Along with periodic Above Avalon posts available to everyone, I send out an exclusive daily email about Apple to members (10-12 stories per week). You can subscribe here. The following story was sent to members on September 15th.
iPhone Launch Weekends are Getting Silly
On Monday morning, Twitter went a bit crazy right around 8:30 a.m. ET as some began wondering if Apple would issue a press release disclosing how many iPhone pre-orders it saw this past weekend. Apple had done exactly that last year, reporting four million iPhone 6 and 6 Plus pre-orders.
We didn't get a press release this year, but instead an Apple statement disseminated through the press. It's rather short, so I've included the entire statement below:
"Customer response to iPhone 6s and iPhone 6s Plus has been extremely positive and pre-orders this weekend were very strong around the world. We are on pace to beat last year's 10 million unit first-weekend record when the new iPhones go on sale September 25. As many customers noticed, the online demand for iPhone 6s Plus has been exceptionally strong and exceeded our own forecasts for the pre-order period. We are working to catch up as quickly as we can, and we will have iPhone 6s Plus as well as iPhone 6s units available at Apple retail stores when they open next Friday."
There was a little bit for everyone in that statement, but the biggest takeaway I got from that is that this entire fascination with opening weekend sales feels old, a relic from a begone era. Essentially, its a leftover from the smartphone wars where opening weekend sales were a sign that your phones were popular.
As expected, Wall Street analysts quickly began trying to read in between the lines, figuring out a way of using Apple's 103-word statement to judge their 2016 iPhone sales estimate. This represents the fundamental problem Wall Street has with Apple. The focus is on the wrong thing. I even saw some analysts comparing this year's Saturday morning iPhone pre-order release to last year's Friday morning release and then making some guesses as to what it all means about year-over-year growth. It's getting silly.
This trend of Apple releasing iPhone opening weekend sales number goes back to the original iPhone and that is one reason why so many observers are so flummoxed with yesterday's statement from Apple. We were accustomed to very detailed iPhone and iPad opening weekend sales announcements and now we are getting less and less in the way of disclosure. In reality, the usefulness of these releases has steadily declined, but most people haven't noticed.
When you consider that we are effectively using 4-5 million iPhone pre-orders to try to discern how Apple will do over the next 12 months selling up to 270 million iPhones, the silliness becomes apparent.
My philosophy on Apple announcing sales numbers has been very straight-forward. If Apple thought it had something to gain from releasing sales numbers, then they should release them.
- Early iPod sales numbers? Tell the world that Apple actually has a product people want.
- Early iPhone sales numbers? Tell the world that people actually want a smartphone with no physical keyboard.
- Early iPad sales numbers? Tell the world that people really do want "just a big iPod touch."
By releasing sales numbers, Apple had something to prove to the world. That motivation is disappearing with iPhone. Opening weekend sales now represents just 4% of annual iPhone sales. Instead, analysts want Apple to release numbers in order to parse out if iPhone sales are growing or not. It's that simple. Of course, Apple ends up releasing iPhone sales numbers in financial filings anyways, but the short-term focus takes precedence.
In reality, Apple's language around opening weekend sales has become more vague over the years, especially last year:
- iPhone 1st gen (2007) = 1M in 74 days (U.S. only - AT&T)
- 3G (2008) = 1M in 3 days (21 countries)
- 3GS (2009) = Over 1M in 3 days (9 countries)
- 4 (2010) = 1.7M in 3 days (600,000 pre-orders on first day) (5 countries)
- 4s (2011) = Over 4M in 3 days (1 million pre-orders on first day) (7 countries)
- 5 (2012) = Over 5M in 3 days (2 million pre-orders on first day) (9 countries)
- 5c / 5s (2013) = 9M in 3 days (11 countries including China in launch window for the first time)
- 6/ 6 Plus (2014) = Over 10M in 3 days (4 million pre-orders on first day) (10 countries not including China)
- 6s / 6s Plus (2015) = Better sales than last year (12 countries including China)
The reason I say that the language is a bit unclear is that last year's "over 10M in 3 days" could very well have been closer to 11M iPhone units, but instead Apple felt "over 10M" would be good enough when compared to the 9M iPhones reported in 2013. Expectations weren't too high since China wasn't in the original launch country list last year. The market would understand if Apple didn't report too much of a sales increase from 2013. This point only goes to show how irrelevant iPhone opening weekend sales have become.
Over the past few years, iPhone opening weekend sales have been more a sign of how Apple has been able to ramp iPhone supply instead of demand. Without going into too much accounting detail, the only iPhone sales Apple includes in opening weekend numbers are those units that have been shipped to an end user. If you pre-order an iPhone, but need to wait a few weeks to receive it, you are not included in opening weekend sales. The pre-order numbers were therefore a bit clearer picture of demand since a pre-order is not the same thing as a sale. Of course, Apple started releasing pre-order numbers once opening weekend sales numbers started to look less attractive on a year-over-year basis.
I would not be surprised if Apple eventually moves away from announcing opening weekend product sales altogether. Apple has shown no interest in disclosing Apple Watch sales, and Apple stopped releasing opening weekend iPad sales right around when unit sales started to decline (another sign that disclosing opening weekend sales is one big game). Critics will say Apple stopped releasing sales because of weaker sales growth. While iPhone sales growth may very well slow, I rather look at it as Apple is now a much bigger company in a different landscape. The Android/iOS activation wars are over. There are other ways to convince the world that iPhones are popular and worth buying besides releasing opening weekend sales. In addition, opening weekend numbers aren't even a good measure of iPhone growth. If we compare the change in opening weekend sales to the corresponding iPhone growth over the following FY year:
- 2010: 70% growth in iPhone opening weekend sales (81% iPhone unit growth in following year)
- 2011: 135% (73%)
- 2012: 25% (20%)
- 2013: 80% (13%)
- 2014: 11% (38%)
I look at that discrepancy as reason for why opening weekend sales is not the most useful parameter to judge iPhone sales.
Over the years there have been ulterior motives to disclose opening weekend sales. Times change. It's making less sense these days to disclose arbitrary sales numbers spanning a few days.
Along with the preceding story, the full list of stories sent to Above Avalon members this week included:
- Apple Watch Hermès Collection is Intriguing
- 3D Touch is a Game Changer
- Thinking About the Big Picture for Apple
- Thoughts on the iPhone Upgrade Program (seven sections: The Details, History, Dollars and Cents, Short-Term Impacts, Long-Term Impacts, Overall Observations, Is It a Good Deal?)
- Making Sense Out of Apple's Mapsense Acquisition
- Kardashian/Jenner Sisters Take on the App Store
- Thursday Q&A: Why Would the iPhone Upgrade Program Lead to a Larger Grey Market for iPhones?
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