and then a huge sales spike in q1 which is the holiday quarter so so last time that spike was big and this time the spike is not so big and you're comparing year over year but their their previous quarter was way bigger so if you look at the quarterly um it maybe makes a little more sense that maybe this is seasonality. I mean, the Mac has been kind of toddling along for a while now and where it's just kind of like fine. And as they have pointed out static in a PC market, that's down is growing, but you know,

Mac units are, you know, the last four quarters, 4.75 million a quarter. And that's down from a high sort of at the end of 2015, beginning of 2016 of 5.1, 5.15 million. So they're selling whatever that is, 350,000 fewer Macs a quarter than they did a couple years ago. Yeah, it's just interesting to me, right? Like that there's some something's changed uh possibly because i mean even even looking at just like the actual

units sold you know there's so for q4 20 uh q4 2016 they sold 4.9 million q4 2017 5.4 million so that was up but then when it comes to Q1 2018, it was down on Q1 2017. So is it something peculiar may have happened? Maybe it was just not a buying time. Who knows? But if we look at this in the way that we looked at the iPad, right?

It was the same thing for us when the iPad Pro started coming out, right? Like, Apple's focusing on it. Please, please let the numbers tell the right story, not the wrong story. So, like, this is something to watch now. Like, are Mac sales on a decline now?

We won't know for the next few quarters. But if they are, you don't want to see that at a time that Apple's committed themselves to more Pro max again so let's hope it's like a blip on the radar i don't i don't think this is um i honestly don't think this is anything i i if you look at the last two quarters of max sales the max doing fine it's not doing you know everything apple did two years ago was like a record high and then last year they

they went down and i think what you're going to see is that the mac sales are going to continue looking more or less like they have um over the last couple of years and that this is this is a little bit more about where the sales fell in terms of q3 verse or q4 versus q1 than it is about anything um endemic to the mac beyond that the ipad story is continuing to be positive 13.2 million units compared to 13.1 million units year over year with a six percent growth in revenue uh suggests that the ipad pro is still doing well um because apple are making more money than they are the unit growth like like what that would indicate, right? So it suggests that the average selling price is continuing to increase. So, you know, they didn't have a huge unit growth, but they had pretty good revenue growth.

So happy to see that. That's, you know, again, for iPad lovers right now, it's just keep it steady and slowly increasing. It's better than decreasing. That's what you want to see. This is the third straight quarter where the direction is up, even if it's only slightly up here. And there's some mitigating circumstances there. The fact that they, I would also say it's the first holiday quarter since 2014 where the iPad has has grown at all year on year wow right because

because it was it was 26 then 21.4 then 16 then 13 26 just ruins all the charts i hate it it is a great number but but the stabilization their ipad quarter is funny i'd say the stabilization of the ipad continues um this is not a kind of result i usually write something about the ipad i've done that for like the last eight quarters and i felt like i had nothing to say this time it's more like yeah it was fine it shows that it's not dropping um nor was it a surprising tick up right it was more just like it was it was you know slightly up over flat and for the iPad, that's a win. And the revenue went up by a little bit more, which means that that's good. Average selling price went down a little bit.

That's okay because it's the holiday quarter. I think in the holiday quarter, they're much more likely to sell the cheap iPads than the iPad Pros. And in the end they uh you know it's uh it's it's fine it's a it's not a regression of the ipad to the free fall that it used to be in even though it's also not a you know a boost into the stratosphere but i'll you know i'll take it but it is a middling ipad thing and given the context of previous years of ipad the last three years of ipad middling is good for the definitely well it's stability isn't it you know and and what you know i i like this the stability level is about two times the amount of the mac

which i think is where it kind of should be considering platform age and focus. So like, I think that's good to see, right? Like, I'm happy to see that. So I hope that it continues. The services revenue is just continuing to soar $7.8 billion in revenue compared to $6.4 billion from year over year. Apple Music is clearly performing well. There was a report from the Wall Street Journal which suggests that Apple Music has been adding subscribers at a 5% monthly rate, according to people familiar with the matter. Spotify is growing

at 2%. If this continues, if these rates continue the same, Apple will catch up and overtake Spotify in the US by the summer. That is surprising to me like i believe it like it's you know like what i i can believe it right like it's not an impossible thing to to to imagine but i don't know if i would have predicted it happening this soon if it happens i was surprised

by that too i also thought to myself as when i saw this story uh the week that home pod comes out this story gets reported yes i don't think that's a coincidence it is the perfect time to do a controlled leak the person in the know may have worked for apple pr but if they are being accurate if they are telling the accurate story of sure then that is that is kind of wild it took me by surprise too uh i hadn't really thought. I know Apple's doing well with services and the service revenue continues to grow. They've increased service revenue, I think basically every quarter

for as far back as my charts go. A revenue increase in the service category would strongly suggest growth in Apple Music, right? I would expect at this point, it's probably the biggest revenue generator in that category, right? I don't know. Maybe.

I mean, there's... Or at least the biggest growing. I can't imagine there's anything growing at the rate that that might. I don't know. iCloud storage may be growing too. But I imagine that iCloud storage, like you pay for it and they've got the whole history of people paying for it where Apple Music is newer. So you can get all of the new people plus all the old people.

They're acquiring new customers. You know, so like, yeah. Yeah, that may be. That may be. I think it does show home field advantage here, right? Which is what we talk about with Apple Maps and Google Maps, that it's not surprising that so many people use Apple Maps because it's already on your phone.

And I feel like this is actually with podcasts too. It's like, it's not surprising that the Apple Podcasts app is the most popular podcast app, because it's already on your phone. You literally don't have to do anything and it's there. And it's now even, you know, it's now even connected directly to Siri, which I think wasn't so much before. And that is driving it even more like the being on the phone. So having it be in the music app, like you're listening to music and there's Apple music, it's in your face, it's right there.

And, uh, there are huge benefits to that, but this is interesting because the narrative really has been like, Apple's trying to take on Spotify, you know, good luck. And the fact is Apple is building this business of paid,

right? Cause there's also sort of, uh, free stuff that you can do, I think on Spotify. Um, it also Spotify, my understanding is like is a money loser and just lost at an attempt to change the terms of some of the streaming fees.

And this is an interesting example where the platform owners like Apple using their platform power to build their own services and bundle them with their platforms. It's the photo backup system all over again. Yeah, it's just you have power with the home field advantage. And Apple is definitely taking advantage of it here and then spreading it to other devices. So I like Apple Music. It's a good service.

I'm sure Spotify is a good service too. But I think that's one of the challenges when the platform owner is there. The difference in catalogs is not notable. Like it's the same stuff. And if you have all Apple devices, Apple Music is awfully convenient. It's awfully inconvenient if you have anything else other than a Sonos, because it doesn't work with anything else. But yeah, so services is big. It didn't go up as much as I think it's gone up in other quarters we'll have to watch that if is the services growth slowing down a little bit but apple seems really confident that it's going to continue to grow and be a huge part of their business and this is one of the

reasons the services stuff is one of the reasons why they are setting records and revenue even though other parts of their business are only up a little bit is they've added this huge other line where they're throwing off now almost eight billion dollars a quarter in services revenue and that that is one of the things that fuels the engine well we'll expect them to do it again this year right tv tv service that that should be another way to add apple music sized increases absolutely this revenue model like to this to this area of the revenue. This is the reason they're doing it, right? They are doing this

because they want to boost the services because as long as the services is boosting, like is going up, so will the share price because that's where they can show growth. And it's a classic Apple move in the sense of Apple has always thought that if, I think Apple's's philosophy and this comes directly from

steve jobs is if anybody can make money from our users it should be us like we should get first like if anyone can do it we can do it but better right and that leads to you know that leads to both of those things lead to a bunch of different apple behaviors some of which are not particularly like sherlocking features right is you could argue there are lots of reasons why apple builds something that turns off the third party because it's because of the home field advantage because yeah you can download a third-party app that does this but only a tiny fraction of people do that but when it's in the system it's right there and everybody's going to use it once it's bundled in once it's part of it. So that's, that's part of the argument. It does lead to

me too stuff like the iPod Hi-Fi, which was very much like how dare Bose make money on the sound dock. We can make one of those two. It turns out they couldn't. And this is, but this is a little bit like that where there are markets where Apple's looking at this. It's very smart and saying, you know, the smartphone is a great platform and the iPhone is a great platform for things like a streaming music service. And so many of our customers use Spotify. Why not us? Like, why are we letting Spotify get that revenue? Why don't we get that revenue?

You know, you could have a selling media, like somebody else could do that. Amazon could do that, whatever. But why not us? Why don't we put it out there and we have the home field advantage. So we're going to be able to take a bigger chunk of that than we would if everything was neutral.

And that's to our advantage. They're not going to enter every market because most of them are probably too small, but the ones that they can control and that they can fuel their revenue. And this is why Apple does a music revenue. And this is why Apple does a music service. And this is why Apple is going to do a TV service. Absolutely. Because there are other companies making a huge amount of money or building a huge customer base with loyal Apple

users driving their revenue. And Apple looks at them and says, maybe we should do that instead and provide a viable alternative. And I realize it seems a little bit ridiculous now to think about like Apple becoming a viable alternative to Netflix. And the dynamics are different because it's about exclusive content in a way that music isn't. But still, that's the kind of idea here. Like if they can build a business that's a viable alternative to Netflix and it's already on your device, that's going to be powerful. And people will still use Netflix and they may use both your device, that's going to be powerful. And people will still use Netflix and they may use both, but it gives Apple another little wedge to get more money out of you. Not necessarily that you wouldn't otherwise have spent. Sometimes it's just instead

of someone else. Give it to Apple instead of somewhere else. It's also worth remembering, and we spoke about it a bunch of times during upstream right like if you're thinking about what netflix have been that's not what the company's gonna be right like if you thought of them as where you go for those tv box sets like that's kind of not what they are anymore they are trying to be the next hbo like everyone's trying to do that instead you know so apple and netflix are moving towards each other at a quicker rate than it may seem from the outside right like apple's yeah absolutely bothering with the back catalog stuff they're trying to build their own at the same time that netflix is trying to build their own by the way i just i've been watching the crown over the last couple of weeks that is a

wonderful wonderful netflix original that i thoroughly recommend um it's like house of cards but with the queen it's wonderful very very very very good um i recommend it uh i will say just as a word of warning in case you're not familiar with a lot of uh uk history stuff they take a lot of rumors and turn it into what look like fact it's just worth noting that like there's a lot of stuff that is that has never been proven or it was just newspaper conjecture that they kind of play off as if it actually happened i just ask you to bear that in mind when you watch the tv show but it is excellent it is incredible casting matt smith that's prince philip oh just just so good anyway great great great, great, great TV show.

Great TV show. Yeah, I recommend it. Anyway, iPhone. We need to talk about the iPhone. That's where all the headlines have been. That's where all the, always, but maybe even now more than ever, we need to talk about the iPhone.

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code UPGRADE for free overnight shipping. We thank Eero for their support of this show and RelayFM. All right, ladies and gentlemen, buckle up. It's time to talk about the iPhone. All right, ladies and gentlemen, buckle up. It's time to talk about the iPhone. $37.1 billion in revenue compared to $34.9 billion in revenue. Oh, great. That is a year-over-year increase. That's what we come here to expect.

More money on the iPhone. But hold on one moment, ladies and gentlemen. 77.3 million units compared to 78.2 million units. That is, yes, you heard me right, a unit decline in the iPhone year over year. Now, Jason, we're going to talk about some of the stuff surrounding this. But am I right in assuming this is the first time this has happened? A unit decline year over year? Well, I mean, no. Okay. times has happened a unit decline year over year well i mean no okay no they i mean that was the whole story of what 2016 was of course it was yes unit decline year over year um but that story was

over and we were seeing now like a slow but steady unit growth year over year after the you know apple came down from the peak of that the the late 2015 early 2016 kind of uh iphone 6 thing which was the big spike and then it came down and then for the last few quarters we've seen growth year over year i must have blocked that out of my brain uh that was q2 of uh 2016 compared to q2 of 2015 where they lost 10 million units so that was the big big decline um they kind of bounced back from that with a bunch of reasons i think the reason i blanked it out of my head is is i am i got so frustrated of having to hear the answer to that like for a year basically right of like what happened there what happened there that kind of thing because oh we made a big phone and we put it into china and you know so that's that was all

taken care of but this is a different situation so what happened here right so much higher revenue revenue is lovely they sold less right they sold less of them and okay well let's let's just we'll get to that we'll get to that but i mean get to that. But I mean, you look at it on paper, right? You look at the numbers, there's less. During their holiday fiscal quarter, they sold fewer iPhone units than they did during their holiday fiscal quarter a year ago.

Absolutely true statement. So that is that, right? So we're gonna park- A very small number, but yes, smaller. We're gonna park that for just a second. One of the other things that was going on here is that analysts, they do what analysts do and they forecast. And many were expecting 80 million. Now, that means what it means.

It can mean nothing. It can mean everything, right? But there is a whole industry based around this, right? That is how all of this stuff works. That's how the stock market works. There are analysts. That's right. Expectation is reality in a way in the stock market because your stock price gets built based

on the expectations and um the you could say is it fair that apple that there are a bunch of stories saying apple missed uh its iphone number because some outside group decided that they looked at apple's guidance and picked a number that was too high if you're worried about like accurate reflections of apple's business then it's not fair and if you're concerned about the the street and investment it's totally fair so you know it depends it depends where you plug your attention into and what you're trying to get out of it, yeah. Don't forget, the last two weeks prior to this has been full of stories about a decline in sales, right? Right. There was a narrative going in that was like, oh, the iPhone X is selling badly.

iPhone sales are bad. It's not going well for apple there was there was this narrative that was developing which i have to say in hindsight looks like uh looks like fraud to me it looks like maybe somebody was trying to suppress apple stock and play some games because it's not bare it's not borne out by the numbers at all but what happens is that narrative starts to move and then sometimes you get writers who see numbers and it allows them to continue with the existing narrative instead of questioning it. And there was definitely some of that. Because I had my theories about this, right? Like what was going on here. So then I was thinking,

oh, well, maybe what it was was we're looking at the wrong quarter, right? And that these declines, this sales decline, oh, was actually happening in what would be Q2, right? That was my thought when I was looking at these numbers. Because clearly, there hasn't been a horrific decline. And we're going to get to all of the reasons why in a moment. But it's like, oh, maybe this is being reported for now. But jumping ahead, next quarter of Apple's guidance, they are saying the iPhone will grow double digits year on year. So I guess not then. So my only thought on this is that something's got mixed up here and that what is actually happening and I believe will happen is that the iPhone 10 will not be available next year, right? Because they will replace it with

other models in the line, which has happened before. I think it was the iPhone 5. It just stopped being made. They made the 5C instead, right? Like they didn't make the iPhone 5 anymore for whatever reason. And the reason with the iPhone 10 is probably that we spoke about this, I believe on this show, that they won't be able to bump it down the line to make it cheap enough. So they're going to replace it with a whole new line of products next year. And then somehow in all of that reporting and all of that conjecture, it got believed that this was because no one was buying the iphone 10 where that doesn't seem to be the case at all because asp was up asp was up significantly so this is this is the thing and i know this is boring acronyms and stuff but asp means average

selling price and if there is a single statistic other than i guess the the revenue itself that I would take away from this quarter it's the average selling price of an iPhone. The average iPhone sold during this holiday quarter was $100 more expensive than last holiday quarter. And were the 8 and eight plus more expensive than the seven and seven plus i don't think yes they were okay i think that i think they were weren't they like fifty dollars more expensive or did that or did that boost come in with the seven i don't

remember but also sequentially which means last quarter compared to this quarter the average selling price was up $178. Okay. So, and we mostly talk year on year here because holiday quarters are very different, but average selling price changes a little bit seasonally, but also just, look, the story here is

the iPhone 10 sold well. It sold really well. And what it did, and maybe the change in composition with the 8 and the 8 plus it dragged the entire iphone up and that's why revenue was up is because apple like imagine if literally every iphone anybody bought went from they were all bought, every single iPhone sold was last year's model. That's discounted $100 to this year's model. So literally every iPhone sold, Apple got $100 boost. That is what happened. And that's because of the iPhone 10. It's because that the Apple found that there was a portion of the iPhone audience that was happy to give them $1,000 or more for an iPhone.

And another portion of the audience that was happy to not and use the iPhone 8, which is the advantage of having the iPhone 8 as well. We thought this was a huge gamble and how was it going to go? And were people going to reject it or were they going to sit out of the iPhone market? And we don't know. Like the next three quarters should we could see some very interesting things with iphone sales especially since uh you know there's a lot of details of inventory and all that and apple's forecasts are that the iphone is gonna kind of like slide back

a bit in the next quarter but the iphone 10 gamble you look at it here and it's like it worked like apple is making more money per iphone sale than it was and a lot of that is coming from the iphone 10 because that's the that's how you drag the average selling price up like that what was that you mentioned about sliding back in the next quarter there's some weird and i'm not the best person to talk about it but there's some weird stuff with how they filled the channel and how they empty the channel and how there were chance. And there was a whole thing where Luca Maestri, the CFO talked about, you know,

in addition to the chain, the, the, the, the length of the quarters, which we're going to talk about in a minute, there were also some things about filling the channel and not that might suspect that there are like,

there are more numbers in this quarter than will be seen for next quarter. It's unclear. Like next quarter is not going to be a record quarter for apple i think even apple said that i don't think they're saying that it's going to be bad but you know my point is the the launch quarter of a brand new iphone does not always tell the whole story of how the iphone is going to be accepted and we're going to have to see i think next quarter is going to be really interesting, the one we're in right now. They did say about iPhone growth year on year

was going to be good though, right? This stuff is so confusing. There's a lot of complexity here. It's a huge business. There's a lot of complexity here. But anyway, for me, this is a huge deal, the ASP thing, which is normally, I mean, I track it, but it's normally kind of boring.

You see it like when the new MacBook Pros came out, the Mac ASP went up because those were more expensive systems and they sold a bunch of them. And so it changes the composition of what got sold and drags it upward. And with the iPhone 10, especially, you're seeing it here where this is all getting dragged upward. And that's what Apple was trying to do. And if they failed, we should have seen it. And I don't think we saw it. I think that the iPhone X appears to be a success. Apple also said in their commentary,

in their call with analysts, which there's a complete transcript at Six Colors. If you don't want to listen to an Apple conference call, you can always read it or just search for words that you're interested in hearing that Tim Cook said or didn't say. But one of the things they said is the moment that the iPhone 10 went on sale, it was their top selling phone and it remained their top selling phone all the way through now, not even through the end of the quarter, but through today, beginning of

February, it was still their number one. So for doubters about the iPhone 10, iPhone 10 is their number one phone and then the 8 and the 8 Plus are behind it. And they said in a lot of countries, including China, if you look at the top five selling smartphone models, four of them are iPhones. So the iPhone's doing okay is what we're saying. It's doing okay, even though there's some interesting quirks in here. And that Apple strategy with the iPhone 10 so far seems to be bearing out bearing out yes obviously there's a couple of things to note right one the iphone 10 came out in november so didn't doesn't get the full time period we don't know how or how much that could have affected there's a chunk of this quarter where the iphone 10 was not on sale and

people were concerned that that would affect the quarterly numbers because there were people holding back from buying an iphone and it could wait for the iphone 10 to right it could have like we don't know like it is there could there could be a fact in there we're never we're probably never going to know that but like that there could it maybe if it came out in september there would have been more sales and there ended up being who knows so here's the thing right apple were repeatedly talking about and i was reading in the tweets that you were sending out from the six colors live blog? Apple were repeatedly talking about, and I was reading in the tweets that you were sending out from the Six Colors Live blog

and from other people talking about it. Apple were repeatedly talking about the fact that this quarter was one week less as being a key factor in iPhone's numbers. So let me tell you my personal story on seeing this. I roll my eyes and I'm like, okay, there's your excuse, right? I'm like, oh, okay, here we go. Excuses, excuses, right? And I mean, I'm like, okay, there's your excuse, right? I'm like, oh, okay, here we go.

Excuses, excuses, right? And I mean, I'm seeing the headlines and I'm seeing that the numbers are down. It's like, oh, okay, this isn't surprising. And I'm looking at the charts and I'm assuming this is the excuse that they're giving. It's not all that bad, but they want to give a little excuse

so they can say why it was the case. And then in the same way that they were giving the the excuse for the drop which we were talking about earlier as being oh well we had unprecedented demand due to the fact that we sold in china for the first time that was their excuse right and i'm just like all right whatever so i'm like how much of a factor is it really so this is some some some quotes that i'm going to read from j Snell. 77.3 million iPhones, which is the highest number ever for a 13-week quarter. Averaged weekly, iPhone sales were up 6% over last year. If you took how many phones were sold a week during the quarter and just divided those numbers out, there was a 6% increase year on year. Apple sold more phones per day than last holiday quarter but the last quarter

had seven more days right and i like this uh there's a one line from you here i think you're on mac or macwell piece and apple wants to make sure that you know it so like something from philip elmer de witt uh he said uh tim cook and luca maestri mentioned the per week discrepancy 16 times during the Q1 earnings call. Yeah, so they did. And what's funny about it, so the short version here is last holiday quarter, Apple did a 14-week quarter, which is not what they usually do. They usually do a 13-week quarter. Why is that? Well, 13 times 4 is 52.

So that's a year. I think it has to do with where the breaks fall because it's not based on months. It's based on weeks. And they wanted to cover the end of the holiday and New Year's last year. The cynical among us, and I'm not sure whether you can prove, I imagine that they always intended the quarter to fall this way. But let me rephrase this. Apple benefited from this last year. Yes. Apple benefited by having a 14-week quarter because they were trying to show that the iPhone sales had stabilized and were going up year over year instead of what they had done for the previous three quarters, which is way down.

They took a week, right? They took that week. So they get that 14-week, and again, I think it may have been planned. It may not have been. I don't know. Let's say it was planned. But they get to benefit from it because they get that extra week of sales that they get to claim as a part of the holiday quarter. And that allowed them to eke out basically flat to slightly up results last year.

So they did that. And they didn't talk about that. I mean, I think they mentioned it was a 14 week quarter, but they didn't talk about it in great detail, because they just want you to look at the main numbers. And then if you recall, like in the week after that, there was a guy who like went around and was tweeting at all of us and emailing and he posted stuff on his blog. And he said, he said, this is kind of bogus analysis, because it's a 14 week quarter. And if you look at the actual sales figures, you know, per day or per week, iPhone sales were down. And he's, he was absolutely right. And I

remember posting a thing on six colors and saying, yep, he's right. Like if you, if you're looking at this, this is a nice quarter, uh, in that the iPhone sales were not down. But if you look at iPhone sales day by day or week by week, they were down. They were down on average during the quarter period because it was longer. Okay. So this time Apple doesn't, and at the time I actually said, this raises the bar for next holiday quarter, because it's going to be 13 instead of 14. And Apple's going to have to deal with that. And here is where it bit them, which is why they kept talking about the fact that it was 13 over 14. Because the truth is, during this holiday quarter, the average iPhone sales per day were up 6% over last holiday quarter.

Up 6%. 850,000 iPhones per day in late 2017 compared to 798,000 iPhones per day during the 98 days in late 2016. By the way, that's huge. 850,000 or something sold every single day. You can divide it by 24 per hour, divide it by 60 per minute. Especially when you assume that it is not like that, right? So like there are some days where they sell over a million a day, right? Like it's wild.

Well, that's also true, right? The seasonality, we don't get a level of granularity below this. The point is, by that measure, which I would argue is the more accurate measure, because when you're talking about 13 versus 14, it's not right, and it was not right last year, and it's not right this year.

It's easy, but it's not right. Apple, because they're living by the sword and dying by the sword, Apple now wants to demystify you, you know, because Apple wants to have be seen in the best light possible. It was okay last year. It's not okay now. It's also true that if you're focused on year on year and year on year is actually not the same that, you know, it's up to you.

Like basically you get to decide what story you want to write. And so if you want to write a story that says, Apple iPhone sales down year on year versus the year ago quarter, it's accurate. Apple's iPhone sales slumping. Apple sold fewer phones during the holiday season season there are a lot of these kind of lazy phrases and headlines that go into some of these stories and that's not right like apple actually sold more if you take any span of time i suspect uh calendar days between last year and

this year or between you, 16 and 17 holidays, you say the month of December or, you know, November 15th through December 25th or whatever it is. I suspect that pretty much for any one of those spans of identical time, Apple sold more iPhones this year than last. It was, it's, you know, it's close enough, iPhones this year than last. It's close enough, but again, I have a hard time. I want to know it. I want to understand it accurately. The same time, I don't have a lot of sympathy for Apple because Apple benefited from this last year at a point where they were trying to show that iPhone sales were no longer sliding. And so now it bites them a little bit. It's tough because I know it's calendar-based and all of that, but look at the revenue, point at the revenue and deal with it.

I think, though, if the problem is that there are some people out there who really want to point and say, aha, look, weakness in the iPhone. It's going down. Haha, they're in trouble again. And it's not borne out by the data. That's just it's not true. It's a quirk. And you could very much say,

aha, look, iPhone sales continue to be kind of flat to slightly up. And it's now entered a slower growth trajectory than it's, than it's ever seen, you know, before the last two years. Yup. That's true. But I think that's, I think that's all it tells us is that what really has happened is the iPhone business post the 2015 boom is what we're seeing here, which is it's growing again, but it's growing slowly. It's growing at a much higher level. This is something that also I think a lot of people don't understand. The iPhone, we talk about like, oh boy, they had that boom.

And then it was really rough after that because the sales fell. rough after that because the sales fell if you look at the average quarter before the iphone 8 came out it was between 35 and 40 um you know million units and it's now like 53 to 55 million units. So we think of that bump as like a, a brief success. And then it led to sort of a sad slide back for Apple. But if you look, that bump led to the sea level rising, like the new normal for iPhone down from that big bump is way bigger than it was before the big bump.

So they didn't lose. It didn't go up and then back down to where it was. It went up and then went down some. So, you know, again, you can write any story you want here. But I do think that there's some malpractice of journalism going out there where people really want to write a story about how the iPhone sales are slipping. And it's not borne out by the data. story about how the iphone sales are slipping and it's not borne out by the data no but the i think the important thing to remember in this is however you choose to write your story you're bound to

for the future so like if you last year were like look how amazing iphone sales are but you don't take into account the 14 week right they weren't they weren't amazing but they were like not down like if you talk about like oh look how great it is then you also need to appreciate the change on the other side right like i feel like that yeah and that's why i like talking about it in all the different routes that we talk about on this show because basically all these earnings reports are are apple trying to tell the best story they can with the data available. Yes. So you are able to look at this data and draw whatever conclusion you want from it because there's so many avenues to it.

Because Apple do not come into these calls and give you all of the data completely accurately without spin. No, no, they will. all of the data completely accurately without spin no no they will well they i'll say i'll say if it's an unprecedentedly good quarter on all fronts which rarely happens but it does happen for apple they will come in and not spin yeah because they don't need to but usually there are some of these gauges that are not up to snuff and that's when they start pulling out but this and look at that and this other thing that we didn't put in the notes but now we're going to tell you so that you can report it and it's all about that and so this is a case where they tell they talk about the quarter length six times because they are now like i said live by the sword die by the sword they benefited from

people not reporting the quarter length very much last year until like i said a couple days later you know that one guy was like this is not true and he was totally right um and now they're trying to go the other way which is well i know we benefited last year but this year no no no no you got to understand how many weeks there are in a quarter it's like that's it's pr it's it's i mean this is apple trying to put its best foot forward so when when I say about like not reporting all of that completely accurately, I don't mean they're changing numbers, but what they're doing is stuff like what they do with the Apple Watch. So Apple Watch, 50% growth in units and revenue, best quarter ever.

Four straight quarters of 50% growth. Yeah. If you ask Apple, what does that mean? They will just repeat that to you. They will not tell you how many, right? So it's like for whatever reason, they've chose to make that decision and they're sticking to it. And right so it's like for whatever reason they've chose to make that decision and they're sticking to it and will they ever break it out who knows but this is

all that is right now so apple have sold somewhere between one and a gabillion apple watches but just know that there was 50 more than the year before even on my bezos chart that has no scale um you can see that the Apple Watch, I mean, it did have the best quarter ever. It did grow for the, not knowing the numbers, they're selectively choosing and I can give them some grief for it.

I had a couple of people misunderstand my joke about this and be like, why are you making fun of the Apple Watch? It did really well. And it's like, I'm not making fun of the Apple Watch. It did do really well. Well, did you look at my Watch? It did really well. And it's like, I'm not making fun of the Apple Watch. It did do really well. Well, did you look at my chart? The bars are good.

There are no numbers, but the bars are good. Point is, they don't give us details. So we're left kind of like trying to guess what they mean. You're making fun of what Apple's deciding to do, which is not tell you. That said, when a product's year-on-year growth is 50%, four straight quarters, it's pretty well it's it's doing pretty well so and and they and and so that's what's going on here is it's doing really well and remember the

the last holiday quarter was a record sale for the apple watch and the previous one was the best yet for the apple watch so they're not only growing in the intervening time, but they're also putting growth. And I think it's quite substantial growth on last year's record number. So it looks like the Apple Watch is more, well, it's seasonal like a lot of Apple's business. The holiday quarter is the best one, but it's also doing really well

to the point where I saw some analysts saying, I'm not sure there's a smartwatch category. There's kind of an Apple Watch category. Oh, that's true. You know, it's just... And by some measurements, Apple is the largest purveyor of wearables by a large amount.

Like they have a huge percentage of the wearables market if you define the Apple Watch and AirPods. Apple is the biggest watchmaker in the world now. And Beats, I suppose. Yeah, it's... Yeah. Yeah, it's... All all right so next quarter guidance of revenue between 60 to 62 billion which would be a record for uh well it would be beating 52.9 in q2 2017 so no it would be it would be a record for q2 if if they are

really hitting in there they're never wrong like and when they are wrong they're only ever wrong up yeah so they've been i mean for a while they really sandbagged the numbers and they were like they were wrong wrong up every single time and they've gotten better at that lately they're closer to their guidance now i think that i think that they've tightened that up because it's not good like you think oh if you beat it every time that's amazing yes but it's not actually good for what you're supposed to be doing at this point like you need to show that you know what your business is doing yeah guidance is supposed to be realistic and also it trains people into believing it's like the boy who cried wolf it trains people into believing that you're always

sandbagging the numbers and that makes it hard when you're when you're looking at a tougher quarter and you try to hit it right on and everybody assumes you're going to be 10 like 10 billion up from that and you're not and you're like no no no really this time so uh but anyway yeah that that um that 60 to 62 billion like apple has never done more than 60 billion in a quarter that wasn't a holiday quarter before. And they're quoting it as being that. It would beat the revenue number from, the current record is 58, which is from 2015,

the first quarter of 2015, which was the heights of the iPhone 6 mania that was happening. And yeah, so it's actually kind of a remarkable bit of guidance. We'll see. They're wrong, but I'm interested to see how it all breaks out.

I'm sure they're right, and I think the question is going to be what are the details? As usual, it's going to be where's the iPad go? Where's the iPhone go? Are they trending up and down? What's up with the Mac, as you asked earlier? And then we can assume services is going to keep on growing, and other products is going to keep on growing,

because those are areas that just keep expanding as Apple expands its portfolio. Well, and other will probably include the HomePod. Right, so that will be money that they never made before. Yeah, that's true. Alright, this episode is brought to you by Squarespace. Use the offer code UPGRADE at checkout

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because neither of us know what to do. And without them, we wouldn't have it. And then we'd just, I guess, have to write letters to people. I don't know how we would communicate the information we need to communicate. So it is super awesome. They have a bunch of great templates just for weddings. So it is fantastic. Their plans start

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Timothy asked, I discovered I'm still playing for iTunes Match. Do I need to keep this subscription now that I pay for Apple music? Is there an easy way to make sure I don't lose anything? The answer is iTunes matches now included in Apple music. So you no longer need, and this has been the case for a year, year and a half.

So cancel that iTunes match subscription. I did all your music that you have, that you ripped from CDs that you downloaded. That's like a rare, like live track or or whatever if you're an apple music customer that stuff gets uploaded from itunes just like it did with itunes match and is part of your library and it all just is fine and works fine so um they've really gotten that it took them a while itunes match was bumpy at the beginning um it wasn't initially part of the Apple Music kind of thing, but it's all together now. And I use that. And so I don't need a separate iTunes Match subscription anymore. Yeah.

And neither do you. No, I don't. And I, well, I know you're not talking to me, you're talking to Timothy, but I don't either. Timothy, yeah. But thank you for addressing it directly to me too. You, dear listener, dear listeners, don't pay for iTunes Match if you're an Apple Music customer. Jason, Roger wants to know, do you think that Apple renaming iBooks to Books means they might be paving the way for an iOS laptop? Oh, boy. Well, I wrote an entire article on this that you can read at Macworld.

So we'll put that in the show notes. That'll be fun. That'll be fun. Which includes a Star Trek reference in one of the subheads that one of my readers got immediately, which made me love that reader so much. The answer is, I don't think it necessarily means that. I would love to believe it because I think iBook would be an awesome name for an Apple iOS laptop. And they have the name because it's freed up. I don't think this means that. I think it means that Apple is continuing to simplify a lot of their software and taking the i names off of pieces of software that don't need it anymore. My piece in Macworld

is basically like the conventional wisdom is there'll never be a new i product, that Apple is decommissioning it everywhere. And while i think that that's probably the most likely uh scenario here i just had i had that moment where i thought to myself well wait a second where does apple use the i and not all but many of the places where apple uses the i are for this i platform the ios ecosystem right ios has iphone and ipad and even ipod touch right the i uh name could be seen as referring to ios devices just as the mac name refers to mac os devices and if that's true couldn't apple have leeway to and and if i'll even go further if apple did create an ios laptop what would they call it and would have would it have i in the name i think maybe it would i'm not saying they're going to i still think that this is a flight of fancy for me a little bit and that you know even though i'd like

to see it i'm i don't know if i actually want to let myself believe that it might happen. But if they did, wouldn't it make sense to say iPhone, iPad, iBook instead of iPhone, iPad, Apple lap book or whatever? Like, I feel like the iName, although it feels old on one level, you could make the argument that actually what they're trying to turn it into is something that's tied into this iOS platform. So I think it might mean that what it means, Roger, is that they could call something else iBook. I kind of wanted the iPad to be called iBook, but that didn't happen. It means they could now because it would be less confusing because iBooks is going away and is just going to be books. I don't think that's probably why they did it. I think they did it because they are continuing to

sort of simplify a lot of their product names. I do wonder about like iMovie, like what in the long run, what's going to happen with iMovie? And is that something that they change and turn into something else? Or do they just leave it because it's had that name for so long that they're going to keep it? That one I don't know. And iCloud, you know, I don't think is going to go anywhere. They're going to rename that again. It seems not. And, you know, again, Apple's most popular platform is iOS.

So on that level, it's probably okay. And then the outlier is the iMac, which, again, I think it's not impossible that Apple might change the iMac's name to call it something like Mac. But now that there's an iMac Pro, what would you call that? So I think in general, my inclination is that popular products with i in the name are just going to stick around because even if Apple doesn't want to ever make anything new with i in the name, those products are too famous to change. But I do think if I were making a new bit of iOS hardware, I would seriously consider giving it an iName because it would fit with its buddies in the iOS ecosystem.

Anyway, that's my short version. You can read the whole column. I went into it. Brianna asks, the 5S can see live photos and messages, but can't take live photos. Can the iPhone 8 and other iPhones see Animojis in the same way? The answer is yes.

Somebody can send Animojis to anyone and you can view them. You just can't make them yourself and send them back. They're just videos. They're just video attachments. So you can even take the videos and share them in other places as well, which is kind of funny. So let's say you see them on Twitter because people send them in messages and then they open the little video and they copy it and

paste it into tweetbot or something like that yeah jeff says so apple's gutting mac os server i'll put a link in the show notes if you're not familiar with what's going on there jeff wants to know do we know anything about what hardware and software apple runs its own data centers on i mean obviously i'm assuming not macOS server. No. Because that would be a shame for them, wouldn't it? So, I mean, do we know anything? It's probably just like Linux or something.

I know that they use Azure, right, for some stuff. Yeah, well, I mean, they're using Azure for some things, but they also have their own data centers. I don't know. There's probably somebody who knows. There's some story out there in some semi-esoteric publication website somewhere about Apple's approach here.

Although Apple keeps it quiet. They're not talking about like Google and Facebook and Amazon. But I imagine it is a Unix Linux of some kind. And is it running Apple's own like darwin stuff it wouldn't surprise me if apple is running some custom uh stuff it also wouldn't surprise me if apple is is running uh stuff that's very commonly used but um you know what we what we do know from other companies is a lot of these companies that have huge cloud infrastructures start building their own stuff because they can control all the parts

because it gives them security to their, they're not taking stuff off the shelf because we have heard, there have been stories about like, you order a server from some, you know, server manufacturer and there's spy hardware in it so that they can intercept.

I mean, that is a thing that happens now so i i think google and facebook build their own stuff i think maybe amazon builds their own stuff so it wouldn't shock me if apple is using its own stuff it's not using mac os right but it wouldn't it wouldn't shock me if it's like its competitors is building some of its own Unix based servers, running code that it is taking from open source maybe and modifying or writing some stuff itself to do that. But if somebody has links to like articles about which give us a little bit better idea of what Apple's own server infrastructure is, I would be fascinated to hear about that. Or if you know, and you want to tell us so we can pass it on anonymously, that would be fascinated to hear about that or if you know and you you want

to tell us uh so we can pass it on anonymously uh that would be great too but i i it's certainly not mac os and as somebody who's used mac os server for a long time i'm kind of sad that it's going away at the same time i mean because it just keeps getting content taken out of it and the latest update the story has pulled a lot more features out of it um but at the same time you know a lot of that stuff's still in the sharing control panel so it's not those questions from leon regarding the youtube competition talk what do you guys think of vine 2 uh the most they kind of is to know about this is uh there is going to be a new vine they've got a twitter account v2 app my feeling on this is i'm happy that that they're going to make it because vine was awesome

right vine was a great little thing and it was it was a real shame actually i think that vine went away i don't know what i think is how i feel this is going to go for them in the future vine one of the reasons vine works so well is that like it was natively embedded in twitter and i'm going to assume they're probably'm going to assume they're probably not going to be able to get that again. So then if that's the case, then they're just links. Then are people really going to want to watch the Vines?

How good of a social network can Vine be on its own? I don't know. I don't know. My concern is it gets a bunch of hype for like a couple of weeks. Everyone's excited to use it and then maybe they don't anymore that that would be my concern what do you think yeah i i don't think i have an opinion on this i mean vine what's funny is that vine seems to have remained successful

after its death like my kids um know all these memes that come that come originally from vine and so the idea of this six-second video social network, it was a huge missed opportunity to turn it into something that it was Twitter, right, that bought it and then basically just killed it. It's a shame. I think maybe, like you said, the time has passed and we have to move on.

But there's going to be stuff that is invented that takes off and you know maybe it'll be this but probably not because that's just true of anything yeah all right and last today from jim regarding the apple watch always on display could there be a bigger concern about image retention on the oled and not battery life i don't think so because you can you can you can vary it in software right like if you had an always on that wasn't the animation and it was just text you can the old classic trick is you can move the text around the screen a little bit just a little bit and it's like a like a screensaver It changes which dots are lit up. And I am sure that clever Apple software engineers could find a way to combat any potential burn-in on the OLED in order to give people actual always-on time, even if the time wasn't always in exactly the right place, maybe, if they felt like that was an issue. And maybe it would be like, how long does it have to stay on?

I'm not saying that there might not be a burn-in issue issue but i'm saying that there's got to be ways around it in terms of just smart software other people do it right and the iphone that's true right they're obviously doing stuff with the iphone 10 to prevent burning where they can right like there's elements that are on for long periods of time my i think i replied to jim on twitter about this but i wanted to say on the show too my feeling on this is that's Apple's problem to solve. Right? They have to find a way to fix that because this is an obvious thing that the watch should be doing.

And if they can't find a way to solve that, then I would be concerned. Right? Because there are things that like, this is the thing with Samsung, right? Like, they move elements, the always-on elements on their phones because they have some software elements that are there permanently, like the home button and stuff. They move it by millimeters, like which is like imperceptible if you're just looking at it.

But that's like a way that they stop burning on the phone. It's like they move the elements ever so slightly every now and then. Right. Not a way that you'd ever see, but it stops it from being in the same place constantly. So there are ways around it. That's just a thing that they would have to work on over time. And I hope that they do find a way to do it. It may well be one of the reasons they haven't done it yet, but I really hope that they find a way

and I think that they should. And what is it? Life finds a way? Something like that. I think that's a phrase that we can apply here too. Okay, we're at the end. We're done. Thanks for listening to this week's episode of Upgrade.

You can go to relay.fm slash upgrade slash 179 to get show notes for this week. Thank you so much to Squarespace, Timing, and Eero for their support. You can find Jason's work at sixcolors.com and theincomparable.com as well as on RelayFM. We both host many shows at RelayFM. Just go to

relay.fm slash shows and you can check out many of the shows here. I think you would enjoy. If you're only listening to this one or one other, then you should listen to more, I think. Listen to more. Jason is on Twitter. He's at jsnell. I am at imike. I am yke. You can send in your questions for the show with the hashtags AskUpgrade and SnellTalk. Two very different types of questions. Send them in to us and we will do our best to answer as many as we possibly can. Next week, hopefully, HomePod. Until then, say goodbye, Jason Snell.

Goodbye, everybody.