Apple's shift towards services revenue has limited its freedom to maneuver, as the China-VPN example shows, while creating a formidable business
even at the cost of the user experience...” http://twitter.com/... @stratechery : Apple and the Oak Tree http://t.co/... Services may be Apple's growth driver, but it has its own costs Nilay Patel / @reckless : Very smart @benthompson piece. (Also Jobs was right and desktop video is now much bigger than desktop publishing.) https://stratechery.com/... Larry Salibra / @larrysalibra : .@benthompson on Apple: the push towards ever more lock-in, ever more centralization will be impossible to stop https://stratechery.com/...
Context & Ripple Effects
Ben Thompson's 'Apple and the Oak Tree' argument lands at a moment when the hardware base is visibly maturing: in Q2 2017 Apple sold fewer iPhones and iPads year-over-year while services revenue grew 18% to $7.04B, making services the growth engine by default rather than by design. The piece's core claim is that this engine has a price — the more Apple's P&L depends on App Store and services lock-in, the less freedom it has when a government like China's demands compliance, as the VPN app removals show.
The arc since then validates both halves of the thesis: analysts flagged 2019 as the pivotal year for the transition under the law of large numbers (the rocky-but-pivotal-year framing), Apple's subscription announcements followed aimed at incremental revenue, churn reduction, and a safety-and-curation brand (the subscription bundle push), and by 2024 Services hit an all-time record $23.9B in a single quarter.
First-order effects
- Apple's dependence on services revenue means it must comply with Chinese app-store requirements like VPN removals, accepting user-experience damage that a hardware-led Apple could have absorbed differently.
- Larry Salibra's read is that the push toward ever-more lock-in and centralization is now structurally self-reinforcing — each services dollar raises the cost of openness.
Second-order effects
- Competitors and regulators alike gain leverage: the same centralization that powers services revenue creates chokepoints governments can target and rivals can attack on privacy and curation grounds.
- Apple's subscription strategy — incremental revenue, lower churn, curated bundles — doubles down on the model, deepening reliance on recurring services rather than diversifying away from it.
Third-order effects
- If the pattern holds, gatekeeper platforms face a structural trade-off between monetizing control and retaining the freedom to resist state pressure — the stronger the services flywheel, the narrower the diplomatic margin.
- The long-run endpoint Thompson gestures at via Jobs' oak-tree analogy: a mature platform company whose growth comes from harvesting its installed base, with regulation and geopolitics shaping what that harvest is allowed to include.
The trend: Platform companies that convert hardware install bases into services revenue gain durable profits but surrender strategic freedom to the governments and regulators their centralized stores answer to.