Since the 1960s, as illustrated in Figure 1, there has been a significant shift within industrialised countries, such as the UK, towards a service-dominated economy (Schettkat & Yocarini, 2006). There are numerous theories for this shift, with William Baumol arguing that it is a result of the ‘technological stagnancy’ (Fourastié, 1949) of service production, with lagging productivity in the service sector driving up its share of workers, compared to the manufacturing sector.
Although my generation can only treat this service-dominated jobs market as the status quo, even in just the last few years, I have noticed subtle shifts towards services as a revenue stream. One example of this is the growing trend that sees more manufacturers move their business strategy towards selling services within their products. In the technology industry, major players such as Apple and IBM have taken this approach, having found that the price elasticity of demand for services is much less than for hardware (Targowski, 2010, p. 55).
Since 2015, Apple has aggressively marketed its Apple Music subscription service, which offers monthly subscribers the opportunity to listen to an unlimited number of songs for a fixed price. Apple’s traditional iTunes pay-per-download model costs the average consumer significantly more than streaming rivals such as Spotify (Quick and Dirty Tips, 2017), so along with many industry observers (Sawers, 2015), I found their new strategy to not be entirely surprising.
Although as a consumer, this new subscription-based revenue strategy seems like a better deal, my bank account, with four monthly subscription charges, tells a different story. With leading economies around the world now dominated by services, it seems as if even the world’s most valuable company can no longer rely on manufacturing-based revenue alone.