Apple had a busy week. The company posted record revenues and profits for its third fiscal quarter and then terminated affiliate fees for Mac and iOS app sales. Adam Engst sees this move as unnecessary, mean-spirited, and harmful. Also this week, Josh Centers shares tips about how to teach Siri about the people in your life and explores what the new USB Restricted Mode in iOS 11.4.1 means for you. Notable Mac app releases this week include Bookends 13.1.2, Cardhop 1.1.3, and ScreenFlow 8.0.
In what Apple CEO Tim Cook called the company’s “best June quarter earnings report ever,” Apple reported net profits of $11.5 billion ($2.34 per diluted share) on revenues of $53.3 billion in its third fiscal quarter of 2018. Those revenues are up 17% compared to the year-ago quarter (see “Apple Posts $8.7 Billion in Profits for Q3 2017,” 1 August 2017), and profits are up 32%.
The lion’s share of Apple’s revenue, $24.5 billion, came from the Americas, followed by Europe at $12.1 billion, China at $9.5 billion, with Japan ($3.9 billion) and the rest of the Asia Pacific region ($3.2 billion) bringing up the rear.
“Our Q3 results were driven by continued strong sales of iPhone, Services, and Wearables, and we are very excited about the products and services in our pipeline,” Cook said.
The iPhone did well this quarter, with a year-over-year revenue increase of 20%. Much of that increase can likely be explained by the high price of the iPhone X, given that the number of iPhone units sold increased by only 1%. The iPhone now accounts for 56% of Apple’s business, bringing in $29.9 billion this quarter alone. Unsurprisingly, the iPhone X was once again the most popular phone.
iPad revenues were down 5% year-over-year, although Apple experienced a 1% uptick in units sold. That was likely due to the opposite of the iPhone situation because Apple’s most recent iPad release, the $329 sixth-generation iPad, probably accounted for more of the share of the tablet sales mix than the higher-priced iPad Pro line.
Mac unit sales were down a more substantial 13%, with 3.7 million Macs of various types sold, although higher average per-unit prices led to a revenue decline of only 5% when compared to Mac revenues a year ago. Looking forward, the launch of the new MacBook Pro models late in the quarter may translate into better performance for the Mac category next quarter. Nonetheless, Mac market share worldwide is up, and Apple says that 60% of Mac purchases last quarter were by newcomers to the platform.
Other Products and Wearables
The vague Other Products category, which includes the Apple Watch, Apple TV, AirPods, Beats headphones, iPod touch, dongles, connectors, and other things, also had a healthy quarter, with a whopping 37% year-over-year revenue increase. Wearable revenues (headphones and watches) were up over 60% year-over-year, thanks in part to the ever-popular AirPods. “AirPods continue to be a runaway success, and we continue to sell them as fast as we can make them,” said CFO Luca Maestri. Cook also noted that Apple Watch sales rose dramatically.
There hasn’t been much Apple TV news lately, but Cook mentioned that cable provider Charter would be offering Apple TVs to its nearly 50 million US households later this year. Charter will also release a Spectrum app for Apple TV (which makes one of this article’s authors happy—or, at least, optimistic). During the analyst’s questions, Cook mentioned his excitement over Apple’s media creation plans, including the company’s partnership with Oprah Winfrey. However, he was coy about the specifics of what Apple is doing, remarking that he was “not ready to talk about it today.”
All that said, the revenue star of the report (Cook even called it “stellar”) was Services, which took a big leap—a 31% increase in revenues from last year’s quarter—making it Apple’s second-largest revenue segment behind the iPhone. Services accounted for 18% of Apple’s quarterly revenue, nearly equaling the combined revenues from iPads and Macs. The company predicts a similar Services revenue improvement next quarter.
Services brought in more than $9.5 billion during the quarter, with subscriptions becoming a significant part of the revenue mix: Apple now has some 300 million active subscribers, and more than 30,000 apps offer subscriptions. Additionally, the App Store has generated twice as much revenue as Google Play so far in 2018. Apple Music saw 50% growth over the past year, and Cook said he saw opportunities to “grow the market” even more in the future. He also reported that AppleCare revenues grew at their highest rate in 18 quarters.
Apple Pay use continues to expand and will be embraced by 7-Eleven and CVS later this year. If you do a double-take at CVS adopting Apple Pay, that’s because it fought Apple’s digital payment offering for years (see “CVS Launches Apple Pay Competitor,” 15 August 2016). Cook also mentioned a healthy increase in Apple Pay Cash use, a service that Apple introduced late last year (see “How to Use Apple Pay Cash for Person-to-Person Transactions,” 7 December 2017).
Reading the Tea Leaves
Looking at these results, a few realities about Apple’s present and future become clear:
- You’ll likely end up paying more for Apple products, since the success of the iPhone X has allowed Apple to continue breaking records while unit sales stagnate.
- Don’t look for significant Apple investment in less expensive products like the iPhone SE and Mac mini.
- Expect to see more and possibly higher-priced services from Apple, as services become an ever-larger slice of the Apple pie.
All told, the latest results, combined with the company’s $247.3 billion in cash, suggest that Apple should be able to remain in business for at least another quarter or two.
As magical as Siri can be when it works, it’s annoying when Siri fails due to not realizing who you are, doesn’t understand who your mother is, or pronounces names wrong. Apple provides a few ways you can teach Siri about yourself and the people in your life, but because many of them require voice commands, they’re not obvious or well explained.
Tell Siri Who You Are
Siri works better if it knows who you are. For instance, when Siri can access a contact card assigned to you, you can issue commands like “Give me directions home” because Siri can look up the home address on your contact card. This contact card also lets you tell Siri who your relatives are.
You might already have this set up—check in Settings > Siri & Search > My Information or just ask Siri “Who am I?”. If you haven’t yet introduced yourself to Siri, tap My Information and choose your contact card from the list. (And if you don’t have your own contact card, open the Contacts app and tap the + button in the upper-right corner to add a new contact with your information.)
Teach Siri Who Your Relatives Are
You can ask Siri to perform tasks like “Call Bertie Wooster.” However, we often don’t refer to those close to us by their names, but instead by how they’re related to us, like “my mom,” “my brother,” “my assistant,” etc. One of the handiest things I do with Siri is telling it to “Call my wife,” after which it calls Hannah Centers without me having to give her name explicitly.
The simplest way to set up such a relationship is via Siri itself, by saying something like “Hannah Centers is my wife.” Or you can do it with these steps:
- Go to your contact card in the Contacts app.
- Tap Edit in the upper-right corner.
- Scroll down and tap Add Related Name.
- A new field appears with a relationship and related name field. The default relationship is Mother. Tap that to choose another from the list, or you can create a custom label.
- In the Related Name field, tap the info button and choose a contact from the list.
- Repeat from Step 3 for additional relationships.
If you set the relationship to “spouse,” Siri will respond to either “husband” or “wife” for the same person. So if I say “Call my husband,” the iPhone still dials Hannah.
Set Nicknames for Contacts
Let’s say your mom’s name is Dahlia, but you only call her “Mom.” People “solve” this problem by setting the first name for their mother’s contact card to “Mom,” which is terrible data hygiene. If you were to share that contact card with someone who has done the same thing, they would end up with two cards called Mom. Apple added a Nickname field to Contacts for just this purpose. Here’s how to assign it to a contact:
- Open a contact and tap Edit in the upper-right corner.
- Scroll down to the bottom and tap Add Field.
- Tap Nickname.
- Back on the contact screen, tap the new Nickname field at the top, enter the nickname, and tap Done in the upper-right corner when you’re finished.
From then on, in Messages and phone calls, that person’s name will be replaced by their nickname. Also, you can give Siri commands based on the contact’s nickname. So if you have a friend named Augustus Fink-Nottle, and you’ve set his nickname field, you can tell Siri to “Call Gussie.”
One more nickname-related tip. By default, Messages displays the first name of the person with whom you’re having a conversation, and if you have a nickname assigned to that contact, it shows the nickname instead. If you’d prefer a different short name format, you can pick one in Settings > Contacts > Short Name.
Teach Siri How to Pronounce Names
Out of the box, Siri often butchers names with unusual pronunciations, but Apple provides a few built-in ways to correct it. The easiest is to tell Siri “Learn how to pronounce Contact Name.” Siri will ask you first how to pronounce the first name followed by the last name, and after each presents a list of options. Tap the play buttons to hear each pronunciation and then tap Select next to the best one.
A quick way to test how Siri thinks a name is pronounced is to tell it “Show me the contact card for Contact Name”—this requires Settings > Siri & Search > Voice Feedback be set to Always On.
Alternatively, you can train Siri with the pronunciation and phonetic name fields in Contacts. You add these fields the same way you add the Nickname field above. The two fields appear to work the same from Siri’s perspective, but the phonetic fields change how the name sorts in lists as well as how it’s pronounced. That’s essential in Japanese, for instance.
I prefer this way of training Siri since you get a handy pronunciation reminder below the contact’s name. Plus, if you use these fields, the information syncs with all the rest of your devices via iCloud, so they’ll pick up the correct pronunciations as well. Training Siri’s pronunciation with the voice command seems to work only on that device.
Voice assistants still have a long way to go before we’ll be able to carry on anything resembling normal conversations with them, but with a little setup and training, you can make talking about people with Siri a lot less stilted.
Since the release of iOS 11.4.1, some readers have complained that their iOS devices aren’t charging, or are charging only after being unlocked. There’s a simple explanation: the new USB Restricted Mode, a security feature introduced in iOS 11.4.1 (see “Apple Releases macOS 10.13.6, iOS 11.4.1, tvOS 11.4.1, and watchOS 4.3.2,” 9 July 2018).
If USB Restricted Mode is bothering you, you can disable it by turning on USB Accessories in Settings > Touch/Face ID & Passcode. Before you do that, let’s look at what USB Restricted Mode does and why Apple added it to iOS.
Apple and the FBI
Longtime TidBITS readers know that Apple and law enforcement agencies have long been at loggerheads. Usually, I’d link to one of our old articles here, but many are relevant, including:
- “Apple and Google Spark Civil Rights Debate,” 10 October 2014
- “The FBI’s War on Encryption Continues,” 10 December 2015
- “Thoughts on Tim Cook’s Open Letter Criticizing Backdoors,” 17 February 2016
- “Details Emerge in Dispute between Apple and FBI,” 22 February 2016
As far as law enforcement is concerned, Apple’s iOS device encryption is too good because only authorized users can access data on a device that’s properly secured. So the FBI and other law enforcement agencies tried to compel Apple to install a backdoor that they insist would only be used by them and not by criminals. Apple refused, and because of that, some government figures even have accused Apple of aiding and abetting terrorists.
The problem is that if Apple were to put in a backdoor, foreign governments and savvy criminals would eventually find it. It’s the digital equivalent of hiding a house key under a rock in your walkway—it’s not in plain sight, but a dedicated criminal who knows the key has been hidden somewhere will eventually unearth it. Now imagine that same key could unlock every house in the country. That’s how big a problem creating a backdoor would be for Apple.
In fact, this scenario has already happened. The WannaCry ransomware that infected hundreds of thousands of computers was made possible by backdoors stolen from the National Security Agency, the very agency in charge of America’s electronic security—see “WannaCry Ransomware Vindicates Apple’s Battle with the FBI” (16 May 2017). To make matters worse, law enforcement has made it clear that it’s unable or uninterested in dealing with malware threats—see “The FBI Isn’t Much Help with Ransomware” (5 November 2015).
Apple’s lack of cooperation didn’t stop the FBI. What finally ended that standoff was the Israeli firm Cellebrite, which found a way to crack iPhone encryption at the cost of $5000 per device. In 2017, a new player entered the iPhone-cracking game, Atlanta-based Grayshift, which sells a product called the GrayKey to law enforcement. It’s a physical box that can extract information from a connected iPhone in a matter of hours or days. The box costs between $15,000 and $30,000, making it a pretty good deal compared to Cellebrite.
Consider what this means from Apple’s perspective: the invention of GrayKey meant that there was a big security hole in every iOS devices—an actual hole in this case— the Lighting port. Hence USB Restricted Mode.
What USB Restricted Mode Does
Put simply, USB Restricted Mode makes it so that a computer—or a GrayKey-like device—cannot access data from your iOS device unless you have unlocked it within the last 60 minutes. The timeout means that most of the time, you shouldn’t have to unlock your device explicitly before connecting it to your Mac or a USB accessory.
In theory, the way USB Restricted Mode locks down access shouldn’t prevent charging, but in reality, it can, particularly when used with third-party cables. Apple acknowledges this problem.
Will USB Restricted Mode Be Effective?
There’s another problem with USB Restricted Mode: attackers can easily circumvent it if they capture the device before the 60-minute timer has expired. Security firm ElcomSoft discovered that plugging Apple’s Lightning to USB 3 Camera Adapter into a device’s Lightning port disables the timer. Unfortunately, the nature of the Lighting port makes a software fix unlikely. ElcomSoft explains:
While we cannot know for sure, the issue appears to lie in Apple’s Lightning communication protocol. If the iPhone talks to a computer, the two devices must establish trust by exchanging unique cryptographic keys. This, however, does not apply to the majority of existing Lightning accessories. Existing accessories share public keys for trust; many of them are simply not designed to exchange cryptographic keys the way computers do. As a result, before USB Restricted Mode kicks in, an iPhone can check if the accessory is MFi certified–but that is pretty much it. It appears that there are no key pairs to be exchanged, and this is probably by design.
So, what should you do, now that USB Restricted Mode is a fact of life in iOS?
Disable USB Restricted Mode… Or Not
If USB Restricted Mode isn’t causing you any trouble, leave it on. Although it doesn’t offer complete protection against an alert attacker who can get access to your device quickly, it’s not worthless. Once your device has been locked for more than 60 minutes, nothing we know of can crack it.
If unlock alerts are nagging you, or if your device fails to charge because you didn’t unlock it, the easiest solution is to turn USB Restricted Mode off. Just go into Settings > Touch/Face ID & Passcode and enable USB Accessories.
Finally, for those who have an iPhone 8, iPhone 8 Plus, or iPhone X, you can work around issues with USB Restricted Mode by getting a Qi wireless charger. Check “13 Qi Wireless Chargers for the iPhone Reviewed” (22 February 2018) for some recommendations. They bypass the Lightning issues entirely and offer a number of other advantages.
In a terse email message to iTunes affiliates, Apple announced that it would be ending affiliate payment for Mac and iOS apps sold through the App Store as of 1 October 2018.
With the launch of the new App Store on both iOS and macOS and their increased methods of app discovery, we will be removing apps from the affiliate program. … All other content types (music, movies, books, and TV) remain in the affiliate program.
Apps bought via an iTunes affiliate link currently earn the affiliate 7% of the purchase price, although Apple attempted to drop that rate to 2.5% a year ago. After backlash from developers and publishers, the company reduced just the in-app purchase rate to 2.5%.
Unsurprisingly, the news elicited harsh reactions from the Apple media world, with publications like TouchArcade seeing it as an existential crisis and others bemoaning the loss of small but welcome bits of revenue.
Although TidBITS is enrolled in the iTunes affiliate program and our previous content management system programmatically added the affiliate code to appropriate URLs, we earned too little money from it (roughly $1000 since 2014) to focus on it or even remember to move the feature forward to our new site.
We’ve also always been somewhat uncomfortable with the inherent conflict of interest involved with affiliate fees—there’s an unavoidable link between publication revenues and encouraging sales. It just feels unseemly; not so much so that we’ll leave the money on the sidewalk, but enough that we’ve avoided adjusting our editorial mix to favor articles that generate income via affiliate fees.
Why Is This Happening?
Historically, affiliate programs work well for large retailers because they incentivize small players to promote specific products. An affiliate program is a lucrative long-tail play for the retailer because it brings in a lot of cumulative sales from numerous affiliates, most of whom don’t make much but are happy with the incremental revenue. Many fewer companies and publishers, such as Wirecutter, earn significant amounts because they’ve built their entire revenue model around recommending products that generate affiliate fees.
The problem with this approach, of course, is being at the mercy of the company offering the affiliate program. This latest news brings to mind an old saying among Mac developers: “Always remember that Apple is not your friend.”
So why is Apple eliminating affiliate fees for apps and in-app purchases now? The letter to affiliates puts it quite bluntly—Apple believes that the redesign of the App Store for iOS and macOS will improve app discovery enough that there’s no reason to incentivize independent media outlets to review apps. Apple says that the new Mac App Store will have in-depth stories written by a global team of App Store editors, and while you probably won’t see their bylines on those stories, we’ve been watching Apple hire experienced industry writers for those positions. Of course, as it becomes ever harder for publications to survive, it’s not surprising that journalistic talent is being forced to make the jump to industry.
Unpleasant Behavior for Little Gain
Even though affiliate fees have never been an important part of our revenue model, I still think Apple’s move is unnecessary, mean-spirited, and harmful:
- Unnecessary because Apple is posting record profits and massive increases in the Services category, even with the affiliate fees. The timing of this news, coming as it does just days after Apple announced $53.3 billion in revenues and $11.5 billion in profits, just makes Apple look unnecessarily stingy (see “Apple’s Q3 2018 Results Break Records Again,” 31 July 2018).
- Mean-spirited because Apple loves to talk about the $100 billion it has paid to app developers without ever acknowledging the amount that it has paid to affiliates. Either Apple paid out significant amounts of money in affiliate fees, at which point it could have crowed about that fact, or it didn’t pay out much, at which point it could have maintained the program.
- And harmful because a company that just hit $1 trillion in market valuation and that prides itself on being on the side of the light shouldn’t be clawing back money from small companies and individuals who have devoted their time to promoting Apple and Apple-related products.
It’s bad enough when Apple builds the features of a popular app into macOS or iOS, effectively killing the app without recompensing or even notifying the developer. (This is called getting “Sherlocked,” a term that dates to when Apple built the features of Karelia’s Watson app into Sherlock 3 in Mac OS X 10.2 Jaguar.) At least in the case of Sherlocking, there’s an argument that Apple could have been working on the app independently, or that the functionality is so important that Apple should provide it to all users.
But what, apart from the 7% affiliate fees for recommended apps, does Apple gain from kicking small publishers to the curb? Enough will survive this that App Store editorial will still have competition, so Apple can’t benefit by monopolizing all app coverage. And how would monopolizing coverage of independent apps help Apple anyway? More coverage equals more sales—it’s a simple equation. It’s not as though Apple supports industry media with advertising either.
It’s also worth noting that the democratization of media technologies has had an unanticipated consequence. Any media-savvy organization, whether it’s a multinational corporation or full-fledged government, can increasingly control public perception not just by manipulating social media but also by bringing content creation and dissemination in-house. It’s all about control in a media world that no longer has gatekeepers. Apple pulled out of Macworld Expo years ago because it could just as easily hold its own product release events, and now we’re seeing Apple do the same to industry publications by competing with them via App Store editorial.
In the end, I’m disappointed in Apple. Not surprised, since Apple has never acknowledged that the media plays a vital role in the broader Apple ecosystem, but disappointed that a company that puts so much effort into bringing joy to users can simultaneously behave so callously to some of its greatest supporters.