Munster’s Model

Thursday, 29 June 2017

Gene Munster, now at Loup Ventures, has published a 5-year forecast for Apple:

Our best guess is that Apple Glasses, an AR-focused wearable, will be released mid FY20. This is based on the significant resources Apple is putting into AR, including ARKit and the recent SensoMotoric Instruments acquisition. We believe Apple see’s [sic] the AR future as a combination of the iPhone and some form of a wearable.

Dedicated AR glasses don’t make much sense for mainstream, daily-use, augmented reality. (They make perfect sense for specialized use, like the way Boeing is using Google Glass today to help assemble airplanes.) The phone is the perfect form factor for casual augmented reality — the camera is great, the display is great, and we all already have them in our pockets. People don’t want to wear glasses all the time, and even if they do, augmented reality is useful and interesting for an entirely different set of things than what a touchscreen interface is useful for.

I’m hard pressed to think of anything we do today on our phones that would be better using AR glasses. Anything. Apple may well be working on AR glasses, but if they are, the use cases are almost certainly new and different from those of the phone, and I would wager that such glasses would be like Apple Watch — a peripheral for your iPhone, not a replacement for it.

ARKit exists because ARKit is going to be useful and fun on iPhones and iPads today. If it weren’t useful and fun on iPhones and iPads, Apple would not add it to iOS. (Consider: there was nothing added to Mac OS X a decade ago to “set the foundation” for writing touchscreen-based apps for the iPhone.)

Look at some of the examples of ARKit-based apps for iOS already, just three weeks after Apple announced it at WWDC. Look at this example by Tomás García. Look at what Apple itself has done with Flyover mode in iOS 11 Maps. (If you’re running iOS 11 betas, search for the name of a major city, then tap the “Flyover” button. In iOS 10 and earlier, Flyover takes you along a set path, and you can touch the screen to pan or twist the view. In iOS 11 you move your iPhone like a camera, and you can walk around the real world to stride about the on-screen city like Godzilla.)

ARKit is not laying the foundation for Apple’s future move into augmented reality. ARKit is Apple’s move into augmented reality.

Back to Munster:

AirPods: Bigger Than Apple Watch. Over the next 10 years, we anticipate that AirPods will be bigger than the Apple Watch as the product evolves from simple wireless headphones to a wearable, augmented audio device. While both AirPods and Apple Watch should continue to grow, we see AirPods contributing about the same amount of revenue as Apple Watch by FY22. We expect the AirPods ASP to increase from $159 today to $200 in FY22 as the product shifts to augmented audio.

I think Munster has this entirely backwards. AirPods are just wireless headphones. The AR device is the iPhone, and AirPods are just a great audio output device for the iPhone. It doesn’t make sense to think of them as a standalone product. They’re a way to make your audio experience with existing Apple products much better. That’s it.

And I think the average selling price for AirPods will drop, not rise, over time. If Apple could sell them profitably for $99 today, I think they would. And at some point I think they’d like to include them in the box with new iPhones.