Apple's new subscription services may be off to a slower than expected start
Some analysts are raising concerns that Apple's 2019 slate of services are off to a slower start than originally anticipated, but how much that may impact Thursday's earnings isn't clear.
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In March 2019, Apple launched four new premium Services offerings: Apple TV+, Apple Arcade, Apple News+ and Apple Card. In the year since they launched, Bernstein estimates that they haven't added much to Apple's top line.
According to Bloomberg, Apple's Services revenue is expected to grow to $13.1 billion in the third quarter of 2020. That's up 15% year-over-year, but data shows the majority of the growth came from existing services.
That growth may be relative, however. Apple TV+, which launched in November, is expected to bring in $2.5 billion in 2020 per Bernstein's revenue models. During this period, Apple TV+ was available for free for Apple users that purchased new hardware, including the $169 Apple TV, and $199 iPod touch.
Apple TV+ has had its own successes, with a handful of its shows winning nominations or awards.
Services revenue is also a combined sector of Apple's business -- the company doesn't break down the sector into specific subscriptions. More than that, the company's slate of Services are already contributing to Apple's continued market outperformance even during coronavirus, and are likely to continue to grow.
In the first half of 2020, for example, the App Store generated $32.8 billion for developers -- up 20% year-over-year. Apple also recently highlighted a report suggesting that the marketplace generated half a trillion in total commerce for businesses.
Some of the 2019 Services have had a rockier start than others, however. In February, Apple News' head of business stepped down. In June, the New York Times said it would leave the free Apple News platform.
The App Store has also generated controversy among some developers, and Apple CEO Tim Cook is set to testify before Congress about whether its App Store policies are snuffing out competition.
Apple does appear to be identifying the sticking points and taking steps to resolve them. In late June, the company was said to be shifting its Apple Arcade strategy to focus on engagement. It has also offered new free trials for Apple Arcade and Apple News+ to users who had subscriptions but canceled them.
In the meantime, Apple's Services sector is still reliant on established platforms like the App Store and licensing deals, which are forecast to bring in about $25 billion for the Cupertino tech giant in the June quarter.
Apple is set to announce its Q3 2020 earnings results on a conference call with investors and analysts at 2 p.m. Pacific (5 p.m. Eastern) on Thursday, July 30.
Credit: WikiCommons
In March 2019, Apple launched four new premium Services offerings: Apple TV+, Apple Arcade, Apple News+ and Apple Card. In the year since they launched, Bernstein estimates that they haven't added much to Apple's top line.
According to Bloomberg, Apple's Services revenue is expected to grow to $13.1 billion in the third quarter of 2020. That's up 15% year-over-year, but data shows the majority of the growth came from existing services.
That growth may be relative, however. Apple TV+, which launched in November, is expected to bring in $2.5 billion in 2020 per Bernstein's revenue models. During this period, Apple TV+ was available for free for Apple users that purchased new hardware, including the $169 Apple TV, and $199 iPod touch.
Apple TV+ has had its own successes, with a handful of its shows winning nominations or awards.
Services revenue is also a combined sector of Apple's business -- the company doesn't break down the sector into specific subscriptions. More than that, the company's slate of Services are already contributing to Apple's continued market outperformance even during coronavirus, and are likely to continue to grow.
In the first half of 2020, for example, the App Store generated $32.8 billion for developers -- up 20% year-over-year. Apple also recently highlighted a report suggesting that the marketplace generated half a trillion in total commerce for businesses.
Some of the 2019 Services have had a rockier start than others, however. In February, Apple News' head of business stepped down. In June, the New York Times said it would leave the free Apple News platform.
The App Store has also generated controversy among some developers, and Apple CEO Tim Cook is set to testify before Congress about whether its App Store policies are snuffing out competition.
Apple does appear to be identifying the sticking points and taking steps to resolve them. In late June, the company was said to be shifting its Apple Arcade strategy to focus on engagement. It has also offered new free trials for Apple Arcade and Apple News+ to users who had subscriptions but canceled them.
In the meantime, Apple's Services sector is still reliant on established platforms like the App Store and licensing deals, which are forecast to bring in about $25 billion for the Cupertino tech giant in the June quarter.
Apple is set to announce its Q3 2020 earnings results on a conference call with investors and analysts at 2 p.m. Pacific (5 p.m. Eastern) on Thursday, July 30.
Comments
So, the solution to the supposed problem, in your view, is really niche programming (in the US and Europe)?!
Personally, I didn't expect much from Apple TV+, Apple News+, and maybe even Apple Arcade. Apple TV+ just doesn't have enough content - even for its modest monthly fee. Apple News+ is probably a niche by now (who wants to binge-read news articles, even if nicely formatted with pretty pictures?) I do, but I'm not paying $10/mo when I can just subscribe to the NYT for $/mo and get the same news through it and other free sources via Feedly RSS reader). Apple Arcade is just getting started and might not have a bad quarter, esp. during covid. But it probably also doesn't have enough content to justify a subscription model for the majority of folks - those who just want to waste a few minutes when they're bored.
I do expect great things from Apple Card/Apple Pay. As people strive for more privacy and security, they can't help but eventually get an Apple Card. I have 5-6 cards and since getting the Apple Card, 95% of my credit card activity is now with Apple Card. And every time someone uses it or Apple Pay, Apple gets their 0.125% (or thereabouts) transaction fee from the issuing bank.
I had an Arcade sub, but cancelled it after finishing the 4 or 5 decent games and being left with essentially ad-free rehashes of the mid to low-grade games that already exist free on the App Store. Rather disappointing to be honest.
And what "data" is that? Services revenue is not broken down into its constituent parts. What dark, smelly hole did the author pull that "data" out of? And Bloomberg? That anti-Apple rag? Really?
Lots of moaning on here about the dearth of Apple offerings. But you folks don't get it. Not everything Apple produces is meant for you, which should be obvious. That it isn't says volumes.
Apple is literally producing high quality product, which moves any profit directly into their coffers. Why do you think everyone's jumping into that arena? If pretty much all you rent or sell is stuff you produce, then it'll take a while (years) to fill the pipeline. But once the pipeline is full, it's a high-margin pipeline. A couple of years out, folks will happily pay the very reasonable fee for what Apple has to offer.
It's called long-term planning. Again, pretty obvious. And again, that it's obvious says much more about many posting here, including the person that wrote the Bloomberg article, than it says about Apple.