This Is The Best Description Of How Apple's Business Works Right Now

Apple announced four new products this week - the iPhone 6, iPhone 6 Plus, Apple Pay, and the Apple Watch.

Of those new products, Piper Jaffray Apple analyst Gene Munster said, "Apple Pay was the most important announcement," and he sees, "Apple Pay as potentially the most important internet service introduced by Apple since iTunes."

However, he cautions Apple will not make money on Apple Pay, at least not in the near term. So, how can a service that makes no money be the most important thing Apple makes? Munster says in the long run "we believe that Apple intends to find specific ways to monetize each payment transaction on platform, which could be achieved through various efficiencies in the system."

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We're skeptical that Apple ever really develops Apple Pay into a cash gusher. It will likely always be in service of selling more iPhones. But, there's nothing wrong with that. Apple's whole business is selling iPhones.

Benedict Evans, an analyst at Andreessen Horowitz, was on a podcast talking about Apple's event and Apple Pay. On the podcast, he had the perfect description of Apple right now: "You could describe Apple as a sort of club where the price of membership is buying a new box every two years. And the benefits of being a member of the club keep expanding in terms of all these incremental services."

In Evans' example, the "box" is either an iPhone, an iPad, an Apple Watch, or a MacBook. In our view, the only "box" that really gets you the full benefits of membership is the iPhone, which Apple continuously improves.

It's a good way to think about Apple's business, because no matter what it does, the only business that matters is selling iPhones. Everything else is small, and in service of selling iPhones. But, that doesn't mean stuff like Apple Pay, or whatever else is coming, is trivial. It's all important, it all makes the subscription to Apple's world worth the ~$325 you pay per year.