As previewed, Apple’s Q2 2023 hardware sales were soft given the unprecedented pull-forward of consumer electronics product demand during the pandemic (which also created a nearly impossible base level to grow from). We estimate that Apple’s hardware sales in the U.S. were down nearly -10% for 1H 2023, with a similar decline likely in Q3. Apple CEO Tim Cook said of the softness: “The primary reason for that is that it's a challenging smartphone market in the U.S. currently.” A new iPhone line-up is expected for the holidays, and so, there is the possibility of a change in the trajectory for Q4 2023.
On a worldwide basis, iPhone and wearables experienced a moderate decline in revenue of -2% for Q2 2023. By contrast, iPad sales were down -20%. On wearables, Apple CFO Luca Maestri noted, “Two-thirds of every buyer of Apple Watch during the course of the June quarter was new to the product. That is all additive to the installed base. It's just great to see that the AirPods continue to be a great success in the marketplace for us.”
On services, Maestri said, “This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago.” Apple’s installed base of products in use now exceeds 2B. As we have been writing about this year, Tesla CEO Elon Musk is carefully studying Apple’s expansion of its installed, services, and the app store to see what lessons he can be applied.
In June, Major League Soccer (MLS) reached a new broadcast agreement with Apple, reportedly worth an estimated $2.5 billion over 10 years. This replaces the league’s past contract with ESPN, Univision, and Fox. Apple will create an MLS subscription service within the Apple TV platform. On that deal, Cook said, “Soccer legend Lionel Messi made his debut with Major League Soccer last month, and fans all over the world tuned in with MLS Season Pass. We are excited about our MLS partnership, and we're thrilled to see Messi suiting up with Inter Miami…We're focused on original content, as you know, with TV+. And so we're all about giving great storytellers the venue to tell great stories and hopefully get us all to think a little deeper. And sport is a part of that because sport is the ultimate original story. And for MLS, we could not be happier with how the partnership is going. It's clearly in the early days, but we are beating our expectation in terms of subscribers, and the fact that Messi went to Inter Miami helped us out there a bit.”
Based on our conversations at recent industry meetings, the MLS is seeking to go “very mainstream,” and we believe that has substantial ramifications for commercial real estate. For instance, Minnesota United FC regularly brings in 25-30K visitors to Allianz Field in 2022 (below). Prior to the stadium, the area was dilapidated and dead of economic activity (it was previously a shopping center anchored by K-Mart). 25-30K on a consistent basis is a substantial boost this region of Saint Paul, MN.
Prior to Allianz Field, Minnesota United played at TCF Bank Stadium (now called Huntington Bank Stadium), which is also the stadium for the Minnesota Gophers football team. The stadium also hosts a large number of music concerts and other events. As shown below, during 2018, the team regularly brought in only 20K fans, far less that an optimized and tailored venue for soccer (below). This year, the Minnesota United is drawing in a similar level of fans as 2022. We will be watching the play as Messi mesmerizes U.S. audiences and as we build into North America hosting the 2025 FIFA World Cup. That may be the “break out moment” for U.S. soccer and all of its arenas.