Watched

By A.S.

AS A technology firm, Apple spends much of its time reimagining the future, but it also likes to pay tribute to its past. Back in 1984 Steve Jobs, with a luminous mane of black hair, double-breasted suit and green bowtie, commanded the stage at Flint Performing Arts Centre near Apple’s headquarters in Cupertino to show off the new Macintosh computer. On September 9th Mr Jobs’ successor, Tim Cook, balding and in blue jeans, held his own performance in the same location. It was the most significant showcase of Apple’s determination to wow the world since 1984. To thunderous applause, Mr Cook showed off two new iPhones, a clever payments system and a wearable device, which it calls the Apple Watch.

No technology launch has ever been so closely watched by the general public, says Avi Greengart of Current Analysis, a research firm. “I took a picture of my badge and sent it to my son, to give him street cred,” he says. Apple tried hard to make the event live up to the hype. A white cube structure was specially built to show off the new gadgets. Inside, models exercised on treadmills to highlight the new watch’s fitness features. U2, a rock band, gave a spirited performance of one of their songs. Afterwards, Bono, the lead singer, admitted to Mr Cook onstage that it had been five years since the band had put out an album; Mr Cook said he knows what that feels like.

That is probably true. It has been four years since Apple introduced a breakthrough product, the iPad. Consumers, analysts and investors have been howling to see proof that Apple can still do the magic tricks of the Jobs era. iPad sales have weakened in recent quarters and the firm has become increasingly reliant on the iPhone, which was launched in 2007. Last year, Apple's smartphones were responsible for more than half of the firm’s revenues.

However, while Apple is the dominant smartphone company in America, some analysts worry that it is losing market share elsewhere. Companies like Samsung, Huawei, Lenovo and LG, which make cheaper phones, and Google’s Android operating system, which runs on 71% of the world’s smartphones, have been luring consumers away from Apple's more-expensive products. The average cost of a new iPhone is $609, compared with $249 for smartphones globally, according to IDC, a market-research firm. That is good for profits, but it places Apple’s future in a luxury niche, traditionally occupied by companies such as Hermès, a fashion house, or Michelin-starred restaurants, notes Colin Gillis of BGC, a brokerage firm.

The Apple Watch will cater mostly to high-end consumers as well. With a starting price of $349, and only usable alongside an iPhone, it is unlikely to be a product with mass appeal. It is certainly a triumph of design: the tiny device contains sensors that measure the user’s pulse to help in fitness activities, and people can communicate by sending their heartbeat as a new sort of expressive message to other watch-wearers. But another world-beating product it probably is not.

Check in here

However, that might not matter as much as people might think. While Apple’s launch event focused mostly on the firm’s snazzy new hardware, two important shifts in focus for the firm were lost in the maelstrom of applause and photos. One is Apple’s evolution from a hardware manufacturer to a platform and “ecosystem” company. This has always been true to a certain extent, with Apple’s iTunes music service, but it is expanding into new areas and services. The newly launched mobile wallet, which aims to replace credit cards with the tap of an iPhone or Apple watch on a retailer’s sensor, is one example of this. Its health and fitness applications, which enable people to monitor their workouts and other health information, is another. More software and services which store users' personal data locks people into the firm’s platform for life. That keeps them buying Apple's high-margin hardware. Ben Wood of CCS Insight, a market-research firm, says this is all part of the plan to make Apple more like Hotel California, featured in a song by the Eagles, “where you can check out anytime you like, but you can never leave”.

Apple’s software and services category, which includes its App Store, iTunes, revenue from warranty products and other businesses, generated around $16 billion in revenues last financial year. That is about the size of Starbucks, Mr Cook has pointed out, and “bigger than CBS, for those of you who are still watching TV”. Because Apple tends to attract wealthier consumers, they are probably more valuable customers over their lifetimes.

The second shift for Apple is its opening up to the outside world. Earlier this year Apple announced a partnership with IBM, a computer-systems maker, to produce applications for businesses, as well as changes that make it easier for outside developers to design apps for Apple’s operating system. Mr Cook has also been much more open to outsiders joining his inner circle, hiring executives from firms like Burberry, Yves Saint Laurent and Nike to expand Apple’s expertise in retail, wearable technology and other fields. Mr Cook has also overseen the largest acquisition in Apple’s history, the $3 billion purchase in May of Beats, a headphones and music-streaming company.

“There has always been a huge tension between keeping control and opening up” at Apple, explains Michael Cusumano of MIT’s Sloan School of Management. Mr Jobs saw Apple products as works of art and never wanted them unbundled. Only after the executive team rebelled in 2003 did he relent and let iTunes become available on Windows—a move that dramatically increased sales of the iPod and may have helped save Apple from going under.

Apple is not the only firm trying to keep consumers and innovators satisfied by its ecosystem and hardware. Its main rival, Google, not only lets device-makers modify its Android operating system, but gives it away free, though with conditions: firms that want the latest version, for instance, need to offer Google’s services along with advertising. Amazon, an online-retail giant, has developed its own version of Android, so it can link its devices to its e-commerce platform, with mixed success so far; to boost disappointing sales of its Fire phone, the firm on September 8th dropped the device's price to $0.99, from nearly $200.

When Mr Cook unveiled Apple’s new products, he said they represented the “next chapter in Apple’s story”. But much of the firm’s book is being reinterpreted. Twenty years ago Umberto Eco, an Italian philosopher, compared Apple’s platform to Catholicism and Microsoft’s to Protestantism. The Macintosh, he wrote, “tells the faithful how they must proceed step by step.” By contrast, Microsoft “allows free interpretation of scripture…and takes for granted the idea that not all can achieve salvation.” Apple, under new leadership, may be at the cusp of its own Reformation.