Tim Cook isn’t the “main character” at Apple anymore. During the company’s keynote presentation on September 9, the long-serving CEO publicly passed the torch to his successor, former hardware engineering lead John Ternus, in time to be the face of a raft of new hardware announcements. There were new Apple Watches, AirPods, iPhones, and, most important of all, the long-expected folding iPhone Duo.
As the announcements progressed, many were watching not just to see what new electronics were coming from one of the mostly highly valued companies on the planet, but also how that company might change under the direction of a new leader. Would Ternus be a continuation of the Cook approach to management? Would new hardware make a comeback after years of tweaks and revenue maximization? Would Apple finally go harder on generative AI after taking a slower and more measured approach to rolling out such features?
It will probably take months, if not years, to fully answer those questions. But early signs are not promising. While the shiny new gadgets might be sufficient to distract some from the business machinations at play in the background, the keynote and reporting in the lead up to it provide a good indication that Apple might not be headed in the greatest direction under it’s new leadership.
Let’s not forget that the Cook era wasn’t all sunshine and rainbows either.
Cook was a numbers guy at the end of the day, and sought to extract maximum revenue from each of the company’s product categories. Product variations expanded to hit higher price points (and profit margins) with more Pro variants, paired with an aggressive push into the services business to extract more revenue from all those locked-in users. For years, the company has been consistently pushing up average retail price and revenue per user under Cook’s leadership. And that’s just the consumer-facing side. Cook was also aggressive on the supply chain, being the executive who initially set up the company’s outsourced production in China.
It’s hard to expect any of that will change under Cook’s hand-picked successor. The iPhone Duo is not just an evolution of the iPhone, but comes with an eye-watering price of between $1999 to $3199 in the United States. Canadians and Australians can expect to pay 10% more even after adjusting for the exchange rate, and in some markets like Turkey or Brazil it’s far higher. Sure, there are higher component costs now, but the company seems to be taking even greater advantage of international markets to eke out some further margin.
The $100 hike in the cost of the new iPhone Pro models can be explained by the memory price hikes affected the entire consumer electronics industry. The company hiked the prices of other products like Macs and iPads back in June. But the iPhone Duo’s price is a continuation of Cook’s strategy to ensure iPhone users pay more for their phones over time, not to mention how the base iPhone 18 won’t even get released until next year. A folding iPhone might be a new gimmick, but it’s also an opportunity to push the average price of an iPhone even higher.
The Ternus era is not only more expensive out of the gate on the hardware side; it looks like something could also be brewing on the software side too.
In the days before the first keynote headed by Ternus, Bloomberg’s Apple obsessive Mark Gurman reported that Phil Schiller didn’t just step down as head of the App Store because he wanted to spend more time with his family; he was also uneasy with Ternus’ plans for his division. “Ternus and services chief Eddy Cue want to make even more money from the App Store and figure out ways to raise margins and squeeze additional recurring revenue from the platform,” wrote Gurman. “Schiller, on the other hand, seems to believe that such moves will only further irk developers and governments.”
Paris Marx
Will that mean more subscription services, like the Creator Studio launched earlier this year? Will it mean higher prices, as Apple TV and Apple One were hit with again last month? Or could Apple step up its efforts to keep taking upwards of 30% of all transactions that occur on its platform, even as courts and regulators try to weaken its grasp? In truth, it’s probably a mix of all those options — and will likely cause consternation among users and developers alike. I wouldn’t be surprised if more AI features are used as part of the justification, as we see with Creator Studio. But that brings us with the other thing that stood out from the new CEO’s first big public display.
Under Cook, privacy was a big part of Apple’s marketing — even if the narrative didn’t always reflect reality. Generative AI clearly places pressure on that stated commitment, and is part of the reason that every time Apple talks about implementations of AI features, it emphasizes the amount of processing that happens on-device and its Private Cloud Compute for the tasks that need to be processed in its data centers. Well, Apple’s privacy narrative might be about to come under much further strain.
It appears one of the big initial Ternus pushes will be more comprehensively integrating generative AI into Apple’s products, following the slow deployment under Cook. It’s most visible in a series of new features for the Apple Watch that record everything said around it to recognize sounds and music, provide a recap of your conversations, and allow a “Live Rewind” where you can see a transcript of what was said around you in the past 15 seconds.
At a moment of people freaking out about Meta’s “pervert glasses,” this is Apple moving to make the fear of your devices listening to everything you say a reality that’s openly championed as a new feature. The company is promising it will all be done in a way that respects privacy and security, but that’s what companies always say as we experience a progressive degradation in those very things.
Apple wants us to see the Ternus era as a wonderful new chapter that will birth wholly new wonders. It seems more likely to result in the company further doubling down on its worst instincts.
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