While You Were Away, U.S. iPhone Availability Jumps to 26% from 2%

Conclusion. We continued our daily monitoring of iPhone X availability, capturing 2224 daily in-store data points for 139 of the 271 U.S. Apple retail stores.

  • This past week (Nov 20-26th) availability jumped to 16%, compared to 2% in the previous week (Nov 13-20th)
  • The increase in supply was more notable when you look at the 3 days following Thanksgiving (Nov 24-26th) which we measured an average of 26% availability compared to 2% in the three days leading up to Thanksgiving (Nov 20-22nd). Data was not available on Thanksgiving Day given Apple stores were closed, eliminating in-store pickup options.

While there have been measurable improvements, iPhone X remains in short supply. We anticipate iPhone X lead times of more than 4 days to continue for the balance of 2017 and expect the iPhone X to reach supply demand equilibrium sometime in January. That’s a slight positive for the outlook for Apple’s Mar-18 quarter.

Online lead times continue to decline. We noted an improvement in global iPhone X lead times (8 countries), exiting last week at 1-3 weeks compared to 2-3 weeks in the previous week, and 3-4 weeks earlier in November.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Posted in Apple  • 

Black Friday Evidence Retailers Lead With Apple; iPhone X M.I.A.

Conclusion. We meticulously went through Black Friday deals to see how major retailers (Best Buy, Target, Walmart) were using Apple products to drive in-store and online traffic and found discounts ranging between 6%-36%.  Apple also weighed in on Black Friday with their once a year “sale” (gift card) offering of 5-15% savings, inline with Apple’s 2016 Black Friday promo. Not surprising, retailers are taking a loss on many Apple products today and Monday (typically retailers have an average 15% margin on Apple products) to drive traffic and build brand.

iPhone X missing in action. While iPhone 8 is being discounted, we saw no discounting of iPhone X, which remains in tight supply.

Target is most aggressive. Target is offering the most aggressive discounts with their $250 iPhone 8 gift card offer yielding an average savings of 31%, along with other discounts including Watch Series 1 of 20% and iPad of 17%. Best Buy was second most aggressive, discounting iPad by an average of 21%, iPhone’s (excluding iPhone X) by 19%, Watch by 19%, and Macs by 11%. Apple not surprising was third with an average “savings” (gift card) on iPads of 12%, Watches of 10%, Macs of 9%, and iPhones (excluding iPhone X) of 7%. Walmart’s Black Friday Apple discounts were somewhere between confusing and misleading. More below.

Walmart’s mystery Apple deals. At first glance, Walmart seemed to be most aggressive with Apple products on Black Friday, leading with an iPhone SE for $99 ($349 retail) on a Walmart Family Mobile Plan and a $300 Walmart gift card for in-store only on select iPhones. We spoke to 2 Walmart stores to get details on the $300 offer, and were told it was for only a fractional number of contracts that quickly got purchased Thanksgiving night. Fractional number of contracts for the ad below feels misleading. What also feels misleading was the advertised iPhone 7 savings of $49 when it fact it was $49 over retail price, and a $250 savings on an iPad Mini when the actual savings was $50. Pull it together Walmart.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Posted in Apple  • 

2017 Loup Ventures Holiday Gift Guide

Here are a few gift recommendations for the 2017 holiday season:

And here’s a look ahead to 2018 with some of the products we’re hoping for:

  • Apple HomePod | Apple’s foray into the smart speaker market.
  • Apple iPhone X Plus | We’d love a larger screen for our iPhone Xs.
  • Oculus Go | Oculus’ $199 standalone VR headset.
  • Magic Leap | Augmented Reality glasses.
  • Tesla Model 3 | Already on the market, we’re hoping to see shorter reservation times.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Apple Readies to Fight for Your Monthly Video Wallet Share

Conclusion. Get ready for another $10 a month drag on your credit card. It’s a rebranded, all in one Apple video and music offering in 2-3 years.

An Emerging Area of Investment. It’s no secret that original content will be an emerging area of investment for Apple, given it will boost the increasingly important Services revenue line. The good news is the trend of more cord cutting is undeniable and consumers paying for multiple monthly streaming services. Multiple streaming services means there will be a handful of content provider winners. The bad news is Apple’s efforts in content have been limited to “learnings” (Carpool Karaoke and Planet of the Apps). We think that will change over the next 5 years as Apple ramps its original content investment from about $500m in 2017 to our estimate of $4.2B in 2022. It’s worth noting this will still lag our 2022 estimates for original content spend (excludes catalog spend) by Amazon at $8.3B which will likely surpass Netflix at $6.8B.

Fighting To Reach 75m Subs. We define a winning content platform as having 75m+ monthly subs. That’s a tall order given it’s a crowded field with more than 200 subscription video services in Sep-17 (Parks Associates). These video services are working to catch up to the creative achievements of existing players. In 2017, HBO won 29 Emmys, (most for the 17th straight year), Netflix won 20, NBC 15, and Hulu 10. Looking at monthly subs, today’s leaders are Netflix (estimated to end 2017 with 115m subs) and Amazon (~80m global Prime subs). Hulu is the 3rd largest with 12-15m U.S. subs, but that doesn’t clear our 75m hurdle. Apple should be able to quickly expand their sub base given they have a running start with just over 30m Apple Music subs that will have access to the video offering for the same $10 per month. Even though Apple employs the “iTunes Store” nomenclature to sell most of its video content, we expect an all in one offering (music and video) to take the form of a rebranded Apple Music sometime in the next 2-3 years.

This note puts Apple’s content ambitions in context with the other players.

Apple. With over 30m Apple Music subs, Apple aims to bundle the music offering with an expanded selection of original content video (essentially two shows today) and will steer clear of license catalog content. Apple cares about original content because it will grow Apple’s Services business. Services will account for about 14% of revenue in CY17, growing at a high-teens rate for the next several years, which is more than double the growth rate of Apple’s hardware business. Separately, Services carry a gross margin which is around 2x Apple’s overall GM of 38%. We note content margins are slightly higher than Apple’s current business based on other streaming services’ margins that are around 45%. As Apple continues to invest in original content over the next few years (we estimate it will be around $800m-$1B in 2017), Services gross margin could decline by 3-5%, which would pressure overall Apple gross margin (currently at 38%) by about 0.5%. We expect will generally have a positive view of this growth vs. margin trade off given this is an investment in a measurable revenue generating in addition to Apple’s core business.

Adding Talent & Shows. Apple announced in early November they are developing a new TV show for its streaming service starring Jennifer Aniston and Reese Witherspoon. They beat out bids from Netflix and Showtime for the rights and could possibly spend over $10 million an episode, according to WSJ. The show, which doesn’t have a script yet, will follow the lives of morning news talk show anchors (think Today Show or Good Morning America). This is the second major content announcement for Apple recently, after announcing it is teaming up with Steven Spielberg to reboot his Amazing Stories series. On top of these two upcoming shows, Apple has been filling the ranks of its programming team with experienced entertainment executives. In late October Apple hired Jay Hunt, a rock star in UK original content, and in June hired Jamie Erlicht and Zack Van Amburg from Sony. Separately, these hires tie back to the acquisition of Beats and Jimmy Iovine joining Apple. Iovine was instrumental in bringing Erlicht and Amburg to Apple and has been the point man for Apple’s push into the original programming. Iovine has deep knowledge and a wealth of experience in the music industry — we consider him a “tastemaker” — and will likely work to expand their video offering into original programming, alongside their existing audio offering.

Rebranding Apple Music & iTunes. Obviously, what is offered with ‘Apple Music’ and in the ‘iTunes Store’ is more than just music, and is another data point Apple lags behind on name changes. Looking back, they were ‘Apple Computer, Inc.’ until 2007 when Steve Jobs decided to ditch ‘Computer’ to better reflect the products the company sold (the first iPhone model was released in 2007). In 2016, they dropped ‘Store’ from their physical retail locations, indicating the stores are more of an experience than simply a place where you buy things (e.g. Apple Fifth Avenue, Apple Lincoln Park, or “I need to stop at Apple”).  With the rebranding and expansion of its content library Apple’s positioned to be a player in original programming.

Netflix. With 115m subs globally  (54m in the U.S) and expected to spend $7-8B in content in 2018, Netflix is the gold standard for over-the-top original programming. Over the years they have won 37 Emmy awards on 128 nominations, and hoping to increase that as they are expect to release 80 original films in 2018. Netflix’s strategy is to keep a steady stream of diverse content coming, as opposed to HBO for example with a few high-profile releases. They certainly have those prestige shows – Stranger Things, Narcos, The Crown, to name a few – but that is not the (sole) objective. Instead, Netflix focuses on offering a content library with a broad range of appeal to its diverse subscriber base, seeking overall commercial success ahead of critical successes here and there. They’re also rolling out this strategy internationally by continually entering new markets and even offering original shows in the local language for those international markets. Currently, native-language shows are available in Spain, Japan, Mexico, South Korea, Brazil, France, and Italy. Netflix has the largest library, budget, and geographic reach of the streaming services and will continue to be a formidable force for many years to come.

Hulu. Subs of 12-15m, U.S. only. Hulu will spend around $2.5 billion on content in 2017. While Amazon and Netflix will both spend more than twice that this year, it’s important to remember that Hulu is only available in the US, while Amazon and Netflix are both distributed internationally. Hulu also is not aiming to be a leader in original programming, instead using it to supplement their focus on licensing quality content from major TV networks. However, they have still had success with their original programs. The Handmaid’s Tale won an Emmy for Outstanding Drama Series, the first such award for a pure streaming service. They have begun bundling their service with others’, notably offering college students both Hulu and Spotify Premium for only $4.99/month. They have Cinemax and HBO add-ons to their service as well, though there are no discounts involved and are simply integrated into the Hulu app. Hulu’s approach is to offer as much quality content as possible, both originals and programming licensed from major networks (recently added 7,500 episodes in Q3).

Amazon. Subs of -90m Worldwide. We believe Amazon Studios’ content spend is budgeted at $4.5 billion for 2017, and they have recently communicated will increase in 2018. On the Sep-17 earnings call, Amazon said they were “bullish” on video given it helps drive more engagement and purchases on Amazon. Prime Video is only available to Amazon Prime members, and Prime members (as expected) spend about 3x more money than non-members. Amazon recently announced they’re expanding Amazon Studios, even after they’ve had management shakeups in the unit in the past month. Amazon Studios’ head resigned amid sexual harassment allegations, and they’ve added new heads of both scripted and unscripted content. Coupled with these management changes is a strategy change. CEO Jeff Bezos had indicated he’s looking to find a high-profile series with global appeal, and recently acquired the rights for a TV show based on J.R.R. Tolkien’s writings (i.e. The Lord of the Rings). Amazon paid $200-$250 million for the rights to the Tolkien IP (Bezos paid $250 million for The Washington Post in 2013), and will shoot two seasons for a reported $100 million each, bringing the financial commitment to nearly $500 million. This has the potential to legitimize their video entertainment ambitions in the eyes of non-Prime customers.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

HomePod Delay Suggests Siri Integration is Harder than Expected

Apple announced today that it will not release the HomePod in December as planned – delaying the launch until “early 2018” instead. We believe that Siri integration – and, more broadly, digital assistant hardware – is more challenging than our phones may lead us to believe.

In line with our previous comments on HomePod, we believe Apple has a grander vision for HomePod than simply delivering a better sounding Echo. We expect the HomePod that will hit the market early next year to have deeper Siri integration than Apple initially presented. As it stands, HomePod will only handle music-related queries on the device itself, routing all other requests for domains like Lists, Notes, and Messaging through an iOS device. But we expect HomePod to be capable of non-music domains that will drastically improve on the voice computing experience that other smart speakers promise, but seldom deliver. We shouldn’t be all that surprised by the delay, as Tim Cook foreshadowed it in a Bloomberg interview shortly after WWDC saying, “One of the advantages that we have is that there are a lot of things that Siri knows to do from the cloud. We’ll start with a patch of those … and then you can bet that there’s a nice follow-on activity as well.”

Apple’s statement. “We can’t wait for people to experience HomePod, Apple’s breakthrough wireless speaker for the home, but we need a little more time before it’s ready for our customers. We’ll start shipping in the US, UK and Australia in early 2018.”

Déjà vu. This isn’t the first time Apple has delayed a product release. Today’s announcement brings us back to April of 2007. Apple is working on the iPhone, set to launch in June, and planning on releasing Mac OS X 10.5 Leopard around the same time. On April 12 Apple released a statement saying, “iPhone contains the most sophisticated software ever shipped on a mobile device, and finishing it on time has not come without a price. We had to borrow some key software engineering and QA resources from our Mac OS X team. As a result, we will not be able to release Leopard at our Worldwide Developers Conference in early June as planned. We think it will be well worth the wait. Life often presents tradeoffs, and in this case, we’re sure we’ve made the right ones.”

“Life often presents tradeoffs, and in this case, we’re sure we’ve made the right ones.” – Apple, April 2007

Did Apple make the right tradeoffs with HomePod? We think so – the damage to the brand as a result of shipping a half-baked product is greater than the potential benefit of pushing it out in time to capture holiday sales. The level of connectivity in Apple’s device ecosystem leads us to believe that HomePod will deliver a superior experience, and loyal Apple consumers will be rewarded for waiting. And the loyal Apple user base would have made up the vast majority of 2017 HomePod sales anyway. In the same Bloomberg interview post-WWDC, Cook added, “For us, it’s not about being first, it’s about being the best.”

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.