Apple's video service expected to launch at $15 per month, still needs healthy iPhone sale...

Posted:
in General Discussion edited February 18
While Apple's upcoming video service should still add a great deal to its bottom line, Apple needs both it, and future growth of iPhone sales going forward, according to one analyst.

Apple TV 4K


Even if Apple were to hit 250 million subscribers in 2023, that would likely represent just 5 percent of the company's expected revenue that year, said Jefferies' Tim O'Shea in a new investor memo seen by AppleInsider. The figure assumes a $15 monthly fee and a 30 percent cut from third-party content, putting video revenue at $13.5 billion.

Netflix has been streaming for over a decade and has some 139 million subscribers worldwide -- Apple would need to quickly bring its service global and go multi-platform, something it has been reluctant to do given its dependence on hardware sales.

The video market is also becoming a tough place to be successful in, O'Shea noted. Apple will have to compete not just with existing players like Netflix, Hulu, and Amazon, but other newcomers such as Disney+ and NBCUniversal. Most people will also only be able to afford a handful of services at best.

Apple is so far spending just a fraction of what Netflix does on original movies and TV shows, and if it does take a 30 percent cut, it will be hard to attract the studios and networks needed to fill in the content gap.

O'Shea did sound a positive note on Apple's services business in general, saying it's "big, real, and growing," and will get bigger over time.

The analyst didn't mention new product categories that could potentially replace iPhone revenue. The company is believed to be working on an augmented reality headset, and is known to be working on self-driving car technology, though whether it might sell a platform or a full-on vehicle is uncertain.

Apple is expected to reveal its video service at a March 25 press event alongside an Apple News subscription service, Apple News Magazines.
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Comments

  • Reply 1 of 35
    Apple may be late to the game, but will do it right. Can’t wait!
    stanhopelolliver
  • Reply 2 of 35
    jungmarkjungmark Posts: 6,646member
    Apple is dooomed unless it listens to these analysts. 
    AppleExposedGeorgeBMacchasm
  • Reply 3 of 35
    Not sure I'm following the logic here: Apple's huge revenue and profit from both hardware and services is somehow going to be a disadvantage when it comes to financing entertainment?
    ArloTimetravelerAppleExposedpscooter63lolliver
  • Reply 4 of 35
    peteopeteo Posts: 348member
    "The figure assumes a $15 monthly fee and a 30 percent cut, putting video revenue at $13.5 billion"

    HUH? apple is creating its own content, no 30% cut in that. Also they are doing contracts for licensing tv shows/movies that they do not create. You pay a dollar amount to these companies for this content and then add it your streaming service for a set amount of time. There is not a any kind of "cut" going on. Baffling how moronic these analysts can be.

    technoSoundJudgmentAppleExposedasdasdn2itivguylolliverbestkeptsecretelijahg
  • Reply 5 of 35
    lkrupplkrupp Posts: 6,687member
    jungmark said:
    Apple is dooomed unless it listens to these analysts. 
    Yep, over forty years now of ignoring analyst’s proclamations... and advice. Tech blogs have latched onto the latest, greatest talking point, Apple’s pricing structure and especially its 30% cut of services. You see this talking point in almost every single article about Apple these days. The push appears to be on to transform Apple into a low margin hardware huckster like everybody else in the game. 
    AppleExposedpscooter63n2itivguylolliverchasm
  • Reply 6 of 35
    technotechno Posts: 691member
    peteo said:
    "The figure assumes a $15 monthly fee and a 30 percent cut, putting video revenue at $13.5 billion"

    HUH? apple is creating its own content, no 30% cut in that. Also they are doing contracts for licensing tv shows/movies that they do not create. You pay a dollar amount to these companies for this content and then add it your streaming service for a set amount of time. There is not a any kind of "cut" going on. Baffling how moronic these analysts can be.

    I was trying to figure out what was wrong, cause it smelled like shit and you nailed it for me.
    AppleExposed
  • Reply 7 of 35
    technotechno Posts: 691member
    My question is: Will Apple announce this new service that is exciting and full of potential only to give it half-ass attention and let it linger in mediocrity for years until the "team" gets around to it again, as it tends to do with other things?
    Latkomuthuk_vanalingamAppleExposedn2itivguyflyingdpdavgregMetriacanthosaurus
  • Reply 8 of 35
    avon b7avon b7 Posts: 3,309member
    jungmark said:
    Apple is dooomed unless it listens to these analysts. 
    This particular analyst is using common sense. Most of what he said is obvious to most people.

    We just don't know which route Apple will take and until that information is available all we can do is speculate in a very general field.

    The easiest solution would be to produce content and sell it to content delivery services. Any unsold content could me made available direct to Apple users (free, or for a fee).

    Producing content and distributing it entails a far more complex operation and the decision to make it Apple only or multi platform. A multi platform solution would mean entering an already overcrowded space and probably provoke some level of consolidation.

    Somehow, a gaming option should be leveraged as a plus but would obviously require more financial outlay.

    Whatever happens, third party content is a must to fill the roster and tempt subscribers to even give the service a go. I'm assuming that some form of trial period is going to be involved. I'd like to see something like Amazon Video where the subscription is almost given away to some users (Prime subscribers). Perhaps included with every Apple device purchase.

    There are too many permutations on all of this so speculation is all there is, but much of it is based on what we already know from the industry and consumer budgets/habits.

    Netflix recently began offering its subscription as part of a carrier plan (Movistar, in Spain) so just by contracting a plan with Movistar you get Netflix thrown in.


  • Reply 9 of 35
    irelandireland Posts: 17,547member
    Not free? Apple and free, lol.

    The stock market is disgusting.
    edited February 18
  • Reply 10 of 35
    Apple may be expecting customer so of Netflix, HBO, etc... to drop one or more of those services in favor of Apple. I personally don't expect Apple to produce any entertainment which is not in the "G" rating category perhaps there edgier stuff will be PG - 13.
    elijahg
  • Reply 11 of 35
    crowleycrowley Posts: 5,733member
    peteo said:
    Also they are doing contracts for licensing tv shows/movies that they do not create. You pay a dollar amount to these companies for this content and then add it your streaming service for a set amount of time. There is not a any kind of "cut" going on.
    Is there no "per view" element to it at all?  Netflix et al just pay a fixed license fee?

    Asking out of ignorance.
  • Reply 12 of 35
    MacProMacPro Posts: 17,984member
    Being higher priced than Netflix is a surprise to me since Apple needs to win people over and also will be far behind in content for some time to come.  I was expecting a lower entry point that would rise over time as the service fleshed out.
    RonnnieO
  • Reply 13 of 35
    Please correct this misinformation.  You skimmed the article way too fast that you are posting . 

    They specifically said they weren't predicting a $15 a month subscription cost!  They were just using it as an example of how revenue, even at that high of a monthly cost, would still be a small portion of Apple's total revenue.
    pscooter63
  • Reply 14 of 35
    ThrashmanThrashman Posts: 13unconfirmed, member
    You guys worry too much - they have OPRAH!!!!


    AppleExposedCarnageMetriacanthosaurus
  • Reply 15 of 35
    tjwolftjwolf Posts: 251member
    What an utterly stup1d and misleading title!  There's absolutely zero evidence that Apple will introduce its service at $15/month.  The analyst being quoted in the piece specifically said that he's not suggesting Apple will introduce a $15/mo service - he was just using that figure in  his thought experiment in order to calculate how much revenue Apple would get if this (and 250m users) were true.
    elijahg
  • Reply 16 of 35
    250 million subscribers? On what planet?
    elijahgMetriacanthosaurus
  • Reply 17 of 35
    Let's see. $15 a month = $180 year.
    250,000,000 million subscribers x $180 = $45,000,000,000 or $45 billion in gross annual subscription revenue.

    Overall cost for content acquisition is estimated by the analyst at 70%? Why is that assumption considered realistic given that Apple has already begun paying to produce its own viedeo content?

    Also, hosting a video streaming service (will magazines and newspapers be packaged with this) isn't the same business as maintaining a store for apps, so why apply the
    latter's business model to the analysis?

     Apple could be developing a package quite unique to the streaming market with costs and revenues difficult to predict.


    lolliver
  • Reply 18 of 35
    AppleExposedAppleExposed Posts: 584unconfirmed, member
    Thrashman said:
    You guys worry too much - they have OPRAH!!!!


    You're always posting this.

    Are you being sarcastic? Oprah pulls in more viewers than anyone else I know.

    250 million subscribers? On what planet?

    It could be the seed of stock manipulation. If Apple pulls in just 100 million subscribers they're "doomed".
    lolliver
  • Reply 19 of 35
    gsrennie said:
    Let's see. $15 a month = $180 year.
    250,000,000 million subscribers x $180 = $45,000,000,000 or $45 billion in gross annual subscription revenue.

    Overall cost for content acquisition is estimated by the analyst at 70%? Why is that assumption considered realistic given that Apple has already begun paying to produce its own viedeo content?

    Also, hosting a video streaming service (will magazines and newspapers be packaged with this) isn't the same business as maintaining a store for apps, so why apply the
    latter's business model to the analysis?

     Apple could be developing a package quite unique to the streaming market with costs and revenues difficult to predict.


    Where are they getting 250 million subscribers? Netflix has been around for years and doesn’t have those numbers. Heck Apple Music isn’t anywhere close to that. 
    Metriacanthosaurus
  • Reply 20 of 35
    I don’t think Apple is doomed any more than any other company its size.  It has a wide range of products and services which are increasingly in demand.  Apple will continue to innovate and the rest will continue to copy. It would be great if Apple streams all the films in its library and does not follow the Netflix and Prime services which provide a couple of top films a month and a lot of make-weight titles.  Added to that should be top television programmes and series from around the world all of which would make a brilliant service which would trounce the current providers.  I’d pay for that, whereas I use my daughters’ subscriptions currently as I don’t find Netflix, Prime and Now TV to be worth the monthly subscription.
    AppleExposed
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