Are Apple and Nike Leading The Way To A Subscription Dominated Future?
With the launch of two new subscription services in late 2019, we look at how Apple and Nike are building a subscription stream like no other which may see them dominate a subscription-dominated market.
It seems like more and more companies have been attempting to build a strong base of subscribers through which they can inject a recurring stream of revenue into their business. Apple (NASDAQ: AAPL) has become a master at this, putting heavy emphasis on its services as its hardware sales decline. As well as this, Nike (NYSE: NKE), who operates in an entirely different market, has been working on building a strong subscription base.
Apple as a company still remains among the strongest on the planet, with a massive reserve of cash and a massive R&D department. However, the iPhone maker is moving away from its flagship product towards a more service-driven approach. This change in direction has led to a huge surge in the development of Apple’s subscription offerings.
In 2019 so far we have already seen the launch of Apple Arcade and the Apple Credit Card, and can also expect the hotly anticipated Apple TV+ to launch in November. On top of this, existing services such as iCloud, News and Apple Music are generating massive revenue on their own, accounting for $11.5 billion in the company’s last quarter.
Apple now has over 400 million subscribers to its various services, with over half a billion expected by 2020, especially as Apple is giving a one-year free subscription of Apple TV+ to anyone that buys a hardware device. With 70 million iPhones expected to be sold over the holiday season alone, Apple will see a massive upsurge in subscribers.
It is not just Apple’s services that are subscription-based! Apple’s iPhone Upgrade Program is currently live in the U.S., which allows customers to essentially rent an iPhone in a monthly subscription plan and receive the newest model every year.
Hardware subscriptions may not be exclusive to the iPhone. We saw earlier in the summer that Apple Watch competitors Fitbit planned to give a free Fitbit device to Singapore citizens if they subscribed to the company’s subscription health service. How long before we see a similar scheme from Apple in its growing wearables market which has grown almost 50% this year? With such a recognizable brand and a massive following, Apple is truly leading the way towards a subscription-life future.
There are few brands more recognizable than Nike, usually associated with retail sportswear and general bricks-and-mortar store sales. However, the big ‘tick’ has recently launched a subscription service for its flagship sneaker products, which may be a sign of a changing business model.
Nike Adventure Club
Nike’s Adventure Club joins the movement of brands launching subscription services for retail, following similar initiatives from the likes of Nordstrom and Under Armour, which saw limited success. Not only is a subscription service a great way to gain insights into consumer habits for its growing e-commerce platform, but it also secures recurring revenue for the company.
The concept is simple: Adventure Club offers three different options for kids aged 2 to 10 to get a new pair of shoes every month. For now, only sneakers are available, but Nike could easily have such services for all manner of products in the future. It is too early to say how successful the service maybe, but for the past two years, Nike has trialled the concept within certain parts of the U.S., which led to 10,000 subscribers.
Nike Training Club
Another popular subscription by Nike is its sporting health app, which is a premium service at $14.99 per month and allows the customer to access hundreds of exercises, nutrition guidance and programs. Nike claims that customers who use the app average 40% more sales on Nike’s online stores than those who don’t, so it is certainly worth the company’s investment.
Nike has a long way to go to reach the levels of all-round subscription power that Apple has built, but in terms of branding, as a market leader, it has set itself up well moving forward so it can build upon a strong subscriber base.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Apple and Nike. Read our full disclosure policy here.