Apple Given Observer Board Seat at OpenAI, A Phil Schiller Renaissance
We begin with my thoughts on Apple being given an observer board seat at OpenAI. The discussion then turns to Apple’s Phil Schiller, who reportedly will fill Apple’s seat on OpenAI’s board. In some ways, this new stage for Schiller comes across as something of a renaissance.
Hello everyone. Happy Monday.
Let's jump right into some news that came out last week.
Apple Given Observer Board Seat at OpenAI
Over at Bloomberg, here’s Mark Gurman:
“Apple Inc. will get an observer role on OpenAI’s board as part of a landmark agreement announced last month, further tightening ties between the once-unlikely partners.
Phil Schiller, the head of Apple’s App Store and its former marketing chief, was chosen for the position, according to people familiar with the situation. As a board observer, he won’t be serving as a full-fledged director, said the people, who asked not to be identified because the matter isn’t public.
The move follows Apple’s announcement in June that it would offer ChatGPT in the iPhone, iPad and Mac as part of a suite of artificial intelligence features. The board arrangement will take effect later this year, and Schiller hasn’t yet attended any meetings, according to the people.”
The news was later confirmed by other publications including the Financial Times.
Talk about a turn of events. Late last year, OpenAI went through one of the crazier stretches in Silicon Valley history as a board coup was attempted to kick Sam Altman out of the company. While the coup initially appeared to be going according to plan, Altman initiated one of the more masterful examples of leveraging social media and the press to win back control of the narrative. This eventually led to something of an OpenAI employee revolt that came across as more of a negotiation tactic. The Inside Orchard essay "Sam Altman Mania" went over my thoughts on how all of that went down. The end result was Altman regaining power at OpenAI while his primary detractors eventually left the company. The path for OpenAI to become a for-profit entity has never been more open.
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.
Wall Street Warms up to Apple, AAPL Valuation Update
Hello everyone.
Over at Above Avalon’s sibling site, Inside Orchard, my essay last week, "Big Tech Is Winning Over Wall Street," went over a Wall Street observation that has been on my mind for the past few weeks.
While NVIDIA was capturing many hearts and minds on Wall Street, a larger story was quietly unfolding in the background. Wall Street was turning decidedly more bullish on the broader Big Tech bucket (Microsoft, Apple, Alphabet, Amazon, Meta). The change in tone isn’t just attributable to AI either. That may come across as a shocking stance to hold - the Inside Orchard essay goes into more of my thinking.
For today, we will keep our focus specifically to how Wall Street is warming up to Apple. The discussion then turns to an examination of AAPL valuation metrics (forward P/E, EV/FCF, and free cash flow yield).
Wall Street Warms up to Apple
A few weeks back, we talked about the trading action seen in Apple shares following WWDC. The signs pointed to algorithm-driven program trading leading to a sudden move higher. It’s certainly possible that some market participants were swayed by other things like fundamentals, but the heavy trading volume suggests something more systematic. Another possibility that we did not explore was a pair trade involving
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.
More on Apple Device Longevity, iPhone Upgrading, Measuring Apple HW vs. Services Growth Potential
Given where we finished last week, there are a few follow-up discussions worth pursuing. We talk about how Apple devices are lasting longer. The discussion then turns to iPhone upgrading and the difference between iPhone average lifespan and upgrade cycle. We conclude with a look at where Apple’s growth potential is found (HW vs. Services).
Hello everyone. Welcome to July. Let's jump into today's update.
More on Apple Device Longevity
Last Thursday’s update was focused on the ramifications associated with Apple having industry-leading device longevity (improving secondhand value, longer product lifespans, and declining service rates). We also looked at some new clues for calculating the average iPhone upgrade cycle length (5 to 5.5 years when taking into account iPhones in the gray market).
One question that we did not address: How are Apple devices lasting longer?
There are three primary answers:
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.
Apple Talks up Device Longevity, Apple Provides New Clues for Estimating iPhone Upgrade Cycle, Google and Samsung Announce Product Events
Today’s discussion will begin with a new document that Apple published regarding device longevity. This will then bring us to the iPhone upgrade cycle. We conclude with somewhat lighter fare pertaining to tech product launches.
Hello everyone. This week flew by. Let’s jump right in.
Apple Talks up Device Longevity
Earlier this week, Apple released a document titled “Longevity, by Design,” outlining its philosophy on device longevity and its connection to device durability and repairability.
Here’s Apple:
“At Apple, we are always working to create the best experience for our customers, which is why we design products that last. Designing for longevity is a company-wide effort, informing our earliest decisions long before the first prototype is built and guided by historical customer-use data and predictions on future usage. It requires striking a balance between durability and repairability while not compromising on safety, security, and privacy.”
The 23-page document contained several interesting data nuggets and tidbits. For example, according to Apple, 85% of the US population is within a 30-minute drive of an Apple Store, Apple Authorized Service Provider (AASP) location, or Independent Repair Provider (IRP). For those in the United Kingdom, the percentage is 82% with a high 89% for Italy and Germany. There were also a few handy exhibits, such as the one below:
According to Apple, they are an industry-leader when it comes to device longevity due to three factors:
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.
Apple Warns of Feature Delays in EU, Apple Accused of Breaking DMA Rules
We begin with my thoughts on Apple warning of feature delays in the EU due to the Digital Markets Act (DMA). The discussion then turns to the European Commission finding Apple has broken DMA rules. We discuss a possible natural end state for the cat and mouse game.
Happy Wednesday. We will jump right into today's update.
Apple Warns of Feature Delays in EU
Heading into last week, we had good reason to assume Apple Intelligence’s rollout was going to be more gradual than consensus thought.
Apple had disclosed that the entire Apple Intelligence portfolio of features and services would be given the beta label (which also serves to avoid another Apple Maps launch debacle circa 2012). More interestingly, Apple also said Apple Intelligence would only be available in U.S. English and on select devices. Those factors told me Apple Intelligence won't be so much a September 2024 event but more of a late 2024 and 2025 event.
As it turns out, a number of features announced at WWDC may end up being delayed for Apple users in the EU.
Here's The Financial Times:
“Apple has warned that it will not roll out the iPhone’s flagship new artificial intelligence features in Europe when they launch elsewhere this year, blaming ‘uncertainties’ stemming from Brussels’ new competition rules.
The iPhone maker unveiled features two weeks ago, including a suite of ‘Apple Intelligence’ services and a partnership with OpenAI, in what chief executive Tim Cook described as its ‘next big step’ propelling the tech giant into the age of generative AI.
But Apple on Friday said complexities in making the system compatible with EU rules — which have forced it to make critical parts of its iOS software and App Store services interoperable with third parties — meant EU users will be denied certain features when they launch in other parts of the world later in 2024.
Apple said on Friday: ‘Due to the regulatory uncertainties brought about by the Digital Markets Act, we do not believe that we will be able to roll out three of these [new] features — iPhone Mirroring, SharePlay Screen Sharing enhancements and Apple Intelligence — to our EU users this year.’”
The way this news was framed on social media caught me by surprise.
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.
Apple Intelligence and Meta Integration Hoopla, Revisiting Apple Intelligence Integration Monetization
We begin with my thoughts on the WSJ’s and Bloomberg’s conflicting reports regarding Apple and Meta in discussions regarding AI integration. The discussion then turns to possible monetization paths for integrating third-party large language models with Apple Intelligence.
Hello everyone.
Before we jump into today's discussion, there is one quick follow-up to yesterday’s email involving Apple Retail.
When it comes to Apple’s retail store footprint strategy, growth is not so much centered on new country expansion but rather new city expansion. Said another way, Apple’s goal isn’t just to have Apple stores in more countries. If that was the singular goal, we would see more Apple stores being opened versus reality. Instead, Apple wants to establish brand embassies in the world’s leading cities.
Given economic trends, a city-focused retail store strategy does match an emerging markets focus. Many of the world’s greatest up and coming cities will be found in countries that fall under the emerging markets categorization. This doesn’t change anything about the stores themselves being Apple brand embassies and effective ways to improve the company's distribution and brand power. Instead, the takeaway is that Apple is being disciplined and deliberate in expanding its retail store footprint.
Apple Intelligence and Meta Integration Hoopla
In an article titled “Apple, Meta Have Discussed an AI Partnership,” here’s the WSJ:
“In its hustle to catch up on AI, Apple has been talking with a longtime rival: Meta.
Facebook’s parent has held discussions with Apple about integrating Meta Platforms’ generative AI model into Apple Intelligence, the recently announced AI system for iPhone and other devices, according to people familiar with the matter.
Meta and other companies developing generative AI are hoping to take advantage of Apple’s massive distribution through its iPhones—similar to what Apple offers with its App Store on the iPhone.
A latecomer to generative AI, Apple has developed its own smaller artificial-intelligence models but has announced it will turn to partners for more complex or specific tasks. When Apple Intelligence was unveiled earlier this month at the company’s Worldwide Developers Conference, OpenAI’s ChatGPT was announced as the company’s first partner.”
Given prior WSJ articles that were published about Apple, the publication’s credibility has taken a significant hit in recent years. All articles need to be approached with a heavy dose of skepticism given the high probability of bad actors (entities tied to Apple competitors) pushing certain stories to gullible WSJ writers and editors.
In this particular case, it is not difficult to see why Meta
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.
Apple Opens First Store in Malaysia, Apple and Emerging Markets, Signal-to-Noise
We begin with Apple opening its first store in Malaysia. The discussion will then turn more broadly to Apple’s emerging markets opportunity and the impact such countries can have on Apple’s installed base growth. We conclude with the signal-to-noise topic which came to mind when thinking about Apple’s store opening in Malaysia.
Hello everyone. Welcome to a new week. Today's update will take us through Apple Retail land. Let's jump right in.
Apple Opens First Store in Malaysia
Over the weekend, Apple held a grand opening for its first retail store in Malaysia.
In a press release issued this past Saturday, here’s Apple:
“Apple’s first retail location in Malaysia opened today in the heart of Kuala Lumpur’s new Tun Razak Exchange (TRX) central business district. Apple The Exchange TRX will be an inspiring space for customers to discover and buy Apple’s innovative lineup of products, receive exceptional service, and learn how to get the most out of their devices through Today at Apple sessions.
To celebrate the opening, customers can participate in a special Today at Apple series, ‘Jom Discover,’ running through July 6. Customers can capture photos on iPhone with smashpop, enjoy a live performance by De Fam, explore how to sketch ideas on iPad with Iman Azman, create on Mac with Adam Lobo, and get moving with Nana Mohd.”
Before we go any further, notice the three things Apple drew attention to for what customers will experience at Apple The Exchange TRX:
Try out Apple products.
Receive customer support / service.
Receive ecosystem experiences / education via Today at Apple sessions.
Those three items / experiences are universal to Apple stores. While most companies are struggling with brick and mortar retail
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.
Apple Discontinues Apple Pay Later, A Limit to Apple’s Fintech Ambition, Apple’s Predicament
We begin with my thoughts on Apple discontinuing Apple Pay Later. We go over the “why” behind the move. The discussion then turns to Apple’s fintech ambition. We look at where Apple has likely drawn a line in the sand as to what can be done internally in the fintech space versus partnering with existing institutions. The update concludes with a closer look at Apple’s predicament in the space.
Hello everyone. Today’s update will be focused on Apple Pay Later news.
Let’s jump right in.
Apple Discontinues Apple Pay Later
At WWDC 2022, Apple announced it was getting into the Buy Now, Pay Later (BNPL) space with a product called Apple Pay Later.
Apple Pay users in the U.S. would be able to split a purchase into four equal payments across six weeks with zero interest and no fees. Consumer loans are underwritten to facilitate BNPL purchases.
Apple Pay Later saw a limited launch in March 2023 with a broader rollout last October.
Last week, the following was posted to Apple’s Pay Later support page:
“Apple Pay Later is no longer offering new loans. Existing Apple Pay Later loans and purchases are not affected.”
That is another way of saying that Apple Pay Later has been discontinued. In a statement to various publications, Apple provided clarification to 9to5Mac:
“Starting later this year, users across the globe will be able to access installment loans offered through credit and debit cards, as well as lenders, when checking out with Apple Pay. With the introduction of this new global installment loan offering, we will no longer offer Apple Pay Later in the U.S. Our focus continues to be on providing our users with access to easy, secure and private payment options with Apple Pay, and this solution will enable us to bring flexible payments to more users, in more places across the globe, in collaboration with Apple Pay enabled banks and lenders.”
Apple Pay Later discontinuation is timed to coincide
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.
AAPL and Wacky Behavior
I would use extreme caution interpreting what's going on with Wall Street as it pertains to Apple shares. Attributing any single day move to a particular news catalyst is a futile exercise.
On June 11th, Apple shares closed up 7.2%. That is the one of the strongest daily moves higher in recent years (there were a few 10%+ moves in 2019 to 2021). For a $3T market cap company, it's noteworthy. One would assume the move higher was related to WWDC. Every Wall Street bank published their WWDC reaction article the night prior. However, there are a few things that give me pause about that thinking.
Apple shares did not gap significantly higher between Monday's close (June 10th) and Tuesday's open (June 11th). In fact, there was no gap at all. This suggests there was not a sudden event or realization the prior night or morning that led to a dramatic shift in demand/supply of issues. Shares were trading as high as $197 on the 10th. Shares opened somewhat calmly at $193 on the 11th. The next two hours saw significant volume and a big move higher. Even more strange? There was another huge move higher at the end of the day into the close.
How is that possible? What happened?
One answer: algorithm-driven / programming trading. On June 11th, demand and supply of AAPL shares was not necessarily driven by participants buying or selling because of WWDC or Apple Intelligence. Instead, computers took over as AAPL shares began to flash (positive) trading signals. To have shares (of the largest company mind you) move a few percentage points higher in an hour triggers bells on trading desks. Have it move 5% higher? More bells. 7%? Even more bells. The fact that these moves weren't overnight gaps factored into the programs. To then have all-time price highs be involved and technical resistance levels be broken, yep - more bells. We can debate technical analysis, but it's a fact programs take such variables into account.
As evidence that something funky happened with wide market participation, AAPL trading volume ended up being 4x average on June 11th. One possible explanation for the heavy volume: The buyside has been underweight AAPL shares all year. Given Apple's large weight in the S&P 500, if the company is underweight in a fund's portfolio and then shares moves significantly higher in price, those funds will see a bad day. As a result, they would need to buy AAPL shares to increase their exposure.
Of course, the market is large and there could be other factors at play. Do some analysts think Apple will sell more iPhones because of Apple Intelligence? Sure. Do some analysts think Apple will generate more Services revenue? Sure. Could those factors have impacted AAPL last week? Sure. This is why one can never be 100% confident that the same event is responsible for a daily tock price move. However, given the way AAPL shares traded last week, I suspect there was a lot more going on behind the scenes of a technical nature than just people being more bullish about iPhone sales or Apple Intelligence.
I do not think Wall Street comprehends long-term implications related to Apple any better today than pre-WWDC. It took Wall Street years to comprehend iPhone. Will likely see the same thing with Apple Vision Pro and spatial computing. Apple Intelligence? Will take years for Wall Street to fully digest.
WWDC Review: iOS 18, Audio & Home, watchOS 11, iPadOS 18, macOS Sequoia
Today’s update will conclude our keynote review as we go over iOS 18, Audio & Home (AirPods / tvOS), watchOS 11, iPadOS 18, and MacOS Sequoia.
Hello everyone. Over the past few updates, we have analyzed approximately half of Apple’s WWDC keynote. Today’s update will conclude our keynote review. Let’s jump right in.
WWDC Review: iOS 18, Audio & Home, watchOS 11, iPadOS 18, macOS Sequoia
Before we get to my granular notes, it is important to look at the big picture.
It’s tempting to look at the amount of stage time given to various Apple platforms and conclude that there wasn’t much announced or discussed. iOS 18 received 16% of stage time. WatchOS 11 and iPadOS 18 received just 7% of stage time each. If going by quantity, there wasn’t a wave of new features announced for each platform. However, Apple hasn’t prioritized new feature quantity at WWDC for years. Instead, Apple has emphasized new feature quality.
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.
Observations Attending WWDC, WWDC Keynote Priorities, An Impressive visionOS 2
As mentioned last week, we will shift our attention this week to everything from the WWDC keynote that wasn’t Apple Intelligence. For today's discussion, we will go over my broader observations from attending the keynote at WWDC and then talk visionOS 2.
Happy Monday. I flew out to Cupertino for WWDC. We will begin today’s update with some of my observations from Apple Park.
Observations Attending WWDC
WWDC is Apple's one event each year that is all about developers (as it should be). While the keynote has a mass market audience, everything else about WWDC is focused on helping developers navigate both new and existing platforms. Apple relied on the usual keynote viewing setup area with some developers seated up front near the stage. The press and media are positioned more in the center of the (large) viewing area where shared is provided by Apple Park's ring building. For the press, shaded seats are a hot commodity for both personal comfort and work (blogging, tweeting, etc.).
One thing that became apparent from attending this year’s WWDC is that the
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.
How Apple Intelligence Was Developed, Ranking Apple Intelligence Features, AAPL’s Wacky Price Action
There is value found in spending time on the details regarding how Apple Intelligence was developed and functions. We will then go over my thoughts on the various Apple Intelligence features, ranking the features from most impressive to most concerning. We will then address AAPL price action.
Happy Thursday. It’s been a very busy week. As a reminder, we still have some WWDC news to go over early next week.
There’s a lot to cover today, so let’s jump right in.
How Apple Intelligence Was Developed
During Apple’s Platforms State of the Union presentation (available to view here), which is aimed at developers, the company went into detail regarding how Apple Intelligence was developed.
Apple Intelligence began with an on-device large language model that Apple built to achieve a certain power/size balance that allowed it run on device yet power the experiences Apple wanted to offer. Apple relied on fine-tuning to “teach” the model certain tasks such as text summarization, proofreading etc. Instead of producing different models with different expertise objectives, Apple relied on adapters which basically gave the foundation model specialization capabilities.
Apple then compressed the model (16-bit per parameter down to 4-bit) with on-device being the goal.
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.
Breaking Down the ChatGPT / Apple Intelligence Integration, Is OpenAI Paying Apple?, Why Apple’s ChatGPT Integration Is Genius
Hello everyone.
I underestimated the amount of notes that I have for Apple Intelligence. In addition, Apple’s Platforms State of the Union, aimed at developers, offered an interesting look at Apple Intelligence. There are then questions coming in from members regarding Apple’s stock price move (+10% in two days).
Here’s the game plan:
Today’s focus will go over the Apple Intelligence / ChatGPT integration. While Apple didn’t dedicate much stage time to the news, there are many implications to consider.
For tomorrow, there is value found in spending time on the details regarding how Apple Intelligence functions. We will also talk about some of the Apple Intelligence features tomorrow. We will then address AAPL price action.
We will get to everything else from the WWDC keynote on Monday. This is not due to those items lacking interest. Instead, it’s just tough to reach everything in short order. There were also a few observations from Apple Park.
Let’s begin.
Breaking Down the ChatGPT / Apple Intelligence Integration
Heading into the WWDC keynote, reports had pegged Apple as announcing an agreement with OpenAI. None of the reports contained many details though. Bloomberg said the deal would amount to Apple offering a popular chatbot. Others said OpenAI would play a central role in Apple’s AI announcements.
Just two minutes off the 39 minutes given to Apple Intelligence went to ChatGPT integration news. OpenAI CEO Sam Altman was in the viewing audience for the taped presentation at Apple Park. He did not make an appearance on the digital state.
Apple framed third-party model integration with Apple Intelligence as a way to offer Apple users external models that have broad world knowledge or domain expertise. Apple referred to ChatGPT as “the best of these [external models], the pioneer and market leader..."
The ChatGPT / Apple Intelligence Integration involves two delivery mechanisms:
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.
Apple Intelligence Is a Game Changer
Hello everyone. Given the way Apple put together the WWDC 2024 keynote, there is a natural divide that we will utilize for our review and analysis. The next two updates will be dedicated to Apple Intelligence. Today’s discussion will have a broader theme while we will go over the Apple Intelligence features and more on ChatGPT integration tomorrow. Thursday’s update will go over everything else from the keynote.
Yesterday, we had an entertaining (virtual) meetup in the member forum. If you haven't checked out how it went down, hop on over to the forum (using this link) and take a look. You can leave your own comments to any of the discussions as well.
Apple Intelligence Is a Game Changer
Apple has been tiptoeing into AI and ML for years. According to Apple's Craig Federighi, there are approximately 200 ML models being utilized for the latest iPhone flagships. There is then Apple’s extensive efforts with custom silicon and neural engines (going on seven years).
Yesterday, we saw a significantly more concerted and focused effort from Apple regarding intelligence. Some of that is due to the broader AI climate that we find ourselves in. For the past 18 months, we have been in generative AI mania. There is no question that Apple has felt pressure to tell the world its AI plans. However, we also saw Apple take its time to unveil a comprehensive alternative path for how to bring intelligence to the masses. While yesterday’s announcements will take time to fully rollout, what was announced yesterday was surprisingly detailed and multi-faceted.
Before we go any further, attention must be given to branding. Apple’s decision
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.
Thoughts Heading Into WWDC 2024
Hello everyone.
Apple’s WWDC keynote will be shown on Monday (1 pm ET) at Apple Park (and online). Today’s update will go over my thoughts ahead of next week.
Virtual Member Meetup on Monday. Following the WWDC keynote, there will be a virtual member meetup in the Above Avalon member forum in Slack (available here) on Monday at 6:00 pm ET / 3:00 pm PT. The meet-up will provide an opportunity for members to have conversations in real-time about everything that Apple announced. In addition to participating in the meetup myself, I moderate the discussion topics etc. The discussions are then made available afterwards for other members to read through in Slack. If you have never joined the Above Avalon team in Slack, you can request an invite here. If you have previously been in the Slack team, your email has already been registered and you can just log in. Any updates/changes related to the virtual meet-up will be shared in Slack, so keep an eye there on Monday.
Thoughts Heading Into WWDC 2024
The setup heading into this year’s WWDC can be described as strange. There is an odd situation unfolding on social media and online that boils down to tech and finance circles talking up anything and everything related to generative AI, to the point of sheer pandemonium, while the masses have a more lukewarm approach to everything that has been proposed so far by big Tech.
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.
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
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.
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.
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.
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.
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.
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).
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.
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.
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.