Apple TV+ predicted to hit 100 million subscribers by 2025
Apple TV+ isn't booming quite yet, but investment bank JP Morgan is telling investors not to write off the service just yet, estimating that it will hit 100 million subscribers in five years.
Credit: Apple
In a note to investors seen by AppleInsider, lead analyst Samik Chatterjee maintains that Apple TV+ could hit 100 million paid subscribers by fiscal year 2025. That's despite the fact that content and adoption for the premium Apple streaming service has been "largely lackluster."
Chatterjee predicts that most current subscribers are taking advantage of free promotions, and that even activations of promotions for eligible users has been low. Current data implies that only 5% to 15% of eligible devices are taking advantage of the free year.
But the lukewarm response to Apple TV+ may have been partly due to its small catalog of titles, something that Apple is actively working on improving. Apple TV+ launched with 8 original shows, but now have 28 titles. That's much less content than its competitors -- even new ones like Disney+.
That says nothing of quality, which Chatterjee expects to be important. Apple TV+ is differentiating itself by "vying for exceptional talent to enable aware winning content." Increasing the quality and quantity of content will increase the likelihood to convert those on promotions to paying customers, the analyst added.
In addition to rapidly securing and adding new content, Apple also appears to be outspending its competitors. Initial reports suggested that Apple was allocating $1 billion toward content development, but that number could be as high as $6 billion now. Some of those investments could also be used to drive subscribers to Apple TV+ via podcasts.
The analyst also outlined some of the signs that Apple TV+ is evolving fast. Apple TV+ could, as an example, open an opportunity for Apple's Services business to grow "much broader and beyond just the iOS eco-system."
"While adoption of Apple TV+ has had a slow start to-date, we believe investors should not be writing off the long-term prospects just yet, as we see the confluence of improving quality, quantity and budget as drivers of increased adoption going forward," Chatterjee wrote. Chatterjee is predicting 100 million paid Apple TV+ subscribers in 2025.
The analyst forecasts Apple TV+ paid subscribers to ramp up slowly throughout 2020, but adds that it expects a "healthy percentage" of renewals past current trial periods and increased adoption among Apple's installed base.
For comparison, Netflix hit more than 100 million subscribers in 2017, about six years after it split its digital streaming offering from its DVD-by-mail service. Currently, Netflix has 167 million subscribers globally. In January, Apple TV+ had about 34 million, though the company doesn't offer regular updates on the number.
JP Morgan's AAPL price target remains unchanged at $365. That's based on a blended price-to-earnings multiple of 22.0x and a earnings-per-share of $16.86.
Shares of Apple were trading at $325.18 on Thursday morning.
Credit: Apple
In a note to investors seen by AppleInsider, lead analyst Samik Chatterjee maintains that Apple TV+ could hit 100 million paid subscribers by fiscal year 2025. That's despite the fact that content and adoption for the premium Apple streaming service has been "largely lackluster."
Chatterjee predicts that most current subscribers are taking advantage of free promotions, and that even activations of promotions for eligible users has been low. Current data implies that only 5% to 15% of eligible devices are taking advantage of the free year.
But the lukewarm response to Apple TV+ may have been partly due to its small catalog of titles, something that Apple is actively working on improving. Apple TV+ launched with 8 original shows, but now have 28 titles. That's much less content than its competitors -- even new ones like Disney+.
That says nothing of quality, which Chatterjee expects to be important. Apple TV+ is differentiating itself by "vying for exceptional talent to enable aware winning content." Increasing the quality and quantity of content will increase the likelihood to convert those on promotions to paying customers, the analyst added.
In addition to rapidly securing and adding new content, Apple also appears to be outspending its competitors. Initial reports suggested that Apple was allocating $1 billion toward content development, but that number could be as high as $6 billion now. Some of those investments could also be used to drive subscribers to Apple TV+ via podcasts.
The analyst also outlined some of the signs that Apple TV+ is evolving fast. Apple TV+ could, as an example, open an opportunity for Apple's Services business to grow "much broader and beyond just the iOS eco-system."
"While adoption of Apple TV+ has had a slow start to-date, we believe investors should not be writing off the long-term prospects just yet, as we see the confluence of improving quality, quantity and budget as drivers of increased adoption going forward," Chatterjee wrote. Chatterjee is predicting 100 million paid Apple TV+ subscribers in 2025.
The analyst forecasts Apple TV+ paid subscribers to ramp up slowly throughout 2020, but adds that it expects a "healthy percentage" of renewals past current trial periods and increased adoption among Apple's installed base.
For comparison, Netflix hit more than 100 million subscribers in 2017, about six years after it split its digital streaming offering from its DVD-by-mail service. Currently, Netflix has 167 million subscribers globally. In January, Apple TV+ had about 34 million, though the company doesn't offer regular updates on the number.
JP Morgan's AAPL price target remains unchanged at $365. That's based on a blended price-to-earnings multiple of 22.0x and a earnings-per-share of $16.86.
Shares of Apple were trading at $325.18 on Thursday morning.
Comments
Apple TV+ is overpriced versus the catalogue of content
Add in the editorial policy which defies logic.
Netflix, Hulu and Amazon likely don’t even consider them a competitor
The forthcoming movie with Gal Godot will probably attract a lot of viewers (and you can bet that more of that sort of thing will continue). The Morning Show certainly did. Apple's recent revamp of the kids catalog will help a lot. The price absolutely helps a lot, as does the "free with Apple hardware purchase" promotion (which I hope they will continue).
I appreciate having a service like ATV+ where I can rest assured that everything -- even the stuff I have no interest in -- is of a very high quality in production, in cast, and in storytelling. I appreciate that it is priced insanely cheaply for what you get, even if only one or two shows really appeal to you. I appreciate that Apple doesn't lard up their offerings with a bunch of old sitcoms that weren't that good to begin with (hello, HBO Max and Prime) or mostly mediocre movies (helloooo, Netflix!). And, as with most of the paid streaming services, I appreciate being able to watch complete stories without interruption or "micro ads" in the corner for some other show (which counts as an ad to me).
Compared to what I once paid for cable, the value proposition here is insane (not just ATV+, I mean almost any of these services), and yet people just seem to whine about it, even more than they did with the awfulness of "network" and ridiculous expense of cable TV. I currently subscribe to four services, and have a couple of free ones on hand. My total monthly bill for more ad-free entertainment aimed at me than I've ever had access to in my life is ... <drum roll> ... $300 per year ($25/month).
At this point Apple TV+ feels like the original iPhone/iPad/Apple Watch. For some it's already a great product, in 12 months time there will be many more customers who find it valuable. It will take a while for Apple to build out the content but the foundations are solid.
What editorial policy? What logic does it defy?
Then they would be making the same mistake that Blackberry, Motorola and so many other competitors made.
Granted, this could also go the Apple TV (hardware) or HomePod way. But it could also go the iPhone, Apple Watch way.
I pay for Prime for the year for Bosch and two other series.
Other book series I think would be good:
Daniel Silva - Gabriel Allon is an Israeli spy.
Brad Thor - Scott Harvath is a CIA type operator.
Vince Flynn - Mitch Rapp is a more badass Scott Harvath.
Robert Ludlum - has lots of options starting with the Bourne series.
Nelson DeMille - I can think of several of his books that would make good series.
I'm certain someone already owns these series but Apple has a few bucks to make them an offer they can't refuse.
Who do they have making decisions on content? My guess is that they don't have a red blooded Conservative making suggestions. Not trying to get political but many of their choices have been head scratchers at a minimum.
https://www.forbes.com/sites/greatspeculations/2019/03/08/loss-of-licensed-content-is-an-underrated-crisis-for-netflix/
https://variety.com/2018/digital/news/netflix-original-series-licensed-viewing-friends-the-office-1203085230/
https://variety.com/2018/digital/news/netflix-licensed-content-majority-streaming-views-2017-study-1202751405/#!
That's one reason they invested in original content to reduce the risks of losing the licensed content and subsequently subscribers. Original content can also be more profitable.
Some more recent data suggests original content viewing has grown since then but licensed content still made up the majority of viewing 60:40:
https://www.ofcom.org.uk/__data/assets/pdf_file/0019/160714/media-nations-2019-uk-report.pdf
Even if it has grown further in the last year to 50:50, half the viewing in licensed content is still a lot. It depends on the quality of that licensed content but this is clearly the appeal of Disney's streaming service (technically it's original content for them but it's legacy content).
There are some good Netflix stats here:
https://www.whats-on-netflix.com/news/every-viewing-statistic-netflix-has-released-so-far-may-2020/
The top content among their originals is movies more than TV shows. The top series are The Witcher, Money Heist, Tiger King, You, Love is Blind, Ozark. This is a mix of reality TV, fantasy drama, crime thrillers.
Apple TV+ content is listed here:
https://en.wikipedia.org/wiki/List_of_original_programs_distributed_by_Apple_TV+
Defending Jacob and The Banker seem closest to Netflix's popular content. Upcoming ones look like Calls (Thriller), Foundation (sci-fi), Brie Larson CIA series, Greyhound (movie), Killers of the Flower Moon (movie).
Good original content is something that compels people to subscribe to a service over other services. If the service is only complimentary to other services then a lot of people will casually unsubscribe from it. A library of good legacy content can help keep subscribers while the original content library grows. If they offered the same legacy content library as Netflix, that covers half of Netflix's viewing. Apple already offers this content on iTunes, including content that Netflix lost from their service:
https://itunes.apple.com/us/tv-season/friends-season-1/id168262075
They can make subscription more compelling overnight by offering subscription tiers for existing quality TV series and movies. If people are into a series like Friends then they will most likely be watching that series a lot. Typical subscription services are aggregating the subscriptions and putting it towards licensed content that people may or may not watch and usually it gets removed from the platform after a while. If it was more on-demand per user but tied into the subscription payment, they wouldn't lose the content. There would probably have to be some kind of aggregation behind the scenes to avoid the subscriptions being too expensive but that's easy enough done and pretty low risk for Apple.
Then they'd have subscription tiers and the base package with only originals can be $5. Then $10 for originals plus a few good movies and TV series from iTunes. Even if it was possible to watch a single movie that just came out on Blu-Ray, that would be compelling enough to pay $10/month and they can make it as high as they want. Movie buffs would easily pay $50/month to have every movie on iTunes a click away on every Apple platform if it saves money over renting individually, which it should due to subscription pooling behind the scenes.
I think most of Netflix original content is low quality (and Amazon), it's essentially made-for-TV content. Some of their movies are better but ones like Bird Box and Extraction are just decent, they're far from blockbuster movies. The Witcher was one of the best series and even there the acting was pretty poor and weak storyline but its production values and theme made it stand out. Tiger King was interesting but disposable content like all reality TV. If I could watch all iTunes content without paying for each item (even in restricted allowance) plus Apple originals, I'd happily drop Netflix and pay double that subscription. Then the library would have all of this:
https://itopchart.com/us/en/movies/
Apple would be able to see in real-time which rentals were trending and make deals with the providers so that subscribers get more value and allowing viewers to rate the content gives them an idea what they like, not just what they watch so they can make better original content.