NBA Media Rights Negotiations Wrapping Up, Where’s Apple?, NBA and Apple Immersive Video
Today's update will have an NBA / Apple theme. We begin with a close look at how the NBA media rights negotiations are trending (via the WSJ). The discussion goes over who are likely to be the big winners. We then turn to Apple and look at where the company is relative to NBA media rights. The update concludes with some ways the NBA can embrace Apple Immersive Video.
Hello everyone.
Some quick follow-up to yesterday’s discussion.
We talked about how publishers are receiving attractive monetization terms from Apple News and Apple News+. As for some of the details, if a publisher participates in the News Partner Program, they receive a 15% commission rate on in-app purchase subscriptions through their iOS app. This includes monthly subscription signups. That is not a bad commission rate, especially considering how other platforms for writers, like Substack, charge 10%. For Apple News ads monetization, publishers keep 100% of ads that they sell and 70% of ads that Apple sells. Again, not bad.
Today's update will have an NBA / Apple theme.
NBA Media Rights Negotiations Wrapping Up
Here’s the WSJ:
“The National Basketball Association entered its first TV negotiations in a decade with a problem: Its main business partners seemed to be on shaky footing.
TNT parent Warner Bros. Discovery was saddled with more than $40 billion in debt, while ESPN parent Disney was battling a Wall Street activist over its slumping stock. Each company was reluctant to pony up the full premium the league wanted. But the NBA had quietly laid the groundwork with two other potential partners, Amazon and NBC, who pounced as soon as they got the chance.
Now, with negotiations ongoing as the Boston Celtics and Dallas Mavericks prepare to face off in the NBA Finals, the league is on track to score big: It is closing in on deals with NBC, ESPN and Amazon that would bring in about $76 billion in media revenue over 11 years, people familiar with the discussions said.
The NBA sweepstakes has turned into a defining moment for the TV industry, highlighting the anxieties of traditional media companies about the collapse of cable and their uncertain financial futures in the streaming world. It has put front-and-center the paradox that sports content is outrageously expensive but also critical to own in an industry in which it is one of the few reliable ways to draw in audiences.”
Here are the NBA media rights details that the WSJ is hearing:
Disney: $2.6B/year for games (fewer than it currently airs) and the NBA Finals. The new ESPN streaming service that will launch will be able to air games.
Comcast (NBCUniversal): $2.5B/year for 100 games per season (half will air exclusively on Peacock). The NBC games
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Qualcomm’s Ridiculous Mac Ad, Publishers Talk up Apple News, Drivers Behind Apple News’ Success
Hello everyone. Happy Tuesday. The discussion begins with my thoughts on Qualcomm’s ridiculous Mac ad involving Justin Long. The update then turns to Apple News and publishers talking up the service. We look at why Apple News is working for publishers.
Qualcomm’s Ridiculous Mac Ad
In a cycle that seemingly never ends, Qualcomm and partners are trying once again to stop Apple’s Mac momentum. The back-and-forth goes back decades. The now iconic “Get a Mac” ad campaign from the 2000s kicked off an era of unprecedented mind share shifting that is still ongoing. One way of summing up the era was that the Mac had the cool factor and the PC (i.e. Windows-powered laptops and desktops) did not.
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Spotify Raises U.S. Prices…Again, Spotify’s Sneaky Audiobook Move, Apple’s Opportunity
Happy Monday.
Spotify is raising prices in the U.S. for the second time in a year. Back in April, over at Inside Orchard, I discussed how Spotify is being pulled in different directions as its advertising apparatus comes in weaker than management hoped.
For today’s discussion, we are going to take things in a different direction as there are some changes in the music streaming landscape that Apple can take advantage of.
Let's jump right in.
Spotify Raises U.S. Prices…Again
Here’s Variety:
“Spotify is hiking rates for its monthly streaming plans in the U.S. for the second time in a year.
The Spotify Premium Individual plan is increasing by $1, from $10.99 to $11.99 per month, according to the company’s updated price listings. The Premium Family plan, which provides access for up to six members a household, is going up by $3, from $16.99 to $19.99 per month.
In the U.S. — Spotify’s biggest market — the company raised prices on its subscription plans in July 2023, the first time it had increased rates since launching in the country in 2011.
‘As we continue to grow our platform, we are updating our Premium prices so that we can keep innovating in changing market conditions,’ the company says in an FAQ about the price increases on its customer-service site. ‘These updates will help us continue delivering value to fans.’”
Even though this latest price increase had been rumored for the past few months, a June effective date is earlier than expected. We will go over what looks to be a big driver behind these price hikes shortly.
Price increases have become the norm across the streaming landscape. On social media, pushback to price hikes have been mixed.
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Signs Point to New Beats Pill Speaker, Google and Magic Leap Form Partnership, First Up-Close Shots of Apple’s Immersive Video Cameras
Happy Friday.
We will conclude this week’s updates with three stories that caught my interest. The discussion begins with a new Beats speaker. We then turn to AR land and news of Google and Magic Leap forming a partnership. The update concludes with Apple Immersive Video.
Let’s jump right in.
Signs Point to New Beats Pill Speaker
We purposely don’t spend too much time talking Apple product rumors, partially because such rumors never end. However, there is one particular rumor that relates to a few recent discussion topics.
“Apple is preparing to launch its second Beats Pill product since acquiring the audio brand nearly a decade ago. After being bought by Apple in 2014, Beats introduced the Beats Pill+ that sold from 2015 to 2020. While it was discontinued without a replacement in sight, the forthcoming Beats Pill has been showing up everywhere from celebrity sightings to regulatory listings…
While good sound is key to great Bluetooth speakers, features and compatibility are equally important for creating standout products. 9to5Mac can report that the 2024 Beats Pill will bring a number of tricks and benefits over the discontinued Beats Pill+.
The new Beats Pill doubles battery life from up to 12 hours to up to 24 hours.
An IP67 rating adds dust and water resistance that previous hardware lacked.
The Bluetooth speaker will be compatible with both iOS and Android for one-touch pairing and auto pairing to compatible devices.
The 2024 Beats Pill adds Apple Find My and Google’s Find My Device compatibility for tracking down lost hardware."
One of those celebrity sightings included Lebron James (shown below with the rumored new Beats Pill speaker).
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About Those iPhone Sales Reports From China, Apple Designers Talk iPad Pro and Apple Pencil Pro
Hello everyone. Happy Wednesday.
We will jump into today's update with some iPhone news, followed by iPad Pro and Apple Pencil Pro.
About Those iPhone Sales Reports From China
Here’s Bloomberg:
“Apple Inc.’s iPhone staged a rebound in China last month with shipments rising 52% amid a flurry of discounts from retail partners.
The latest figures from the China Academy of Information and Communications Technology [CAICT] showed smartphone shipments surging in the country, of which roughly 3.5 million units came from foreign brands, according to a Bloomberg calculation. The iPhone accounts for the vast majority of such devices, and its bounceback comes after it registered growth in March following steep declines in the first two months of the year."
What a whirlwind. There’s been a lot of noise written about iPhone sales in China. It’s comical how in just a few weeks the narrative has apparently shifted from “Apple is falling out of favor in China” to Apple is benefiting from a “premiumization trend in China.” The reality is that those making such claims aren’t sure what is going on and are instead trying to make sense of smartphone shipments data from CAICT.
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Apple & Beats: Ten Years Later, Grading the Beats Acquisition, Apple / Beats Lessons
Hello everyone. It’s good to be back after a long weekend.
Today’s update will be a bit different as we look back at Apple’s largest acquisition to date: Beats.
Let’s jump right in.
Apple & Beats: Ten Years Later
Today marks the tenth anniversary of Apple announcing its Beats acquisition. Rumors of the acquisition began to leak a few weeks prior in early May 2014. Some of you may have remembered the now infamous YouTube video of Dr. Dre prematurely celebrating the deal.
Things were made official on May 28th, 2024 with Apple paying $3B for Beats (down from the rumored $3.2B).
No subsequent Apple M&A deal has come close to that $3B price tag – the closest was $1B for a majority of Intel's smartphone modem business. It’s safe to say no other deal has been as controversial as Beats either.
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Microsoft’s Recall Feature, PC vs. Mac in Enterprise, Humane Looking To Sell
In today’s update, we go over my thoughts on Microsoft’s Recall feature. The discussion then turns to the theory that Apple has been successful in steadily picking off Windows users in enterprise settings. We conclude with Humane reportedly looking to sell itself just a month after releasing its pin.
Microsoft’s Recall Feature
Recall was one feature announced during Microsoft's pre-Build event that we did not talk about yesterday. Here's ArsTechnica:
"At a Build conference event on Monday, Microsoft revealed a new AI-powered feature called ‘Recall’ for Copilot+ PCs that will allow Windows 11 users to search and retrieve their past activities on their PC. To make it work, Recall records everything users do on their PC, including activities in apps, communications in live meetings, and websites visited for research. Despite encryption and local storage, the new feature raises privacy concerns for certain Windows users.
‘Recall uses Copilot+ PC advanced processing capabilities to take images of your active screen every few seconds,’ Microsoft says on its website. ‘The snapshots are encrypted and saved on your PC’s hard drive. You can use Recall to locate the content you have viewed on your PC using search or on a timeline bar that allows you to scroll through your snapshots.’”
You can maybe see what Microsoft was trying to accomplish here. People want to recall something they saw or did on their computer (on a website, in an email, in a PowerPoint presentation) but it’s too difficult or time-consuming to find the thing they want to find via traditional search mechanisms.
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Microsoft’s Copilot+ PC Event, It’s All About Apple, A Dystopian Future
Happy Tuesday. We will continue going over tech presentations as they take place. Today’s update will be dedicated to the Microsoft event that occurred yesterday.
Microsoft’s Copilot+ PC Event
One day before kicking off its Build developer conference, Microsoft held a 67-minute live presentation (not livestreamed) at its Washington headquarters that left me with more questions than answers.
Heading into the event, expectations called for Microsoft to have Windows, Surface, and AI news. While all of that ended up being true, the event came across as more of a PC industry pep rally for Windows partners to bring the fight to Apple (the Mac). The event didn’t come across to me as strong or, to be frank, compelling for consumers. Instead, the issues we have previously talked about regarding Microsoft having trouble connecting with consumers came to light.
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More on the Current State of iPad, CIRP’s Wacky iPad Upgrade Math, My iPad Upgrade Data
Hello everyone.
Last Friday, a new Above Avalon report, "iPad Pro and the Goal of Perfection," was sent out to all of you via email. For those of you with the podcast add-on, the audio version of the episode (20 minutes) came out on Friday as well – under the Above Avalon Reports podcast. For today's update, we will continue the iPad discussion.
More on the Current State of iPad
The newest Above Avalon report went over my thoughts and perspective regarding all things iPad.
For being 14 years old, the product category has had its fair share of ups and downs. In some ways, the iPad has seen it all.
While consensus, at least judging by tech-oriented social media, has been downbeat on iPad (iPadOS to be precise) for some time, my view is that the product category is in a good position. We don’t need to preface that with disclaimers and fine print either. While sales have been on the weak side post-pandemic, much of that is due to a slowdown in device – something that has unfolded across Apple’s products portfolio. Upgrading trends certainly weren’t boosted by the lack of iPad updates in 2023 (and 1Q24).
There are three overarching points anchoring my “iPad is doing better than consensus thinks” view (the report goes into each in much more detail):
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iPad Pro and the Goal of Perfection (Above Avalon Report)
An examination of Apple’s iPad strategy as the new iPad Pro goes on sale.
Written by Neil Cybart – May 17th, 2024.
The state of iPad is strong as Apple moves that much closer to its long-held goal of having the iPad become a magical piece of glass. If there is such a thing as an ideal state – a state of perfection – for iPad, Apple sure seems to be getting close. Of course, the company will never get to that point. Perfection is not an end state but rather a state of mind.
Apple has rightly resisted calls to morph iPad into a Mac hybrid. Criticism that the iPad has somehow fallen short of its initial expectations fail to acknowledge the product category’s positioning within the Apple ecosystem. iPad is a touch-first computer offering more versatility than any other Apple product category.
With the iPad Pro cementing its place as the marquee iPad, a discussion regarding the new iPad Pro will inevitably evolve into a discussion about the current state of the iPad.
We begin such a discussion by looking at the iPad’s early days.
Table of Contents
History
The New iPad Pro
iPad Strategy
Criticism
My iPad Theory
Future
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Google I/O 2024, Project Astra, Imagen 3 / Music AI Sandbox / Veo
Happy Wednesday.
Yesterday’s update was all about OpenAI’s spring event. Today’s update is all about Google I/O 2024.
Let’s jump right in.
Google I/O 2024
Sundar Pichai kicked off the I/O 2024 keynote (video available here) by saying Google was fully in its Gemini era, after more than a decade of AI work. Gemini is Google’s multimodal model which can turn any input (text, images, video, code, and more) into any output. Sundar said that the combination of Gemini, multimodal, long context, and agents brings Google closer to its ultimate goal of making AI helpful for everyone.
The keynote’s first 15 minutes may have been one of the better openings to Google I/O in years.
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OpenAI’s Spring Update Event, GPT-4o, Apple Hardware at the OpenAI Event
Hello everyone.
Let's jump right into today's update.
OpenAI’s Spring Update Event
In what may become an annual tradition, OpenAI held a spring event to unveil ChatGPT and GPT-4 updates. GPT-4 is OpenAI’s multimodal large language model. The event took place just one day ahead of Google’s annual developer conference and about a month ahead of Apple's WWDC.
The livestreamed presentation (available here via YouTube), which appears to have taken place at OpenAI’s headquarters in San Francisco, had an audience consisting of two to three dozen people. Judging from the applause, the crowd was comprised of OpenAI employees. OpenAI CTO Mira Murati kicked things off and then guided the presentation along.
Murati anchored the event around three updates:
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Apple 2Q24 10-Q Takeaways, Thoughts on Apple’s Dividend, Thoughts on Apple’s Share Buyback Authorization
Happy Monday. Welcome to a new week.
Today marks the ninth anniversary of the Above Avalon membership launch. The first members joined on May 13th, 2015. Over that span, nearly 1,700 daily updates have been published. To the inaugural group of early members, thank you for nine years of support.
Let’s jump into the first update of Year 9.
Apple 2Q24 10-Q Takeaways
Published at the end of FY1Q, 2Q, and 3Q, 10-Q filings provide additional commentary and disclosures regarding a company's business and financial results.
The following items from Apple's 2Q24 10-Q jumped out at me.
Product Details. Apple provided additional commentary behind sales trends for its major product categories.
iPhone. Net sales decreased due to “lower net sales of Pro models.” This was expected as 2Q23 iPhone sales included a catchup in supply for iPhone Pro models impacted by COVID in China.
Services. Net sales increased due
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Apple Pencil Pro and iPad Pro M4 Unboxing
A quick Apple Pencil Pro unboxing.
Made in Vietnam.
Works with iPad Pro M4 and iPad Air M2.
An intriguing computer from Apple with the broader category likely having a future role to play in spatial computing.
Experience my iPad Pro 13-inch (M4) unboxing.
Notably lighter (15%) than previous generation.
Device dimensions may play some mind tricks on you at first. You will probably want to try bending the device.
Lays surprisingly flat on table (w/o case/cover).
Three Charts From Apple’s 2Q24 Earnings, Warren Buffett Trims Apple Stake, Buffett and AAPL Underperformance
Happy Thursday.
As mentioned yesterday, we will circle back to Apple's 2Q24 earnings today. There is also Warren Buffett news to go over.
We still need to go over Apple’s 2Q24 10-Q - we can quickly discuss the most interesting takeaways from the document next week.
Let’s jump right in.
Three Charts From Apple’s 2Q24 Earnings
Quarterly earnings provide snapshots for how a company is performing. Stringing together a few earnings reports provides a clearer picture of business trends.
After going through Apple's 2Q24 earnings, a few items jumped out at me as needing some context.
The following three charts highlight a few intriguing Apple financial trends: Gross Profit Growth (HW vs. Services), HW vs. Services Revenue, Wearables Revenue.
Gross Profit Growth (HW vs. Services)
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The iPad Event
Hello everyone. Today's update will be dedicated to discussing Apple's iPad event. We will circle back to a few final things about Apple's 2Q24 earnings (and Warren Buffett news) tomorrow.
The iPad Event
Yesterday’s iPad event consisted of a 38-minute taped presentation similar in style to what Apple has been producing since the pandemic. I attended a small gathering that Apple held where the presentation was shown. Afterwards, a hands-on demo area allowed guests to try out the new products.
The announcements were grouped into five buckets:
Updated iPad Air (the big news being the Air will come in two sizes for the first time - 11-inch and 13-inch).
Updated iPad Pro (all-new thin design including an Ultra Retina XDR Display).
M4 chip unveiling (the M4 is the first chip relying on second-gen 3nm process tech).
All-new $129 Apple Pencil Pro.
Updates (with various "AI" features) to Logic Pro and Final Cut Pro. Many of the features demoed were impressive.
Tim Cook kicked off the presentation by
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Reading Between the Lines of Apple’s 2Q24 Earnings Q&A With Analysts
Hello everyone. This is shaping up to be a busy week. We still have a good amount to discuss when it comes to Apple’s 2Q24 earnings. There is then an Apple product event (online) on Tuesday at 10 am ET. Let’s jump into today’s update.
Reading Between the Lines of Apple’s 2Q24 Earnings Q&A With Analysts
After recapping each question-and-answer exchange that occurred on the call between Apple and sell-side analysts, we will go over my response to the exchange. Let’s go beyond what was talked about on the call with the 10th installment of reading between the lines of Apple's earnings Q&A with analysts.
NOTE: The following earnings call questions (“Q (Sell-Side Firm)”) and answers (“Cook” or “Luca”) have been cut, summarized, paraphrased, and rearranged for clarity. To read the full question and answer exchanges, Seeking Alpha offers a written transcript here.
3Q24 Guidance
Q (Goldman Sachs): What gives you confidence that revenue will grow in 3Q24 (the June quarter)?
Luca: Our guidance commentary will be limited to my prepared remarks: Overall revenue will be up “low-single-digits,” Services growing “double-digits at a rate that is similar to what we’ve done in the first half of our fiscal year,” and iPad up double-digits.
My response: With Services representing ~30% of 3Q24 revenue, growth of approximately 15% will go a long way to offset weakness in HW.
Q (Citi): What are you assuming for commodity pricing on memory in guidance?
Luca: Our guidance assumes memory and FX to be slight headwinds. FX will have a 30 basis point negative impact sequentially.
My response:
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Key Takeaways From Apple’s 2Q24 Earnings
Hello everyone. Welcome to a special Friday edition of the Above Avalon Daily. We will begin analyzing Apple’s 2Q24 earnings. There is a lot to unpack. The earnings review will take place across a few updates.
Key Takeaways From Apple’s 2Q24 Earnings
Heading into 2Q24 earnings, the expectations bar facing Apple had been set low. The company easily jumped over the hurdle. Both revenue and EPS beat consensus with revenue trending flat when excluding a one-time COVID impact. Gross margins are trending at levels that the company has not seen in over a decade. Apple provided 3Q24 guidance that suggested revenue growth will return. Everything is on track for FY24 to be something of a rebound year for Apple on the financial front. Under the hood, the Apple ecosystem continues to quietly expand as new users enter the fold and existing users move deeper into the ecosystem.
The Numbers
Here are Apple’s reported 2Q24 results versus my expectations with brief commentary for each item.
An Above Avalon membership is required to continue reading this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
Choose either a monthly or annual membership. Payment is hosted by MoonClerk and secured by Stripe. Apple Pay and other mobile payment options are accepted. After signup, use this link to update your payment information and membership status at any time. Contact me with any questions.
Contact me directly if you would like to purchase multiple subscriptions (five or more) for your team or company.
An audio version of the newsletter is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here. Special Inside Orchard bundle pricing is available for Above Avalon members. Additional membership customization is available via the Financial Models add-ons.
My 2Q24 Apple Estimates, Expectations for Apple's 3Q24 Guidance, My Updated Apple Earnings Model
Happy Wednesday. One quick thing before we get to the second half of my earnings preview.
Financial Models Add-on. As a reminder, members now have access to my iPhone, iPad, and Apple Watch installed base models with the Financial Models add-on. These models make it possible to estimate device unit sales, the number of devices in the wild over time, product upgrade cycle length, percent of device sales going to new users versus existing users by year and more. For those of you who purchased the Financial Models add-on, all installed base models have been updated ahead of earnings. You can access the models at any time by logging into your Above Avalon membership account here and going to the Digital Package tab (shown below). My earnings model has also been uploaded so that it will always be available in the same tab for easy access.
The Financial Models add-on is designed to be a perfect companion for AAPL investors wanting to take a deep dive into Apple’s financials as well as Apple competitors and suppliers needing to better understand the marketplace dynamic. For pricing information and to purchase the add-on, check out this page.
My 2Q24 Apple Estimates
Here are my granular estimates for Apple’s 2Q24:
Revenue: $91.9B (consensus: $90.0B)
Overall gross margin: 46.9% (guidance: 46% to 47%)
Gross margin (HW): 37.4%
Gross margin (Services): 74.6%
EPS: $1.59 (consensus: $1.50)
iPhone revenue:
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Choose either a monthly or annual membership. Payment is hosted by MoonClerk and secured by Stripe. Apple Pay and other mobile payment options are accepted. After signup, use this link to update your payment information and membership status at any time. Contact me with any questions.
Contact me directly if you would like to purchase multiple subscriptions (five or more) for your team or company.
An audio version of the newsletter is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here. Special Inside Orchard bundle pricing is available for Above Avalon members. Additional membership customization is available via the Financial Models add-ons.
Setting the Stage for Apple’s 2Q24 Earnings, Thoughts on Apple’s Stock Price Underperformance
Hello everyone. Happy last day of April. We will begin preparing for Apple earnings. Today’s discussion will look at the big picture ahead of Thursday’s earnings release. We will go over my granular estimates on Wednesday.
Setting the Stage for Apple’s 2Q24 Earnings
Heading into Thursday’s earnings, the setup looks positive for Apple. Expectations surrounding Apple are at a multi-year low while business fundamentals appear to be holding up OK. This lowers the bar for what Apple needs to report and say on Thursday to please analysts and company observers. While a slowdown in device upgrading and sales weakness at the low end of various product lines continue to weigh on Apple’s
An Above Avalon membership is required to continue reading this update. Members can read the full update here. (Members: Daily Updates are accessible via the archive. If you haven’t logged into the archive before, fill out this form to receive an invite.)
Choose either a monthly or annual membership. Payment is hosted by MoonClerk and secured by Stripe. Apple Pay and other mobile payment options are accepted. After signup, use this link to update your payment information and membership status at any time. Contact me with any questions.
Contact me directly if you would like to purchase multiple subscriptions (five or more) for your team or company.
An audio version of the newsletter is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here. Special Inside Orchard bundle pricing is available for Above Avalon members. Additional membership customization is available via the Financial Models add-ons.