Apple's video service expected to launch at $15 per month, still needs healthy iPhone sale...
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.
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.
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.
Comments
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.
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.
The stock market is disgusting.
Asking out of ignorance.
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.
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.
Are you being sarcastic? Oprah pulls in more viewers than anyone else I know.
It could be the seed of stock manipulation. If Apple pulls in just 100 million subscribers they're "doomed".