Among the dozens of new features announced by Apple on Monday, one of the most useful is a tool called Optimize Storage. This nifty addition does exactly as its name implies: It takes files that you've long ignored on your Mac and pushes them off of your machine and into the iCloud, freeing up storage space.
"We think this is going to make a really big difference for all of you," said Craig Federighi, Apple's senior vice president of software engineering. About the only thing missing was an asterisk at the end of Federighi's comment.
Although Optimize Storage will be available to most Mac users later this fall, not everybody will be able to use the feature as intended. That's because Apple users only receive 5 gigabytes of free storage on iCloud, and if you're looking to actually optimize your machine, you're going to need to clear more than 5 GB. To truly take advantage of Optimize Storage, you're going to have to pay for one of Apple's monthly iCloud subscription plans, and that's becoming the case for more and more of Apple's latest offerings.
Throughout the tech behemoth's Worldwide Developer Conference keynote, Apple announced numerous features that require users to form a monthly billing relationship with Apple. It's a massive shift in the way Apple conducts business, and it's here to stay.
Want to use Apple's new Memories feature to make cool videos and collages of all of the pictures you take on your iPhone? You better sign up for an iCloud subscription so you can store all of your pictures within Apple Photos. Want to rock out to the redesigned interface coming for Apple Music? That'll be $9.99 per month, or $14.99 if you want to include the whole family. Apple News is also getting a redesign to include access to publications like National Geographic and the Wall Street Journal. But if you'd like to use that feature -- you guessed it -- you'll have to pay for subscriptions to those outlets, and Apple will gladly facilitate the sale.
Apple is pushing subscriptions so hard that late last year the company actually introduced the "iPhone Upgrade Program," which lets users lease the Apple smartphone and pay for it starting at $32.41 per month. And just before WWDC, the Cupertino giant announced a change to how it plans to pay developers. Rather than the standard 70-30 split, Apple is now willing to pay developers more if they charge using a subscription model, rather than a one-time, up-front fee. Keep a customer on that subscription for a full year, and Apple will pay you 85 percent of the sale instead.
"Apple is signaling its realization that subscriptions are now an important part of the user experience equation, in addition to hardware and software," said Paul Kopacki, chief marketing officer of Realm, a mobile database company.
Apple's newfound obsession with subscriptions comes at a time when its hardware sales are starting to look questionable. IPad quarterly sales, for example, have been on a year-to-year decline for the past two years now. The iPhone, meanwhile, saw its own decline during Apple's last earnings period, and another decline is expected this quarter.
No one expects service subscriptions to make up for the company's declining hardware sales in the short-term, but many experts agree that this is a business model Apple is smart to adopt. In the long-term, subscriptions could become a much bigger contributor to Apple's revenue, but for now, subscriptions help keep users locked into the Apple ecosystem, ensuring future sales to those customers.
"This is the way of increasing the switching costs for the iPhone," Matt Argersinger, portfolio manager at The Motley Fool. "If you can build users' acceptance of Apple Pay and iCloud, it just makes them harder to switch out of iOS."
Additionally, many see subscription models as becoming commonplace and even favored by customers. Already, many users are paying monthly fees for access to entertainment services like Netflix and Spotify. On the productivity side of things, a switch to subscription models seems to have paid off for companies like Adobe and Microsoft. With services like iCloud and Apple Music, the maker of the iPhone can offer subscriptions for the sake of both business and pleasure.
"Consumers no longer want to spend a lump sum of money to buy a depreciating asset that may even become obsolete within a year or two," said Matthew Tuttle, chief investment officer of Tuttle Tactical Management. "Instead, they are comfortable paying a small monthly fee for 'access.' Apple is smart to jump on this recurring revenue bandwagon. It is a win-win for the consumer and the business."
It's also a win for app developers. By charging iPhone and Mac users on a regular monthly or annual basis, developers create a recurring and more reliable revenue stream. That in turn gives them incentive to stick around and keep rolling out updates for their apps, keeping users happy.
"If you're doing a productivity app, [subscriptions] are a much better way to try to make money than having people just buy upfront something that's $10," said Johnny Won, founder of Hyperstop, a tech consulting firm. "You can charge people $3 or $4 a month, make the same amount of revenue, and it's more dependable."
But there is a downside to subscription models. Jan Dawson, chief analyst at Jackdaw Research, has written about his concern that by charging for services on a monthly basis, Apple runs the risk of ruining, or at the very least altering, its relationship with its customers. Rather than paying hundreds of dollars at one time for an iPhone and then forgetting about the purchase, Apple users who adopt the company's subscriptions will start getting monthly reminders of just how expensive their relationship with the iPhone maker has become, Dawson said.
"People generally don't have good relationships with the companies that bill them significant amounts each month," Dawson said. "What Apple needs to balance is the convenience of the subscription model with the risks of being seen as a utility."