Apple TV+ predicted to hit 100 million subscribers by 2025

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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
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

  • Reply 1 of 20
    AppleishAppleish Posts: 687member
    Never mind. I just saw the bundle in code article.
    edited June 2020
  • Reply 2 of 20
    DAalsethDAalseth Posts: 2,783member
    To be honest I think this is wildly optimistic. I suspect a huge portion of people with the free year will decide they have watched everything on ATV+ and will drop it for another service that has material that is new to them. People only have so much cash for streaming services, especially if the economy goes in the dumpster over the next few months. COVID is slowing the release of new shows for everyone, giving a huge advantage to services with extensive back catalogs to tap into. Apple doesn’t have that. I would not be surprised if subscriptions drop by over half between November and March. Unless Apple keeps giving the free year, forever, but that won’t build the brand. That will only replace people dropping with people coming in.
    edited June 2020
  • Reply 3 of 20
    lukeilukei Posts: 379member
    This is unrealistic beyond words

    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 
    chemengin1
  • Reply 4 of 20
    fluffheadfluffhead Posts: 55member
    Let’s see if Apple does anything to keep all these people (myself included) subscribed. If it weren’t for my iPhone purchase I would not have this mediocre service. 
    entropysDancingMonkeys
  • Reply 5 of 20
    DAalsethDAalseth Posts: 2,783member
    fluffhead said:
    Let’s see if Apple does anything to keep all these people (myself included) subscribed. If it weren’t for my iPhone purchase I would not have this mediocre service. 
    Same here. ATV+ has introduced us to Britbox. At the end of the year we’ll likely drop ATV+ and just subscribe directly to Britbox. Nothing else on there has really interested us.
  • Reply 6 of 20
    entropysentropys Posts: 4,152member
    fluffhead said:
    Let’s see if Apple does anything to keep all these people (myself included) subscribed. If it weren’t for my iPhone purchase I would not have this mediocre service. 
    Quite so. It is not worth paying for. After three weeks I had watched everything I was going to see.  Free I will stay subscribed. Maybe.
  • Reply 7 of 20
    I will continue to reiterate that Apple could make way more by making the content free and having 3-4 minutes of commercial in each episode.  Less for shorter episodes. 
  • Reply 8 of 20
    CarmBCarmB Posts: 80member
    The first wave of free subscriptions will expire late this year. As such, it’s premature to determine if what Apple offers is enough to keep millions subscribed. It isn’t a simple matter of Apple having released all the content it’s going to offer and going forward we get what we’ve already gotten. More content is coming. More properties will be acquired, more content produced, including future seasons of titles already in the mix. As for old content to, as it were, fill out the service, meh. I own more than 500 titles and there are many with collections that far surpass what I have.  I also subscribe to Netflix and Amazon Prime, As well, there are assorted free sources of older content. At the price Apple has set for its service, it’s being offered as a compliment to other streaming services, not a competitor. It’s not Apple’s service or Netflix or Amazon Prime etc. It’s Apple’s offerings in addition to whatever other service one wants to use. As long as Apple prices it’s service low enough, it will have a place in the streaming universe. By the way, if Apple really did have 100 million paying customers, the annual intake would be more than enough to allow Apple to pour billions into plenty of excellent content. If, for example, the money coming in was say $500 million a month, that’s $6 billion annually. 

    I have to say that but for Netflix and Amazon Prime original content, I would have dumped both long ago, despite the older titles both services have in abundance. Those libraries of legacy titles are way overrated and, I suspect, not used by customers as much as many might think. That Apple, so far, hasn’t added to all that clutter, really, is not a problem. Quite the opposite. Less content, sure, but a lower cost. There’s merit in that.
    lolliver
  • Reply 9 of 20
    lolliverlolliver Posts: 493member
    I will continue to reiterate that Apple could make way more by making the content free and having 3-4 minutes of commercial in each episode.  Less for shorter episodes. 
    Apple could also decrease the cost of the iPhone by including adware like some other OEM's do. Thankfully that's not the approach they ever take. Advertising interrupts the flow of the show/movie. Maybe Apple could offer a free tier with advertising and a paid tier without but I doubt it. It's just not their style. 
    watto_cobra
  • Reply 10 of 20
    chasmchasm Posts: 3,273member
    I've enjoyed several things I've seen on ATV+ as I've mentioned before. I think audiences are trained not to give completely original shows a try unless it is painfully obvious that this is right up their street (so Bob's Burgers fans will probably like Central Park, people with young kids will like Helpsters and Fraggle Rock, etc), or they've been inundated with hype/buzz through the mainstream media. That last bit -- more than the actual programming, which will of course expand on its own -- is something Apple needs to work on more. It needs to make sure its creators take every opportunity to make themselves available for interviews and talk shows about their work for TV+ the way Disney does. Short of a widespread ad campaign on "free" TV, nobody is going to sell you on the idea of giving a show a chance like the creators will.

    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).

    I think a lot of the commenters here dissing on ATV+ are suffering from a bit of lack of imagination. There's a story on this very site that Apple has hired someone to add sports (and probably more and other live events like that) to ATV+. We just got our first-ever "back catalog" series, which I feel is incredibly well-chosen compared to the dross that litters even very good services like Britbox (not to mention the ones I've already mentioned, though of course there are some -- or many -- gems amongst the rubble with all of them). In short, ATV+ in 2025 will bear little resemblance to its first year. I understand and respect that for some, there wasn't enough there to interest you today -- so fine, go elsewhere. But keep an eye on it -- HBO's first years in terms of original programming was all comedy specials, and look how far they've come since then. Netflix in particular had no original programming for a very long time, and now it wins awards for that stuff.

    What I do -- and this might appeal to some here -- is what I call "evaluate and rotate." When it comes time to renew (I generally subscribe for a year at a time because its a better value), I evaluate not "how much do I watch of this service"-- that's the wrong question --  but "how much compared to the cost do I enjoy what I do watch on this service." If it's not worth the $60/$80/$100/$150 or whatever it costs per year, I'll drop it --  and perhaps sign for a year with something else. Swap Britbox for AcornTV, for example, or swap Netflix for Prime Video every other year or something. Try one "niche" service for a month every year, see if it's good enough to keep you. I retain the option to switch back and see what's new, or stay on if there's reason to expect I'll get another $60/80/100/150 per year out of it.

    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).
    lolliveranantksundaramwatto_cobra
  • Reply 11 of 20
    lolliverlolliver Posts: 493member

    Very well thought out comment. I completely agree. The backlash against Apple TV+ is very much like past new "products" for Apple. They get labelled a failure out of the gate only to go on to be a success. It's the same type of arguments. Complaining about price without looking at value or complaining about missing features while ignoring other features or quality. 

    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.  
    chasmwatto_cobra
  • Reply 12 of 20
    entropysentropys Posts: 4,152member
    I think Apple will release a stack of new content next November 
    watto_cobra
  • Reply 13 of 20
    lolliver said:
    I will continue to reiterate that Apple could make way more by making the content free and having 3-4 minutes of commercial in each episode.  Less for shorter episodes. 
    Apple could also decrease the cost of the iPhone by including adware like some other OEM's do. Thankfully that's not the approach they ever take. Advertising interrupts the flow of the show/movie. Maybe Apple could offer a free tier with advertising and a paid tier without but I doubt it. It's just not their style. 
    I like the two tier approach.  We are talking Super Bowl level advertising rates for every show.  I get that they don't like it but as an investor I have trouble passing up that type of revenue.
  • Reply 14 of 20
    harry wildharry wild Posts: 807member
    I have Prime, Showtime, CineMax and I try the free trail of Apple TV+ and could not find one Apple movie or show that I like!  Apple better try hard to get some meaty shows instead of the feel good, PC type shows that they have now!  If people want these type shows, the over the air have them a plenty!
    edited June 2020
  • Reply 15 of 20
    bestkeptsecretbestkeptsecret Posts: 4,265member
    lukei said:


    Add in the editorial policy which defies logic.

    What editorial policy? What logic does it defy?


    lukei said:


    Netflix, Hulu and Amazon likely don’t even consider them a competitor 

    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.

    watto_cobralolliver
  • Reply 16 of 20
    It's a fairly simple formula IMO.  Find a popular book series(detective, spy, etc..) and create a season from each book.  Even ones that already have had movies made would be acceptable.  I can think of two right out of the gate - Jack Reacher and Alex Cross series.  Tom Clancy is another that would bring eyeballs.  Buy the rights.  That would be 3 A+ series out of the gate.  Prime has the rights to Jack Ryan(Clancy) right now but they don't follow the books.

    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.

  • Reply 17 of 20
    CarmBCarmB Posts: 80member
    I have Prime, Showtime, CineMax and I try the free trail of Apple TV+ and could not find one Apple movie or show that I like!  Apple better try hard to get some meaty shows instead of the feel good, PC type shows that they have now!  If people want these type shows, the over the air have them a plenty!
    Are you referring to feel-good shows Like Servant, Defending Jacob, and The  Morning Show? 


    watto_cobralolliver
  • Reply 18 of 20
    MarvinMarvin Posts: 15,309moderator
    CarmB said:
    I have to say that but for Netflix and Amazon Prime original content, I would have dumped both long ago, despite the older titles both services have in abundance. Those libraries of legacy titles are way overrated and, I suspect, not used by customers as much as many might think. That Apple, so far, hasn’t added to all that clutter, really, is not a problem. Quite the opposite. Less content, sure, but a lower cost. There’s merit in that.
    There was some data from 2017/2018 that reported Netflix's library of older content made up 2/3 of viewings:

    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.
    watto_cobra
  • Reply 19 of 20
    CarmBCarmB Posts: 80member
    Apple’s offering is entering the picture after services like Netflix and Amazon Prime have already spent years building up a base of users. By the time AppleTV+ has built up a decent library of original content, Disney+ will have built up a large group of regular subscribers, if it hasn’t already. It will not work for Apple to just pile on in its usual approach of coming in late to the party and evolving steadily. On the other hand, if Apple takes a somewhat different approach, keeping the cost to consumers significantly lower while not worrying about delivering a library of third-party legacy titles, Apple can find a place in the streaming mix. 

    Right now Apple has a small group of original titles that can not justify the monthly cost to the service. Way too thin to be seen as a worthwhile compliment at the price. Yet that’s the case right now, hence Apple’s strategy of offering free one-year subscriptions. Jump forward a year, two years, three years, and it will not be the same situation. Content will grow and reach the point where for many, if done right, paying far less to add on that collection of titles will make a lot of sense. It’s not a simple matter of adding a library of titles. That involves having to charge more to cover the cost of paying for that content. But what if one doesn’t care much for those titles. If we’re forced to pay extra for something we don’t want in order to get what we do, we’re basically in the spot we were with cable in which we pay for a whole lot of filler. 

    There is a way to do both. Offer two versions of AppleTV+. One at the current price with original Apple content and the other adding the legacy package for an additional fee. In other words, if you want the extra content, pay extra for it. Some will, others won’t. If not enough pay extra for the library content to justify keeping it, don’t maintain it. To lock into that approach with a risk of not getting enough subscribers to sustain the service would be ill advised considering this streaming market is still evolving as more services enter the fray. 

    The evolving nature of streaming offerings makes it more difficult to plan ahead based on historical data. What might have been valid two, three, four years ago isn’t necessarily going to apply two, three, four years from now. 
    watto_cobra
  • Reply 20 of 20
    The problem Apple has for Apple TV+ is quality over quantity.  I have watched a number of Apple’s programmes and films and they are very high quality.  Unfortunately, most folks seem to prefer quantity, no matter how poor it is.  My family has Netflix and Prime, as well as some other UK based repeat services such as Britbox and none of these provides anything near the quality of the Apple shows.  I am more than happy to pay for Apple TV+ whereas I do not pay and will not pay for Netflix or Prime.
    watto_cobralolliver
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