Is Apple TV+ a Loss Leader?

NEWS ANALYSIS — Is Apple serious about the Apple TV+ subscription streaming service?

Apple TV+  launched in November 2019, ahead of Disney+, with a smattering of original shows and free 12-month access to anyone who bought an Apple device.

Fast forward to the present and the free trial has been expanded into 2021. Apple entered the year with a few hits — “The Morning Show” with Jennifer Aniston, Reese Witherspoon and Steve Carrel; “Ted Lasso” with Jason Sudeikis; navy wartime drama Greyhound, starring Tom Hanks — and even bigger consumer indifference.

While the consumer tech giant has never released subscriber count details, new 2020 year-end data from MoffettNathason found that 62% of Apple TV+ subs were on the free trial, and 29% accessing the service for free planned to drop it when it came time to pay the $4.99 monthly fee.

A year ago, Ampere Analysis suggested Apple TV+ had about 33 million subscribers, including free trials, with the tally expected to reach 40 million by the end of 2020.

The analyst firm and others contend Apple is largely unfazed by its sluggish SVOD start in comparison to high-profile Disney+, HBO Max and NBCUniversal’s Peacock. Some proof lies in content spend. While Netflix and others lavish billions on original movies and TV shows, Apple, despite having hundreds of billions of free cash at its disposal, has been slow to pull the trigger on big-budget productions.

“Apple is still not all-in on making Apple TV+ originals a focal point,” MoffettNathanson wrote.

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And why should it be? Apple saw a $14 billion increase in revenue in fiscal 2020 to $275 billion. That’s 56% of Netflix’s annual revenue! Services revenue increased 16% to $53.8 billion. Services includes subscription revenue and digital sales of movies and TV shows on Apple TV.

In addition, Apple mirrors Disney’s ESPN+/Hulu/Disney+ bundle offering AppleTV+ with Apple Music+, Apple News+, Apple Fitness+ and Apple Arcade in so-called “Apple One” bundles priced from $14.95 monthly.

“Apple could have easily leveraged Apple One to specifically prop up Apple TV+ but all it really did was again make it a throw-in,” wrote analyst The Entertainment Oracle. “For some people that’s fine, but again when you look at the point of the bundles, the hope from a number of investors was it would help Apple TV+ be more competitive.”

Apple reports first-quarter fiscal 2021 results Jan. 27.

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