Apple Disputes Goldman Sachs Analyst Report Claiming Free Year of Apple TV+ Will Impact Earnings

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Goldman Sachs this morning cut its target price for Apple's stock from $187 a share to $165 a share, claiming Apple's plans to give away free access to its upcoming Apple TV+ service will cause a "material negative impact" on earnings because of how the accounting for the service will work.


Goldman Sachs' Rod Hall said that Apple would account for the one-year free trial as a combined hardware and services bundle discount, which would show lower hardware profit margins.
"We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle," wrote Goldman analyst Rod Hall, in a note.

"Effectively, Apple's method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple's services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1?20 to December," Hall added.
Apple in a statement to CNBC disputed Goldman Sachs' negative call and said that it does not expect the introduction of Apple TV+ to have an impact on its financial results.
"We do not expect the introduction of Apple TV+, including the accounting treatment for the service, to have a material impact on our financial results," the company said in a statement to CNBC.
Apple is planning to provide one free year of Apple TV+ access to all customers who purchase an iPhone, iPad, iPod touch, Apple TV, or Mac, aka any device able to play the service's TV shows and movies.

For those who do not get Apple TV+ for free through a device purchase, Apple is charging $4.99 per month for the entire family. Apple TV+ is set to launch on Friday, November 1.

Article Link: Apple Disputes Goldman Sachs Analyst Report Claiming Free Year of Apple TV+ Will Impact Earnings
 

Solomani

macrumors 68040
Sep 25, 2012
3,919
7,630
Alberto, Canado
That analyst is clueless. He has no idea how powerful, how entrapping and addicting the Apple Ecosystem is. Once Apple customers get sucked into the Apple Ecosystem, it's very difficult to bail out. And often it starts with a Free Trial. Remember all the clueless analysts that said Apple Music would fail? That it would never ever compete or catch up to Spotify etc? LOL

Apple Music also started with free trials.
 

gugy

macrumors 68040
Jan 31, 2005
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La Jolla, CA
This was a smart move by Apple. If their content is indeed great, people will have time to get used to it and eventually keep it in the long run.

I am hoping Apple at some point creates a master subscription plan that includes all their services and iCloud storage at a fair price for individuals and families. That might entice me jumping into other services that at this point I don't care about it.
 
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bpeeps

macrumors 68040
May 6, 2011
3,132
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Apple calling every Goldman contact they can think of to shut this analyst up.
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I know that Goldman Sachs' credit card division is a very different part of the company than the investment banking analysts' division, but this sure is awkward.
I guarantee you most of the comments here won't understand this distinction.
 

lazyrighteye

macrumors 68000
Jan 16, 2002
1,911
661
Denver, CO
Anyone know if those of us who just leveraged iUP for a swap of our last year devices for this year devices qualify for free Apple TV+?

Thnx.
 

ct2k7

macrumors 603
Aug 29, 2008
6,324
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London
To be fair, a company like Goldman Sachs has hundreds of "analysts". Maybe thousands if you count their contractors and partners. But it sure is awkward to downgrade Apple just after the recent partnership.
Why is this awkward? the public side of the firm is different to the private and advisory side of the firm.

But yes, there are thousands of analysts and associates and Vice Presidents ;).
 
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Amazing Iceman

macrumors 68040
Nov 8, 2008
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This large financial entities should screen their analysts opinions before letting them out to the public.
These narrow minded and cheap analysts are out of control.

A free year of AppleTV+ Is the best advertising campaign Apple could have chosen.
Encourages people to buy Apple products just to get the freebie, and also gives them a chance to try it and become addicted to it.
 

ct2k7

macrumors 603
Aug 29, 2008
6,324
652
London
This large financial entities should screen their analysts opinions before letting them out to the public.
These narrow minded and cheap analysts are out of control.

A free year of AppleTV+ Is the best advertising campaign Apple could have chosen.
Encourages people to buy Apple products just to get the freebie, and also gives them a chance to try it and become addicted to it.
It’s this analyst’s opinion, which apparently many people in the firm agree with.
 

bruinsrme

macrumors 604
Oct 26, 2008
6,596
2,350
I agree with Goldman. I NEVER bought something after trying it for free, NEVER.
Well maybe a few times.
Maybe a few more times than that.
Apple has a knack of reading consumers and picking their pockets.
Goldman's Sach is wrong on this which has been proven by the likes of Hulu, Netflix and other subscription services.
 

i1100

macrumors newbie
Feb 28, 2012
15
6
Also, add up all iPad, iPhone, AppleTV and Mac purchases going forward and thats how many subscribers Apple can claim for AppleTV+. Makes numbers look really good when compared to other streaming services, sure to drive serious ad revenue.
 

agsystems

macrumors 65816
Aug 1, 2013
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Interesting - good to see is Apple jumping on this before the market start selling off - you would think the 'expert' analysts would know how are they handling
 

coolfactor

macrumors 601
Jul 29, 2002
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Vancouver, BC
For the next 12 months the service isn't worth $1.99 a month with the content.

Maybe next year they can be worth $4.99
Please.... tell me the winning lottery numbers!!! I need to become a millionaire! :rolleyes: :p

Apple seems to have a wide range of content coming to Apple TV+. Not everybody will like everything. For example, the typical heavy pro-US angle of For All Mankind does not sit well with me, and my impression of The Morning Show is that it's sloppy and silly. But my impressions can and likely will change when I start actually WATCHING the content. Only then can I make a judgement for myself, not beforehand.
 

unobtainium

macrumors 68020
Mar 27, 2011
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Anyone know how the free subscription will work? I’d be interested in gifting it my parents (the shows are more their style) but it’s probably tied to my Apple ID right?
 

coolfactor

macrumors 601
Jul 29, 2002
4,664
4,780
Vancouver, BC
Also, add up all iPad, iPhone, AppleTV and Mac purchases going forward and thats how many subscribers Apple can claim for AppleTV+. Makes numbers look really good when compared to other streaming services, sure to drive serious ad revenue.
There's no ads in Apple TV+, is there? I sure hope not.
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Anyone know how the free subscription will work? I’d be interested in gifting it my parents (the shows are more their style) but it’s probably tied to my Apple ID right?
Add your parents to your Family Plan and they will have access to your Apple TV+ subscription, I believe? Isn't it a family subscription?
 

zubikov

macrumors regular
Sep 3, 2014
132
457
PA
Cost: Apple already sank a lot of $$$ into TV+. Apple is expected to sink much more more $$$ in the future.

Revenue: Apple is playing accounting tricks to make is looks like a service is generating revenue, even though hardware is.

Profit: Apple will try to say it's a profitable service with growing revenue. The street called bs on them.
 

cknibbs

macrumors regular
Dec 12, 2012
235
571
I’d argue that it could help move some hardware too... I’m in the market for a new AppleTV but have been waiting to purchase one... free AppleTV+ for a year is an incentive to purchase.
 
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Rainshadow

macrumors regular
Feb 16, 2017
194
476
For the next 12 months the service isn't worth $1.99 a month with the content.

Maybe next year they can be worth $4.99
So < $24 is what you think these shows are worth? I couldn’t disagree more.

1. A single season of a series is more than $24 when you buy it (though you own it) even though most people don’t rewatch them for years.

2. The shows may not be my top picks but almost all of the non-children shows would rise to the top of my Netflix que... Netflix is really slowing, I feel.

3. The quality of the production looks fantastic

4. ITS FREE FOR A YEAR! At least for me... don’t go around complaining about a price, which objectively is good (so good that partners are calling them out on it).

I know that to you this surely means Apple thinks it’s not worth $5 themselves, but I think Apple is making a bigger play here. The price will go up, the content will increase. But for you to aimlessly claim “it’s not worth 1.99... SMH.
 
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