An unbelievable streak ended yesterday as Apple announced their first quarterly drop in revenue since 2003. Now Apple is not doomed by any means, they still made $10 billion in profits, but it does seem that we have hit a peak of some significance. 65% of Apple’s revenue is from the iPhone, and since Apple sold 10 million iPhones less than they did in Q2 2015, it’s clearly the main culprit in the company’s decline in revenue.
I don’t pretend to be a financial expert, but a 16% decrease in iPhone sales from one year to another is bad news. Clearly demand for the iPhone 6s is not as high as it was for the iPhone 6.
Traditionally, sales have increased more in years where Apple unveils a brand new iPhone design than the “S” years where the body stays the same and the internals get an upgrade. Tech nerds may tell you that the “S” generations are the ones to buy because they tend to get the bigger spec bumps (especially when it comes to cameras and processors). And while I don’t disagree with that sentiment, I think most people get more fired up to go out and buy a new iPhone when the design changes.
That’s why the image at the top of this post is a little scary if the iPhone coming this fall is indeed a very minor visual upgrade over the current iPhone design. Rumors of a touch-sensitive home button and waterproofing sounds great, but if it’s all in a phone that looks basically the same, I don’t think it’s going to be the phone that lifts iPhone sales again. Apple’s marketing campaign when the 6s came out was “The only thing that’s changed is everything” and it seems that more people than Apple would have liked said “did it really?”
When you add in the fact that carriers have been making it easier than ever for you to upgrade your phone at least once a year, it’s even more distressing. All 4 major carriers have switched to installment plans that let you walk into a store and get a new smartphone without dropping more than a few dollars up front (thanks T-Mobile). Even with this new ability most people have, many decided to stick with their older iPhones than upgrade to the 6s. I don’t think it’s that big of a stretch to assume that more people would have made the jump if the new iPhone looked newer.
The bottom line is that phone design still matters quite a bit. Apple is already evolving their phone design slower than the rest of their competitors with their long-running 2 year cycle, and pushing that cycle to a third year is just a bridge too far. The flagship phones from Samsung, LG, HTC, Huawei, and Motorola evolve their look every year and they get people excited1. There are many advantages to Apple’s slower pace of design revamps, but I don’t think they can slow it down by another year. Even I, as a sucker for new tech, am going to be a lot less excited about buying a new iPhone this fall if it still has the same boring design I’ve had for 2 phones in a row2.
Now Apple may have an amazing new design for 2017’s iPhone, but that’s not going to help them sell more phones this year. People are looking for something new from the iPhone, and if a pressure-sensitive screen, 12MP camera, 4k video, a stupid-fast processor, and rose gold didn’t sell more iPhones this past year, I don’t think waterproofing and a modified home button are going to do it this fall.