Almost no one in the world is familiar with the name Cornelius McGillicuddy, and only the most avid baseball fans would know him better by his nickname, Connie Mack. Mack, FYI, was a baseball player in the early days of the professional game in the U.S. in the late 19th century. He went on to be a team manager for the first half of the 20th century.
Mack managed in Philadelphia from 1901 to 1950 before retiring at the age of 87. To this day, he still holds professional baseball’s record for most games managed (7,755), most games won (3,371) and most games lost (3,948).
And it is because of that interesting win-loss record that you probably already know Connie Mack’s most famous saying, even if you didn’t know who he was until reading the last few paragraphs.
When asked what it was like to have baseball’s best and worst win record, Mack famously replied:
“Well, you win some, you lose some.”
And as the last full week of “real” business in 2015 runs to a close, Apple has had a Connie Mack kind of week. It won some, it lost some and even fought its way to a draw.
In the win column, Apple Music looks to be performing strongly (if recent reports are accurate), and Apple has improved its executive roster. In the loss column, Apple Pay whiffed in Australia over interchange fees. In the draw column, Apple converted an early week loss in China into at least a tie.
So, what does a closer look at the scoreboard say?
It was a good week for Apple Music — and not just because of the Taylor Swift deal.
Since its launch over the summer, the horse race coverage has been very back and forth. Strong signups at launch were the lead-off stories, followed by months of gloomy speculation that Apple was simply too late to the race and that once users had to opt in to paying monthly for the service, they were more likely than not returning to ads and free music over at Spotify.
But Christmas has come early, care of the music industry, with recent tidings of great joy. And while it might not quite rank up there with a savior in a manger, the news that Apple might just catch Spotify in 2016 could set some bells jingling.
Industry analyst Mark Mulligan of MIDiA Research predicts that Apple Music will end 2015 with just under 8 million paying users, and that total should more than double by the end of 2016 to approach 20 million.
Those 20 million users would make Apple Music a stone’s throw behind category leader Spotify (which currently has about 20 million paid subscribers). There are also 55 million unpaid Spotify subscribers, but Apple has no equivalent service. And, Mulligan noted, the 20 million figure for Spotify counts three-month $1 trial members, which means it may be somewhat inflated if Spotify fails to convert a large chunk of its users. (Mulligan also noted that Apple did give its retail employees free Apple Music accounts, though he believes those will move the needle far less.)
“The wildcards in the equation are whether Apple can do a better job of pushing users from iTunes Radio to Apple Music and what happens when Spotify restates its subscriber number to reflect the impact of $1 a month three-month trials,” Mulligan wrote.
Mulligan ultimately believes Spotify will hold its lead on Apple through 2017 but only very narrowly. He also believes that though Apple has been unsuccessful in backing music companies down off their fees, such that it can charge less than $10/month for the service, it likely has not given up on the goal.
“If Apple finds growth tough going, expect it to throw everything it has got at getting the labels to agree to lower price point products so it can open up large chunks of the iTunes music customer base,” he said.
And that, he notes, could set Apple up for the music streaming game-changer.
Speaking of game changes…
Apple also announced a series of upgrades yesterday (Dec. 17) that might make a very big difference in the company’s near-term future — though those upgrades were executive, not technical.
The biggest announcement was the appointment of long-time Apple exec Jeff Williams to the job of chief operating officer, a position that had gone unfilled since current CEO Tim Cook held it in 2011.
“We’re recognizing the contributions already being made by two key executives,” Cook said in a statement.
Williams has been with Apple since 1998, when he joined up as head of worldwide procurement, before ascending to VP of operations in 2004. In 2010, he was placed at the head of Apple’s supply chain, which runs components and parts for products, such as the iPhone and iPad.
“Jeff is hands-down the best operations executive I’ve ever worked with,” Cook noted in his statement.
Apple also increased the corporate real estate under Philip W. Schiller, Apple’s SVP of worldwide marketing, to include oversight of the App Store, which had once been overseen by Eddy Cue, Apple’s SVP of Internet software and services.
“It seems like Eddy Cue could have a pretty full plate with trying to negotiate TV rights at the moment, for example,” Jan Dawson, an analyst at Jackdaw Research, told The New York Times.
Also moved up as Apple strengthens its roster to end off the year is Johny Srouji, who is now a senior vice president for hardware technologies; he was behind the creation of the A4 chip.
Tor Myhren is also signing onto Apple as VP of marketing communications. Myhren was the chief creative officer and president of Grey New York, a part of the Grey Group.
There were two big international misses for Apple this week. One in Australia and one in China.
In Australia, the big banks decided to accept payments made via Google’s Android Pay — but Apple Pay, not so much. Westpac, ANZ and Macquarie banks will accept contactless payments via Android smartphones when Google hits Australian shores in the first half of 2016. Both debit and credit cards will be supported.
The culprit: Apple’s business model, which takes a haircut off of interchange fees, which are next to nothing in the land down under. Apparently, banks don’t want to dip into operating margins to fund Apple Pay — at least not yet.
Apple remains in talks with those same banks and is already operating in Australia thanks to a side deal with American Express. But it still has no access to the 80 or so percent of Australian customers who do not carry an Amex.
“It’s a big bargaining chip for [Australian] banks to use to force a better deal with Apple,” Foad Fadaghi, managing director of technology research firm Telsyte, told Reuters.
Australia’s banks’ tepid response to Apple (similar to their international counterparts) stems from lack of enthusiasm for paying Apple a cut of their swipe fees, which are much lower than their counterparts in the U.S. Apple is seeking 15 basis points in interchange fees, and banks in Australia (and around the world) are left cold by paying it.
“The four Australian banks aren’t prepared to give up the amount of interchange fees that the U.S., Canadian and U.K. banks have done,” said Grant Halverson, a payments consultant from McLean Roche.
And Australia was not Apple Pay’s only international loss to a rival.
Early in the week, British payments startup Powa Technologies bagged a highly desired 10-year deal with China’s state-owned UnionPay, a payments company, to bring its mobile payment app to China.
“This is like winning the lottery for us; it’s such a huge deal. Nobody’s ever done a deal in British tech like this ever,” Powa Founder and CEO Dan Wagner told Business Insider.
The joint venture is hoping to have 1 million shops and 50 million consumers recruited by the end of the first year. Powa forecasts the ventures will generate $5 billion (£3.3 billion) in revenue over the next two years, with profits split roughly 50-50 between Powa and UnionPay.
He further noted that with 4.5 billion cards in circulation, accepted at 6 million merchants nationwide, “they are the only partner you want in China for payments — there is no other partner.”
A position Apple seems to have assuredly agreed with, as a little under a month ago, Bloomberg was reporting that Apple Pay was “this close” to signing the same deal with UnionPay to work together to introduce Apple Pay to China.
Close perhaps, but no cigar — or, at least, that is how it appeared yesterday. But it seems Santa had other ideas for Apple.
Apple Inc. and China’s state-run bank card giant are bringing Apple Pay to China together, as Apple, China UnionPay Co. and 15 Chinese banks will all be part of the road production of Apple Pay, with a goal of having the mobile payment service on the ground (and in the ether) in China by the early part of 2016.
“No matter what kind of payment it is, as long as it complies with the laws and demands in the local marketplace, as well as fulfills consumers’ needs, we will all be welcoming,” saidUnionPay President Shi Wenchao in an interview on the sidelines of China’s World Internet Conference. “UnionPay is not afraid of competition, which is a good chance for us to break past our old steps and level up our services.”
Still unclear is if Apple Pay will be making the same cut of interchange in China as it does in the U.S., where it racks up 15 basis points per card transaction and $0.05 per debit transaction.
UnionPay, the legally enshrined monopoly holder in processing bank card payments in China, has been busily making mobile friends of late, other than Apple and Powa. Last week, UnionPay struck a deal with its South Korean neighbors at Samsung that will allow its cards to work with the South Korean company’s Samsung Pay smartphone card management system. The firm in the last few days has also announced its own QuickPass mobile payment system in conjunction with 20 Chinese banks on phones that run Google Inc.’s Android software.
And those are just the wins, losses and draws. Apple also has a few games in process, most notably its push into the enterprise with IBM. This week, the two firms announced they have built their 100 apps for business and have also launched an aggressive campaign online to land those corporate customers.
Will those corporate customers show up? Well, that will be an interesting question to pick up … in the new year.
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