The Gray Market's Impact on iPhone Pricing

The expanding gray market for refurbished and previously-owned iPhones continues to gain legitimacy and influence. According to my estimate, approximately 150M iPhones in use passed through the gray market. This means that nearly 20% of iPhones in the wild, including hand-me-down iPhones, were previously owned by someone else. Along with helping Apple expand its user base, the gray market is also impacting Apple’s iPhone pricing strategy in an unexpected way: by driving iPhone average selling price (ASP) higher.

iPhone ASP

A few years ago, consensus was convinced that Apple would need to lower iPhone pricing due to competitive pressures. The iPhone 5c and iPhone SE, while very different from each other, were positioned by many as attempts by Apple to address lower-priced market segments.

However, things changed in a big way in 2017. Apple became more aggressive at the high-end of the iPhone line. The iPhone X’s $999 starting price was one of the most talked about Apple topics last year. Apple also increased pricing for iPhone 8 and 8 Plus. Management expanded on its high-end iPhone pricing strategy last month with iPhone XS Max, the highest-priced iPhone to date. In what ends up being a sign of how far Apple’s iPhone pricing has changed, Apple’s “low-cost” flagship, the iPhone XR, is priced $50 higher than the iPhone 8.

Given higher-priced flagship iPhones, it shouldn’t come as a surprise that iPhone ASP has been on the rise. As seen in Exhibit 1, which tracks iPhone ASP on a trailing twelve months basis, a notable upward trajectory in ASP began in 1Q18 with the iPhone X launch.

Exhibit 1: iPhone Average Selling Price (ASP)

The rise in iPhone ASP has led some to conclude that Apple must have shelved its strategy for growing iPhone sales and the user base by lowering prices. Instead, Apple is said to be milking existing iPhone users with higher-priced models. This school of thought ends up ignoring how the expanding market for refurbished iPhones is contributing to new user growth and a higher iPhone ASP.

Gray Market Impact

A tenet of Apple’s iPhone pricing strategy has been selling older flagship iPhones at lower prices. For example, along with selling iPhone XS Max, XS, and XR, Apple continues to sell iPhone 8, 8 Plus, 7, and 7 Plus. Apple is even selling older models such as the iPhone SE and 6s Plus in select markets. The company is able to run with lower prices for these older flagship models due to economics of scale and improved production and assembly costs.

Traditionally, older iPhone models accounted for as much as 30% of overall iPhone sales. Having such a significant portion of unit sales going to lower-priced iPhone models kept a lid on iPhone ASP. However, things are changing. In 3Q18, non-flagship iPhone models likely represented just 20% of overall iPhone unit sales. As the number of customers buying refurbished and pre-owned iPhones through the gray market increases, Apple is seeing less demand for the lowest-priced iPhones in its lineup. Customers in lower price brackets have additional iPhone purchasing options at their disposal thanks to the gray market.

Despite weaker demand for lower-priced iPhones, Apple continues to see modest growth in iPhone sell-through demand. This tell us that demand for new flagship iPhones has not subsided. Instead, demand for higher-priced iPhones is growing. The shift in iPhone sales momentum from lower-priced, older flagships to higher-priced iPhones is contributing to higher iPhone ASP.

Gray Market Ingredients

Three key ingredients are needed to sustain a functioning gray market for iPhone.

  1. Good device durability and usability. Simply put, iPhones need to hold up over time. A phone that can barely last after two or three years of usage is not conducive to a vibrant used market.

  2. Strong demand for refurbished iPhones. Many of Apple’s competitors lack a vibrant gray market given the lack of customer demand for refurbished products from that brand. In addition, other brands directly address lower-priced segments. However, given Apple’s iPhone pricing strategy and the company’s aspirational brand, there is a considerable amount of interest and demand for refurbished iPhones at lower prices.

  3. Steady supply of gently-used iPhones. Services like early upgrade plans offered by mobile carriers and Apple’s iPhone Upgrade Program are resulting in a stream of gently-used, year-old iPhones being turned in by customers. This supply of used iPhones is needed to satisfy the demand for lower-priced iPhones.

Durability and Usability

At last month’s iPhone and Apple Watch event, Lisa Jackson, Apple VP environment,
policy and social initiatives, unveiled Apple’s latest environmental goal to eliminate the need to mine new materials from the earth. In order to stop mining new materials, Apple will focus on three things:

  1. Find new ways to make products with recycled or renewable materials.

  2. Make products last as long as possible.

  3. Recycle products properly.

Increased durability doesn’t just allow existing customers to use Apple products for longer. The products can also enter the gray market and eventually be used by more people over time.

When it comes to durability, Jony Ive and Apple’s Industrial Design group have been focused for decades on the topic as it relates to product design. Good product durability is one reason there is already a strong gray market for iPhone. It is true that Apple designers sometimes find themselves between a rock and a hard place in terms of durability. Mobile batteries are a prime example. The fact that iPhone users can’t easily replace batteries is a durability trade-off in order to achieve other usability goals. However, Apple’s embrace of an iPhone battery replacement program speaks to management’s desire to elevate device durability within its iPhone strategy.

Meanwhile, Apple’s focus on having iOS 12 support older iPhone models highlights management’s motivation to improve usability. By supporting iPhone models going back to the 5s, Apple is able to keep tens of millions of devices, many of which have likely passed through the gray market, running the latest software. This proves beneficial when it comes to keeping these iPhones in circulation.

Strong Demand

Apple has the most popular smartphones in the market. This popularity translates to strong demand for iPhones, even at higher prices. The reason iPhone sales are a fraction of overall smartphone sales is that Apple is only playing in certain market segments. Such a decision ends up providing a huge boost to the iPhone gray market as there is unfilled demand for lower-priced iPhones.

The gray market allows Apple to reach customers who may not otherwise be in the company’s traditional target market. While iPhones sold in the gray market aren’t included in Apple’s revenue, the company does benefit if sales are to new users. Apple is able to sell services and additional hardware to these new users over time. This cycle becomes that much more impactful assuming an iPhone ends up being passed on to three or four owners over its lifetime, with each ownership change occurring at a lower price.

Steady Supply

Services like early upgrade plans offered by mobile carriers and Apple’s iPhone Upgrade Program are made possible by a functioning gray market. Robust residual values make it financially feasible for users to turn in gently-used iPhones after making 12 monthly payments and walk away with the newest iPhone. Many of these gently-used iPhones that are turned in are then recirculated in the market to find a new home. This creates the supply the iPhone gray market needs to sustain itself.

Exhibit 2 highlights iPhone residual value as a percentage of original launch price. After the first year, iPhone residual value is approximately 40%. This means that an original iPhone 8 / 8 Plus owner trading in the device after a year can expect to receive 40% of the device’s original cost. The percentages come from iPhone trade-in values offered through Gazelle. It is important to note that iPhone users may find better trade-in values elsewhere, such as store credit through Apple.

Exhibit 2: iPhone Residual Value Percentage

Note: Trade-in values are for unlocked iPhones in “good condition” and for the lowest storage configuration.

iPhone depreciation appears to be high in the first year (62% on average). The rate of depreciation slows to 13% in the second year and 11% in the third year. All of these iPhone depreciation rates appear to be lower (iPhone has stronger residual values) than the rates of Samsung smartphones.

My theory regarding these residual value/depreciation rates is that iPhone trade-in programs offered by some mobile carriers are beginning to result in a supply of gently-used iPhone 8 and 8 Plus iPhones entering the market. This may be leading to some weakness in trade-in offers for these models from sites like Gazelle. Interestingly, the higher-priced iPhone X has a better residual value percentage than does the lower-priced iPhone 8 and 8 Plus. This could be due to the iPhone X launch taking place in November 2017. Meanwhile, there appears to be a better supply/demand environment for customers trading in two and three year old iPhone models, as seen by lower depreciation rates.

As the gray market for refurbished iPhones grows, it would not be surprising to see iPhone residual values improve slightly over time as demand for pre-owned iPhones increases.

Stronger Flagship iPhone Sales

Earlier this year, the WSJ published an article positioning the gray market as “a culprit to blame for slumping [smartphone] sales.” The scenario painted by the WSJ was that current iPhone users were turning to the gray market when buying iPhones. This was said to result in less demand for higher-priced flagship iPhones.

The problem for the WSJ is that their thesis was built on the theory that iPhone X sales were weak. In reality, Apple sold 60M iPhone X units since launch, which is an impressive feat. The WSJ’s factually incorrect stance ended up being widely held in the press, despite Apple management declaring quarter after quarter that the iPhone X was the best-selling iPhone.

While it may seem counterintuitive, a healthy iPhone gray market can boost sales for higher-priced flagship iPhones. A functional gray market makes it possible for services like mobile carrier upgrade plans and Apple’s iPhone Upgrade Program to exist. As the number of iPhone users take advantage of these upgrade services, Apple sees a growing stream of annual iPhone upgrades. In a market in which the overall iPhone upgrade cycle is getting longer, annual iPhone upgrades, even if representing a small percentage of sales, can play a role in stabilizing iPhone demand and boosting iPhone ASP.

Looking Ahead

Apple will continue to sell lower-priced, older iPhones in in select markets, like India. However, as the gray market for refurbished iPhones continues to expand, Apple will face less pressure to come out with lower-priced iPhones with fewer features in developed markets. This dynamic bodes well for the idea of higher iPhone ASPs over time.

In 3Q18, Apple reported a $724 iPhone ASP, a record-setting $118 higher than the $606 iPhone ASP reported in 3Q17. It will be difficult for Apple to report a similar jump in iPhone ASP in FY2019. Instead, the more likely scenario is that the long-term average for iPhone ASP gradually increases. Over the past 10 years, the mean iPhone ASP was $640. It is possible that this mean ASP will move towards $700 over time.

The iPhone gray market is turning into a long-term tailwind for iPhone ASP. A major implication from such a development is that iPhone ASP is more resilient and sustainable than it may appear at initial glance.

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Above Avalon Podcast Episode 134: Let's Talk Netflix

The Netflix machine seems unstoppable. Strong paid subscriber growth and rising content budgets have given Netflix a commanding lead in the paid video streaming market. However, change is in the air. Episode 134 is dedicated to discussing Netflix’s business model and why calls suggesting Netflix has won the paid video streaming war are grossly premature. Additional topics include Netflix’s keys to success, upcoming paid video streaming competitors, lessons from the music streaming industry, and things to watch out for in paid video streaming over the coming years.

To listen to episode 134, go here

The complete Above Avalon podcast episode archive is available here

Netflix Isn't Invincible

Netflix has been on a roll. The company is adding approximately two million paying subscribers per month while its original content portfolio grows by leaps and bounds. However, calls suggesting Netflix has won the paid video streaming war are grossly premature. In fact, the battle hasn’t even begun. We are still in the early stages of what will likely become a brutal stretch for many players as competition for paying subscribers and our time intensifies. New players, including Disney and Apple, are about to enter the scene as different direct-to-consumer business models are put to the test. Many prevailing assumptions about the paid video streaming industry will end up being proven wrong.

Netflix Growth

It’s easy to see why Netflix has been a Wall Street darling. The company has seen years of sustained paid subscriber growth in an intriguing new market. While a few disappointing earnings reports, including 2Q18 results, have led to sporadic bouts of investor jitters, Wall Street has rewarded Netflix’s paid subscriber growth with a market cap roughly equal to that of Disney. Instead of judging Netflix on profitability or sales, Wall Street has only cared about one metric: the number of paid subscribers.

Exhibit 1 highlights both Netflix’s steady increase in the total number of paid subscribers and robust growth in the international segment offsetting slowing U.S. subscriber growth.

Exhibit 1: Netflix Paid Subscribers

As depicted in Exhibit 2, year-over-year growth in the number of paid Netflix subscribers on an absolute basis stands at an all-time high. In 2Q18, Netflix saw a 25M year-over-year increase in paid subscribers. This is roughly equal to the number of Hulu subscribers. Netflix now has close to 125 million paying subscribers, and the company’s momentum seems unbeatable.

Exhibit 2: Netflix Paid Subscriber Growth

Netflix Keys to Success

A few factors explain Netflix’s strong momentum over the years:

  1. Original video content. Netflix’s decision to bet on original content has been a game changer, helping to maintain paid subscriber momentum from the early 2010s. Shows like House of Cards and Stranger Things have single-handily helped boost Netflix’s paid subscriber tally.

  2. Low pricing. Compared to the price of a large cable bundle, Netflix’s low monthly subscription pricing is viewed as attractive by consumers. Netflix is also running with low pricing options in international markets.

  3. Superior user experience. Consumers want to decide when to watch their favorite shows instead of being told when to tune in.

Netflix’s business model is ultimately dependent on the number of hours subscribers spend watching Netflix content. As long as subscribers are watching an increasing amount of content, the Netflix model works marvelously. Strong paid subscriber and engagement trends give management the green light to spend an increasing amount on original content, which then contributes to additional user and engagement momentum. This produces a positive feedback loop, as shown in Exhibit 3.

Exhibit 3: Netflix Feedback Loop

Screen Shot 2018-10-10 at 1.53.51 PM.png

Netflix Competition

Competition has been a recurring theme on Netflix’s quarterly earnings calls. Management’s response has included a carefully-crafted, cautious tone, although the takeaway has been consistent: Instead of spending time worrying about the competition, Netflix remains focused on coming up with a better user experience. The aim isn’t to deny that Netflix faces competition, but rather to claim that Netflix doesn't look at the competition to figure out what to do next.

Up to now, Netflix has faced two primary competitors: legacy cable and our time. Netflix is a media company selling a video bundle to consumers. The company has seen much success in going up against the traditional cable bundle given innovation surrounding distribution. The way we consume video is undergoing a sea change, and Netflix has been able to ride the wave while legacy video struggles to stay afloat.

As shown in Exhibit 4, ESPN’s subscriber count, which serves as a proxy for the health of the large cable bundle, has declined by about 11% from the peak. Given how a growing number of slimmed-down cable bundles include ESPN, the large cable bundle has likely experienced even steeper subscriber declines.

Exhibit 4: ESPN Subscribers

Netflix’s fight against our time has been the more intriguing competitive battle. Netflix’s success is directly related to the amount of time users spend on the platform. Accordingly, the more Netflix video is consumed, the brighter Netflix’s prospects look. Given the finite amount of time available each day, Netflix ends up competing against everyday tasks for our time and attention. This battle has placed Netflix up against work, chores, errands, and even sleep. The battle for our time, not Amazon or even YouTube, has proven to be Netflix’s most formidable competitor to date.

New Battles

While it may seem like Netflix already has quite the nuanced battle on its hands going up against the clock, competition will only intensify. Up to now, Netflix has been running away with the ball with little to no competitive response from other paid video streaming players. When it comes to paid services other than Netflix, the list isn’t long with Amazon, HBO, and Hulu possessing the most mindshare. Things are about to change in a big way. In fact, we haven’t even seen a genuine battle yet in the paid video streaming space.

Three notable competitors are about to enter the paid video streaming scene:

  1. Disney. The company’s existing intellectual property portfolio, combined with assets acquired from 21st Century Fox, position Disney as a formidable force in the direct-to-consumer paid video streaming space. The company plans to have three video bundles: a Disney-branded bundle with family-friendly content, a Hulu bundle with content that isn’t as family friendly, and ESPN+. It is not a question of if Disney will succeed over the long run, but rather how aggressive Disney will be out of the gate in terms of grabbing paying subscribers.

  2. Apple. The new kid on the block. We are seeing what it looks like for Apple to go all-in on developing its own video streaming service. There are still questions surrounding Apple’s video strategy. However, the stream of reports regarding new shows and movies points to Apple building a decent-sized (at least a dozen shows) portfolio out of the gate.

  3. AT&T / Time Warner (HBO). After buying Time Warner for $85 billion, AT&T has a strong incentive to leverage its crown jewel, HBO, to gain a stronger footing in the direct-to-consumer paid video streaming landscape. AT&T seems interested in tinkering with HBO’s strategy of valuing quality over quantity. Such a content strategy is being questioned when compared to Netflix chasing both quality and quantity at the same time.

The three preceding companies will likely unleash a brutal paid video streaming war over the next five years. There will be intense bidding wars for the best ideas and shows. Talent will become even more scarce. Consumers will have more in the way of choice when it comes to watching high-quality shows. This battle will be so intense, free video streaming players, like YouTube, will likely be pulled into the mix. The significant momentum found with the paid video space is a direct threat to ad-based video models. Google may feel pressure to wade even further into the paid video streaming space.

Netflix’s Problems

Netflix’s grip on the paid video streaming market is not as strong as it may appear. The company’s competitive advantages in the marketplace are being oversold.

  1. Netflix’s video catalog is underwhelming. Aside from its one to two dozen original hit shows, Netflix’s broader content portfolio isn’t compelling. Much of the legacy content is stale while a surprising number of original movies feel off - as if they are low-budget despite having household stars. While Netflix’s growing efforts with original shows may be enough to keep viewers as monthly subscribers, more is needed on the content front if Netflix wants to grow viewer engagement.

  2. Switching between video subscription services is easy. The idea that consumers will stick with one video streaming platform has not been fully thought out. While companies like Netflix are incentivized to keep viewers on their own platforms, attention is easily transferrable to other video streaming services. Apple’s TV app breaks down the barriers between video streaming services to the point of there not being any barriers at all. It is not surprising that companies like Netflix have little desire to fully participate in such a service.

  3. Netflix’s technology advantage is misrepresented. As Ted Sarandos, Netflix’s chief content officer, discussed in a recent interview, gut represents around 70 percent of the equation when it comes to Netflix determining what makes great content. The narrative that Netflix is actually a technology company masquerading as a media company ends up being a stretch. Instead, Netflix is a media company that must continue to come up with popular hit shows.

  4. Subsidized subscription pricing helps the competition. Netflix continues to subsidize paid memberships in order to grab as many users as possible. An unintended consequence of this practice is that Netflix ends up leveling the playing field for competitors by devaluing paid video content. By keeping pricing artificially low, Netflix makes it that much easier for new competitors to enter the market with pricing that isn’t too far off from that of Netflix. Disney has telegraphed that it will likely price its family-oriented video bundle at around $5 per month, which isn’t too much lower than Netflix’s pricing, despite Disney having a content portfolio that will be a fraction of the size of Netflix’s.

Business Models

Paid video streaming does not have the characteristics of a winner-take-all industry. No one company will have a monopoly on good, compelling video content. Netflix is not going to become “the new cable bundle.” Instead, it’s very likely that consumers will subscribe to multiple paid video streaming services. We may very well see a handful of video streaming services have more than 100M paying subscribers around the world. This reality is made that much more likely given the significant financial resources found with industry players including Disney, Apple, Amazon, AT&T, and Google.

There have been two primary business models in the paid video streaming space:

  1. Direct subscription fees (Netflix, Hulu)

  2. Larger entertainment bundle fees (Amazon)

The two business models haven’t been put to the test. Direct subscription fees continue to be subsidized in order for companies to grab users. It is very obvious that Netflix will have to raise its subscription pricing in a big way, especially if engagement hours plateau.

Meanwhile, companies that position video as merely one of a handful of services for subscribers don’t need to turn a profit with video streaming. By bundling video into Prime, Amazon doesn’t have to worry about video streaming pricing. Ultimately, this dynamic will pressure companies dependent on direct subscription fees. We haven’t seen what the video streaming industry looks like with another major player bundling video as part of a larger entertainment package. Apple is expected to offer a comprehensive entertainment package containing music, video, news, and even cloud storage.


Paid music streaming provides a sneak peak of what may unfold in the paid video streaming industry. In some ways, the music streaming industry is a few years ahead of the video streaming when it comes to having genuine competition.

There are key differences between the music and video streaming industries. With music, the same content is available on multiple paid streaming platforms. This has resulted in streaming companies positioning music discovery and the listening experience as the primary forms of differentiation. In what is a new development, hardware is also now being positioned as a differentiator with stand-alone stationary speakers, in addition to wearables, increasingly paying a role in how consumers pick between music streaming services.

Meanwhile, differentiation for video streaming comes in the form of original content. For example, Stranger Things is available only on Netflix and will likely remain so for the foreseeable future. Based on Netflix subscriber trends, original programming plays a major role in driving subscriber growth. This has led to a type of arms race when it comes to content budgets. Netflix is reportedly spending close to $10 billion per year on original content. Amazon is spending near $5 billion per year.

There are similarities between the two industries as well. Both music and video streaming began with a clear first-mover. Spotify was the undisputed leader in paid music streaming, similar to how Netflix now holds the same title in the paid video streaming space. This title gave each company significant mindshare, which corresponded to strong early momentum in terms of grabbing new users.

However, with a genuine competitor in the music streaming market, Spotify’s mindshare has suffered. Exhibit 5 compares the growth in paid subscribers for Apple Music and Spotify. While each company continues to benefit from the music streaming pie getting larger, Spotify now has to share the stage with Apple for mindshare.

Based on company disclosures, Apple Music’s new user growth is indeed accelerating as time goes on. In what is likely a worrying development for Spotify, Apple Music is now said to have more paid users than Spotify in the U.S. Similar trends are unfolding in other developed markets.

Exhibit 5: Apple Music vs. Spotify

Meanwhile, Spotify’s stronghold appears to be in Brazil and emerging markets, locations in which Apple’s market penetration is low. This dynamic doesn’t give one confidence in Spotify’s long-term opportunity. Instead, Apple will continue to chip away at Spotify’s mindshare.

While Netflix is able to use original content as a way to set itself apart from the competition, the company hasn’t needed to share the paid video streaming stage with such household names as Disney and Apple.

The Key Variable

The number of paid subscribers is not the key variable to monitor with Netflix. Since the paid video streaming market faces a number of tailwinds, it is certainly possible that Netflix will continue to grow its subscriber count over time. The overall streaming pie will continue to grow. Instead, the Netflix item to watch is subscriber engagement.

Netflix’s business model is ultimately dependent on the number of hours subscribers spend watching Netflix content. As discussed up above with Netflix’s feedback loop, as long as subscribers consume an increasing amount of content, the Netflix model works marvelously.

Based on Netflix’s 2Q18 earnings commentary, viewing/engagement hours are still up year-over-year. What will happen to Netflix engagement once Disney and Apple launch their own video bundles? Questions surrounding future competition are legitimate for Netflix. While consumers may very well end up subscribing to multiple video bundles, there is only so much time that can be split among each bundle. Time spent watching Disney or Apple content will be time not spent watching Netflix content.

As shown in Exhibit 6, the hole in Netflix’s armor will likely be found with the item circled in red: engagement. Any sign of plateauing engagement could lead to a domino effect as Netflix loses pricing power and the ability to run with higher content budgets. Any slowdown in new original content could then begin to impact new user trends, especially in international markets. Less content could then lead to even lower engagement.

Exhibit 6: Netflix Feedback Loop (Potential Problem Circled in Red)

Screen Shot 2018-10-10 at 1.55.51 PM.png

The Big Picture

Given how Netflix is viewed by many as unstoppable, it probably shouldn’t come as a surprise that consensus expectations remain muted for Disney and Apple in the paid video streaming space. This will likely end up being a mistake. Various publications have been solely focused on casting doubt on Apple’s video efforts instead of highlighting how the paid video streaming market remains attractive for a company like Apple. The cynicism surrounding Apple Video brings back memories of the doubt facing Apple Music in the early years.

Tim Cook and Eddy Cue are reportedly taking a very hands-on approach with Apple’s video initiative, highlighting the service’s importance to Apple. Video will end up being a key ingredient of an Apple entertainment bundle containing various services. The company ends up building not just a video streaming service, but a Hollywood arm. Meanwhile, Disney has the strongest intellectual property out of any video player. The company’s problem up to now has been found with distribution. Those problems are now being addressed.

As for Netflix’s future, management appears to be well-aware of the risks found with being just a paid video streaming company. Netflix management will likely focus on two items in particular:

  1. Acquire or build a strong portfolio of intellectual property. It would not be surprising to see Netflix embrace M&A (the company has only acquired one company - Millarworld) in an effort to beef up its intellectual property.

  2. Expand beyond video content. Netflix reportedly considered buying a chain of movie theaters. Recent reports have Netflix moving into radio as well. These efforts are designed to move Netflix beyond being just a paid video streaming company.

Disney and Apple don’t have to go toe-to-toe with Netflix to do well in the video streaming space. Instead, each company is ultimately focused on grabbing viewer attention with compelling content. The ingredients are in place for both Disney and Apple to do very well.

Receive my analysis and perspective on Apple throughout the week via exclusive daily updates (2-3 stories per day, 10-12 stories per week). Available to Above Avalon members. To sign up and for more information on memberships, visit the membership page.

Above Avalon Podcast Episode 133: The Big Picture from Steve Jobs Theater

Earlier this month, Apple Watch was the star of Apple’s second major product event at Steve Jobs Theater. Episode 133 is focused on looking at the big picture following Apple’s event. The discussion begins by going over Tim Cook’s comments regarding Apple’s mission statement and then quickly puts the iPhone and Apple Watch updates into context. We then turn to my Grand Unified Theory of Apple Products. Additional topics include my user base estimates for Apple’s various product categories, my rationale for why Apple Watch and Apple Glasses will one day have a larger user base than iPhone will, and the power associated with new form factors that are capable of handling new tasks.

To listen to episode 133, go here

The complete Above Avalon podcast episode archive is available here