Apple‘s (NASDAQ:AAPL) streaming service, Apple TV+ will debut this November, taking on the likes of Netflix and Disney’s upcoming Disney+ offering. The service will be priced at $5 per month and Apple indicated that a year of free service would come bundled with most Apple devices. Apple has signed up big names from the entertainment industry including Oprah Winfrey and Steven Spielberg to create original programming. Below, we take a look at how the foray compares with key rivals in the streaming space.
View our interactive dashboard analysis Will The $5 Price Point For Apple TV+ Change The Game?
Aggressive Pricing Indicates That Apple Wants To Complement Existing Players, Not Replace Them
- Apple’s move to price the service aggressively at $5 per month, compared to $13 per month for Netflix and $7 for Disney+, indicates that it wants customers to view the service as complementary to existing players such as Netflix, rather than being an alternative.
- This is probably the right strategy, given that the streaming race is unlikely to be a zero-sum game. Streaming subscriptions typically cost just a few dollars a month versus pay TV packages which average ~$100/month, meaning that cord-cutters could opt for multiple offerings.
- The pace of cord-cutting is accelerating, with the number of pay TV subscriptions in the U.S. declining from 94.4 million in 2014 to 89 million in 2018, while broadband penetration is picking up.
Apple Is Banking On Its Ecosystem To Drive Adoption
Subscriber Base Could Be As Large As Netflix Over First Free Year
- Apple is leaning on its device ecosystem to build early traction, providing a complimentary year of Apple TV+ family subscriptions with every new iPhone, Macbook, and iPad.
- As we project that Apple will sell over 170 million iPhones in FY’20, along with tens of millions of iPads and Macs, it’s possible that Apple TV+’s subscriber base will be roughly as large or larger than Netflix (160 million+ global users presently) over the first free year.
- This could allow Apple to give a large base of high-value customers a taste of its service and content, eventually converting them into paying users.
Apple’s Installed Base Of 1.4 Billion Devices And Large Base Of Services Users Could Help Apple TV+
- Apple has an installed base of over 1.4 billion devices and its users already spend a significant amount on its services.
- We believe it is possible that Apple could eventually bundle the TV+ service with other offerings such as Apple Music and its upcoming gaming service into a single package.
Success Will Ultimately Depend On Delivering Compelling Content
- While the streaming market offers scope for growth, the quality of Apple’s content will ultimately decide the uptake of Apple TV+, and the company’s previous attempts at content have been underwhelming. Its Carpool Karaoke and Planet of the Apps shows were both poorly received.
- Apple TV+ will debut with 9 original titles, featuring big Hollywood names and the company has indicated that it would be adding more original content every month.
- In comparison, Netflix has a growing catalog of thousands of movies and original shows while Disney+ will potentially have a massive catalog of legacy content that it can bank as it works on new shows.
- Although Apple has reportedly earmarked $6 billion toward content, per the Financial Times, this will be well below Netflix and Disney.
- We believe it is possible that Apple could eventually acquire established media companies such as Lions Gate or CBS-Viacom to bolster its content.
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams| Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore example interactive dashboards and create your own