Apple's iPhone16 Debut + Apple Intelligence Delays

Ranjan Roy from Margins is back for our weekly discussion of the latest tech news. We cover 1) Apple's iPhone16 launch 2) Apple Intelligence disappointment & delays 3) Apple's future runs through Siri 4) Apple Intelligence's impact on iPhone16 sales 5) Will the iPhone17 spark a supercycle? 6) Does Apple Intelligence compete with apps? 7) Apple's reliance on its services business 8) Is Apple a software company now? 9) Risks of Apple's software reliance 10) What happened to the Vision Pro? --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

  The iPhone 16 is here, but a lot of Apple intelligence is not. We'll talk about what it means and what Apple the company is becoming right after this. This episode is brought to you by Genesis. What does it actually take to put a Gentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial to go inside a large scale agentic CX transformation, including the business decisions, trade offs, and lessons along the way.

• 0:42Alex Kantrowitz?

  You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay? Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razer were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation.

• 1:14Alex Kantrowitz?

  Welcome to Big Technology Podcast, a show for cool, yet a nuanced conversation of the tech world and beyond. The biggest event of the year for Apple has arrived and it happened on Monday, a special Monday event for them because they wanted to miss the presidential debate and get out ahead of all of that news. So the iPhone 16 is here and so is Ranjan Roy, joining us in a new slot because we didn't want to wait till Friday to break down what this release and the absence of many Apple intelligence features means. So we're going to do it today on a Wednesday. Forget the flagship interview. It's the two of us back together again here breaking down the Apple event. Ranjan, welcome back to the show.

• 1:57Speaker 01

  Did you bring me in just to hear? How sad I am about that event.

• 2:04Alex Kantrowitz?

  There is, uh, we didn't know initially that Siri would be as disappointing as, as it was. But, um, maybe in the back of my head, I thought I couldn't let this week go by without hearing the emotional response from you to what we saw on Monday.

• 2:23Speaker 01

  I'd ra-, you're right. I'd rather get this out of the way earlier rather than later. So it's fresh. So it's really when I'm, when I'm deeply affected by this. So let's go.

• 2:32Alex Kantrowitz?

  Okay. And it's interesting that right off the bat, we're talking about Siri. And usually like Siri is a conversation that we have around Worldwide Developers Conference. And with the phone, we talk about hardware. And with the iPhone 16, we've gone from iPhone 15 to iPhone 16. The entire discussion around this new phone has not been about hardware upgrades. And there have been a couple of them. There it's a little bit faster. It has this new camera button. But entirely about the hype around our, uh, Apple Intelligence, which is Apple's AI push within the phone. And sort of the delays around the features that we are not going to see as this phone rolls out, at least not initially.

• 3:16Alex Kantrowitz?

  So was that the highlight for you? I mean, we could talk a little bit about the phone's features. But to me, the big story coming out of this was this was a hardware event with a software focus. And the software wasn't there yet. It was a very weird week for Apple.

• 3:30Speaker 01

  Highlight is a very generous term there, perhaps low light, but yeah.

• 3:35Alex Kantrowitz?

  I'm sensing a little disappointment in your voice. By the way, this was not planned. We haven't talked about this before.

• 3:39Speaker 01

  We have not talked about this yet.

• 3:41Alex Kantrowitz?

  Let it all out.

• 3:41Speaker 01

  Alex is hearing this fresh. This is a therapy session for me. I was hoping for something dramatic in terms of Apple Intelligence. And I think the most disappointing part for me was when they debuted this, I believe it was in June. The initial launch of this is going to be Apple Intelligence. This is going to change everything. Here's these incredibly flashy demos.

• 4:03Speaker 01

  We assumed by the September iPhone launch, there would be some very concrete releases. They'd be saying, okay, when you buy your phone, you should buy it because it can do these incredible things for you. And instead, the things that they are releasing are so incredibly incremental around the improvements to Siri, around Apple Intelligence. There are simple things that Siri will now be able to supposedly query Apple apps only. It's still not even going to integrate with any third-party app in any meaningful way. And we've tested this kind of thing, even using

• 4:41Speaker 01

  Apple Mail with the Apple iOS 18 beta, it doesn't work. And then visual search on photos? Interesting, sure. Google Photos already does it very well. So the idea like, and this is again, where you can search very specific things, being able to search around time, things that are within photos should work. And Apple has already had computer vision-based search in some capacity for a long time as well. So, so the two things that will actually be shipped are probably not going to be very good. They won't be great. And the things that we've been been promised around agentic AI running across various apps and taking actions and being able

• 5:26Speaker 01

  to use Siri in a meaningful way on par with ChatGPT audio or ChatGPT voice, none of that is coming anytime soon.

• 5:35Alex Kantrowitz?

  Right. And so let me just take Apple's side here.

• 5:39Speaker 01

  Go for it.

• 5:40Alex Kantrowitz?

  For the sake of argument, don't we need to allow the company a little bit of time so developers can familiarize themselves with this technology and start building for it as opposed to like have it work across the board from the beginning? Isn't that a bit unrealistic to expect?

• 5:55Speaker 01

  Okay, so when I think about the original iPhone launch and then the App Store coming, and I remember there was, there was this, do you remember the beer app? I always, I always.

• 6:08Alex Kantrowitz?

  Yes, I do, but talk about.

• 6:09Speaker 01

  I always think about it. It was this app that was incredibly silly and ridiculous and so much fun. It was an app that leveraged the original iPhone's accelerometer. So when you turned it and you've made it look like you're drinking and your listeners cannot see me doing this, but I'm acting like I'm currently drinking and it would look like a beer kind of dissipating and as though you're drinking. And again, it was ridiculous. It was silly. It showed the power of the accelerometer within the iPhone, but more importantly, it got you used to the App Store and finding things on the App Store. They did not promise the App Store would turn into this incredibly robust thing that would change the way we

• 6:51Speaker 01

  interact with our phones five years from there. They said, oh yeah, you can download some fun apps tomorrow. And that's what we were promised. So Apple does not have this history until very recently of promises of where things will be in a few years. They'll tell you what you can do today. The original promise with the iPhone was it just works. Pinch to zoom on the New York Times. The web is just the web on your phone. And these are things that were actually shipped. So I think this idea, the idea of giving time to developers, yes, is correct. And they should be reaching out to developers and they should be developing these things before going all in to try to boost their stock

• 7:33Speaker 01

  price in the short term. As you can tell, I'm not very happy.

• 7:37Alex Kantrowitz?

  So you think that most of this big, broad vision setting for AI for Apple has just been a stock market move? I mean, don't they need to inspire people to want to build with this technology?

• 7:50Speaker 01

  I, I mean, maybe this, maybe I'm so worked up because this falls into a larger issue around generative AI that we've discussed extensively. It's the idea that when the promises are made so grandly, the trough of disillusionment is around the corner. People are going to get disillusioned. It's, it's going to lead to a potential like. I mean, it'll make the potential realization of those promises so much more difficult because the first time your Siri does not work and find your flight info, which is the most basic query imaginable, or Siri is nowhere on par or Apple Intelligence with other consumer products that are out there.

• 8:33Speaker 01

  I think that's a problem. I was actually thinking of like, even all the things that they have announced are down the road. Some large scale consumer app is already doing and doing it very well. And yes, Apple's Apple's very good at packaging things into their ecosystem to work well. But usually they don't heavily advertise those things again before they're actually ready for use.

• 8:57Alex Kantrowitz?

  Right. And one of the interesting things here was that the entire event was called It's Glow Time. And that is the new UI that you'll have with Siri where you say you summon Siri and your phone's screen starts to like wobble and glow and it's pretty cool. And here's like the thing to me is you're talking, we talk about what Apple Intelligence is. And it's sort of this umbrella term for like all these AI features that's going to be on the iPhone. And you're totally right that everything outside of Siri is not really a needle mover. So it's going to summarize notifications. I have that on my phone today. It's not that cool. It's going to make, it's going to allow you create, to create emojis with natural language.

• 9:39Alex Kantrowitz?

  That's interesting, but again, it's a feature and that's also delayed. It's going to allow you to create images with your phone, like you mentioned. That's something that you can do with Dolly or a number of other image generators today. Yes, it's Apple, so it'll be available to so many more people, but it's not unique to Apple. And then the visual intelligence, which they released, which we can talk about a little bit more in a bit, where you point your phone and, and you know, you ask what it is, like that's Google Lens. So the big innovation here really will be the voice controls for your phone, which is Siri. And we know that's delayed, right? That's not going to come until 2025. And by the way, like again, hardware event, I'm going to talk about it again.

• 10:20Alex Kantrowitz?

  Hardware event named after a software product and the software product doesn't even come till next year. And so, yes, a lot of the things that Apple is talking about with Siri are pretty cool. If it's able to pull it off. But here's the thing, and I think this is kind of going to your, why you're depressed this week, is that Does Apple have the track record to let us think that it's going to be able to pull off Siri? I don't think so. There's nothing that Apple has done to this point to show us that it can upgrade Siri in a meaningful way. Yes, there's new technology. We acknowledge that that should be able to improve it.

• 10:59Alex Kantrowitz?

  But there have been incremental points of new technology being introduced throughout Siri's entire lifetime. And has there been a moment at all where Apple has shown, yep, we've been able to integrate that effectively? I would answer no.

• 11:14Speaker 01

  Yeah, I mean, I think that's exactly my biggest worry that I say this as someone with HomePods around my home and an iPhone and a MacBook and AirPods and whatever else. No Vision Pro though, but pretty much everything else.

• 11:28Alex Kantrowitz?

  Yeah, with the program, man.

• 11:31Speaker 01

  And I, I, I want them to do this. I really do. But the Amazon Echo and Alexa have been far, far, far superior for years. So they've had the opportunity to at least bring Siri to being market level and they haven't. So the idea that they were going to make this dramatic leap forward. It was difficult, but honestly, with the advent of L L Ms, I figured if there was ever a time that they would be able to do this, you have this new technology that is specifically designed to revolutionize a problem that Siri is dealing with in terms of processing information and giving you answers using natural language. I mean, it's literally what Siri was meant to do.

• 12:16Speaker 01

  So this could be that moment, but again, the way they're rolling this out really worries me for the company. Because doing this stuff is hard. Doing this stuff is there's, you're gonna, I mean, Google told us to eat rocks. Everyone's going to have kind of problems along the way, which is fine. But a company like Apple is not, something like the, like, you know, generate an image like Dolly or Mid Journey or whatever else. You know they're going to have problems at some point. So the longer they wait to release it, it will never be perfect. And this makes me think that they're just going to have to wait and wait and wait. And either it'll get more and more delayed, or it will

• 12:58Speaker 01

  be a half baked feature that they've oversold so much that the average user, which is what Apple's promise is, is bring these technologies to the average user, will just be disillusioned or just think this is stupid and a waste of time.

• 13:11Alex Kantrowitz?

  And just so people don't get the feeling that we're being extra harsh on Apple, John Gruber, the famous Apple watcher who's been on the show, great interview with him. If you want to go check it out, he's fascinating, fascinating perspectives on the company. On threads yesterday, he posted, "The obvious truth is that we all, including Apple, miss Steve Jobs."

• 13:32Speaker 01

  I mean, I, but they've done things, even the Vision Pro for its potential flaws, they, they swung, they took a chance and I respected it. Here is a completely like, this is fun technology, this is exciting. What they're selling me, what they were selling on Monday, it's not even fun, even on the hardware side. I mean, I'll admit, I was like, it's so incremental. Even I thought maybe the AirPods Pro 2 would have the health sensors. The hearing aid thing is cool. And I mean, but I thought something big, something interesting on the hardware side, there was absolutely nothing. Yes, there's like a haptic button

• 14:17Speaker 01

  to take photos instead of a physical button. Great. I'm sure that's cool. I'm sure I will like it at some point and it would be interesting. But even on the hardware side, it just did not seem fun or exciting to me. It seemed like a really, really half-hearted attempt at putting on an event that was just not even worth having an event. It could have been a press release.

• 14:40Alex Kantrowitz?

  So you're not going gaga over the new camera button on the iPhone 16?

• 14:45Speaker 01

  I'm not, do you know what? I'll, I'll admit, and we are a nuanced show here. The studio quality mics on the iPhone, that was, that was as, as a podcaster along with you. I was like, okay, if this means that the iPhone can actually work on, at the same level as the Shure MV7 sitting in front of me, that's kind of interesting. That's cool. So I'll give a, give a little bit of a shout out there. It's, I'm not going to upgrade for it anytime soon. I have the iPhone 15 Pro Max, but it was, that was the only interesting hardware announcement for me.

• 15:22Alex Kantrowitz?

  Right. So I'm curious what you think this means now for Apple's product sales. So the iPhone makes up more than 50% of Apple's total sales. I think it's 52%. This year, the iPhone is accounting for 68% of total product sales, right? So the iPhone is 52% of all sales, 68% of Apple product sales. And we're in a moment where in the first three quarters of this year, Apple product sales have declined from the year before, right? They had that run of five of six quarters where they've had, they had revenue contraction. And the iPhone is the thing they count on. And a lot of analysts were saying, listen, this is going to be the super cycle for Apple. iPhone 16, Apple intelligence, and they're not going to have that.

• 16:06Alex Kantrowitz?

  So are we basically looking at another year of like, kind of bleak hardware performance for Apple?

• 16:14Speaker 01

  I think we are. I think this is actually, I mean, this is really, again, as a long time Apple fan, this, this pains me to go, have to go through this. Again, this is like Apple therapy right now. But the hardware revenue, I mean, iPhone was already contracting, as you said. Services revenue, it was up 9% last quarter. That's one of the only growth areas in the company. And the worst part of this is a world where if no one is upgrading their iPhone, which I do not think this creates a compelling case in any way. And they're not even saying it is because if you're telling me that it's going to be nine months to a year from now before I can create generative emoji,

• 16:57Speaker 01

  or in context Siri, which I think is still the most important part of this whole rollout, then why would you buy the iPhone 16? Either you wait, maybe you're waiting for the 17 anyway, but they, it, the, Apple has been facing this problem for the last few years that. The iPhone up, I used to upgrade every year. I don't every three years or so. I every year from like years one through seven, every year. Most people I know, people are, and it's good that people are running four year old, five year old iPhones and they're working still. Um, but that idea that there's something so new and exciting that you need to upgrade is completely gone. And I think another thing is in the antitrust environment.

• 17:40Speaker 01

  The way Apple and I say this uncomfortably, but Apple is, I mean, Tim Cook and Apple are quietly one of the most aggressive monopolists in terms of how they build the ecosystem and juice that services revenue. And that kind of growth, I think will stall out. I think we're going to start to see some kind of pressure on bundling. And the way they approach just pushing every type of product in the way they do with auto renewals. Um, so I think, and we've already seen that in the EU significantly. So I do think that they're going to be hit on both sides right now.

• 18:16Alex Kantrowitz?

  Yeah, and we're going to go into services a little bit deeper in the second half of this show. But I want to keep harping on this, like try my, my main goal in this episode is to sort of, we both had like pretty negative reactions to this. And I want to get it all out there, let us express our feelings, but also see if we're overreacting here. And by that, I'm, the question I have is, are, are we premature? Like, we know the 16 is not going to do as well. I mean, the 16 is not going to be the super cycle that's based off of Apple intelligence that so many people hoped. But do you think, and this is what Mark Gurman from Bloomberg thinks, that within a year, you get the, you get Apple intelligence working, developers become familiar with it.

• 18:55Alex Kantrowitz?

  And then Siri starts to work better. This is obviously a priority for Apple. When Apple makes something a priority, it tends to go well. Is this just kind of like us being like so greedy, we want it all or impatient? We want it all to happen. So, you know, immediately, but with a product like this, that's AI based, that's going to take a totally new way of building applications or building or developers, building their services into this new AI. Um, is it just that, you know, it might look bleak right now, but give it a year and then it achieves its promise?

• 19:28Speaker 01

  No.

• 19:29Alex Kantrowitz?

  Okay.

• 19:32Speaker 01

  Well, no, no, here's why, here's why it's they have set the roadmap a year ago. I mean, they've announced it publicly four months ago. And actually, I think this is the most dangerous part for Apple. It's the things that they have outlined in the roadmap are things that were interesting in generative AI six months ago. Again, generative emoji, uh, agentic AI was all the hype. And I still think that's probably the most important thing for Siri. But a year from now, we have no idea what other consumer facing generative AI will be doing. If you think about the last year and a half to two, the amount of advancement is incredible. So, so what is cool?

• 20:17Speaker 01

  Like generating songs from scratch did not exist a year from ago, six months ago, you could do it. Like still waiting when Mid Journey and Dolly and all these other companies are just pushing image creation so fast and so far, what that even looks like a year from now? We have no idea. And only then will Apple be releasing these features. And I don't think they're gonna create some magic, unless they create some, they're the ones pushing some magic new format, which they never really do. I think they're gonna be behind the curve.

• 20:50Alex Kantrowitz?

  But they're the ones that have the phone, right? And if you think that the future of AI is gonna be a personalized assistant that knows your context, knows what you do, knows who you communicate with, knows who your family is, can accomplish goals on your behalf, the argument would be this all happens through the phone. Nobody is in a better position than the hardware makers, than the phone makers, to take all that information and make it into something that makes your life easier. So why not?

• 21:20Speaker 01

  It's a wonderful pitch. It is a wonderful pitch. I actually, this is where I genuinely would be curious and there's been, actually there hasn't really been much reporting on kind of the organizational side of what Apple intelligence looks like or what Apple's generative AI looks like. I mean, there are the stories when they shut down the car project that a lot of people moved over to generative AI. But I think this is a really interesting innovator's dilemma type of. Organizational question of are they is can they actually pull this off? Do they have the right talent, the right chops, the right like just overall teams to make this happen?

• 22:02Speaker 01

  And I they've certainly not shown that they do as of yet. They have the opportunity. I agree. It's the perfect simplest pitch in the world. That's why they well, that's why in June I was excited.

• 22:13Alex Kantrowitz?

  They pitched it.

• 22:14Speaker 01

  You all heard me. I was I was smiling. I was happy. I was excited. And and now it's we're heading into fall and things look bleak.

• 22:25Alex Kantrowitz?

  Confident Siri, here we come. I remember I was listening.

• 22:30Speaker 01

  I was, oh, I dreamed. I dreamed.

• 22:33Alex Kantrowitz?

  So here's a question. Is Apple in a in a worse position than Google, right? Remember we had Google, we had this whole discussion about Google, about the the innovator's dilemma for them. You brought up innovator's dilemma that Google didn't want to displace its Tembu links with AI because people won't click the links, they won't get paid if people don't click the links. But remember, Apple makes thirty percent of all App Store sales. And is AI potentially something that displaces some apps? And Apple makes billions of dollars from Google from search. And again, like if they make the default chat GPT, that revenue is going to be more difficult to come by.

• 23:15Alex Kantrowitz?

  So I want to talk about some of these issues, the innovator's dilemma that Apple might have, whether Apple really wants Apple Intelligence to succeed. And then again, hardware event called Glow Time, named after Siri. Services growing, product revenue shrinking. What is Apple? That's coming up right after this. This episode is brought to you by App Point. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data and most teams have no single way to see it, secure it and prove it's under control. That's exactly what App Point does. For twenty five years, they've been the trusted layer.

• 24:00Alex Kantrowitz?

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• 24:45Alex Kantrowitz?

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• 25:28Alex Kantrowitz?

  Learn how to stop online threats before they become real-world attacks. The link's in the show notes.

• 25:38Alex Kantrowitz?

  And we're back here on Big Technology Podcast. It's really a Friday edition on Wednesday, but I'm thrilled to be talking about the big story, what's going on with Apple and Apple Intelligence, here with Ranjan Roy of Margins. So Ranjan, let's just go back to this question of what happens to Apple's app ecosystem if Apple Intelligence works. You know, I was speaking about this with someone yesterday, where you, it's just like, with Apple, it's making 30% off of all of these apps. And if Apple Intelligence works the way that it's supposed to work, do we then just not need, you know, many of the apps because Apple's able to accomplish these things? I mean, you go to like the canonical example of like, book me a flight. Like, do you still need a kayak or something like that?

• 26:22Alex Kantrowitz?

  So is it possible that Apple is? If this works the way that Apple wants, that it might actually end up cannibalizing some of its services revenue, throw in the Google, by the way, the Google search deal. Like if people end up using ChatGPT instead of Google, isn't that bad for Apple? What do you think?

• 26:39Speaker 01

  This is interesting. I like that Alex left me hanging before the commercial break with the most existential, what is Apple?

• 26:47Alex Kantrowitz?

  That's coming. We're talking about that.

• 26:49Speaker 01

  I think you're, okay, I think you're on to something here. So I think it was last night, there was the Klarna CEO who has been on this show and I, you pressed him on trying to defend, and I thought he did a reasonable job of defending of.

• 27:05Alex Kantrowitz?

  He's legit.

• 27:06Speaker 01

  Yeah, I, as again, someone who's done a lot of work with generative AI, for context, Klarna in the past said, I think they cut like 50% of their time to mark or ability to create marketing content, some major reduction in costs and time in creating marketing content with generative AI. But yes, and on this show, he admitted to you that part of the reason he made a big deal about it, rather than keeping it a competitive secret, was for the attention. And last night, for the attention, he made a big announcement saying that they're going to be cutting their entire Salesforce and Workday budgets because they've built in-house

• 27:46Speaker 01

  processes that are simpler, faster, using AI, generative AI, good old fashioned databases and coding, but they're able to do this. The reason I bring that up is that is interesting to me that if this works, what does that? That eliminates a lot of apps, that eliminates tons of apps, could become simple actions. They can, and we've talked about this before, that actually my hope is Apple's shortcuts become kind of the skeleton and the infrastructure behind all of the goodness of what could happen with Siri, the idea that like. An app is just a couple of actions that go through Siri. But then what does that mean for revenue? What are you actually paying?

• 28:31Speaker 01

  Like, the idea that you're going to an app, opening it, using it, and needing to pay some amount of money starts to become less and less of use cases. And I actually think this is kind of interesting. Like, what does that do to the app ecosystem? I think it changes the nature of what is an app at the minimum.

• 28:50Alex Kantrowitz?

  Right.

• 28:50Speaker 01

  So then, I mean, in terms of maybe new monetization models are created, but I think that actually could be a threat that is not talked about very often.

• 29:01Alex Kantrowitz?

  I'll just give you one example that I saw in the presentation. With the visual intelligence thing where you point the camera. So if someone points the camera at a restaurant and asks for some more information about the restaurant, and it pulls up the rating of the restaurant from OpenTable. Okay, well, on my phone, you know, I might be using OpenTable, but I also might be using Yelp. I also might be using Google Maps to see like how these restaurants are rated. And now with visual intelligence or Apple Intelligence, those decisions are made for you. And if this takes off, then yeah, it becomes this point where the app developers are going to start to see that. And as again, this is always a threat with big tech. They ingest so much of the experience that the app developers are effectively R and D

• 29:45Alex Kantrowitz?

  for the eventual big tech products.

• 29:47Speaker 01

  I'm sure the folks at Yelp will be ecstatic about this.

• 29:53Alex Kantrowitz?

  But I think there's a reason why Yelp is like the most anti-big tech or like anti-big tech, anti-trust company. It's because they realize how vulnerable they are to this type of stuff. Sorry, go ahead.

• 30:02Speaker 01

  Yeah, yeah, no, no, I agree. Yelp, for a long time, has been one of the most vocal opponents of Google in terms of Google basically initially ingesting, as you said, Yelp data, presenting it without directing people to the Yelp site. And then as they build reviews on Google Maps itself and then prioritize those in search and map. So Yelp is definitely kind of the most, they're the most vocal, as he said, but. This is gonna, you're right, this could happen more and more with Apple, but in a way with Apple because of the App Store revenue, it's not just clean for them to create these new user experiences because they're not getting any additional money for every visual intelligence

• 30:47Speaker 01

  search. Maybe there's some kind of affiliate model that's built off the click through to OpenTable. I don't know, like a search model, but otherwise they're basically eliminating apps or the need for apps to enhance their, their products and they're not going to get that 30% cut anymore.

• 31:06Alex Kantrowitz?

  Yeah. So maybe Apple doesn't fully understand what it's doing here. I mean, of course, they, they are smart. They must understand. Uh, maybe that's the reason why this stuff is slowing down. I don't know. We certainly know within Google, they weren't hardwitting to-

• 31:18Speaker 01

  That's tin foil-y. That's-

• 31:21Alex Kantrowitz?

  Yeah, maybe that's too conspiratorially.

• 31:23Speaker 01

  Actually, no, no. I mean, I guess that is-

• 31:24Alex Kantrowitz?

  You're, you're going with the- Yeah, go ahead.

• 31:26Speaker 01

  That is, okay, I, I said that was tin foil-y, but that is actually-

• 31:31Alex Kantrowitz?

  I've been accused of worse.

• 31:32Speaker 01

  No, but that, that is the definition of the innovator's dilemma, that companies don't properly invest and push things that will disrupt their existing business models. Okay, I take it back. That's actually like Harvard Business School professor, uh, as opposed to-

• 31:48Alex Kantrowitz?

  I've really got upgraded a couple, couple levels here. From Alex Jones to Harvard professor. Solid. Thank you.

• 31:56Speaker 01

  The old Alex Jones to Clayton Christensen upgrade. It's a good one.

• 31:59Alex Kantrowitz?

  I feel like few have made that jump. So it's really a great moment in my podcast-

• 32:03Speaker 01

  So quickly, in just the space of one sentence.

• 32:06Alex Kantrowitz?

  So, but I think we should get to like the bigger issue here, which is sort of the existential question that I asked about Apple, uh, to begin with, which again, like, okay, so Gurman has, has some good reporting on what's coming next on the hardware front for Apple and that's a much thinner iPhone somewhere down the line and potentially is an iPhone that folds or an iPad that folds really is the thing that they're prioritizing. So I'm not going to suggest that Apple has given up on the hardware front. It hasn't. And it just released the Vision Pro, new hardware device. So it's like clearly working to build more hardware devices, but- Like I mentioned, and like you mentioned, all the growth or most of the, much of the growth is coming from services at this point. In fact, yeah, I think over the first three

• 32:48Alex Kantrowitz?

  quarters, all the growth for Apple came from services compared to products. Services now makes up 24% of Apple's revenue compared to 21% of Apple's revenue last year. And as product revenue has gone down and services revenue has gone up, the margins for Apple have gone up. So this is behind a lot of people saying you should value Apple as a tech company, not a hardware company, which has been behind some of its growth in the stock market. The thing is, they're also shipping products more on a software schedule, right? With their hardware, remember, hardware, it's somewhat constrained, you build up the

• 33:29Alex Kantrowitz?

  new iOS, you release the new phone with all the bells and whistles, and it's this huge splash. Everyone knows all the new stuff that's going to be in it, and you do it once a year. With software, you roll this stuff out gradually, and that's what it's doing with Apple Intelligence. So I just am curious, and by the way, I'm writing about this in Big Technology, so I'm actually going to give away the newsletter in this week's podcast, but whatever, I don't mind. Does Apple now transition from a company that's sort of have the hardware DNA first to one that has the software DNA leading? What do you think?

• 34:05Speaker 01

  I think they need, they need to. It sounds like, I mean, they're kind of pushing themselves in that direction, but they have never been that company. Anyone who has used Apple proprietary software for years, again, the kind of more like the operating system level, clearly they're amazing at, but the app side of it, I mean, have you used Pages or Numbers in a long time?

• 34:35Alex Kantrowitz?

  No, for a good reason.

• 34:36Speaker 01

  Yeah, exactly. Like even, I mean, Notes is a Good product, but it's just, it's almost by default. Like every single product that they create, every, every piece of software is either by default or more and more, just kind of by like auto charge subscription, which I think is such a large part of their software services business model that I don't even understand. I get, I have any number of emails coming in saying you have been charged for Apple Care for some, I mean, I'm Apple TV subscriber, whatever else. Like I think they don't, it's, people aren't excited around using Apple software.

• 35:18Speaker 01

  So if they move in that direction, I think that is a little worrying for them. Like their software success has been on account of the hardware.

• 35:26Alex Kantrowitz?

  Yeah, no, I, I think it's risky, but it's also something that, that maybe they have no choice over because like you talked about, it used to be you would upgrade your, your iPhone, let's say every 18 months, right? Or maybe every two years. And now people are holding them, I think I heard this week, an average of 42 months. So three and a half years. And when that happens, you're going to have your product sales go down. You're still delivering quality product, but you need something else. And that's kind of like, obviously services has been growing, but now Apple Intelligence is coming in and it's gonna basically, they're, they're positioning it as the leader of this. And now Apple Intelligence is free, but let's be honest, it's a services product.

• 36:08Alex Kantrowitz?

  If you love searching your photos with natural language, then you're going to put all your photos in Apple's Photos app. And when all your photos are in there, you pay them a larger.

• 36:19Speaker 01

  Exactly.

• 36:20Alex Kantrowitz?

  You pay them more storage fees. So this is, this is, I think, again, part of their transformation towards software company first versus hardware company first. And then the, the real thing is, man, that's risky, but they may not have a choice.

• 36:36Speaker 01

  It's, I don't think they shouldn't be making that bet if that is the bet that they're consciously making. Maybe it's kind of happening, but I actually think Apple's like strongest competitive positioning from the hardware side is, okay, maybe you're not getting the iPhone every year, but when you're locked into the ecosystem like I am myself, and that's why I'm so passionate about this, there's going to be, whether it's the new AirPods, or whether it's a new watch, or whether it's a new iPad, or whether it's a new MacBook, or whether it's a new iPhone, one of these products within the ecosystem will be interesting and will make you want to buy it, and probably multiple ones within a 12-month period.

• 37:21Speaker 01

  So getting people locked into the, like delivering exciting new hardware among one of the products within their sphere is still a viable way of pushing hardware. And then, again, the Vision Pro was supposed to be the breakthrough of what is the next big product. It's certainly not there yet, but I think like, I still think moving to software first, they are never going to be that company. And maybe it's good, it's competition. It's like an actual sign of the market is working and we're moving towards a world where maybe there's going to be exciting new hardware and not the humane pin and whatever else.

• 38:01Alex Kantrowitz?

  Could you see a world where Apple's services revenue surpasses iPhone revenue?

• 38:05Speaker 01

  Yeah, yeah, I think it's going to happen. I mean, after the, after the announcement of the 16, I think, I think it's probably going to be sooner rather than later, but.

• 38:16Alex Kantrowitz?

  Yeah, I mean, that would be, that would be very interesting and kind of existential for the company. So, okay, just a word on the Vision Pro. I didn't think I saw, I didn't think the Vision Pro was mentioned at all. Was it mentioned in the event?

• 38:27Speaker 01

  No, it's so sad. It's so sad.

• 38:29Alex Kantrowitz?

  What does that tell us?

• 38:31Speaker 01

  I mean, the people I know who bought it have stopped talking about it. It's still, when I've tried it a number of times, one of the coolest pieces of technology I've tried in the last five years, maybe. But it, it clearly is not landing. There's no, nothing being developed for it. I was actually thinking one thing, though, that like, did you see, this is separate from Apple, but still connected. There are these bars out in Dallas and LA where they have kind of like, you're like an immersive IMAX type of experience to watch sports. Like, there are the, I saw some, oh, you got it.

• 39:15Speaker 01

  For, there are these like, there are these viral tweets going around, like, where it starts, it looks like you're in the end zone for the game, and then it pans around and people are just sitting at tables, eating and drinking and cheering. And like, it was just a reminder that like, immersive sports should be such a breakthrough. Like, we, we've all been told you can sit courtside and watch games in a completely new way. Why hasn't it happened yet? And like, there's still so much opportunity. Why is everyone on a plane not wearing the Vision Pro? And watching like, movies on their small screen? I think, uh, there's still so much potential for this, but it's, it's, I'm a little sad by it.

• 40:00Speaker 01

  Not as sad about Siri, but still a little bit sad.

• 40:03Alex Kantrowitz?

  Still, one of the coolest things I've ever seen in technology was a 3D television, where I saw a football, like, being thrown through the air on a football field and just watched the spiral, like, kind of up close from a camera. It was amazing. This was a long time ago.

• 40:18Speaker 01

  Yeah, I remember that, actually, one of the TVs my parents bought, probably in the two, like, mid 2000s, it came with glasses, and we did it once or twice, and that just...

• 40:30Alex Kantrowitz?

  They eventually all just got discontinued. My galaxy brain take on virtual reality is that we will eventually move from trying to put glasses on our heads to just implanting it into our brains. And that's what VR and AR are gonna be.

• 40:48Speaker 01

  Is it then augmented or is it then your reality?

• 40:51Alex Kantrowitz?

  Yeah, that is a great question. I would say, yeah, I don't know. It's both.

• 40:58Speaker 01

  It's just our, it's just our.

• 40:59Alex Kantrowitz?

  I'm in the middle of listening to Lex Friedman's like nine hour podcast with Elon Musk and the entire Neuralink stuff.

• 41:06Speaker 01

  I, I want you to go through and complete it. And I think that will be an endurance test for the ages. And I think that will be incredible.

• 41:15Alex Kantrowitz?

  It's, it's, yeah, it's a, it's definitely an intense endeavor. Okay. Last thing for you and then, then we'll head out. So, Apple, big Vision Pro demo, kind of little bit of disappointment in reality, or a big disappointment in reality. Big Apple Intelligence demo, one year later to the date at WWDC, and now kind of another wave of disappointment. How many strikes does Apple get if, you know, before people start to sound the alarm on this company?

• 41:48Speaker 01

  I think this is the problem. This is why it did. I think Monday was a very big problem for them. It's, they have a, they're gonna have plenty of goodwill with people like myself included, based on the amount of lock-in they have, ecosystem lock-in from the amount of gadgets I have and the amount of like, I'm not gonna chant, you know, like completely change my entire ecosystem to Android or other devices anytime soon. But the moment they stop being fun and exciting and kind of boring, I actually think that's the biggest threat to them.

• 42:26Speaker 01

  And the big, the most important takeaway for me from Monday was it really was not fun and exciting. Like there was nothing, there was nothing that had me saying, oh, wow, this is cool. I can't wait to use this. And when they're running around saying generative emoji, like it's just, it's, it's cringe-worthy. It's cringe, as the Gen Z says.

• 42:53Alex Kantrowitz?

  No iPhone 16 for you?

• 42:55Speaker 01

  I mean, not certainly not anytime soon. Again, I'm I am sitting on iPhone 15 Pro Max. And I got it a while when it came out and absolutely no reason until you tell me the studio quality mics are actually as good as a sure and then

• 43:14Alex Kantrowitz?

  It's not gonna be me. I got I have the 15 Pro and I'm not switching. All right, everybody. Thanks so much for listening. Thank you, Ron. John. Great speaking with you. Are you happy? You got this off your chest and

• 43:23Speaker 01

  I'm very glad we did this on a Wednesday, so I didn't have to sit with it all week. And now I'm cleansed.

• 43:29Alex Kantrowitz?

  Are you feeling better?

• 43:31Speaker 01

  I'm feeling better.

• 43:32Alex Kantrowitz?

  Okay, great. That's what we're here for. Thanks, everybody for listening and we'll see you next time on Big Technology Podcast.

• 43:39Speaker 02

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