Apple eBook

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INTRODUCTION

Apple, always the trendsetter, did something in 2015 that few if any companies have ever done. It managed to have two completely different years in a 365-day period.

Which actually makes it somewhat difficult to rank, rate or evaluate Apple 2015 performance in a way that doesnt sound a little contradictory or incoherent, because when asked, So how did Apple do in 2015? the most sensible answer is probably another question.

Which one the first one, or the second one?

Apples 2015 No. 1 a time period roughly, but not entirely contiguous with the first half of the year was undeniably awesome. The iPhone 6 didnt so much beat sales records as annihilate them, banks were lining up around the block to sacrifice a piece of their beloved interchange fees for a piece of the Apple action, and those same banks also decided to take on the challenge of advertising Apple Pay. The possibility of a trillion-dollar valuation actually seemed pretty viable and in the Apple Watch it seemed the company had finally done the impossible: created a wearable consumers wanted to purchase instead of openly mock (we miss you every day, Google Glass).

In most situations, any and all of those things would be reason enough for party hats.

But Apples 2015 No. 2 a time period roughly, but not entirely contiguous with the second half of this year was not quite so rosy. For all of its hype, Apple Pay didnt quite attract users or merchants at the rates initially expected, the Apple Watchs status as a success is largely unknown (ditto to Apple Music), the iPhone 6s doesnt seem to have sold as well as expected and the Apple TV was mostly met with yawns without a streaming service to go with it. Almost all at once, the invincible seeming company was the object of investors concern, particularly about the diversity of its product line. The dominant question in late 2015 was: Can Apple continue to be the most powerful company on Earth essentially on the strength of one product, even a product as historically successful as the iPhone?

And as it turns out, there are no easier answers to any of those questions. Apples successes are legitimate and staggering, and their failures arent so much clear

The dominant question in late 2015 was: Can Apple continue to be the most powerful company on Earth essentially on the strength of one product, even a product as historically successful as the iPhone?


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misses as mostly unknowns. And that situation is exacerbated by Apples generally low enthusiasm level for sharing any results that are not mind-bendingly awesome.

So whats an Apple watcher to do in the face of so much uncertainty? Well, you could try to read everything published on the subject in the last year, but that would be inefficient. So, instead, you could read this eBook and get the easiest and most accessible guide to last years roller coaster ride with the worlds most successful firm. Buckle in for the ride!

CHAPTER 1

THE YEAR OF APPLE PAY While we dont imagine Tim Cook has much in the way of regrets, we imagine that sometimes he might wish that perhaps he had been a bit more conservative in his estimation of where Apple Pay was going (and how fast it was getting there) in January of 2015.

But they do say to go big or go home and Apple didnt get to where it is by going home a lot.

Which makes Tim Cooks 2015 will be the year of Apple Pay declaration less than wholly shocking. Perhaps it was ill-advised, but not surprising. And besides, things were looking pretty good back then. As of today, about 750 banks and credit unions have signed on to bring on their customers, and in just three months after launch, Apple Pay makes up two out of three dollars spent on purchases using contactless payments across the three major U.S. card networks, Cook noted on the investor call during which he declared 2015 the year of Apple Pay.

Of course, even back then, there were doubters, most notably MPD Chairman Dr. David S. Evans, who noted that, despite its massive power as a consumer brand and its army of loyal fanboys, Apple wasnt actually ideally positioned to launch a payments platform. Apple didnt have enough merchants already on board, nor enough consumers showing interest and without a massive amount of one or the other (or a large number of both), payments platforms historically dont fly.

...Despite its massive power as a consumer brand and its army of loyal fanboys, Apple wasnt actually ideally positioned to launch a payments platform. Apple didnt have enough merchants already on board, nor enough consumers showing interest and without a massive amount of one or the other (or a large number of both), payments platforms historically dont fly.


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However, whatever the eventual outcome for Apple Pay, as of January 2015 it had already pulled off a minor miracle that may have passed hardcore payments followers by: Apples move into mobile signaled the beginning of mainstream interest in the topic, from the news media to the average suburban consumer in the U.S.

Which in turn changed the conversation about mobile, subtly but noticeably. The main question was no longer if mobile would ignite, but instead when it would ignite and who would ignite it.

Unfortunately for Tim Cook, the answers to those two new questions are not clearly Apple Pay at this point.

Tim Cook: 2015 The Year Of Apple Pay We are in the first inning.

2015 will be the year of Apple Pay.

Those two talking bits about sum up what Apple CEO Tim Cook had to say about the progress of the mobile payments app and how the service will evolve in attracting new merchants, issuers and consumers in the year to come. During the companys first-quarter earnings call yesterday (Jan. 27), Cook gave analysts a peek into Apple Pays success, and in true Apple fashion he alluded to the products growth without providing any overly specific payment volume figures. But as he rattled off the growing number of Apple Pay-accepting merchants and issuers, Cook gave some insight into some key figures about what sort of mark Apple Pay is making on payments.

As of today, about 750 banks and credit unions have signed on to bring on their customers, and in just three months after launch, Apple Pay makes up two out of three dollars spent on purchases using contactless payments across the three major U.S. card networks, Cook said. In merchants who already accept Apple Pay, the rates are even higher. Panera Bread tells us Apple Pay represents nearly 80 percent of their mobile payment transactions. And since the launch of Apple Pay, Whole Foods Markets has seen the use of Apple Pay increase by more than 400 percent.

Apples move into mobile signaled the beginning of mainstream interest in the topic, from the news media to the average suburban consumer in the U.S.

Click here to read the article on PYMNTS.com


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Citing the example of USA Technologies, which announced yesterday that theyd be accepting Apple Pay at 200,000 of its locations, Cook emphasized everyday payments are happening. Cook indicated that POS providers are seeing high demand for merchants to accept Apple Pay, particularly through its partners and customers.

When asked by an analyst about the potential for mobile payments in terms of Apple Pay and customers making in-app payments, Cook discussed how the potential of mobile payments varies depending on region and demographics. Both the contactless app and the in-app payment are important. I think they are both huge opportunities. I think theyll play out differently in different geographic regions as to which one is larger than the other and likely the mix of those things will change over time as more and more commerce flows across apps, said Cook, who also talked about how Apple Pay might evolve.

Evolving for Apple, who already has a dominating presence in the U.S., means going global and getting Apple Pay outside of the U.S. While theres still work to do at home particularly with merchant adoption and convincing consumers to use Apple Pay Cook indicated theres evidence Apple Pay can succeed on an international level.

I think we are in the first inning on [Apple Pay], and we havent even completed the first inning yet. Theres tons of things on our roadmap for adding functionality to it. Were obviously just in the U.S. right now so theres tons of countries to go to. Theres not a day that goes by that I dont get notes from many businesses outside the U.S. wanting Apple Pay and banks and merchants. And of course we still have a lot of merchants in the U.S., Cook said. But I have to tell you, that given that we launched in October [2014], I am actually unbelievably shocked positively shocked at how many merchants were able to implement Apple Pay in the heart of their holiday season. But we were able to get a lot of different merchants and I give them a lot of credit for that. I think were just on the front end and I think that this is the year of Apple Pay.

Cook hinted that Apple, and the launch of Apple Pay, was designed to create the virtuous circle: The launch of Apple Pay would create more iPhone 6 customers and more iPhone 6 users would be driven by the desire to use services like Apple Pay. Did that strategy pay off for Apple? Its hard to tell. But the massive number of iPhones sold last quarter, which include holiday sales, indicate that a lot more consumers have the power of Apple Pay in their hands. We just dont quite know how many of them are actually using the app.

I think we are in the first inning on [Apple Pay], and we havent even completed the first inning yet. Theres tons of things on our roadmap for adding functionality to it. Were obviously just in the U.S. right now so theres tons of countries to go to." - Tim Cook, Apple CEO


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If the number of iPhones Apple sold in its first quarter equaled the population of a city, the figure would be roughly eight-times larger than New York City. Hint: thats 74.5 million the number of iPhones Apple sold in Q1. But because Apple doesnt release its precise inventory figures, its impossible for those outside of Apples ranks to know how many of those were iPhone 6 or iPhone 6 Plus. The surge of iPhones sold in Q1 also helped Apple hit another milestone: the sale of its billionth device. That helped Apple hit its all-time record revenue of $74.6 billion, a 30-percent increase from the year prior. Profit hit $18 billion for the quarter.

What also helped fuel Apples iPhone sales growth was Apples emerging presence in China. First-quarter earnings in revenue from greater China hit $16.1 billion, which reflects a 70- percent growth from the year prior. Apple consistently trailed Samsung in the Chinese market, but research firm Canalys estimates that Apple is now the top smartphone maker in China. In October of 2014, the same month Apple Pay launched, Apple was the No. 6 smartphone maker behind its Asian counterparts. While the U.S. still makes up a majority of Apples retail sales, Cook indicated that the companys growing presence in China will help show a shifting global market for the company.

Cook said the results of inland China Apple customers shows iPhone sales are up 100 percent, year over year. Additionally, he said, China is going to be a major market for Apple, the iPhone and potentially Apple Pay in 2015. While he didnt point to China specifically for Apple Pay, its growing share of iPhone users show Apple may work to get into the heavily regulated payments market in China. Saying Apple is a big believer in China, Cook said Apple will soon his 20 stores in China and that will double by mid-2016. Apples eCommerce presence is also growing and available in over 350 cities in the country.

And Cook certainly wasnt shy in sharing his thoughts on the iPhone market share, indicating that Brazil and China are the two emerging markets Apple has focused on recently. Cook also got a few jabs in at the Android market, citing that the latest quarter was the highest Android-to-Apple switchover rate than any of the three previous phone launches.

We believe that [the iPhone] is the best smartphone in the world. Our customers are telling us that, the market is telling us that. Were doing well in every virtually every corner of the world and so were very bullish that it does have legs.

We believe that [the iPhone] is the best smartphone in the world. Our customers are telling us that, the market is telling us that. Were doing well in every virtually every corner of the world and so were very bullish that it does have legs. - Tim Cook, Apple CEO


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What Cook also said will have legs in 2015 is Apples launch of the Apple Watch in April, which was delayed multiple times, including its most recent release projection of March. But Cook defended the product rollout of the smartwatch which will also be Apple Pay compatible saying that Apple always said it would come out in early 2015, which he said considers to be the first four months of the year.

But with the earnings figures, iPhone sales and overall growth all beating analysts expectations, Cook and his crew at Apple might have just bought themselves some extra time from analysts wondering why Apple hasnt rolled out its next product. And by this time next year, well be able to answer the one question payments pundits all want to know: Will 2015 be the year of Apple Pay? Tim Cook already thinks so, but do consumers?

APPLE AND APPLE PAY IN 2014

Apples fourth quarter earnings came in just hours after Apple Pay launched on Oct. 20, and the quarter brought in record-breaking revenue, sales and profit. Strong sales of iPhone6 and 6 Plus, which had huge backlogs in Q4, brought home a strong year for Apple. Apples Q4 was its strongest revenue in seven quarters, reporting $42.1 billion in revenue and a net profit of $8.5 billion. And that capped off a strong 2014 for the tech company.

Over the last four quarters, our products and services have generated $183 billion in revenues, an increase of $12 billion over last year. We sold 243 million iOS devices and 19 million Macs, both all time highs, said Cook in the Q4 earnings call. Our revenue from iTunes software and services reached $18 million, which was more than the annual sales of two thirds of the companies in the Fortune 500 and we generated $6.45 in earnings per share, which is 14 percent higher than last year and also set a new record. Analysts wanted to know about the Apple Watch during Q4 but Cook was candid in telling analysts he wasnt going to give up details on the numbers. He also didnt give projections for iPhone 6 or 6 Plus sales, but did stress during the call that Apple cant keep up with the high customer demand of its products.

To be straight, I am not very anxious in reporting a lot of numbers on Apple Watch and giving a lot of detail on it because our competitors are looking for it and so aggregating it is helpful from that point of view as well, Cook said.

To be straight, I am not very anxious in reporting a lot of numbers on Apple Watch and giving a lot of detail on it because our competitors are looking for it and so aggregating it is helpful from that point of view as well. - Tim Cook, Apple CEO


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Apples Q4 talks were much more payments focused than the companys third quarter, which strangely enough didnt have any questions from analysts about Apples mobile payments plan. That was in late July, and by Sept. 9, talk of Apple Pay was all the rage in the payments industry. Everyone who had anything with tech, commerce, payments and mobile had something to say about Apple Pay, and the conversations have kept flourishing since. And here at PYMNTS weve been tracking its every step with our Apple Pay Ecosystem Tracker. But Apple Pay only made up the last quarter of the year for the company. So what else happened for Apple in 2014 in terms of earnings?

In Q2, Apple generated a March quarter record of $45.6 billion in revenue, up 4.6 percent from $43.6 billion during the same period ended March 31 last year. Net income rose 7.4 percent, to $10.2 billion from $9.5 billion. The share of revenue from hardware/devices (iPhone, iPad, iMac and iPod) during the quarter was 86.9 percent, down from 87.4 percent a year earlier. iPhone units sold during the quarter totaled 43.7 million (compared with 37.7 million expected by analysts), also a March record and up 16.8 percent from $37.4 million. iPhone sales revenue was up 13.5 percent, to $26.06 billion from $22.96 billion. Some 16.35 million iPad units were sold during the quarter, short of analysts estimates of 19.7 million units but at the high end of company forecasts.

Cook remained determined in April to keep the companys future plans close to the vest. When asked about new products like the iPhone 6 or Apple Pay no specific details were ever given. It would be nearly six months before details would emerge.

For Q1, the quarter that ended Dec. 28, 2013, Apple posted an all-time quarterly record of 51 million iPhones. Apple also sold 26 million iPads during the quarter, also an all-time quarterly record, compared to 22.9 million in Q1 of 2013. Overall, Apple posted a revenue of $57.6 billion and a net profit of $13.1 billion. Still, just like first and second quarter, Apples earnings focus was all given to iPhone and iPad sales; the interest in investors has changed quite a bit in a year, as most are wondering how Apple Pay has influenced that sale of iPhones. But since thats a speculative figure, Apple will have to keep relying on its iPhone sales figures as indication if theres consumer interest in at least owning the device that gave new life to the mobile payments industry. The next step, as its been since last September, is convincing those consumers to use that smartphone to make mobile payments.


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OTHER READING

Apple Pays Most Unusual Ignition Strategy http://www.pymnts.com/news/2014/apple-pays-most-unusual-ignition-strategy/

Apple Pay A Bust On Black Friday http://www.pymnts.com/news/2014/apple-pay-a-bust-on-black-friday-new-data-shows/

Apple Pay Fizzling? No Way Man, Its Sizzling! http://www.pymnts.com/news/2014/is-apple-pay-fizzling-no-way-man-its-sizzling/

CHAPTER 2

THE SLOW MARCH TO ADOPTION

Apple spent much of 2015 learning the two lessons that many others who have flown close to the sun in payments have also learned the hard way:

1) Consumers are stubborn and dont like doing new things 2) Merchants run on narrow margins and dont make expensive upgrades unless they

absolutely have to (and sometimes, as EMV has proven, not even then).

Which meant that after the big initial pops mentioned during Apples Q1 earnings report last year and the first big waves of super-early adopters downloading and installing Apple Pay, the long, slow march toward increased consumer use and merchant acceptance began in earnest.

It is impossible to know with certainty exactly how slow that march has been, mostly because Apple in the last year has released no official figures on Apple Pay. While by inference one can assume that means the numbers are not awesome (as Apple is usually pretty forthcoming when they are succeeding ridiculously), it is hard to gauge if those numbers are mediocre or actively alarming.


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Especially because Apples lack of official releases has in no way stopped many, many research firms and consultancies from putting together their own estimates, which have the curious tendency of offering an incredibly wide range of results. Sometimes, by some counts, Apple is dominating the market and consistently picking up market share. Other times, by other counts, Apple is getting the stuffing kicked out of it by consumer indifference and merchant hostility.

Luckily, PYMNTS and InfoScout have been tracking Apple Pays adoption all year and instead of consulting complicated models or relying on consumers self-reporting their habits, we just looked at thousands of receipts, specifically of consumers who could have used Apple Pay (i.e. had the right phone and were in a store that would have accepted it).

The pattern was pretty clear. Early-on adoption was growing, but slowly, with the vast majority of potential iPhone users never so much as trying the service. As the year wore on, and less technologically inclined later adopters started upgrading to the iPhone 6, adoption numbers plateaued and then fell such that Apple Pays Black Friday numbers in 2015 were actually worse than the 2014 results.

And those results were widely considered to be a bust at the time.

Apple Pay By The Survey

The Internet is good for many things not the least of which is numbers. Want to know how many people are living Peoria right now? The Internet has your back (~116,000). Need to know Avogadros number? No need to find a chemist Google can tell you (6.0221413e+23)

The Internet has pretty much destroyed the old problem of limited access to data and created a whole new one too much data without context. The World Wide Web is awash with facts and figures the problem is not all figures tell the right story. You know the old adage that there are three kinds of lies, lies, damn lies and statistics? Thats a nod to the fact that one can use numbers in just about any way to make a point. And, thanks to Google and Sir Tim Berners Lees invention of the World Wide Web, a survey a year ago of 50 redheaded women between the ages of 25 and 30 who when asked

It is impossible to know with certainty exactly how slow that march has been, mostly because Apple in the last year has released no official figures on Apple Pay.



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about buying shoes, say that they only buy red ones, turns into a new finding about how Millennial women now overwhelmingly express a preference for red shoes.

This, of course, is an exaggeration to make an important point. And, that is the importance of understanding the details and associated rigor with which surveys and data and results are done.

And that brings us to Apple Pay.

This weeks contribution to the growing Apple Pay data set is a new survey released by 451 Research entitled Apple Pay Outperforming PayPal in Mobile Payments.

Here is its conclusion.

Our latest survey shows planned use of Apple Pay has been on an upward trajectory since it became available six months ago with the service helping to spark consumer demand for mobile payment technologies, said Andy Golub, Survey Research Director for 451 Research. Although consumer perceptions of security remain an issue, the results point to marked improvements in this area.

But what we dont really know is who they asked iPhone 6 consumers, iPhone consumers or just people on the street and how they drew their conclusions, which are all over the Web now and undoubtedly in a slew of PowerPoint decks already.

Their results are also somewhat inconsistent with the results of the work InfoScout has done to track Apple Pay Transaction volume. They ask consumers who, in fact, own iPhone 6s why, how and whether they use them for payment and why after leaving a store that accepts Apple Pay. Security is not an issue that ever comes up and in fact, consumers who use Apple Pay really like the experience. They just forget to use it since it is not available in enough of the places they shop to make it a habit, and offers nothing more than payment, at least today, to make consumers go through the trouble of remembering.

The timing of these findings is also interesting given PayPals announcement of its Q1 performance yesterday, which do seem to show PayPal with a bit of the mobile payments wind at its back. PayPal gained 3.6 million new active accounts in Q1, an increase of 11 percent, to 165 million registered accounts, processed more than 1 billion transactions in the quarter, which is an increase of 24 percent and saw customer

Early-on adoption was growing, but slowly, with the vast majority of potential iPhone users never so much as trying the service. As the year wore on, and less technologically inclined later adopters started upgrading to the iPhone 6, adoption numbers plateaued and then fell such that Apple Pays Black Friday numbers in 2015 were actually worse than the 2014 results."


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engagement spike as PayPal transactions per active account increased to 23 and monetization per active account jumped to $49.

Perhaps 451 Researchs conclusions about Apple Pay sparking momentum for mobile payments is right and has helped drive interest in consumers using PayPal!

But as positive as this is, pun intended, PayPals performance and Apple Pays is a bit of an Apples and Oranges comparison. Apple Pay survey data, at least for the most part, is about measuring in-store usage, mostly, and PayPal is about online/mobile mostly. Neither PayPal nor Apple Pay have been successful at igniting mobile payments at the physical point of sale for all of the reasons that weve been writing about forever now. Its just hard, and takes time and merchant initiative to enable it.

But theres conflicting data on Apple Pay usage, and this is not an uncommon issue especially in discussion of Apple Pay. One set of data says one thing and a different set of data indicates something entirely other. In late 2014 during the holiday rush, something similar happened. InfoScout released a report that indicated Apple Pay was fizzling with consumers, while ITG put out a report that indicated it was positively sizzling.

So whats happening? Damn lies and damn statistics? Not quite. Taking a closer look at the new 451 Research study and a handful of the most popular ones released before it, it emerges that everyone seems to be reporting honestly on different topics.

Specifically, all the researchers are gathering the data differently targeting different groups, asking different questions and measuring different things. Some studies like InfoScouts measure actual use by counting receipts and asking iPhone 6 users who could use their phones in a store that accepted it why they didnt. Other studies like ITG or Phoenix Marketings rely on consumers reporting on their use habits and its not clear that all of those consumers are all iPhone 6 users. And some like the 451 Research data do no actually report on use at all that study that boldly finds that Apple Pay is dusting PayPal does not actually contain a single piece of data on consumer use instead it focuses on consumers intended use in the future.

So, in order to at least lay it all out there so that you can see it all for yourself and then decide how or if to use the data in your next PowerPoint presentation, take a look at our pretty chart to find out who asked who what, and when and what they reported.


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APPLE PAY BY THE SURVEY | AS OF APRIL 24, 2015 Source | PYMNTS.com

Our latest survey shows planned use of Apple Pay has been on an upward trajectory since it became available six months ago with the service helping to spark consumer demand for mobile payment technologies. - Andy Golub, 451 Research


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... All the researchers are gathering the data differently targeting different groups, asking different questions and measuring different things.


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OTHER READING

Wanna Know How Many Apple Pay Users There Are? http://www.pymnts.com/in-depth/2015/wanna-know-how-many-apple-pay-users-there-are/

Apple Pay Adoption: Improving But Still A Long Way To Go http://www.pymnts.com/in-depth/2015/apple-pay-adoption-improving-but-still-a-long-way-to-go/

Pii360 : The Payments Innovation Index, Powered By Market Platform Dynamics http://www.pymnts.com/pii360/

CHAPTER 3

ITS NOT EASY GOING GLOBAL

In the U.S., where interchange fees are fairly high and likely to remain so in light of being affirmed by the US Supreme Court banks were willing to sacrifice 15 basis points to Apple in the hopes that some of Apples Pays widely forecasted customer-attracting magic would rub off.

In the rest of the world, where regulators take a much dimmer view of swipe fees and they are legally mandated at a much lower level, issuing banks are somewhat less enthusiastic to hand over those 15 basis points, as that is a proportionally large bite out of their fees.

And when the issuing banks of the world decide they arent so interested in paying to pay, it gets a lot harder for a payments platform to take the world by storm.

And so progress was slow and for the vast majority of 2015, Apple Pay was a U.S.-only way to pay, unless one happened to be a foreign national carrying an American-issued card.


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However, as the year started to wind down into the fall, progress was made. American Express gave Apple a major assist by helping them launch globally, first in Australia and then in Canada. 2016 is expected to bring launches in Spain and Singapore.

That move incidentally did very little to endear Apple to the issuing banks of Australia, which are now openly accusing Apple and Amex of not playing fair, and more or less refusing to support Apple Pay.

But in the U.K., Apple and the bulk of the country's big banks found a way to bury the hatchet over fees and get Apple Pay launched, though what the exact structure of those deals is remains a mystery.

And finally, just under the wire as the year was closing out, UnionPay announced that they would be teaming up with Cupertino to bring Apple Pay to the mobile-enthused Chinese market.

Of course, whether the Chinese market is a great place for Apple to be hanging out is something of a question mark, but lets not get ahead of ourselves thats still a chapter away.

Apple Pays Business Model Blues There is no shortage of things to say about Apple Pay which is why we developed an entire Tracker on the subject.

However, for all the focus on the technology powering Apple Pay, the security that keeps its payments credentials airtight, how many consumers use it and how many merchants accept it, the one thing that doesnt get a lot of airtime is the business model that underpins it.

Of course, the essence of the Apple Pay business model is the money Apple makes on the sale of hardware the iPhone 6/6 Pluses. Selling hardware is how Apple always makes money, and Cupertinos hope is that Apple Pay is such a cool mobile payments app that consumers will buy/upgrade/switch their current phone to its newest Apple

...when the issuing banks of the world decide they arent so interested in paying to pay, it gets a lot harder for a payments platform to take the world by storm.



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Pay-enabled model. Apple even made news recently when it launched its trade-in program designed to get consumers to do just that. (And it seems to be working.)

Of course, Apples app store is legendary and why consumers and developers both love the Apple platform. But of the $182.8 billion in revenue that Apple booked last year, only $15 billion came via the sale of apps. ($15 billion high margin dollars, mind you, but app store revenue is roughly 8 percent of the total.)

So, the real shocker when Apple Pay launched in October of 2014 was the little toll booth that Apple placed between it and the issuers whose cards are so elegantly provisioned in the Apple Pay wallet. That toll booth collects a small toll, 15 basis points (0.15 percent or 15 cents on a $100 transaction), from the issuer each and every time their card is used at a merchant.

And that tool isnt going to make Apple rich.

Piper Jaffrays low-end estimate forecast that this fee will bring in $118 million in revenue in 2015, increasing to $310 million in 2016. On the high end, Nomuras equity analysts estimated it could account for $1.6 billion in revenue by 2017 two years from now.

Which in Apple parlance is pretty much bubkus, a mere rounding error at a firm that has $160 billion in the bank and is positioned to be the worlds first trillion dollar market cap company.

NOW, APPLE PAYS ISSUER FEE IS CONTROVERSIAL ON A NUMBER OF FRONTS.

First, when the carriers proposed something similar with Isis/Softcard back in the day, the issuers and merchants threw up all over it. It was a non-starter. What, they said. Put a barrier between me and my customer and charge me on top of that? You have to be nuts!

Or five years later, Apple, and all of its allure as a beloved consumer brand.

The real shocker when Apple Pay launched in October of 2014 was the little toll booth that Apple placed between it and the issuers whose cards are so elegantly provisioned in the Apple Pay wallet. That toll booth collects a small toll, 15 basis points (0.15 percent or 15 cents on a $100 transaction), from the issuer each and every time their card is used at a merchant.


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In the United States, interchange is a well accepted, if not very well liked, reality of the payments ecosystem.

But thats not the case everywhere else in the world.

WHICH IS CONTROVERSIAL POINT NO. 2.

When Apple knocked on the issuers doors in the U.S. and asked for a cut of their interchange revenue, there was actual interchange revenue on the table to discuss and to take a cut of.

However, as Apple is trying to expand outside the U.S., not all issuers are as enthusiastic about having that discussion. In most parts of the world, interchange revenue is as thin as a runway model. Pretty soon, as a result of an almost finalized EU regulation, credit cards in the EU will be at 30 basis points, so Apple would be taking half of that. Debit will be at only 20 basis points.

International issuers are less than interested in handing over a section of a small amount of revenue just for the privilege of letting their customers pay the Apple Pay way.

So will global iPhone 6 owners (without U.S. issuer-based cards) be paying with Apple Pay at a merchant near them any time soon?

Well

IT PLAYS IN BOSTON (AND NEW YORK, L.A., SAN FRANCISCO)

As all of you inside baseball payments aficionados know well, the interchange fee is what the merchant pays to the issuing bank every time a consumer uses a card. The interchange fee is set by the card networks and represents the largest component (70 percent to 90 percent) of the fees merchants bear for accepting electronic payments transactions. How exactly that rate gets set for individual cards is based on a variety of circumstances including card brand, regions, the type of card (credit/debit), the type and size of the accepting merchant, and whether the card is physically present at a merchant or not.

When Apple knocked on the issuers doors in the U.S. and asked for a cut of their interchange revenue, there was actual interchange revenue on the table to discuss and to take a cut of.


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That very simple explanation unleashes a torrent of surprisingly complex reactions to the concept.

Merchants who ultimately pay this (and all other swipe fees) hate it. Issuers and card networks love it. Consumers dont know and dont care.

As a result of bullet point No. 1, there has been a long and protracted history of merchant ligation over the issue. That litigation has been largely unsuccessful. It hasnt stopped merchants, however, from wanting to do something about interchange and that something isnt about making those fees higher. For example, a large consortium of them in the form of MCX developed a yet-to-be launched mobile payments scheme that would ride alternative rails that would be cheaper for them to process and accept.

Sort of.

MCX and its members have poured millions of dollars into developing their own payments network; a network that, in theory, would make the cost of accepting a payments product cheaper than it is for them now. wrote MPD CEOKaren Webster in a commentary late last year. You have to really be mad at the networks to take such a costly and extreme step.

Since, of course, operating a payments network isnt exactly free. And until MCX gets up a head of steam, merchant members would be forced to accept all forms of payment see bullet point No. 3 above. Consumers dont know and dont care about interchange they just want to use the cards they want to use at their favorite merchants.

Meaning, This isnt a battle being fought over security or ease of use, John Zurawski, an executive at Authentify, told CNN. Its a battle being fought over interchange fees that merchants pay.

ENTER APPLE.

Apple keeps Apple Pay users on the standard credit and debit rails. When it launched, Apple made a point of saying how much of an advantage it was for them to embrace

MCX and its members have poured millions of dollars into developing their own payments network; a network that, in theory, would make the cost of accepting a payments product cheaper than it is for them now. You have to really be mad at the networks to take such a costly and extreme step. - Karen Webster, CEO Market Platform Dynamics


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the payments ecosystem that is known to consumers and merchants and knows how to run a payments network.

So, it wasnt all that surprising that issuers were willing to give up a cut of their fees in order to enlist Apple as their champion to ignite a nascent mobile payments scheme one that leveraged the NFC technology that most had left for dead by leveraging the powerful Apple brand and the infrastructure that they were already a part of.

Moreover, Apple Pay users seem to favor and use credit more than debit card products. Our own PYMNTS/InfoScout Apple Pay Transaction Tracker released in March 2015 showed that 85 percent of users have at least one card registered to their Apple Pay account, and 63 percent of those cards are credit cards. At stores where consumers might have used debit more like grocery with Apple Pay, those transactions now show a more than noticeable tip toward credit card usage.

Which could make some merchants even grumpier as the cost to them to serve that consumer goes up.

But, as weve said repeatedly, if Apple Pay can drive more spending by more customers who prefer their store because they accept Apple Pay, merchants will accept Apple Pay because thats what their consumers want to use and dont know and dont care how much it costs the merchant to do so.

Making merchants just a little nervous maybe not so much now that Apple Pay volume is low but potentially a lot nervous if Apple Pay gets a head of steam. More consumer traction and dependence on Apple Pay, merchants have said, could put them behind a pretty big interchange eight ball at some point.

BUT ITS LIKELY TO MISS IN BERLIN

That, situation is very different in Berlin, Paris, London or any other European city.

In Europe, interchange is next to nothing in several sizeable countries and going to probably be next to nothing if the regulators have their way, Webster wrote last October. Its unlikely that issuers, who will get hardly anything when their cards are used, will be willing to pay Apple anything like the fees it is getting from U.S. issuers. Apple will just have to be happy selling iPhones and making money some other way. Its

Apple keeps Apple Pay users on the standard credit and debit rails. When it launched, Apple made a point of saying how much of an advantage it was for them to embrace the payments ecosystem that is known to consumers and merchants and knows how to run a payments network.


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hard to see Apple Pay generating the same sort of excitement from European issuers. And, in fact, European regulators did get their way and in March voted overwhelmingly to cap interchange fees. By a 621-to-26 vote, the move officially codified a deal that was struck in December between lawmakers and the EU Council to set the caps at 0.2 percent for debit and 0.3 percent for credit transactions. The ruling also set limits on Visa and MasterCards Honor All Cards rule. For consumer debit cards, the new rules also allow individual EU member states to set lower percentage caps and impose maximum fee amounts.

This legislation will put a cap on interchange fees, make them more transparent and remove a hurdle to rolling out innovative payment technologies, said EU Commissioner Margrethe Vestager, whos in charge of competition policy for the Commission. It is good for consumers, good for business and good for innovation and growth in Europe.

And while these caps might be very good for all of those parties as Commissioner Vestager believes they will be it is certainly not going to be good for Apples hopes of getting European issuers to hand over any part of those fees.

All of that uncertainty has certainly slowed the pace of rollout in the U.K. and Europe, despite the rapid clip sales of iPhone 6s there. Its hard to make a persuasive case to an issuer who is getting nothing in the way of interchange and who is faced with having to dig into other revenue buckets to write Apple a check.

AND IT LEAVES BEIJING COOL

Chinas Central Bank also forced interchange fees down to close to nothing. Not surprisingly, the Chinese banks, all part of the Union Pay system (sort of the Visa of China), arent excited about shelling out 15 basis points any more than their European counterparts.

Apple is reportedly having difficulty in its ongoing negotiations with at least eight major Chinese banks that belong to Union Pay. Chalk it up to that other i word interchange. Quite simply, Chinese issuers are balking at a 15 bps cut of the interchange fee they think that amount is too high. According to an employee of one large bank, they just dont want to give up such a large percentage to Apple.

In Europe, interchange is next to nothing in several sizeable countries and going to probably be next to nothing if the regulators have their way. Its unlikely that issuers, who will get hardly anything when their cards are used, will be willing to pay Apple anything like the fees it is getting from U.S. issuers. Apple will just have to be happy selling iPhones and making money some other way. Its hard to see Apple Pay generating the same sort of excitement from European issuers. - Karen Webster, MPD CEO


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Now, this could all be just posturing and good negotiating tactics on the part of issuers all over the world. After all, Apple did persuade many of the nations largest banks to not only roll with their mobile wallet, but actually pay them to be part of it. And those issuer partners have even done Apple Pay one better, and created extensive advertising campaigns to highlight how much they support Apple Pay.

But a business model based on interchange that doesnt exist in any material way outside of the U.S. makes global expansion difficult without some thought about what the right business model for Apple should be.

And that is all a function of how serious they are about payments.

Consumers dont have enough places to use Apple Pay to make it a driver of their iPhone 6 purchase. But theyll keep buying them because it has lots of other cool features that they do love. That means that Apple will still ring that HUGE cash register called hardware whether or not Apple Pay is a success.

But ringing the payments revenue register now or a few years from now will rest with the decisions they make about how they use incentives to get the right stakeholders on board. Clearly, they have the consumer getting the banks and the merchants will take more than the other i word to pull off.

Of course, it could also be posturing by Apple, which may drop its fee entirely or in part as it realizes the economics dont work out for the banks either. Remember, again what Apple really wants is to sell phones.

Consumers dont have enough places to use Apple Pay to make it a driver of their iPhone 6 purchase. But theyll keep buying them because it has lots of other cool features that they do love. That means that Apple will still ring that HUGE cash register called hardware whether or not Apple Pay is a success.


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OTHER READING

The Apple Pay/Amex Global Adventure http://www.pymnts.com/in-depth/2015/the-apple-payamex-global-adventure/

Apple Pay In The UK http://www.pymnts.com/in-depth/2015/apple-pay-in-the-u-k/

Apple Pay Gets More UK Bank Support http://www.pymnts.com/news/payment-methods/2015/apple-pay-gets-more-uk-bank-support/

Apple Pays Canadian Day http://www.pymnts.com/news/2015/apple-pays-canadian-day/

CHAPTER 4

THE CHINA QUESTION

Tim Cook and team Apple have been extremely bullish on China for the entirety of 2015 and for very good reason. China is the fastest growing market in the world, with the fastest growing middle class. And those middle class shoppers do not need to be converted to mobile commerce, as mobile commerce is almost de rigueur in China.

And China is also dominated by different A players, or a pair of them actually: Alibaba and its offshoot payments platform, Alipay. Which presents Apple an interesting and unique challenge. They don't have to convert consumers to mobile in China to the extent they do in the U.S. or Europe, but they do have to convince those consumers that they would rather use the import than the homegrown hero (or the homegrown heroes if you count second runner-up Tencents Tenpay).

However, Apple does have some experience in persuading Chinese consumers away from homegrown heroes, as the incredible success of the iPhone in China has demonstrated. At various points in 2015, Apples iPhone has been the best-selling phone in China, edging out Xiaomi and Huawei and their vastly less expensive products.


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Plus, after months of back-and-forth with UnionPay and an apparent loss to a smaller British player Apple managed to get a deal with UnionPay signed and sealed in the 11th hour, though Apple Pay delivery wont be achieved until 2016.

But Apples big problem is China is the same as every other players struggle with big Chinese exposure: it is unclear just what comes next for the Chinese economy. After more than a decade of recording-setting growth the Chinese economic engine is slowing down, the stock market has gotten volatile, and analysts and observers worldwide are trying to figure out if China is currently sitting on a plateau in advance of resumed growth or if the worlds most dynamic economy has settled into a calm before for the full tilt economic storm begins.

And for as long as that issue remains essentially unsettled, Apples bullishness on their future fortunes in the Chinese market remains difficult to evaluate. If China gets back to growing and its middle class stays super enthused about spending, Apple is in good shape. But if not, well, it seems worth noting that less than a week into 2016, reports are circulating that Apple is cutting iPhone 6s orders, at least partially due to weakness in Chinese sales.

Not a good sign.

And, as the next chapter demonstrates, its not the only one.

But Apples big problem is China is the same as every other players struggle with big Chinese exposure: it is unclear just what comes next for the Chinese economy


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Apples China Crisis

Roller coasters are a lot of fun when theyre in theme parks. But on Wall Street, no one loves a roller coaster ride or, as weve experienced this week, an inverse roller coaster ride.

Most coasters start with a long and suspense-building climb before the plunge. This weeks wild ride in the stock market got right to the point and kicked off with a 1,000 point stock drop right out of the gate. Tuesdays open had the appearance of a turnaround, but despite getting up by as much as 400 points throughout the early buildup, the market went cold right at the end of trading, and wiped out the days gain. But the U.S. markets bounced for real this time on Wednesday and managed to close 600 points up combined with gains as of the time this article was written. By the midway point in Thursdays trading in the U.S., most of the early week losses had been erased.

Whew.

Yet concerns persist.

Chinese market instability is what set off the six-day stock sell-off, and the Chinese outlook remains a concern.

The downward trend has not changed. The market is on track to bottom out, said Shenzhen-based Yang Delong, chief strategy analyst at China Southern Asset Management, in an interview with The Washington Post. The rebound [in China] is a technical rebound. It is the market self-correcting after several recent big drops. And while bad news for China has proven to be tough for the entire global economy, it is particularly hard on Apple. Investors were so worried about it Monday, that Apples stock briefly dipped below $100 per share. The situation turned around with a surprising intervention from Apples chief himself but some Apple watchers are still nervous.

As it turns out, Apple is in an unusually interdependent relationship with China and faces more than average risk from economic weakness overseas. Which means that while others in the global economy may be hopping off the roller coaster this week,

As it turns out, Apple is in an unusually interdependent relationship with China and faces more than average risk from economic weakness overseas.



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Apple may have merely been getting a taste of things to come.

A DIMINISHED MARKET FOR GOODS

While the fireworks were particularly bright this week, concerns about Apples exposure to China have been cropping up for the last month and have been one of the factors that has contributed to the 23-percent erosion in Apples stock price during that period. Apple has been a favorite brand of the emerging Chinese middle class. Sales in-nation are growing faster than they are worldwide and Apples global sales are pretty strong. But, Apples Chinese sales growth has been astonishing.

Last fiscal year, China generated $29.85 billion in sales a 135 percent pick up from three years earlier. During the last quarter, iPhone sales shot up 87 percent but the general smartphone market in China only grew 5 percent, indicating that it has quite a lot of potential ground to capture.

And Apple will like be looking west for that growth, particularly as the U.S. market is approaching saturation with the latest iPhone release and theres no apparent successor to the iPhone as an alternate revenue generator, at least so far. However, Apples continued success in the Chinese market depends on a Chinese middle class that continues to grow, thrive and feel comfortable spending.

Which, it should be noted, Chinas premier Li Keqiang has every confidence it will, as he believes the general economic conditions in China are much better than currently believed.

Fundamentally, the overall stability of the Chinese economy has not changed, and positive factors sustaining a turn for the better in the real economy are accumulating, he said in a meeting Tuesday, state media reported.

And thats a view the premier of China seems to share with Apple CEO Tim Cook.

I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the

Fundamentally, the overall stability of the Chinese economy has not changed, and positive factors sustaining a turn for the better in the real economy are accumulating. - Li Keqiang, Chinas Premier


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past few weeks, and we have had the best performance of the year for the App Store in China during the last two weeks, Tim Cook wrote in a note to Jim Cramer on Monday, hoping to soothe investors who had becoming unusually sell-happy with their Apple stock.

Obviously I cant predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge, Cook added. Sure, tell that to the Chinese middle class guy whose stock market fortunes just got wiped out. Chinese stocks, generally, have lost half of their value in this latest rout. And the emerging middle class investor may be feeling a lot less confident about spending money on anything, much less a pricey iPhone. Building that shaken confidence is why the Chinese government is taking such extraordinary steps to pump liquidity into the market.

Which could create big headaches for Apple.

SELLING IN YUAN, PAYING IN DOLLARS

The relative strength of Chinas economy and middle class is only part of the equation for Apple. Since the way China smoothes out its economy is unusually important to Apple, a very devalued yuan is a big problem because of how Cupertino pays and gets paid in China.

When Chinese consumers buy iPhones, they pay in yuan. And because Apple as a general rule doesnt change its retail price in response to currency fluctuations, a big drop in the value of Chinese currency means they are making less per unit sold.

This means Apple can continue selling a ton of phones to the Chinese middle class if the yuan is entirely devalued, they wont be taking in as much revenue as they want to be. And given that last quarter 27 percent of Apples revenue and 50 percent of their revenue growth came from China, that is not a small hit to their bottom line.

Now you might be thinking right but doesnt Apple manufacture most of their stuff in China? So theyre losing retail dollars but saving big on manufacturing costs, right?

Obviously I cant predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge. Tim Cook, Apple CEO


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Wrong. Apple doesnt pay its big suppliers like Foxconn and Lenovo in yuan those contracts are all negotiated in dollars. Meaning while a weak yuan can reduce Apples revenues, it will have no lowering effect on their costs. Boeing faces a similar issue in China though their sales are priced in dollars, not yuan, so they are somewhat less exposed than Apple.

In short, Apple needs its Chinese customer base stable and spending, but it also needs them to be spending a home currency that has not been radically devalued, or that spending wont be helpful enough.

THE HAZY OUTLOOK

Of course, in the marketplace, any number of things can change. The China picture is drawing a lot of doom and gloom predictions now, but if market volatility slows down going into fall, concerns could still abate in much the way the Chinese premier (and Tim Cook) thinks they will.

Apple could also see a secondary product emerge to provide an income stream comparable to the iPhone. This week, IDC released figures that indicate Apple has shipped 3.6 million of its wearable device implying it has been somewhat more successful than some analysts had projected. That follows reports from Best Buy that the Apple Watch was a big enough hit to actually boost the stores earnings.

However, while getting to the No. 2 spot in the wearable world (behind FitBit) in a short time is a notable accomplishment, it seems at least for now the Apple Watch wont quite have the mass appeal the iPhone does.

Which means Apple probably still needs China and will be watching very closely to see just how the recent economic unrest will work itself out.

Which means Apple probably still needs China and will be watching very closely to see just how the recent economic unrest will work itself out.


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OTHER READING

Apple Grabs More Of Chinas Smartphone Share http://www.pymnts.com/news/2015/apple-grabs-more-of-chinas-smartphone-share/

Apple Pay Is Going To China After All http://www.pymnts.com/news/2015/apple-pay-is-going-to-china-after-all/

Apple May Cut iPhone Orders http://www.pymnts.com/news/merchant-innovation/2016/apple-may-cut-iphone-orders/

CHAPTER 5

OUT WITH NOT QUITE A WHIMPER, BUT DEFINITELY NOT A BANG

In gymnastics, when a performer does an otherwise perfect series of moves only to manage a spectacular wipeout at the end, it is traditionally said that they have not stuck the landing.

And while Apple had some absolutely undeniable success throughout the year, the end of the year is pretty clearly a paradigmatic case of not sticking the landing. Stock price spent much of the fall falling, as the bloom rapidly came off of the Apple rose for investors who first found themselves worried that Apple was entirely too exposed to Chinas economy and then found themselves worried that Apple is the worlds most magically successful one-trick pony.

A fear that is not entirely misguided.

Apple Pay has had a bumpy year as we have already demonstrated. Apple Watch seems to have had an OK launch, but not a great one. Rumor has it that a boatload of them sold during the holiday, but that seems just a little contradicted by the fact that Apple Watch was heavily discounted ($100 off) throughout the season and the fact that


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it is not Apples custom to discount products that are doing extremely well.

Also falling into the big question mark category is Apple Music. At various times this year it has been reported as both a homerun and a total flop and the building consensus seems to be that it is neither, and that it just wont be a game changer for Apple.

Also unlikely to be a game changer anytime soon is Apple TV, which is well reviewed, but not rapturously reviewed. Consumers like it, but not notably better than they like the Roku or Amazon TV and the lack of a streaming service (which no one was ever actually promised but everyone got excited about anyway) really took a big bite out of enthusiasm.

And, though they didnt need any more question marks, the fate of the iPad (especially in the context of Apples new push with IBM into enterprise computing) is also unknown. The good news is that Apple and IBM have built all the business apps they planned to, but the bad news is that it is still not known if building it means they will come, especially if the they in question have spent the last 25 years using MS Office products and have no inclination to learn something new, no matter how much they like their iPhone.

Which means, as 2016 is getting its sea legs, for all the changes Apple has seen in the last year, one thing remains the same.

It all comes down to the iPhone; as long as it dominates, Apple does, too.

Which means, as 2016 is getting its sea legs, for all the changes Apple has seen in the last year, one thing remains the same. It all comes down to the iPhone; as long as it dominates, Apple does, too."


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Apples Continually Blue Christmas

Generally speaking, the good news about a bad week is that things usually get better by comparison. The day after your car breaks down is, for the most part, better than the day before when it did, since although you may have lacked a working car on both days, only one of them was spent on the side of a highway waiting for AAA to show up.

Unfortunately, that is more a guideline than a hard-and-fast rule and why the superstitious among us never utter the phrase well, at least, things cant be worse.

After reading the payments and commerce headlines drifting through the ether this week, we cant help but wonder if someone over at Apple, coming off of last weeks buffet of bad news, accidentally said, Well, at least, it cant get any worse.

Because however rocky things may have looked for Apple Pay and Apple Watch last week, they both look a little worse this week. And, adding worry lines to those in Cupertino, Apple TV seems to have suffered a major setback, and the iPhone is looking a lot less invincible.

So, what went wrong?

APPLE PAY, MEET WALMART PAY. NOW, MARVEL AT ITS SCALE. Walmart managed to pull off what will almost certainly be registered as the payments and commerce shocker of the year with the announcement that it is jumping into the payments arena with both feet.

Like, starting right now, with 5,000 merchant locations and 22 million consumers enrolled in its payments method.

With none of the fanfare and fireworks of the various Pay products, Walmart launched Walmart Pay in Bentonville, Arkansas, yesterday (Dec. 10). Early 2016 will see the quick rollout of the planned abbreviated beta, and by the halfway mark of next year, Walmart Pay will be in all 5,000 U.S. Walmart locations.



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A longer way of typing: Walmart Pay will be available in locations that are within 15 minutes of where 87 percent of the American population lives.

Walmart reports that 140 million consumers (or 77 percent of the U.S. adult population) visit its physical stores each week. Online, in November and December alone, Walmart.com is anticipating 210 million visits, up from 18 million two years ago. The Walmart app ranks among the top 3 retail apps in the Google and Apple app stores every month, and according to comScore, Walmart already has 22 million customers using its app in store each month.

To gain that kind of scale, Apple would almost have to capture every other retailer in the U.S. by 2016 and hope for an insane upswing in the usership of Apple Pay. Which is nearly impossible.

Apple Pay is a service restricted to owners of the most recent two models (more or less). Walmart Pay was designed somewhat differently: to accept any payment form, on any type of phone, running any type of operating system, at any Walmart register. Apple Pay uses NFC, which is available at scant merchant locations and not at all at Walmart. Walmart uses the Walmart.com app, the cloud and QR codes to simulate an eCommerce transaction in the store.

So, its easy, its accessible, its familiar and, now, its going to a retailer that sees 77 percent of the U.S. population on a weekly basis. That is beyond bad news for Apple and Apple Pay, which is struggling to get even 5 percent of the few consumers who can use Apple Pay (right merchant, right hardware) to engage with it.

Apple may have been mobiles great white hope in 2015, but it just watched mobile payments Black Swan swim by, maybe.

PLUG PULLED ON APPLE CABLE BEFORE ANY CORDS COULD BE CUT

Much of the spring and summer was spent speculating that Apple might be the killing blow for the much maligned, big, bloated cable packages consumers are forced to buy if they want the handful of digital channels they are actually interested in.

Apple Pay is a service restricted to owners of the most recent two models (more or less). Walmart Pay was designed somewhat differently: to accept any payment form, on any type of phone, running any type of operating system, at any Walmart register. Apple Pay uses NFC, which is available at scant merchant locations and not at all at Walmart. Walmart uses the Walmart.com app, the cloud and QR codes to simulate an eCommerce transaction in the store.


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And while that day may be coming, it wont be coming from Apple anytime soon. Apple announced this week that it will suspend its plans to develop a Web-based television service in favor of focusing on being a platform to which media companies can sell directly to consumers via the Apple Store and apps.

Reports also indicate that Apple has not entirely given up on the notion of offering a 14-or-so channel package for $30$40 a month, but for now, at least, strong resistance from media companies seems to be sufficient to keep Apple on the sidelines. A main issue was money, specifically the high costs media firms want for their programming.

Hmmm It is almost as though they were watching the less-than-wonderful experience the telecom and music industries have had being Apples partner and decided to take a pass or, at least, requested some very rich compensation for access to their content.

CBS Corp. Chief Executive Officer Les Moonves noted on Tuesday that despite the pause, he still thinks the service is coming.

But, for now, its not happening, and it seems worth wondering what that will mean for Apple TV, Apples newly redesigned digital media streaming device that was widely expected to be the vessel for the coming streaming service. The Apple TV costs more than either the Roku or the Amazon variation, and both make it easy to tap into digital subscription streaming.

Some wonder if Apple TV is a device without a purpose.

APPLE WATCH UPDATE

So, good news for those who have been on the fence as to whether or not they want to surprise someone with an Apple Watch this Christmas. It is increasingly being priced to sell.

Best Buy has taken $100 off the price of every Apple Watch and Apple Watch Sport in its online shop. That is actually a better deal than what Best Buy was offering during Thanksgiving weekend, when the big electronics retailer was taking $100 off higher-end Apple Watch models but the Sport was only getting a $50 discount.

Apple announced this week that it will suspend its plans to develop a Web-based television service in favor of focusing on being a platform to which media companies can sell directly to consumers via the Apple Store and apps.


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And though Best Buy is lowest on sticker price, it is far from the only sale on offer. Target is also selling the Apple Watch at a discount, though the $100 comes in the form of a gift card. B&H is also going the gift card route, though it is only giving out $50.

The goods news? Those big cuts in price will probably move a lot of fence-sitters toward an Apple Watch. But, man, there must have sure been a lot of them to make an Apple product go down in price by so much right before its first year of Christmas retail.

THE CREEPING ANDROID MENACE

Throughout what has thus far been a very difficult fall for Apple, there has been one common refrain offered as an explanation of the bright spot.

There is always the iPhone, which was killing it in the sales department.

And that is actually a pretty strong refrain, because as long as the iPhone remains as dominant as it is, Apples other products dont have to do well immediately.

But about that dominance

The latest report from Kantar Worldpanel indicates that Android has been gradually eating away at Apples market share in the U.S. and Europe.

Between August and October, the iPhones smartphone share in the U.S. fell to 33.6 percent, compared to the 42.9 percent it was clocking in this time last year.

Googles Android operating system was up 9.5 percentage points to 62.8 percent from the same period a year ago, Kantar reported.

On the other side of the pond, the picture was also one of loss during the fall months. The iPhones market share declined 2.2 percent in France, 1.7 percent in Italy and 0.6 percent for the top five nations in Europe (France, Germany, Italy, Spain and the U.K.) combined. Kantar considers the overall drop in Europe to be minimal, driven primarily by a deceleration of growth in Great Britain and Germany.

Now, analysts are not overly concerned. There were a variety of high-profile Android hardware launches this year from Samsung, LG and (shockingly) BlackBerry, while

Between August and October, the iPhones smartphone share in the U.S. fell to 33.6 percent, compared to the 42.9 percent it was clocking in this time last year. Googles Android operating system was up 9.5 percentage points to 62.8 percent from the same period a year ago, Kantar reported.


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Apples upgrade was to an interim S model. Generally, the successes in off-years are, well, off.

But for a firm as centrally associated with its smartphone as Apple, any dip is notable. Particularly if the other products in the stable are meeting with a tepid response, like the watch, or at risk of being knocked out of the market, like Apple Pay. Cue Elvis.

OTHER READING

Tim Cooks Batting Average http://www.pymnts.com/news/payment-methods/2015/tim-cooks-batting-average/

Issuers To Apple Pay Just Say No http://www.pymnts.com/news/2015/issuers-to-apple-pay-just-say-no-2/

New Apple Adoption Numbers http://www.pymnts.com/news/2015/new-apple-pay-adoption-numbers/

Apples Win Some, Lose Some Week http://www.pymnts.com/news/2015/apples-win-some-lose-some-week/


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