Carmbo

The most important piece of this puzzle is the price. The price Apple has announced hits the sweet spot. It’s low enough that quite a few people will give the service a try, even early on with a small number of titles. As to how consumers are going to respond to specific offerings, I would imagine Apple will have hits and misses, just like every other content provider. No content provider has or likely ever will get it right 100 per cent of the time. But a percentage of the offerings will be excellent, no doubt, and at about $5 a month, the service will flourish, as long as Apple resists the urge to significantly increase the cost in the long run. 

The beauty of digital distribution is that the additional cost of increasing volume is relatively low. It can work out to be a matter of less is more in that if you lower subscription  cost which triggers a dramatic increase in subscribers, you can make more money by charging less. If you attract 10 million subscribers at say $9.99 a month yet attract 50 million subsribers at 5.99 a month, the math suggests $5.99 is the better option. The production spending one presumes is an annual number. So, let's look at the money brought in annually with those numbers. At $9.99 a month for 10 million subscribers, the amount annually is about $1.2 billion. At $5.99 a month for 50 million subscribers the amount climbs to about $3.6 billion. Assuming no extra cost in content acquisitiion and/or creation, it's unlikely the cost of accomodating an additional 40 million subscribers would approach $2.4 billion annually. If the infrastructure needed to handle many more subscribers is already in place, charging less to attract more subscribers is clearly the way to go.

 Consider that if you charge so little that many subscribers to other streaming services sign on because it's such a small additional cost, your potential subscriber base is dramatically expanded. If instead of having to convince consumers to pick your streaming service instead of an alternative service like Netflix, you offer your service as a compliment, many more consumers would potentially sign up. Best of all, you are not forced to seek out additional content to justify a higher subscription cost. From the consumer's point of view, Apple is providing an appealing service at a great price, which is good for brand image.

Also, consumers already can have volume from established players in the streaming space. If all the participants struggle to produce a volume of offerings that justifies higher and higher subscription rates, the quality will be spread alarmingly thin. There is only so much quality production that can be conjured up. There is already a lot of junk served up as it is on services like Netflix. Lots of good content, sure, but a lot of filler, too. Apple shouldn't be looking to add to the junk pile.

Sounds like a potentially expensive offering that will have a hard time gaining traction. Of course, the devil is in the details and the biggest question is how much will it cost. Many such services vying for consumers to agree to significant monthly fees is going to produce more losers than winners. Greed will be the undoing of those seeking a piece of this action. Keep the cost at an attractive point and sheer volume will produce fabulous profits. Pile on the content to up the monthly fee and you run the risk of pricing yourself out of what appears to be developing into a crowded space. It was really straightforward back in the day when Netflix had a ton of content that was more than reasonably priced. Opting for Netflix was, for many, a no-brainer. Now it’s getting tricky. 

If content providers are proceeding on the premise that four, five, six services approaching $20 a month each are going to fly, well, that’s a huge miscalculation. Most consumers will simply not buy all-in to such a scenario. 

You can charge X amount and then scramble to deliver enough content to justify whatever the target monthly subscription is but there is an alternative approach. Deliver original content and then charge accordingly. In other words, if you're Apple, don't waste money buying up filler content and instead charge a lesser amount that is a fair price for what you deliver.

Realistically, if the incoming content providers try to emulate the Netflix model, i.e. offer a service with volume for in excess of $15 a month for the top tier, this forces consumers to choose between various options because subscribing to all the impending services is simply too expensive for most. Instead, what we should see is multiple services priced to be viable for consumers to subscribe to multiple offerings. It shouldn't be about Apple TV+ competing with Netflix but rather Apple's offering serving as a decent compliment. Apple would, at the right low-enough price, attract more than enough subscribers to make money off it's original programming without trying to compete against Netflix for a finite pool of content of varied quality. Let Netflix do the everything-but-the-kitchen-sink routine, but offer up let's say a $5-a-month service that delivers some excellent content to consumers. Apple doesn't pay for more than a specific amount of unique content but still makes a lot of money because it's lower-cost, more-focused offering is seen by consumers as something well worth adding on to whatever else consumers have access to. The potential number of subscribers to such a lower-cost package is staggering.

If, on the other hand, Apple insists it is delivering quality and hence should charge closer to let's say $10 a month for a lot less content than Netflix or even Disney, frankly, that will not fly. Those services will, undoubtedly, have some quality of their own sprinkled in with all that filler. 

The amount of the subscription fee will have a lot more to do with if Apple's service succeeds than how many of its programs are well-received by critics and consumers.