Apple set to unveil streaming video service
- Apple is set Monday to announce its own video streaming service
- Streaming leader Netflix says it won’t put its original content on Apple’s service
- The average consumer subscribes to three streaming services, and Apple is betting they’ll welcome another one
Apple is scheduled Monday to introduce a video-streaming platform, culminating years of planning by the the world’s largest technology company to enter the TV and movie business and adding a powerful competitor for streaming leaders such as Netflix and Amazon.
“Linear TV is dying, and Apple taking advantage of this fundamental shift in consumer behavior,” said BTIG analyst Richard Greenfield.
Some 69 percent of American households now subscribe to a digital streaming service, compared to 65 percent who subscribe to traditional pay TV, according to a recent Deloitte survey.
The average consumer subscribes to three streaming services, according to the study, making clear people want variety — and that no single platform can deliver everything they want to watch. “This is happening more frequently as more studios and TV networks are pulling content from the major streaming services to launch their own direct-to-consumer offerings,” the report said.
Other players have since joined — or plan to join — the streaming party. Disney last week closed ato acquire Fox entertainment assets and will launch its Disney Plus streaming service later this year. WarnerMedia will also offer a streaming service by year-end.
A long time coming
Apple, which last week touted the streaming platform launch by tweeting “It’s Show Time,” is expected to launch the service this fall. The tech giant will also unveil news and games subscription services.
The TV and video service has been a long time coming, according to analysts. CEO Tim Cook in 2012 called Apple TV, an existing device that lets consumers watch content from networks and apps — including Netflix — an area of “intense interest.” In June 2017, Apple hired former Sony Pictures Television presidents Zack Van Amburg and Jamie Erlicht — signaling its push, in earnest, into video programming.
“We believe Monday’s announcement is just the tip of the iceberg for Cook’s broader streaming content strategy to take hold and in our opinion adds a significant potential catalyst to the Apple services growth story for years to come,” Wedbush analyst Daniel Ives said in a note to clients.
The technology giant is pumping an estimated $2 billion annually into content creation, according to BTIG analyst Greenfield. Steven Spielberg, Reese Witherspoon and Jennifer Aniston are among the Hollywood heavyweights Apple has partnered with to create its own movies and series, according to reports.
Still, the service is expected to offer limited original programming, which analysts say will restrict Apple’s ability to charge for the service. Some analysts believe Apple streaming will be free to Apple device owners — at least initially — to accumulate eyeballs. “It’s hard to imagine a service that has limited content trying to charge consumers directly for that service and it having mass adoption,” Greenfield told CBS MoneyWatch.
He suspects Apple will mimic Amazon, which offers its Prime Video service to existing Prime members for free, and will sell subscriptions to third-party networks. “I think the goal is to add benefits to device ownership, like how an Amazon membership has its benefits,” Greenfield said. “If you look at what Amazon has done, they have provided free content as the onboarding, to drive third-party subscriptions to HBO Now for example,” he said.
“This is about selling services layered on top of devices and trying to drive subscriptions to a wide array of video apps,” Greenfield said. The new service might help Apple sell more iOS devices, including iPads and iPhones, but these gains won’t have much of an effect on Apple’s bottom line, according to Goldman Sachs’s Rod Hall.
“This is an ecosystem lock-in,” Morningstar analyst Neil Macker told CBS MoneyWatch. “It’s selling services as opposed to hardware, and the service should probably be hardware-agnostic in order to get it in front of as many eyeballs as possible,” he said.
Apple is reportedly negotiating movie and TV deals with programmers including HBO, Showtime and Starz. The current Apple TV device gives consumers access to other networks’ content by directing shoppers to the networks’ apps. The new strategy, which Apple has already applied to the music industry, will allow customers to access more content while keeping them in Apple territory. The new streaming service will be a home hub for everything consumers want to watch, with the exception of Netflix original series, of course.
Tigress Financial’s Ivan Feinseth estimates Apple has roughly 900 million iPhone users, which Apple could leverage to bring in partner content. “Apple has the largest installed user base — that’s one thing they have going for them,” he said. “I think their competitive advantage in streaming is that large base. If they price the service on the low end, at a few dollars a month, you can say why not? People like the convenience of buying more product from one provider.”