Amazon touts 100M Prime users as Apple quietly passes a quarter-billion paid subscriptions...

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in iPod + iTunes + AppleTV edited April 19
Apple now has a customer base of more than 250 million paid subscriptions across its Services offerings of Apple Music, iCloud and App Store continuing payments. Viewed against Amazon's recent announcement of 100 million Prime members, that figure is substantial. But Apple is also adding around 30 million new subscriptions every quarter.

Tim Cook talks Apple Music
Tim Cook touts Apple's rapidly growing subscription services

Apple primes the subscription pump

In February, Apple's chief executive Tim Cook noted App Annie data showing that its iOS App Store "continues to be the preferred destination for customer purchases by a very wide margin, generating nearly twice the revenue of Google Play."

That's easily true worldwide, given that Google Play doesn't even materially participate in China, the world's largest market for mobile software. In the U.S., recent data from Sensor Tower showed that Apple has a wide lead over Google in the revenue it gets per average user, which includes downloads, In-App Purchases and ongoing subscriptions.

2017 US App Store revenue per person from Sensor Tower


Of course, Apple's business model differs dramatically from its competitors. Apple alone is generating massive yet sustainable, ongoing revenues from sales of premium mobile hardware. That's an area where Google has failed despite years of struggling and where other contenders have simply given up, notably Microsoft's ill-fated Windows Mobile, Facebook's various phone flops and the total meltdown of Amazon's expensive Fire Phone project.

Yet while Apple is raking in virtually all of the profits in the global smartphone industry--despite phony reports by Nikkei and from the Wall Street Journal about the supposed "failure and disappointment" of iPhone X which alone gobbled up more than a third of all the money made in selling phones of any kind--it's also beating everyone in the surrounding ecosystem of software and services as well.

That's historically unprecedented. Apple has long managed to finagle profits from premium hardware while its rivals struggled to profit from PCs, MP3 players, phones, tablets and watches. But back in the early days of the Mac, Apple's software efforts were no match for Adobe, Microsoft and other major developers.

Apple's iTunes powerhouse driving content for iPods was largely run as a break-even effort, and the App Store was similarly viewed as a way to foster innovative, creative software titles for iOS devices rather than being a cash cow. Other ecosystem rivals struggled to compete against iTunes and the App Store, with Microsoft throwing in the towel on Zune Marketplace and Samsung giving up on Milk Music, for example.

Yet over the past few years, Apple has converted its Services businesses from a way to culture curated content into a cornucopia of cash creation. Ongoing first and third-party subscriptions are key to that shift.

An Apple a day keeps the servers OK

Apple's first hand subscription offerings, notably Apple Music and iCloud, are not merely speculative stabs at creating a customer base to later monetize in the future somehow, but are (like iTunes and the App Store) already self-supported enterprises that fund their own expensive growth of server farms and the inherent expenses of paying royalties to artists and lighting up and cooling down global data centers with clean energy.

There isn't much room for profit margins in just selling streaming music subscriptions, as is seen in the failure of Spotify to generate an operating profit. Yet Apple's size and scale of subscribers will enable it to exist even as Spotify struggles to fund its own expansion.

Apple Data Center
Building and maintaining global data services infrastructure is very expensive


Additionally, Apple also obviously has side businesses that Spotify lacks: Apple Music drives sales of iOS devices, AirPods and the new HomePod (regardless of whatever phony media narrative Bloomberg can invent about its supposed "failure and disappointment" as a product and assumptions derived from supply channel rumors). Spotify's own speaker remains vaporware, and there's little potential for pulling material licensing revenue out of third-party Spotify-connected speakers.

Amazon's Alexa platform is similarly hailed as a rival to Siri, HomeKit, HomePod and so on, but Alexa doesn't generate significant direct revenues. Apple's Siri-powered devices actually do, in addition to creating a much larger platform that adds value to other products Apple sells (and which Amazon lacks, such as a smartphone). Amazon is currently selling a series of loss leaders that direct to sales of other loss leaders, sort of like the SNL First CityWide Change Bank that comically claimed to make its money "in volume."

250 million subscribers, paying Apple

Apple doesn't have a quarter-billion subscribers to its own Services; many of its subscribers signed up through the App Store are for games, services and content feeds that pay Apple a cut for merchandising and facilitating their subscriptions, the same model that supported iOS app development.

Apple Services revenue 2014-2018
Apple's growing Services revenues


Facile advice that Apple "should have acquired" Spotify or Netflix fails to grasp that Apple instead built a platform for selling subscriptions that allows it to materially benefit from the shared success of those services when set up through its devices. Subscriptions made through Apple support the operations of its Services and the growth of its required infrastructure.

Apple's subscriber numbers are growing rapidly. In November, Apple announced fiscal Q4 2017 results that included "210 million [subscriptions] at the end of the September quarter, an increase of 25 million in the last 90 days.""The number of paid subscriptions across our services offerings passed 240 million by the end of the December quarter. That's an increase of 30 million in the last 90 days alone, which is the largest quarterly growth ever" - Tim Cook

Three months later, Cook called out even faster growth. "The number of paid subscriptions across our services offerings passed 240 million by the end of the December quarter," he stated. "That's an increase of 30 million in the last 90 days alone, which is the largest quarterly growth ever."

Apple is set to announce Q2 results at the beginning of May. It can be expected that total subscriptions have already 260 million, and could easily surpass 300 million well before the end of 2018.

Amazon's 100 million Prime subscribers pay between $49 and $99 per year, which is less than an Apple Music subscription or most iCloud tiers, but more than Apple's cut for facilitating most third party subscriptions. However, Amazon also pays out more in benefits such as free shipping and content streaming royalties, making Prime hardly a cash cow on its own, and more of a way to encourage loyalty among shoppers.

Those 100 million Prime accounts likely represent even more users, as many families share a single Prime Account. However, as impressive as Amazon's reach is among consumers, it's also useful to acknowledge that Apple's subscription business is much larger in count, in clout, in commercial value, in scope globally across more countries and languages and is growing considerably faster. Amazon Prime launched in 2005, 13 years ago. Apple subscriptions are just getting started.

The speed of which Apple Music has grown paints an picture of how fast Apple could similarly roll out a subscription video and film service, subscription news services as we reported a month ago at the acquisition of Texture, and potentially even paid social networking and sharing services to rival the surveillance adware-supported model of Facebook.

Additionally, Apple Pay and its integration with a growing number of transit operators effectively expands the potential for Apple to act as a subscription payment processor for an expanding number of transactions outside of its current successes in mobile software and content streaming.
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Comments

  • Reply 1 of 30
    I think this statement: 

    Amazon's 100 million Prime subscribers pay between $49 and $99 per month
    should be

    Amazon's 100 million Prime subscribers pay between $49 and $99 per year.
    edited April 19 airnerdjbdragonbshankpscooter631983
  • Reply 2 of 30
    2old4fun2old4fun Posts: 189member
    " to culture curated content into a cornucopia of cash creation." Excellent command of the English language. I like writing that makes me smile!
    jdgaz1983baconstangwatto_cobra
  • Reply 3 of 30
    mbenz1962 said:
    I think this statement: 

    Amazon's 100 million Prime subscribers pay between $49 and $99 per month
    should be: 

    Amazon's 100 million Prime subscribers pay between $49 and $99 per year.
    Yes, thanks for catching that.
    watto_cobra
  • Reply 4 of 30
    lkrupplkrupp Posts: 5,874member
    The people running Apple are competent. The company is in good hands. I have some AAPL in my IRA and those dividend deposits are welcome.
    bshankchasmjony0watto_cobra
  • Reply 5 of 30
    rufworkrufwork Posts: 123member
    [That 250 mil includes this and that...] and App Store continuing payments.

    Oh, DED. Of course if you include every freaking HBO, Showtime, MLB, Overcast, NY Times... subscription, Apple has more than Amazon. 

    But those aren’t Apple’s subscriptions. They get a cut, and that’s great for my AAPL, but let’s not compare Apple’s apples to Whole Foods’ oranges.

    (◔_◔)

    edited April 19 singularitylarryaelectrosoft
  • Reply 6 of 30
    adm1adm1 Posts: 752member
    I'm shocked amazon's prime subscriber base is only just hitting 100m, I assumed it was far higher given it offers much more than just films and tv series. Incidentally, I see Netflix "only" has 125m subscribers worldwide too, maybe I was assuming more people had these services given the popularity among people I know/work with/speak to/friends & family etc. etc. and the amount of countries they are available in.
    jbdragon
  • Reply 7 of 30
    SpamSandwichSpamSandwich Posts: 29,058member
    adm1 said:
    I'm shocked amazon's prime subscriber base is only just hitting 100m, I assumed it was far higher given it offers much more than just films and tv series. Incidentally, I see Netflix "only" has 125m subscribers worldwide too, maybe I was assuming more people had these services given the popularity among people I know/work with/speak to/friends & family etc. etc. and the amount of countries they are available in.
    And Netflix is spending billions of dollars a year on original content... BILLIONS!
    jbdragonwatto_cobra
  • Reply 8 of 30
    adm1 said:
    I'm shocked amazon's prime subscriber base is only just hitting 100m, I assumed it was far higher given it offers much more than just films and tv series. Incidentally, I see Netflix "only" has 125m subscribers worldwide too, maybe I was assuming more people had these services given the popularity among people I know/work with/speak to/friends & family etc. etc. and the amount of countries they are available in.
    From what I can gather, full Prime is not available in many countries. Prime Video is available in more but the content is fairly limited. I'm about to drop my limited Netflix sub and will give Prime Video a go but I don't have high hopes. Illegal streaming/P2P still seems to be the most viable option in many countries when you literally cannot pay for the content you want.
  • Reply 9 of 30
    rogifan_newrogifan_new Posts: 2,715member
    rufwork said:
    [That 250 mil includes this and that...] and App Store continuing payments.

    Oh, DED. Of course if you include every freaking HBO, Showtime, MLB, Overcast, NY Times... subscription, Apple has more than Amazon. 

    But those aren’t Apple’s subscriptions. They get a cut, and that’s great for my AAPL, but let’s not compare Apple’s apples to Whole Foods’ oranges.

    (◔_◔)

    Of course DED would use an Amazon shareholder letter to spin up a positive article on Apple and how Apple > Amazon.  Let’s see if he writes a feature/editorial around AAPL shares being down 2% pre-market with TSMC offering weak guidance attributing it to softening demand in the premium smartphone market.
    edited April 19 muthuk_vanalingam1983
  • Reply 10 of 30
    adm1 said:
    I'm shocked amazon's prime subscriber base is only just hitting 100m, I assumed it was far higher given it offers much more than just films and tv series. Incidentally, I see Netflix "only" has 125m subscribers worldwide too, maybe I was assuming more people had these services given the popularity among people I know/work with/speak to/friends & family etc. etc. and the amount of countries they are available in.
    And Netflix is spending billions of dollars a year on original content... BILLIONS!
    Netflix is surely spending billions of dollars on content and not every series or movie is a hit, but it doesn't matter to Wall Street. All Wall Street is concerned with for Netflix is subscriber growth and as long as Netflix has that the stock will remain highly valued. I don't know what Apple needs to get even a P/E of 20. Sell tens of millions of more iPhones every quarter? Another thing with Netflix is that subscribers can quit at any time. It's not even as though they're tied in for longer than a month.

    Where's this huge moat for Netflix that Wall Street thinks can't be breached by any other video streaming company? I have never bothered to take Netflix trial offer over the years because I've no reason to do so. I have an Amazon Prime subscription and it offers plenty of video options for me. There's only so much I can watch on a daily basis and I simply don't need any more, especially during the summer months. Apple is the only company that seems to remain on the doomed list while all the FANG stocks are said to have unlimited growth potential. Why isn't Apple able to do anything about their situation considering they have so much more money to spend than rivals? Bezos makes an announcement and Amazon stock soars. That never happens to Apple. Only doom and gloom reports for Apple to make the stock sink.  Why can't Apple get a video streaming service if there's that much low-hanging fruit for Netflix's UNLIMITED growth?  It's so annoying Apple can't take advantage of that.
    edited April 19 StrangeDaysLukeCage
  • Reply 11 of 30
    avon b7avon b7 Posts: 2,097member
    mbenz1962 said:
    I think this statement: 

    Amazon's 100 million Prime subscribers pay between $49 and $99 per month
    should be: 

    Amazon's 100 million Prime subscribers pay between $49 and $99 per year.
    And the amount is incorrect. My annual Prime subscription (including Prime Video) cost 20€ (renewed in December).

    My mother complained when her subscription tripled with the obligatory inclusion of Prime Video a few years ago. She told me she would cancel the subscription and use a relative to continue Prime delivery. I wonder how many subscribers they lost as a result of that move.

    That said, I'm a very happy Prime subscriber  (in a different country) and very happy with Amazon overall.

    For Apple, the sale of services and subscriptions gets harder as sales flatten out (which has been basically true for a few years now) and subscriptions increase. I imagine new app purchases tail off as iDevices get older. There will be a point where growth will also slow as a result of 'peak' services and subscriptions. 

    There are three Apple IDs at home, none of which have paid subscriptions.

    As far as Netflix is concerned, I think  it was a mistake not to snap them up when they were bite-sized if Apple already had a defined video content creator roadmap. It would have taken a now formidable competitor out of the game and given it leveraging power, content rights and tentacles into many areas.

    This is in hindsight though. Perhaps they simply didn't have such a roadmap when Netflix started making a name for itself but this isn't my area.
    edited April 19 muthuk_vanalingam1983
  • Reply 12 of 30
    sirlance99sirlance99 Posts: 1,077member
    rufwork said:
    [That 250 mil includes this and that...] and App Store continuing payments.

    Oh, DED. Of course if you include every freaking HBO, Showtime, MLB, Overcast, NY Times... subscription, Apple has more than Amazon. 

    But those aren’t Apple’s subscriptions. They get a cut, and that’s great for my AAPL, but let’s not compare Apple’s apples to Whole Foods’ oranges.

    (◔_◔)

    Of course DED would use an Amazon shareholder letter to spin up a positive article on Apple and how Apple > Amazon.  Let’s see if he writes a feature/editorial around AAPL shares being down 2% pre-market with TSMC offering weak guidance attributing it to softening demand in the premium smartphone market.
    Or when Amazon passes Apple in market cap. The way Amazon is growing is astonishing. 
  • Reply 13 of 30
    netmagenetmage Posts: 172member
    avon b7 said:
    For Apple, the sale of services and subscriptions gets harder as sales flatten out (which has been basically true for a few years now) and subscriptions increase. IimaginI  new app purchases tail off as iDevices get older. There will be a point where growth will also slow as a result of 'peak' services and subscriptions. 
    Except that isn’t what has happened in the last two quarters - instead they have grown subscribers and growth rate and the fact that Apple App Store customers still hugely exceed Google Play Store purchasing implies it isn’t happening there either. 
    watto_cobra
  • Reply 14 of 30
    lkrupplkrupp Posts: 5,874member
    rufwork said:
    [That 250 mil includes this and that...] and App Store continuing payments.

    Oh, DED. Of course if you include every freaking HBO, Showtime, MLB, Overcast, NY Times... subscription, Apple has more than Amazon. 

    But those aren’t Apple’s subscriptions. They get a cut, and that’s great for my AAPL, but let’s not compare Apple’s apples to Whole Foods’ oranges.

    (◔_◔)

    Of course DED would use an Amazon shareholder letter to spin up a positive article on Apple and how Apple > Amazon.  Let’s see if he writes a feature/editorial around AAPL shares being down 2% pre-market with TSMC offering weak guidance attributing it to softening demand in the premium smartphone market.
    Or when Amazon passes Apple in market cap. The way Amazon is growing is astonishing. 
    For every DED article expressing a positive spin attitude about Apple there are hundreds of gloom and doom screeds by negative spinmeisters. Why do you not object to those? Because Daniel Dilger writes very well his I see his articles showing up on tech news aggregators these days. That he writes positively about Apple and that upsets you is telling. Now tell us where you can find an objective and balanced article about Apple anywhere. Apparently you are now in the Apple doomsday cult and anything positive about the company is drivel, right? 
    StrangeDaysapplepieguywatto_cobra
  • Reply 15 of 30
    avon b7avon b7 Posts: 2,097member
    netmage said:
    avon b7 said:
    For Apple, the sale of services and subscriptions gets harder as sales flatten out (which has been basically true for a few years now) and subscriptions increase. IimaginI  new app purchases tail off as iDevices get older. There will be a point where growth will also slow as a result of 'peak' services and subscriptions. 
    Except that isn’t what has happened in the last two quarters - instead they have grown subscribers and growth rate and the fact that Apple App Store customers still hugely exceed Google Play Store purchasing implies it isn’t happening there either. 
    That was my entire point. Is there 'peak' on the horizon in the relatively near future if sales remain flat?
    muthuk_vanalingam
  • Reply 16 of 30
    rufwork said:
    [That 250 mil includes this and that...] and App Store continuing payments.

    Oh, DED. Of course if you include every freaking HBO, Showtime, MLB, Overcast, NY Times... subscription, Apple has more than Amazon. 

    But those aren’t Apple’s subscriptions. They get a cut, and that’s great for my AAPL, but let’s not compare Apple’s apples to Whole Foods’ oranges.

    (◔_◔)

    The comparison isn't a pissing match. The fact is that 100M paying subscribers is a significant accomplishment for Amazon, and it is similarly important to understand that Apple already has +250M paid subscriptions that it is making money on.

    Amazon's Prime memberships are not pure profit. It's not selling a software license, it's providing a range of shipping/streaming services and other perks that cost money to deliver. Apple Music and iCloud both also involve expenses to serve. 

    But what you take the most issue with is Apple's subscription cut from app and service partners, which is much closer to being pure profit for Apple. It goes directly into subsidizing the rest of Apple's Services business, infrastructure and merchandising in the App Store. And somehow you think that is less significant than a Prime membership? Please explain your logic! 

    Also, Prime is a single fee commonly stretched across individuals, such as a household. An individual user may have several paid subscriptions in the App Store: Apple Music, iCloud, HBO, Netflix etc. In fact, if you're a subscriber of one you're more likely to be a subscriber to other Apple-sold services as well. And many family members either buy a shared family membership to Apple Music or have their own. So Apple's subscriptions are more valuable, stacked higher and cross-sell each other. And Apple is selling 2.5x as many, most of which probably return higher margins than the Prime fee.

    Again, on what planet is it "better" that Amazon sells fewer Prime versus Apple's multiple subscriptions per person? 
    lkruppStrangeDayswatto_cobra
  • Reply 17 of 30

    Of course DED would use an Amazon shareholder letter to spin up a positive article on Apple and how Apple > Amazon.  Let’s see if he writes a feature/editorial around AAPL shares being down 2% pre-market with TSMC offering weak guidance attributing it to softening demand in the premium smartphone market.
    Are you just never embarrassed to post the stuff you endlessly shovel at me? 

    Also, I have never written Motley Fool style articles offering to explain daily stock price changes. That would be a fool's errand.

    Also your "AAPL shares being down 2% pre-market with TSMC offering weak guidance attributing it to softening demand in the premium smartphone market" is directly ripped from a headline by 9to5 paraphrasing the genius work at CNBC repeating the total BS that iPhone X is a great disappointment and that somebody somewhere cut orders. 

    There are so many sites on the internet offering to dribble out total garbage that's obviously bullshit. Why do you want AI to be another one?
    lkruppStrangeDaysjcs2305pscooter63bestkeptsecretbaconstangapplepieguywatto_cobra
  • Reply 18 of 30
    d70macd70mac Posts: 5member
    Concerning TSMC...

    Tim Cook has said on multiple occasions that trying to divine how Apple is doing by reacting to supply chain rumors and analysis is a fool’s errand. (my words)

    StrangeDayswatto_cobra
  • Reply 19 of 30
    larryalarrya Posts: 484member
    rufwork said:
    [That 250 mil includes this and that...] and App Store continuing payments.

    Oh, DED. Of course if you include every freaking HBO, Showtime, MLB, Overcast, NY Times... subscription, Apple has more than Amazon. 

    But those aren’t Apple’s subscriptions. They get a cut, and that’s great for my AAPL, but let’s not compare Apple’s apples to Whole Foods’ oranges.

    (◔_◔)

    The comparison isn't a pissing match. The fact is that 100M paying subscribers is a significant accomplishment for Amazon, and it is similarly important to understand that Apple already has +250M paid subscriptions that it is making money on.

    Amazon's Prime memberships are not pure profit. It's not selling a software license, it's providing a range of shipping/streaming services and other perks that cost money to deliver. Apple Music and iCloud both also involve expenses to serve. 

    But what you take the most issue with is Apple's subscription cut from app and service partners, which is much closer to being pure profit for Apple. It goes directly into subsidizing the rest of Apple's Services business, infrastructure and merchandising in the App Store. And somehow you think that is less significant than a Prime membership? Please explain your logic! 

    Also, Prime is a single fee commonly stretched across individuals, such as a household. An individual user may have several paid subscriptions in the App Store: Apple Music, iCloud, HBO, Netflix etc. In fact, if you're a subscriber of one you're more likely to be a subscriber to other Apple-sold services as well. And many family members either buy a shared family membership to Apple Music or have their own. So Apple's subscriptions are more valuable, stacked higher and cross-sell each other. And Apple is selling 2.5x as many, most of which probably return higher margins than the Prime fee.

    Again, on what planet is it "better" that Amazon sells fewer Prime versus Apple's multiple subscriptions per person? 
    Daniel, it’s intellectually dishonest, that’s all. People who subscribe to HBO should be considered HBO subscribers, not Apple subscribers. If they moved to Android they would continue to be HBO subscribers.  My $14 annual subscription to Keeper that I didn’t realize I had until I got a statement is simply not the same thing as an Apple storage or music subscription, and you know that, yet you would count it.  By your logic, you should add a significant portion of Apple’s “subscribers” to Amazon’s, since Amazon hosts much of it on their servers. 
    muthuk_vanalingamsingularityrogifan_newelectrosoft
  • Reply 20 of 30
    mavemufcmavemufc Posts: 275member
    Wonder how this will climb once Apple starts rolling out the original content they have coming.
    watto_cobra
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