Apple's services bonanza 'sizzle, but little steak' at launch, needs more details says ana...

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in General Discussion
Analysts have started to issue their verdict on Monday's Apple event, with JP Morgan and Cowen believing the new offerings are generally a positive thing for the iPhone maker's Services business, but at the same time suggesting Apple could have gone a lot further in detailing what to expect with Apple TV+.

Apple CEO Tim Cook onstage announcing Apple Card
Apple CEO Tim Cook onstage announcing Apple Card


Apple's "It's show time" event covered a lot of ground, with the announcement of services including the Apple TV+ subscription, Apple Card, the Apple Arcade gaming subscription, and Apple News+ offered in quick succession at Apple Park's Steve Jobs Theater. Just as the services varied considerably, the investor notes are showing some areas are more welcomed by analysts than others.

The event "offered more breadth than investors expected, starts JP Morgan's note as seen by AppleInsider, "but at the same time it failed to offer the same depth that investors would have liked to see to position each category for success." While Apple TV+ offers "little value for users" outside of a subscription and content aggregation, the remainder of the list were considered to be favorable.

"'It's show time' had sizzle, but little steak" Cowen's investor note starts, again picking up on the "thin details" on Apple TV+ offered at the event. "We believe the market is somewhat underwhelmed by the new announcements, and note that the modestly negative stock reaction to the event follows a similar pattern to many hardware-focused events in the past."

Though it is not possible for Apple to "transform overnight into a Services story," Cowen hints this is "still the early innings in the Services growth narrative and in shifting market perspectives," and that Services remains a "long term investable theme."

Apple CEO Tim Cook and Oprah Winfrey
Apple CEO Tim Cook and Oprah Winfrey


On a per-subject basis, both sets of analysts are left unsatisfied by what was shown of Apple TV+, with Cowen claiming the announcement "leaves some questions unanswered" as the market wanted to see that it would directly compete with services like Netflix, something the presentation apparently did not suggest. While not competing directly, Apple is praised for "promoting artists and focusing on high-quality, original content," though while it could ave low operational margins by going for original content, Apple is still entering "an increasingly crowded space."

JP Morgan feels the announcement left investors "largely disappointed relative to expectations" Apple would become a strong video competitor. The aggregation, ability to sign up to individual subscription channels, and original content, "offers little value at this time other than offering one portal to access all existing subscriptions, while continuing to pay the same subscription fee for each service."

It is also though Apple "might be challenged in monetizing its own original content with users," due to its limited scope compared with Netflix, Amazon, and HBO.

Apple News+, the paid subscription for magazines, is favorable but with little improvement on what was offered by Texture. "We believe the new subscription offers limited incremental functionalities to the Texture app, which already allowed customers to access content from 200 leading magazines" JP Morgan suggests.




Cowen is more positive "from an ecosystem enhancement perspective" than as a revenue driver. While it could represent $0.10 in earnings per share for every 15 million news subscribers, it is thought that it could take some time for even this to be reached, with current speculation putting the audience at 9 million by 2021.

Cowen is waiting for pricing details before offering more opinions on Apple Arcade. As it stands, with mobile gaming revenue mostly gained through in-app transactions in free apps, it is suggested the potential user base for the service may skew "towards gamers with an inclination towards discovery and exploring new genres, with limited near-term EPS anticipated.

The gaming subscription "makes strategic sense," according to JP Morgan, considering the estimated 1 billion gaming customers already on the App Store, and continued expected strong growth for the gaming industry as a whole.

Lastly, Apple Card is thought by Cowen to provide tangential benefits in bringing payments in-house and accelerating Apple Pay adoption, rather than any direct revenue contributions from the service initially.

The consumer benefits could trigger significant adoption according to JP Morgan, including its absence of fees and daily cash rewards. "The introduction of Apple Card will allow the firm to leverage the growing adoption of Apple Pay and capture a greater portion of fees in the payment ecosystem," the investor note states.
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Comments

  • Reply 1 of 21
    Of all the presentation, I thought the Apple Card stands out the most. Especially the app that goes with it outdoes other credit card apps that I am using.
    StrangeDayspscooter63watto_cobra
  • Reply 2 of 21
    I also thought the Apple Card portion of the presentation was the most interesting. I feel like, based on the rewards, this is meant to drive adoption of Apple Pay usage which is completely understandable.  However, I also wonder how long it will take to get “normals” to sign up for an Apple Card and start using Apple Pay. It seems to me like Apple Pay is used fairly often by people who know about it and have set it up. The flip side of that is all the people who haven’t set it up or had it set up for them when they got their iPhone 6 and then promptly forgot about it.  Those are the people that “need” to start using Apple Pay in order to see an increase in usage. Apple introducing their own credit card probably isn’t something that will be noticed by the people in the not-using-Apple-Pay camp. 
    watto_cobra
  • Reply 3 of 21
    dewmedewme Posts: 2,099member
    As disappointed as I was not to see some cool new gadgets unveiled at Monday's event I totally understand where Apple is coming from and why they need to continue to push more heavily into services. Any negative perceptions that I have are totally on me. Apple's commitment to serving its huge customer base requires that they find new ways to offer new products and services for sale to those customers without asking them to pony up $200 bucks for a new accessory, $1000 bucks for a new iDevice, or $3000 bucks for a new Mac. They need to gain some advantage from having their huge customer base and rich ecosystem - without resorting to selling out their customers by turning them into the product like so many other companies have done. I'd rather pay for a service than be told that I'm getting it for free (or at great subsidy) only to have my personal data and information served up like raw meat to a pack of hungry advertisers and marketeers.

    Everything Apple does is about increasing the reasons for customers, partners, and stakeholders to stay within the Apple ecosystem. They also strive to keep the provider-customer relationship honest and above-board and protect you from becoming the product. As long as that relationship is preserved and as long as you feel like your investment in being inside the Apple ecosystem is worth what you're paying to play, everything is good. If you no longer want to be a customer inside Apple's ecosystem, you are free to leave and do so without leaving any of your personal data and information behind for further harvesting.    
    watto_cobra
  • Reply 4 of 21
    I also thought the Apple Card portion of the presentation was the most interesting. I feel like, based on the rewards, this is meant to drive adoption of Apple Pay usage which is completely understandable.  However, I also wonder how long it will take to get “normals” to sign up for an Apple Card and start using Apple Pay. It seems to me like Apple Pay is used fairly often by people who know about it and have set it up. The flip side of that is all the people who haven’t set it up or had it set up for them when they got their iPhone 6 and then promptly forgot about it.  Those are the people that “need” to start using Apple Pay in order to see an increase in usage. Apple introducing their own credit card probably isn’t something that will be noticed by the people in the not-using-Apple-Pay camp. 
    I don’t know about them not knowing. I have a hunch Apple will be marketing this card heavily on and off the platform. The wiping of fees will be a huge draw!  
    watto_cobra
  • Reply 5 of 21
    seankillseankill Posts: 477member
    I am interested in the Apple card. Sad the 2% only applies to Apple Pay though. 

    How many places take Apple Pay? I find it’s so hit and miss, I just go for my credit card rather than bother looking whether or not they take Apple Pay. Further, at sit down restaurants, forget it. Credit card every time. 

    I do use it a lot at chick fil a 
    edited March 26
  • Reply 6 of 21
    genovelle said:
    I also thought the Apple Card portion of the presentation was the most interesting. I feel like, based on the rewards, this is meant to drive adoption of Apple Pay usage which is completely understandable.  However, I also wonder how long it will take to get “normals” to sign up for an Apple Card and start using Apple Pay. It seems to me like Apple Pay is used fairly often by people who know about it and have set it up. The flip side of that is all the people who haven’t set it up or had it set up for them when they got their iPhone 6 and then promptly forgot about it.  Those are the people that “need” to start using Apple Pay in order to see an increase in usage. Apple introducing their own credit card probably isn’t something that will be noticed by the people in the not-using-Apple-Pay camp. 
    I don’t know about them not knowing. I have a hunch Apple will be marketing this card heavily on and off the platform. The wiping of fees will be a huge draw!  
    I hope you’re right but it will take a lot of effort on Apple’s part.  More effort than they’ve put into pushing Apple Pay so far. Many people are change averse. Getting them to use Apple Pay with an existing card is already a challenge. Having them sign up for Apple Card AND start using Apple Pay will be harder.

    Do you know people that have an iPhone or Apple Watch that have no idea they can use them to make payments? I know plenty and Apple Pay has been a thing for 5 years. 
  • Reply 7 of 21
    ElCapitanElCapitan Posts: 223member
    The most disappointing is when Apple calls for an international launch, but in reality only launch products and services applicable/available to the US market, it feels like being invited to a birthday party and being denied the cake

    Unless they set themselves up for global delivery to their global customer base, backfilling slumping coffers caused by decreasing hardware sales and market saturation will be very difficult. Granted, most of these non US markets will be more sensitive to services pricing. 
    edited March 26 elijahg
  • Reply 8 of 21
    seankill said:
    I am interested in the Apple card. Sad the 2% only applies to Apple Pay though. 

    How many places take Apple Pay? I find it’s so hit and miss, I just go for my credit card rather than bother looking whether or not they take Apple Pay. Further, at side down restaurants, forget it. Credit card every time. 
    I live in a small-ish suburb. Our “biggest” stores are CVS, Rite Aid and McDonald’s. In my small town I use Apple Pay at the places we go to the most: the grocery store, the convenience store, the dry cleaner, the pharmacy, the farm stand, the pizza joint, the ice cream shop and even our local breakfast/lunch diner. Most of those places are within 1/2 a mile of each other. 

    I’m with you, though, I wish more restaurants accepted it. Or at least, made it an option. For all I know the server is taking my card to an NFC capable POS terminal. 

    I do wonder how many of the places that have a chip reader but don’t accept NFC payments simply don’t have the NFC on for whatever reason. 


    edited March 26 StrangeDayswatto_cobra
  • Reply 9 of 21
    Not sure what the investor complaint about the video services is really getting at. Amazon just lumped their own original content into Prime and then jacked up the Prime prices. That's an even less direct way of competing with Netflix than what Apple is doing. Amazon obviously didn't have much confidence that people would pay for it separately.
    retrogustopscooter63
  • Reply 10 of 21
    FolioFolio Posts: 567member
    Better than I expected, despite the celebs. Analyst mistaken in that Texture app was previously 100 percent "dead" PDF. Lively Apple News Format already embraced by good portion, starts to bring mag database into 21st Cent. Initial alliance w Goldman disruptive enough for a good start. Arcade wonderful concept, if practical. New Oprah Book Club if a third the influence still immense. Immigrant stories freshest sounding content. Edit: celebs useful in proving newcomer Apple an instant huge force in industry
  • Reply 11 of 21
    They showed a lot of people that had made amazing things in the past but not one show was "must watch". If you were to look at all the new content on NetFlix, HBO and Apple TV+ and then pick one premium service, I doubt it would be Apple's. Apple can probably kick Amazon's butt except that Amazon's service is bundled with Prime deliveries, music and a bunch of other services for one reasonable price.
  • Reply 12 of 21
    gatorguygatorguy Posts: 20,755member
    They showed a lot of people that had made amazing things in the past but not one show was "must watch". If you were to look at all the new content on NetFlix, HBO and Apple TV+ and then pick one premium service, I doubt it would be Apple's. Apple can probably kick Amazon's butt except that Amazon's service is bundled with Prime deliveries, music and a bunch of other services for one reasonable price.
    I have Amazon Prime for the free shipping and anything else is a bonus.

    With video for instance I rarely use Amazon, but the Amazing Miss Maisel is VERY good. Great actually. Not enough to make me want to subscribe for that show alone nor the few other instances where Amazon Video is the go-to, but enough to satisfy me that the small bump (less than $2/mo) in the annual Prime membership is still a great value.
  • Reply 13 of 21
    FolioFolio Posts: 567member
    Agree Amazon some compelling content, and Apple justly highlighted Mrs Maisel in presentation. Free shipping is all but generic now in US and even conditional with Prime. But Amazon content and ease justifies the yearly fee for me. Glad to see Apple emphasize downloading capabilities, as Amazon.
  • Reply 14 of 21
    Not sure what the investor complaint about the video services is really getting at. Amazon just lumped their own original content into Prime and then jacked up the Prime prices. That's an even less direct way of competing with Netflix than what Apple is doing. Amazon obviously didn't have much confidence that people would pay for it separately.
    Excellent point. Apple doesn’t have to charge anything for it to be a worthwhile investment if they use it to generally reinforce the ecosystem, but they could also bundle together multiple services, like Music and Plus, etc. The fact that they will be offering it on non-Apple devices makes me think that they will probably charge something, but of course it would have to be very cheap or bundled with a lot of other stuff to look reasonable compared with the other services and their enormous libraries. 
  • Reply 15 of 21
    FatmanFatman Posts: 300member
    This is just the start - I believe once it gains momentum, other content providers will not want to be left out and will jump on board The exceptions will be the market leaders, e.g. Netflix, Disney (who owns ESPN). In a couple of years many will opt to buy the AppleTV Channels and Plus accounts and simply add one (or two) others, such as Netflix to fill the void. Hopefully it will do way with the dozens of disparate apps for each channel/network that exists today.
  • Reply 16 of 21
    StrangeDaysStrangeDays Posts: 8,006member
    seankill said:
    I am interested in the Apple card. Sad the 2% only applies to Apple Pay though. 

    How many places take Apple Pay? I find it’s so hit and miss, I just go for my credit card rather than bother looking whether or not they take Apple Pay. Further, at sit down restaurants, forget it. Credit card every time. 

    I do use it a lot at chick fil a 
    Businesses don’t need to take AP, they need to have modern POS terminals that can do NFC tap to pay. More and more of retail does. A few refuse. AP will work on any NFC POST (CVS had disabled it out of spite but is done with that nonsense now). 

    Once America has fully embraced change and uses NFC the question will be moot. All my grocers, and pharmacies do, local and national.
    edited March 26 watto_cobra
  • Reply 17 of 21
    StrangeDaysStrangeDays Posts: 8,006member

    ElCapitan said:
    The most disappointing is when Apple calls for an international launch, but in reality only launch products and services applicable/available to the US market, it feels like being invited to a birthday party and being denied the cake

    Unless they set themselves up for global delivery to their global customer base, backfilling slumping coffers caused by decreasing hardware sales and market saturation will be very difficult. Granted, most of these non US markets will be more sensitive to services pricing. 
    As usual, it’s not Apple’s issue at play. Media companies have region specific licensing agreements. Blame them. 
    watto_cobra
  • Reply 18 of 21
    slurpyslurpy Posts: 5,154member
    Eh, these analysts can go fuck themselves. Can't remember a single time where they showed any kind of insight, and history shows them to be wrong much more often than not. But hey, they get paid big bucks to spout nonsense, so what do I know. 
    watto_cobra
  • Reply 19 of 21
    kruegdudekruegdude Posts: 340member
    seankill said:
    I am interested in the Apple card. Sad the 2% only applies to Apple Pay though. 

    How many places take Apple Pay? I find it’s so hit and miss, I just go for my credit card rather than bother looking whether or not they take Apple Pay. Further, at sit down restaurants, forget it. Credit card every time. 

    I do use it a lot at chick fil a 
    I’m just the opposite. I look for the NFC payment indicator and try it if it’s there. If it’s not there I ask if they take it. Im getting a surprisingly increased number of people telling me they do take it. I even called the owner of our local Chevron station when the clerk and I couldn’t get it to work at the pump. He says he’s been bugging Chevron to get their software updated so it’ll work. I even helped a local small shop owner get it working and tested on her POS system.  Note, I live in east Texas, not a bastion of high tech but there’s a lot of places taking it now. 
    watto_cobra
  • Reply 20 of 21
    Just maybe..... when Apple TV+ is released it will be a bundle that’s why they have been so vague about the details now.
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