Why Apple's hard bet on software is fraught with risks

Apple has, in the past, conquered domains with well-entrenched competitors like Nokia and BlackBerry.

Once upon a time, college dropouts Steve Jobs and Steve Wozniak founded a company (in Jobs' garage) called Apple with a vision to make computers small enough to fit in homes and offices. Apple has seen few lows since then, becoming the world's first trillion-dollar company in August last year (its current market cap, though, has slipped to $890 billion). Jobs, fired in 1985 from his own company, went on to invest in Pixar (animated film studio) and NeXT (a hardware-cum-software firm). NeXT was merged with Apple in 1997 when Jobs rejoined the firm (NeXT software forms the basis of the iOS platform on which Apple devices operate).
The company has largely stuck to making its juice from hardware - Macintosh, iPod, iPhone, MacBook, Apple TV, Apple Watch, AirPods, and more - but has recently started enjoying the low-hanging fruits of commission-based profits. In 2018, a year that saw the sales of its ace device iPhone decline by 3 per cent, Apple's revenue for the App Store, Apple Music, Apple Pay, AppleCare, licensing, and other services were up 24 per cent year-on-year. The iconic brand is now betting big by leveraging the 1.4 billion iDevices out there to make a foray into original content and video streaming via Apple TV+. It will also aggregate content by selling news subscription from over 300 publications (News+), gaming (Apple Arcade) and TV channel subscriptions (Apple TV).
In a nutshell, Apple will be peddling content from third-party vendors. That's an area that falls way out of its 'hardware' comfort zone. Its rivals in the streaming business (Netflix and Amazon) are no less hungry, no less entrenched, and no less cut-throat. Make no mistake - Apple has, in the past, conquered domains with well-entrenched competitors like Nokia and BlackBerry, and it will be hoping to do so again. But those competitors made the mistake of not being nimble enough to follow the changing trends while Netflix and Amazon are arguably nimbler than Apple. Its latest move is driven by its hunger for growth, but Apple will need to think out of the box and address a latent demand - like what the founders did - to be able to succeed.