SVOD Helps Apple Post Record Q1 Services Revenue of $12.7 Billion

Despite myriad naysayers, the Apple TV+ subscription streaming video service is quietly exceeding expectations and producing on the bottom line, according to CEO Tim Cook.

Speaking Jan. 28 on the Q1 fiscal call, Cook said Apple TV+, which launched on Nov. 1, 2019, has had a “rousing start” with strong consumer response worldwide. Unlike Disney+, which launched on Nov. 12 in six markets, Apple TV+ is available in 100 markets that sell iPhone, iPad, Apple Watches and Mac computers.

The SVOD platform helped Apple’s “services” business segment generate record revenue of $12.7 billion for the first quarter, ended Dec. 28, 2019. That was up 17% compared to services revenue of $10.8 billion in the previous-year period.

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The services category, which also includes iTunes, the App Store, the Mac App Store, Apple Music, Apple Pay, AppleCare and Apple Arcade, has become a significant revenue driver for the Menlo Park, Calif.-based tech giant.

Apple also had a great quarter overall, posting record revenue of $91.8 billion, up 9% from the year-ago quarter. International sales accounted for 61% of the quarter’s revenue.

“We are thrilled to report Apple’s highest quarterly revenue ever, fueled by strong demand for our iPhone 11 and iPhone 11 Pro models, and all-time records for Services and Wearables,” Cook said.

He said Apple’s install base across all branded devices grew in each of the company’s geographic segments topping 1.5 billion.

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“We see this as a powerful testament to the satisfaction, engagement and loyalty of our customers — and a great driver of our growth across the board,” Cook said.

 

Apple Ups Q2 ‘Services’ Revenue to Record $11.5 Billion

Apple April 30 reported record “services” revenue of $11.5 billion, up more than 16% from revenue of $9.13 billion during the previous-year period.

As the media/tech giant shifts its focus from hardware products such as iPhone, iPad, Mac and Apple Watch, among others, it has upped scrutiny on services, which include sales of digital movies and TV shows on iTunes and Apple TV, in addition to the pending rollout of Apple TV+ app and separate subscription streaming video service.

“Our March quarter [services] results show the continued strength of our installed base of over 1.4 billion active devices,” CEO Tim Cook said in a statement.

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Cook eyes Apple’s install base as the genesis for the future success of AppleTV+ and related Apple business ventures such as Apple News, Apple Pay (including branded credit card), Apple Arcade (gaming) and Apple Music.

Indeed, Apple said sales of its legacy iPhone declined nearly 18% to $31 billion from $37.5 billion during the previous-year period. The attributed the decline to 21.5% drop in unit sales in China – a slight improvement from 26.7% unit drop in the prior-year quarter.

Mac revenue dipped 4% to $5.5 billion, while iPad sales revenue increased 21.5% to $4.8 billion.

Net revenue fell about 5% to $58 billion from $61.1 billion. Net income fell almost 17% to $11.5 billion from $13.8 billion.

Report: 83% of U.S. Teens Own an iPhone

With Apple prepping to launch its rebooted Apple TV+ streaming platform, new data from Piper Jaffray found that 83% of teen survey respondents in the United States own an iPhone.

The survey of 8,000 teens skewed 54% male with an average age of 16.3 years. Notably, 86% of respondents said they would choose an iPhone for their next mobile phone – up from 75% in a spring 2016 survey.

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The data suggests teens would continue use the iPhone as adults, with usage expanding to Apple Music, AirPods, Apple TV+ and Apple Watch.

Indeed, Piper found that 27% of teens own a smartwatch, with another 22% planning to buy one in the next six months. That’s up from 20% in the same survey a year ago.

Apple iPhone Q1 Revenue Drops 15%, Services Sales Top Record $10.9 Billion

Apple Jan. 29 reported first-quarter (ended Dec. 29, 2018) revenue from the iPhone fell 15% to $52 billion from $61.1 billion during the previous-year period.

Apple attributed the lower than anticipated revenue to sluggish sales in China and emerging markets.

“We believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, U.S. dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements,” CEO Tim Cook said in a statement.

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While the downturn forced Apple to revise its fiscal guidance, the company continued to fire on all cylinders in other business segments.

Apple services revenue, which includes sales of digital movies and TV shows on iTunes and Apple TV, generated a record $10.9 billion – up nearly 20% from last year.

The segment, which also includes AppleCare, Apple Pay, licensing and other services, is on track to double in size from 2016 to 2020.

Overall, Apple posted quarterly revenue of $84.3 billion, a decline of 5% from the year-ago quarter, and quarterly earnings per diluted share of $4.18, up 7.5%. International sales accounted for 62% of the quarter’s revenue.

 

Apple Begins Contactless College Student ID Program

Apple Oct. 2 officially started its student identification app within the Apple Wallet platform for the iPhone and Apple Watch.

First announced six months ago, students at Duke University and the University of Alabama and University of Oklahoma can now add their college ID card to Apple Wallet and use it to pay for laundry, coffee or lunch, and get into their dorms, the gym or the school library.

With access to the dorm, dining hall, gym, library and campus events using only their iPhone or Apple Watch, college students can now leave their physical wallets behind. The app can be used to paying for supplies at the bookstore, for laundry or off campus purchases.

The contactless payment market is projected to top $48 billion in transactions in 2018 – up 30% from 2017, according to industry estimates.

“[The] iPhone and Apple Watch have brought us into a new era of mobility, helping to transform everyday experiences,” Jennifer Bailey, VP of Internet services, said in a statement.

Bailey said the launch of Apple Pay was done to replace the physical wallet. By adding transit, loyalty cards and contactless ticketing she said Apple has expanded the capabilities of Wallet beyond payments, and we’re now thrilled to contactless student ID cards.

Johns Hopkins University, University of Santa Clara and Temple University plan to employ Apple’s contactless technology by the end of the school year.

 

Apple Completes Shazam Music Recognition App Acquisition

Apple Sept. 24 announced it has finally completed the acquisition of Shazam, a highly-rated music app that enables users to recognize a song playing around them after hearing a few notes. The app has been downloaded more than 1 billion times.

Financial terms of the deal first revealed last December were not disclosed, although media reports pin the transaction around $400 million. It marks Apple’s biggest acquisition since the 2014 purchase of Beats for $3 billion.

“Apple and Shazam have a long history together,” Oliver Schusser, VP of Apple Music, said in a statement. “Shazam was one of the first apps available when we launched the App Store and has become a favorite app for music fans everywhere.”

The app – which was reportedly coveted by Spotify and Pandora – will soon be offered ad-free to users, according to Apple. How the tech giant plans to monetize Shazam remains to be seen.

Shazam says users employ the app more than 20 million times each day – yet the technology has reportedly never been profitable despite enabling users to discover, interact with and share video, audio or printed content across devices and mediums.

Online music has become a hot market with Apple Music recently edging ahead of Spotify with more than 20 million paying subs. In May, CEO Tim Cook said Apple Music was approaching 50 million users when combining free and paid subs.

Apple revolutionized personal technology with the introduction of the Macintosh in 1984. Today, the company has transformed consumer technology with the iPhone, iPad, Mac, Apple Watch and Apple TV. Apple’s four software platforms — iOS, macOS, watchOS and tvOS — provide seamless connectivity across all Apple devices and services, including the App Store, Apple Music, Apple Pay and iCloud.

Morgan Stanley Says Apple SVOD Service Can Rival Netflix — in Seven Years

Netflix shares took a slight hit after Morgan Stanley Sept. 5 issued a bullish note on Apple’s slowly evolving subscription streaming video service.

In the report — Apple, Inc.: The Emerging Power of Apple Services, Part 3: Video a New Growth Driver in 2019– Morgan Stanley analysts believe Apple’s longstanding success with iTunes and the music industry, Hollywood and its ability to capture consumer demand through the iPhone, iPad and Apple Watch portends great promise in over-the-top video distribution.

“We forecast that an Apple Video streaming service with high-quality but limited breadth could be priced at the low end vs. competitors, or $7.99/month, and reach over 50 million paid subscribers by 2025, compared to 124 million at Netflix subs and Apple’s 650 million-unit iPhone installed base,” wrote the analysts.

Indeed, the note suggests Apple’s SVOD service could grow from a $500 million business in 2019 to $4.4 billion operation by 2025.

Lofty projections considering the late Steve Jobs often considered Apple TV and streaming a video a hobby and not a platform Apple could invest heavily in.

That’s changed as CEO Tim Cook and Eddy Cue, SVP of Internet software and services, have upped Apple’s video profile by hiring a string of entertainment executives, producers and directors to jumpstart original programming.

The biggest announcement occurred last November about an untitled morning show drama starring and executive produced by Reese Witherspoon and Jennifer Aniston.

Other projects include a sketch comedy with Kristen Wiig; renewed seasons of “Carpool Karaoke,” a basketball drama with Golden State Warriors Kevin Durant serving as both the subject and producer; and unnamed series from directors M. Night Shyamalan, J.J. Abrams and Oprah Winfrey, among others.

Morgan Stanley believes the Apple SVOD service could get a boost when bundled with the Apple Music and Texture news and magazine subscription services. A strategy Hulu has employed partnering with Spotify.

The note said such a bundling would diversify content options for consumers, diminish the need for immediate original content hits, increase perceived consumer value and simplify billing, among other features.

“If we incorporate the assumptions from our Apple Media bundle scenario while keeping all other Apple Services forecasts unchanged, then we’d expect Apple Services revenue to grow at a 21% through 2025, ultimately reaching $143 billion by 2025, up from current forecasts of a 19% revenue growth and $124 billion in revenue by 2025.”

Apple Services generated $95 billion in revenue in the most recent fiscal period.

“We believe that Apple Video will become a reality sooner than investors think, and use this report as a way to frame the two most likely methods for video content distribution and potential impact video could have on Apple’s Services business,” wrote the analysts.

Apple Ups Q3 ‘Services’ Revenue 31%

Apple may be known for the iPhone, iPad Apple Watch, but its digital content business, which includes sales of digital movies and TV shows on iTunes and Apple TV, remains an emerging giant.

The tech company July 31 reported third-quarter (ended June 30) services revenue of more than $9.5 billion, which was up 31% from services revenue of $7.2 billion during the previous-year period.

The segment, which also includes AppleCare, Apple Pay, licensing and other services, benefited from a one-time favorable $236 million resolution of various litigation. The unit is headed by Eddy Cue, SVP, Internet software and services.

Overall, Apple generated net income of $11.5 billion on revenue of $53.2 billion, compared to income of $8.7 billion and revenue of $45.4 billion last year.

The company sold more than 41.3 million iPhones, 11.5 million iPads and 3.7 million Macs in the quarter – the latter down 13% from the previous-year period.