Apple Looking to License Movies for Apple TV+, Warner Bros. Discovery Thinking of Splitting Itself, Skydance Merges With Paramount
Given a busy news flow, we are going to stay in video streaming land for one more update. We begin by going over a report pegging Apple as looking to license more movies for Apple TV+. The discussion then turns to Warner Bros. Discovery, Skydance, and Paramount.
Hello everyone.
Two quick notes:
1) With Netflix reporting earnings a few hours ago, the CY2Q24 tech earnings season has officially begun. We still have some time before preparing for Apple earnings. One thing that has been on my to-do list is take a fresh look at the business performance (i.e. cash flow) for paid streamers as they report this earnings cycle.
2) Earlier today, Apple issued a press release detailing new Apple Immersive Video content that will be coming to Apple Vision Pro. We briefly talked about the new series and films last month as they were highlighted during the WWDC presentation. As some Above Avalon members speculated would be the case, Apple timed the release to coincide with Apple Vision Pro being available internationally. If any interesting observations come from the new content, we will talk about them in these updates.
Apple Looking to License Movies for Apple TV+
Here’s Bloomberg:
“Apple Inc. is having discussions about licensing more films from major Hollywood studios as it looks to bolster its Apple TV+ streaming service, people familiar with the matter said.
The iPhone maker has spoken to several of the largest studios about acquiring more programming from their libraries to offer customers both in the US and abroad, said the people, who asked not to be identified discussing private negotiations. A representative for Apple didn’t respond to a request comment…
Apple licensed about 50 movies from Hollywood studios earlier this year in the US, adding classics such as Mean Girls and Titanic. That experiment went well enough that Apple has gone back to many studios for more, either to license those titles internationally or to add more.”
This is the type of rumor that can be easily misidentified and misconstrued. There is no evidence of Apple changing strategy and looking
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Churn vs. Engagement in Paid Video Streaming, Disney Looking to Boost Streaming Engagement, Implications for Apple TV+
We begin with a closer look at some churn vs. engagement data for paid video streaming. The discussion then turns to Disney looking to boost engagement within its streaming properties. We conclude with a look at some implications regarding engagement and Apple TV+.
Hello everyone. Today's update will take us to the paid video streaming industry. Let's jump in.
Churn vs. Engagement in Paid Video Streaming
In his Screentime newsletter, here’s Bloomberg's Lucas Shaw:
“There is a direct link between how much time people spend watching your [paid video streaming] service and how likely they are to keep paying, according to the research firm Owl & Co. (It got some help from our friends at Antenna.)
Those dots on the bottom right of this chart represent Netflix data for different quarters. People spend a lot of time watching every month and don’t cancel.
Every other service is up and to the left, meaning they generate a lot less viewership and have far higher rates of cancellation.
This may seem obvious, but it’s a key point. Many companies in Hollywood are cutting back on spending right now. If you cut spending, that means you offer customers less to watch, which means they will spend less time on your service.
The industry has spent many years criticizing Netflix for making too much. But by offering new series every week, Netflix ensures that customers always feel like there is something to watch.”
The theory that Lucas ends up supporting is that Netflix is winning by focusing on video quantity over quality as there is more content available to watch (which Owl & Co. says results in greater engagement and less churn). Going a bit further, Netflix apparently
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Apple Pushes Apple Watch for Kids, Apple Watch SE 3 Rumors, Apple Watch New User Trends
We begin by examining Apple’s new minisite: “Apple Watch For Your Kids.” The discussion then turns to Apple Watch SE 3 and its connection to Apple’s sales pitch to parents. The update concludes with a look at my Apple Watch unit sales growth figures, new user totals, and adoption figures.
Hello everyone.
It’s good to be back after a mini vacation. Over the coming days, we will gradually get back into the swing of things. Fortunately, the tech news flow has been rather light. This gives us time to pursue a few topics that grabbed my attention over the past week or so.
Apple Pushes Apple Watch for Kids
Last week, Apple launched a new minisite, "Apple Watch For Your Kids," dedicated to pushing cellular Apple Watches for children.
Here’s Apple:
“Set up any Apple Watch with cellular for your kids, even if they don’t have their own iPhone. Easy to call and text. Know where they are. Great ways to keep them active. It’s independence for them. And peace of mind for you."
The minisite is accessible via the Apple Watch SE page (shown below).
Although this is not entirely new messaging from Apple, it is a rebrand. Apple Watch For Your Kids is the new name for what was previously called Family Setup (introduced in 2020). Family Setup was billed as a way for “kids and older family members” without iPhones to use a cellular Apple Watch.
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Microsoft and Apple Give Up OpenAI Observer Board Seats, AI Regulation Silliness, A Few Apple TV+ Observations
We kick things off with my thoughts on changes to OpenAI’s non-voting observer board seats. The discussion then turns to why so much of these attempts to regulate AI come across as silly. We conclude with a few Apple TV+ observations that have been on my mind. “Dark Matter” became the latest Apple TV+ series to be placed on my watched list.
Happy Wednesday.
I will be taking two vacation days to make this upcoming weekend a long one. The next update will go out on Tuesday.
Microsoft and Apple Give Up OpenAI Observer Board Seats
On Monday, we talked about Apple being given an OpenAI non-voting observer board seat as part of the Apple Intelligence partnership with ChatGPT. One day later, that board seat, along with Microsoft's observer board seat, have been wiped away as a preemptive move to remove oxygen from growing regulatory scrutiny.
Here’s the Financial Times:
“Microsoft has given up its seat as an observer on the board of OpenAI while Apple will not take up a similar position, amid growing scrutiny by global regulators of Big Tech’s investments in AI start-ups.
Microsoft, which has invested $13bn in the maker of the generative AI chatbot ChatGPT, said in a letter to OpenAI that its withdrawal from its board role would be ‘effective immediately’.
Apple had also been expected to take an observer role on OpenAI’s board as part of a deal to integrate ChatGPT into the iPhone maker’s devices, but would not do so, according to a person with direct knowledge of the matter. Apple declined to comment.
OpenAI would instead host regular meetings with partners such as Microsoft and Apple and investors Thrive Capital and Khosla Ventures — part of ‘a new approach to informing and engaging key strategic partners’ under Sarah Friar, the former Nextdoor boss who was hired as its first chief financial officer last month, an OpenAI spokesperson said.”
We do have some deflection on Microsoft’s end. Instead of blaming regulatory scrutiny for giving up its board seat, Microsoft is saying the seat was actually no longer needed. Giving up the board seat just as regulators examine the ins and outs of having the board seat is just a coincidence?
As for that regulatory scrutiny, the item that seems to be at the crux of the issue is EU and U.S. regulators looking
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Amazon Unveils Updated Echo Spot, Amazon’s Data Center Spending Aggressiveness, Amazon’s AI Predicament
Today’s update will have an Amazon theme. We begin with my thoughts on Amazon bringing the Echo Spot back. The discussion then turns to Amazon’s shocking level of data center spending commitments. We conclude with Amazon finding itself in an AI predicament involving Alexa and AWS.
Hello everyone. Today’s update will have an Amazon theme. Let’s jump in.
Amazon Unveils Updated Echo Spot
In a press release issued yesterday, here’s Amazon:
“Introducing the all-new Echo Spot, the latest addition to Amazon’s lineup of Alexa-enabled devices. Echo Spot is a sleek new customizable smart alarm clock, featuring a variety of custom-designed clock faces and fun colors. It’s built for the nightstand, with a display that makes it easy to set and view alarms, see the time, weather, or song titles at a glance, and a directional speaker that delivers vibrant sound.
Echo Spot is available now in Black, Glacier White, and Ocean Blue, for $79.99—but Prime members can get it for just $44.99 through July 17, in celebration of Prime Day.
The all-new Echo Spot builds on what our customers loved most about the original product—like the semi-spherical shape, access to Alexa, and the compact and vibrant display—and reimagines it with even better visuals and improved audio quality.”
While the timing for a launch via press release is ludicrous – right smack in the middle of U.S. vacation season – the launch is being timed to coincide with Prime Day occurring in mid-July.
In addition to Amazon bringing the Echo Spot out of retirement (it was discontinued in 2019 after just two years on the market), it's the second new / updated device that Amazon is launching with Panos Panay heading the company’s devices division. The Echo Hub was the first back in February.
A few things jump out at me about this updated Echo Spot.
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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.
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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
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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:
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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:
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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.
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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
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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
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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
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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.
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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
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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.
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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:
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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
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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.
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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.