Apple (AAPL  ) had its Product Day, and it announced a slew of new products. However, it disappointed some who were hoping for the unveiling of the iPhone 12.

Some of the major reveals were the Apple Watch 6, Apple Watch SE, iPad 8, a new iPad Air, Fitness+ Workout Services, and the Apple One Services Bundle. It also unveiled iOS 14, the newest iPhone operating system which includes new security features, widgets, and different ways to organize the home screen.

Services Bundle

While most of the product announcements were simply updated versions of existing products, the Apple One Services Bundle is probably the most meaningful new product announcement. It packages Apple Music, Apple News+, Apple TV+, and Apple Cloud together.

It has an individual tier for $14.95, a family subscription for $19.95, and a premium version that also includes Fitness+ and Apple News + for $29.95 a month. Fitness+ is a new product designed to stream exercise classes which in some ways makes it a Peloton (PTON  ) competitor. The Fitness+ syncs with an Apple Watch that displays real-time biofeedback.

It continues Apple's focus on diversifying its revenue stream away from physical products to higher-margin, services that are deserving of a higher multiple. This successful pivot is in some ways responsible for its multiple expansion over the past 12 months.

Services Business is Apple's New Growth Driver

During this period, Apple's stock price is up more than 100%, while its earnings and revenue have been pretty flat. Analysts attribute it to the growth in its services business in addition to expectations that the 5G-enabled iPhone 12 will drive a massive upgrade cycle.

Apple's Services encompass Apple Pay, iTunes, Apple Cloud, Apple Music, and the App Store generated $13.4 billion in the last quarter. Analysts estimate that the unit would be worth $100 billion if it was spun out as an independent entity. In total, it has 515 million subscriptions.

People spend money on a device, laptop, or tablet once every couple of years. In contrast, these subscriptions are a source of recurring monthly revenue. Over time, there will be more pricing power as well.

Controversy

In a sense, the device gets people into the ecosystem to sell them higher-value items. The bundle will lead to more sales and more subscriptions.

Already, Spotify (SPOT  ) has cried foul, since it believes Apple is unfairly using its platform to favor its music service over its competitors. And, it's certainly reminiscent of Microsoft (MSFT  ) using its OS to push Internet Explorer on people.