Two weeks ago Apple launched Clips, an app designed for cutesy video editing on your iPhone. Users can combine clips, add filters or emojis, and even use voice translation to quickly put subtitles on videos. The app is not yet embedded in the native iPhone camera app (you have to download it from Apple’s App Store) but expect that to come soon.
But why in the world is Apple doing this, when Snapchat and Instagram and thousands of other apps offer similar video editing and better sharing?
Because Apple needs to protect its iPhone. What many commentators have missed is Apple has morphed in the past five years into, well, an iPhone company. iPhones now make up nearly three-quarters of all Apple revenue. In business-speak, this is known as becoming “concentrated” — where one product line drives the majority of your business — and that is a scary place to be. Because what happens if that one thing starts to go awry?
Apple’s risk factors
Now, consider the risk. In its annual report, Apple, like all public companies, discloses “risk factors” of things that could go wrong with its business. Public companies are required to share these risks, and if you want insight into the future of any business, it’s always smart to start with the challenges they face ahead. In its 2015 annual report, Apple writes:
Global markets for [Apple’s] products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets … if the Company is unable to continue to develop and sell innovative new products with attractive margins … the Company’s ability to maintain a competitive advantage could be adversely affected.
And there’s the rub. Apple lives or dies now on iPhone sales, and the iPhone is becoming a commodity. The current largest model, the iPhone 7 Plus, has a 5.5-inch hi-res diagonal screen, 32GB base storage, and 12 megapixel cameras. Hm. The new Samsung Galaxy S8 has a 5.8-inch screen, 64GB storage, and 8 and 12 megapixel cameras. A space alien exploring our technology culture would be hard pressed to tell mobile hardware apart.
So Apple’s future is software
It sounds irrational to predict that the Cupertino technology giant that conquered the world with slick, Jony Ive-designed hardware will ever pivot to software, but that is exactly what Apple must do. Mobile devices housed in glass and aluminum frames are becoming, well, basic glass rectangles, and the nuances of an Apple iPhone vs. Samsung Galaxy vs. Sony Xperia vs. HTC One M9 are merging fast. The real differentiator of the future will be the images and sounds emerging from transparent panes.
Apple still has some hardware upside, but it is closing fast. In 2016, global smartphone sales were $428 billion, and by this year one-third of the world population now owns at least one mobile phone. Apple and others can push farther into the human population, and entice us all with biannual upgrades. And it’s trying with ever-fancier iPhone shapes.
There are rumors that Apple is building slicker augmented reality visuals into its future iPhones … or that iPhones may have wrap-around glass screens, eventually turning the entire device into a glowing orb that could be translucent, invisible (imagine the front-facing camera making the back of the glass phone “disappear”), or a portal into a 3D immersive world. But these visual tricks are already being tested by other brands’ hardware, such as the Nintendo 3DS which uses eye tracking to project a stereoscopic vision.
Eventually, all these gadgety panes of glass will become like windows in your wall — something that you expect to use, but that you don’t really value much at all. The shape of the portals into the new virtual worlds will start to become less valued, and the software powering those new digital images will be all that matters. We are on the verge of a multibillion-dollar mobile hardware industry collapsing as technology advances to the point where digital screens become as common as pieces of white office paper.
All of which is why Apple is testing silly iPhone apps like Clips.
See more of our point of view on this trend in this edition of Digiday.