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Streaming TV Service Revenue Will Be a 'Drop in the Bucket' for Apple, Even If It Rivals Netflix

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Analyst Tim O'Shea recently published a new research report looking at the impact of Apple's upcoming streaming TV service on the company's overall financial earnings (via Business Insider). According to O'Shea, even if Apple priced the service at $15/month (and took a 30 percent cut, while the rest went to video production partners), the resulting revenue would just be "a drop in the bucket."

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O'Shea predicted that if Apple could get to 250 million subscribers by 2023, it would earn the company $13.5 billion in revenue and account for about 5 percent of the company's revenue that year. Not only that, but 250 million subscribers in four years is a generous prediction, given it took Netflix 12 years to reach its 139 million subscribers as of January 2019.
"It's going take a long time for this type of service to really move the needle," O'Shea told Business Insider. To figure out the potential of the video service, which Apple is widely expected to launch next month, O'Shea estimated that Apple would charge customers $15 a month and take a 30% cut, giving the rest to video production partners

If the service is extremely successful and attracts 250 million subscribers, it would yield $13.5 billion in revenue for Apple. That's nothing to sneeze at. After all, Netflix's total sales last year were $15.8 billion. But in the context of Apple, such a figure would be just a drop in the bucket.

In fiscal 2018, the company posted revenue of $265 billion. Though O'Shea and other analysts expect Apple's sales to drop sharply this year before slowly recovering in coming ones, $13.5 billion would still represent only a small fraction of the company's revenue.
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To be clear, O'Shea isn't predicting that Apple will price its streaming TV service at this level, but the analyst is simply providing a "what if" scenario for the launch of the service. CNBC previously reported that Apple will offer its original TV shows for free to Apple device owners, and new reports have suggested that users will be able to add more premium channels onto the service at a cost.

As part of these recent rumors, it's also been suggested all users will have to pay a monthly subscription to gain access to Apple's original TV shows. In regards to these rumors, a price has not yet been put forward. More clarity should be given to Apple's streaming service on March 25, when the company is expected to host a major event debuting the service and outlining its big features.

Article Link: Streaming TV Service Revenue Will Be a 'Drop in the Bucket' for Apple, Even If It Rivals Netflix
 
Article Link
https://www.macrumors.com/2019/02/18/tv-service-revenue-drop-in-bucket/
He’s not accounting for the hardware sales achieved by retaining people within the Apple ecosystem.

iTunes sold music but above all, it sold iPods and from there, the halo effect lead to new Mac users, impressed with the Apple experience, switching from PC.

That iPod halo effect lead directly to the iPhone whicH is responsible for the world’s first trillion dollar company.
 
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That's 250 million subscribers who will be kept a little more happy and secure inside the walled garden.

Besides, $13.5 billion in revenue? That's roughly half of what Apple makes each year selling Macs!
 
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ipedro said:
He’s not accounting for the hardware sales achieved by retaining people within the Apple ecosystem.

iTunes sold music but above all, it sold iPods and from there, the halo effect lead to new Mac users, impressed with the Apple experience, switching from PC.

That iPod halo effect lead directly to the iPhone whicH is responsible for the world’s first trillion dollar company.
Click to expand...

But I feel like video streaming is not something that should ever be hardware-specific. I'm pretty opposed to the idea of having services that don't require extra security not existing on multiple platforms. Either way, I assume that the streaming service will be Multiplatform, since it would be really really really dumb to not have the content available on a browser.
 
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There is a reason why cable and satellite service costs so much--it is expensive when you have to pay each source for the rights to stream their shows, and each source wants a king's ransom and then some! Plus the cable and satellite service companies want to make a huge profit. From what I'm reading and hearing, most of the streaming companies like Netflix are struggling to make profits because they are trying to price their services way below cable and satellite in order to compete against them. Personally I don't think any of the big players in streaming will be able to produce enough shows to compete with cable and satellite, and their prices will be way too high for just a few shows. The only way to make their services attractive to large numbers of customers will be to pay the established networks and channels to include their shows, and that is way too expensive.
 
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With DirecTv ceasing satellite service within the next few years and Dish probably doing the same, though they haven’t announced it, I have to look at all of the different streaming services. Because of the cost of both Internet and Netflix/Disney/Hulu etc this is likely to become very expensive. If 5G wasn’t going to have data caps I’d say that is an answer, but I think data caps are going to become standard in all plans in one form or another. It may not be called a data cap but that will be its practical effect.
 
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I get a feeling that Apple is chasing yesterday's business. Especially if all other players disaggregate and each content owner sets up their own subscription service - there are only so many services you can subscribe to before getting back into the cable bill territory paying up $150/ month.
 
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It's just a means of "stickiness" for Apple, which is logical.

Apple makes around 55X the profit of all of NFLX, so even acquiring the entire Netflix business would be a very small part of Apple's earnings.
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mtneer said:
I get a feeling that Apple is chasing yesterday's business. Especially if all other players disaggregate and each content owner sets up their own subscription service - there are only so many services you can subscribe to before getting back into the cable bill territory paying up $150/ month.
Click to expand...
Streaming content is not yesterday's news. Apple has the money to buy all the content they need, which is the game.

NFLX knows first hand how much cash is required to keep making/buying/licensing content. It's a cash drain.
 
ipedro said:
He’s not accounting for the hardware sales achieved by retaining people within the Apple ecosystem.
Click to expand...
It would be impossible to get 250 million users with a walled garden approach. This is why Apple is expanding its services to other devices. They know they can't compete in the streaming tv world with a lock-in approach.
 
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mtneer said:
I get a feeling that Apple is chasing yesterday's business. Especially if all other players disaggregate and each content owner sets up their own subscription service - there are only so many services you can subscribe to before getting back into the cable bill territory paying up $150/ month.
Click to expand...

I think I just read the average person now spends $37 a month in subscriptions (of various things, not just streaming). And that’s average...
 
His math sucks. Revenue would be $45 billion if Apple does a Netflix competitor. This isn’t an App Store 30%-cut revenue sharing model. That said, I don’t think they’ll get 250 million subscribers and I don’t think it’ll be priced at $15/month.

He seems to be confusing two completely different concepts:
  • A Netflix-like streaming service where Apple gets all the revenue, but also has a ton of costs associated with producing original shows and licensing third party content; and
  • Taking a cut (it probably wouldn't be 30%) for getting people to subscribe to (and billing for) other streaming services, which would be available through the TV app: Showtime/HBO/STARZ/Disney/whatever. (Amazon Prime does this.) There could also be an element of live-channel streaming like Sling/PS Vue/Hulu Live/DirecTV Now, either through pass-through subscriptions or by creating their own similar OTT service.
Can’t believe this guy’s getting paid for his “analysis”. What a mess.
 
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