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.

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 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.

Apple Previews New Operating System for Apple TV 4K, Announces Deal With Charter

Apple June 4 previewed the tvOS 12 operating system for Apple TV 4K with support for Dolby Atmos audio, new features to easily access shows and movies, and aerial screensavers shot from space. The company also announced that Charter Communications, the second-largest cable operator in the United States, will begin offering Apple TV 4K to its customers.

Apple TV 4K debuted last fall. The service offers customers the largest collection of 4K HDR movies, according to Apple, including free 4K HDR upgrades to previously purchased movies in customers’ iTunes libraries.

“This fall, iTunes will be home to the largest collection of Dolby Atmos-supported movies anywhere, and these titles will also include Dolby Atmos audio for free,” according to an Apple press release. “With tvOS 12, Apple TV 4K will be the only streaming player both Dolby Vision and Dolby Atmos certified, delivering the highest quality cinematic experience of stunning 4K HDR visuals and immersive sound that flows all around in three-dimensional space.”

Also, later this year, Charter customers in nearly 50 million households will have access to live channels and tens of thousands of on-demand programs via an all-new Spectrum TV app on their Apple TV 4K, iPhone and iPad, integrated with Siri and the Apple TV App, Apple reported. In addition, as part of this collaboration, Charter will be offering iPhones and iPads to customers as they grow their mobile presence. Charter joins AT&T’s DirecTV Now in the United States, CANAL+ in France and Salt in Switzerland, which have begun offering customers Apple TV 4K with their services.

The Apple TV App on iPhone, iPad and Apple TV allows customers to find and watch TV shows and movies from more than 100 participating video apps in 10 countries, according to Apple. Single sign-on for Apple TV and iOS has allowed users to sign in once to get access to all the video apps available through their cable subscription. With tvOS 12, Apple further simplifies the authentication process with “zero sign-on.” Apple TV detects the user’s broadband network and automatically signs them in to all the supported apps they receive through their subscription — no typing required, according to Apple. Zero sign-on begins with Charter later this year and will expand to other providers over time.

In collaboration with the International Space Station National Lab and the Center for the Advancement of Science in Space, Apple unveiled new aerials shot from space by NASA astronauts, “so Apple TV customers can enjoy even more stunning scenes filmed in 4K HDR,” according to Apple. Aerial screensavers will also be more interactive, allowing viewers to see the location information and swipe between dozens of aerials, the company noted.

Additional tvOS 12 features for Apple TV 4K and Apple TV 4th generation make it easier for customers to access shows and movies, according to Apple:

— With iOS 12, users can securely AutoFill passwords from iPhone and iPad to Apple TV to easily sign in to Apple TV apps.

— The Apple TV Remote will be automatically added to Control Center on iPhone or iPad for Apple TV users, giving users quick access to Apple TV controls.

— Home control systems such as Control4, Crestron and Savant can be used to control Apple TV, including using Siri for voice search and control.

“The arrival of Dolby Atmos on Apple TV, ‘zero sign-on,’ a deal with Charter Spectrum, a new TV OS and, perhaps more tangentially, Siri support for third-party apps, all point towards an evolutionary product, rather than a revolutionary one, which we have become accustomed to from Apple over the years,” read a Futuresource Consulting blog in response to the announcements.

Futuresource estimates that there were approximately 21 million Apple TVs in use worldwide at the end of 2017, approaching half of these in the United States.

“Apple TV continues to add features, build partnerships and is clearly striving to offer the best quality digital streamer experience there is — albeit at a higher price than its competitors,” read the Futuresource blog. “Service partnerships will therefore be key to driving the attractiveness of the product and a channels approach, akin or better than Amazon Channels and Roku’s equivalent, will also be hugely important if Apple still wants to become the main entertainment hub in the home — something which Amazon arguably has gained a lead in.”

The new tvOS will be available this fall as a free software update for Apple TV 4K and Apple TV 4th generation. For more information, visit apple.com/apple-tv-4K.

Winter Holiday Tablet Sales Return to Growth

Sales of detachable tablets (convertible laptops with keyboard), including iPad and Galaxy, increased 10.3% to 6.5 million units in the fourth quarter of 2017 compared to the previous-year period, according to new data from IDC.

Tablet sales for the year increased 1.6%, which trailed significantly from 24% growth in 2016.

IDC attributed slowness to the launch cycle of high profile devices like Microsoft’s new Surface, which was off schedule, leaving older Surface models on shelves as consumers waited to see the upgrades.

Meanwhile, slate tablets (without keyboards) shipped 43.1 million units in Q4, and 141.7 million for the year – down about 7.6% from 2016. The report suggested sales have remained relatively steady as consumers increasingly use slate tablets to consume media, including over-the-top video and SVOD.

Top tablet vendors include (in order), Apple with 24.3% market share and 0.6% annual growth and Amazon Fire Tablet with whopping 50.3% growth and 9.6% market share. Samsung ranked third with 14.9% market share (13% sales decline), Huawei (5.9% market share, 11.9% growth) and Lenovo (6.6% market share, 13.1% sales decline.

“Continued success of [the tablet category] hinges on the willingness of other PC vendors to participate and more importantly, consumers from other countries to adopt the [detachable tablets] over convertible PCs,” Jitesh Urbani, senior research analyst with IDC, said in a statement.