Why You Shouldn't Be Surprised at Apple Killing the Headphone Jack

By Markets Fool.com

Apple (NASDAQ: AAPL)held an unveiling of its iPhone 7 and 7 Plus earlier this month. Among other things, the company announced the removal of the headphone port, much to the chagrin of many.

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In this segment from Industry Focus: Tech, Motley Fool analyst Dylan Lewis and Fool contributor Evan Niu explain why Apple got rid of the jack, and why some of the criticisms against the company might not be completely fair.

A full transcript follows the video.

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This podcast was recorded on Sept. 16, 2016.

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Dylan Lewis: Given that the iPhone lineaccounts for about 60%of Apple's revenue -- it fluctuates quarter to quarter -- tech insiders and investors alike are eagerlyanticipating this unveilingand see what the next-generation device looks like. So,why don't we hop right in? What does the new line offer users?

Evan Niu:I think it's pretty modest and incremental. Every year, it's getting more and more incremental,just because smartphones are so good nowadaysthat it's hard to really make them that much better. The improvements a few years agoused to be so mind-blowing, that it's like, yeah,you have to upgrade if you care about it. But I'm actually skipping this yearfor the first time in eight years,which is weird for me,just because I don't think it's that compelling.

So far, theearly indications look pretty strong, in terms of...again, the lines at the stores,you have the carriers announcing a lot of good, strong activity. There'sa lot of positive sentiment right nowaround this device,even though it seems, in my opinion, a little incremental.I don't think the improvement's all that great.

Lewis:I think one of the biggest -- and probably got the most pressin terms of features or changes -- was the removal of the headphone jack. Definitely one of the more controversial elements of the new phone.Apple decided to shiftconsumers toward wireless connections usingBluetooth and things like that. And, of course,they're offering $159 AirPods to help ease that pain. But, the new phones will be shipping with a Lightning port adapter that will allow people to plug in their headphones. It seemed like the removal of the headphone jack was really something that enabled them to up the processing power, improve the battery life, make some camera improvements. It was a form-factordecision that help to them juice the gutsof the phone itself.

Niu:Yeah. It's just Apple's same thing ofidentifying that some technology standard is outdated. And the headphone jack is 100-plus years old. So, of all the standards they've killed in the past, this is one of the oldest ones. Arguably, it'skind of surprising that they haven't done it already. But every time they do this, they get a bunch of crap, and people don't like it. But the market always survives. And yeah,there's always these big ecosystems that are built around these ports of standard. But at the same time, they're the only company that does this, thatpushes the industry forward in this way,because all the other companies are too afraidto make these controversial decisions. This is not a new thing for Apple. They have done this for the past four years,and every time they do it it'scontroversial.

You can see both sides. Just likeevery other time they've done it, there's two sides. Everyone's like, "Hey,I want to still be able to use all my stuff." But then, if you lookforward into the trajectoryof audio connectivity, yeah,Bluetooth, like you mentioned,is getting a lot better, especially with Bluetooth low energy. It's justkind of like analog going to digital. The Lightning audio is a digital connection, versus the headphone jack, which is an analog connection. It's just one of those things that probably needs to happen eventually, and Apple is making the leap now. And there's even suggestions now,they actually just sent out a surveyto their users asking if peopleuse headphone jacks on their laptops. So they're obviously thinking aboutkilling it on the laptopeventually, which isn't surprising. But for people'scomputers, there are people who plug in their home audioand computer speakers in there too,in addition to headphones. It's an even bigger ecosystem ofdevices that you would have to try to transition somehow,versus on a smartphone. It's just headphones, versus speakers. It'spretty big change, it's one of the bigger ones.

Lewis:Yeah. To quote Apple, "Itdefinitely takes courage to make a decisionlike that." I know as someone with a nice set ofBose headphones that are not wireless...

Niu:Yeah, like these.

Lewis:Yeah. I'm going to need to use that adapter.Like I said, they will ship with the phones. One of the criticisms is that,unless you use a different type of adapter,you won't be able to charge and listen to music at the same time.

Dylan Lewis owns shares of Apple. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.