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With any Silicon Valley-goes-to-China story, it’s easy to assume that the American hotshot is doomed to play a rigged game. Though elements of that narrative are true, it’s not always the whole story. In Apple’s case, other services, namely Apple Music and Apple Pay, have been allowed to continue to operate. But they are deeply unpopular. China’s native competitors have grown to fill every niche in which Apple has dabbled with more useful features, more local relevance, and therefore more users.
Though the whims of Beijing continue to pose a threat, the popular narrative of Big Government may have overshadowed a more fundamental challenge to Apple’s business. The Cupertino company hasn’t been a victim to regulation so much as a victim of its own failure of imagination.
With competition over smartphone sales growing more intense, in September 2015 Apple broadened its ecosystem of services by introducing Apple Music, iTunes Movies, and iBooks to China. Services are central to Apple’s business strategy. During this year’s first quarter earnings report, CEO Tim Cook said the company’s goal is to double its services revenue by the end of 2020. In addition to providing new revenue streams, services help cement iPhone owners’ loyalty.
But this time, the gambit didn’t work. A mere six months after their roll-out, Chinese regulators from the State Administration of Press, Publication, Radio, Film, and Television stepped in, and the company promptly shut down iTunes Movies and iBooks.
At the time, most news reporting focused on how China’s big government was stepping in to slow Apple’s momentum. The New York Times, for example, pointed out that both iTunes Movies and the iBooks Store had competed directly or indirectly with Chinese services such as Tencent Video and Youku Tudou for video and China Reading (Yuewen Group) for ebooks. Apple Music and Apple Pay seemed like they could be up next on the chopping block.
Yet Apple Music continues to straggle along. So does Apple Pay, the mobile payment and virtual wallet service that launched in China in February 2016. Neither has enjoyed success of the sort that might cause either Chinese competitors or the Chinese government to take much notice. (To be fair, though, neither iTunes Movies nor iBooks was a runaway hit, either.)
